India's PNB eyes faster credit growth in fiscal 2028 after pruning low-yield loans, CEO says

BENGALURU: India’s Punjab National Bank expects loan growth to accelerate in fiscal 2028, after it completes pruning its lower-yielding retail and corporate loans, a strategy that has weighed on credit growth but improved profitability, its CEO said.

The state-run lender retained its loan growth target of 12%-13% for the current financial year as it allows older, lower-yielding loans to run off, that is, mature and be paid down without renewal.

We expect faster credit growth in fiscal 2028 once the portfolio clean-up is complete, MD and CEO Ashok Chandra said in an interview.

“We are deliberately keeping good-quality advances in the portfolio… I’m very confident the way we are rejigging our balance sheet, by the end of this financial year, everything will be in place,” Chandra said.

PNB’s retail loans grew 17.5% in the three months ended June 30, excluding inter-bank participation certificates (IBPCs), which are loan participations purchased from other banks, typically carrying lower yields. Its reported retail loan growth stood at 9%.

The bank has shed about $2.3 billion of IBPC loans over the past year, Chandra said.

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It has also let some lower-yield loans in its corporate portfolio to run off, keeping reported corporate loan growth at around 10%, Chandra added.

Total advances grew 12.7% in the June quarter, with underlying credit growth remaining stronger than the headline numbers suggest, the bank said.

Indian banks have been on a lending tear, with credit growth surging to 18.6% in the fortnight ended June 30, as corporate borrowing picked up and retail demand held firm, according to central bank data.

PNB reported a three-fold rise in first-quarter net profit over the weekend. Its year ago profit was impacted by a one-time tax charge.

It also reiterated its forecast for a net interest margin of 2.6%-2.7% this fiscal and added it expects margins to improve by 4-5 basis points in the September quarter. Its NIM stood at 2.5% for the quarter.