‘Will not hesitate to provide loans to viable SMEs in need’ – SME News

State-owned Punjab National Bank (PNB) will not hesitate to provide loans to “viable” micro, small and medium enterprises (MSMEs) under the Special Mention Account (SMA) category as the Centre has said it will provide credit guarantee for such loans, MD & CEO Atul Kumar Goel told Piyush Shukla in an interaction. MSME loans by over 5 crore ticket size amounting to1,012 crore are currently in the bank’s SMA-2 bad debt category. Edited excerpts:

Would PNB provide loans to distressed SMEs? as proposed by the government?

If a viable entity in the SMA category, which is temporarily stressed, needs credit, we will provide funds. No one will ask banks to lend money to a non-viable entity. The government will at least provide a credit guarantee for such loans.

Have bank deposit costs peaked at 5.08%?

The cost of deposits, in my opinion, has already peaked. But because there is a gap between credit and deposit growth, the interest rate on bulk deposits has increased and is changing daily. The one-year retail deposit rate or the rates on special deposit schemes may not change now. But the rates on bulk deposits depend on liquidity and changing needs of banks and changes.

Are we seeing a structural shift from bank deposits to the stock market??

No doubt about it, the money moves from banks to mutual funds, which has an impact on the CASA (current account and savings account) ratio. However, mutual funds sometimes park money in fixed bank depositsDeposits return to the bank, not completely, but certainly in part.

PNB’s CASA ratio moderated to 40.1% in Q1FY25 from 41.4% in the previous quarter. Your outlook for the full year?

We aim to end FY25 with a CASA ratio of 42%, compared to 40% in Q1. However, there is pressure on CASA mobilisation due to the interest rate differential between CASA and bulk deposits. Some customers with money in savings accounts park part of the money in fixed deposits if they do not need the money immediately. So, CASA deposits are declining but term deposits are increasing. Despite these trends, we are confident of achieving a CASA ratio of 42% as we have taken several initiatives including improving customer acquisition mechanism, service quality, enhanced call centre service, customer relationship management services, etc.

Has the bank assessed the impact of ECL standards on the balance sheet?

We have to wait for the final guidance on the expected credit loss (ECL) model for banks. Banks have five years to meet higher provisioning requirements, so there is no reason to worry. ECL essentially takes into account the probability of default. To give you some perspective, over the past four years, our underwriting skills have
8.32 trillion of loans, of which7.49 trillion has been disbursed. Current outstanding loans are over 5 trillion and the total NPAs are only2,276 crore. If this trend continues, there will not be much impact due to implementation of ECL accounting norms.

How many corporate loans are in the pipeline?

We have about Rs 1 trillion of corporate loans in the pipeline at various stages including those that have been approved, unutilized, under discussion stage or under new business proposal stage. There are proposals from road sector, steelcement and NBFCs.

PNB was fined RS 1.3 crore by the RBI for approving working capital loans to two government entities against amounts receivable through grants from the Centre. What measures have you taken to prevent such violations?

The RBI has already imposed a penalty and we have taken corrective measures to improve this and will ignore this kind of financing. We will ensure that no loans are given to companies against amounts receivable from the Centre through subsidy repayments or future repayments.