Punjab National Bank (PNB) Q4 FY23 Earnings Concall Transcript

Punjab National Bank (NSE:PNB) Q4 FY23 Earnings Concall dated May. 19, 2023.

Corporate Participants:

Deepak Singh — DGM

Atul Kumar Goel — Managing Director & Chief Executive Officer

Analysts:

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Ajmera — — Analyst

Bhavik — — Analyst

Jai Mundhra — — Analyst

Sushil Choksey — — Analyst

Ashlesh — — Analyst

Presentation:

Deepak Singh — DGM

Good afternoon, ladies and gentlemen. I, Deepak Singh, DGM, Punjab National Bank, welcome you all for the Earnings Con-Call of Punjab National Bank for the financial year ended FY’22-’23.

Bank is represented by Managing Director and CEO, Shri. Atul Kumar Goel; Executive Director, Shri. Vijay Dube; Shri. Kalyan Kumar; Shri. Binod Kumar; and Shri M. Paramasivam-ji; and other senior members of the top management. The structure of the con-call shall include an opening statement by MD and CEO Sir, and then the floor will be open for interaction.

Before getting into the con-call, I will read out the usual disclaimer statement. I would like to submit that the statements given herein are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Investors are therefore requested to check the information independently before making any investment or other decisions.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Sir, I think your voice is not audible.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Rakesh, am I audible to you?

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Yes, sir. I can hear you, sir.

Atul Kumar Goel — Managing Director & Chief Executive Officer

It’s Properly. Yeah, Okay.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Yeah, I can hear you, sir.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yeah. Can we start with one disclaimer? You already read.

Deepak Singh — DGM

Yes, sir. Disclaimer over. Thank you, and over to you.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Good afternoon to everybody. I welcome all the analysts who are attending this con-call of the Panjab National Bank.

Yeah. I am happy to say the result of the quarterly closing March 2023 as well as the whole of the financial year ’22-’23 of the Punjab National Bank. And before I start, I think this quarter was remained a very good quarter for the bank, because if you see last five quarters, which we have published the result, this is the one of the best quarter because the profitability has increased tremendously, gross NPA and net NPA has reduced drastically, operating profit and net interest margin has also increased and as well as the PCR is also increased. So I will give you some idea of the whatever the — we have performed last quarter in the last financial year.

Gross business of the Bank increased by 12.14% to the tune of the INR11,65,000 crore. Then gross deposit increased Y-o-Y of 11.77% to the rupees — of INR12.81 lakh crore; gross advance increased by 18.68% at INR8,84,681 crore. Saving bank — there was a growth of around 2.72%, and stood at INR4,63,987 crore; and CASA share is 42.98%, and the RAM share out of the total advances is INR4,69,981 crore, which is 55.31%. Now come to the profitability part, the net interest income — there is a robust growth of 30.05% Y-o-Y, which used to be around INR7,304 crore in the last quarter of the ’21-’22 March quarter, has increased to INR9,492 crore for the quarter ended March 2023.

Similarly, the operating profit, there is an increase of around 11.42%. The operating profit for the March ’22 quarter was INR5,265 crore, which has increased to INR5,866 crore. As far as the net profit of the bank is concerned, net profit of the Bank in March 2022 was INR202 crore, which has increased to INR1,159 crore with a growth of 473.57%. As far as asset quality of the bank is concerned, quarter-by-quarter, there is an improvement in the asset quality and one more thing, important thing, every quarter from the June ’22 to March ’23, the recovery was much more than the addition. GNPA which used to be around INR92,448 crore as on the March 2022 has reduced to INR77,328 crore. And GNPA in terms of the percentage 11.78% March ’22 has reduced to 8.74% by March ’23.

Net NPA, which used to be around INR34,909 crores March ’22 reduced to INR22,585 crore; and net NPA which used to be 4.80% reduced to 2.72%. And we have given the guidance for the — 9% for the gross NPA, which reduced to 8.74%. Similarly, we had given the guidance for the 3% of the net NPA, which reduced to 2.72%. PCR, which used to be around 81.60% by the end of March ’22 improved to 86.90%. And one more thing is as I told you the recovery — and the recovery versus slippage. There was a lot of improvement in the recovery versus slippage. June quarter — June ’22 quarter, recovery was INR7,057 crore, which increased to INR8,565 crore in September and INR6,035 was in the December; and INR7,439 crore was in the March as against the target of around INR32,000 crore for all of the year.

We have recovered INR29,096 crore as for slippage is concerned. Slippage is reducing quarter-by-quarter. In the first quarter, June ’22 slippage was INR6,468 crore, which reduced to INR5,979 crore in the September quarter, further reduced to INR4,072 crore in the December quarter and further it is reduced to INR3,996 crore in the March ’23 quarter. So Bank has done a very good — as far as the recovery of the asset quality is concerned. As far as capital adequacy is concerned, there is an increase of the 100 basis points in this year. It was 14.5% in the March ’22, which has increased to 15.50% and the Tier 1 which was 11.73%, increased to 12.69%. And cost of deposit, which was 4.15% in the December ’22, 3.97% in the March ’22 increased to 4.54%.

