Punjab National Bank (PNB) reported impressive numbers on Monday, with net profits rising by 137% to Rs 4,714 crore in the second quarter of FY25. Atul Kumar Goel, MD and CEO of PNB, tells FE that the bank plans to launch a wealth management arm to serve high-net-worth individuals. Excerpts:
With the interest rate cycle expected to turn soon, are you concerned about the bank’s margins moving forward?
As of date, around 48% of the book is linked to either the repo or the T-bill. Around 4 lakh books are linked to the repo. If there is a rate cut, this book will be immediately repriced. Definitely, there will be pressure on the margin because deposits will not be repriced immediately. If I reduce the yield on the advances, why should I not think to reduce the interest rate on the deposit side also? At the same time, savings deposits are much bigger than the book linked to repo. This gives me the flexibility to maintain margins.
There has been a significant fall in new provisions and contingencies. What is the reason for this?
We have sanctioned Rs 9 lakh crore in the last 51 months, out of which Rs 8.19 lakh crore has been disbursed. Currently, the outstanding is Rs 6.31 lakh crore and the NPA is only Rs 2,374 crore, or 0.29%.
If your underwriting is not good, then they will slip into the NPA. And the moment they slip into the NPA, you have to make the higher provisions. In new underwriting, we have taken very few risks and worked on how to improve the collection efficiency.
Agri and MSMEs represent the largest share of SMA accounts, with slippages mostly concentrated in these sectors. What strategies do you have in place to reduce delinquencies in these areas?
We have given the guidance for the 1% for NPAs, which is the tolerance limit. If I give the guidance less than 1%, I am not being fair because 1% is bound to happen in this segment. In corporate, there are no NPAs.
Also, our MSME exposure isn’t very high and around Rs 1.5 lakh crore. The maximum portion is in the AAA category. So, we don’t have to worry too much. We do cherry-picking to whom we are giving as our money should come back.
In September, the bank declared MTNL an NPA. Does that have any impact on margins? Are there any talks going on with the government?
If an account has become an NPA, it will certainly impact margins. Money will come and it is under discussion.
Private and foreign banks are targeting affluent individuals and HNIs with specialised products. Do you have any plans to tap this segment?
Yes, we have plans to enter the wealth management business. Currently, we are giving some facilities in the mobile app and to our corporate clients. But we plan to have a separate arm for this as well.