Punjab National Bank (NSE: PNB) Q3 2025 Earnings Call dated Jan. 31, 2025
Corporate Participants:
V.B. Bansal
Ashok Chandra — Managing Director and Chief Executive Officer
Unidentified Speaker
Analysts:
Palak Shah — Analyst
Mahrukh Adajania — Analyst
Ashok Ajmera — Analyst
Jay Mundra — Analyst
Rakesh Kumar — Analyst
Aditi Naval — Individual Investor
Sarvesh Mutha — Analyst
Krish Shah — Individual Investor
Parth Patel — Individual Investor
Parag Thakkar — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Punjab National Bank Q3 FY ’25 Earnings Conference Call, hosted by Elara Securities Private Limited. [Operator Instructions]
I now hand the conference over to Ms. Palak Shah from Elara Securities Private Limited. Thank you, and over to you, ma’am.
Palak Shah — Analyst
Yeah. Hello, everyone, and welcome to the Q3 FY ’25 earnings call of Punjab National Bank.
Today, we have with us the entire team of PNB management, headed by Mr. Ashok Chandra, MD and CEO; Mr. Kalyan Kumar, Executive Director; Mr. Paramasivam, Executive Director; and Mr. Bibhu Prasad Mahapatra, Executive Director.
With this brief introduction, I’ll hand over the call to the PNB management — PNB team, Mr. V.P. Bansal to read out the disclaimer, post which he will hand over the call to MD sir, who will address the conference.
Thank you, and over to you, sir.
V.B. Bansal
Thank you, Palak. The disclaimer statement is that this representation contains certain forward-looking statements apart from historical information. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Punjab National Bank undertakes no obligation to update forward-looking statements to reflect events or circumstances after the present day.
Thank you. Over to MD sir.
Ashok Chandra — Managing Director and Chief Executive Officer
Good evening to all the participants. I am presenting the highlights of our bank for this particular quarter. And then, we will open the session for question and answer and for any clarification.
Highlights of our performance, I will be giving it under three segments. One is the business parameter. Global gross business of the bank stood at INR26.40 trillion as of December ’24 with a yearly growth rate of 15.20%. Within the composition of this, the gross business, the total global deposits stood at INR15.30 trillion with a YoY growth rate of 15.6%. And global advances stood at INR11.10 trillion with a YoY growth rate of 14.8%. CD ratio of the bank is comfortable level at 72.58% as on December ’24 against 73.08% as on December ’23. The CASA share is 38.12% as on December ’24.
Coming to the profitability side, the highlights are — coming to — the net interest income stood at INR32,025 crore with a YoY growth of 7.8% for nine months ending 31st December ’24. There is a sequential growth in net interest income for the last 12 quarters, and our current quarter NII is INR11,032 crore. Our domestic NIM is 3.12% for nine months of ’25, whereas global NIM stood at 2.97%.
The operating profit for nine months ended December ’24 is INR20,055 crores, which has improved from INR18,515 crore in the same period last year with a growth rate of 8.3%. Our quarterly operating profit is INR6,621 crore, which has improved from INR6,331 crore in the same period last year with a growth rate of 4.6%.
The net profit of the bank for the nine-month period ’24-’25 is INR12,063 crore, recording a growth rate of 130.5% YoY compared to the nine-month period of ’23-’24 at INR5,234 crore. For the December quarter, net profit stood at INR4,508 crores against INR2,223 crore Q3 ’23-’24 with a YoY growth rate of 102.8%.
If I compare for ratios, ratios on return on assets, that stood at 1.03% for Q3 FY ’25 and 0.96% for nine months FY ’25, achieving the guidance of our FY ’25. Return on equity is 19.22% for Q3 FY ’25 against 18.87% for nine months financial year ’24-’25.
Highlights of asset quality. As far as the asset quality is concerned, GNPA has reduced from 6.24% in December ’23 to 4.09% in December ’24. Similarly, the net NPA ratio, which was 0.96% in December ’23, has improved to 0.41% in December ’24. The PCR of 94.28% in December ’23 has improved to 96.77% in December ’24, which is well above our guidance of more than 95% for FY ’25. The total fresh slippages during nine months is INR4,557 crore and INR1,774 crore in this particular quarter, as against INR1,793 crore in Q3 of ’24 and INR2,181 crore in Q2 of ’25. Total recovery stood at INR3,412 crore for financial year ’25 Q3 and INR10,400 crore for nine9 months ’24-’25.
Bank has initiated a lot of digital tools. Our mobile app and the WhatsApp banking is very, very active. The bank is focusing on building digital capabilities by using new-age technology. The share of digital transactions has increased to 91% for Q3 financial year ’25 against the 88% in Q3 financial year ’24.
Highlights of capital. If I talk about the capital adequacy, it’s 15.41% as on 31st December ’24 compared to 14.63% as on 31st December ’23. During the Q3 of 2024-’25, bank raised Tier II bonds of INR3,000 crore. And CET1, AT1 and Tier II stands at 10.65%, 1.88% and 2.88%, respectively. That is the growth that has happened in this particular quarter.
Thank you very much. And now, I open the forum for the question-and-answer and any clarification which anybody would like to have. Thank you.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Mahrukh Adajania from Nuvama. Please go ahead.
Mahrukh Adajania
Hello. Congratulations. I had a couple of questions. Firstly, congratulations on your appointment, sir.
Ashok Chandra
Thank you, madam.
