Punjab National Bank (PNB) is cushioned by a large pipeline of sanctioned loans, improved asset quality and a strong bad loan recovery capability as it plans to steer through any slowdown that may hit the Indian economy due to uncertainty over global trade and US President Donald Trump’s reciprocal tariffs. 

With Rs 1.35 lakh crore of corporate loans in the pipeline, the  lender is more or less assured of a growth of over 10% in the current financial year. That has kept PNB managing director and CEO  Ashok Chandra less worried, even after credit growth for the banking sector in May fell below 10% for the first time in more than three years.

“We have Rs 1,35,000 crore of corporate book in place (sanctioned) and I am expecting with this at least 50% disbursements are going to happen. With that itself we will be able to grow at a speed of more than 10%,” Chandra said.

The chief of India’s second-largest public sector bank said a lower interest rate regime can only push up this demand. Renewable energy, steel and infrastructure are the sectors the bank is bullish on, Chandra added.

The Reserve Bank of India  (RBI) in its June bi-monthly monetary policy announced a 50-basis-point cut in repo rate to 5.5% and a 100-basis-point reduction in cash reserve ratio  (CRR) to 3%. 

While Chandra expects ‘good’ growth in the corporate segment, the plan is to expand the retail, agriculture and MSME (RAM) sector lending to 58% of the bank’s loan book in FY26. The outreach programmes are a way of achieving this target, he said. In the previous fiscal, PNB had an outstanding under RAM segment at Rs 6.02 lakh crore, or 56% of the  loan book.

Chandra has guided for a 11% to 12% credit growth in FY26 and a 9% to 10% growth in deposits. “We had given a similar guidance for FY25 but ended up doing better than that. While in credit we almost grew 14%, in deposits we crossed 14%. This financial year also I am sure we will cross our guidance numbers,” he told analysts.

The bank is expecting to maintain its net interest margin (NIM) at 2.8% to 2.9% in the first half of this fiscal by lowering deposit rates while rejigging  lending rates. It will revisit the deposit rates as the market dynamics has changed. “We are going to take it to the asset liability committee meeting on 30 June and assess on whether we need to reprice our deposits for now,” Chandra said.

Ahead of the RBI’s monetary policy, PNB lowered the 390-day fixed deposit rate by 10 basis points to 6.9% from 7%, the highest that it offers to general public across tenures. The bank also cut interest rates on other tenure deposits. On the lending rate front, PNB announced a 50-basis-point cut hours after the RBI slashed repo rate for the third successive time. 

Chandra said NIM is expected to pick up from the third quarter as the RBI’s decision to cut the CRR will provide access to more funds to lend. While the RBI move will release liquidity of Rs 2.5 lakh crore to the banking system, PNB will get around Rs 15,000 crore of additional lendable funds during the course of the year. 

The CRR cut will be in four equal tranches of 25 basis points each from fortnights beginning 6 September, 4 October, 1 November and 29 November this year. It is expected to bring down the cost of funds for banks and improve their net interest margins by at least 7 basis points, as per RBI estimates. 

Easing of interest rates is expected to put pressure on yields but ample liquidity in the banking system will give banks the room to further cut deposit rates so that NIMs are protected. 

The bank has set a target of Rs 16,000 crore from recovery of bad loans for FY26 while slippages would be kept below 1%. In FY25, the total recovery stood at Rs 14,336 crore while slippages ratio was 0.73%. 

Chandra said minimum recovery through the technical write off accounts would be Rs 1,500 crore every quarter. The total write off book is about Rs 91,000 crore, including assets which have gone for liquidation. “Actual recovery is going to happen from 50% of that. And there, we are going to recover around Rs 6,000 crore this year, which will directly go to the operating profit” he said. 

Chunky assets are no longer there now, I think all the recovery will be in the range of Rs 25 crore to Rs 50 crore NPA accounts, he added.

The PNB chief does not see any further stress in the system today. “If you see our SMA (Special mention accounts) book, none of the corporate accounts are appearing even in the SMA 0 also, especially for the Rs 50 crore and above accounts. We don't have any such account in that particular bracket. There is another one study which we have done from accounts which was sanctioned from 1 July 2020 till today. Almost around 9 lakh crore sanction has happened from 1 July 2020 to 31 March 2025 with no stress ,” Chandra said.