Ashok Chandra, the Managing Director and CEO of Punjab National Bank (PNB), believes that the pressure on the bank’s Net Interest Margin (NIM) will ease in the third quarter of the current financial year. This is due to the reduction in policy rates by the Reserve Bank of India (RBI), which is expected to lead to a decrease in the cost of funds. Chandra predicts that the NIM will hover around 2.8-2.9% in the current financial year, with a target of 2.93% for FY25.
The RBI’s recent repo rate cut of 50 basis points is expected to lead to a reduction in deposit rates, which will help to decrease the cost of funds for banks. PNB will review its deposit rates in the upcoming Asset-Liability Committee (ALCO) meeting to determine the impact of the repo rate cut on liquidity in the market. Additionally, the 100-bps cut in the Cash Reserve Ratio (CRR) by the RBI will provide PNB with approximately ₹15,000 crore, which can be used to expand lending.
PNB is also focusing on lending to the retail, agriculture, and MSME (RAM) sectors, with a growth target of increasing RAM lending from 53% of the loan book in FY25 to 58% in the current financial year. The bank has been taking measures to increase RAM lending through outreach programs, including a digital lending facility for MSMEs. In FY26, PNB’s lending to the RAM sector was around ₹6 lakh crore, accounting for approximately 56% of the loan book.
Chandra is optimistic about corporate credit offtake in the current financial year, citing the decline in lending rates. Last year, the bank sanctioned ₹1.35 lakh crore for corporates, with renewable energy, power, steel, and infrastructure sectors seeing higher traction. Overall, PNB is well-positioned to take advantage of the favorable market conditions and is expected to see an improvement in its financial performance in the coming quarters. With its focus on RAM lending and corporate credit, the bank is poised to achieve its growth targets and maintain its position as a leading player in the Indian banking sector.