Mahrukh Adajania
Thank you. Sir, basically, my question was that, obviously you’ve not spent much time with PNB, but — and over the last three, four quarters there was a stable growth path of PNB. They were kind of acquiring market share in loans and deposits, keeping margins more or less stable, reversing provisions. So that’s been a strategy over the last couple of quarters. Now under you, do you see that change? Because that is — whenever there is a change in CEO, that is the biggest investor concern, right, that the CEO may have his own strategy, may have his own thought process, which will always be good for the medium-to-long term. But how do we view it or how do we assess the short-term financial impact of any change in thought process? So that’s my first question.
And then, I have a few questions on numbers. So the question I have on numbers is that your NIM has held much more steady compared to other state-owned banks. So what would be the outlook for 4Q, right? Because your deposit growth is strong, your loan growth is also strong, and that helps. But your margin performance has been better than other PSUs. So what is the outlook here? And then what will be a steady state of credit cost? Because this quarter, there were reversals. And last quarter also, credit costs were very low. So what would be a steady-state credit cost in FY ’26? Sir, these were my questions.
Ashok Chandra
First question — thank you very much, madam. In fact, we used to interact frequently there. See, first, you talked about the strategy. See, PNB has a strong legacy of 129 years. And generally, a bank like this, we go by the system in place, which is already there in built now. It doesn’t change with the MD and CEOs. The position changes. So whatever the growth path is there and the profitability angles are there, I think definitely we are going to continue the same momentum. Yes, some of the cost of deposits and yield on advances, some adjustments and some tweaking we would like to do in the interest of the profitability. And there is enough potential which I see that even if some tweaking happens in the cost of deposit and the yield on advances, we have enough kitty in the book, which will take care of my growth also and the profitability part also.
We have more than 1,30,000 [Phonetic] corporate book sanctions in place. And I think if any some adjustments which we need to do in the yield on advances, low-yield advances assets, I think we have enough cushion to do that. And we will maintain the growth which is there in the PNB for the last three years. I think that growth momentum will be there. And I can assure you that the profitability which is there in the system, I think definitely that is going to continue. This is the core strength of the balance sheet of our bank. And the profitability part, definitely, it is a very, very core strength is there now. And that is the reason bank is able to maintain the NIM in the range of 2.9% to 3%. The reason being is that the provision coverage ratio is already 97%. So, almost the entire book is already provided. So today, whatever recovery that happens, either by way of write-back of provision in the GNPA recovery and in the TWO, whatever we are recovering it, it is directly adding to my operating profit. And despite around INR700 crore dip in the recovery in the TWO compared to the previous quarter, we are able to maintain the NIM at this level now. And if you see our recovery, which used to happen every quarter, in the TWO itself is more than INR1,400 crore, INR1,500 crore. Even if that has not happened, but we are able to maintain that — the NIM and the NII and all those key ratios. So I think that is one strength which is there in our bank is we have INR91,000 crore of technical retain of accounts. So there is enough cushion for us to recover it and maximize our operating profit, thereby maximizing the net profit of the bank. So that is going to continue. And I’m very sure that in the coming quarters and the years also, the profitability part, all of you should rest assured that it is going to happen now.
Your related question is the credit cost, which I’ve already covered now. Since already provision coverage ratio is 97%, and I am seeing for the last three quarters, our recovery is higher than the slippages. And when I am talking about recovery, the recovery in the gross NPA, not in the TWO recovery. Recovery in the gross NPA and the upgradation which is happening in the gross NPA, that itself is higher than the slippages to the tune of around INR100 crore to INR200 crore. So in a true sense, there is a good write-back of provisions are happening. And that is one of the reasons that my credit cost is very, very low. And this trend is going to continue in the coming quarters also.
Mahrukh Adajania
Got it, sir. Thank you so much. Thanks a lot.
Operator
Thank you. The next question is from the line of Ashok Ajmera from Ajcon Global. Please go ahead.
Ashok Ajmera
Thanks for the opportunity. Congratulations, sir — Ashok Chandra sir, for coming and heading the largest — I mean, next to State Bank of India, public sector bank with over I think, INR2,600,000 crore business. And with you being there, yes, we are again reassured that PNB will — has almost come back and will come back further and will reach to its previous glory. You are a taskmaster. And on that note, I wish you all the best here in this bank. Having said that, sir, again, my question is on the — Mahrukh’s little more extended this thing — that in PNB, even in this quarter also, both your business growth — I mean credit and deposit growth has been phenomenal. So far, whatever results are declared of the other banks — hello, am I audible?
Ashok Chandra
Yes, very clear, Ajmera ji.
Ashok Ajmera
Yes. So, on the credit front also it is 4.56% in this quarter, and on the deposit front also 4.75%. And overall also, if you look at the 9 months also, it is over 12%, the credit and — almost 13%. So sir, going forward, are we going to maintain the same tempo for the overall business growth, especially the credit growth, with you being there? And what kind of targets we can look at? That is my first question.
And sir, second one on, this other income has come down from INR4,572 crore to INR3,412 crore, other income in this quarter. I couldn’t go much in detail because I was traveling and I just landed in Mumbai. So on that, is it anything one-time or it is going to be maintained the same tempo of having a larger income? Because from the written-off account, recovery this time is only INR823 crore as compared to the quarter of INR1,404 crores. Maybe this may be the main reason.
And sir, the third question is on, you said, you already covered that digital footprint and PNB also going very aggressive on digital — digitization. So what is the exact status today? And how many journeys have been completed? And what kind of plan we have for making this bank fully digitized, not only in the retail but in the all kind of businesses?
