DTA tax shock and Rs.850cr PSLC embarrassment gave way to ECL build (INR2,045cr cumulative), three new fee verticals, and a NIM guidance walk-down from 2.8-2.9% to 2.6-2.7%.

My first question is on recoveries. There were weaker technical recoveries and interest accruals. If you can shed more light on this, that would be great? And how do you see rest of the year? And further, sir, asset quality was benign with reduced credit costs and slippages. But SMA2 ratio picked up marginally even though overall numbers remain favorable. Can we get more color on this?

In this particular quarter, the total recovery is Rs3,356 crores and the recovery in the technical write-off is around Rs.1,200 crores, and if I add this recovery in TWO and the interest, the total amount is Rs.1,700 crores. And the guidance for this year, already we have given that Rs.16,000 crores will be the total recovery, which we will be doing it. And within that Rs.16,000 crores, Rs.1,500 crores per quarter, that is around Rs.6,000 crores recovery will happen through the technical write-off. See, in the first quarter, always the business and the total activity also remains muted because of the various transfers and all those issues are happening in the first quarter. In the month of July itself, we have a good number for the Q2. So, I am expecting that the guidance which we have given, Rs.16,000 crores of total recovery, definitely we are going to touch this number.

My second question is on operating expense. I wanted to understand the reason behind elevated operating expense this quarter. OPEX was like 16% to 17% year-on-year with other OPEX going at 22% year-on-year. So, is it going to stay elevated for the year or is it like there was some one-off going in this quarter?

In the first quarter, because of the PSLC which we purchased for the priority sector, that is the PSLC Priority Sector Lending Certificate, that amount itself is around Rs.850 crores now. So, that is one of the reasons the operating cost for this particular quarter, you see that some number is high. Otherwise, definitely there will be a stable expenses will be there in future in Q2, Q3 onwards.

If we exclude one-off tax provisions of like Rs.33 billion, your ROA would be greater than 1%, with NIMs continuing to decline, weak credit growth and treasury gains might not stay that elevated throughout the year. So, what are the levers you are going to use to deliver over 1% ROA for the rest of the year?

First of all, with the migration to the new tax regime, that itself is going to help us by around 16 basis points in the ROA. That is the first point. Second point is, see the NIM and the NII is muted for this particular quarter, and in fact, in the last meeting also I had indicated that Q1 and Q2 will be a challenging quarter for maintaining the NIM and the NII. But definitely the repricing which is happening in the deposit front and the deposit rate which has been reduced, I am expecting that Q3 onwards, definitely the Bank will have the good NIM and good NII. I think the guidance which we have given for the NIM is around 2.8% to 2.9%. Definitely, we are going to hold on to this guidance.

Sir, just one is tax change in the tax regime. So, if I understand correctly, out of this higher provision of the tax of Rs.5,083 crores, Rs.1,600 or Rs.1,700 would have been in otherwise also the tax like this. So, basically Rs.3,300 or Rs.3,400 crores has gone from that DTA. So, what is the exact calculation? Because at the year end, if we take it almost about Rs.29,500 crores of operating profit according to your guidance of 9% plus, so on that our tax liability overall will be Rs.7,300 crores something under the new regime. So, can I just understand that what would be the final tax figure in the P&L in FY26 if that profit assumption is correct?

You have rightly mentioned that Rs.3,324 crores has come out with the DTA, which the provision higher tax was there. Now, because of the migration to the new tax regime, this was 25%. So, to that extent, Rs.3,324 crores we had to save out and Rs.1,700 crores would have gone normally also with the tax regime. So, Rs.5,000 crores plus is the outgo for this particular quarter. Now, from the new tax regime, Q2, onwards, we will have to pay tax at the rate of 25%. And assuming this Rs.7,000 crores, the operating profit, which the Bank has shown, and the first time we have shown the Rs.7,000 crores of operating profit, and I am hopeful that this trend will continue. So, 10% if I can reduce, because 35% is the old tax regime and 25% is the new, so 10% I am going to save. It means in the absolute number Rs.700 crores minimum every quarter I am going to save on account of the migration to the new tax regime. So, if you can calculate the three quarters, it comes to around Rs.2,100 crores net accretion will happen in the net profit.

Will the treasury profits which are shown Rs.1,816 crores in the profit plus overall if you see the segment wise income on the treasury, it is Rs.3,415 crores as against Rs.1,963 crores in the last quarter. So, going forward, we are continuing to see the same trend on the treasury income or do you think it will get little muted?

In this financial year, we have built a very strong treasury book now. If you see our entire total portfolio under the treasury itself is around touching Rs.5 lakh crores now. And with the lower interest rate regime, which also you have highlighted, definitely, I think this book is going to contribute in a very, very bigger way to the overall income of the Bank and we are very confident that good treasury book is going to give us a good income in the Q2, Q3 also now. So, that trend will continue.

