Most of FCNR(B) flows will come in August, September; overall target achievable: PNB CEO Ashok Chandra

Foreign Currency Non-Resident (Bank) deposits, commonly known as FCNR(B) deposits, are fixed-term bank deposits that can be opened in India by non-resident Indians (NRIs), Overseas Citizens of India (OCIs) and Persons of Indian Origin (PIOs).

They allow overseas Indians to hold their savings in designated foreign currencies, such as the US dollar, pound sterling, euro, Japanese yen, Australian dollar and Canadian dollar, instead of converting their funds into Indian rupees.

Interest earned on FCNR(B) deposits is exempt from income tax in India, provided the depositor qualifies as a non-resident under Indian tax laws. Under the current framework, banks can offer interest rates linked to internationally accepted benchmark rates. Edited excerpts:

Coming to the recent RBI measures relating to FCNR(B) deposits, how has been the response so far? Are inflows meeting your expectations? What do you expect over the next three months?

Yes, the response has been in line with our expectations. So far, we have mobilised around $425 million. We have guided the market that we intend to mobilise $2.5 billion before September 30, and we are on track to achieve that target. In fact, we expect to reach it ahead of schedule.

Has the higher cost of funds created any challenges? Since depositors can also borrow overseas, has that affected mobilisation?

No, not at all. While the cost structure has increased, it has not created any significant issue for us. We have a large NRI customer base across several countries, and our teams are actively engaging with them. What has changed is the scale of our outreach.

Earlier, we may have focused on a relatively small group of NRIs. Today, we are engaging with a much larger customer base. Our objective is to broaden our overseas deposit base rather than depend on a limited number of customers.

More broadly, do you believe the banking industry as a whole will be able to mobilise around $50 billion under the scheme?

Yes, I believe it will. Most of the inflows across the industry are likely to come during the latter half of August and September, so I am optimistic that the overall target can be achieved.

Is there any significant switching by NRIs from NRE deposits to FCNR(B) deposits?

No, we are not seeing that. It would generally not be advantageous for customers to convert existing NRE deposits into FCNR(B) deposits at the current rates, as they would incur a loss in doing so. The scheme is more beneficial for customers bringing in fresh overseas deposits, and that is where we are seeing the inflows.

Credit growth has picked up significantly over the last few months. Which sectors are driving this growth? Do you expect the momentum to continue in the coming months and quarters?

The retail, agriculture and MSME (RAM) segment has performed very well. Throughout the last financial year, we saw healthy growth in every quarter across retail, agriculture and MSME lending.

The bank placed considerable focus on these segments during the last financial year. We conducted extensive outreach programmes across the country. The entire top management — including the MD and CEO, Executive Directors, Chief General Managers (CGMs), General Managers (GMs), and officials from the Head Office — visited the field. This created significant traction.

Retail lending grew by 17.5%, priority sector lending by 16.4%, and MSME lending by 19.8%, nearly 20%. Our corporate loan book also grew by around 10%. In fact, the underlying corporate portfolio grew by nearly 15-16%, but because we repriced and exited certain low-yield advances, the reported growth stands at about 10%.

We continue to see strong traction in the corporate segment as well. Overall, the bank has performed well across all segments, and this momentum has continued into the current quarter.

What is the situation in retail lending? There appears to be some moderation in unsecured loans. Which segments are driving retail growth? And what is your strategy on gold loans?

Our primary focus in retail is on housing loans, mortgage loans, lease rental discounting (LRD), and education loans. Education lending remains one of our highest priorities because it is important for the country’s development. These segments are showing healthy growth, and we are participating actively in that growth.

We are also increasing our focus on gold loans. Historically, PNB was not a major player in this market because there was limited regulatory clarity around the business. Since the Reserve Bank of India provided greater clarity through its guidelines, we have begun placing much more emphasis on this segment. Gold loans require very little risk capital, offer attractive yields, and historically have had negligible NPAs.

As a result, the bank has stepped up its efforts. During the current quarter, we have seen nearly 100% growth in our gold loan portfolio. We expect this momentum to continue because we intend to focus strongly on this business. Agricultural gold loans also help us meet our priority sector lending targets.

With our network of more than 10,300 branches, we believe we can build a sustainable gold loan portfolio.

On the deposit side, growth has been lagging credit growth, and competition for deposits remains intense. How are you managing this? What is your strategy?

