Repo Rate, CRR Cuts To Boost Credit Offtake By 1–2%, Says PNB CEO Ashok Chandra
Punjab National Bank expects to reap significant benefits from its treasury operations. The bank has a credit-deposit ratio of around 71%.
The Reserve Bank of India's latest repo-rate and cash-reserve-ratio cuts will help increase credit offtake and speed up the growth of the retail, agriculture and MSME segment for Punjab National Bank. according to Chief Executive Officer Ashok Chandra.
“A 100-basis-point cut has happened in the last four and a half months. At least 1% to 2% growth will happen in the credit offtake," he told NDTV Profit in a conversation on Monday.
"RAM (retail, agriculture and MSME), we will be growing at a faster speed. Corporate book also, which had shown in the last year a growth of around 10% to 11%, at least 1% to 2% growth should happen in the corporate loan book in this financial year," the managing director said.
Following the RBI repo rate cut, the second largest public sector lender has already passed on the benefit to the customers.
The top executive acknowledged that the RBI's move would place short-term pressure on the bank's net interest margin. He projected a potential impact of "around 3% to 5%" on the NIM in the first two quarters of FY26.
However, PNB has a clear strategy to mitigate this. The bank's asset liability management committee is set to meet to decide on a corresponding cut in deposit rates.
Chandra pointed to the RBI's "bonanza" of a 100-bps cut in the CRR. It is scheduled to be implemented in four stages from September. "That also will bring some liquidity in the system, Rs 15,000 crore of the amount will be released in our bank. We are going to deploy and we will make some money out of that," he said.
Chandra expects that from Q3 onwards, the bank will "make good of that loss, which will happen in this Q1 and Q2".
The bank's loan book is currently split, with 42% linked to the repo rate and around 50% to the marginal cost of funds-based lending rate. "With the ALCO meeting going to take place, I think we will take a view on the MCLR front also," he added.
PNB expects to reap significant benefits from its treasury operations. The bank has a credit-deposit ratio of around 71%.
"With the lower interest rate scenario, if you have a strong treasury book, definitely the treasury is going to support in a very, very big way in the operating profit. And I'm very bullish about that also," the seasoned banker outlined.
