Punjab & Sind Bank is increasing its physical presence outside the state of Punjab, a market it finds saturated.

The plan is to open 416 new branches by March 2027, most of which will be in states other than Punjab. This will take the bank’s total branch network to 2,000.

The strategy falls in line with the bank’s decision to increase its CASA deposits and retail loan base, a segment that is growing at 18-20% and providing better lending margins.

“We are adding 50 branches in the current financial year. We want to take our branch network up from 1,584 as of 31 December 2024 to 2,000 by March 2027. This expansion will be mainly outside the state of Punjab. We are finding that the Punjab market is almost getting saturated for us and if we don’t widen our branch network to other geographies, it will limit our growth potential,” Punjab & Sind Bank managing director and CEO Swarup Kumar Saha told Indianbankingnews.com.  

 A similar journey was undertaken by Bank of Maharashtra a few years back, with much more aggression. The Pune-headquartered state-run bank opened 600 branches in the last three years to expand its core business. 

Punjab & Sind Bank has 40% of its branches located in Punjab and only 22% of its business comes from that state. “It is a very deposit-rich state for us. But for credit growth, there aren’t many opportunities to scale up substantially. For us to expand, we need to set up new branches in other parts of the country,” said Saha.

The bank will rejig its branches in Punjab, with some shutting down and new ones coming up in other localities. There will be very little net additions of branches in Punjab, said Saha. 

The bank will add 12 districts in its new branch launches during the quarter ended  March 2025, taking its geographical presence to 363 districts across the country. “We are now present in 351 districts compared to 316 districts two years ago. During the March quarter, we are adding 12 districts where we did not have a branch presence,” said Saha.

The lender’s delivery channels are to expand to another 2,500 business correspondents and 50 branches and ATMs during the final quarter of the current fiscal ended March. “We will be having additional touch points of 2,550 during the quarter. With this, our overall touch points will climb to over 7,000 as of 31 March 2025. We plan to add another 2,000 to 2,500 touch points during the next financial year,” Saha said.

As part of the strategy to de-risk the balance sheet, the bank intends to increase the share of RAM (retail, agriculture and MSME) in the overall loan mix while reducing the corporate segment. The first target is to move RAM up from the current 54.20% to 56% by the end of the current financial year. “Our target is to eventually move the RAM share up to 60%,” said Saha.

For the quarter ended 31 December 2024, the bank’s RAM advances grew 20.85% year-on-year to Rs 51,966 crore while the corporate segment rose 8.25% to Rs 43,904 crore. 

Saha has revised the lender’s loan growth guidance upwards to 14-15% for FY25 as the liquidity conditions have relatively eased. The earlier guidance was 10-12%, but since then the bank raised Rs 3,000 crore through infrastructure bonds for the first time and the Reserve Bank of India, in its December policy, cut cash reserve ratio (CRR) by 50 basis points to 4%, effectively infusing Rs 1.16 lakh crore into the banking system. 

“We saw liquidity through capital raise from infra bonds and CRR cut, the first since March 2020. The CRR cut freed around Rs 650 crore for us, enabling the bank to extend more credit. We are upping our credit growth target to 14-15% for FY25,” Saha said.  

Earlier, Saha was reluctant to grow credit beyond 10-12% for FY25 as the bank’s deposit growth was under pressure. “There is a genuine reason why banks of larger size are moderating their credit growth. With deposit mobilisation facing challenges, we feel that the credit growth that is happening is not sustainable. Only if we have higher-yielding assets come our way will we pursue a target beyond 10% to 12%. We have told corporates to either increase loan pricing to some level or pre-pay our loans. That churning process is going on and that's a big number. We need to grow profitably,” Saha had then said. 

The bank has a corporate loan pipeline of around Rs 6,000 crore. “This will continue to help us to reach our goalposts for March, and then subsequently again. We are more flexible now and we are looking for opportunities to lend in various infrastructure projects. We are also looking into some strong real estate groups. Hospitality and renewable energy are some of the other sectors where loan demand will come from,” said Saha.

The focus, however, will continue to be the RAM sector where the yield on advances at over 9.5% is higher than the corporate segment. There is also the de-risk element. While increasing the corporate loan book, we will be conscious of the pricing that we get. We have to protect our net interest margins (NIM) and return on assets,” said Saha.

The bank is also looking to expand through the co-lending partnership model. Though co-lending is at around Rs 3,100 crore at this stage, Saha said there is sufficient room to increase it further.

The state-owned bank’s business stands at Rs 2.23 lakh crore as of 31 December 2024, with deposits at Rs 1.27 lakh crore and advances at Rs 95,870 crore.

Saha expects deposit growth to be around 8% to 9% in FY25, a clear lag behind the pace at which credit is moving. While deposits saw 7.64% year-on-year growth in the December quarter and 2.72% quarter-on-quarter, advances grew by 14.73% and 5.31%.

For the December quarter, the growth in CASA (current account saving account) deposits was muted at 2.36% year-on-year to Rs 39,701 crore while term deposits was at 87,696 crore.

Saha is looking to bring the gross non-performing asset (NPA) ratio to below 3.5% by the end of March 2025 from 3.83% as of end-December 2024, net NPA to below 1% (from 1.25%) and NIM to between 2.75% to 2.80% (from 2.78%).

On the bad loans recovery front, Saha expects the target of Rs 1,000 crore in FY25 will be surpassed as the bank has already achieved Rs 944 crore in the first nine months. “We expect that this run rate of Rs 1,000 crore will be achievable in the next financial year as well,” he said.