Punjab National Bank

NSE:PNB

Earnings Call Analysis

PNB Reports Robust Growth & Profits

Punjab National Bank (PNB) showcased an impressive year-over-year growth of 10.82% reaching a total business of INR 229,074 crores. A major highlight is the net profit surge of 253.39% to INR 2,223 crores, marking it the highest in the past 15 quarters. Deposits and advances grew by 9.35% and 12.90% respectively, with the CASA ratio slightly increasing to 42.47%. Net Interest Income climbed by 12.14% as the bank managed its asset quality diligently, slashing Gross NPA from 9.76% to 6.24% and Net NPA from 3.3% to 0.96%, reaching the highest provision coverage of 94%. Despite a slight dip in total capital to 14.63% due to growth in risk-weighted assets, the bank's cost-to-income ratio improved, and it remains on track to meet a recovery target of INR 22,000 crores for the financial year.

Business Performance and Profitability

Punjab National Bank has showcased an impressive year-over-year business growth of 10.82%, reaching a total business of INR 229,074 crores. Deposits rose by 9.35% to INR 13.23 lakh crores, while advances spiked by 12.90% to INR 9.67 trillion. Encouragingly, savings grew by 5.96% and current account deposits by 6.26%, leading to a combined CASA of INR 547,515 crores, representing 42.47% of total deposits. The share of RAM (Retail, Agriculture, and MSME) to total advances stood at 55.07%, with a collective value of INR 5.12 trillion. Demonstrating robust earnings, net interest income rose by 12.14% to INR 10,293 crores, and operating profit climbed by 10.77% to INR 6,331 crores. The net profit surged by a remarkable 253.39% to INR 2,223 crores, the highest in 15 quarters.

Asset Quality Improvement

The bank has seen a notable improvement in asset quality with a gross NPA reduction from 9.76% to 6.24%. More specifically, gross NPA dropped from INR 83,584 crores in December 2022 to INR 60,371 crores. Net NPA followed this positive trend, plunging from INR 13,114 crores to INR 8,816 crores, and the net NPA ratio contracted from 3.3% to 0.96%. The bank also fortified its provision coverage ratio, escalating it from 92% to a robust 94%.

Credit and Capital Management

Credit cost for the nine-month period stood at 1.56%, aligning with the bank's guidance of maintaining it within 1.5% to 1.75%. As for capital adequacy, the bank reported a total capital ratio of 14.63%, which is slightly decreased from 15.09% in the previous quarter. This decrease was primarily attributed to a rise in risk-weighted assets, especially within the NBFC portfolio. To strengthen capital, the bank has raised INR 1,153 crores in Tier 1 capital and approved plans to raise a further INR 12,000 crores in the FY 2023-24, with a future equity or FPO fundraise of INR 7,500 crores potentially in the pipeline for FY 2024-25.

Cost-to-Income and NIM Performance

The bank observed a marginal cost-of-deposit increase of 10 basis points to 4.94% but was able to offset this rise with a more substantial yield on advances improvement of 31 basis points to 8.54%. Despite a slight reduction in the cost-to-income ratio from 52% to 51.18%, the overall net interest margin (NIM) remained strong with Domestic NIM at 3.30% and Global NIM at 3.15%.

NPA Movement and Recovery Focus

Fresh NPA additions lessened to INR 1,793 crores compared to the previous quarter, with consistent quarter-on-quarter reductions over seven quarters. Cash recoveries totaled INR 1,828 crores along with INR 1,217 crores in upgrades. Including recoveries from technically written-off accounts, the bank secured INR 7,387 crores, targeting a substantial recovery of INR 22,000 crores.

Wage Provision and Other Provisions

The bank has set aside INR 800 crores provision for wage revision, up from INR 694 crores in the previous quarter, adjusting the provision rate from 14% to now 17%. This provision, along with INR 322 crores for AS 15 liabilities (pension and gratuity), reflects the bank's prudent fiscal management, anticipating an additional INR 1,200 crores recovery in the current quarter.

Underwriting and Special Mention Accounts (SMA)

Reviewing more than three years of data, the bank has underwritten loans worth INR 7.11 trillion, disbursed INR 6.48 trillion, and returned INR 5.08 trillion. NPA from this period stands at just INR 1,576 crores, a rate of 0.24%. SMA-2 was INR 11,362 crores in December 2023 which decreased to INR 7,136 crores by January 25th. The bank's consistent improvement across business aspects signals a likely reduction in NPA provisioning in the future.

Earnings Call Transcript 2024-Q3

[Anand Dama, analyst]

Good evening. On behalf of Emkay, we welcome all the participants to Punjab National Bank Third Quarter FY '24 Post Results Conference Call. From the bank, we have the entire top management, including MD and CEO, Shri Atul Kumar Goel; and Executive Director, Shri Kalyan Kumar, Shri Binod Kumar, Shri M Paramasivam, Shri B.P. Mahapatra; and the CFO. We would first request MD, sir, to briefly summarize the key highlights from the third quarter results, followed by outlook on the growth, margin and asset quality, post which, we will take questions from the participants. Over to you, MD, sir.

[Atul Goel, executive]

Thank you very much, Anand. As far as business is concerned, the total business has grown by 10.82% Y-o-Y and total business stood at INR 229,074,000 crores. As far as the deposit is concerned, there is a growth of around 9.35% in the deposit, which has improved from the 12.10 lakh crores in the last year on the December '22, to INR 13.23 lakh crores in current quarter -- current means, last quarter of the December 2023.

Advances has grown by 12.90%, and it stood at INR 9.67 trillion. As far as savings is concerned, there is a growth of 5.96%. And current, there is a growth of 6.26%. And the CASA -- total CASA stood at 547,515 crores. And total percentage of the CASA to total deposit stood at 42.47%, and it has little improved from the last quarter, which was 42.15%.

Share of the RAM to the total advances is 55.07%, and total RAM stood at INR 5.12 trillion. As far as net interest income is concerned, it has improved from the INR 9,179 crores on the December '22 quarter 2, INR 10,293 crores. There is an increase of 12.14%. And the operating profit, which used to be around INR 5,715 crores, increased to INR 6,331 crores with a growth rate of 10.77%. And both the numbers, net interest income as well as the operating profit is higher than the last quarter.