Yield on Advances has also improved, which was 6.80% in the March ’22 improved to 8.05% in the March ’23, and it was 7.35% in the December quarter last year ’22. And the cost to income ratio, there is an increase in the cost to income ratio from 56% — 46% to 54.59%. This is the major on account of the increase in the employee cost. Last quarter, March quarter, we have made a provision of INR278 crore for the wage revision, which is due from the November 2022. November and December, we have provided in December quarterly result. And AS-15, we have made a provision of INR1,244 crore, which includes the wage revision and the — factor of the wage revision on the gratuity as well as on the pension.

We have also made a provision of PLI performance incentive of INR103 crores again — out of which INR79 crores was provided in the December quarter itself. Because as per the bipartite settlement, if improvement in the 5% in the OP, there in all the establishment for the 5 days PLI. So this is the reason of the increase in the cost to income ratio. As far as the NIM is concerned, NIM domestic is 3.38% and NIM global 3.24% as against the 2.86% in the March ’22 and 2.76% global NIM in the March ’22. AS-15, I have already advised. As far as provision for NPA is concerned, March ’23, we have made a provision of INR3,624 crore.

Credit quality is coming 1.72%. It was INR4,563 crore In the March ’22, which was around 2.45% as the credit cost. December ’22 figure was INR3,908 which is coming 1.87%. Whole of the year, for full year credit cost was 2.03%. As far as the RAM is concerned, as I told you, it was 51.23%, increased to 55.31%. OTR Restructuring, standard outstanding as of the OTR 1 is INR3,174 crore; OTR 2 is INR7,760 crore. As far as SMA-012 is concerned, SMA-012 in March ’22 was INR175,391 crore, which reduced to substantially in the December. And as on March ’23, the total amount is INR70,762 crore. Out of which INR850 crore in the SMA-2 only, and INR5 crore and above SMA 2 in March ’22 is hardly INR82 crore. As far as fresh slippage of INR3,996 crore is concerned, it is agri [Foreign Speech] around INR1,253 crore; MSME INR1,337 crore, retail INR660 crore; and others INR260 crore, existing INR478 crore.

As far as our pricing on the credit portfolio is concerned, around 85.20% is the floating, which is based on the MCLR around 35%, RLR 26.39%, RLLR ELITE is 12%, and TBLR 10%. Fixed is hardly 7.16%, 4.3% in the foreign currency et cetera and the remaining 3.3% is the BS rate as well as the BPLR. One more thing I would highlight to all of you. This fresh underwriting, we have taken a lot of initiative for the improvement in the underwriting as well as improvement in the collection efficiency. I will give one data from the 1st of the July 2020 to March 31st 2023, around INR5,72,539 crore loan we have sanctioned. Out of which INR5,18,257 crore we have disbursed. INR4,16,638 crore is the outstanding, out of which the NPA is INR1,178 crore, which is coming around 0.23%. This you will get the — how the new underwriting standard is being done in the bank.

The recovery from the NCLT in the last full year — first quarter was INR693 crore, quarter two was INR778 crore, quarter three was INR730 crore, last quarter, it was around INR1,000 crore. As far as investment is concerned SDMA around 79% is there. AFS is around 20% and modified duration of the AFS and the HFT portfolio is 2.53%. So this is my initial remarks to all of you. Now I would like to give answer of your questions. Thank you. Thank you. This — last year was very good. And I assure all of you ’23-’24 will be very good year for the bank. And I will give some guidance also. Credit growth, we are giving the guidance for the 12% to 13%, deposit growth we are giving the guidance 10% to 11%, and CASA share, we are giving the guidance around 43% to 44%. Net interest income, we are giving around increase 10%, and NIM will be around 2.9% to 3% because the repricing of the deposit has not taken place fully in the last year. Out of the loan — repricing has done immediately, but the repricing of the deposit has to take place.

Gross NPA, we are giving guidance, it will be less than 7%. Net NPA will be less than 2% and credit cost, which was around 2.03% last year, we are hopeful it will further reduce, it will be around 1.5% to 1.72%. And the target of the recovery for whole of the year will be a around INR22,000 crore.

So this is my initial remarks. Thank you. Thank you very much.

Questions and Answers:

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Yeah. Thanks a lot, sir. So very strong set of performance the bank has given considering the raise in the margin on a sequential basis in the domestic margin. And also the asset quality has been quite good. Just one — couple of questions around on the margin side, sir. So CD ratio — domestic CD ratio is around 68% currently for the — for this quarter. So is there a scope to further increase the domestic loan deposit ratio from ASR because that would help us on the margin front?

Atul Kumar Goel — Managing Director & Chief Executive Officer

It was — if you see, it was around 69% as per our data. 69% was the CD ratio because we are having the excess SLR also, you all are aware. So, definitely, we would like to use. And without raising further deposit, even we will be in a position to improvement in the CD ratio in times to come.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Correct, sir. Correct. And sir, ROA guidance like that we have given for the FY’24 would be sir?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Return on assets — Return on assets, if you see, as on data is — because the profitability was less, so I think next year, I think, I will be in a position to give guidance of around, it should be around 50 or 60 — 0.50 or 0.60 basis point, yeah, percent.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Superb. Great. I would request Mr. Ajmera to unmute and go ahead with your question. Mr. Ajmera, please go ahead with your question.

