Lower guidance for deposit growth will not impact credit growth during the current fiscal, Ashok Chandra, Managing Director and CEO of Punjab National Bank has said. In an, interview to businessline, he also mentioned that the higher fresh slippage in MSME segment is due mainly to below ₹10-lakh accounts.
Your net profit is down by almost 48.7 or around 49%, but your operating profit is at an all- time high. How do you read these two numbers?
We have migrated from the old tax regime (OTR) to the new tax regime (NTR) and because of that our DTA (Deferred Tax Assets) also have to be recalculated based on the NTR. Earlier, DTA calculation happened at 34.99 per cent, which has to be recalculated at 24.99 per cent, so there is a 10 per cent difference between the old tax and new tax regime and when we recalculate the tax on the DTA, that amount has to be carved out and calculated as a tax component. Because of that and this year’s income tax on that operating profit, both put together the number comes to Rs 5,083 crore. This amount has been provided as tax in the June quarter. Any bank that migrates from the old tax regime to the new tax regime has to do so in one quarter itself. This is a one-time exercise and from this quarter onwards, if we record the same operating profit, our net profit will be in the same range or ₹5,000-crore plus
What are the reasons behind your all-time high operating profit?
One is the treasury book, which we built up during January-February-March when we saw interest rates had started declining in the financial year 2025-26. We hold a good treasury book of Rs 5 lakh crore currently. With interest rates coming down, our old investments are going to give us income from the treasury side. We have also realised good recovery from technical write-offs and the overall recovery. With advances rising, we have made good earnings on processing fees also. These are the few components which have added value to the operating profit.
Slippage in the MSME segment is up by 51.4 per cent, what are reasons for that?
Last year, during the first quarter, our MSME fresh slippage was ₹638 crore and this year it is ₹966 crore. If you see Q4 (FY25) also, slippage was around ₹995 crore. We have analysed these slippages and found that 80 per cent of those loans are below ₹10 lakh, which are MUDRA kind of loans. We have now initiated changes in the processes. We initially brought the end-to-end digital process for loans up to ₹10 lakh, which has now been raised to ₹25 lakhs. We will make the end-to-end digital process mandatory for MUDRA loans. And in another two months time, MSME loans of up to ₹25 lakh will be done through the digital channel only.
Guidance pegs credit growth at 11-12 per cent for the full fiscal, as against around 10 per cent achieved in the first quarter, but deposit growth has been projected at 9-10 per cent for the entire fiscal, as against around 13 per cent in the first quarter. Will this not impact your credit projection?
We have given a low guidance because our CD ratio is 71.24 per cent, which means we have enough room with the existing deposit itself to go for credit growth. Absolutely, there is no challenge, because if you take CRR (3 per cent) and SLR (18 per cent) together, 21 per cent is blocked, which means you have a 79 per cent kitty available for lending. Of this 79 per cent, we have reached only up to 71 per cent. Although deposit guidance is at 9-10 per cent, we have grown at 12.86 per cent in this quarter. We had mentioned earlier that we would surpass the conservative guidance we have set.
You have removed the penalty for non-maintenance of minimum balance in saving accounts, which implies a hit of some hundred crores on book. How will you recover this amount?
We are on a growth curve, which will accelerate in the SB individual segment. We have revamped our entire CASA product and, accordingly, all SB products were revamped on April 12, 2025. We have built a good SB individual portfolio in this quarter — 26 lakh good quality accounts have been opened and accretion in the SB individual is ₹4,600 crore. The CASA ratio is down as institutional deposits are going out of the system. This is not only in our bank, but for the entire banking system. The CNA and SNA account, which the Government of India or the states used to keep, now goes directly to the RBI and from there to the bank branches for direct payments or the director payment now. But since we are growing in the SB individual segment, and, thereby, CASA, we are getting those funds at 2.5 to 2.7 per cent. This will take care of the loss on account of the minimum balance charges being done away with.
