Slippages will gradually dip every quarter: PNB chief Atul Kumar Goel

In a Q&A, the lender's MD & CEO says the bank's NPA ratio could improve further as it doesn't have any large loan that needs to be regarded as bad

Atul Kumar Goel, MD & CEO of Punjab National Bank says the lender's non-performing asset ratio could improve further as it does not have any large loan that needs to be recognised as bad, in an interview with Manojit Saha. Edited Excerpts:

Higher operating expenses and provisions caused the net profit to decline. Employee benefit expenses went up by 185 per cent in Q3. Is it a one-time hit, or do you see more provisions in the coming quarters?

The bipartite settlement [with employees’ unions for wage revision] was due in November 2022. In the December quarter, we provided Rs 181 crore for two months. In addition, as part of the settlement, if the operating profit for the nine months is more than the nine months of the corresponding period last year, then provision is also required. On that count we've provided Rs 79 crore. Our AS15 provision for the December quarter was Rs 1,330 crore.

Some provisions on these aspects may continue, particularly wage revision, though the burden for AS15 provision could be less.

Total provisions went up by 40 per cent year on year, of which standard asset provision was Rs 469 crore, which was negative Rs 120 crore a year ago. Can you shed some light on this sharp increase?

Total provision for the December quarter was Rs 3,908 crore. The reason for higher provision was due to the ageing of NPAs. However, addition to NPAs are declining.

Credit cost which is about two per cent in Fy23, will be less than 1.5 per cent in FY24. Our provision coverage ratio has increased to 85 per cent.

Fresh slippages in the third quarter were close to Rs 4,000 crore, though the trend is declining. Do you expect slippages to come down further in Q4?

Definitely. They will decline every quarter, because we do not have any lumpy accounts. There isn't a single account over Rs 100 crore that we have to recognise as NPA. SMA2 in December 2022 was Rs 10,207 crore. This declined to Rs 4,816 crore in January. Of this, accounts in excess of Rs 5 crore only stood at Rs 1,107 crore in all. The maximum amount is Rs 93 crore. So slippages will gradually decline every quarter.

Where do you see your net and gross NPA ratios at the end of the financial year?

Our gross NPA ratio was 9.76 per cent at the end of Q3. We are hopeful it will be about nine per cent by the end of the current financial year. Net NPA was 3.3 per cent in December and is likely to come down to three per cent.

What is PNB’s credit growth projection for the current financial year?

Our credit growth for the current financial year will remain between 13-14 per cent. Demand is improving. Now the companies are using the working capital limits that were sanctioned. Some steel firms are going for expansion. A lot of road infrastructure projects are also coming up.

Do you think deposit rates have peaked?

Our deposit rates are on a par with peers. We have revised our term deposit rates in the last six months, and I do not foresee much increase further--may be 10-15 bps but not beyond. As far as PNB is concerned, deposit is not a concern because we have a large branch base and we have had 6.4 million accounts since April 1.

PNB’s domestic margins were 3.3 per cent. With re-pricing of deposits happening, will PNB be able to hold on those levels?

The global margins were 3.16 per cent. As I said, we've revised the term deposit rates, and all deposits are yet to be re-priced. The full impact will be felt in days ahead. We're giving a guidance of 3-3.1 for global margins.