Ajmera — — Analyst

And — yes, compliments to Atul Sir — Goel Sir and the entire team for another set — I mean another good quarter — for the good set of numbers. Of course, the Bank has still — has to go a long way because of the some past negative legacy. Still our figures are not that very encouraging though, comparatively, yes, it is definitely better on many points, especially this — now — just now we discussed about the ROA. ROA of 0.32 in this quarter and 0.17 in the last quarter is very low and even the target also up 0.5 doesn’t inspire much.

And similarly on some of the other data, if you look at though we are — your target for bringing the gross NPA down to 7% and net NPA to 2% is definitely encouraging. But finally, we would like the bank to come down below 5% in the gross and may be below 1% on the net NPA. Many of the peer banks have started coming down to net NPA at 0.7 or 0.5 or even 0.27, one of the small banks. Having said that, sir, what are our plans to bring down the credit cost? Credit cost is very, very high comparatively in our bank and still, I think the target is also not been given very encouraging. So what exactly the Bank is planning to bring the credit cost down, increase the ROE? And the write-offs are also very high, in this quarter, INR6,000 crore, in the overall year, INR16,578 crores. So going forward, what are our views on that? This is my first question on these three things combining.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Thank you, Ajmera Ji, for the compliment. As far as your question is related to the credit cost, the credit cost in the last quarter was 1.72%. If you see the whole of the year, credit cost was around 2.03%. And we have already given the guidance, it should be within the range of 1.5% to 1.75%. And why we are giving this statement because you must have seen our quarterly number of the recovery as well as the reason. If you see the recovery quarter-by-quarter it is reducing. And recovery quarter-by-quarter increasing and the addition is reducing, because if I will give the number, the first quarter, June — you take the quarter of the June ’22.

The recovery was INR7,057 crores. And the recovery was increased INR8,565 crores in September, and INR6,035 is in the December; and INR7,439 crore in the last quarter. So if you make the total, it was around INR29,000 crore against the very robust target last year, we have done for the INR32,000 crore.

Similarly, this addition is reducing quarter-by-quarter. First quarter of the last financial year it was — June INR6,468 crores. And September, it was INR5,979 crores. December, there was a steep fall, around INR4,072 crores. And in the last quarter also, it’s further reduced to INR3,996 crores. So if we are making more recovery and if we are — addition is reducing, so credit cost is bound to reduce because aging provision is also reduced because the 86% more than 86% we have PCR.

So I do not foreseeing there will be — but your point is very right, although we are giving the guidelines for the gross NPA number 7%, 2% for the net NPA number, and you were saying other bank has come down less than the 5% or the 1%, the net NPA — I full fully agree with you. But because — only — if you see from the — from where we have started last year, 11.7%, we have reached to 8.7%. It means 3% we have reduced last year. And the — from the number of the gross NPA from the 4.80% to 2.72%. So last time we have done a very good job in the recovery and I’m hopeful this year will be very good for the recovery as far as the addition will be further reduced, and the credit cost, which I’m giving you the guidelines for the 1.52%. It will remain 1.5%.

One more thing — because the I am giving the Return on Assets. Although I told, around 50 to 60 — 0.50% to 0.60%. But even if we see my net profit was around INR2,507 crores. And we are targeting it will be more than INR1,000 crore every quarter. So, if we take, it will be more than INR4,000 crore for the whole of the year. So even if I recalculate, so my return on asset will be around 0.40% to 0.42%, even we are giving the guidelines it will range between the — we will try to improve to 0.50. But I think when we are saying the target of the net profit, so I think you can take it 0.40 instead of 0.50. Yeah.

Ajmera — — Analyst

No. I fully appreciate sir, I mean, after such a strong team led by you, definitely during your tenure, I mean things have been improved a lot. Yes, you are caring the past whatever is the negative legacy or whatever it is, you are definitely trying to improve the things. And we have lot of expectations from you and this team sitting here. Sir, now with this ECL now coming — now the guidelines are not 100% clear. But — is coming, is in offering. So the kind of report which you submitted to RBI or the kind of internal preparation, which you must have done, are you prepared for that without any shocks or without any negative effect going forward? Have you worked on the numbers? And have you made some provision on that, sir?

Atul Kumar Goel — Managing Director & Chief Executive Officer

[Foreign Speech] Ajmera Ji. I will give answer your question like this. Point number one, this guidance of the ECL, point number one is the draft guidance. And final guidance is likely to come. I think we should wait for the final guidance. And moreover in the draft guidance, what will be the requirement of the additional provision? The RBI has proposed they will give five years for this, because ultimately when we are talking about the ESL, it is on the — based on the expected credit loss. As of date, we are making the provision on the incurred loss basis, the account, which has turned to NP, we are making provision. But expected credit loss [Foreign Speech] ECL [Foreign Speech] expected credit loss.

I have already given you the data of the last two and more than half year from the 1st July ’22 to till 31st March 2023, where I have already given how we are waving our new book, INR5.72 lakh crores we have sanctioned; INR5.18 lakh crore we have sanctioned. This was INR4.86 core is averaging where the gross NP number is 0.23 only, because this is the purpose of the underwriting standard only because ECL role is only for the underwriting. And role of the PCR is also in the ECL calculation because 81% to 86.90%, we have already read and CRA also — there is a 100-basis-point improvement from the March ’22, which was 14.50% to 15.50%. So considering all these things, I think there should not be any challenge whatever the guidance will be receiving from the RBI. We will definitely be ready for whatever the final guidelines will come.

