Having completed the merger with Oriental Bank of Commerce and United Bank of India and navigating through merger challenges, Punjab National Bank (PNB) is now required to support its borrowers and carry out direct benefit transfers and other government schemes for the benefit of the poor, amidst the coronavirus pandemic. Speaking on the eve of PNB’s 126th foundation day, SS Mallikarjuna Rao, MD and CEO, told Sandeep Singh that the bank is comfortable on financial and capital adequacy fronts for now. Stating that while the bank had earlier planned for a 8 per cent credit growth in FY21, the COVID-19 impact may limit it to around 6 per cent. Excerpts: How is the moratorium relief working out for customers? RBI has given moratorium for three instalments and we have passed it automatically to all customers. Among others things, we are looking at the fact that the daily cash withdrawal requirements are met and electronic transactions go through. We are seeing that the money is going to Jan Dhan account holders under direct benefit transfer. In the last week, we have released four new schemes. For Kisan Credit Card holders, additional funding of 25 per cent of their limit or Rs 50,000, repayable in periods. For self help groups, we are releasing funds of up to 5,000 for each member or Rs 1,00,000 for the group, and this is also repayable in three years. We are also giving personal loan equivalent to three months of average monthly salary up to a maximum of Rs 3 lakh, which again is repayable in three years. Then, we have another scheme for big customers which is additional working capital funding. Now, we are reaching out to them for utilisation of funds. How is the pace of PMJDY withdrawal? Till yesterday, around 15 per cent had taken it. It has gained pace over the last 2-3 days, both at ATMs and through banking correspondents. We are following certain measures to maintain social distancing and to avoid crowding. Do you see any uptick in credit growth? Our credit growth happened till second week of March and it was 3 per cent year-on-year. We were running negative till December 2019. We don’t expect investment or other demand in the first half of the fiscal and expect the investments to pick up in the second half onwards. How are you positioned both on capital and risk front? Would you require any fresh capital from the government? No, we don’t need capital from the government. As of December 2019, PNB’s capital adequacy ratio was 14.04 per cent, and at the end of March 2020, we expect it to be around 13 per cent, which is sufficient enough. RBI has recently decided to defer the implementation of the last tranche of 0.625 per cent of the capital conservation buffer by six months from March 31 to September 30. So I don’t think we will be breaching the common equity tier 1 (CET1) level or capital to risk assets ratio (CRAR). It will be much more than what is required by regulation. In September, we got Rs 16,000 crore because of which the capital adequacy is there. In December, we took Rs 1,500 crore as tier 2 and we have asked the government to permit for additional tier 1 for anywhere between Rs 3,000-4,000 crore. We also have more headroom in tier 2 to the extent of Rs 1,500-2,000 crore. We are planning these two in the first half of this fiscal. As far as QIP is concerned, which we are planning in H2 , we will assess after the first combined balance sheet is out after the end of June quarter. That will be the first balance sheet that will give us the position of CRAR. Originally we planned for a credit growth of 8 per cent and now we will have to see how COVID impacts and it may be around 6 per cent. Considering that, we will plan for QIP or other means in H2. The quantum we will finalise after June quarterly result. Why are banks not extending moratorium to NBFC term loans? It has not been extended automatically because the other window of targeted long-term repo operations (TLTRO) is working. Already RBI has come with two biddings and whatever fund we get from TLTRO bidding, we will be required to invest in bonds or CPs of the companies. Out of that, 50 per cent is earmarked for primary issuances and 50 per cent for the secondary market. Suppose a MF (mutual fund) has invested in NBFC and the MF is having a liquidity problem, we can purchase from the secondary market. Besides, NBFCs can also come in the fourth window that I spoke earlier about — the emergency credit facility regarding working capital. While state-owned banks are passing on rate cuts to customers, private banks do not seem to be so prompt. Why this stark divergence? If you look at the repo linked lending rates, it is mandatory for banks. When RBI cut the repo rate by 75 basis points last month, this got automatically transferred to retail and MSME borrowers beginning April 1. I don’t think there is any option for private sector lenders to not pass on that. However, in case of MCLR linked rates, the reductions are not on expected lines. We have already reduced 30 basis points from April 1. RBI is talking to everybody. The paradoxical position is that inspite of that, their credit growth is much higher. Can you see a reason to that? I think that because of the settlement of cases under the IBC process, the loan outstanding has gone down. Suppose if Rs 10,000 crore is settled, while the amount received is only Rs 5,000 crore (50 per cent haircut), but the loan outstanding is reduced by Rs 10,000 crore. Majority of the IBC accounts are in public sector banks and private banks have few. So, the credit growth of public sector banks should be understood more intrinsically with the outstanding that gets reduced because of the settlements.
