Punjab National Bank (PNB) Earnings Call Transcript & Summary

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Good afternoon, everyone, and thanks for joining the call. On behalf of Batlivala & Karani Securities, we welcome you all to Punjab National Bank 1Q FY '21 Post Results Conference Call. We have with us today, the management of Punjab National Bank, represented by Mr. Ch. S. S. Mallikarjuna Rao, MD and CEO; Dr. R. K. Yaduvanshi, Executive Director; Mr. Sanjay Kumar, Executive Director; Mr. Vijay Dube, Executive Director; Mr. A. K. Azad, Executive Director; and other senior officials. I would now request MD and CEO sir to start the call with his opening remarks on 1Q FY '21 results, post which we can start the Q&A session. Over to you, sir.

Okay. Good afternoon, once again, to all of you. At the outset, I would like to welcome on behalf of Punjab National Bank for this conference call involving the analysts. With respect to the results, what we have declared by June 2020, while all the details are in the public domain by way of listing, what you call, details and as well as the presentation, still, I would like to take a few minutes by giving you the highlights of the performance and leave the forum open for the questions. With respect to domestic deposits, there's a growth of 3% moving to INR 10,44,290. Domestic advances have grown by 1%, almost flat. Domestic business overall has grown by 2.2%. CRAR stood at 12.63% at the end of June 2020. CASA has grown by 10% -- 10.1% on a year-on-year basis, out of which savings itself has grown by 11%. Retail credit has grown by 4.2%, of which housing loan grew by 6.22%. Operating profit grew by 2.5%. Net profit for the quarter end stood at INR 308 crores. And the noninterest income has grown by 7.9%. If you look at gross NPAs, gross NPA ratio stood at 14.11%, net NPA ratio stood at 5.39%. Provision coverage ratio has moved to 80.75% as at the end of June 2020. These are the major areas of our performance. With respect to any other queries, now I'll -- I open the forum for discussion.

[Operator Instructions] First question is from the line of Mahrukh Adajania from Elara Capital.

Sir, I had a few questions. Sir, my first -- hello?

May I ask you to speak a little louder?

Hello? Can you hear me?

Yes, ma'am.

Yes, please. Tell me.

Sir, I had a few questions. Sir, firstly, just in terms of slippages and restructuring, I know that it's a volatile environment, but what would be your best guess for full year slippage and for the onetime restructuring for FY '21?

Okay. Any question further or shall I reply to this question?

Yes, sir, I have other questions on the ECLGS scheme, but I can take that up after this?

Okay. So on restructuring and the, what you call, slippage, both are different because restructuring once you undertake, there's no slippage -- accounts will not be slipping. So our estimate at this point of time is only, you can say, guesstimate because we await the outcome of the covenants to be decided by KV Kamath Committee in terms of the accounts which are having INR 100 crores and above. However, we anticipate that roughly around 5% to 6% of the credit book may be going under restructuring. That is the overall, what you call, estimate we are having as on today, but it will be crystallized by end of September once we receive the guidance from them. In terms of MSME, in terms of retail, it is clearly visible to us with respect to restructuring because of the RBI guidelines, which are clear. We are also working on identifying them because we may not offer restructuring in terms of personal loans to everybody because majority of the housing loans are personal loans in public sector space. Specifically to PNB, they're all government employees. So repayment is already happening, so there may not be any requirement of restructuring there. However, they may require moratorium, which anyway is available as per RBI guidelines, which will be extended and they will be paying at the end of the repayment schedule. So that is related to restructuring. The overall estimate is 5% to 6% of the loan book. With respect to slippage, the slippage what you have seen by June stood at INR 1,917 crores. So roughly, it could be around INR 8,000 crores to INR 10,000 crores slippage, what we can anticipate during the year-end March '21. This amount covers those accounts which are not permitted for restructuring, more importantly, some of the NBFC accounts where stress may be there. And some of the accounts in the corporate book because of covenants, we may not be able to offer restructuring. There may be possibility of slippage. Though individual verification will be clear by September end, we are estimating that there could be anything around INR 8,000 crores to INR 10,000 crores. So that is our estimate for both the things.

Got it, sir. Sir, and just -- so, sir, basically, in terms of restructuring, how much of retail do you think would get restructured? I know it's mostly housing, but that again, would be 6% to 7% only? Or...

It would be even less than that because majority of the housing profile will be satisfied with the moratorium, which doesn't constitute the restructuring.

