Deposit rate repricing largely completed, more transmission expected in Q4: PNB MD

PNB, MD & CEO, Ashok Chandra

• PNB cuts deposit rates from 7.25% to 6.40%, more reductions expected in Q4
• Record profit from retail, agriculture, MSME, and new business growth.
• PNB aims for Rs 16,000 crore in recoveries, focusing on strong Q4 plans.

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Punjab National Bank (PNB) has already transmitted a significant part of the recent rate-cut cycle to depositors, with deposit rates reduced from 7.25 percent to 6.60 percent by December and further lowered to 6.40 percent from January, Ashok Chandra, Managing Director and Chief Executive Officer, told Moneycontrol in an interview on January 22.

Overall, around 55-60 basis points of deposit rate repricing has already been completed, Chandra said, adding that the transmission process is still underway.

“The remaining 20–30 basis points of reduction should happen in the fourth quarter,” he said, indicating that banks will continue to recalibrate deposit rates in line with the changing interest rate environment.

Chandra noted that the staggered approach to repricing reflects a balance between protecting margins and gradually passing on the benefits of lower policy rates to depositors.

Edited excerpts:

Is the Q3FY26 profit the highest-ever reported by the bank. What has driven this performance?

There are multiple factors behind this record performance. First, we have significantly increased our focus on the retail, agriculture, and MSME (RAM) segments.

MSME advances are growing at 19 percent, retail at 18.5 percent, and agriculture at over 10 percent. These segments contribute meaningfully more to profitability, and this strategic shift is now delivering strong returns.

Second, we have launched and strengthened several new verticals. They include supply chain finance, cash management services, and credit card business. While one of these verticals existed earlier, it has been significantly strengthened. Together, these three new departments are adding to the bank’s bottom line.

Third, savings bank (SB) account mobilisation has played a key role. In April last year, we revamped our CASA products. Under the new scheme, we opened around 30.6 lakh new accounts, mobilising over Rs 20,000 crore in SB deposits. This has directly supported profitability.

Another important aspect is operating performance. For the first time, our operating profit crossed Rs 7,000 crore in the June quarter and remained above that level in the September quarter as well, showing consistency.

Finally, recoveries have been strong. During the quarter, total recovery stood at Rs 4,090 crore, of which Rs 1,956 crore was technical recovery. All these factors together have driven the highest-ever profit for the bank.

Where do you see the bank’s profitability closing for the full year?

We are confident that our operating profit will remain above Rs 7,000 crore every quarter. Net profit is also expected to be more than Rs 5,000 crore every quarter on a consistent basis.

Corporate loan growth was around 9 percent year on year. How does the corporate pipeline look for Q4 and FY26?

In the first nine months of this financial year, we have sanctioned corporate loans worth Rs 3.12 lakh crore, out of which disbursements of about Rs 1 lakh crore are still pending.

For context, in FY24-25, total corporate loan sanctions were around Rs 2 lakh crore. This year, sanctions have already crossed Rs 3.15 lakh crore, and by March-end, we expect this to exceed Rs 4 lakh crore, almost double that of last year.

We could have grown the corporate loan book by 11-12 percent, but we are consciously reducing low-yielding assets and IBPC (Inter-Bank Participation Certificates) exposures. This strategy supports long-term profitability and consistency. As a result, we expect corporate loan growth to be around 8-9 percent by the end of this financial year.

You have guided for a 60:40 RAM-to-corporate loan mix. Currently it stands at 57:43. When will this target be achieved?

We are aiming the 60:40 ratio in FY26-27. Most likely, this will materialise by Q3 or Q4 of that year, as building a high-quality RAM book takes time.

How will this shift in loan mix impact margins, especially after recent rate cuts?

The real positive impact on margins will be visible from Q2 of FY26-27, assuming no further rate cuts. Around 125 basis points of policy rate cuts have already taken place, but we have not fully transmitted these to deposit rates, particularly in Q3.

Some deposit rate reductions, around 20-30 basis points, were implemented from January 1. Additionally, older deposits raised at higher rates, including a 7.25 percent special scheme last year, are now getting repriced. The combined impact should become clearly visible from Q2 of FY26-27.

How much of the rate cut has been transmitted to deposit rates so far?

From 7.25 percent, deposit rates were reduced to 6.60 percent until December, and further to 6.40 percent from January. Overall, around 55-60 basis points of repricing has already been completed. The remaining 20-30 basis points should happen in Q4.

What are your expectations from the February RBI policy?

Given the strong growth outlook and moderating inflation, we do not expect any further rate cuts in Q4.

CASA has remained resilient despite industry-wide pressure, but it has declined slightly year on year. What are your expectations, going forward?

When credit growth is running at 11-12 percent, CASA cannot grow at the same pace. A lag is inevitable. We believe 8-9 percent CASA growth is reasonable and achievable.

Currently, CASA growth stands at 5.66 percent year on year. While individual SB balances are growing well, institutional SB balances, particularly government accounts, are declining due to changes in government fund management under CNA (Central Nodal Agency) and SNA (Single Nodal Agency) frameworks. This trend is impacting the entire banking system, not just PNB.

How much has institutional SB balance declined over the past year?

SB institutional balances have declined by around Rs 7,000 crore between December 2024 and December 2025. This decline offsets growth in individual SB and current accounts, impacting overall CASA growth.

On ECL provisioning, how much has been provided so far?

This quarter, we made total provisions of Rs 1,343 crore. Out of this, Rs 955 crore is towards ECL-related floating provisions.

As of now, we have built a cumulative floating provision of Rs 1,775 crore for ECL implementation. Depending on profitability, we may add further provisions in Q4. This gives us a strong cushion ahead of ECL implementation, potentially reaching around Rs 2,500 crore.

If we had not made the Rs 955 crore ECL provision this quarter, net profit would have exceeded Rs 6,000 crore. However, from a long-term balance sheet strength perspective, this approach is prudent.

Are there plans to sell large NPAs through NCLT or ARCs in Q4?

Yes. We expect around Rs 500 crore recovery through NCLT (National Company Law Tribunal)  , Rs 250 crore through NARCL(National Asset Reconstruction Company Limited) , and about Rs 160 crore via ARCs. Overall, Q4 recoveries should be in the range of Rs 4,000-4,500 crore, similar to Q3.

Our full-year recovery target stands at Rs 16,000 crore.