PNB expects the transition to new credit rules to cost $1 billion, says CEO

Brady House Branch of Punjab National Bank in Mumbai | Photo credit: FRANCIS MASCARENHAS

Punjab National Bank (PNB) will face an impact of an estimated 90 billion rupees ($1.03 billion) if the lender moves to a central bank-imposed credit loss framework by 2031, its CEO said on Monday.

The country’s third-largest state-owned lender by market capitalization is among the first to release an estimate of the likely impact of the rules, issued by the Reserve Bank of India earlier this month, on its balance sheet.

“The impact is about Rs 90 billion,” said Ashok Chandra, managing director and CEO of PNB, in an interview with Reuters. “The bank has made a rough estimate as these (new lending rules) were already in the pipeline… I don’t see any further deviation.”

The RBI’s draft guidelines require banks to move to an expected credit loss (ECL) framework, under which funds are set aside to cover the likely risk of default, over a period of five years from April 1, 2027. Currently, bad loan provisions are made when a loan becomes delinquent.

Major Indian banks, including the State Bank of India, are assessing the impact of the transition.

According to internal estimates, Chandra said, the New Delhi-based bank will face an impact of around 0.85 percentage points on the capital-risk-asset ratio (CRAR), a metric that measures the bank’s capital adequacy.

According to the company’s presentation, PNB’s CRAR stood at 17.19% as of September 30. According to the RBI’s latest financial stability report, Indian commercial banks had a CRAR of 17.3% at the end of March.

The impact will be offset by the profits generated from the bank’s normal operations, Chandra said.

“I think we can manage on our own with our internal structure. The Bank is well prepared to meet all the demands of the future.”

For PNB, most of these provisions will apply to assets in the second phase of the retail, agriculture and small and medium enterprises portfolios, Chandra said.

Second stage assets refer to high-risk loans where the borrower has missed a repayment deadline but has not turned into a non-performing asset.

The lender on Saturday reported a net profit of 49.04 billion rupees for the second quarter, up 14% from a year earlier. Chandra expects the bank to post a net profit of over Rs 150 billion for the 2026 financial year.

Published on October 20, 2025