MC Exclusive | Punjab & Sind Bank aims to contain slippages below Rs 1,000 crore in FY23, MD says

Swarup Kumar Saha, MD & CEO, Punjab & Sind Bank

Punjab & Sind Bank expects to contain slippages below Rs 1,000 crore in this financial year in its endeavour to keep bad loans under control, the state-run lender’s MD & CEO Swarup Kumar Saha has told Moneycontrol in an exclusive interview.

“Our slippages are a bit higher in Q2 incrementally but overall the guidance is that they will be contained below Rs 1,000 crore for FY23. Credit costs will be below 1 percent for this financial year,” Saha said.

A slippage occurs when a borrower has not paid interest for over 90 days.

In the July-September quarter, Punjab & Sind Bank reported fresh slippages of Rs 377 crore, sharply lower than Rs 1,566 crore in the same period last year but higher than Rs 321 crore reported in April-June.

Corporate slippages jumped to Rs 93 crore, up from Rs 3 crore in the previous quarter, while agriculture slippages also rose to Rs 71 crore in the fiscal second quarter, up from Rs 52 crore in the April-June period.

Saha said a mid-segment corporate account of around Rs 70-80 crore slipped in the reporting quarter but the bank had already provided 50 percent for it.

Another account with an outstanding of Rs 75 crore, which was actually an NPA on the book, was not declared because of judicial intervention, he said, adding that the bank has already provided 40 percent for this account.

“There is no big, lumpy corporate account that is stressed, for now. Apart from these, all lumpy stressed accounts are under control,” Saha, who took charge as MD and CEO in June this year, said.

In December 2010, the government divested a 17.93 percent stake in the bank through an initial public offer. However, post many capital infusions from FY18, the government’s shareholding had steadily risen and stood at 98.25 percent as on September 30. In FY22, the bank staged a turnaround and came into the black with a net profit of Rs 1,039 crore.

Tackling bad loans

Punjab & Sind Bank’s bad loans are higher compared to other state-run peers. The bank’s gross non-performing asset (NPA) ratio stood at 9.67 percent in July-September, down from 11.34 percent in the prior quarter. In the reporting quarter, Indian Overseas Bank and Bank of Maharashtra’s gross NPA ratios stood at 8.53 percent and 3.40 percent, respectively.

Saha acknowledged that the bank’s gross NPA ratio continues to be “significantly high” in comparison with its peer group. However, the endeavour will be to bring down the bad loan ratio to as low as possible, he said. He expects gross NPA and net NPA ratios to fall below 9 percent and 2 percent, respectively, for FY23.

“We are having aggressive recovery mechanisms; our bad loan recovery target is above Rs 2,000 crore for FY23,” said Saha. “We have provided Rs 210 crore additionally for NPA accounts which has increased the provision coverage ratio by more than one percent. This will also help me bring down NPAs and make the balance sheet fundamentally strong.”

“From April-September, we have recovered around Rs 729 crore; we have some mid-segment resolutions happening as well. In October itself, we have recovered around Rs 200 crore.”

Saha said he was expecting bad loan recoveries from the National Asset Reconstruction Company Ltd (NARCL) and the National Company Law Tribunal.

The bank has identified seven accounts amounting to Rs 1,590 crore to be sold to NARCL, which includes two SREI group accounts of Rs 1,200 crore, he said. The bank expects some resolutions to happen in October-December and the rest in January-March.

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‘Credit growth above 15% in FY23’

The bank’s focus will also be on expanding credit to the right segments and growing in line with the industry, the MD said.

In the July-September quarter, the New Delhi-based lender recorded a year -on- year credit growth of 9.12 percent. Advances to retail, agriculture, medium and small enterprises (RAM) grew over 16 percent YoY, while corporate advances rose 2.5 percent. Individually, retail loans rose nearly 19 percent, while MSME loans clocked a growth of 17.5 percent YoY.

“We expect a credit growth of 20-22 percent in the RAM segment and 7-8 percent in the corporate segment by March-end,” Saha said. The idea is to make the bank fundamentally strong and efficient, he added.

“We had given a credit growth guidance of over 15 percent for FY23,” the MD added. “We stick to that guidance and we hope we can stick to it for the whole financial year.”

To fund the credit growth, the bank is coming up with new products to mobilise deposits, offering competitive interest rates on term deposits and is focused on opening more salary accounts, Saha said.

The bank is also looking to mobilise current account savings account (CASA) deposits so that its credit-deposit ratio remains competitive, he said, adding the lender is targeting a deposit growth of 12 percent for FY23.

Net interest margins (NIMs) will remain above 2.90 percent for FY23 compared to 3.06 percent in July-September, Saha added.

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Along with mobilising deposits, the bank may go for an equity capital raise of Rs 300 crore after the third quarter, depending on its financial performance, the MD said. The bank is speaking to stakeholders for it and will tap the market after October-December results, he added.

Saha also said he is determined to transform the 114-year-old public sector bank into a digitally savvy institution through co-branded partnerships and collaborations with fintechs.

“We have partnered with around five NBFCs (non-banking finance companies) for co-lending in the MSME (medium and small enterprises) and housing loan segments. That is giving us good traction,” said Saha. “We already have a book of Rs 500 crore for that and are expecting to grow it to Rs 1,500 crore. We are also looking to explore fintech partnerships.”