PNB to transfer bad loans worth Rs 8,000 crore to NARCL

In current quarter, the bank expects substantial recovery from DHFL, although there are some issues lingering in NCLAT, its MD said

Punjab National Bank (PNB) has identified bad loans worth Rs 8,000 crore that it will transfer to the National Asset Reconstruction Company (NARCL), expected to be operational from July, the lender’s managing director S. S. Mallikarjuna Rao said.

In the first tranche, the bank has identified non-performing assets worth Rs 8,000 crore to be transferred to the NARCL, Rao said, adding that the bad bank will be operational by July 1.

The bad bank, initially proposed by the Indian Banks Association, and later endorsed by the government in the Union Budget, will have public sectors banks as its promoters, who will collectively hold 51 per cent in the bad bank. PNB’s share in the bad bank will be little less than 10 per cent, Rao said.

The bad bank will help in aggregating the loan book of stressed assets from all banks, and facilitate an easy process of auctioning through the Swiss challenge method.

However, the operational guidelines are in final stages, and the decision whether such assets will have to be transferred to the bad bank at net book value, is yet to be taken, Rao said.

Asset Sale

Rao said PNB board has decided to exit Canara HSBC Oriental Bank of Commerce Life Insurance Company (CHOICE), and the sale process would take around 1-1.5 years as it would involve appointment of intermediaries and engagement with advisors. The bank expects to exit the insurance venture at a good valuation.

The bank has also decided to exit Asset Reconstruction Company (India) Limited (Arcil), and currently doesn’t have any plan to further cut its stake in PNB Housing Finance.

In current quarter, the bank expects substantial recovery from DHFL, although there are some issues lingering at NCLAT, Rao said. Overall recovery in April-June would be around Rs 8,000 crore-Rs 10,000 crore. The bank has already realised Rs 3,000 crore, he said.

India’s second largest public sector lender, PNB, reported a profit of Rs 586 crore in January-March quarter on Friday, and reported a global net interest margin of 2.88 per cent. Rao said Q1FY22 will be tough for the entire banking industry and it is difficult to predict credit growth for the period. However, PNB would show a credit growth of 8 per cent in FY22, and estimates to report a net profit of not less than Rs 6,000 crore next year, he said.