Ashok Chandra
Yes. Thank you, Ajmera ji. And first, I’ll touch the credit growth part. Yes, this quarter and this entire year, there has been good growth, and the deposit has grown by 15.60% and advances 14.8% growth is there in YoY. And QoQ also, what you have told, that is a fact. I am expecting that the credit growth will continue to move in the range of 13% to 14%. I think that we’ll continue to have that because we have already INR1.3 trillion corporate book sanctions are in place. And I am expecting that in this quarter and the subsequent quarter, all these books are going to be availed by the corporates. So there is going to be a good growth in the corporate segment. At the same time, we are going to have very focused attention and activity from the RAM sector now, because that is one area I have seen that the MSME segment if I talk about, we have grown in the single digits. And we are going to put a lot of focus on the RAM activity. And you will see that in this particular quarter there will be a good growth in the MSME segment particular, and the overall retail also will grow substantially. So I am expecting that my credit growth will flow in the range of 13% to 14% in this particular year as a whole.
Second part is other income. See, other income, there are two components which has brought down the operating profit. First part is the technical write-off. You have touched this point. Compared to the last quarter and subsequent previous quarters also, we used to have around INR1,400 crore to INR1,700 crore recovery in the technical write-off accounts. But this quarter, it is very muted recovery happened in the TWO. And the TWO recovery is INR823 crore against INR2,059 crore in subsequent — I mean, last year, the ’23-’24 financial year and INR1,400 crore last quarter. So that is one of the reasons why our operating profit has come down, and other income also, it is appearing less.
Second reason is the MTN provision. I think this quarter it has affected in the negative, whereas in the last quarter we were INR700-plus crore positive. So that has also put a dent on our other income. And I am expecting that some situation change should happen in this particular quarter. Even if we are not going to be positive, at least some changes should happen in this portfolio in this particular quarter. After written-off account recovery, definitely that is going to happen in a very, very big way in this particular quarter because we have INR91,000 crores of the technical write-off book now. And there are a lot of the accounts where resolutions have happened. We were expecting the recovery to come in this Q3. I think those accounts are getting matured. And definitely, in this particular quarter, we should have a TWO recovery of around minimum INR1,500 crores to INR1,600 crores. And already I have seen that targeted accounts are there and is it going to happen now.
Your third part is the digital footprint. See, both sides, one is the liability side and the asset side, bank is in a very, very active status now. We have more than 2 crore log-ins, and the activation is there of our PNB ONE mobile app. It is a big number. And I’m seeing that the transactions which are happening, that is also almost doubled or tripled in the last one year, if I think about. The average daily active users on that mobile app is 13 lakh. It used to be 9.5 lakh. And if I talk about the average daily UPI transactions, last year, during the same period, it was 37,000. This year, it is 11,300,000 [Phonetic]. That is the transactions that is happening now.
Unidentified Speaker
1.13 lakhs.
Ashok Chandra
1.13 lakhs. Sorry.
Ashok Ajmera
1.13 lakhs. So it was 37,000 last year and this year, it is 1.13 lakh. So I think if we see the transactions which is happening, that reflects that digital footprint of our bank is — has become very, very strong. So this is about the liability side. And if I talk about the lending side, asset side, our bank has already created the lot of journeys up to INR25 lakh. We are one of the few banks who has started cash flow-based digital journey for MSME now. Even if the MSME, those who are not having any balance sheet or any documents, based on their transactions happening in that account, their credit score model, the system is in-built, and it is totally end to end up to INR25 lakh. And it is both for the existing customer as well as the new-to-bank customers. This is one journey which we have started just last month. Besides that, all our digital footprints in the MSME segment, this one is the INR25 lakh segment, then MSME SVANidhi scheme, MSME Vishwakarma scheme. I think already, all those things are under the digital footprint. We also have the PAPL, the personal loan. That is also against the digital — by reading the account statement and other footprint which the customer has, we are also doing that. I think we have also initiated the process of renewal of our MSME book. I think that journey has also started. And all of us know that up to INR25 lakh, highest number of accounts are there under that particular segment, not only in our bank, in the banking sector as a whole. So that renewal part up to, I think, INR10 lakh or INR25 lakh, that already — INR25 lakh. Up to INR25 lakh renewal through the digital footprint, already we have started. And besides that, we have also strengthened our data analytics center. We have created a lead management system and lead management portal is there. So any customer who is banking with us, we are analyzing their transactions in the account, and we are giving the lead to our branches to follow up for the further loan requirement of that particular customer. So I think a lot of initiative bank has done. And going forward, I think bank is poised for a digital transformation. So, that is all I can talk about the digital transformation happening in the bank. Point well taken, sir. Just last question in this round. Sir, we are this thing — at this time in the provision, we are negative INR285 crore as compared to INR2,088 crore in the last quarter, whereas in NPA — for NPA, we have INR317 crore provision. So in all, the effect of about INR602 crore. So going forward, how do we see the provisioning on account of overall provision, including NPA? And do you have some additional buffer left to be a zero-provision bank, which will add up to our bottom line further? And we will be a bank of about INR22,000 crore profit in this whole financial year, sir.
Ashok Chandra
Thank you very much for such an ambitious figure which you are giving now. But yes, I can assure you that, as far as the provisioning of the bank is concerned, bank is adequately provided. We have 97% of provisions are there. And if I talk about the tangible provisioning, that is, if I exclude that TWO provisioning, still we have more than 90% of provision in the GNPAs also. So that gives a cushion for the bank to reduce the credit cost. And the write-back of provisions are going to happen in the subsequent quarters also. It is not that one particular quarter this phenomenon has happened. I think definitely the write-back of provisions will be there. Negative trend will continue further now. Now this additional provision which we have paid, which you are talking about is INR318 crore, this is for reducing the net NPA which we have made the provision. And that is one of the reasons our net NPA has, subsequently, it has come down compared to the last quarter.
