Punjab National Bank (PNB) has entered a phase where its chief executive officer Ashok Chandra believes that a quarterly profit of Rs 5,000 crore is sustainable, providing the lender leverage to absorb other shocks like additional provisions for bad loans.

Chandra said he expects the bank’s fiscal fourth-quarter net profit to be over Rs 5,000 crore, similar in line with the Rs 5,100 crore posted in the preceding three months ending December. Incidentally, this was the highest quarterly profit ever for PNB and 13.1% more than the year-ago period, taking the nine-month count in the current fiscal to Rs 11,679 crore. 

According to Chandra, an elevated profit will help the bank to keep aside a higher floating provision without putting pressure on the balance sheet. Under the Reserve Bank of India’s (RBI) mandate, banks are required to transition to the expected credit loss (ECL) regime from April 2027. 

In the December quarter, PNB made floating provisions of Rs 955 crore. With this, the cumulative floating provision buffer stood at Rs 1,775 crore.

“We were actually required to make provisions of Rs 386 crore in Q3. The elevated provisions are made to strengthen the bank’s balance sheet and to help us transition smoothly to the ECL regime from April 2027,” Chandra said.

PNB has estimated Rs 10,000 crore over five years as transition impact to an RBI-mandated ECL framework by FY31, implying that it needs to set aside Rs 500 crore every three months over 20 quarters.

As per the RBI draft guidelines, banks are required to set aside funds to cover likely risk of default, over a five-year period starting 1 April 2027. 

On the deposit front, Chandra said there will be an interest-rate repricing to ease pressure on margins, which have seen a further narrowing in the quarter ended December 2025. The bank’s domestic net interest margin (NIM) declined to 2.65% in Q3FY26, from 2.72% in the preceding quarter and 3.09% a year ago. 

“We planned to reduce our deposit rates in October and November but could do it only in January, amid competition and loyalty consideration of our over 18 crore customers. There is room now to further cut deposit rates to ease our margin strain,” Chandra said.

Banks have seen their lending margins squeeze following the RBI’s rate-easing cycle. Since February last year, the repo rate has dropped by 125 basis points to 5.25%.

According to Chandra, the bank’s entire deposit repricing should be visible by May this year. PNB had mobilised deposits at higher rates, particularly with the special 440-day term deposit scheme which helped garner over Rs 2.8 lakh crore at rates of 7.25% and 7.75%. Around 70% of the repricing was completed by 31 December while another 21% will be done in the coming quarter and the remaining 9% by May 2026, Chandra said.

The bank’s margins have compressed as loan yields have fallen while funding costs have not dropped proportionately.  

Domestic cost of deposits eased marginally to 5.10% in Q3 from 5.18% in the September quarter and 5.23% a year ago. The yield on loans, however, saw a sharper drop to 7.8% in the December quarter from 8.01% in the preceding quarter and 8.5% a year ago.  

Chandra said the bank’s NIM should improve in the first and second quarters of the next financial year as high-cost deposits mature and are repriced. 

On the credit front, the corporate segment has seen sluggish growth this year due to mute demand as well as the decision to shed low-yielding advances. “We could have grown the corporate loan book by 11-12% in the December quarter but let go low-yielding advances. We will see a bounce back in Q4 and corporate credit should move in double digits,” Chandra said.

The bank has guided for a 11-12% credit growth and 9% deposit growth for the full-fiscal. 

For the three-months to end-December, PNB posted 8.5% year-on-year growth in deposits to Rs 16.60 lakh crore, with term deposits rising 10.4% to Rs 10.68 lakh crore. The low-cost CASA (current account savings account) share in the deposit mix declined to 37.1% from 38.1% a year ago and 37.3% a quarter ago. 

The lender’s asset quality improved, with gross non-performing assets (NPA) ratio declining to 3.19% in the fiscal third-quarter ended December, from 4.09% a year ago and 3.45% a quarter ago. The target is to bring the gross NPA to below 3% in FY26.

Net NPA fell to 0.32% versus 0.41% at the end of the third quarter last fiscal and 0.36% in the September 2025 quarter.

“There is consistency in our performance across all parameters except NIM, which is an industry issue. We are looking to improve on that also after repricing our deposits,” said Chandra.