Punjab National Bank is confident of maintaining its profitability and further improving it in coming quarters after posting a standalone net profit of Rs 1,158.61 crore in the fourth quarter of 2023-23. In an interview with Surabhi, Atul Kumar Goel, managing director and CEO of PNB, speaks about the bank’s strategy and said the lender has taken steps to improve underwriting and collection efficiency. Post-Covid, demand from companies for credit is also improving, he said. Excerpts:
What steps will the bank take as it focuses on profitability?
Our focus will now be on recovery. In FY23, the recovery was much more than the additions in every quarter. Total recovery was Rs 29,000 crore. This year, we have given the target to our branches that recovery should be more than the additions. Second, our gross and net non-performing assets as a percentage of advances have reduced. We expect the GNPA to decline to less than 7% and the NNPA to less than 2% in FY24. Our provision coverage ratio was at 86.9% as on March 31, 2023 as against 81.6% a year ago. Our ageing provision requirement has reduced. We are hopeful that our credit cost will also be in the range of 1.5% to 1.75% this fiscal. When the provisions on the NPA requirement is less, profitability is bound to increase. We hope to achieve a similar Rs 1,000 crore profit every quarter and we are conservative when we say that out profits by FY24 will be about Rs 4,000 crore.
What is your strategy for reducing NPAs and what loans are you selling to National Asset Reconstruction Company Ltd (NARCL)?
We have done a lot to improve underwriting as well as the collection efficiency because if you are recovering from NPA and the new acquisition is not qualitative, then what is the benefit of recovery? New NPAs will also be created. From July 1, 2020 to March 2023, we have been monitoring the behaviour of our new business. We had sanctioned around Rs 5.72 trillion, of which Rs 5.18 trillion was disbursed and the outstanding is Rs 4.16 trillion. Only Rs 1,178 crore is NPA, which is hardly 0.23%. In FY23, the recovery from the NCLT was Rs 693 crore in Q1, Rs 778 crore in Q2, Rs 730 crore in Q3 and over Rs 1,000 crore in Q4. We are expecting recovery of about Rs 500 crore plus in Q1 this fiscal and Rs 1,300 crore plus in Q2. In the NARCL, as of date, about 38 accounts for Rs 17,658 crore are under discussion out which one account has been assigned for Rs 447 crore. We sold two accounts to another ARC as the offer was not matched by NARCL. Additionally, another 13 accounts of Rs 4,346 crore where we are the lead banker and the exposure to banking sector is over Rs 500 crore is under discussion.
With the withdrawal of Rs 2,000 notes, what preparations are banks making?
We will do whatever special requirement is needed. This is the withdrawal of Rs 2000 notes but it will remain legal tender. From May 23, people can exchange the notes from the bank up to a limit of Rs 20,000 per day or Rs 4,000 through BC channel. Account holders can deposit the Rs 2,000 amount in their accounts and there should not be any limit also a long as the account is KYC compliant.
Do you expect any rush for deposit of Rs 2,000 notes?
I don’t think as these notes are very less in circulation and continue to be legal tender. There is no ban in accepting these currency notes. We have to see the behaviour of the acceptance but there is no ban on even shopkeepers accepting the notes.
You have a fairly ambitious lending target for FY24 but do you think inflation and high interest rates will have an impact on it?
Our target at 12% to 13% is not very ambitious as we had a 12.68% growth in advances in FY23. Our focus in the current fiscal will be on RAM or retail, agriculture and MSME lending. We also provide financing to the corporate sector. Earlier, companies were not utilising the working capital limit. The Covid impact is now over and some of the corporates who are involved in steel and cement industry are seeking an extension and are also approaching us for capex loans. There is good demand from some of the infrastructure projects, especially from the roads sector as well as from NBFCs. Our corporate book in FY24 should grow by about 10% in FY24 as against 2.56% in FY23.
Is deposit mobilisation a challenge?
There is a gap between credit and deposit growth. For PNB, deposit growth is not the issue. CASA is the USP of PNB. In FY23, there was growth in savings accounts but not in current accounts. We opened about 7 million accounts in FY22, which grew to 8 million in FY23. We want to increase this further. As on date, we have around 160 million customers and about 10,076 branches. We have quickened the account opening process, which is now being done on the same day. This will help in more fund flows into customer accounts and the bank.
What is your target for branch opening?
We expect to open about 250-plus branches this fiscal in areas where we do not have branches, particularly in the south. In FY23, we opened 36 branches.
Post-the Supreme Court orders on fraud classification, what are banks doing as of now?
The RBI circular is also in force but the Supreme Court said banks should give an opportunity of being heard to the customer before declaring an account fraud. Definitely, we have to change the SOP. Customers were already aware of the forensic audit and action being taken by the banks even before. We will give the opportunity as per the order of the court. We will draft this SOP but we are awaiting guidance from the RBI.
The finance ministry is understood to have given banks a directive to increase recovery from written off accounts. What has happening on that?
It is a very good thing that the ministry wants that we focus more on recovery from written off accounts. Whatever the recovery is made will increase our operating profit. We are already focusing on this. The recovery from written off accounts in March quarter of 2023 was Rs 2,216 crore as against Rs 879 crore in March 2022. In FY22, total recovery from written off accounts was Rs 3,441 crore. In FY23, this increased to Rs 6,508 crore. In FY24, we will try to increase this further.