Punjab National Bank (PNB), India’s second-largest state-owned lender by assets, has set an ambitious target to recover ₹170 billion (approximately $1.96 billion) in bad loans during the current financial year, which concludes in March 2025. Chief Executive Officer Ashok Chandra announced that the bank anticipates reclaiming about one-third of this amount in the January-to-March quarter, focusing on substantial corporate loan accounts that had previously been written off.
Strategic Focus on Corporate Recoveries
CEO Chandra emphasized that the recovery efforts will primarily target large corporate accounts. While specific names were not disclosed, these accounts represent significant write-offs from previous years. The bank’s strategy includes leveraging insolvency proceedings and one-time settlements to expedite the recovery process.
Improvement in Asset Quality
Over the past two years, PNB has reported notable improvements in asset quality. The gross non-performing asset (NPA) ratio, a critical indicator of asset health, declined to 4.09% as of December 31, 2024, from 4.48% at the end of the previous quarter. This positive trend reflects the bank’s ongoing efforts to strengthen its financial position and reduce the burden of bad loans.
Financial Performance and Provisions
In the December quarter, PNB’s net profit more than doubled, a development attributed to enhanced asset quality and effective management of provisions. The bank has been proactively setting aside funds to cushion its balance sheet against potential loan defaults. Recoveries from written-off and bad loans enable the reversal of these provisions, thereby bolstering profitability.
Future Outlook and Growth Targets
Looking ahead, PNB has revised its loan growth target for the fiscal year to 13%-14%, up from the earlier projection of 11%-12%. Similarly, the deposit growth target has been increased to 12%-13% from the previous 9%-10%. As of the December quarter, the bank’s loans and deposits grew by 14% and 14.4% year-on-year, respectively. This robust growth is largely attributed to PNB’s extensive network of over 10,000 branches across India, which facilitates deep market penetration and customer engagement.
Challenges and Market Dynamics
Despite these positive developments, PNB continues to face challenges, particularly concerning loan pricing in the competitive banking landscape. The bank aims to maintain a net interest margin within the range of 2.9% to 3.0% for the fiscal year, compared to 3.09% reported in the December quarter. Maintaining this margin is crucial for sustaining profitability amidst fluctuating interest rates and market conditions.
Conclusion
Punjab National Bank’s aggressive recovery target underscores its commitment to strengthening financial health and enhancing shareholder value. The focus on recovering substantial corporate bad loans, coupled with improved asset quality and strategic growth initiatives, positions PNB to navigate the challenges of the banking sector effectively. As the fiscal year progresses, the bank’s performance in achieving these recovery targets will be closely monitored by stakeholders and industry analysts alike.