Last quarter, NII was INR 9,923 crores, and the operating profit was INR 6,216 crores. As far as net profit is concerned, net profit is concerned, it was INR 629 crores in December 2022 quarter last year and it has increased to INR 2,223 crores. There is an increase of 253.39%. For the information to all my analysts also, the net interest income as well as the net profit, it is the highest in the last 15 quarters of the Punjab National Bank.

As far as the asset quality is concerned, there is too much of improvement in the asset quality, whether it is a gross NPA, whether it is in net NPA, whether it is a provision coverage also. Gross and NPA, which used to be around 9.76%, has reduced to 6.24%. And if you compare from the corresponding last quarter, last quarter it was 6.96%. As far as the amount is concerned, INR 83,584 crores the gross NPA was in December '22, which has reduced to INR 65,563 crores in September '23 and further improved to INR 60,371 cores.

Similarly, the net NPA has reduced to INR 8,816 crores from the figure of INR 13,114 crores from the last quarter, that is September '23. And a percentage of the NPA, which used to be around 3.3% in the December 2022 and 1.47% in the September '23, has reduced to 0.96%. The provision coverage ratio has increased to 81.5% from the December '22 and 92% from the September '23 to 94%. As far as credit cost is concerned, we have given the last time, the credit cost will remain in the range of the 1.5% to 1.75%. And credit cost in the last quarter, December quarter, it was 1.26%. And the September quarter, it was 1.31%. And the 9-month credit cost is 1.56%. The absolute number -- the NPA provision, which was INR 3,018 crores in September '23 has further reduced to INR 2,993 crores. Slippages, as far as slippage is concerned, slippage has reduced to 0.81%. And the total slippage is hardly INR 1,793 crores. And the slippage in the last 7 quarters, every quarter, it is reducing. As far as capital is concerned, total capital is 14.63%. It has a little bit reduced from the 15.09%.

In the last quarter, September '23. It was majorly on account of the increase in the risk weighted assets in the NBFC portfolio. If you see my total risk weight, RWA, it has increased around INR 31,000 crores from September '23 to December '23. And out of the INR 31,000 crores, around INR 27,000 crores on account of the increase in the RWA in the NBFC. So this is the reason of the reduction in capital [indiscernible]. So although we have also raised the INR 1,153 crores in the last quarter Tier 1.

As far as the CET-1 is concerned, 9.86%. AT-1 is the 1.87%. Total Tier 1 is the 11.73% And Tier 2 is the 2.90%. The total is 14.63%. And we are -- as you are aware, we have already got the approval of the Board to raise the capital of the INR 12,000 crores in the current financial year '23-'24. Out of this, INR 7,000 crores was for the Tier 1, INR 5,000 crores for the Tier 2, against which we have reached INR 3,094 crores Tier 2 in the earlier quarter. And Tier 2 -- Tier 1, we have raised total INR 4,153 crores; INR 3,000 crores, we have raised in the September quarter; INR 1,153 crores raised in the last quarter, that is December quarter.

As far as capital is concerned, another in the last Board meeting, we have got the approval of the Board for raising INR 7,500 crores equity or FPO in the next financial year'24-'25.

Cost of deposit, which was 4.84% in the September quarter, has increased to 4.94%. There is an increase of 10 basis points. But as far as yield on advances is concerned, it was 8.23% in the September quarter, which has improved to 8.54%. It means there was an increase of around 29, 30 basis points against the 10 basis points increase in the deposit cost. This is one of the reasons there is an increase in the NII of the bank.

Cost-to-income so, although it has been a little bit declined as compared to the last quarter, it was 52% in the September and it is 51.18%. As far as NIM is concerned, total NIM, Domestic NIM is 3.30% and the global NIM is 3.15%. We have given the guidance, our NIM will be in the range of 3%. Our guidance will remain same.

As far as the movement of NPA is concerned, the fresh addition was INR 1,793 crores as against INR 4,072 in December '22 quarter and INR 1,826 crores in the September quarter. If you see the slippage data from the last 7 quarters, it is reducing every quarter.

As far as cash recovery is concerned, it was INR 1,828 crores, and upgradation is INR 1,217 crores. Total recovery for the quarter, December quarter, including the recovery from the technical written-off, INR 7,387 crores. We have set a target for INR 22,000 crores in the current financial year. As against the INR 22,000 crores, we have already recovered INR 17,000 crores. I think we will be in a position to achieve the -- whatever the target we have fixed for the recovery in the current year.

As far as other thing is concerned, I would like to tell you regarding the wage impact. AS 15 provision, we have made around INR 322 crores. And arrear provision. Arrear provision, last quarter, September quarter, it was 694 crores. And at that time, we have made a provision of 14% from the November '22 from where the wage revision is due. Now we have made a provision of INR 800 crores in the last quarter, that is a December '23 quarter. And we have made a provision of around 17% where the negotiation has been done.

As far as credit cost, I have already discussed, slippage is concerned. Slippage in the December quarter, mainly from the RAM; Agri, INR 439 crores; MSME INR 709 crores; Retail, INR 434 crores; and others were INR 13 crores; and INR 198 crores in the existing NPA account, where we were having the non-fund exposure that has been devolved.

Further for the information to all of you, as far as floating and fixed rate is concerned in the advances, around 90% in the -- linked with either MCLR or repo or the repo ELITE, and around 9% to 10% in the fixed rate.

And one more thing for the recovery from the NCLT. The first quarter recovery from the NCLT was INR 566 crores. Second quarter, it was INR 556 crores in the [indiscernible] year. In the last quarter, December quarter, it was INR 1,831 crores. And we are expecting we will be in a position to recover around INR 1,200 crores in the current quarter, that is March quarter.

One number I would like to give, which normally I give you every time, the new underwriting. This data is from the July 1, 2022, December 31, 2023. It is a data of around more than 3 years, 3.5 years. Total Loan, new underwriting, we have [indiscernible] INR 7.11 trillion. The disburse is INR 6.48 trillion, and our return is INR 5.08 trillion, against which the NPA is only INR 1,576 crores, which is coming around 0.24%. I will give you further breakup of the sector by. Agri , it is 0.31% slippage. MSME, 1.49%. Retail, 0.19%; as far as Other is concerned, it's hardly 0.01%.

As far as SMA is concerned, SMA-2 was INR 11,362 crores in December 2023. And as on date, on 25th of January, it was around INR 7,136 crores. And December '23, the SMA-2 more than INR 5 crores and above was only INR 1,336 crores. From this, you will see all-round performance, whether it is business performance, whether it is a profitability performance, whether it's a performance in the assets quality. There is an all-round performance in all the -- and the provision requirement is reduced quarter-by-quarter. And on account of the 94% PCR, we are of the view, there will be drastic reduction in the NPA provisioning in times to come.

