Interest rates have peaked, moderation expected towards year-end: PNB MD

Days before RBI's monetary policy, Punjab National Bank (PNB) managing director Atul Kumar Goel said interest rates have peaked and are expected to see a reversal by the end of this year.

The Monetary Policy Committee, which is expected to keep the policy rate unchanged for the eighth time in a row, is scheduled to begin its meeting on June 5. The decision of the rate-setting panel will be announced on June 7.

"Interest rates are contingent upon so many factors like growth, inflation, monetary policy stance of other countries. I think rates have reached the peak. I think after some time maybe by the end of this year, we can see some reduction in the rate of interest," he told PTI.

There should not be an increase in the deposit rate as 95 per cent of deposits have already been repriced, he said.

Goel said the Retail, Agriculture and MSME (RAM) segment is going to be the focus area for the bank but would not shy away from financing good corporate loans.

"RAM is about 55 per cent of total credit. We want to increase this number by around 60 per cent in the next four to five years. For this year, we have set a target to achieve 57 per cent. As I told you we are one of the largest banks in the country, although the focus is on the RAM but if an opportunity comes, we will not allow it to go out," he said.

As far as corporate credit is concerned, he said, there is demand from infrastructure projects, especially roads.

"Even some of the big corporates are also planning to increase their capacity. So, there is a demand from the steel sector and even renewable energy where we see too much of the demand," he said.
 

PNB has seen consistent improvement in its financial health and it recorded the highest growth in terms of profit in FY24.

PNB topped the chart recording the highest profit growth of 229 per cent among the 12 public sector banks during the fiscal ended in March 2024. The bank's net profit increased over three-fold to Rs 8,245 crore compared to Rs 2,507 crore in the previous fiscal.

Talking about the strategy to improve profitability, he said, the focus would be on expanding the retail, agriculture, and MSME portfolio, extending good corporate loans, controlling slippages and improving recovery.

Besides, he said, the thrust would also be on improving forex income and garnering higher fee income from selling third-party products to augment non-interest income.

With regard to improving interest income, he said, the focus would be to increase low-cost deposit CASA (Current Account Savings Account).

CASA as a percentage of total deposits stood at 41.4 per cent at the end of March 2024, he said, the target is to improve beyond 42 per cent by the end of the current fiscal.

The bank intends to keep credit costs below 1 per cent during this financial year.

With all these efforts, he said, the Return on Assets (ROA) is expected to increase to 0.8 per cent during the year and touch 1 per cent by the end of March 2025 translating into a substantial jump in profit.

Asked about anticipated business growth in the current financial year, Goel said, credit growth is expected to be 11-12 per cent while deposit would be 9-10 per cent.

To fund this business growth, the bank has received approval to raise capital of Rs 17,500 crore from Tier I and Tier II bonds and share sale through private placement during the year.

During FY24, the bank had raised Rs 10,000 crore from Tier I and Tier II bonds at a very competitive rate, he added.