Ashok Ajmera
Yes, sir. Will the moderator permit me for one more question?
Operator
Yes, sir, you can go ahead.
Ashok Ajmera
Okay. So that is, I want to ask to give some color on the treasury operations. Our segment-wise result, if you look, the treasury profit has come down from INR3,339 crore to INR2,780 crore. That is as per the segment-wise. But overall, since the treasury is very active and must be making a lot of good deals and good profit, so in this coming quarter also, with the treasury performance — and with the little sign of rates coming down, how do we stand on the treasury front? And how much more the treasury can add to our bottom line in the coming quarter so as to make FY ’25 a INR22,000 crore profit bank, sir, pre-tax?
Ashok Chandra
I think if I can talk about this particular quarter, and — because we will have to wait for the MPC [Phonetic] to be announced and how it pans out. But two, three decisions which the RBI has taken last week, I think that is going to add to the profitability part of the treasury. One is that open market operation, that INR60,000 crore which has been announced, I think definitely that is going to add to the kitty of the treasury. I think I am expecting some rough calculation is there around INR150-plus crores should happen on account of this transaction.
Ashok Ajmera
I think on the liquidity front also.
Ashok Chandra
Yes. Liquidity front also? Yes, liquidity front also. So that will also ease my cost of deposit. So I think we need to wait for the further announcement. One is the budget and especially in the MPC, how it happens. And I’m expecting that the performance which is there in December quarters, there will be some improvement in the treasury performance in this particular quarter.
Ashok Ajmera
Okay, sir, thanks. Thanks. Thanks a lot, sir. And all the best to you. Yes, definitely, we will see PNB growing more faster and healthier in the coming quarters. Thank you.
Ashok Chandra
Thank you. Thank you, Ajmera ji.
Operator
Thank you. The next question is from the line of Jai Mundhra from I-Sec. Please go ahead.
Jay Mundra
Yes. Hi, good evening, sir. And congratulations on good numbers and also on your appointment as MD and CEO of the bank. Sir, I have a few questions. First is, I just wanted to check the other interest income this time around, right, which is INR500-odd crores. Does this include any IT refund or any one-off receipts?
Ashok Chandra
Yes. There is one IT refund component is there. I think INR400 crore — INR350 crore, one component is there in this.
Jay Mundra
Okay, sure. And second thing is, sir, if you can also talk about the total SMA of the bank, including below INR5 crores ticket size?
Ashok Chandra
See, if I talk about the SMA-1 and 2, I think INR5 crore already it is disclosed. It is already there with all of you. And if I talk about the SMA-0, 1, 2 for the entire segment, it is in the range of around 7%.
Jay Mundra
Okay. So total 0 plus 1 plus 2 is 7% of the overall loans, right?
Ashok Chandra
Yes.
Jay Mundra
And would you have the bifurcation also, sir, 0 is how much, 1 is how much and 2 is how much?
Ashok Chandra
See, the highest of that is under the SMA-0 segment. SMA-1 and 2, it is in the range of around 4%. So I think…
Jay Mundra
So 1 and 2 — sorry, sir. Please continue.
Ashok Chandra
Yes. SMA-0 is the highest. And if I can give you the number, INR49,522 crore is SMA-0, and SMA-1 is INRINR15,000 crore, and SMA-2 is INR13,000 crore. And this SMA-0 also, most of these accounts are with the retail segment. And because of the repayment period which is paid in the system and the actual repayment that happens, there is a delay of around one week, 10 days’ time. And that is one of the reasons SMA-0 book is a little high. So we are putting some system in place so that this book also gets reduced. But SMA-1 and -2 itself only if I take, and in fact, that is one of the concerns for any bank, that is well within our tolerance limit now.
Jay Mundra
Okay. Sure. Sir, within this — with this set of SMA numbers, maybe at 7% and maybe 4% of 1 plus 2, are you confident on sustaining this current INR1,700 crores, INR1,800 crores kind of cost slippages? Or do you think there is a chance that it may go up?
Ashok Chandra
No, I am very much confident because this is not a one-off of performance of this quarter. If you can track for the last 1.5 years, quarter-to-quarter, there is reasonable slippages have happened and all are almost in the same range, so INR1,600 crore, INR1,800 crore, like that only the slippages are happening. And we are very confident that we will be able to retain these slippages in the same range.
Jay Mundra
Right. Sure. And sir, we had also created floating provisions in this quarter, right, some INR250-odd crores. What is the policy? How do you — is this ad hoc provisions, or there is some formula-driven policy in creating these provisions?
Ashok Chandra
There is proper guidelines there. And RBI also permits to have this floating provision, and we have the Board-approved policy also. And under that provision setup only this provision has been made. So this is a floating provision. And as and when it is required to be made for any particular account, we will use that provision for that particular time of purpose.
Jay Mundra
Okay. And we do not make any provisions on SMA-1 or 2, right? That is not the policy as such?
Ashok Chandra
We don’t provide for SMA book. But if it is any restructuring if we are doing it, then definitely we are supposed to make some provision. And any account — I think all of you know that 7th June circular — if any accounts are there and any restructuring, under that 7th June circular, if it is there, then we are also supposed to make a provision under that particular account.