So with this word, this is the one brief about the financial performance of the quarter 3. Now you are open for the question. And I would like to give the -- whatever the query you will raise during the course of the discussion. Thank you very much. And thank you, Anand ji. Thank you all, the person who is attending this virtual meeting.

[Anand Dama, analyst]

Thanks a lot for the update. Sir, first question I have is about, you talked about the wage revision provision that we have made about INR 800-odd crores during the current quarter. But when we look at the staff cost, it remains largely flat on a quarter-on-quarter basis. So that is basically -- can you just explain like, how basically it has remained largely flat despite making this kind of provision? Number one.

Number two, a lot of banks that we have spoken recently, they have said that apart from the wage revision provision, they have also taken some provision on the increase in the retirement liability. For example, Canara Bank talked about INR 250 crores additional provision that they have made. Have we also made some kind of provision on the retirement line during the current quarter?

[Atul Goel, executive]

Yes. Anand, Point number one, this wage revision. This was INR 394 crores in September '23 quarter, which has increased to INR 800 crores. This is on account up to -- last quarter, September quarter, we have raised from the 10% to 14% from the November '22 because wage revision due is in November '24. And INR 800 crores, we have made a provision from the November '22 to until December '23, 17%. This is point number one.

And we have also provided the provision for the pension also, on the increased wages is also, which I am telling you every quarter. Every quarter, we are making the provision for the increased liability for the [indiscernible] wage revision. We have made 100% provision last quarter itself. Your question is, why the -- there is the same staff cost in the December '22 and the December '23. The reason is that in December '22, the AS 15 provision was INR 1,330 crores, which has reduced to INR 322 crores in this current quarter, [Foreign Language] December '23 quarter.

Reason was that because in the December '22, the G-SEC rate 7.33%. And the September '22, the rate was 10 basis points higher. On account of the reduction and the 10 basis points, we were required to provide additional INR 800 crores in the December '22 -- this in the reason, it is flat.

[Anand Dama, analyst]

That's very helpful. Now we'll open up the floor for questions. [Operator Instructions]

[Atul Goel, executive]

Anand, [Foreign Language] I'll one more thing also. I told you, INR 800 crores for debt. Total provision was INR 1,330 crores, December '22, for the clarification, yes.

[Anand Dama, analyst]

[Operator Instructions] First question we have from [ Mahrukh ].

[Unknown Analyst]

Congratulations.

[Atul Goel, executive]

Thank you very much, Mahrukh. Thank you.

[Unknown Analyst]

So sorry, but -- so I have 2 questions. One is on wages. You explained, but just to get the math right. So basically, the provision for the quarter -- only for the third quarter is INR 322 crores, correct?

[Atul Goel, executive]

Yes, yes. Yes.

[Unknown Analyst]

Yes. And then what is the backlog provision?

[Atul Goel, executive]

Mahrukh, that is the AS 15 provision. Both are different provisions. INR 800 crores provision in the December '23 for the wage revision. And INR 322 crores is the provision for the AS 15. That is related to the pension liability or the gratuity liability.

[Unknown Analyst]

Okay. But sir, so basically, you had said that -- okay, so last quarter, what was the AS 15 provision? Because there seems to be a write-back, right?

[Atul Goel, executive]

No, no, no. Last quarter means September '23? You were telling, last quarter means September '23 or December '22?

[Unknown Analyst]

December -- September '23.

[Atul Goel, executive]

September '23, the arrear provision was INR 694 crores. And in this particular quarter, we have increased the provision, which earlier we used to make 10%, we have made 14% from the November '22. The total was INR 694 crores. And the INR 580 crores was the provision for the AS 15.

[Unknown Analyst]

Okay. So again, INR 694 crores plus INR 580 crores, you have provided INR 800 crores plus INR 332 crores.

[Atul Goel, executive]

Very, very, very much right. Absolutely right, INR 800 crores plus INR 322 crores.

[Unknown Analyst]

Okay, sir. And so my next question is actually very basic. So you have a domestic LDR of around 72%, right? And so it's one of the lowest. And next quarter, say, in the March quarter, that is in the current quarter, see if your deposits grew only 2% because you have excess LDR. So suppose they grew only 2%, the year-on-year deposit growth will look as low as around 6%. So would you monitor it that way? Or would you get it from an overall LDR point of view only? Because in the last year...

[Atul Goel, executive]

Please go ahead.

[Unknown Analyst]

In last year's fourth quarter, you had a very, very strong deposit growth like a few other banks. That's why I'm asking. So the overall year-on-year growth will look lower than current. But that should be okay, right? Because a lot of managements like to focus even on year-on-year growth. That's why I'm asking you.

[Atul Goel, executive]

Yes, yes. I will give the reply of your question, Mahrukh. First, if you see my CD ratio, loan-to-deposit ratio, net advance to total deposit is 69.24%. So it is less than 70%. There is a worry for those who -- if you are having more than 75%. If you see the gross advance to total advance, then CD ratio is the 73%. Point number one, as far as deposit is concerned, deposit, the 9.35% of the growth of the deposit as against 12.90% of the growth. Reason behind why we are not raising the deposit because 1-year deposit, we can raise, no doubt, but it is very costly. Because today, the rate of the 1-year deposit, et cetera, has been -- we are not giving the rate to the bulk deposit. And because I am having the excess SLR also of around more than INR 80,000 crores. In case of the need, I can use that channel also.

And for the Punjab National Bank, deposit is not an issue because we are having 10,000 branches. In last year, '22-'23, we have opened around 85 laves account, saving bank accounts; 2 lakhs account in the current account, which number has increased in the first 9 months of the current financial year, 76.65 lakhs account we have opened. And the current account, we opened 1.97 laves. Even if you see my deposit growth in the term deposits, less than INR 2 crores is much more as compared to the bulk deposit.

I will give you the data. My total term deposit is INR 7.71 lakh crores, which has increased to INR 7.75 lakh crores. Even in less than INR 2 crores [Foreign Language] 540,000 [Foreign Language] 550,000, there is also increase of the 10,000. So we are not depending on the bulk deposit. I don't require the bulk deposit -- because it will impact my, unnecessary, the NII.

