The COVID-19 pandemic hit hard most of the Industries. The Punjab National Bank informed of its decision to restructure 5-6 percent of its loan books. This comes after RBI had announced their one-time asset restructuring window.
The bank had already restructured micro, small and medium enterprises (MSME) loans worth ₹1300 crore under the existing dispensation. Despite this, 14 percent of the MSME books are non-performing.
The bank also expects that the overall economy will return to its former rate and see better growth from the start of October. The second-largest public sector bank of the country also predicts that the overall growth would be 4 to 6 percent in this fiscal year. The forecast was said by the Managing Director and CEO of the bank, Ch SS Mallikarjuna Rao, during a virtual press conference to discuss the June quarter results of the bank.
He added, “We are not reviewing our 4-6 percent overall credit growth guidance. We will stick to our earlier guidance. We may look at the position after October. MSMEs are expected to do well as they will have a wonderful opportunity from the ban on Chinese goods. Sectors like hospitality, tourism, and aviation will take a long time to come back. Within the 4-6 percent, we expect MSME and retail to grow 8-10 percent.”
On the concept of asset reconstruction, he said that the bank would pass the scheme in the coming months. By September he added that they would brainstorm the idea and come up with a way to let the people know about the number of accounts that would be eligible to attain the facility. The would also wait for the release of Kamath committee guidelines on this matter. The Kamath committee guidelines are expected to be out by the end of this September.
Rao, the managing director, and CEO also said, “By September-end, the Kamath committee guidelines will also be available. This 5-6 percent is in terms of the value of loan book and by September-end we should have details in terms of individual accounts. We are preparing the covenants to look in terms of identification of borrowers who would be eligible for restructuring.”
He also said that much of the reconstruction would depend on the guidelines and recommendations of the Kamath committee while expressing his inability to give a detailed overview of the sectoral picture about the reconstruction.
On the matter of extending the time period of moratorium, he said, “A restructuring window is a permanent solution. A moratorium facility is temporary. There is no need in the current situation to extend the moratorium.”
Punjab National Bank, the sate based moneylender had put forward a report showcasing standalone net profit of ₹ 308 crores for the first quarter of this year. The first quarter of the year ended in June 2020. The profits came as the bank’s bad loan amounts declined the slippages were suppressed due to the moratorium. The outstanding provision of the bank fell by 1.5 percent during the June quarter. The bank had released the data after the joining of the Oriental Bank of Commerce and the United Bank of India with themselves. The bank managing director also had said that there is no plan of any layoff of employees due to the merger.
Rao also said that he decided to stay on with the already published profitability guidance that was given for the current fiscal. The profitability guidance was announced during the announcement of the results of the March quarter. He had said, “As expected, we are in profits in the first quarter. We will look to be in profits in each of the three remaining quarters, although there is no clarity on how the Covid-19 impact will play out in the next few quarters.”
According to him, he said that he does not think that the COVID-19 pandemic would largely affect the net interest margin (NIM) and Net Interest Income (NII).
Rao also made the bank’s plan to go in for Qualified Institutional Placement (QIP) to raise capital. He said the bank would opt for the QIP in the early fourth quarter or at the end of the third quarter. Although the pandemic, there is no plan for the company to approach the government for capital infusion.
On NCLT resolution, Rao said, “We are expecting the hearings to happen more effectively from October. Nothing has happened in the June quarter. We expect it to improve in the third and fourth quarters.” He still sticks to the money lender’s March indication that said that the bank expects ₹6,000-8,000 crore worth resolution this fiscal as regards matters pending before NCLT.
Analysts, however, as reported by the Livemint.com, flagged off high bad loan ratios and also a high moratorium level. As reported the stock has been marked as underperforming by Morgan Stanley and Jefferies India Pvt. Ltd. The bank decided to raise capital in the second half of the fiscal year to counter this. But what is more needed than capital is good borrowers of the bank in the current situation.