Ajmera — — Analyst

Sir, coming to that on how much buffer overall like standard provision structured — restructured book, COVID restructured book, other than the — what is recognized then as for RBI guideline and direct norms, what additional buffer or the provisions we have overall in the bank?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Ajmera Ji, ultimately [Foreign Speech] what I’m trying to tell, first, you are asking for the standard, what is the buffer in the standard? Point number one is that we should see how much buffer we are having in the NPA provision. [Foreign Speech] Last year it was 81%, it is around 87%. The standard provision — definitely, we have to provide as per the RBI guidelines. So, definitely, there is some buffer, which we have provided for the — as per the July 2019 circular. If the account will be resolved, this provision will be reversed in the last quarter also, because we have made a provision for the — standard provision for the some of the account, which was falling under the July 2019 circular, around INR500 crore, INR600 crore, was the around reversal in the March quarter itself. Even we are hopeful, even we’re hopeful full June quarter also because the account is under out of the visualization — definitely you can think this provision, which we have made, it will be — it is a buffer for us.

Ajmera — — Analyst

My last question in this round is around treasury book. Treasury performance, of course, because of the upward trend going on till now, till March, performance is not good everywhere. There are some reduction in the profit, or it’s somewhere at losses also, MTM also. So in our case, how is our treasury book is placed? And how do we see now going forward when the rates are softening up or sub 7 now, 6.9, tenure. So can we get some color on the — our treasury performance in the coming quarters? And what are our — basically, our finance for that just then to make more profits?

Atul Kumar Goel — Managing Director & Chief Executive Officer

As far as our treasury, Ajmera Ji, our treasury is very active or we are having the good exposure in the investment side also. As your question is, because it is a movement of interest rate. Already interest rates further fallen, because if you see the tenure as you said, it was around 6.95 to 6.99 in four, five days also. And we have already provided mark-to-market, movement further interest rate will decrease, definitely, we can make the profit because we are earning profit on daily basis also with this yield of the 2.99%, and we are immunized also, because if there is a risk of the interest rate, because our modified duration is hardly 2.53% for the EFS as well as the HFT portfolio.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Yeah. Ajmera ji, so can I request you to come back into the queue? There are other persons also waiting for the — with their queries?

Ajmera — — Analyst

Oh, sure. Thank you. Thank you. I’ll come back. I’ll come back. Thanks for giving me so much of time. Thank you.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Yeah. Hi, Bhavik, can you go ahead with your question? Yeah, Bhavik, please go ahead with your question.

Bhavik — — Analyst

Hi, sir. Congrats on good set of numbers. So just three questions from my side. Sir, first of all as in, what would be the LCR ratio? And — hello?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Bhavik, go ahead. Your first question is LCR ratio. Yeah.

Bhavik — — Analyst

Yes, sir. Sir, second question, sir. Sir, we saw a very strong quarter-on-quarter uptick in yields. So what drove that increase in yields? And is there any one-off there with respect to interest on income tax refund or some proportion of recovery from written-off accounts being a portion to the NII line?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Bhavik, first question is the LCR. LCR in the range of the 150%. It will keep on changing. It is within the range of the 150% to 160%. Your question is regarding the improvement in the yield. Improvement yield on the two, three count. So first count is the recovery. Not only the recovery in the technicality, it is not coming in the interest side, because if the — we are recovering more than the principle in the return, then only the part is coming to be interest income. But basically, there are — what is the USP of the bank, 43% we are having the CASA. That is the one of the reasons our NII growth is there, and the yield of advances is also increasing. So basically recovery has the main factor and even some of the account, if we are making 50 basis points, 25 basis points or so, we are not allowing the opponent to go. So this is the reason our yield of advances has increased.

Bhavik — — Analyst

Okay. Understood, sir. And sir — so sir as in — so on the NII line as in for the full year, there is no interest portion from recovery from written-off, or there is some?

Atul Kumar Goel — Managing Director & Chief Executive Officer

There is no — there is — Bhavik, there is no — some portion is there, because we are getting the amount in the standard or doubtful category. If we are getting some money, we are also in the interest income. But your specific question was if some of the recovery on the technical written-off account was there — there was not there, but definitely interest income was very much there in the account, which will NPA and the — whatever the recovery we have made in the last year, INR29,000 crore we have recovered. The moment — it is just 8% to 9% again moment you are making the recovery. So it will start earning the interest income because as on date we are not earning anything out of it. So this is the reason recovery has contributed to the improvement in India.

Bhavik — — Analyst

Understood, sir. And sir, how do we look at NIMs going forward, how much cost of deposits still see rising from here?

Atul Kumar Goel — Managing Director & Chief Executive Officer

[Foreign Speech] Bhavik, as far as yield of advance is concerned, 8.05% is the last quarter yield. So definitely — because some of the loan will be re-priced, which was earlier on the MCLR, their tenure is — as far as cost of the deposit is concerned, cost of deposit is 4.54% in the last quarter, it is bound to increase, because entirely pricing of the deposit will take at the time of the maturity of the term deposit. Because most of the deposit within the range of the one year to two year, so entire repricing of the deposit has not been affected. Definitely, in the next — current year ’23-’24, cost of deposit will definitely increase.

Bhavik — — Analyst

Understood, sir. Sir, that’s it from my side.