[Unknown Analyst]

Okay. Sir, and just one very last question. You recovered a very big amount from NCLT, INR 1,800 crores something. How much of that would have been recognized through the NII line?

[Atul Goel, executive]

[indiscernible] normally, Mahrukh, normally every quarter because we are having the good portfolio of the NPA because we are having the technical written-off as well as the -- and gross NPA also INR 60,000 crores, NNPA INR 90,000 crores, around INR 500 crores to INR 600 crores. It depends on the every quarter. Normally, INR 500 crores to INR 600 crores is coming in the NII.

[Unknown Analyst]

Sir, this quarter also the same?

[Atul Goel, executive]

A little bit in this quarter around INR 100 crores was more as compared to the earlier quarter, INR 150 crores to INR 150 crores.

[Anand Dama, analyst]

[Operator Instructions] Jai, you are next in the line.

[Jai Prakash Mundhra, analyst]

Congratulations on a great quarter. Great, sir. Excellent number and excellent performance on asset quality. So I have a question, which partly you have already answered. But on wage provisions, right, so 15% going to 17% will also have some bearing on the AS 15 liabilities also, right? So have you provided anything on that aspect?

[Atul Goel, executive]

Yes. Jai Mundhra, we have already provided. We have already provided, as I told you, because there are 2 things: one is the wage revision. Then increase in the pension liability on account of wage revision. Then -- because one more thing I may clarify you. We have made a 17% provision. Normally, it will not be the 17% on the basic because there is a lot of components. Some part will go to HRA, some part will go to the leased accommodation, so many things. But we have provided 17% of the basic, which will not be the case. Actually, it will not be the 17% on the basis. Whatever the impact will be on the pension, because that factor we have already provided in September itself, yes.

[Jai Prakash Mundhra, analyst]

So in a way, the 17% you are saying, that will take care of part provisioning needed on the pension AS 15 -- enhanced AS-15 liability?

[Atul Goel, executive]

Yes, yes. We have provided enhanced AS 15 also provided and the 17% we have provided for the basic pay, although it will not be that [ 117% ], actually.

[Jai Prakash Mundhra, analyst]

Right. Okay. But sir, I mean, the only question is there are a few banks who have started providing on the enhanced AS 15 also, but that is okay. So that is -- that clarifies this thing.

Secondly, sir, there is some treasury loss. There's loss on the revaluation of investment, right? And is there any -- what is the nature of this INR 10,000 crores of negative MTM or negative revaluation of investment? What is the nature of the that?

[Atul Goel, executive]

Yes. Jai Mundhra, there was one account which has been changed the classification from the NPA to standard [Foreign Language] there was a INR 700 crores provision in the mark-to-market loss because it has been shifted from the NPA to standard [Foreign Language] provision for the standard mark-to-market, we have to provide on the -- above the operating profit.

The same amount was released in the operating profit. You have seen we already mentioned in our clarification also, on account of the -- because if you see my total provision, total provision was less than the provision on the NPA. [Foreign Language] there were the release.

[Jai Prakash Mundhra, analyst]

Right. Okay. Understood. And sir, a few question on margins, sir. So we see this quarter the yields have expanded by 30 basis points, right, the loan yields. So, a, is there any one-off or you think that you are able to, let's say, effectively implement the MCLR regime or higher rates? Or this kind of a yield increase may not be very sustainable?

[Atul Goel, executive]

Mundhra, last time also and at this time I'm also telling, as far as our guidance for the NII is concerned, that will remain in the range of the 3%. And the yield of advances, it may be plus/minus, let, maybe 5 basis points, 10 basis points. But our endeavor is our NII in terms of the actual numbers should increase quarter-by-quarter. We will try to maintain, Jai Mundhra, in the absolute number, NII in the current quarter itself. But hardly there may be a change in the NII also because 3.3% is my NII as on date, domestic 3.15%. Because some of the transaction, I am not getting 3%. If I'm getting the 15% -- only 20 basis points, 30 basis points, [Foreign Language] I am not allowing that transactions should go.

Absolute number, we will try to maintain. This is -- every quarter, we are doing like this. This is the reason our NII in terms of the number is increasing.

[Jai Prakash Mundhra, analyst]

Right. No, that is very clear, sir. And so related to that is, sir, that NBFC exposure actually has gone up, right? And there are a few banks which have said that post the RBI risk-weight hike, they have started implementing higher yield on NBFC. And in the process, they have seen some churn from that book and they have let it go that, that exposure. Did the same thing happen to us as well? Or that may come up later in some point of time?

[Atul Goel, executive]

Actually, Jai, there is no much difference. If you see, hardly only INR 4,000 crores in case because [ 1.23% to 1.27% ] because we are having the book of the [ 9.7% ], sometimes some of the loan in the short term in the nature also. There is not much impact. But as far as increase in the risk weight is concerned, we are negotiating with the higher pricing to the existing as well as the proposed loan also.

[Jai Prakash Mundhra, analyst]

Right. And last question, sir. What is your sense on the corporate loan growth for PNB and also in the system. But for PNB, right now, I think we are running at -- loan growth of corporate book is now running, if I were to calculate, then we are running at around this quarter, we have seen around 4% quarter-on-quarter growth and around 10%, 11% Y-o-Y growth. Do you think that over the next 12 to 18 months, it can rise to like 15%, 20% or more likely to remain at 10% around, the corporate growth, large corporate growth?

[Atul Goel, executive]

Corporate [Foreign Language], I think we may think a little bit increase also because some of the corporate, they have started utilizing the working capital, which they aren't utilizing. There is some demand in the CapEx also, but not too much. But there isn't too much of demand in the infra as well as the road, et cetera, also.

I do not foresee immediately there will be an increase of the 15%. But I can think there will be some jump also from the 10% to 12% also. But as far as our guidance is concerned, our guidance will remain same, 12% to 13% for the current financial year. And next year, we will see what will be the scenario in the end of the March quarter, then we will decide what should be our [ CAR ] growth for the next financial year.

[Anand Dama, analyst]

[Operator Instructions] [ Rahul ], your next in the queue. You can ask the question.

[Unknown Analyst]

Sir, a couple of questions. First of all, a great set of numbers. So first question, can you give, as your personal loan and vehicle loan, et cetera book is too small compare to the peers, what is the target? Can we expect the similar kind of run rate of growth in high mid-teens or any percentage of loan book you want to achieve, especially in the unsecured and the retail part, apart from the home loan side?

