Swarup Kumar Saha has been driving Punjab & Sind Bank’s business growth since he took charge as CEO in June 2022. He has set the business target at Rs 3 lakh crore for FY27, up from Rs 1.72 lakh crore in FY22.
Saha has followed two pivotal strategies to scale up the public sector bank’s deposits and loan book. The first task was to increase the RAM (retail, agriculture and micro, small and medium enterprises) portfolio to over 60% of the lender’s total advances.
The other was to plan branch expansion mainly outside the state of Punjab, a market he realised was almost getting saturated. A broader pan-India presence would enable the bank to tap low-cost CASA (current account savings account) deposits and credit growth opportunities.
In an interview with Indianbankingnews.com Editor Manju AB, Saha talks about the bank’s profitability, co-lending business, bad loans, lending margins and the challenges facing CASA deposits mobilisation.
Here are the edited excerpts from the conversation.
Is the dragging on of the US-Israeli war with Iran going to impact the bank’s three-year growth plans?
Though it is difficult to presently predict the exact nature of the impact of the Gulf war on the Indian economy and in certain select sectors in view of the uncertainty of how long it will prolong, we as of now do not foresee any significant impact on the overall growth estimates for the next three years.
The bank’s business, comprising loans and deposits, will touch Rs 2.64 lakh crore in FY26. We should hit Rs 3 lakh crore by March 2027, and we have a board-approved strategic plan to reach Rs 4 lakh crore in the next three years by FY29. If we find that there will be some impact on this growth plan due to the current geopolitical tensions, we will revisit our strategy to take corrective action whenever it is deemed fit.
Incrementally, the business has increased by Rs 24,000 crore in 2023-24 and Rs 32,000 crore in 2024-25. We expect to end FY26 with the business growing by about Rs 35,000 crore over the year-ago period.
We are also very focused on boosting our profits. We feel that every addition of Rs 1 lakh crore of business should generate at least Rs 1,000 crore of operational profit. If that is taken care of, then every other performance indicator will be in place.
Retail will obviously be the fulcrum driving this growth. But why have you decided to strategically revise upwards the RAM (retail, agriculture and micro, small and medium enterprises) ratio of the loan portfolio to 70% from the earlier targeted 60%?
Penetration in the RAM sector is better and will offer an encouraging return on assets. The bank has now various products in the retail, agriculture and MSME segments including digital lending products which will allow it to diversify risks. This will also lead to higher yield on assets.
We are targeting a higher RAM to improve our net interest margins (NIM). Besides, we have to improve our CASA to bring down the cost of funds.
We are looking to end FY26 with the percentage of RAM to the total advances at around 60%, up from 57.45%, and the guidance for FY27 is to touch 65%.
Is this strategy also because corporate lending has become highly competitive and is difficult to generate margins for a bank which has such a low CASA base?
We do not want to be very active in the highly competitive corporate lending market where the margins are currently too tight.
When the CASA deposits are low, the cost of funds is high. We feel that the high-yielding RAM loan book will help the bank to improve its margins. This is not to say that we do not want to lend to AAA or AA corporates. But if the margins are wafer thin, we will like to restrict our exposure in this segment.
Don’t you think CASA at 31% is very low and it will be a Herculean task in the current market ecosystem to lift it up substantially?
The main challenge is to maintain the CASA ratio, which is tending to fall. Since it is getting more and more difficult to lift CASA up, we have started to look at CASA + retail. The green shoot in our deposit bucket is that much of the CASA is moving to retail term deposits, which now comprise 45% of the total deposit base.
The mobilisation of CASA deposits will need to be more spread out. Retail, gold and mortgage loans will help. The opening of new branches will also lead to more CASA deposits. Besides, we are trying to get the salary accounts from government institutions like defence.
We also want to bring down the bank’s bulk deposits to below 20% of the total mix from its existing 24%.
In this growth strategy, how important is it for the bank to expand beyond Punjab as it is nearing saturation levels in that market?
Punjab enjoys 40% of our branch network but only 22% of the bank’s business comes from that state. It is a deposit-rich state for us but for credit growth there aren’t many opportunities to scale up substantially. It is thus important for the bank to have a broader pan-India presence. A diversified reach will help in growing the low-cost CASA deposits, thus providing a leeway to lend at competitive rates.
Each of the branches that we plan to open in future will strategically be aimed at becoming profit centres, helping the bank to garner more CASA deposits and exploring new loan opportunities.
Are the new branch launches going to be mostly outside the state of Punjab?
The strategic plan is to launch new branches in other parts of the country. We are looking to add 200 branches in FY27 to take the total network to over 2,000, which will give a further boost to our retail business. We intend to have 7,000 business correspondents and 3,000 ATMs by FY27.
The expansion of the footprint will see new branch launches in Maharashtra, Odisha Telangana, Andhra Pradesh and Chhattisgarh.
Do you have plans for the bank to have any international branches?
We have got approval from the Reserve Bank of India (RBI) to set up a new branch in Gift City in Gujarat. Since we do not have an international presence, this branch will help us in foreign loan syndications.
The other area the bank is not into is in the direct credit card business. Are any plans afoot to make an entry into this space?
We are not planning to have a credit card of our own. We have a co-branded tie up with the State Bank of India (SBI), which will continue.
What are the improvements on the bad loans and recovery front?
We are steadily bringing down the bank’s non-performing assets (NPAs). The gross NPA ratio is at 2.60% in Q3 of FY26, down from 3.83% the same time last year. We are working towards bringing this further down to below 2.5% by March 2026.
We have had a recovery of Rs 1,000 crore for the first nine months during the current financial year. We hope to end the year with recoveries of Rs 1,400 crore. Big ticket resolutions will take a while but the smaller ones will see recovery.
What are the possible strategies the bank can look at to raise its lending margins from the existing level of 2.59%?
We are doing co-lending business, which can improve our net interest margins. We are looking at growing our current Rs 4,800 crore gold loan book, both organically and inorganically. The branch expansion plans are also going to help in improving the bank’s NIMs.
What is the next transformation journey for the bank?
Ramping up investments in technology and innovation will be our next big step. The bank needs to focus on generating more fee-based income, creating fraud risk management mechanisms, building resilience to operational risks, setting up agile call centres and developing robust cyber security systems.
