PNB loan recoveries hit hurdle in Maharashtra

ICRA strips 'AAA' rating status for PNBs bonds

While reeling under a rise in stressed loans, Punjab National Bank’s efforts at recovery from these has hit a hurdle in Maharashtra.

The Delhi-based public sector lender has blamed the state government for inordinate delay in giving approval and assistance to take over the assets of defaulters.

In  a letter to Bank of Maharashtra (BoM), convener bank for the State Level Bankers' Committee (SLBC) in the state, PNB said: “We are facing difficulty in getting approval/assistance from district magistrates for taking physical possession of assets under the (Sarfaesi, or Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act.” This newspaper has reviewed a copy of the letter.

“Even after our efforts and personal meetings with the authorities, we are not getting timely approval,” PNB said, adding huge amounts of public money was involved in these accounts.  

It urged BoM to take up the issue for discussions at the SLBC meeting on Thursday with state government officials, to review the annual credit plan and performance of financial inclusion schemes. It has given a list of accounts for which it had filed the applications for physical possession. PNB's net profit for the quarter ended December fell by 93 per cent to Rs 51 crore from Rs 774 crore in the same period of FY15. Asset quality deteriorated further; gross non-performing assets (NPAs) hit 8.47 per cent of gross advances from 5.97 per cent a year before.

Net NPAs rose to 5.86 per cent of net advances, from 3.82 per cent.

Rating agency ICRA has downgraded the rating assigned to PNB's infrastructure bonds and tier-II bonds, as a result. The earlier 'AAA' status has been turned to 'AA+'. The revisions were due to higher than anticipated stress, slower than expected pace of recovery and weak outlook for several credit-intensive sectors, ICRA stated.

PNB’s exposure to stressed sectors (iron & steel and power) is relatively high at around 18 per cent of their domestic loan book as on December 2015. Gross NPA plus restructured advances are relatively high at around 17 per cent, which could lead to elevated fresh NPA generation rate and make recoveries more challenging over the next one-two years, it said.

The ratings continue to draw comfort from PNB’s majority sovereign ownership (62.08 per cent stake held by the government of India).

It also, said ICRA, has a strong franchise, imparting a healthy and stable deposits base, comfortable liquidity profile and adequate current capitalisation (tier-I capital of 8.52 per cent as on end-December).

It has relatively better core operating profitability compared to other public sector banks, which provides cushion to absorb higher credit provisioning to some extent, ICRA added.