Jay Mundra
Right. Sir, coming back to net interest income, right, so if I strip this INR350-odd crores of interest on IT refund, then the margins declined by 8 basis point, 9 basis point, right, on QoQ basis. And in fourth quarter, as you step up on corporate loans, margins may again sort of soften, right? So how should one look at the NIM trajectory? Because this quarter, of course, it has been aided by one-off of this interest on IT refund. And as you go along growing corporate book also, how should one think of NIM?
Ashok Chandra
I will give you two parts in this. One is we are re-pricing our corporate book. That is one strategy we have already initiated. And there are, I think, around INR10,000 crore which is renewals or re-pricing it came. And we have gone for some modification in the pricing, and it has already happened. So, that is one strategy we are going to put in place in this particular quarter, so that our yield on advances in this particular quarter should improve from the existing level. That is one strategy which we are doing it. Second is, we are expecting that treasury interest income also, some improvement will happen in this particular quarter. And as far as this one-off provision of this income tax, see, it is also happens on a regular basis also. It is not that one time it has happened. We will have to see that in this quarter also, maybe we would like to get some part of this income tax refund also, and that will be a part of this setup. All put together, whatever contribution that has come through this particular setup, I think that will make a good — the loss which — you are suggesting that it will not happen, and if that doesn’t come, how it will happen. I think these things will take care of that part.
Jay Mundra
Right. And sir, any ballpark number that you will envisage for FY ’26 on ROA front? Would you like to sustain the 1% trajectory that we have achieved in the last two quarters or — because as we go along in FY ’26 there is a rate cut, which will depress margins for all banks, including PNB, how should one think of the ROA for FY ’26?
Ashok Chandra
See, as of now, the guidance which we have given for this financial year, that is 2.9% to 3%, that we are — definitely, we are going to achieve, and we will cross that. Let us wait for the important events which are already there in the system, budget announcement, plus the MPC, how it happens. And further, we need to have a strategy meet and Board strategy discussion and what will be our plan of growth for deposits, advances, and all these different parameters, and then only, I think, we can disclose that what is the growth and what is the NIM which we are envisaging in ’25-’26.
Jay Mundra
Fair point, sir. If I can just ask one data point, sir. What is the NPA recovery that goes to NII line item for this quarter? The NPA recovery that goes to interest income, not in the other income, but interest income, how much is that amount in this quarter?
Ashok Chandra
That is around INR400 crores — INR645 crore, both from the GNPA recovery side also in interest component it has gone. And from the TWO recovery side also, some part has gone to the interest income. And that is also every quarter, I think, INR500 crore to INR600 crore, we are able to recover that.
Jay Mundra
So INR645 crore in this quarter. And maybe if you have the numbers for last quarter, sir, that will be very, very helpful to just get a sense.
Ashok Chandra
I will tell you. INR606 crores, sir.
Jay Mundra
Okay. So it’s not too much change, right?
Ashok Chandra
It will not change, sir, because whatever recovery we are doing it, some part of that recovery goes to the income side — interest income side. And then, it gets reduced to the book balance.
Jay Mundra
Sure. Thank you so much, sir. And all the very best. Thank you.
Operator
Thank you. The next question is from the line of Rakesh Kumar from B&K Securities. Please go ahead.
Rakesh Kumar
Yes, hi, sir. Could you hear me, sir?
Ashok Chandra
Yes.
Rakesh Kumar
Yes. Hi. Congratulations, sir, on the new assignment.
Ashok Chandra
Thank you.
Rakesh Kumar
So, a couple of questions, sir. Firstly, like even with quite good deposit growth that we had this quarter of around 4.9%, TD cost does not — TD cost has not gone up on a sequential basis. So in case of other banks, especially the PSU banks also and the private banks also, we saw that even banks not having much deposit growth, they had witnessed deposit cost rise. So what is happening differently in our case? Because that protected our margin this quarter?
Ashok Chandra
See, one is, we are able to mobilize a sizable amount under the retail term deposit. And we have one special scheme of 7.25% for more than one year. And we are able to mobilize a good number of amount under that particular bucket. And you also know that we are one of the largest bank under this CASA segment. INR562,000 crore is our portfolio under CASA, and it is, next to State Bank of India, that is the highest CASA which we have now. And there has been growth also in the CASA. Despite having such a large base, there is a growth of around 2.81% that has happened in the CASA segment. So all those put together, we are not seeing much strain on our NIM.
Rakesh Kumar
Got it, sir. And secondly, sir, like looking at your — on the bifurcation that we have given in EBLR, MCLR, T-bill and all, so T-bill composition, if I see, it has gone up from 8.4% to 11%. And if I look at like domestic, in the scale loan growth, that is around 3.5% — approximately 3.5% sequential. So against that growth, if I see — or against that composition change of the credit, if I see, the composition change of the lending rate benchmark, especially on the T-bill, which you might have used for corporate lending, has gone up sharply, and for MCLR it has come down. So have we changed our benchmark for the corporate lending? And like there is pressure coming from corporate borrowers in terms of pricing? So if you can clarify, sir?
Ashok Chandra
There is no pressure from the corporate side. It is a conscious decision of the bank to — when we had the liquidity. And with the thin margin also, we are able to rotate our fund and make good of that particular fund. And that is the reason, if you see the TBLLR, the growth, substantially it has gone up, for the 31 days, 45 days, 90 days period also, through our short-term loans, WCDL, we are making good money out of that. So one is that we are getting the fund, shorter fund also, and we are able to deploy those funds in that particular segment, and we are able to make good money out of that. So this is a conscious decision bank has taken. It is not because of the strain in the system.
