On opex - it was a positive surprise with cost cutting. Earlier guidance was INR8,000 to INR8,200 crores quarterly opex but it came much lower. Anything to read into this?
We are very, very mindful and the top level at the head office level and the field level we have sensitized about all those things. And wherever it is required, those expenditures only we are doing it. And that is the reason it has been brought down now.
Clarification: (1) color on the large other provision in the P&L line; (2) on the ECL 75-80 bps CRAR impact - would it be absorbed upfront through P&L on 1st April on adoption?
On ECL P&L timing: that is the call we need to take. We have not yet finalized what we are going to do. Depending upon the cushion and profitability, we will see. Anyway, when the cushion is there for 5 years, depending upon the profit and capital position, we will take a call. Maybe at the end of the financial year only we will be taking that call. On other provision: one IL&FS account was upgraded this quarter. That was an NPA account, and that provision has moved from NPA accounts to standard assets - that is why you are seeing the other provision going up.
Margins estimated to improve by 5 bps in Q3 and 10 bps in Q4. With new government measures like GST cuts, M&A activities, new products - can margins have a higher uptick?
I think for Q3 and Q4, the estimate which I have given, I will be holding to that level. We can see all those impacts in the '26 to '27 financial year going forward.
You mentioned that INR1,200 crores of NPA provision has moved to standard asset provision. Against which accounts?
This is one big account - very legacy accounts which got upgraded. We are holding the provision in that particular account.
First question on credit growth: annualized growth is 10.14%, but to meet the 12% target for FY26, the bank needs to disburse around INR80,000 crores in the remaining 5.5 months. Are we on target? What is the sanction book pipeline? Second, what is the financial impact on the bank from the Canara HSBC Life IPO where the bank's stake came down from 23% to 13%? Third, other income has declined this quarter - TWO recovery fell to INR854 crores from INR1,200 crores, and fee-based income fell to INR1,685 crores from INR2,250 crores. What is the reason and outlook? Finally, can you provide the full SMA picture (SMA-0, SMA-1, SMA-2) as of 30th September 2025, and what are the recovery targets?
On advances growth: retail advances excl. IBPC grew by 18%, Agriculture 13%, MSME 18.6%, and corporate loan book grew 7.9% Y-o-Y with 3% Q-o-Q growth. The sanction book for pending disbursement has grown from INR136,000 crores to INR178,000 crores - these are all sanctioned and approved, with disbursements pending. Around 40% to 45% are project loans which take 1 to 2 years to disburse. The direction of 11% to 12% credit growth will be achieved. RAM share is 56.8%, targeting improvement to 57% to 58% and long-run goal of 60% RAM, 40% corporate. On Canara HSBC Life: bank will receive around INR950 crores from the 10% dilution, nothing has been factored in September quarter - all will be factored in Q3. On TWO recovery: overall recovery is INR3,920 crores, almost INR4,000 crores. TWO recovery was muted this quarter but advanced-stage negotiations are happening for many accounts; expecting around INR1,200 crores of TWO recovery in Q3. Yearly guidance of INR16,000 crores of total recovery is on track; expecting around INR4,500 crores of recovery in Q3. On fee-based income: Q1 always has higher noninterest income due to processing and yearly charges. With a strong credit pipeline and growing corporate book, BG commission, LC commission, and processing charges should improve in Q3 and Q4. SMA book: SMA-0, -1, -2 all put together irrespective of the amount is 5.75%.
What is the outlook on margins? They fell around 10 basis points on a global level Q-o-Q. If there are no rate cuts, do they stabilize or improve? Will increased corporate mix bring margins down? How do we view margins in the next 2 quarters given downward MCLR repricing?
In Q1 and Q2 there were challenges because of the 100 basis point repo rate cut with 49% of the book priced at RLLR, which was passed on immediately. Repricing of deposits has already started and cost of deposits has come down substantially. Those benefits will be seen in Q3 and Q4. Q3 and Q4 onwards there will be good movement in NIM and NII.
There were reports about an IL&FS account being upgraded this quarter. Has the bank taken that as an upgrade in costs and NPL movement?
Yes. That account has been upgraded, but the provision is not yet released. I think we may take this release in the Q3 or Q4.
Can we see 5 to 10 bps per quarter NIM improvement for the next 2 quarters?
On conservative estimate, at least 5 basis point improvement will happen in Q3 and around 10-plus basis points in Q4 because by that time the entire 1-year deposit will be repriced and the benefit will be realized in the full financial year. So at least 15 bps cumulatively over the 2 quarters.
How do we think about ROA and ROE targets over FY26 and FY27? What are the key metrics management is focused on for these years?
ROA has improved and we have already touched 1.05%. Expecting further movement; in Q3 and Q4 it should be somewhere around 1.10%. ROE is already at 17.95%, a good improvement from the same time last year. Going forward, when the entire deposit is repriced and NIM and NII improve, profitability is likely to improve. In this financial year we will be touching around 1.10%, and going forward it will be more than 1.10% - a definite improvement. Cannot give the exact number but definitely more than 1.10%.
