PNB's unsecured loan exposure within regulatory norms, says MD & CEO

Atul Kumar Goel, managing director (MD) and chief executive officer (CEO) of Punjab National Bank (PNB), in an interview with Nikesh Singh, says the bank will provide recapitalisation funds to regional rural banks (RRBs) in FY24. He adds that PNB is in compliance with the regulator’s guidelines on unsecured loan exposure. Edited excerpts:

How has the focus of the bank shifted to high-quality advances, reducing exposure to unsecured loans following the observations made by the government and the Reserve Bank of India (RBI) in recent meetings?

We do not have much exposure to unsecured loans as compared to our peers. There were guidelines from the RBI that there may be some risks in unsecured loans. We have done new underwritings from July 1, 2020, to March 31, 2023, with sanctions of around Rs 5.72 trillion. Of this, Rs 5.18 trillion was disbursed. The non-performing asset (NPA) on these accounts is hardly 0.23 per cent. The bank is in compliance with the guidelines of the RBI and the finance ministry, in terms of exposure to unsecured loan portfolios and better credit underwriting norms. 

RRBs under PNB saw their collective capital adequacy ratio (CAR) decline by 111 basis points (bps) in FY23. What are the reasons behind that, and being a sponsor bank, will you infuse capital in FY24?

We have infused around Rs 200 crore in FY23 to the RRBs where there was a requirement for capital. PNB has told its RRBs to focus on recovery. Out of the nine RRBs under PNB, six are in profit. The RRBs were facing information technology (IT) challenges, and being a sponsor bank, we are providing support and enabling them to provide digital products to customers. Definitely, there will be a need for recapitalisation in RRBs in FY24 and PNB will provide its share.   

The current account savings account (CASA) of the bank declined to 43 per cent at the end of FY23 from 47.4 per cent a year ago. How does the bank aim to sustain this in FY24? 

CASA has two components — one is the savings account, and the other current account. There was a growth in the savings account of 2.72 per cent in FY23 but there was some decline in the current account, resulting in a decline in CASA. In FY23, there was a big gap between the savings rate of interest and term deposit, resulting in conversion of savings into term deposit. Around 8 million accounts were opened in FY23. The bank has provided the facility of tap banking at all branches through which savings and current accounts can be opened immediately. This is helping the bank acquire new CASA businesses.

How do you see the repricing of deposits affecting your net interest margin (NIM) in FY24 as the bank has kept the target unchanged for FY24 at 2.9-3 per cent?

In FY24, there will be pressure to maintain net interest income (NII) because of repricing of existing deposits at the time of maturity. Some deposits have already been repriced, but all deposits have not been repriced. This is because there was a lot of interest rate hike in FY23 as far as deposits are concerned. As far as advances are concerned, 86 per cent is linked with the marginal cost of funds based lending rate (MCLR) or the repo rate.

The targets for gross non-performing asset (gross NPA) and net NPA were achieved in FY23. How do you see the target in FY24?

The gross NPA and net NPA stood at 8.74 per cent and 2.72 per cent at the end of FY23. The bank has set a target of reaching gross NPA and net NPA below 7 per cent and 2 per cent by the end of FY24.