On advances on the credit side, sir, we have a little bit slowed down. So, are we still sticking to that 11%, 12% and we will be able to achieve even that also in the next three quarters? And sir, this SMA numbers little bit increased in this quarter at Rs.1,596 crores against Rs.239 crores in March. Is there any specific reason, any one-off account in this or is it paid by now, sir?

If you see MSME growth, we have shown a growth of more than 18% ... it is 18.6% growth in MSME. Core retail has grown by 17.7%. What we have missed out in the corporate loan growth, there is a growth, but in fact, both QoQ growth is also there and YoY growth is also there. But the challenge which has come in the corporate book is that we have Rs.1,29,000 crores of sanctions in our book now and disbursements have started happening, but there are many project financing we have done now. Rs.1,30,000 crores of book is already there with us and going to be disbursed in Q2, Q3 onwards. What we are focusing on improving the turnaround time of the sanctioning of the loan and that is one commitment which we have given to all the corporates that any proposal which comes to head office with all the waiting and everything, at head office the sanction will happen within 15 days and this is one comfort we are giving to all the corporates and based on that I am seeing lot of interest in our Bank from the corporate side and I am very confident that going forward you will see good growth and we are still sticking to the guidance which we have given, I think we are going to grow at the same speed.

In terms of margins, so most banks are guiding to some sort of a recovery or stabilization in the second half. But in the second quarter, how much do you expect margins to fall -- will it be more than 11 basis points that we have seen in the first quarter or will it be lower or higher, like a rough ballpark would really help?

I think in Q1, you have seen that domestic NIM is 2.84% and the overall global NIM is 2.70%. Our guidance is 2.80% to 2.90%. Now, if we talk about the Q2, I think we will be holding to the same level which is there in Q1 because the interest rate cut which has happened, that impact already we have seen in the first quarter. So, Q2 also will be having the same level, and we have also improved the advances portfolio. More than that, we have said around 21,000 of the corporate low-yielding book. So, I think that also will give us some good income and definitely our NIM, what we have done in this particular quarter, I think we are going to hold on to this level now, around 2.7%. Two things which are in favor now. One is the overall loan growth has also happened. And second is, since we have shed some low-yielding advances, that is also in our favor. Third point is that we have also reduced the cost of deposit and that impact also we are going to see in this entire full quarter. The rate reduction in the deposit also happened subsequently, I think, in the second month of the Q1. So, that impact also we have not seen fully in that particular quarter. So, this particular quarter, we are going to see that entire impact on the cost of deposit also. So, all those things put together, I am expecting that 2.70% definitely we are going to hold on.

And the MCLR has been cut by how much, sir? And my next question is on MSME loans. So, some lenders have called out stress in the MSME segment. What are your thoughts?

We have already reduced by 15 basis points. We had 9.05% and today we are at 8.90%. On MSME stress: We are not seeing any such movement or any such change in our portfolio. And I think the way the book was behaving earlier, the same way it is behaving now also. And the fresh underwriting which has happened for the last four years, in that incremental MSME growth, we are seeing slippages of around 2.5% to 3%. No, we do not do unsecured MSME because there are two ways of doing the MSME loan. One is that CGTMSE coverage is available. So, wherever the collateral security is not there, we advise the customers to go for the CGTMSE coverage. So, either it is CGTMSE coverage or the collateral securities are there.

The question is on SMA, the increase in the SMA pool, which is there in the MSME, and maybe when you look at it overall in general, it has gone up maybe a bit, say when you look at it even agri there is SMA pool, which has got built up. So, how do we read this number of say closer to like Rs.1,600-odd crores of SMA? If you can highlight the overall SMA pool, say even below the Rs.5 crores, say SMA 0, SMA 1 and SMA 2?

I can give you the full SMA 0, 1, 2 of the entire Bank irrespective of the amount. See, it was 6.79% last year. Okay? And now that has come down to 6.14%. And that includes from Re.1 to the Rs.1,000 crores now. So, that is a book and I think there is a good control on the SMA book and even for the Rs.5 crores and above book, only 0.14% is the stress is there. Retail, we have Rs.28,500 crores and Agri, it is Rs.11,600 crores, MSME, Rs.24,000 crores, and all others, like corporates and all put together, it is Rs.5,200 crores. This is the total stress. Total of around Rs.69,000 crores is the 0, 1, 2 book is there now. In that, SMA 0 itself is Rs.43,300 crores. SMA 0 is Rs.43,300 crores, SMA 1 is Rs.13,200 crores and SMA 2 is Rs.12,700 crores.

Sir, last year, our slippages in MSME were Rs.638 crores and now it is Rs.966 crores and it has been above Rs.900 crores for the last two quarters, it is on an increasing trend. So, what exactly is happening on the ground?