Rakesh Kumar
But it looks very contrary, sir. Like our reported margin — like margin is looking flat, but we have gone on the T-bill pricing. So where else we have made surplus margin to make up for the loss when we are doing corporate lending on the T-bill?
Ashok Chandra
No. It is not like that because we are also doing some repricing of our — the corporate book, which we had given below 7%. There was [Indecipherable], which we had 7.25% also. So some price adjustments we are doing there also. And wherever there are opportunities to make the good of our — the surplus which we are having or the overnight borrowing which we are doing it, we are also using that fund on a regular basis for the WCDL and all for making the — even if some small spread is there, we are able to make some good money out of that.
Rakesh Kumar
And sir, lastly, on the AS-15, we had INR2,060 crores provision in the Q2. This quarter, we have INR1,400 crore. So during the nine months for this fiscal year, have we changed our discount rate for either gratuity or pension? Because last quarter we made quite high provision, on the ad hoc basis. So if you can help us, like where are we on that?
Ashok Chandra
See, generally, AS-15, the provision happens and we decide in the beginning of the financial year. March, the actuarial calculation happens. And based on that calculation, we make the provision in the very first quarter and subsequently subsequent quarters also we go by that. But when we saw that there is a dip in the yield which is happening and based on that, I think, 7.78%.
Unidentified Speaker
7.05% to 6.75%.
Rakesh Kumar
So there was some 0.30% dip was there in the yield. So because of that, we recalculated the actuarial provision. And then we found that there is — excess provision has to be done in the September quarter. And that is the reason we have gone for some higher provision in the September quarter. At that point of time, we calculated that the entire year, I think it was INR5,600 crore was the total provision that was required for the entire year based on the calculation in the month of September.
And accordingly, we have worked the calculation and we have done the calculation for this quarter to the extent of INR1,400 crore. If the same situation remains as it is and we are expecting almost the yield will remain the same, then in the March quarter also we will require to have the provision of only INR1,400 crore. So it means, sir, at the current yield of around 6.7% in your annual yield, and we had a discount rate of 7.2% in the March ’24. So we would not be required to make any further change in the discount rate like what you are assuming right now?
Ashok Chandra
Absolutely.
Rakesh Kumar
And what is that discount rate number, sir, now that we have?
Unidentified Speaker
6.75%, we have done.
Ashok Chandra
6.75%, we have done in this particular quarter.
Rakesh Kumar
For gratuity and pension both?
Ashok Chandra
Yes, both.
Rakesh Kumar
Thank you, sir. Thank you so much, sir. Thank you so much, and all the best.
Operator
Thank you. The next question is from the line of Aditi Naval [Phonetic], an individual investor. Please go ahead.
Aditi Naval
Hello. Am I audible?
Ashok Chandra
Yes.
Aditi Naval
Hi. Thanks for the opportunity, and congratulations on your appointment and congrats on the quarter as well. I just had one question. So it is regarding the recoveries that you’ve been guiding to the tune of around INR18,000 crores. Now until Q3, we have done around INR11,500-odd crores of recovery. So now if I run some calculations, and also with the guidance that you’ve provided that in tune — so we’d be expecting TWO recoveries to the tune of INR1,500 crore to INR1,600 crore, I’m able to calculate some shortfall of around INR2,000 crores, INR2,500 crores in the recovery amount. So could you just help me with whether we will be able to meet the target of INR18,000 crores or there will be some softening on that?
Ashok Chandra
I think, yes, we are aiming for INR18,000 crore. But with a conservative estimate, I can tell you that in this particular quarter, we should be in a position to mop up the recovery to the extent of around INR5,000 crore to INR6,000 crore.
Aditi Naval
In Q4?
Ashok Chandra
Because there are some recoveries which we are expecting in the last quarter to come. There were some bigger accounts were there, which didn’t materialize. Generally, in the corporate recovery, it happens like this. But all those recoveries, we are expecting that, I think, in this quarter and some bigger recoveries are going to come in this February month itself.
Aditi Naval
Around INR5,000-odd crores of recoveries in TWO, as well as write-back of provisions?
Ashok Chandra
Both of these is going to happen, yes.
Aditi Naval
That will be it from my end, sir. Thank you so much.
Ashok Chandra
Thank you.
Operator
Thank you. The next question is from the line of Sarvesh Mutha from AGFR Financials Research. Please go ahead.
Sarvesh Mutha
Hi. Thank you for the opportunity. Sir, I had a question on the tax rate. We have a tax rate currently of around 34.5%. Now going into FY ’26, do we plan to migrate to the 25% tax rate any time next year?
Ashok Chandra
We are estimating and we are planning now to decide in the ’25-’26 at any quarter. Depending upon our position, I think definitely, we would like to move to the new regime.
Sarvesh Mutha
Okay. And sir, on margins, you had said that you will be maintaining the 2.9% to 3% margin. Now if we look at FY ’26, now there could be a couple of rate cuts during that year. And do we think that this 2.9% to 3% could be held even for FY ’26 as well?
Ashok Chandra
We will have to see that what sort of the announcement comes from RBI side and how the budget announcement comes, what are the provisions that come. And then, we’ll take a call that what is the business model which we are going to adopt. And see, whenever the re-pricing happens, so the re-pricing will happen on the deposit side also. So I think we will take care of the margin part even if the rate fall happens. I think we will declare and we will announce that what is our guidance for ’25-’26 by the end of this financial year.
Sarvesh Mutha
Okay, thank you. Thanks for the opportunity. Thank you.
Operator
Thank you. The next question is from the line of Krish Shah [Phonetic], an individual investor. Please go ahead.