And second question, sir. How much of NCLT-based projects recovery you are being expected. So for the next 2 years, what kind of recovery can we expect? Because currently, we are witnessing the recoveries and upgrades are higher than the slippages run rate. This trend shall continue for the next year itself also? These are the 2 questions.

[Atul Goel, executive]

[ Saurabh ] (sic) Rahul, as far as retail unsecured loan is concerned, there is 2 questions, the banking loan and the unsecured. First, I will take the unsecured loan. Total unsecured loan is INR 26,800 crores, out of which around INR 3,500 crores is the education loan, then around INR 4,300 crores is the personal loan to the pensioner, and the remaining is the personal loan. And out of the personal loan, 2 types of the personal loan: one is the digital. Digital is around [ INR 4,328 crores ], remaining is the physical.

The NPA percentage in the digital personal loan is hardly 0.40%. Now your question is, what is your vehicle loan growth as well as the personal loan...

[Unknown Analyst]

Sorry to interrupt, sir. I got a point on growth side. I'm expecting smaller rate of growth will be there for the next 1, 2 years, looking at the peers where the loan book as a percentage of share is there.

[Atul Goel, executive]

I think there will be -- there is a good demand in the retail side, either in the vehicle loan, in the housing loan. Housing loan, if you see my growth is 30%. Vehicle loan growth is around 26%. And personal loan -- because base was less. This was the reason it a growth 30%.

Otherwise 30%, on account of the base, it is looking on the higher side. But the growth is -- there is a good demand in the -- all the retail side, even for the MSME as well as the agriculture. The RAM sector, in total, I can say whatever the demand is there, that will remain there.

[Unknown Analyst]

So on RAM side, you will be continuing to grow at 15%, 16%, which is the current run rate?

[Atul Goel, executive]

Yes. That is our focus area, yes.

[Unknown Analyst]

Okay. And sir, on the recovery from the NCLT. Will the trend of recovery and upgrades higher than the slippages for the next year, FY '25?

[Atul Goel, executive]

No. I think you should not concentrate only on the NCLT also. Because I am having the stock other than NCLT also. Because last time, we have taken -- our recovery '22-'23 [Foreign Language], recovery should be more than the slippage. And all the quarters of '22-'23, recovery was more than the slippage.

And the total target of INR 32,000 crores, against which we have achieved INR 29,000 crores. This year, [Foreign Language] '23-'24 [Foreign Language], we have set a target recovery should be double of the slippage. Again, if you see the last quarter, December quarter [Foreign Language], the slippage was hardly INR 1,763 crores and the total recovery was INR 6,387 crores -- it is 3x.

We will not concentrate on the NCLT because we are having the other stock also -- our recovery should be double. That is our target [Foreign Language] recovery should be double in the current financial year. Even for the next financial year, we will set the target. What will be the slippage, recovery should be double because we are having so much of stock. INR 60,000 crores is the gross NPA, then INR 90,000 crores book is the TWO also.

You question is recovery from the NCLT. Because if you ask me, the INR 6,300 crores which we have recovered in the December, the recovery from the NCLT is only INR 1,831 crores -- it is 1/3 only. We should not think only for the NCLT is the only reason. There is other recovery measure also.

[Unknown Analyst]

And sir, just a related question, as your PCR has reached to a very optimum level. But what kind of credit cost guidance you would be giving for the next year, sir? Because I'm just asking this question means within that 84.5%, has PNB taken some contingent provision buffers or extra buffer in case of any contingencies taking ahead in FY '25? Or are we at intervals for some higher risk weights or et cetera?

[Atul Goel, executive]

Rahul, actually [Foreign Language] 94% PCR. Moment 94% PCR has been there, there will be a very less requirement of the provision for the NPA. Because if you see my net NPA, net NPA is only INR 8,000 crores. I will -- if I will make the provision of INR 8,000 crores, there will be no requirement. And if slippage is half of the recovery also [Foreign Language] credit cost definitely is bound to reduce because for the current financial year '23-'24, we have given the guidance of the 1.5%.

If you see the 9-month data, it is coming 1.59%. But for particular December quarter, it is 1.26%. I think we can easily assume -- in '24-'25, credit cost would not be more than 1%.

[Anand Dama, analyst]

Sir, before we take up the next question, we have 1 question in the chat box regarding your tax rate. Sir, your tax rate still seems to be on a higher side, more than 35%. When are we basically going to shift to the new tax regime? So that is basically the question that we have on tax rate.

And the another question that we have is on the interest income. What is the amount of interest recognition that we have done on the recoveries that we have had during the current quarter?

[Atul Goel, executive]

Okay. Dama, as far as tax rate is concerned, we are still using the old regime also. We have not shifted to the new regime. That is under discussion. We are discussing with our tax consultant what is the appropriate time because there is some other deduction, et cetera also -- as on date, we have not decided. We will take an appropriate decision at an appropriate time. It is under consultation.

Your another question, what was the interest income on the recovery from the NPA. Normally, Anand use to -- Mahrukh has also the same question. Normally, it remains in the INR 500 crores to INR 600 crores every quarter, sometime plus/minus INR 50 crores, INR 100 crores. But this, as I told you earlier also -- this time, there was one recovery in the bigger account -- there was INR 100 crores extra in this particular quarter.

[Anand Dama, analyst]

Okay. And do you have any pipeline like of big recovery and because of which that should lead to higher interest income going forward?

[Atul Goel, executive]

We always hope for the higher recovery because INR 60,000 crores, the gross NPA; INR 90,000 crores, the technical write-off. We are having the book of the INR 150,000 crores. Every time, it is our focus area -- how much we will be in a position to recover the existing outstanding NPA account. That is a very focused area. Whatever the tools available, whether it's NCLT, whether it's [ NARCL ], whether it is [indiscernible]. See, we have not left out any opportunity which is available to us for recovery of the stuck amount.

[Anand Dama, analyst]

The next question, we have [ M.V. Mahesh ].

[Unknown Analyst]

Sir, could you just let us know which sector contributed to this higher recovery for the quarter from this NCLT account?

[Atul Goel, executive]

NCLT account, there are 2 major accounts. I think to give the name is not appropriate in this forum. So 2 key accounts. But I can tell you there is 2 big accounts, which was recovered in this December '23 quarter.

[Unknown Analyst]

These recovery rates, how are they looking, sir, from the NCLT accounts?