Slippages have increased Q-o-Q this quarter. Any reason? How is the pattern going?
There is absolutely nothing to worry about the slippages. This quarter slippages are only INR1,955 crores; last quarter was INR1,886 crores. The range is around INR1,800 crores to INR2,000 crores. Last year in the same period slippages were more than INR2,100 crores. Annualized slippage ratio is 0.71% which is well within the guidance of less than 1%. No challenges anywhere.
How is business momentum across different verticals - energy, steel, infrastructure? Are NPAs increasing in those sectors? What is the customer sentiment for investment and borrowing?
Total loan sanction pending disbursement is INR1.78 trillion. Infrastructure is growing at more than 9% Y-o-Y. Renewable energy is a champion sector. Proposals from road projects, renewable energy, steel sector, data centers - all put together there is good traction. RAM book growing at 16% to 17%: MSME 18.6%, retail excl. IBPC more than 17%, agri 13%. GST rate cut in September will add 1% to 2% impact to RAM book. As of today, none of the corporate book is appearing in SMA-0, reflecting credit writing quality. In the last 5-year sanction book NPA percentage is only 1.40%.
Can you share: (1) assessment of expected impact from the ECL transition; (2) the SMA-1 and SMA-2 book overall; (3) explanation of the large NPA provision reversal and why you added to the buffer of other provisions; (4) clarification on the ROA guidance of 1.1% for FY26 given H1 ROA is about 80 bps; (5) AS 15 provisions that declined - are you well provided and what is the run rate?
On ECL transition: final framework is not yet prepared but Stage 1, 2, 3 have been calculated. Stage 1 is similar to current standard assets provision - no challenge. Stage 3 with 96% PCR - no challenge. Stage 2 has elevated provision with 5% provision requirement in different sectors. Rough estimate is 75 to 80 basis point impact on CRAR, split over 5 years. The bank has enough cushion and profit to bridge the gap. SMA: SMA-0 is 3.67%, SMA-1 is 0.90%, SMA-2 is 1.18%, total SMA-0, 1, 2 is 5.75%. On NPA provision: with 96% PCR, whenever there is a recovery other than TWO, there is large-scale reversal of provision. In this quarter INR588 crores was provided in NPA accounts but write-back was higher, resulting in negative credit cost. That will continue as long as good provision coverage is maintained. On ROA: last quarter was muted because of moving from old to new tax regime - the DTA recalculation required an additional INR3,200 crores tax provision. Without the new tax regime shift last quarter profit would have been INR5,000 crores. Going forward, the 10% benefit from the new tax regime will continue every quarter - that is one reason ROA is above 1%. On AS 15: last quarter provision was elevated due to full-year calculation based on government securities yield. This quarter yield went up so provision came down. No major challenge in Q3 and Q4 on this front.
Just to clarify on the other provision: is the entire INR1,500 crores provision because of IL&FS, and was INR1,500 crores reversed out of NPA provision (shown as negative INR600 crores on the slide)?
No. The IL&FS account provision that moved from NPA to standard assets constitutes around INR1,200 crores. That has not been factored as a write-back of provision; it has moved from NPA to standard assets. The negative credit cost visible is INR639 crores, and we have made provision of INR588 crores in NPA accounts this quarter. That is the reason provision coverage ratio improved from 96.7% to 96.9%. Raman Grover: Additionally there is a continuing provision of around INR187 crores made probably during COVID times, which is continuing. The IL&FS upgradation provision balance will be reviewed for release in Q3 or the coming quarters.
What is the estimated profit from sale of stake in Canara HSBC Life?
That is around INR900 crores.
On NIM: if we expect 10 to 15 bps cumulative sequential expansion, what proportion of deposits are still to reprice? Year-to-date we have seen around 18 bps benefit in cost of deposits. With 27% of the book still on MCLR, how much more deposit repricing is available?
Around 60% of the term deposits with maturity period of around 4 months, 6 months and 1 year have been repriced. The remaining 30% to 40% we expect to happen in Q3 and early part of Q4. That is the basis for the NIM and NII improvement visible in Q3 and Q4.
With loan growth guidance of 11% and the ask rate now slightly lower, do we see any upward risk to the guidance?
RAM, Retail, Agri and MSME are all growing at more than 15%. MSME is 18%, agri 13%, retail excl. IBPC is 18%. Corporate loan book which was muted in Q1 showed Q-o-Q growth of 3% and Y-o-Y growth of 7.9% in Q2. With the INR178,000 crore sanction book for Q3 and Q4 disbursements, good corporate loan growth is expected. When corporate loan book growth moves to 10%, overall credit growth will be more than 12% to 13%.
On the M&A financing comment - is it a coordinated effort through IBA or among large banks directly? What is the structure?
