Punjab National Bank (PNB) sees about 5-6% of its loan book (about Rs 36,000-43,000 crore) getting recast in FY21 under the central bank’s one-time asset restructuring window to soften the Covid-19 blow to borrowers, its managing director SS Mallikarjuna Rao said on Monday. A clearer picture, however, will emerge after the expert committee under KV Kamath prescribes the contours of the recast scheme, he added.
The global advances of PNB, after the amalgamation of Oriental Bank of Commerce and United Bank with it, stood at Rs 7,21,695 crore as of June 30.
Addressing a virtual conference, Rao also said the credit growth of the country’s second-biggest lender will likely be around 4-6% this fiscal. However, loans to MSME and retail borrowers, which made up for 35% of the bank’s credit portfolio as of June, could grow at 8-10% in FY21, far exceeding the pace of rise in PNB’s corporate loan portfolio.
Rao also said the repayment moratorium should not be extended beyond the August 31 deadline, as green shoots are emerging in the economy.
The lender has no plans, as of now, to approach the government for fresh capital infusion in FY21, Rao said. Instead, it wants to test market apetitte first and intends to go in for qualified institutional placement (QIP) by the end of third quarter or early fourth quarter. The bank has already received shareholders’ approval to raise Rs 7,000 crore.
The capital-to-risk-weighted-asset ratio of PNB, after amalgamation on April 1, stood at a healthy 12.63% as of June 30, higher than the Basel norm requirement (including the additional conservation buffer stipulation that comes into effect from September).
In an exchange filing last month, PNB said it would raise up to Rs 10,000 crore through a share and bond sale. It planned to explore raising funds through a combination of QIP, FPO, rights issue and issuance of tier-2 bonds. The bank also added that it would seek shareholders’ approval to raise Rs 7,000 crore in equity capital in its next annual general meeting. The government held as much as 85.59% in PNB as of June 30, thanks to regular doses of infusion to bolster its capital base.
Rao said loan disbursement will improve as the economy returns to normalcy from October onwards, Rao said. However, tourism, hospitality and aviation, which are among the worst-hit sectors, will take longer to get back on track, thanks to the changing social behaviour after the pandemic.
“We are not reviewing our 4-6% overall credit growth guidance. We will stick to our earlier guidance. We may look at the position after October. MSMEs are expected to do well as they will have wonderful opportunity from the ban on Chinese goods,” he said.
Rao refrained from offering a precise estimate of likely sector-wise recast of loans under the new window, saying details of eligible individual accounts will be available only by September, after the Kamath panel’s recommendations are announced. “We are preparing the covenants to look in terms of identification of borrowers who would be eligible for restructuring,” he said.
Earlier this month, the Reserve Bank of India extended a special window for lenders to recast stressed retail and corporate loans without classifying them as non-performing, provided that they set aside 10% provisions on such advances.
PNB recorded a net profit of Rs 308 crore in the April-June period, the first quarter after the amalgamation exercise. Before the merger, it had witnessed a profit of Rs 1,019 crore in the April-June quarter of the last fiscal. Its net non-performing asset ratio stood at 5.39% as of June 30 and it provided for as much as 80.75% of its bad loans.0