Rate cuts may impact margins by up to 5-10 bps: PNB MD Ashok Chandra

PNB expects to recover over ₹400 crore from MTNL and up to ₹500 crore through NPA sales this quarter, as the bank sharpens its focus on asset recovery and balance-sheet strength

Punjab National Bank (PNB) is expecting  total recovery of over ₹400 crore from Mahanagar Telephone Nigam Limited (MTNL) and ₹300- ₹500 crore by selling non-performing assets (NPA) in Q4FY26, says Ashok Chandra, managing director and chief executive officer of the bank. In an  interview with Harsh Kumar in New Delhi, he talks about the impact of rate cuts on the bank’s margins and status of regional rural bank (RRB) IPOs. Edited excerpts: 

Are interest rate cuts impacting the bank’s margins? 

Rate cuts affect the entire banking sector. In the near term, the impact may be around 5–10 basis points (bps). Around 65–70 per cent of our term deposits have already been repriced, with the remainder to be repriced by Q1 FY27. As repricing completes, we expect a 60–70 basis point reduction in cost of deposits, which will support margins. 

Recently, one of your large accounts was declared fraudulent of over ₹2,400 crore. What is the status of that account? 

The account you are referring to belongs to the SREI Group, including SREI Infrastructure. This is an old account where resolution has already taken place through the National Asset Reconstruction Company Limited (NARCL). There are two aspects here- first, the resolution process, which has already been completed, and second, the forensic audit and fraud declaration, which has also been examined and completed. Recovery has already been initiated, and NARCL will continue recovery through its established processes. 

You had earlier mentioned selling a large number of NPA accounts. What is the current status? 

Our plan is that a majority of eligible NPA accounts would be considered. In the current quarter, only a few accounts have been sold. In Q4, including January, we have already showcased more than 20 accounts to the ARC (asset reconstruction company) cell in the first week itself. We expect recovery in the range of ₹300–₹500 crore through this route. 

What is the latest on the MTNL account? 

Discussions are ongoing, and there is increasing visibility on resolution. I am optimistic that by Q4, we should be able to achieve recovery, our exposure is over ₹400 crore in this account. Various issues are being discussed with stakeholders and the ministry concerned. Our focus remains on recovering the entire amount, and I expect a positive outcome. 

What is the bank’s recovery target for FY26, and how much progress has been made so far? 

Our recovery target for FY26 was ₹16,000 crore. While the final figure will be available after the audit, based on current trends and the guidance we have given, we are on track to meet and even cross this target. 

What is the status of RRB IPOs and consolidation? 

The IPO process for RRBs has already been initiated. From our (bank) side, Haryana Gramin Bank is one of the candidates, we have deployed resources — such as deputing a company secretary — and the preparatory work is underway. We are on track, and regular reviews are taking place both at the bank level and at the government level. At an appropriate time, we will approach the market. As far as consolidation is concerned, IT integration has been completed, and we were the first sponsored bank which successfully integrated our RRBs with the process being smooth. 

Customer grievance redressal has been a key focus area for you. How effective has the new mechanism been? 

In the calendar year 2025, the bank focused heavily on improving customer service and strengthening grievance redressal. As a result, customer complaints declined by nearly 65 per cent year-on-year. Moreover, we surveyed 10,228 branches, with officials visiting each location. Our objective was that every branch should look like a newly opened branch. Branches were categorised into three buckets, and renovation roadmaps were prepared. The total expenditure is expected to remain under ₹100 crore. This is a one-time exercise, and no major renovation should be required for the next four to five years.