We will have to explore through the IBA also. Some 4 to 5 big banks in the country will propose to come together for financing this area. The opportunities are very high and scale is very high - if 2 to 3 banks come out collectively, we can take a bigger pie. It will be like consortium or joint lending. Last year in FY24 total INR10 lakh crores of M&A happened; taking 40% debt component is INR4 lakh crores; even if 30% is funded by banks like ours, that is INR120,000 crores of scope.
RBI has permitted banks to lend for retail share advances up to INR1 crore and IPO financing limit has increased. Is the bank planning to enter this area?
We are trying to come into this particular area. IPO financing limit for individuals has improved from INR10 lakh to INR25 lakh. We are seeing good IPO activity with many new corporates coming to the IPO market. Definitely we will be coming out with a separate policy for this financing.
Retail and RAM sector growth is all above 15% and corporate pipeline of sanctioned but unavailed is approximately INR180,000 crores. What sectors are you seeing green shoots in beyond renewables?
Infrastructure other than renewable: telecom, roads and ports, power, even one data center. Data center has picked up very well. Engineering sector, various sectors put together. This book comprises many sectors and that amount is around INR128,000 crores. It is mainly private sector capex. PNB has a niche in project financing and is coming back in that area. 40% of this particular book is project financing.
What is the digital spend likely to be this year - the annual budget for both capex and revenue expenditure?
Both capex and revenue expenditure together is INR3,500 crores for this financial year. Around 30% has been achieved in the first half.
Last quarter AFS reserve outstanding was INR800 crores. What is the number this quarter?
INR700 crores provision, which we have made in this particular quarter now.
What is the outlook on treasury profit from here? How will management use treasury as a lever to support ROAs?
Q1 and Q2 both quarters we have maintained a good stream. INR1,800 crores was the treasury profit in Q1 and in this particular quarter also the treasury income all put together is around INR1,800 crores. Q3 - let us wait and see how bond movement happens. But somewhere around INR1,500 crores is the minimum treasury gain we will be holding every quarter. We have INR5 trillion book under the treasury.
PNB has outlined focus on digital transformation and retail penetration. What are the biggest execution challenges - especially legacy system integration, customer onboarding, and talent readiness? How is the bank prepared to overcome them while maintaining service quality and regulatory compliance?
The biggest challenge is educating and informing people about available digital channels. We have launched a GenAI-based PIHU chatbot at our website and other customer-facing channels where people can ask anything and PIHU will reply. We are also conducting field outreach activities and creating awareness through social media and physical visits. On legacy systems and infrastructure: we are shifting our data center to a new center at Gurgaon where infrastructure is world class. Almost ready, expected to shift the entire data center in March or April. It will have a robust cybersecurity framework and our own private cloud space. That center will enhance the legacy system and the speed of business.
With credit growth picking up across MSME and retail, how is the bank balancing growth with risk management, especially in unsecured lending and stressed sectors?
The bank is not very active in unsecured lending. There are 3 segments: (1) Personal loan - restricted to those whose salary comes to the bank. Classification is unsecured but fully protected. No major challenge. (2) Education loan - has government guarantee. Portfolio is behaving very well. (3) Credit card - portfolio is very, very stable. No major challenge happening because of unsecured advances.
Treasury income of INR1,500 crores - is that every quarter?
Yes, yes, every quarter because Q1 also we had INR1,800 crores of treasury income. Q2 also we have around INR1,790 crores, so almost INR1,800 crores and we have enough book under that - INR5 trillion book is there under the treasury. So definitely we will be able to at least make an income of INR1,500 crores in every quarter.
Despite PNB coming down from 5% GNPA in Q1 FY25 to 3.5% now, is there an intent to accelerate the fall in gross NPA to get below 2% to 2.5%? Also, on NIM: it has gone from 3.07% in Q1 FY25 to 2.60% today, passing through 2.92%, 2.93%, 2.81%, 2.70%, 2.60% - what direction and when do we recover?
On asset quality: net NPA percentage has come down to 0.38% and the guidance for this year is 0.35% - we are going to do that and will be well below 0.35%. Gross NPA is at 3.45% and guidance for the year is below 3% - we are going to achieve that. For FY26-27 we will come out with a new strategy. For the last 2 years, quarter-to-quarter, recovery in every quarter is higher than slippages. Even excluding TWO recovery, upgradation and cash recovery is INR2,700 to INR2,800 crores which is higher than slippages of INR1,900 crores. Technical write-off this quarter was only INR1,200 crores. Net NPA absolute number is only INR4,000 crores - one quarter profit is sufficient to make a zero NPA bank. None of the corporate book is even appearing in SMA-0. NPA percentage in the last 5 years' sanction book is 1.40%. On NIM: the repo rate impact has already happened in Q1 and Q2. Repricing of deposits has already started; expecting 70% to 80% of 1-year term deposits to reprice in Q3. NIM and NII will benefit in Q3 and Q4. At least 5 basis point ROA improvement in Q3 and around 10 basis points in Q4. ROA around 1.10% for the year. NIM improvements will be around 15 basis points over the 2 quarters.