[Atul Goel, executive]

NCLT -- I will give you the data because it depends on the resolution also. Because you cannot set a criteria -- what will be the recovery in a particular quarter. You can assume for the whole of -- this you can make a recovery from the NCLT. If you see the trend, INR 566 crores was in the first quarter, then INR 556 crores in the second quarter. And the third quarter recovery from the NCLT was INR 1,831 crores. And we are thinking around INR 1,200 crores odd number will be recovered in the last quarter, [Foreign Language] March quarter.

So if you see around INR 4,000 crores to INR 5,000 crores easily. INR 4,000 crores to INR 5,000 crores we can fix every year -- we can make a recovery from the NCLT. But it depends on the total legal -- sometime recovery, we are thinking coming in this particular quarter, but sometimes it shift to the next quarter. It depends on the resolution process.

[Anand Dama, analyst]

Next question we'll take from Rakesh Kumar.

[Rakesh Kumar, analyst]

Good numbers. Good set of performance overall. So sir, a couple of questions. Firstly, sir, this quarter, the interest accrual is from the recovery in the written-off, is it close to around INR 1,100 crores, INR 1,200 crores, sir, in the interest income line, sir?

[Atul Goel, executive]

You are asking for the recovery on the technical write-off account?

[Rakesh Kumar, analyst]

Yes, sir. Yes, sir.

[Atul Goel, executive]

Rakesh -- recovery from the written-off account is INR 2,055 crores.

[Rakesh Kumar, analyst]

Interest income line, sir, how much would be in the interest income line, sir? INR 1,100 crores to INR 1,200 crores?

[Atul Goel, executive]

No, no, no. INR 2,055 crores is the recovery from the written-off account. And as I told you -- normally, it remains interest income -- INR 500 crores to INR 600 crores. There is around INR 700 crores. Because I told you, in this particular quarter, there was some excess recovery. But I may clarify you, INR 2,055 crores recovery [Foreign Language] but there is some provision also against this recovery. Because if there's change of management, we have to make the provision in the investment side also.

[Rakesh Kumar, analyst]

Okay. And sir, in the Slide #30, like there is a mention of gross NPA sector-wise, industry-wise that we have given. So in the energy, there is some increase in the gross in the number. So from INR 450 crores to around INR 1,300 crores. So if you can help us understand, sir, where this increase has happened on this...

[Atul Goel, executive]

Rakesh, I must tell you also, there was one account which was technical written-off, which was technical written-off but later on, it has been restructured now. This was the reason, there was an increase in this NPA figure, yes, because it was in the technical written-off books, now because when we have restructured the account, and they are making the payment as per restructured terms -- it has come in the life book. You see, otherwise, there is no addition. Actually, there is no addition.

[Rakesh Kumar, analyst]

But sir, after having written off the book from the balance sheet, so how do we take it back in the balance sheet then?

[Atul Goel, executive]

[Foreign Language] that is a book entry. Account has remained in the book. [Foreign Language] amount has remained in the book. You have made a provision. This is also one of the [indiscernible] process.

Because normally, if we are writing off the account -- we are getting the cash recovery, but one of the account on account of the change in the because now they are having the PPA agreement, et cetera. So -- now unit is running. Unit is running -- then we have restructured the account. So this is the reason it has increased, yes.

[Rakesh Kumar, analyst]

But instead of, sir, -- instead of restructuring the account, if we recover the account, the TWO account. So was it written off or it was only 100% provided, sir?

[Atul Goel, executive]

As I told you, it was 100% provided and written off. I will explain you off-line also. Yes.

[Rakesh Kumar, analyst]

And second point was, sir, on the NBFC Private, sir. There is a good growth that we have seen in the NBFC Private in the -- within the NBFC vertical, the Slide #14. So considering the risk weight increase, sir, how do we pricing the fresh exposures?

[Atul Goel, executive]

Whatever you are seeing, 53,000 to 60,000 private NBFCs also. So this was mostly before the increase in the RWA. And I may clarify one more thing also.

There is 1 sector. If you are giving the loan to the private NBFC for the priority sector, suppose for the agriculture, for the MSME sector also -- there is no increase in the risk weight. So this the reason exposure has increased, even the prices will not increase in the sector where the loan is for the priority sector.

For the other -- you're asking about the pricing also. Definitely, for the other NBFCs, we have the -- classification is not coming the priority sector. We are charging the higher rate -- around -- we have made a calculation on account of the increase in the RWA. There is around 20 to 25 basis points increase in the pricing. So there, we are demanding.

[Rakesh Kumar, analyst]

Okay. Great. Great, sir. Great, sir. And sir, last question, sir, on the ROA. What is the estimated ROA or guidance you can provide, sir, for maybe FY '25, sir?

[Atul Goel, executive]

1%. 1%, I have given the guidance because every analyst asking when you will be reaching the 1% -- we have told 1% ROA, I think we should be in a position to reach at the exit of '24-'25.

[Rakesh Kumar, analyst]

At the exit. Okay. But overall, sir, overall, on an average for the full year?

[Atul Goel, executive]

Maybe a little bit less also. But 1%, I think, we should be in a position to achieve at the exit of the '24-'25.

[Anand Dama, analyst]

Next question we'll take the [ Ankit ].

[Unknown Analyst]

Sir, my question is, the performance of the bank is improving quarter-by-quarter, looking good. Everything is looking good. Sir, my question, sir, gross NPA and net NPA, there is a long gap, like net NPA have reached below 1%. There is almost nil gap to cover. But in GNPA, you have a lot to cover, sir, why this -- so much of the margin, sir?

[Atul Goel, executive]

You tell me, Ankit, only one thing. Suppose my net NPA is 0, suppose -- because as only INR 8,000 crores number is the net NPA. Suppose we'll make the provision of INR 2,000 crores in the fourth quarter. Let us assume, INR 2,000 crores we are having the operating profit of the INR 6,000-odd crores. And after 4 years, it will become 0. So what is the relevance of the gross NPA number?

Gross NPA number can be reduced by writing off the -- we are not choosing that route also, otherwise, gross NPA number can also be reduced if we are doing the more write-off. But if you see this 6.24%, it was 11.78% in March '22. It is hardly 50% from the March '22. It takes some time to build the gross NPA number, yes.