Krish Shah
Hi, sir. I have two questions to ask. So first is, are we looking to do anything to improve our CASA growth? Because as I observe, banks are in sort of interest rate war going on. And second would be on operating expense cost. Is it — are you going to follow this rate [Phonetic]? And how much are we investing in digital?
Ashok Chandra
See, first is the CASA growth. See, our assumption is that in CASA, interest rate doesn’t make much difference. And the interest rate which we are offering already, it will continue. And there will not be any interest rate changes that is going to happen in the CASA front now. And as far as the growth is concerned, we are mindful of that, that today, if we want to initiate and grow in the CASA front, a lot of initiatives are required. One is that how much additional facilities which we are offering in the particular CASA product, whether we have the segment-based CASA products, all those things we are going to review in our bank also. And we will have the best probable facilities which are being given by different banks. Definitely, we are going to adopt in our CASA products also. So we will be very, very competitive as far as the CASA is concerned. And being the major presence in the North and Northeastern states, we have the locational advantage also as far as the CASA growth is there. So I think that piece, we are not going to miss, and we will be one of the market leaders in the CASA growth front now. And operating cost-wise, see, one cost is almost — it remains fixed and flat. That is the employees-related cost. There may not be any changes which we are envisaging in this coming quarter also and going forward also. What we are going to put emphasis on that, how much improvement we can do it in the non-interest income part. There are a lot of avenues are there, which we are discussing it at bank level. One is that the cash management services. We would like to explore that how much income we can generate through that activity. Supply chain, vendor management, that is wonderful opportunities that is there in the system. And the bank has just initiated that process for the supply chain and vendor financing. So I’m seeing that wonderful opportunity for these two segments, which will increase our non-interest income and thereby the operating income and the operating profit. I think that we will be able to sustain and we will able to grow.
Krish Shah
Thank you so much, sir. All the best.
Ashok Chandra
Thank you.
Operator
Thank you. The next question is from the line of Parth Patel [Phonetic], an individual investor. Please go ahead.
Parth Patel
Hi, sir. Sir, my first question is around the provisions you hold for the SME, the standard and the restructured book put together, so the non-NPA part. How much provisioning are you holding in total for that?
And the second question is, sir, around this year we are seeing INR18,000 crores in terms of NPA recovery. But if you just look at the TWO recovery, you said you have INR91,000 crores of TWO book. So next year, do you think that the TWO recovery will be more than FY ’25, less than FY ’25? Do you have any number in mind?
Ashok Chandra
See, one is, first, your provision part. See, in the standard account of provisioning, there are only two ways which we do. One is the normal RBI mandate is there for making the provision, I think 0.40%, which we are supposed to do that. We do that. And wherever the restructuring that has happened in the standard account — see, one is the OTR-1 book, OTR-2 book and the normal 7th June circular, any restructuring has happened — in those accounts only, we are supposed to maintain the provisioning norms and provisions. So other than that, we are not supposed to maintain any — the guidelines, we are not supposed to maintain any provision for the standard book. But we have around INR750 crore of floating provision which we are holding it. And whenever it is required to be used for any purpose, we are going to use that provision. So we are well capitalized and well provisioned held bank now. So there is no challenge as far as that part is concerned.
Your second question was the TWO recovery. See, the book is so high that I am expecting that not only this quarter, going forward also, bank is going to have a good recovery under the TWO, because INR91,000 crore is a big book, and there are — we have INR54,000 crore of NCLT book. And all the NCLT book which we are holding it, it is under the TWO now. So this INR54,000 crore out of INR91,000 crore, definitely it is going to be realized in the next year or the subsequent years also. So that is the opportunity which is there in the system for the bank to get back that recovery. So I’m very hopeful that TWO recovery will continue to bring the good income for the bank.
Parth Patel
Got it, sir. Thank you so much.
Operator
Thank you. The next question is from the line of Parag Thakkar from Fort Capital. Please go ahead.
Parag Thakkar
Yes. Hi, sir. Congratulations for the new assignment, and congratulations for a good set of numbers. Sir, as you — as everybody is expecting that rate cuts are going to happen, and so there will be some margin compression. But don’t you feel that because you have a CD ratio of 72% only, and if the system liquidity improves due to RBI steps, like as you mentioned, VRRs and OMOs, the growth will also be better?
Ashok Chandra
Yes. I fully agree with you, sir. We have enough cushion for growth now. Having 72% of the CD ratio and 15.56% of the CRAR and the profit which we are holding it, we have enough cushion to grow in the system. And if further rate cut happens, I think opportunities will be immense for the corporate also to come forward and avail the facilities.
Parag Thakkar
Sir, do you feel that growth will offset whatever little bit margin contraction which happens due to interest rate cuts? Because as you very rightly said, deposit would also get repriced, but there will be some lag effect, right?
Ashok Chandra
Yes. So we will have to see what is the rate cut that is being offered, and that happens in this particular quarter when the MPC happens. And I think, see, in the shorter span of time, one quarter, two quarter, definitely, there will be some impact. If I say that no impact will be there, I will not be doing justice to that. So there will be some impact. But whatever happens, the impact for this quarter will be very, very minimal. I think with the growth in the credit pipeline which we are holding it, I think that should offset the effect of the rate cut which is going to happen. So in this particular quarter, I am not seeing any major impact of the rate cut even if it happens.
Parag Thakkar
And sir, when you say 13% to 15% loan book growth, you have said for FY ’25, or for next year, ’26?
Ashok Chandra
No. See, our guidance for this year is 10% — 11% to 12% of the loan book now, and I am expecting that our growth will be in the range of 12% to 13% in the financial year ’25.
