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India's PNB CEO targets record-low bad loans ratio by increasing debt recovery, he says

Ashok Chandra, the CEO of Punjab National Bank, India's second largest state-run bank by assets, said that the bank aims to recover a higher percentage of soured loans in 2018. This will lead to a gross bad loan ratio record low, which is a key asset-quality metric.

Chandra, a New Delhi-based banker, said in an interview that the lender aims to recover bad loans worth 160 billion rupees (1,89 billion dollars) in this financial year. This is an increase of 11 times over the 14,36 billion rupees recovered by 2024-25.

He said that 60 billion rupees would come from the loan accounts previously written off.

This would lower the gross non-performing assets (NPAs) ratio of PNB to less than 3% at the end 2025-2026. That would be its lowest ever.

The gross NPA ratio has improved from 4.09% to 3.95% by the end March.

This is a far cry compared to a gross non-performing loan ratio of 14.33% following the COVID-19 pandemic in 2011 after a crippling corporate bad loan cycle.

PNB announced a nearly-52% increase in its net profit for the quarter January-March, partly due to the fact that it had set aside less money for bad loan reserves. The domestic loan growth rate was 13.1% while the deposit growth rate was 13.3%.

Chandra stated that PNB anticipates its loan book will grow by 11%-12% in the fiscal year which began in April and that deposits will increase by 9%-10%.

He added that the company has a corporate lending book of 1,35 trillion rupees, and that it expects to see a growth in loans for medium and small businesses between 16%-17%.

Chandra explained that the PNB's costs of funds would remain high for several quarters because the rate cuts of the central banks usually take time to be felt.

Chandra stated that PNB has been in contact with other lenders of Bhushan Power and Steel, to determine the next steps after the Supreme Court ruled against JSW Steel’s four-year old buyout of Bhushan Power and Steel.

As part of this resolution, PNB received approximately 30 billion rupees.

All options will be considered to determine the best way forward. $1 = 84.6780 Indian Rupees (Reporting and editing by Savio Da Souza; Siddhi Nyak)

(source: Reuters)