Atul Kumar Goel — Managing Director & Chief Executive Officer

And as far NIM also — NIM also you asked. NIM [Foreign Speech] because the NIM was 3.38% in the last quarter, domestic and global was 3.24%. Because we are also envisaging the cost deposit will increase because the pricing — the pricing of the interest, which was linked on the REPO immediately done. So this is the reason we are giving the guidance for the next year, NIM will be between the range of 2.90 to 3.

Bhavik — — Analyst

Understood, sir. Sir, thank you, sir. That’s it from my side.

Jai Mundhra — — Analyst

Hello. Yeah, hi, sir.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Yeah. Please go ahead sir.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Jai Mundhra, we are not in a position to hear. Rakesh, we are not hearing Jai Mundhra. Are you hearing?

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Yeah. I heard him, but now his voice is not coming.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yeah. Initially, I’ve also heard.

Jai Mundhra — — Analyst

Sir, is this better now?

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Jai, your voice is not clear. It is quite feeble. We can’t hear you well. Your voice is breaking in between. Can we move to the next participant? Kunal sir, please go ahead with your question. Kunal, please go ahead with your question. Kunal, are you there on the line? I think Kunal is not there. We will request Mr. Sushil Choksey to go ahead with your question.

Sushil Choksey — — Analyst

PNB for stable result. So what’s your credit pipeline visible in this current quarter?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Credit pipeline as far as concerned, we have already told you growth we are envisaging 12% to 13% around INR1,00,000 crore. INR1,00,000 crore loan is the — already we have sanctioned. They are in the pipeline for the different — at various stages.

Sushil Choksey — — Analyst

Do you — are you seeing this more in infrastructure and corporate or you are seeing in some other sector?

Atul Kumar Goel — Managing Director & Chief Executive Officer

It is a mix of — it is a mix of everything. It is a mix. Not only everything in the infra.

Sushil Choksey — — Analyst

Sir, you highlighted that the treasury may have a substantial gain or a stable gain in coming quarters to come. Can you broaden the statement a little bit?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Hey, I just told the answer of the Ajmera Ji, up to last quarter. Because on account of increase in the yield, we were not in a position to make the treasury profit. Because, if you see the last quarter, from the March 2022 to March current date, March 23 [Foreign Speech] rate was 7.31%. If you see the 10-year G-Sec as on date, 6.98. [Foreign Speech] my answer was this, because already there is a reduction of around 32 — 33 basis points. By reducing of the 32, 30 basis point, some of this code — which were in the losses and the profit. So we can make profit also, because it is a moment of the interest rate game. 30 to 32 basis point is too reduction in the 10-year G-Sec from the March to till date.

Sushil Choksey — — Analyst

Sir, my question was more directly related because the FED is more or less indicated that it is stopped out on interest rate, MPC has already indicated. Today, RBI’s remittance of dividend to central government has already triggered at INR87,000 crore, which maybe in surprise. So the borrowing plan so far, which people were thinking would be huge. It will have a impact on money market. Currently the short-term liquidity tightness may be there because of various factors led by RBI mopping of dollars, various maybe sector regions. But what I’m sensing, some of the peer banks have indicated that 10-year bond may head towards INR675 crore in the year-end. So one is — has the rate cycle peaked? Second thing is, are you seeing more credit in front-ended in the first half? And are you seeing a sustainable treasury profit in four quarters or you’re just seeing in Q1, Q2 itself?

Atul Kumar Goel — Managing Director & Chief Executive Officer

It is a matter of the booking also. Suppose I am sitting on the profit as on date — suppose let us take a hypothetical example, whatever you are saying is 6.7% by the end of the current financial year. Today is 6.98%. Suppose it is, as on date, 6.75%. I will be in the huge profit. So every profit I will not to book immediately. I will book the profit on a quarter-to-quarter basis. So it will be scattered on the quarter-to-quarter basis. And first, whatever the liquidity, if there is a liquidity issue whatever you are seeing some of this — if we are having the lesser yield, definitely we will sell, we will book the profit, and we will utilize that money for investing in the loan book, so that we can earn more profit. It is a mix of each and every thing. It is very difficult to answer whether you — when you will book, when you will — it depends on what is my liquidity position, what is the demand of the credit, everything is inter-related.

Sushil Choksey — — Analyst

Sir, I’m not asking you whether you will book in Q1, Q2. I’m just asking an estimate whether you’re seeing front-ended profit or the second half. It’s okay, I’ll take up this question offline. Second thing, sir, what is the digital spend on the current year?

Atul Kumar Goel — Managing Director & Chief Executive Officer

What is that?

Sushil Choksey — — Analyst

Digital spend — digital expenditure.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Digital last — digital, if you see the IT expenditure, last year, March 2022, it was INR1,750 crores as compared to INR1,170 crore, increase of 54.5%.

Sushil Choksey — — Analyst

Thank you, sir, for answering all my questions. All the best to PNB team for future.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Thank you. Thank you Sushil Ji.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Yeah. Hi, Ajay. Please go ahead with your question. Ajay, please go head with your question. I think, again, there is some issue in his line. Ashlesh, please go ahead with your question.

