Punjab & Sind Bank must pace itself on credit growth: MD | The Financial Express

Punjab & Sind Bank must pace itself on credit growth: MD

The bank is also undergoing a technological upgrade that is expected to be completed by June 2023. Through the upgrade, the bank can go strong on digital initiatives and collaborations with fintechs.

Punjab & Sind Bank must pace itself on credit growth: MD
Corporate segment lending grew by muted 2.5% in Q2FY23, while retail lending improved by 16% y-o-y.

Having set an ambitious target of 15% credit growth for FY23, Punjab & Sind Bank needs to pace itself to catch up with the overall banking sector, Swarup Kumar Saha, MD & CEO of the bank, said in an interaction with FE. This was Saha’s first full quarter after taking charge of the bank and other than improving the business, he has plans to put various systems in place. Acknowledging that the bank is the smallest public sector bank in terms of size, Saha said that he is working to make it the most efficient lender.

The bank is working on improving risk management and underwriting systems in order to take limited exposure on the corporate sector, without taking too many risks, he said. The lender had shifted its focus to the retail, agriculture and MSME (RAM) segment to de-risk its balance sheet and also to stave off capital constraint issues. Corporate segment lending grew by muted 2.5% in Q2FY23, while retail lending improved by 16% y-o-y.

“I cannot do hara-kiri in my credit growth, but I need to pace myself and put enough systems in place. Today we are at 9%, and I have given a guidance of 12% for the December quarter and 15% trajectory for March, with 22% growth for the RAM sector,” Saha said.

The bank is also lacking on fee income, on which the management is working strongly, he said. Core fee income, which consists mainly of loan-processing fee and brokerage, was at Rs 102 crore in Q2FY23, higher by 13% y-o-y. The bank is also undergoing a technological upgrade that is expected to be completed by June 2023. Through the upgrade, the bank can go strong on digital initiatives and collaborations with fintechs.

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The bank also needs to ramp up its deposits franchise to support its credit growth aspirations, Saha said. While deposit growth was a mere 3.3% in Q2FY23, the bank has plans to boost deposit growth to 12% in FY23. To that end, the bank is focusing on mobilising salary accounts and salary deposit schemes. The lender has tied up with the municipal corporations of Chandigarh and Lucknow and has so far opened more than 24,000 salary accounts. This will aid the bank in raising low-cost deposits and improve its overall current account, savings account (CASA) ratio, which stands at 34% as on September 30.

Despite the net interest margin (NIM) hitting 3.06% as of September 30, Saha has given a guidance of 2.90-2.95% for FY23. Given the rising interest rate cycle and mobilisation of low-cost deposits, the bank will be able to maintain the NIM at these levels, he said.

On the asset quality front, Saha said that the bank is quite comfortably placed. The bank had fresh slippages of Rs 538 crore in H1FY23. The slippages would have been higher if not for strong recovery in Q2FY23 on the accounts that slipped in Q1FY23. Similarly, the bank has recovered more than Rs 200 crore in October itself, which will enable the bank to restrict slippages to Rs 1,000 crore in FY23, he said, adding that the target for recoveries and upgrade is Rs 2,000 crore, of which the bank has already done close to Rs 900 crore.

The bank has already identified seven accounts to be transferred to NARCL, with a total quantum of Rs 1,600 crore. The accounts include two Srei accounts of Rs 1,200 crore, and one of them is of Jaiprakash Associates. The bank has done technical write-off for Srei accounts, so any recovery will add to the bottomline, he said.

The bank has come out of a period of challenging times and is well capitalised to sustain its growth without government funds, Saha said. The government had infused Rs 4,600 crore in the lender in FY22. The bank’s capital adequacy ratio stood at 15.68% as of September 30, as against 17.92% in the previous year.

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First published on: 11-11-2022 at 01:00 IST