[Unknown Analyst]

Okay. Okay. Sir, my next question is, sir, how you're seeing the growth of India, in which PNB can participate, which sectors, forthcoming new sectors are being coming where you are seeing a great loan growth? How you are defining the next 1 or 2 years as an economy point?

[Atul Goel, executive]

All the sectors, Ankit. We are one of the largest bank of the country. We cannot fix only the one sector or the another sector. Where the growth opportunity is available, PNB is the part of the growth story of the country. And if you see, in the -- now India is one of the choicest place for the entire word because it's one of the best economy developing. And even the last RBI policy also, 6.5% GDP has been increased to 7%. So it is one of the best destination among the world. Everybody is thinking to set up their manufacturing unit -- we cannot react to one particular segment. So any segment where we can participate, we will now bound to participate.

[Unknown Analyst]

Sir, lastly, sir, I have not seen your presentation. Sir, what are the net interest margin for this quarter? .

[Atul Goel, executive]

Net interest margin, yes -- you mean NII or the net interest income -- net interest margin? The net interest margin, 3.3%. 3.3% was the domestic and 3.15% for the global. And we have given the guidance, we will remain at 3%. Last time also we have given our NIM should be around 3%. Because there is some transactions where we are not getting more than 100 basis points, 50 basis points. But we are utilizing that opportunity, that market is available. This is the reason in terms of the percentage, it may reduce, but we will try to maintain in the absolute number.

[Anand Dama, analyst]

[Operator Instructions]. Yes, Kunal.

[Unknown Analyst]

Congratulations on the great set of numbers. I just have 1 question, sir. So when do you expect the final ECL norms to get implemented?

[Atul Goel, executive]

Kunal, I think it depends on the regulator also. I think it will not be appropriate to give answer of this question because draft guidance has already been come. It is a call to be taken by the regulator. But we are ready. We can say we are ready. Whenever the regulator the decision, we will implement.

[Anand Dama, analyst]

Next question we'll take from [ Chintan ].

[Unknown Analyst]

So first of all, congratulations on great set of numbers. Sir, I had a question on slippages. So agri slippages, sir, we've seen a dramatic reduction in agri slippages. So what has been the strategy there? How are we able to reduce the slippages to such an extent? Any help there? Any guidance there?

[Atul Goel, executive]

Chintan, we are working for the last 1.5 years, not only in this particular quarter. If you see, INR 439 crores in this quarter. Even in the last quarter [Foreign Language], September quarter, it was INR 424 crores. You see, and in Q1 also, it was INR 360 crores. It has not reduced in a particular quarter. We are working in the -- more than 1.5 years. And every quarter, whatever the slippage in the agriculture, we are recognizing. This is the one of the reasons, nothing else, yes.

[Unknown Analyst]

Sure, sir. And so sir, on ECL, also, any guess what would be a total provisioning required for us under Ind AS? And also how have we provided on that? Any idea there?

[Atul Goel, executive]

[Foreign Language] last time also, somebody has raised this question. My answer is same. It is draft guidelines. There is no set formula also. Everybody is taking different formula. And if the -- what will be the guidelines? 5 years will be available for this -- I can say only what will be the -- we will not be much impacted. Earlier there was a worry because your provision coverage ratio is less, et cetera. Now my provision coverage ratio is 94% -- we will be at par with the industry. We will not be outside of the industry. Earlier there was a worry. As on date, that is not a worry.

[Unknown Analyst]

Sure. And sir, on the outstanding DT amount, what would be our current outstanding DT? And when do we plan to migrate to the new tax regime, any thoughts there?

[Atul Goel, executive]

We are just discussing. We are just discussing with our tax consultant also -- as on date, we are using the old regime also. Then when we will be in a position -- there is a benefit to shift to the new regime also, it is under discussion.

[Unknown Analyst]

Sir, on data point question, what is the PV01 number, if you could share?

[Atul Goel, executive]

PV0 number, I think if I'm correct, it is around INR 10 crores.

[Unknown Analyst]

And sir, one last on the restructuring part. So what would be a total restructuring, including our DCCO and SME restructuring? I think there are 2 tables [indiscernible] some separate research and numbers [indiscernible]. So just wanted to understand exactly what is outstanding.

[Atul Goel, executive]

I may give you OTR-1, OTR-2. OTR-1 outstanding, standard, it is INR 2,939 crores. And OTR-2, INR 6,781 crores. This I'm telling only the standard, not the NPA. And a part of your question, for the DCCO, if there is a change in the DCCO, that is not coming under restructuring.

[Anand Dama, analyst]

Sir, we have 1 question in the chat box, which talks about that there is a lot of noise around the loan waivers being asked by the public, particularly in the Northern India. So any thoughts over there?

[Atul Goel, executive]

Anand, can you repeat your question. Anand?

[Anand Dama, analyst]

Sir, basically, a lot of -- there's a lot of noise around the [Foreign Language] and loan waivers asked by some activists in Northern India. So this was a question which was also posed, I believe, in one of the other public sector bank call. So any thoughts over there? Do you see any impact, which actually this can have on the asset quality?

[Atul Goel, executive]

As I said, I don't have any thought on this, yes. No, not at all, yes.

[Anand Dama, analyst]

[Operator Instructions] Yes. Someone from has Indus Equity has raised the hand.

[Sushil Choksey, analyst]

Congratulations to PNB team for excellent results. And sir, my question -- Sushil Choksey here. Sir, my question is, sir, what is your expenditure on digital and human resource as you've taken good care of your past legacy to resolve all your problems? To be future enabled, digitization is a must. And second thing, the human resource for betterment is also a must. So what initiatives have you taken? And what kind of CapEx are you going to incur on that?

[Atul Goel, executive]

[Foreign Language] as far as HR is concerned, [Foreign Language] we have taken a lot of initiative on the HR transformation also. Even this transformation is under implementation where we have been a very -- bit consistent also and it will be implemented by March '24 completely.

As far as total expenditure on the HR including salary, et cetera, is concerned, it was around INR 4,460 crores in the December. And it is in the same range because it is on account of the change in the provision which was made in the AS 15 in the December [ '20 ] in this particular quarter.

Otherwise, it is on the higher side. And your second question regarding the digital. The digital basically, it depend on how much we are making the expenditure on the IT initiatives also -- normally, our budget for the IT in the whole of the year is around INR 2,500 crores.

