PNB expects GST rate cut to boost retail credit growth, MSME: MD & CEO Ashok Chandra

You expect credit growth of 11 to 12 percent and deposit growth of 9 to 10 percent. There is a difference of about 2 percent. How will you fill this gap?

One of them is retail, agriculture and small and medium-sized enterprises, the figures I have given. We are growing at that speed and this has been the case even before the VAT reduction. Post the cut, we expect further growth of 1-2 percent in the retail and MSME segment; there will now be at least 1 to 2 percent further growth in the system. The challenge lay in the corporate loan portfolio. Last quarter, the corporate loan portfolio grew by approximately 3 to 4 percent, while this quarter is 7.9 percent. And on a quarterly basis, the corporate loan portfolio has grown by 3 percent.

In the last conference after the June results, I had mentioned that there is ₹1.36 lakh crore of sanctions on the book for which the disbursements will be made. Now that book has become ₹1.78 lakh crore. Last year, in the full year, whatever total sanctions we had to do, we did this year in these six months, and I have another six months to go, and that’s why I’m talking about ₹1.78 lakh crore.

These are not the proposals in the pipeline. These are sanctions and I expect that the payout will certainly take place. In this book we have 40 percent project loans. PNB was at one point very active in the project loan financing segment in the country. We want to regain that space, with a lot of attention being paid to high-quality project loans. Given the disbursement of these sanctions in the coming quarters and year, I expect corporate lending to be somewhere between 8 and 9 percent in the third quarter and growth in the fourth quarter to be in the double digits. All this is expected to push credit growth to 11-12 percent in FY26.

What about funds?

Funds are available. There is sufficient liquidity in the system. We could have easily grown 12 to 13 percent in the down payment. Deposit includes a part of bulk deposit and CD (Certificate of Deposit). We have consciously completely separated ourselves from the bulk deposit and CD market. If you can give you the CD, the total deposit we had as of December 2024 was Rs 76,000 crore. Today we are at Rs 43,800 crore. During the September quarter of last fiscal, we reached CD 77,000 crore. We have reduced the dependence on the CD and the bulk deposit, which has a very high price and also fluctuates very much.

We have accumulated around ₹35,000 crore in retail term deposits this financial year. CASA is a concern and we have not reached its full potential. We grew by 4.7 percent year-on-year and 2.6 percent quarter-on-quarter. The bank has revamped the entire CASA product range and in the revamped scheme, we have mobilized 27 lakh new accounts with ₹18,000 crore of the deposit under the SB individual, the new scheme.

All those things together we have grown by 10 percent. A down payment is no problem at all. For the extra we have a pillow. The SLR camera is also there and in return we also have the buffer to borrow. Keeping all this in mind, if my credit growth happens and a down payment is required, we will definitely be in the market and increase the down payment.

What key sectors are you looking at for project financing?

Renewable energy is one of the areas and a sector that plays a major role for our bank. We are growing very quickly in this regard. The exhibitor there has gone up from Rs 14,000 crore last September to Rs 20,000 crore. We have also received proposals from steel, food processing and telecom. We are already working on the road and the power. Apart from that, we have the data center in India coming up very well and we have made some progress there. We now have a good exhibitor in INVIT and REIT, and we look forward to some good proposals. Smart meters are happening now and there in many states. PNB is now very active and has received proposals in many states.

This year we saw a policy rate cut of 100 basis points. And if I go by your fund costs, there has not been much decline, what could be the reason?

In the case of a down payment, the impact of the interest rate reduction comes with a delay. Many of our deposits had terms of one year and longer and we had a special 400-day deposit program with an interest rate of 7.25 percent (7.75 percent for seniors). Now all those deposits expire and then the extension applies and we currently pay 6.4 percent. We’ll be able to see the real impact on down payment costs in the third and fourth quarters, but with all of these things, our down payment costs in June 2025 were 5.35 percent, which has dropped to 5.18 percent. The fund’s costs also fell from 4.7 percent to 4.57 percent.

Does this also have consequences for your net interest income and net interest margin?

Certainly. I expect to see at least a 5 to 7 basis point improvement in the December quarter and a 10 to 12 basis point improvement in the fourth quarter as my entire deposit will have been repriced by then.