Right. No, so what I'm saying is that you may extend the moratorium after the moratorium ends through the onetime restructuring. So that will be counted as restructured or not?

Absolutely. If you're extending the moratorium, it will be restructuring. That profile may not be very high, it could be anything around 5% to 6%.

Got it. Got it. And MSMEs? Under the MSME scheme, you would restructure, is it?

Yes, yes. MSME, that window is different. As you are aware, this has been a window available from RBI for the last 1 year. And the covenants are also different. Standard SMA0, 1, 2, are all eligible as on 29th of February 2020. So those accounts also we are identifying, but then account should be ongoing account. There are certain other factors which we verify. But there also, it will not be very high because already NPA ratio in MSME is around 14.8% currently. So maybe another 5% -- 6% -- 5% to 8% could be the profile where we may undertake restructuring.

And this is even after the ECLGS scheme? So even after they've got additional funding or these...

That is the reason why the scope is very limited because whatever stress they had, we have already funded them. One is 10% funding we have given initially, and then 20% has come by way of government guarantee credit. So naturally, the possibility of restructuring happening in MSME accounts is very, very less.

Got it. Got it, sir. Sir, and my other question was on the ECLGS scheme. Sir, so -- sorry, coming back to restructuring, again, which are -- sir, in corporates, we know what sectors have been stressed by COVID, like hotel, tourism, airport, aviation, but other than that, do you think other sectors in the corporate segment will also get restructured? Like, earlier before the DISCOM scheme actually came into play, people were worried that a few more power accounts could get restructured. Is that a risk now any longer?

I don't see. The first thing is that in the aviation sector, there will be an impact, but then aviation, our exposure is restricted to one standard account of the Government of India, another is already NPA, Jet Airways. So the question of restructuring does not arise there. The other sectors where PNB, what you call, will be having little amount of stake would be the, what you call, hospitality segment will be there, then tourism industry is there. These are all the areas where probably restructuring is required to be undertaken. Aviation, we are ruling out. We don't have many bigger accounts, only small account is there. So restructuring is not an issue. Tourism and hospitality segment. Further, there may be industrial accounts where there could be a problem depending upon the dependency on the labor. If it is a high labor-intensive industry, it may take longer time for coming back. When I say longer time, it may not happen from October, but it may take another 5 to 6 months' time. So depending upon the industry, we'll have to go about it.

Got it. Got it. And sir, in the ECLGS scheme, the government has outlined INR 3 trillion, but as of early August, the sanctions were only INR 1.5 trillion and have risen a bit more now. Sir, why is the offtake so weak? As in, it's such a good scheme that banks have zero risk weight. For the borrower, the rates are low. So one thought that this entire thing would be used up soon so that the borrowers can be refinanced at a lower rate, so your risk is lower, plus you have zero risk weight, so your risk-adjusted returns are also high?

Correct. See, the fundamental point is INR 3,00,000 crore estimate was a generic bird's eye view estimate at the government level. When it got drilled down to identifying the accounts, for example, as on 29th of February, the eligibility is up to INR 25 crores, 20% of which can be given. Now INR 25 crores when we estimate at bird's eye view has happened, data collected from the banks. But the same borrower having exposure in multiple banks, crossing above INR 25 crores was not eligible at that point of time. So in reality, when we went ahead for implementation, there was a lot of change. That is one reason. That is regarding the eligibility. Second reason is medium enterprise. My MSME contains 3 categories: micro, small and medium. Medium enterprises, many of the people have got the sanctions or probably they were not willing to have the sanction. Those who have got the sanction also have not utilized. The reason is, they wanted to wait for the operating cycle to start, and then only they wanted to take. So these are the 2 major reasons. The first reason in order to overcome, the government has enhanced the eligibility to now INR 50 crores. So up to INR 50 crores accounts will be eligible now. Again, we are embarking on reaching out to the customers for sanctioning to them. As you rightly said, it is a very good scheme where risk-weighted assets -- risk weight is 0, government guarantee is there, pricing is also very low. We are offering at 7.5%. So there's no reason why borrowers should not take. But there are genuine reasons why borrowers are waiting for, what you call, availing the money until they get the operating cycle starts. So we expect somewhere from October onwards, availments will start where we have sanctioned, and further sanctions will be improved since they have increased the amount up to INR 50 crores.