Ashlesh — — Analyst

Can you talk about the slippages that we are seeing? We saw 2% gross this quarter, still equally higher as compared to [Indecipherable]

Atul Kumar Goel — Managing Director & Chief Executive Officer

Slippage, if you see quarter-by-quarter, there is a reduction in the slippage. In the last quarter, it was in the range of the INR4,000 crore. It was less than INR4,000 crore. And quarter-by-quarter, we are of due — definitely, there will be a reduction in slippage.

Ashlesh — — Analyst

[Indecipherable]

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Your voice is not clear.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Rakesh, voice is — we are not in a position to hear.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Yeah. I also —

Ashlesh — — Analyst

Is it better sir?

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Yeah, it is better now. Please continue.

Ashlesh — — Analyst

Yeah. So I was talking about the recoveries. You have guided for INR22,000 crores for FY’24. Any chunky accounts that you expect recoveries over here?

Atul Kumar Goel — Managing Director & Chief Executive Officer

It is a — it is a — it is a mix of all — mix of all. I can give you some of the — for the quarter one and quarter two what we are expecting from the NCLT. First quarter, we are estimating — it is estimation, around INR500 crore plus from the first quarter, and second quarter, we are hopeful around INR1,300 crores plus will be the recovery from the NCLT. So it is a mix of all. It is a small account also. Some money will come from the sale of the securities through auction, some money will come through the OTS also. And we have also floated one scheme e-OTS, that is we are the unique in the industry.

And this e-OTS, the applicable for the amount, less than INR10 lakh. As on date, we are having good number of account, INR11,000 — 11 lakh account of INR11,000 crore eligible. Last year, we have recovered around INR900 crore from this e-OTS. Customer is not required to visit. They can make the payment sitting at their home, and after making their payment, it is NDND scheme, non-discriminatory and non-discretionary. They are not required to negotiate also and after making the payment they can generate the no due certificate from the mobile app only.

Ashlesh — — Analyst

[Indecipherable]

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

We can’t hear you, Ashlesh. Your line is not clear to us.

Ashlesh — — Analyst

Is this better?

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Now better.

Ashlesh — — Analyst

Yeah. [Indecipherable]

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Your voice is breaking. I would request you to go to a better reception area because we are not — we can’t hear your voice.

Ashlesh — — Analyst

[Indecipherable]

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Sir, I think he is asking for the breakup of slippage, sir.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Breakup of the slippage, I can give you the breakup of the slippage for the last quarter. The agri is around INR1,253 crores, MSME INR1,337 crores, Retail is INR660s, Others is INR268 crores and existing account it was INR478 crores. So INR3,996 crore, I can give it you for full year also. Maximum slippage for them only. Agreement for all of the year INR6,542 crore. MSME, it was INR5,836 crore. Retail, it was INR2,126 crore, and the remaining was INR7,062 crore, and the existing was INR3,178 crore.

Ashlesh — — Analyst

So, talk about [Indecipherable] INR270 crores as well the bipartite type.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yeah. Provision. Yeah. You’re asking slippage for the next year or this year also, Rakesh, because their voice was not clear.

Ashlesh — — Analyst

Wage related provision that you’ve made this quarter.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yeah. I will tell you. Wage revision, we have made INR278 crore provision in this current quarter. Last quarter also, we have made a provision of INR181 crore. In addition to this, AS provision INR1,244 crore, which is also having the impact of the wage revision.

Ashlesh — — Analyst

Okay. Perfect.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Could I request Kunal to go ahead with your question? Kunal, please go ahead with your question. Yeah, Kunal, please go ahead. We can’t hear you Kunal. Yeah, Mr. Ajmera Ji, would you like to go ahead with your question now?

Ajmera — — Analyst

Thank you for giving the opportunity again. Many of the questions have already been answered by Atul Ji. But just some — just discussions since I got the opportunity. One thing is that it’s a point of basically a complement only. If you see the — most of the other peer banks, the employee cost has gone up because of these two, three provisions, and also maybe the performance-linked bonus and other things. At least 10% to 20%, the employee cost has gone up in this quarter, but in your case its hardly gone up by — hardly INR100 crore.

Employee cost INR4,570 crores compared to INR4,460 crores. Similarly, the other operating expenses also in your case has gone up by only INR140 crores. So what is the, basically, what have you done? I mean, what is that all possible provisions which are required have been made — you already said about the wage revision that the provisions have been made as far as the additional pension which was already made in the last year. Any increment? So how this magic happened that — total employee cost and the operating cost has been under so much of control.

Atul Kumar Goel — Managing Director & Chief Executive Officer

No, operating costs [Foreign Speech] operating cost is under control, no doubt about it, because there is no much into the other operating expenditure. But whatever you are saying is payment to employee. If you see the March ’22 data, I think you are not seeing data, please. March ’22, the employees cost was INR2,158 crore only, which has increased to INR4,570 crore in the March ’23. It is basically double. There is no magic. There is double. If you see the whole of the — whole of the year also — whole of the year, ’21-’22, the employee cost was INR11,841 crore, which has increased to INR14,810 crore.

So employee cost definitely in the tune with the other bank has increased. And we have also made a provision, as I told you, from the November to March, INR278 crore in this last quarter, INR181 crore in the December quarter. And there was a lot of provision for the AS-15 also INR1,244 crore we have made in the provision in the last quarter March, similar provision was in the December also. Otherwise, this provision used to remain within the range of the INR500 crore to INR600 crore. [Foreign Speech] Ajmera Ji.

