Punjab National Bank during the financial year will increase its focus on low-cost deposits, shedding of low-yielding advances and deployment of AI-powered solutions while  mobilising foreign currency non-resident deposits.

FCNR(B) target of $2.5 bn

The spike in FCNR(B) deposits this year, due to the Reserve Bank of India’s special swap scheme, will allow the bank to retire high-cost borrowings and bring down credit cost, which is guided at below 0.4% for FY27. It will also provide rupee liquidity for credit growth.

The bank is targeting to collect $2.5 billion in FCNR(B) deposits by 30 September. “Around $425 million has already come in through this route. Out of this, I think $200 million has come through the leverage side,” said PNB managing director and CEO Ashok Chandra.

The state-owned lender is offering non-resident Indians (NRI) leverage schemes to borrow on their foreign currency funds and reinvest it into FCNR(B) deposits.

The RBI has left the window open until September-end for fresh FCNR(B) deposits with maturities of three to five years to come under the swap facility. 

Loan pipeline and growth target with RAM at the centre

PNB, which reported a threefold rise in net profit to Rs 5,253 crore in the June quarter from Rs 1,675 crore a year ago, has guided for a credit growth of 12%-13% and deposit growth of 9%-10% for FY27.

Chandra is confident that the bank’s loan growth, which saw a 12.7% YoY rise to Rs 12.73 lakh crore in the June quarter, will continue to have a strong run during the year. The bank has sanctioned over Rs 95,500 crore of credit facilities during the financial year of this particular quarter and a total of Rs 1.38 lakh crore is pending for disbursement, he said. 

In line with its heavy growth focus on retail, agriculture and MSME (RAM) loans, PNB is looking to open 250 branches in the current financial year. The plan is to increase the RAM loan portfolio to 60% of the total asset book while keeping the corporate segment at 40%.  

The new branches will go to strengthen the bank’s presence in the southern and western region, said Chandra. PNB already has a total of 10,359 branches, most of which are in the agri sector.

The bank’s strategy is to get out of low-yielding corporate loans as it seeks to improve its net interest income (NII) and net interest margin (NIM). In the first quarter of the financial year, around Rs 35,000 crore of low-yielding advances was shed. “We are in a position to depress and replenish it with the high-yielding advances,” said Chandra.

The bank classifies low-yielding advances as those giving below 7%. 

The plan is also to dilute the low-yielding inter-bank participation certificates (IBPC). “The loan growth of 12.7% in Q1 of FY27 was despite a Rs 22,411 crore low-yielding IBPC exposure, largely from the retail portfolio. Excluding the impact of this book, the bank’s core advances grew 15.4% YoY, underscoring sustained credit demand and healthy business momentum,” Chandra told analysts in a post-earnings call. 

For the fiscal first quarter ended June, PNB’s domestic loan book grew 11.6% to Rs 12.04 lakh crore. The RAM (retail, agriculture and MSME) segment grew 12.8% YoY to Rs 6.88 lakh crore, while corporate loans rose 10% to Rs 5.15 lakh crore. The RAM segment comprised 57.2% of the bank’s domestic credit mix, up from 56.6% a year ago. Corporate loans accounted for the remaining 42.8%.

Cautious approach on deposit growth with cost in mind

On the deposit front, the bank has completed its repricing in May and the cost of deposits has improved by 34 basis points to 4.99% as on 30 June compared to 5.33% a year ago.

“The bank is mindful of high-cost deposits. That is the reason why we are absolutely not there in the bulk deposit and CD (certificate of deposits) market. And very cautiously, we have kept the deposit growth at 8.5%,” said Chandra.

Though the credit-to-deposit (CD) ratio increased to 73.8% from 71.1% a year ago, it still provides adequate balance sheet flexibility to support credit expansion while allowing the bank to remain selective in raising higher cost deposits, said Chandra.

The bank’s total deposits stood at Rs 17.25 lakh crore as on 30 June compared to Rs 15.89 lakh crore a year ago. Out of this, domestic deposits grew 8.6% YoY to Rs 16.70 lakh crore. The low-cost CASA (current account savings account) deposits ratio declined to 36.7% as on June-end 2026, from 37% in the same period last year.