Got it, sir. Sir, and what is the total sanction and disbursals right now?

At our end?

Yes.

So it is INR 10,000 crores.

Sanctions?

Yes. And INR 8,000 crores is the disbursal.

[Operator Instructions] Next question is from Jayant from Crédit Suisse.

Sir, congratulations for the numbers. Sir, actually, I wanted to know on the provisioning, we've taken around INR 48 billion this quarter, whereas the slippages were lower and the provision coverage Q-o-Q seems to not much sharply gone up. So can you just explain the provisioning this quarter?

See, provisioning has been there. This quarter also provisioning, we have shown, what you call, INR 4,000 crores amount of total provisioning, what we have done in, what you call, Q1 of the current financial year, just 1 minute, INR 4,836 crores, we have done the provisioning in the current year. Now INR 4,836 crores also includes the provisioning related to fraud of the last one and this one. So if you remember, last year, in the notes on accounts, INR 760 crores -- INR 766 crores was the amount, which was deferred to be provided, out of which INR 704 crores provisioning we have done in this quarter. Only INR 59 crores is now deferred to be done in September. Similarly, this year, we have -- this quarter, we have identified around INR 1,600 crores provisioning is required in the fraud accounts, where we have done around INR 425 crores, remaining we'll be doing in the next quarter. So provisioning coverage is there, the ratio has improved. If you were looking at quarter-on-quarter, the provision coverage ratio has gone up to now -- from 77%, it has gone up to 80%. What was the other question?

Sir, I'm talking about the -- so basically, even if I take this INR 700 crores and INR 400 crores, that will be roughly INR 1,000 crores, INR 1,100 crores?

Correct.

Still, sir, that INR 4,800 crore number is slightly higher? Or is it aging provisions kicking in? How much of that...

Yes, yes, aging provision is there. Aging provision is there.

How much would be aging provisions?

That is almost INR 3,000 crores -- INR 2,800 crores.

Okay. Okay. Okay. And sir, lastly, on the net worth, sir, can you just give a little walk-through on your net worth during the merger and post? Basically, how has the CET1 moved from a stand-alone 10.6% to, right now, I think, we're at 9.4%. If you can just explain a little walk-through how much of it was harmonization and then how much was it routed through net worth and P&L?

Yes. Before coming to that, there was a provision of INR 1,000 crores held for COVID, which is not counted in the provision coverage ratio.

Okay. Okay.

Okay? Now coming back on the CRAR. CRAR PNB 1.0 alone stood at 14.04%, if you remember, for March. And as of 1st April, it has come down to 12.32%. 12.32% because of the accumulated losses being adjusted and the figure taken forward. CET1, what you call, as on 1st of April, has come to 9.17%, okay? Whereas, it was, what you call, more than -- around 10.25% -- it was more than 10% in -- 31st March for PNB stand-alone. Now in June, the overall CRAR accounts to 12.63%. Hello?

Yes, yes. Go ahead, sir. Sorry.

Now in June, the CRAR has come to 12.63%. There's an increase of 30 basis points, purely because of 2 reasons. One reason is reduction in the risk-weighted assets because of reduction in credit outstanding. Second is that INR 700 crores, which was debited in the March to reserves account, that fraud provisioning, now that is debited to P&L and reserves have been restored. So there is a 10 basis points increase because of that reason.

Okay. Okay, sir. And 4Q, the absolute amount that you routed through net worth for harmonization was how much, sir?

One minute, that I'll give you. Accumulated [Foreign Language] I'll just come back. You can continue with the other questions, I'll come back, just within a minute.

Okay. No, sir, that is it from my side. This was the last question.

Okay. Yes, please, next?

Next question is from Rahul Nandwani, Centrum.

Sir, if I look at your SMA2 positioning, from March to June, it has declined. So is this due to repayments?

No, that is repayment only. That is -- the major one was -- in March, Air India was there in SMA2, now it is SMA0. So that is the reduction. INR 17,000 crores was there in March, now it has come down to INR 10,000 crores.

And how much of this do you expect to...

In March, INR 10,000 crores was there. Air India is around INR 4,000 crores.

Okay. So that is the differential. Got it, sir. And sir, for Q2, how much do you expect slippages from SMA2 book?

The SMA2 book could be around INR 2,000 crores, not more than that.

INR 2,000 crores. Rest will be repaid? Is what you -- or restructured...

