Punjab National Bank chief executive Ashok Chandra has planned to aggressively push the lender’s retail, agri and MSME (RAM) portfolio while progressively reducing the share of corporate loans in an effort to elevate its net interest margins (NIM).

The redesigning of the bank’s asset portfolio is part of the drive to bring down the share of corporate loans to 40% of the book from the existing 46% while scaling up RAM to 60%. For the current financial year, the target is to increase the share of RAM loans to 58% from the current 54% (excluding IBPC or inter-bank participation certificate).

“The plan is to bring down the bank’s dependency on corporate loans. If the 60:40 ratio in favour of RAM happens, the yield on advances will go up and this will contribute to higher net interest income (NII),” Chandra said.

The reason for this strategy is simple: the bank’s yield on standard corporate loans is lower at 7.55% while on MSMEs (micro, small and medium enterprises) it is as high as 9%. The bank’s domestic yield on standard advances is 8.23%. 

Working on the rebalancing of the asset portfolio, Chandra has created opportunities for fostering brisk growth in the RAM portfolio. The mega outreach programmes have ensured that growth in the MSME segment is around 20% in a quarter while on retail it is 18% and on agriculture 16%.

“We have put increased focus on mobilising the RAM portfolio last year onwards. Since the yield on MSMEs is high and contributes a great deal to the profitability of the bank, we want to build up a good portfolio in this segment. We have also carried out mega outreach programmes in retail and agri. This has led to the kind of growth we are seeing in the RAM segment,” said Chandra.

This momentum has no tendency to slow down in the current financial year. In the month of April, the bank organised a massive outreach activity for retail in over 200 centres. A similar exercise was executed at the bank’s MSME clusters in 220 centres. “We generated Rs 9,000 crore as lead in our retail portfolio and Rs 21,000 crore in the MSME segment. We are going to have an agri expo as well,” Chandra told analysts in a post-earnings call.

On acquisition financing which the Reserve Bank of India (RBI) has recently allowed domestic banks to operate in, Chandra said PNB is not keen to quickly jump into it and will first set up the framework for it. The immediate goal is to exploit the opportunities in the RAM segment. 

The bank has guided for NII growth at 7% in FY27 while credit is expected to expand at 12-13%. “The NII estimate is at a conservative level because a lot of things have to happen under the deposit and credit systems. The moment the corporate loan book comes down to around 40% and the RAM share becomes 60%, I think the NII lever will improve,” Chandra said.

Corporate credit constituted almost 50% of the bank’s loan book a year back. Seeking to improve the yield on advances, PNB has brought the corporate loan book down to around 46% by the end of FY26. 

Accelerating low-cost CASA (current account savings account) deposit growth is the second thing Chandra is working on. Last year, the bank revamped its entire line of CASA products and introduced several customer-centric initiatives. This resulted in a 9.2% growth in savings bank at an individual level and opening of over 40 lakh accounts during FY26. 

The CASA ratio stabilised at around 37% in all four quarters of the financial year. “We are expecting good traction to come in the CASA deposit area this year as well. The other thing we are expecting to do well is in the retail term deposits front,” Chandra said.

In CASA, the bank strategically focused on enhancing the individual savings account balances. “Over 35% of our customers are under 30 years of age, giving us a strong foothold in the next generation segment. We are focusing on serving them across their financial life cycle with tailored digital-first solutions and driving long-term relationship value,” Chandra said.

For expanding the NIM to 2.6–2.7% in FY27 from the March quarter of 2.47%, the bank intends to reprice deposits, shift towards the higher-yielding RAM segment and gradually reduce low-yielding interbank participation certificates (IBPC).

Around 95% of the old fixed deposits, including the popular one offering 7.25%, have been repriced by the end of March 2026. But deposit rates remained sticky and did not fully compensate for the compression in yield on advances. Moreover, while in Q3 the impact of the December rate cut was limited to 26 days, in Q4 it played out over the full quarter. The anticipation of an offset through moderation in deposit rates did not happen. 

“The deposit rate is still a bit elevated as there was no repo rate cut in April. That is one of the reasons why the impact we have not been able to see in our NII and NIMs. We are expecting some improvement to happen in the cost side of deposits,” said Chandra. 

PNB has brought down the IBPC portfolio to Rs 34,049 crore and the plan is to exit this segment over time. “We are going to replenish all those IBPC at the lower range and around Rs 18,000-20,000 crore will be further reduced. We want to totally come out of this IBPC business. Going forward, you will see a lot of things happening in the retail, agri and MSME side,” Chandra said.

The bank met or exceeded its stated guidance for FY26 across most key parameters. “The only areas of variance were the CASA rations and margins, which were largely influenced by liquidity and interest rate dynamics. To drive growth, the bank is sharpening its focus on the RAM segment through targeted outreach campaigns,” said Chandra.

Guidance for FY27

PNB has guided credit growth at 12-13% for FY27 compared to 12.7% achieved in FY26.

Deposit growth should move in the 9-10% range, almost similar to 9.2% reported in FY26. The CASA share is projected to inch up to 38% in FY27 from 37% in FY26. 

NII is expected to see a 7% YoY rise in FY27. Though the bank had guided NII growth at 7% in FY26 too, it actually de-grew by 1.9% YoY.

NIM is targeted at 2.6%-2.7% in FY27. In FY26, the bank's NIM stood at 2.57% against the guidance of 2.8%-2.9%.

The bank expects its operating profit to rise by 9%-10% YoY in FY27. While it had guided for 8-9% YoY growth in FY26, it ended up doing better with the operating profit rising by 9.2% YoY.

The bank has guided gross NPA to stay below 2.50% in FY27, improving from 2.95% in FY26. 

Net NPA is expected to stay below 0.3% in FY27. In FY26, it ended up at 0.29% against the guidance of 0.35%.

The bank is targeting the recovery amount from bad loans to be over Rs 13,000 crore in FY27. While it had guided for a recovery of Rs 16,000 crore in FY26, it achieved to get Rs 15,501 crore.

Branch expansion

PNB is planning to open 250 branches in the current financial year, after adding 144 in FY26.

“These branches will be primarily in the southern and western regions. A new zonal office in Bengaluru has already been operationalised to strengthen our presence and execution in the southern region,” Chandra said.