PNB will lend to “viable” MSMEs in the SMA category, backed by the Centre’s credit guarantee, says MD & CEO Atul Kumar Goel. Currently, ₹1,012 crore in MSME loans are in the bank’s SMA-2 doubtful debt category.
If a viable entity in the SMA category needs credit, we will provide funds. Banks won’t lend to unviable units. The government will offer a credit guarantee for these loans.
In my opinion, the cost of deposits has already peaked. However, due to the gap between credit and deposit growth, the interest rate on bulk deposits has increased and fluctuates daily. The one-year retail deposit rate or rates on special deposit schemes may remain stable, but rates on bulk deposits depend on liquidity and the varying needs of banks.
Money is undoubtedly moving from banks to mutual funds, impacting the CASA (current account and savings account) ratio. However, mutual funds sometimes invest in bank fixed deposits. Thus, deposits are returning to banks, albeit partially.
We aim to increase our CASA ratio to 42% by the end of FY25, up from 40% in Q1. However, the interest rate difference between CASA and bulk deposits is putting pressure on CASA mobilization. Some customers are moving funds from savings accounts to fixed deposits if they don’t need immediate access. Consequently, CASA deposits are decreasing while term deposits are rising. Despite these trends, we are confident in achieving a 42% CASA ratio due to various initiatives, including improving customer acquisition, service quality, call center services, and customer relationship management.
We should wait for the final guidelines on the expected credit loss (ECL) model for banks. With a five-year period to meet higher provision requirements, there is no immediate concern. ECL considers the probability of default. Over the past four years, we have sanctioned ₹8.32 trillion in loans, disbursed ₹7.49 trillion, and currently have over ₹5 trillion in outstanding loans, with total NPAs at only ₹2,276 crore. If this trend continues, the implementation of ECL accounting norms will have minimal impact.
We have approximately ₹1 trillion in corporate loans in the pipeline, spanning various stages such as sanctioned but unused, in discussion, or under new business proposals. These proposals come from sectors including roads, steel, cement, and NBFCs.
The RBI has imposed a penalty, and we have taken corrective actions to address the issue. We will avoid such types of financing in the future. Moving forward, we will ensure that no loans are extended to companies against amounts receivable from the Centre through subsidies, refunds, or reimbursements.