Public sector lender Punjab National Bank (PNB) expects to maintain healthy growth in deposits despite tight liquidity conditions. Its MD & CEO Ashok Chandra tells Sachin Kumar that higher recoveries and a focus on low-cost deposits will help the bank protect NIM at its current level. Excerpts:
At a time when other banks’ net interest margins have shrunk, PNB’s NIMs have improved sequentially. How have you improved your NIMs?
We are among the few banks that have grown net interest income sequentially and year-on-year. This has helped us to maintain our target NIM (net interest margin) between 2.9 to 3%. Also, our recoveries have been strong which has also helped in protecting our margins. We had given the guidance earlier to maintain NIM at 2.9 to 3% and we will be closing the year in the same range.
Are you experiencing challenges in raising deposits?
The deposit mobilisation, no doubt, is a challenge in the present context, especially on the CASA (current account savings accounts) front. Our CASA ratio has gone down from 42% to 38% but despite that, we are able to mobilise our retail term deposits in a bigger way and that has helped in maintaining my NIMs because we have not gone for bulk deposits. We expect growth in deposits to be in the range of 12 to 13% in the current financial year.
What is your credit growth target?
We have grown advances we have grown at 15%. We are expecting that my credit growth will be in the range of 13 to 14%. On the retail side, credit growth will driven by MSME and housing loans. On the corporate side, we have corporate loan sanctions worth 1.15 lakh crore in place and some disbursements will happen in the current quarter. Renewable energy, infrastructure, road, power and telecom are driving corporate loan demand.
What are the reasons behind a significant improvement in asset quality in the third quarter?
The bank has done very well in containing slippages and increasing recoveries. We had given the guidance of keeping the slippage ratio at 1% but we are currently at 0.68%. If you are able to contain the slippages and maximise the recovery, it will definitely improve asset quality. Our recovery is higher than the slippages on a quarter-to-quarter basis, which has helped in bringing down gross NPA and net NPA.
Will you achieve this year’s recovery target?
Our recovery target for the current financial year is Rs 18,000 crore and we have already done recoveries worth Rs 11,500 crore in the first nine month of the current financial year. So there is a gap of Rs 6500 crore, I expect recoveries worth Rs 5000 to Rs 6000 crore in the fourth quarter of the current financial year.