PNB expects $1 billion hit in transition to new credit rules, says CEO

India's Punjab National Bank (PNB) will face an estimated 90 billion-rupee ($1.03 billion) impact as the lender transitions to a central bank-mandated credit loss framework by 2031, its chief executive said on Monday.

The country's third-largest state-owned lender by market capitalisation is one of the first to disclose an estimate on the likely effect of the rules, issued by the Reserve Bank of India earlier this month, to its balance sheet.

"The impact comes to around 90 billion rupees," said Ashok Chandra, PNB's managing director and CEO in an interview with Reuters. "The bank has done a rough estimate as this (new credit rules) was already in the pipeline ... I don't see any further deviation."

 

The RBI's draft guidelines require banks to transition to an expected credit loss (ECL) framework, wherein funds are set aside to cover likely risk of default, over a five-year period starting April 1, 2027. At present, provisions for bad loans are made when a loan becomes overdue.

Top Indian banks, including the State Bank of India, are in the process of evaluating the impact from the transition.

As per internal estimates, Chandra said, the New Delhi-based bank will face an impact of around 0.85 percentage points to its capital to risk assets ratio (CRAR), a metric that measures bank's capital adequacy.

PNB's CRAR was at 17.19%, as on September 30, according to the company's presentation. As per RBI's latest financial stability report, Indian commercial banks had a CRAR of 17.3% at March-end.

The impact will be offset by the profit generated from the bank's operations in the normal course, said Chandra.

"I think we will be able to manage with our internal accrual itself. Bank is well poised to take care of all requirements which is going to come in future."

For PNB, a majority of these provisions will be for stage-two assets in its retail, agriculture and small and medium enterprises portfolios, Chandra said.

Stage-two assets refer to high-risk loans where the borrower has missed a repayment deadline but has not turned into a non-performing asset.

The lender on Saturday reported a net profit of 49.04 billion rupees for the second quarter, up 14% from a year earlier. Chandra projects the bank to post a net profit of over 150 billion rupees for the 2026 financial year.