Ajmera — — Analyst

So sir, we generally — once we finish the quarterly discussion, we concentrate more on the quarterly performance only. So I was comparing only with the December quarter and the March quarter. In that, there is hardly any increase?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yeah. You are very much right. You are very much right. December or March, there was no much difference. But December vis-a-vis September or the March 2022, it was doubled. We are worried how to reduce the employee cost.

Ajmera — — Analyst

No. So what I was actually drawing the point to — is that, in the coming quarters now, whether it is going to remain around the same INR4,500 crore, INR4,600 crore the employees cost and the other operating expenses about INR2,500 crores, so that we can have some idea about the future quarters or is there anything coming there?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Ajmera Ji, basically the employee cost major factor is one account of the AS-15 provision as well. And if you see the 10-year G-Sec momentum, there is a very volatile. I will give you the — March ’21, it was 6.18. March ’22, it was 6.84, March ’23, 7.31. And currently, as on date, it is hovering around 6.95 or 6.96. So basically, if there is a reduction in the 10-year G-Sec AS-15 provision immediately increases. If there is a hardening in the interest rate, AS-15 provision reduces. So sometimes it depends on the moment of the interest rate also.

Ajmera — — Analyst

Okay, sir. Now, some things around this NARCL, what is the status there? How many accounts? Whether any account has been settled during this last quarter, January-March, or it’s in offing? What is the status there, sir?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Ajmera Ji, as far as in our bank, NARCL is concerned, around 38 accounts for INR17,658 crore under discussion. Out of this, one account of INR447 crore, we have already assigned to NARCL. Another two accounts also, we have sold to the NARCL, but later on some other ARC, they have increased the rate, which they have not mailed — two accounts sold to the other ARC. In addition to 38 accounts, which I told you, around 35,000 accounts is also under discussion for an amount of INR16,892 crore, where exposure of the banking sector is more and more than INR500 crore and in these 35 accounts we are the lead bank.

Ajmera — — Analyst

Okay. So, many of these resolutions are expected in the coming year now, isn’t sir?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yeah. Definitely.

Ajmera — — Analyst

And, sir, this INR447 crore, which had been done in March, you must have received the SR for the 85%, which is government-guaranteed SR.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yeah.

Ajmera — — Analyst

So the SRs are also put in SRs and provided for 100% or a separate treatment — a different treatment is given to, like suppose the INR447 crore account just must have been settled for about INR100 crore or something. So you must have received about INR80 crore, INR85 crores of SRs. I’m just guessing, I don’t have the exact number. But for example — so what treatment to this SR has been given ended your SRs of INR1,518 crores that include this SR also, and whether it is the entire amount has been 100% provided for?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yeah. And — this is the in addition to debt whatever the other SR available as on date, that — 100% we have provided. This is a very small amount and treatment is same. Only the difference in this code we received is different because they are being government-guaranteed and they are being treated in the market also. The amount was very less in this account. Yeah.

Ajmera — — Analyst

Okay. But you will be giving the same treatment like any other SR providing?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yes. You are right. On the basis of the NAVR.

Ajmera — — Analyst

Sir, last if time permits is on your CASA. Every bank’s little bit decline is there in the CASA in the last quarter because people are opting for more of the term deposits. So going forward, do you have any specific plan or some scheme or something to increase the CASA of the bank? Because you are at a comfortable level, in fact, and you can go still further, Punjab National Bank being a National Bank, a Pan-India bank very, very old bank. So whether any plan, anything is in place?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yeah. Ajmera Ji, [Foreign Speech] I will tell you. This is one of the focus areas and this is the USP of the Punjab National Bank. As on date, if you see, 43% is the around the CASA of the Bank. And we are having the 16 crore customers. And we are trying to increase the new acquisition in ’21-’22 around 71.33 lakh accounts we have opened, which has increased in the last year, ’22-’23, 85.02 lakhs. We are providing a facility — we have provided TAP. We have provided all the 10,000 branches where they can open their account within one day earlier because the branches were getting the document, they were sending to the back office. It was sometimes — sometimes it was taking three days, four days, sometimes it takes 15 days also because they’re raising the query. So after this implementation of the providing of the TAP, this process of the new acquisition has become very good, and we are hopeful next year definitely we will increase a substantial number of the — not only VISA also the card also.

Ajmera — — Analyst

Thank you very much, sir. And all the best to you. With such a strong team, I think you will deliver more than what you are promising. Thank you.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Thank you. Thank you, Ajmera Ji.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Yeah. Ashlesh, do you have any more questions? Yes. Please go ahead. Ashlesh, do you have any more questions? Mr. Choksey, do you have any other questions to the management? Please go ahead.

Sushil Choksey — — Analyst

Sir, can you highlight something on your subsidiaries? What is your plan going forward as that maybe bringing in good benefit to the PNB?

Atul Kumar Goel — Managing Director & Chief Executive Officer

The subsidiary, I think, as on date, there is no plan to sale of the — any equity in the subsidiary, as on date, no plan.

Sushil Choksey — — Analyst

And I’m not asking for —

Atul Kumar Goel — Managing Director & Chief Executive Officer

We — actually we want to increase the valuation of the subsidiary rather than to sale the subsidiary because all the — most of the subsidies we are getting the dividend and et cetera. As on date, there is no plan on sale of the — sales invested in the subsidiary.

