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Punjab & Sind Bank will improve underwriting standards: MD & CEO Saha

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Swarup Kumar Saha, managing director and chief executive officer of Punjab & Sind Bank, in an interview with Nikesh Singh says that the bank will improve its underwriting standards on the non-corporate side of the advances and will focus on garnering low-cost Current Account and Saving Account (CASA) going forward. Edited excerpts:


Q. How has the focus of the bank shifted to high-quality advances following the observations made by the government and RBI in recent meetings? 

As far as high-quality asset is considered, we have both corporate and non-corporate sectors. The credit profile on the corporate side has improved sequentially as AAA rated accounts have increased from 10.3 per cent in FY22  to 26.27 per cent in FY23. On the non-corporate side, as the observations have been made by the government and regulator, the bank will be improving underwriting standards, and the measures opted by the bank in the recent past will reduce future delinquencies and enhance collection efficiency.


Q. The deposit growth stood at 7.37 per cent in FY23 against the target of more than 12 per cent. How do you see the 8-10 per cent growth target for FY24?

We had a growth of 15 per cent in advances and more than 7 per cent in the deposit side in FY23. The gap of 8 per cent is in line with the industry trends. The deposit mobilisation has picked up in the last two quarters as the rate of interest has been hiked by various banks. However, we were not able to capture the market as much as we expected, so the bank was not able to build retail term deposits. Recently declared results show that both private and public sector banks have witnessed slower growth in CASA deposits in Q4FY23 than the December quarter (Q3). There has been a challenge in terms of garnering the resources of low-cost deposits. We thought that our dependency on bulk deposits should reduce. We took a conservative view in setting the deposit and credit growth targets for FY24, but the gap will exist. Our basic challenge will be to garner more current and savings account.


Q. The fresh slippage in the March quarter of FY23 has jumped to Rs 433 crore from Rs 243 in the previous quarter, what is your take on that?

This was primarily due to additional slippage in the agricultural side which is another area of bank’s asset quality with small-value accounts. Every bank has its own challenges on the agriculture sector. If you see the last quarter (January-March) of  FY22, there was a spike in the slippage of the agriculture segment and that has carried forward to some extent in the Q4FY23 also. But after these two years of slippage in the agriculture sector, the bank feels that things are now in a  better position, but this will be subject to external factors that affect the loan repayment capacity of the sector. 


Q. The bank target on Gross Non-performing Asset (GNPA) and NNPA for FY23 were achieved and stood at 6.97 per cent and 1.84 per cent respectively. How do you see the trend in FY24?

The bank has had robust recovery in the last two FYs with Rs 2143 crore in FY22 and Rs 2,151 crore in FY23. The bank has also done some technical write-off as per the regulatory ambit. The bank has set a target of more than Rs 1,500 crore recovery in FY24 which includes written-off loans as well. This will help the bank to get its GNPA less than 6 per cent and NNPA less than 1.5 per cent in FY24. 


Q. The bank’s provision coverage ratio rose by 117 basis points to 89.06 in FY23. What is the target the bank is aiming in FY24?  

The bank aims to achieve provision coverage ratio above 90 per cent by the end of FY24 from 89.06 per cent building the strength of the bank’s balance sheet. During the June and December quarters in the last financial year, the bank made provisions as the buffer was available.  


Q. How do you see the bank’s net interest margin (NIM) affected in FY24 with the transmission of policy rates?


We need to churn our deposit portfolio and at the same time garner deposits for the bank. In that scenario, we will lose certain margins. There is a shift from CASA to term deposits in all the banks that have published their results. The shift has been because the differential between the two has been very high. The bank is aware with the rate hikes transmission and has taken a conservative target in NIM at more than 2.95 per cent for FY24. 

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