[Sushil Choksey, analyst]

Sir, your outlook on treasury based on what the Fed is guiding and what RBI governance is speaking, and the inflation is tapering off. If oil is stable, how do you see your treasury behaving? And are we seeing the peaking of deposit cost by this quarter end or the next quarter? And how are we placed on that?

[Atul Goel, executive]

[Foreign Language] there is some different view. Although if you see, what was the December '22-'23, 7.17%. It is the 10-year G-SEC rate is 7.77%. September, it was 7.22%. Although there is an ease in the 10-year from 7.22% to 7.17%, 5 basis points reduction. But I may tell you, there is no reduction in the deposit rate.

Deposit rate is not cheaper as on date as compared to the September. Deposit rate has increased -- I do not foresee any change in the deposit in very shorter period -- deposit will be cheaper in the one quarter or the second quarter also even if there is a reduction in the G-SEC rate also.

[Sushil Choksey, analyst]

So then you are expecting that the repricing of deposit plus cost of deposit for the next 6, 8 months on the next 2, 3 quarters will stay elevated. So neither will your MCLR and you don't see lending price going down?

[Atul Goel, executive]

Yes. At least for 6 months -- we can think; 6 months because whatever the trend prevailing as on date in the market. Because 1-year deposit is not available around 7.80%, 7.90%. I was told some of the bank has quoted more than 8% also. In short term, I am not thinking. Because everybody is after the deposit. But we are not on the bulk deposit side. We are not giving very aggressive rate because we are having the excess SLR around INR 80,000 crores.

[Anand Dama, analyst]

The next question we have from Rahul.

[Unknown Analyst]

Just a follow-up question, sir. Can you give some color going forward on the fee income part because -- it has been muted even in this quarter and even if we look at on a 9-month basis. But as you're finding the RAM segment of the share on mid-teens growth, how should we be looking at the fee income?

[Atul Goel, executive]

Rahul, there is a lot of pressure on the fee-based income. Reason behind that, because there are 2 things: if you are choosing very good quality account, so there is a very competition in the interest as well as the other charges also because a good corporate client AA or AAA, they are not ready to pay the process fee, et cetera, also.

So even if they are getting the non-funded facility also, that is very competitive one -- this we have to decide which type of the customer we want to land. If definitely, we want to land the good rated customer -- fees income will not increase too much. But ultimately, what we can think, we can increase the turnover. Ultimately, we have to see. Because we are not compromising on the asset quality, we are compromising on the yield.

But if you see my NII, there is an increase in the NII quarter by quarter. It means we are growing much faster as compared to the compromising only -- basically compromising on the asset quality.

[Unknown Analyst]

And sir, rightly understood, sir. But are you running for a particular corporate in terms of getting its wallet share? Or you are just focusing on a good quality corporate -- comes at a lower yield and go for more asset term so that it leads to volume growth?

[Atul Goel, executive]

No, no, no. That is not the -- I'm just telling you, because if you see what is my portfolio of the AAA, what is my portfolio of the AA, even I can give one example.

You see the portfolio of the NBFC. NBFC, my portfolio is around 127,000, in which 99% is the A and above A. And one more thing -- A -- only 2,799 -- such type of the borrower is not giving the -- but we have set up our new vertical marketing, where we are giving the focus on the garner the other business, like personal loan of the corporate, salary account of the corporate. So we are trying to give the combo deal. If we are compromising on the this, we are giving the combo deals, we should get the other business of the particular corporate by way of salary account, housing loan, car loan and the other loan to their employees -- where we can think to increase some other income, fee-based income, basically.

[Anand Dama, analyst]

Sir, we have 1 question in the chat box. That's primarily related to the funding cost. So how do you see the funding cost shaping up in the next 1 or 2 quarters?

[Atul Goel, executive]

Funding cost. Yes, basically [Foreign Language] if you see my first, I will take 2 things: one, the cost of deposit. If you see my cost of deposits, it's at 4.94%; 4,94% as against the 4.84% -- hardly only 10 basis points because my 95% deposit has already been repriced -- my only 5% is the deposit, which has to be repriced.

The cost of fund, if you see, it is in the range of the 4.3%, 4.4% -- I do not foresee except 5, 10 basis points, there should not be much increase as far as cost of fund is concerned of the Punjab National Bank.

[Anand Dama, analyst]

Sir, there is one -- another question in the chat box from [indiscernible]. He is asking that what will be the sensitivity on the investment book provision linked to the 10-year benchmark? And what is the average duration of the AFS book at this point of time?

[Atul Goel, executive]

I will give you the -- one of the modified duration of the AFS as well as the HFT book. It is 3.54. And we are not required to book the provision on the mark-to-market on the [ HTM ] as on date. 3.54 is very reasonable. And as on date, we are immunized at 7.17. 7.17, we have already immunized. We have made a provision, which was the prevailing rate of the December 2023. We are not seeing much change in the mark-to-market provision as on date, yes.

[Anand Dama, analyst]

Sure, sir. I think we are largely done with all the questions that we have. Sir, basically, with this, we would want to end the call. But before that, if you have any closing remarks to make?

[Atul Goel, executive]

Closing remarks, Anand, only, I want to assure all the analysts also, if you see the performance of the bank, the last 7 quarters, in all the parameters, whether it is growth in the business, whether it is a profitability; profitability, if you see the [indiscernible] operating profit, net interest income as the net profit, it is increasing every quarter.

Similarly, if you see the assets quality, gross NPA, net NPA, in terms of the percentage as well as in terms of the amount also, it is reduced every quarter. Similarly, the PCR, which is one of the major factors to increase the profitability of the organizer, that has also improved to 94%. I can assure only -- I can assure to all, the bank is on the very right path. All the employees [indiscernible] working whatever, they can do betterment for the organization. Day and night they are working. Focus area is the recovery, focus area is the curtailment of the slippage, focus area is the how to improve the CASA and how to make the use of the digital. It is also one of the priority area, [indiscernible] which I just told, March '24, it will be completed. After that, we will be in a position to make the difference between the performance and the nonperformance, then it will further add to the productivity of the organizer as well as the each and every employee. So this is my closing remarks. Nothing more I want to add. And I hope every quarter, you will see further -- next quarter, you will see some good numbers also. This can I wish only.

[Anand Dama, analyst]

Thank you and best wishes, sir. With that, we will end the call. Happy evening to all. Thank you.

[Atul Goel, executive]

Thank you. Thank you very much. Thank you, Anand ji. And all the team who attended this virtually. My thanks to all of them also.