Sushil Choksey — — Analyst

So, sir, I’m not asking for sale of any holding from any other subsidiaries. But as times may get better with PNB Housing, MetLife, and various other arms, the profits can shore up and support on cross-selling between PNB customer base and company. And that is the reason I ask you about digital spend. I suppose, as on today, you’re not even penetrating 2% or 3% or 4% of your customer base with your products. Can it go to 5%? Like yesterday, in one of your peer large banks, they had aspiration for $1 billion of other income. Do we have some number? And what kind of cross-sell will we do for our products and external products?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yeah. You are very much right. Definitely, we are taking all these terms how to improve the working of the subsidiary of the associates also, so that whatever the dividend et cetera we are getting, that should be improved. So my balance sheet in the consolidated number will also increase. And we will also utilize this subsidiary for the other purpose also. We are having one of the subsidiaries where we have got the approval from the regulator to do other activity also, which will be beneficial for the Bank. We will use that subsidiary as our marketing again for generating the lead for the housing, generating the lead for the — even for the retail side also.

Sushil Choksey — — Analyst

Thank you for answering my questions, sir.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Sir, there are some questions which are the chat box. Firstly, starting through the question from Jai Mundhra, breakup of INR70,700 crore SMA number into SMA 0, 1, 2, if you can provide the breakup, sir?

Atul Kumar Goel — Managing Director & Chief Executive Officer

Yeah, I can provide the breakup. Out of the INR70,762 crore, the SMA 0 is INR52,622 crores, SMA 1 is INR17,290 crores, and SMA 2 is the INR850 crore. The maximum is the SMA 0 only. There is a — accounting issue also — we are also addressing.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Got it, sir. Second question is from Kunal sir with respect to EBLR or MCLR and fixed route book breakup that is already there in the presentation. So the second question from Kunal sir is pertaining to the behavior of MSME restructured portfolio, if you can elaborate, sir, please?

Atul Kumar Goel — Managing Director & Chief Executive Officer

The MSME in OTR, when I will give you the — only for the MSME. OTR [Foreign Speech] around is implemented was INR670 crore, the standard [Foreign Speech] outstanding is INR343 crore. And if you see the OTR 2 also — OTR 2 [Foreign Speech] the MSME was around outstanding is INR4,587 crores, out of which is standard is INR2,657 crore. Some of the account definitely in the OTR 1 and OTR 2 also, has moved to the NPA, out of this OTR 2 around INR1,931 crore was the NPA.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

And sir, I missed the total provision on the restructured book that we have sir, standard restructured book, total provision that we have.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Total provision on the standard book, it includes the — if you’re asking the OTR 1 — OTR 1 and OTR 2 [Foreign Speech] we have already given in the Note 2 accounts, it is 10% of the outstanding. But restructuring is — there is some provision also, which we have to make the provision as per the 7 July 2019 circular also. Although that is not the structure, but we have to make a provision also.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Okay. Thanks. And sir, one thing I noticed compared to higher deposit growth number on a Y-o-Y basis, NDTL growth is around 7%. So have we reduced — like the borrowings from the book? Or what is the reason for lower growth in the NDTL on a Y-o-Y basis as compared to deposit growth?

Atul Kumar Goel — Managing Director & Chief Executive Officer

NDTL actually — actually it is the combination of the deposit and the other liabilities also. So maybe some of the other liabilities have reduced, but normally it keep on changing on the quarterly basis also, because some part of the deposit on the bulk side also. So it keep on changing also.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Okay. And sir, there is a question from Bhavik pertaining to the guy SMA details.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Rakesh, from where you have taken this data of the NDTL? If you see the NDTL is on the same line. I am not seeing any difference. If you see my December ’22 number, it was INR11,52,000 crore. And even if you see the March ’23 number, INR11,75,000 crore. So from where you were seeing there is a difference? So it is not decreasing. You’re seeing the decreasing?

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

No, it is not decreasing, sir. In the slide number 16 sir, you have given investment portfolio and the NDTL number where the Y-o-Y variation is 6.93. And if I look at deposit growth number, that is global deposit number —

Atul Kumar Goel — Managing Director & Chief Executive Officer

The 11% — you’re comparing with the deposit number also. 11% itself — average — sometimes it is on average basis also, because if somebody increasing the deposit in the last, that is also it. Yeah.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Got it. Correct. Got it, sir. Ashlesh, do you have a question? Your hand is raised. Do you have a question Ashlesh, please go ahead.

Ashlesh — — Analyst

[Indecipherable]

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

I think that is all from our end, sir. I think there is no more questions. There is no more questions, sir, from our end. I think we are done with the questions and there is no further query.

Deepak Singh — DGM

Thank you. Thank you, Rakesh.

Atul Kumar Goel — Managing Director & Chief Executive Officer

Thank you very much, Rakesh. Thank you. Thank you to all the persons who have joined this con-call also from my side. Now over to Deepak.

Deepak Singh — DGM

Thank you, Rakesh. And we can log off. Please log off Mr. Rakesh and team.

Rakesh Kumar — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

With this, we would like to thank everyone, PNB management for giving us this privileged to host, and thanks everyone. And we can log off.

Deepak Singh — DGM

Thank you very much.