Parag Thakkar
Correct. And ’26, you’re saying…
Ashok Chandra
’26, I have not told anything. And we need to wait for the — see, there is a process for fixing the number for the next financial year. And somewhere in the first week of March we will have the Board strategy meet, and then we will decide the growth path, what is the profitability which we are going to fix up, what will be the NPA number and the guidance we will give at the end of the financial year to the analysts and everybody that on the 13 basic parameters where we want to place our bank in ’25-’26.
Parag Thakkar
And sir, when you say that out of your technical written off INR91,000 crore, INR54,000 crore book is in NCLT, so how much portion of that do you expect to recover? For example, if it is in NCLT and the asset is monetized, what is your general assumption that out of this INR91,000 crore or, say, INR54,000 crore which is in NCLT, based on your assessment, what is the total recovery amount, of course, which will come over a period of time, not necessarily next year itself, but what is your general assessment on that?
Ashok Chandra
See, in this particular quarter, the recovery through the NCLT is only INR370 crore in Q3 — INR380 crore. And I am expecting the accounts and the resolutions which are maturing now, I am expecting around INR570 crore recovery through the NCLT route in this particular quarter. And through NARCL route also, we are expecting around INR500 crore of recovery in this particular quarter. So if I can put it — because this INR54,000 crore is NCLT also, and there are some accounts which are in NCLT but getting resolved through the NARCL. So put together, I am expecting that a recovery of around INR1,000 crore from the NCLT and NARCL. And this entire book will be the TWO book.
Parag Thakkar
Okay. And there is another number which you said, INR1,400 crore to INR1,500 crore of recovery, right, in Q4?
Ashok Chandra
That is the TWO recovery I was talking about. That is the TWO recovery. So INR1,000 crore through NARCL and the NCLT, that is a part of this INR1,400 crore or INR1,500 crore which we are aiming to do it in the Q4 quarter.
Parag Thakkar
Okay. So total recovery number is INR1,500 crore?
Ashok Chandra
Total INR1,500 crore under the TWO. And total recovery in this particular quarter, we are expecting around INR5,000 crore to INR6,000 crore.
Parag Thakkar
Okay, thanks a lot. Thanks a lot, sir. All the best.
Ashok Chandra
Thank you.
Operator
Thank you. The next question is from the line of Rakesh Kumar from B&K Securities. Please go ahead.
Rakesh Kumar
Yes. Hi. Thank you for the opportunity again. Sir, just one question, sir. On the provision line, we have a write-back in the investment depreciation. So what is this number of INR190 crore pertaining to write-back?
Ashok Chandra
Yes. That is a recovery in one account is there. See, there has been write-back of a provision that has happened in a few of the accounts. And that’s the reason there is a provisioning the credit cost, and all if you see, that is the impact of that only, the write-back of provision has gone up now.
Rakesh Kumar
Yes. So, how many accounts that we have for kind of — this must be nonperforming investment where the recovery will happen. So like how many accounts are there and from which sector, if you can help us understand?
Ashok Chandra
Yes. There are two ways of write-back of provision happens. So one is when we recover the amount under the NPA account, under the GNPA, it comes back as a write-back of provisions, okay? And in the TWO whatever recovery happens, it directly goes to the operating profit. So this is one way of write-back of provision. Second write-back of provision, which has happened in this particular quarter, generally that happens is, in the 7 June circular, we are supposed to maintain the — in the restructured book, we are supposed to maintain the provision. Now if that account becomes the standard account once again, it gets revived, then that provision we have to roll it back. And that is the one provision which has been rolled back, and there’s a write-back of provision. So a standard account also, because of the restructuring, whatever provision we do that, and once after the time line provided in the restructured account, if that time line meets and the account behaves properly, that provision, we need to reverse back. So there are two ways of write-back of provisions.
Rakesh Kumar
Yes. Correct, sir. Referring to that nostro accounts where you were talking about the resolution of stressed assets, where we have written back around INR320 crore. So, that is one write-back of provision of INR425 crore, this must be included there. And over and above, we have another investment depreciation or NPI write-back. So like for how many accounts…
Ashok Chandra
Yes. NPI write-back is that INR190 crore on account of the NPI write-back. That is because of that it has happened. And the OTR — on account of OTR write-back, it is INR81 crore. Second, the third point is the 7th June circular, there were some accounts where INR447 crore write-back has happened. So these three things put together, the write-back of provision has happened in the system.
Rakesh Kumar
Okay. And what is the continuity, possibly, if you can — if you have anything? Because discussions must be going on on such larger accounts. So any visibility we have for fourth quarter such kind of recoveries or write-backs?
Ashok Chandra
Definitely. The write-back of provisions, definitely, it is going to happen in the system, and we are also expecting that both in the NPA side and the non-NPA side, the standard account side, I think INR300 crore to INR400 crore write-back of provisions will happen in this quarter also.
Rakesh Kumar
Understood, sir. Understood. Okay. Great, sir. Great. Thank qyou, sir. Thank you and all the best.
Ashok Chandra
Thank you.
Operator
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you, sir.
Ashok Chandra
So thank you very much to all the esteemed investors and the analysts for reposing your faith and confidence in Punjab National Bank. On behalf of the top management and the entire PNB family, we assure you that we will continue to have the robust growth, we will continue to have the robust operating profit, net profit, and all the financial parameters, you will see that there has been — there will be continuous improvement. Thank you very much.
Operator
[Operator Closing Remarks]
Ashok Chandra
Thank you.