See, these slippages which have happened in the MSME is Rs.10 lakh and below category. And most of these loans are under the Mudra loans for which the government guarantee is also available. 75% of the outstanding we are going to get back in that particular category. So, that is the only slippage which is happening. Otherwise, the MSME book of Rs.10 lakh and above is fully behaving well. We have a good underwriting structure is there. And Rs.10 lakh and above, we have a centralized set up at 138 centers in the country. All those proposals come under that MSME cell and there only the processing and disbursement happens. So, I do not see any challenge in this entire book. There are two things. One, the customer walks into the branch and branch itself sources the proposal. There is no DSA or third-party involved in this Mudra loan.

Sir, just one other question on OPEX guidance for FY26. This quarter it was Rs.8,700 crores. What will it be for the full year approximately if you can guide us?

Operating expenses also, yes, this particular quarter, there is one head that is the Priority Sector Lending Certificate, that is the PSLC. Because of the shortfall in the priority sector, we go to the market and purchase that to achieve that priority sector target. Because of that only in this particular quarter, there is one PSLC is there in the operating expenses. Otherwise, we have stabilized operating expenses, both in the employee side also, and the other than the employees expenses also. So, I do not see any big changes going to happen in the operating expenses. In the Q4 also, our operating expenses was Rs.8,697 crores, and Q1 of this also it is Rs.8,765 crores. We are almost in the same range, except that one head where we have said around Rs.800 crores, PSLC certificate. That only the cost has gone up. Rs.8,000 crores to Rs.8,200 crores.

Just on margins, do you mind sharing with us what is number one the recovery on written off debts in the interest income line? And also, how much is interest on tax refunds this quarter?

Yes, recovery in technical write-off and the interest, all put together is Rs.1,700 crores. And the tax component is around Rs.500 crores. See, Rs.1,200 crores is the technical write-off recovery and Rs.500 crores is the interest recovery. And this Rs.500 crores in the interest recovery, in every quarter, we are recovering in the interest to the extent of around Rs.500 crores to Rs.700 crores, every quarter, that figure is there.

Sir, in the last quarter, we had AS 15 provisions of around Rs.1,400 crores and this quarter it is Rs.1,150 crores. Is it fair to assume it will stabilize at this run rate for the entire year? And sir, our net worth has increased by Rs.4,600 crores while our PAT was around Rs.1,600 crores. Can you explain the walkthrough of what goes into that Rs.4,600 crores?

Yes, yes. We have taken the calculation from the actuarian and based on that only we have factored this. I do not see that in any of this quarter we are going to exceed this amount. On the net worth walkthrough: One element is there in that. Revaluation, we have done and that figure has also increased and because of that it has gone up. It has gone to Rs.800 crores now. Last year, in the same quarter, it was Rs.33 crores which has gone to Rs.800 crores now. That figure is around Rs.2.8 lakh crores of bulk deposits. The bulk deposit rate itself, 100 basis points, we have brought it down because last quarter, Q4, it used to range between 7.8% to 7.85%. Now, the bulk deposit rate is around 6.7% to 6.78%. And PNB is not there in the bulk deposit market. Definitely it will materially reprice next quarter.

Sir, we saw a standard provisioning of Rs.309 crores this quarter and a write-back from investment of over Rs.403 crores. If you can just explain as in what were those for?

See, a standard account provision, whatever we do at the 7th June circular, there was one account which was triggered under the 7th June and because of that, we have made some additional provision. The writeback from investment: because of the MTM and the RRBs and all which the amalgamation has happened. So, again, the valuation has happened and because of that there is some writeback there.

My question is on asset quality, mostly on credit cost. That credit cost for this quarter is around 14 bps. And in last three or four quarters also, we see the similar range of 10 to 20 bps is going on and you have given guidance of the 50 bps of the credit cost. So, can we think that these 10 to 20 bps range for a credit cost is normalized, like you can lower the guidance of the 0.58%, are there chances?

Credit cost, the guidance which we have given is 0.50 for the entire year, right? And in this particular quarter, our credit cost is 0.14%. And we will remain well below the 0.5%. I think that is the assurance I can give you. We have Rs.1,29,000 crores of sanctioned book under the corporate segment. And in that, Rs.43,000 crores is the sanction which we have done up to March '25. Rs.48,000 crore sanction which we have done in this financial year, that is the first quarter itself. So, both put together, Rs.91,000 crores is there and Rs.38,000 crores is the sanctions is in the pipeline, which we are going to do it. All put together is Rs.1,29,000 crores is the book which is there with us now, for which the disbursements are going to happen.

Your RAM advances is visible at 17%-18%. How do you visualize here on RAM advances and what is it currently? And what is the yield on RAM?

