PNB expects Rs 9,000–10,000 crore additional provisioning under new ECL norms, says MD Ashok Chandra

Punjab National Bank

Punjab National Bank (PNB) has estimated an additional provisioning requirement of about Rs 9,000–10,000 crore under the Reserve Bank of India’s (RBI) new Expected Credit Loss (ECL) framework, managing director and chief executive officer Ashok Chandra told Moneycontrol in an interview.

The bank has conducted preliminary calculations based on the probability of default across stages 1, 2, and 3, which indicate an overall impact of around 75–80 basis points on its capital, he added.

Chandra said the provisioning will be spread over a five-year period, giving the bank sufficient time to absorb the impact without straining profitability or capital adequacy. “Our capital position remains strong with a CRAR of 17.19%, and we have enough cushion to meet the ECL requirements comfortably,” he said.

He added that the bank expects to plough back ₹15,000–16,000 crore of profits this year into its capital base, further strengthening its buffers.

Edited excerpts:

Your CASA share is lower on a year-on-year basis, though it has improved sequentially. What strategies are you implementing to strengthen CASA growth and retention?

Yes, CASA, especially institutional deposits has come under pressure across the banking system. Even individual accounts have slowed as we don’t run many special schemes. Despite this challenge, we’ve taken several steps.

On April 12, our Foundation Day, we completely revamped our CASA product suite. We now offer tailor-made savings products for specific segments women, salaried employees, non-salaried individuals, army personnel, youth, pensioners, senior citizens, and farmers. Each segment has special add-on benefits.

As a result, we now have over 27 lakh new accounts under the revamped schemes, garnering Rs 18,000 crore of savings deposits in just six months. This focus on individual accounts has helped us hold CASA steady in fact, it grew 4.7 percent year-on-year and 2.6 percent quarter-on-quarter.

We’ve also introduced digital account opening through our mobile app with video KYC. Our PNB One mobile app provides a state-of-the-art banking experience, encouraging customers to park funds digitally.

Additionally, we’ve launched a three-in-one account combining a savings account, a demat account (managed in-house), and a trading facility through our correspondents. All these initiatives are showing very good results.

What are plans for revamping credit cards?

We do have our own credit card portfolio with 6.5 lakh active cards, but it wasn’t marketed well. The digital platform was weak. We’re now completely revamping the system. By November 15, we’ll have a robust, end-to-end digital platform onboarding, collections, tracking dues everything will happen digitally.

Customers will be able to apply directly via our website or mobile app, and the sanction process will be fully automated based on credit scores and history.

We plan to reach 10 lakh credit cards by March 2026, and after that, we’ll scale up aggressively in FY27.

How has retail demand, especially for home and vehicle loans, been shaping up in festive season?

Even though the GST cut was effective for only nine days in September, we’ve already seen traction. Going forward, housing and vehicle loans will grow very fast, we expect these two segments to be outperformers in Q3. Overall, retail growth should see at least a 2 percent boost purely due to the GST cut.

Your NIMs have compressed recently, but with the RBI maintaining status quo for two consecutive policy meetings, how do you see NIMs trending in H2?

NIMs have largely stabilized now. The full impact of earlier 100 basis point rate cuts and the CRR reduction has been absorbed in Q2. That CRR cut alone has released about Rs 15,000 crore liquidity for us.

With deposit repricing underway, we expect a 5–7 basis point improvement in Q3, and by March 2026, 10–15 basis points improvement overall.

What about the cost of deposits? Do you think it has peaked?

In fact, the cost of deposits will come down further. It increased from 5.36 percent in June quarter to 5.81 percent now, but as deposit repricing continues and liquidity of Rs 15,000 crore comes into the system, we expect further moderation in cost of funds.

Any plans to transfer NPAs to NCLT or sell assets to ARCs in H2?

Currently, we don’t have any fresh assets to send to NCLT. However, we have showcased about 30–35 assets recently, and one or two assets worth Rs 700 crore are likely to be sold to NARCL during H2.

RBI’s latest policy introduced M&A financing for banks. Do you plan to enter that space?

Yes, earlier we didn’t have a policy since it wasn’t permitted. Now, with RBI allowing it, we’re formulating a comprehensive M&A financing policy and matrix model.

As India’s second-largest public sector bank, PNB will play an active role in supporting the country’s growth story. We may even collaborate with other large banks for joint M&A financing deals.

On the new ECL (Expected Credit Loss) norms, have you estimated how much additional provisioning will be required?

We have done preliminary calculations. Based on the probability of default across stages 1, 2, and 3, we estimate an additional 75–80 basis points provisioning impact, translating to about Rs 9,000–10,000 crore in total.

This is to be spread over five years, and we have ample cushion. Our CRAR stands at 17.19%, and with ₹15,000–16,000 crore expected profit this year being ploughed back, we’ll comfortably meet the requirements. In fact, some capital release provisions from April 2026 onwards will further strengthen our position.