PNB’s gross global business reached Rs 29.98 lakh crore as on 30 June 2026, registering a YoY growth of 10.2%.

CASA, NII and NIM

The bank has guided to a CASA share of 38% by March-end 2027, NII growth of 7% and NIM at 2.6%-2.7%.

For the fiscal first quarter ended June, NII stood at Rs 10,798 crore, up 2.1% YoY. Domestic NIM fell by 20 basis points to 2.64% from 2.84% in the earlier year, but improved by 3 basis points from 2.61% in the preceding quarter.  Global NIM was fell to 2.50% from 2.70% a year ago, but improved from 2.47% in Q4 of FY26.

NPA and slippages

On the asset quality side, PNB has guided its gross non-performing assets (NPA) to settle at less than 2.50% and net NPA at 0.3% by the fiscal-end.

As on 30 June, gross NPAs fell to 2.78% of gross advances, from 3.78% a year ago and 2.95% in the preceding March quarter. Net NPAs declined by 10 basis points YoY to 0.28%.

In absolute terms, gross NPAs narrowed by Rs 7,292 crore to Rs 35,381 crore from Rs 42,673 crore. Net NPAs reduced by Rs 699 crore to Rs 3,433 crore from Rs 4,132 crore as on June 2025.

Emphasizing on the bank’s drive to improve its asset quality and underwriting standard, Chandra said in the six-year period between 1 July 2020 and 30 June 2026 the lender sanctioned around Rs 14.74 lakh crore loans, out of which the disbursed amount was Rs 12.92 lakh crore. “The outstanding in these loans is Rs 8.94 lakh crore, which is close to 70% of our total outstanding loan book. The NPA in this book is hardly Rs 5,486 crore, which is only 0.42% of the disbursed amount under fresh underwriting,” he added. 

During the quarter ended June, the bank’s slippage ratio declined to 0.68% from 0.71% a year ago and 0.94% in the trailing quarter. Fresh slippages increased to Rs 2,080 crore compared to Rs 1,886 crore in the same period last year and Rs 2,758 crore in the preceding quarter.

The bank aims to keep its slippages ratio below 0.9% in FY2027.

Recoveries and provisions

The bank is looking to recover Rs 13,000 crore from bad loans in FY27.

The total recovery during the June quarter stood at Rs 2,789 crore compared to Rs 3,362 crore a year ago. 

Recovery in written off accounts was Rs 908 crore, down from Rs 1,189 crore in Q1 of FY26.

Provisions for bad loans rose to Rs 792 crore in the June 2026 versus Rs 396 crore a year ago. 

 The provision coverage ratio stood at 97.23% as on 30 June 2026, up 35 basis points YoY and well above the bank’s guidance of over 96% for FY27.

Profitability  

The bank has been consistently achieving a net profit of around Rs 5,000 crore for the last few quarters. In Q3 and Q4 of FY26, PNB had reported a net profit of Rs 5,100 crore and Rs 5,225 crore, respectively, while in Q2 it touched Rs 4,904 crore. 

The aberration was in Q1 of FY26 when the net profit slumped to Rs 1,675 crore from Rs 4,567 crore in the preceding quarter. This was on account of an outgo of Rs 3,200 crore as the bank migrated to the new income-tax regime. 

PNB’s operating profit for the June 2026 stood at Rs 7,519 crore, up 6.2% from Rs 7,081 crore in the same quarter last year.

The bank’s return on assets increased by 67 basis points to 1.04% and capital adequacy ratio improved to 18.13% from 17.5%.

AI push

On the technology front, the bank has deployed AI-powered solutions across customer service, employee productivity, learning and credit processes. It has partnered with Microsoft to launch an AI training and certification programme for all officers to build future-ready digital capabilities.

“Going forward, we are scaling artificial intelligence and machine learning across operations, analytics, risk management and decision-making. We believe AI will be a key differentiator in making our bank more agile, efficient and customer-centric,” said Chandra.