In an exclusive interview with ET’s Atmadeep Ray, Goyal said the bank is capital ready to capitalize on the growth opportunities going forward. He said the revival of the economy as well as focused recovery initiatives would help the lender reduce NPA Up to a single digit and improve net interest margin to 2.9%.

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With the Indian economy showing signs of resilience amid the global turmoil, how much credit growth do you envisage for the banking sector?

The country has shown exemplary resilience from both the COVID-19 induced stagnation and the current global situation. Our strength is internal. We are primarily a consumption driven economy with a strong demographic dividend. When the developed world is going through a period of high inflation and policy makers are finding it difficult to reduce it, we are able to manage inflation expectations well. I am hopeful that the Indian growth story will continue.

As far as credit is concerned, it is expanding in double digits and will continue to do so despite rising interest rates. A strong economy, budgetary support from the government in the capital intensive sector, schemes like PLI (Production Linked Incentive Scheme) and ECLGS (Emergency Credit Line Guarantee Scheme) and better consumption demand will pave the way for better credit growth. The banking sector is also strong and well positioned to grab the opportunities ahead.

What is the credit growth target for PNB? Which sectors are most likely to contribute to PNB’s credit expansion?

We are envisioning 11-12% in credit growth. In the June 22 quarter, we crossed Rs 8 lakh crore in global advances, up 10% year-on-year. Our retail loan portfolio grew 11% and personal loans grew 25%. Apart from retail, we will also target sectors such as MSMEs (Micro Small and Medium Enterprises), manufacturing, renewable energy and infrastructure sectors like roads. All these sectors are getting support and increased investment from various policy initiatives.

As on June 30 this year, the gross non-performing assets (NPA) ratio of PNB was 11.2%. When do you expect the NPAs to come down to single digits? What is your guidance on NPA management?

Asset quality is one of the most important areas in determining a bank’s conditions. We have focused more on this aspect. Our NPAs have come down sequentially and yearly. The GNPA ratio improved by 306 basis points year-on-year and 51 basis points quarter-on-quarter.

Similarly, the net NPA ratio improved by 156 basis points year-on-year and 52 basis points quarter-on-quarter. In absolute terms also, our GNPA and NNPA have declined by 13.36% and 17.72%, respectively, on year-on-year basis. To improve the credit underwriting standards, we have established different verticals for sourcing, sanctioning and monitoring of loans. The underwriting standards have been further strengthened through PNB Lens (Lending Solutions) which is a system driven standardized credit processing application.

To enhance the collection efficiency, the bank has become the first bank to go live on BBPS (Bharat Bill Payment System) channel and also activated on payment gateway channels through which customers can use UPI (Unified Payment Interface), mobile banking can pay. Internet Banking with Debit Card. We have taken a lot of initiatives for NPA recovery and with better implementation, we expect the Gross NPA Ratio to come down to single digit and Net NPA level below 4% by the end of the current financial year.

What is your guidance on Net Interest Margin (NIM) for the year?

Certainly our margins will be better as compared to last financial year with increase in repo rate by reserves

And NIMs are likely to improve with transmission in lending rates. However, as the cost of deposits also rises to meet the credit demand later, the NIM will gradually stabilize. I expect it to be in the range of 2.80-2.90%.

You said that the banking sector is ready to take advantage of the opportunities that come with rising credit demand? Is PNB capital ready for this? How big are your capital raising plans this financial year?

For FY23 we have got approval for raising capital in one or more tranches up to Rs 12,000 crore – up to Rs 5500 crore through Basel IL Compliant Additional Tier-1 (AT1) Bonds and Tier-II Bonds up to Rs 6500 crore Up to Rs. The approach will be gradual and will depend on the growth of the business, market conditions and progress as per applicable laws/guidelines.

Out of the AT1 plan of Rs 5500 crore for the year, we have already raised Rs 2000 crore in July. Our CET1 (Common Equity Tier 1) stood at 10.94% during the current financial year even without raising any equity capital and the CRAR is expected to be around 14.5%.

We had raised Rs 7690 crore in FY22. Out of which Rs 1800 crore was raised through QIP (Qualified Institutional Placement), Rs 1919 crore was raised as Non-Convertible Full Paid Up Tier II Bonds and Rs 3971 crore was raised as Tier I Bonds.

Do you plan to add more branches and ATMs to your network in the current financial year?

Expansion and rationalization of banking outlets is an ongoing process and is crucial for the bank to improve its visibility, grow business, increase market share and build brand image/awareness. We are planning to open around 200 branches mainly in the southern and western part of the country. More than 1000 ATMs have been rationalized till March this year. We are planning to rationalize our branches and ATMs across geographies to further strengthen our position.

However, we are planning to keep the total number of our branches at around 10000 level to maintain a wider and deeper reach to our customers.

RBI has approved PNB’s investment plan of Rs 500 crore. What are your views on PNB’s future shareholding in the mortgage lender?

Yes, we have got RBI approval for investment up to Rs 500 crore to subscribe

Finance’s proposed rights issue up to Rs 2,500 crore. After the rights issue, the bank’s stake will come down below 30 per cent but above 26 per cent so that the bank retains the promoter status.

What are your plans with regard to your existing overseas subsidiaries and joint ventures? Would you like to expand overseas operations?

Our Bank has overseas business through branches in Dubai and GIFT City, Gandhinagar. We have two international subsidiaries, PNB International Limited London (PNBIL) and Druk Bank Limited Bhutan. Through a network of seven branches, PNBIL provides a wide range of financial services to its customers.

Druk Bank is the first FDI bank in Bhutan and serves the country with eight branches. Our International Joint Venture Everest Bank Limited is serving over 1 million customers through 117 branches. We are concentrating on our international business through these ventures and we do not have any further expansion plans for overseas locations.

After the merger of Oriental Bank of Commerce and United Bank of India, PNB had several real estate properties. Do you have any plans to make money from them?

After the amalgamation, rationalization of the existing network of branches, ATMs, offices was necessary. Most of the real estate assets have been utilized for setting up various vertical offices for greater operational efficiency. However, we have

Identified certain real estate properties for monetization.

Can PNB shareholders expect better valuations going forward? What’s in store for them?

We are a well capitalized bank managing to reduce the government shareholding to 73.15 per cent. We have started focusing more on our asset quality through stronger credit underwriting, enhanced collection efficiency and NPA recovery drive. We aim to drive credit growth of 11-12% on the back of a healthy demand pipeline.

With all such initiatives, it is expected that the profitability of the Bank will improve further going forward with quality credit growth. Gradual improvement in margins, stable operating efficiency with adequate provisioning buffer will certainly improve shareholder value in times to come.