Within the RAM, if we can share some figures, MSME has grown by 18.6% and core retail has grown by 17.7%. Bank has initiated a lot of things in RAM now. One is that massive outreach activity is happening in our Bank, where from the top management, including M.D. and EDs and everybody is participating and they are visiting the centers, conducting the outreach activity, and this is happening for the retail, agri, MSME. Just on 25th of July, we have conducted the MSME outreach activity, 11th of July, we conducted the agri outreach activity, and 17th of July, that was for the retail expo. So, these activities are generating lots of good leads and then the leads are getting processed at the centralized hub and getting sanctioned now. For MSME, separate figures are there. Like for retail, it is varying in the range of around 8.35%, agri, it is 7.95%, MSME, it is 8.42%. The share of corporate and RAM will be, with the initiative, I am expecting somewhere around 58% to 59% under the retail and remaining 40% to 41% under the corporate.

I just wanted to check if the benefit of 100 bps of repo cut has been completely transmitted to the borrowers so far? And also, could you please tell us the MCLR, EBLR and fixed rate loan mix?

Yes, it has already been passed on. In fact, in our Bank, there is a guideline that today if the MPC decides to rate cut and if it is announced by RBI, I think the next working day itself, it is getting implemented straightaway. We have around 56% linked to EBLR, including our repo linked, treasury linked, that composition is around 56%, remaining all is the fixed rate, base rate, and the MCLR. MCLR is 30%.

Like the last quarter and this quarter also we had Rs.2.8 lakh crores of bulk deposit. Because this deposit is going to be short-tenured, have you started seeing benefits on the bulk deposit repricing, and if you can quantify how much interest saving can happen in Q2? And your global book is less than 5% of overall book, but still it creates on the overall 15 basis points impact on the overall Bank. It looks like that the overseas margins are like 0.5% or even below.

The bulk deposit around 100 basis points dip has already happened in the system. And in our Bank also the same thing is there because earlier the bulk deposit was in the range of around 7.85% to 7.9% which has come down to 6.7% to 6.75% So, almost 100 basis points dip has already happened. And definitely the impact of that, it will be visible in our Bank also from the Q3 onwards… real impact will be visible. On overseas margins: Yes, you are absolutely right. It is in the same range; it is in the range of around 0.45% to 0.50%. I think we are revisiting our strategy and we will see that because finally outcome has to be that how it is going to improve my NIM. So, we will revisit that. Portfolio is very small, but definitely it affects my bottom line. Housing outstanding is Rs.1,06,000 crores, vehicle is Rs.27,000 crores, education is Rs.8,500 crores, and mortgage is Rs.16,400 crores, personal loan is Rs.22,500 crores, gold loan is Rs.3,400 crores under the retail segment, credit card is Rs.1,200 crores.

One is on the PSLC expense that we have incurred this quarter. So, can you talk about as to what steps Bank is taking to ensure that we do not incur a PSLC shortfall in the following years, because some of the PSU banks are making really decent income on the PSLC certificate that they are selling, so, why is PNB sort of missing out on that front?

We have taken a lot of steps now because I know that many of the public sector banks are making money out of this. And a Bank like ours having 10,200 branches, we were missing out. But this year, massive activities have been started. And the self-help group, one segment, which takes care of the small and marginal farmer category also, and the 40%, the agriculture target of 18% also, it falls under both these categories. And there only we are missing the target. So, we are going in an aggressive way for the self-help group onboarding now. And the benefit of self-help group is, one is that yield is also very good. NPA percentage is just around 1%. If you see the YoY figure under this self-help group, almost Rs.4,000 crores has been added. It was Rs.8,500 crores last year by June '24. Now it is Rs.12,000 crores plus. We have already created a roadmap for totally coming out of the PSLC purchasing. And within three years roadmap, I think we are going to come out of this entire PSLC borrowing from the market. Next year itself, I am expecting that to the extent of around Rs.300 crores we are going to save from the income side now with the initiative which the Bank has taken under the agri segment.

Any qualitative color around treasury because this quarter we have seen most banks reporting very strong treasury gains -- can there be a sharp fall versus what the first quarter has been or is there more room that you still see?

Yes, since our Bank, we have built in a very good, strong treasury book to the extent of around Rs.5 lakh crores and already the reducing market scenario when the interest rates are falling, definitely, the treasury book is going to behave very well, not only this quarter, this quarter definitely we have made good money, I think going forward also, in the entire this financial year, treasury book is going to support in a very, very big way in the operating profit.

On the business growth and particularly on CD ratio, will we look to utilize the room that we have?

Yes, yes, we will continue to hold on to this level now. Rather, we are expecting that there will be some improvement in our CD ratio. Right now, around 71.09% is there. I am expecting by end of this year, somewhere around 73% definitely we should be able to touch that. But growth in the deposit and advances are very, very stable and the activities and the initiative the Bank has taken I am very sure that there will be good credit growth.