Hit by NPAs, PNB to focus on lending to better-rated firms

MD and CEO of the Punjab National Bank,
 Usha Ananthasubramanian

Impacted by asset quality woes, state-run Punjab National Bank today said it will focus on lending to better-rated corporates for credit growth.

"We are looking for highly rated accounts like AAAs and AAs, but it does not mean we will shy away from the B-rated accounts.

"However, the preference is always for the higher rated corporates," the bank's Managing Director and CEO Usha Ananthasubramanian told reporters here. 

She said even if income is going to be less from such accounts, there is stability in this segment as the capital charge is reduced. 

"We also encourage the B-rated companies because that rating does not mean they are bad. The only thing is that where the capital charge is more, we re-look and want them to be supported by collateral," Ananthasubramanian said. 

Although the bank gets proposals from sectors which are not performing well, it takes a conscious decision not to get into them, she said. 

"We do not want iron and steel but where we are already in, it is difficult to come out. Thermal power, gas-based power plants are some of the sticky areas. The old projects we have to continue and should support but we are not keen on incremental fresh exposure," she said when asked which sectors the bank is more cautious about. 

The bank had yesterday reported a 58 per cent decline in net profit to Rs 306 crore for April-June period on account of rising bad loans. 

Provision for NPAs jumped almost three-fold to Rs 3,620 crore from Rs 1,291 crore in the same period a year ago. GNPA ratio shot up to 13.75 per cent.
Speaking about recoveries, Ananthasubramanian said the 

bank is trying to recover non-performing loans which have turned bad. 

"How it improves our asset quality is a thing we have to see and one quarter will not decide it. So going forward, if you are able to control the slippages and improve the recoveries to outnumber the slippages, then it will reflect in the asset quality of the bank," she said. 

The bank has identified some bad loans to be sold to asset reconstruction companies (ARCs). 

"We have already lined up about 72 accounts which have been identified but it is not known how many of them will actually be put on sale," she said. 

The bank has enough security receipts (SRs) and is fine with the SR route as well, she added. 

"It is a misconception that the bank is always after full upfront cash purchases by ARCs," she said.

Asked whether bank has identified accounts under the scheme for sustainable structuring of stressed assets (S4A), Ananthasubramanian said the accounts are run by a consortium of lenders and not by one bank. So, most of the accounts where the bank would like to invoke S4A, there are other consortium lenders. 

She, however, said only completed projects which have commenced operations are eligible for S4A. 

"Unless they generate a positive earnings before interest, taxes, depreciation and amortisation (EBITDA), it will not be possible because the servicing of the loan starts the day you identify the sustainable debt and the unsustainable debt," she added.