Deposit mobilisation is not a challenge for us. Our strategy, both last year and this year, has been to mobilise only the level of deposits required to support our planned credit growth. Our Credit-Deposit (CD) ratio is around 73%, and our Capital to Risk-weighted Assets Ratio (CRAR) is above 18%. That gives us adequate room to grow our loan book.

There is no point in mobilising excess liquidity if it cannot be deployed productively. Therefore, we have targeted deposit growth of around 9-10% this year while aiming for credit growth of around 12-13%.

On the corporate lending side, which sectors are generating the strongest demand?

Renewable energy is one of the sectors we have identified as a champion area. We are growing faster than many players in this segment, with growth of around 30% in renewable energy financing. Apart from that, we are seeing healthy demand in infrastructure, particularly roads, data centres, agriculture-related businesses, trading activities, and engineering.

During the last financial year, we sanctioned nearly Rs 4 lakh crore worth of corporate loans. Our lending is well diversified across sectors.

Credit growth is improving significantly. Do you think this could eventually affect asset quality and lead to higher NPAs over the coming quarters?

I would like to share one important statistic. If we look at all the loans we have sanctioned between July 1, 2020, and June 30, 2026, the NPA ratio for those loans is only 0.42%. We have carefully analysed this data, and it has also been independently audited.

During these six years, we sanctioned loans amounting to approximately Rs 14.73 lakh crore, and the NPA ratio on this portfolio is just 0.42%. I believe this reflects the strength of our credit underwriting standards and the quality of our lending.

Looking ahead, what will be your key priorities in terms of credit growth, profitability, asset quality and return ratios?

Those are priorities for every bank. If you ask any banker, they will talk about credit growth, profitability, asset quality and returns. They remain important for us as well. Beyond those, I would like to highlight our technology initiatives. The bank is investing significantly in Artificial Intelligence (AI), Generative AI (GenAI) and quantum technology.

While many banks are still discussing quantum technology, we have already begun implementing it. We have deployed quantum-safe cryptographic solutions across 86 customer-facing applications. These solutions have also been certified in accordance with standards published by the National Institute of Standards and Technology (NIST), USA. To drive innovation, we have established a dedicated Innovation Lab within the bank. It is headed by a General Manager and supported by a strong team of technology professionals and young employees.

The Innovation Lab is focused on three key areas — AI, Generative AI and quantum technology.

AI is being adopted rapidly across industries. Do you think it could eventually lead to job losses in the banking sector? How do you see it helping areas such as credit operations and risk management?

Our objective in adopting these digital tools is to improve the customer experience. Customer convenience remains our highest priority. These technologies will enable our employees to engage more effectively with customers and provide better service.

At the same time, we will continue to upgrade the skills of our employees through training and reskilling so they can work effectively alongside these new technologies. The objective is to ensure that both our employees and our customers benefit from digital transformation.

So, are you saying AI will not result in job cuts?

No, we do not see AI leading to job losses. What AI will do is improve productivity, streamline processes, enhance the quality of our services and improve the quality of our data. These are the key benefits we expect from adopting these technologies.

On digital frauds, we continue to see incidents involving phishing, credit card fraud and other forms of online financial fraud. How do you assess the situation?

Overall, we are seeing a decline. I would like to emphasise that customer awareness is the single most important safeguard. Customers should never share their OTPs or passwords. They should change their passwords regularly and avoid clicking on suspicious links or responding to unsolicited messages. They should also be cautious of offers promising unusually high returns.

If we can educate a larger section of society about these basic precautions, we can significantly reduce digital fraud. Importantly, these frauds are generally not the result of breaches within the bank’s systems. They mostly occur because customers inadvertently share passwords or OTPs, or click on fraudulent links.

We have also introduced additional safeguards for senior citizens. If a customer aged 60 years or above attempts to prematurely close a fixed deposit of Rs 5 lakh or more through digital channels, the transaction is not processed immediately. Instead, the system generates alerts, and a representative from our call centre contacts the customer to confirm the transaction. We have built several such risk scenarios into our systems to provide an additional layer of protection.

What are your funding plans for the current financial year? Are you considering overseas borrowings?

At present, our primary focus is on mobilising FCNR(B) deposits. After that, probably around September or October, we will evaluate the possibility of issuing Medium-Term Notes (MTNs). However, that will require Board approval, and no such approval has been taken yet.