Yes, yes. I'm expecting roughly INR 2,000 crores per quarter. That is why I gave an estimate of anything between INR 8,000 crores to INR 10,000 crores slippage.

And how do you look at the morat number? It is still high as compared to your private sector banks. So how do you look at the morat?

Which number?

Moratorium.

Moratorium?

So it's at 29%, right, on the overall book?

That is at the end of June. Whereas, by 31st July, it has come down to 21% -- 20%, 21%.

20%, 21%?

Yes.

And segment-wise, it is more or less the same as on June?

You see, segment-wise, if you look at MSME, it is around 37%, 35%. Corporate and others, around 25%, 26%. In fact, in retail, it is less. And retail, it could be even -- around 18% by 31st of July. Agriculture, again, around 32% is there.

And in August, do you see that trend improving further or has it...

Yes, yes. There is an improvement. So mostly in the moratorium book, the things can be settled to a greater extent with the moratorium only. So there won't be requirement of restructuring. Only in corporate and MSME, we'll have to see for restructuring. Retail and -- retail impact will be very less.

And for retail, the restructuring would mean only extension of the time period, no?

Correct. But if you're extending beyond 6 months of moratorium, it tantamounts to restructuring.

Yes. That 1 year under that scheme, which you got...

Correct, correct.

Next question is from Amit Jain from Axis Capital.

Sir, I have a question on your borrowings. Sir, on 1st of April, you reported a borrowings of somewhere close to INR 66,000 crores, whereas in June, there has been a sharp decline. Sir, I just wanted to understand what has led to that decline?

1st April, what is that we have shown? Borrowing?

Yes, sir. I think it was close to INR 66,000 crores, sir.

I'll just check and tell you. Probably, it is because of the 3 interbank transaction amount also maybe -- may have been included there. Because 30th June, that would have been nullified. I'll just check and come -- what you call, come back to you during the time of, Mr. Rahul (sic) [ Amit ]. Any other question?

No. That's it, sir. That's it from me.

Yes. I'll come back, Mr. Amit, yes.

Next question is from Akshay Ashok from Dalal & Broacha Stock Broking.

Sir, congratulations on a good set of numbers. I just have 3 questions for you quickly. Sir, there is one, are you planning to float any onetime settlement schemes for this current year? Or are you waiting for all the restructuring, all the modalities and all to be finished? And then after this amalgamation, has it helped in recovery better? Because now there may be some common accounts and other things, so has it helped in recovery after the ones that -- because amalgamation is now complete I know that. So has the recovery become better? And are you looking at any co-origination of loans with some NBFCs going forward? Yes, that's it from my side.

Yes, first question, what was that? I missed out.

Any specific settlement scheme.

Yes, yes. OTS scheme is already there with us. In fact, all the OTS approvals what we had given up to 31st of March, because of COVID, we have extended time suo moto in order to give them opportunity to make the payment, and we have given time up to 30th of September. So we are expecting recoveries from those OTS proposals. We'll be following individually. Though -- the special OTS scheme, keeping in mind the current requirement to hasten the process, we are approaching the Board by this month end to get the approval so that it will be open from 1st of September onwards. And as you rightly said, in terms of common accounts, the approach remains the same because the efforts need not be multiple. It will be only single effect from the PNB 2.0, that is amalgamated entity. There will be definitely tough time for us to move for recovery. It all depends upon the economic recovery and the position of betterment of the stressed assets what they see. However, NCLT cases are there, which are in the final stages, some of them, 1 or 2 cases are there in the Supreme Court. So we are expecting from NCLT alone, the recovery should be around INR 8,000 crores before the, what you call, Q4, then we are also expecting other recoveries to be equal amount. So anything around INR 15,000 crores to INR 16,000 crores is our target to recover, but how it pans out, we'll have to see. We are gearing up because we've already restructured the entire organization recently, and we have created verticals for exclusively recovery down the line up to circle offices. So they have started functioning very recently. So we expect good amount of, what you call, results out of the, what you call, these organizational restructuring in terms of recovery.

Okay. Okay, sir. And about this co-origination, are you planning with any NBFC or microfinancing?

Yes, yes. We have plans. We already have arrangement with 1 company, but did not take off because of COVID. We are very, what you call, focused on the -- for undertaking co-originations.

[Operator Instructions] Next question is from Sushil from Indus Equity.

Hello?

Please go ahead.

Yes, please go ahead.

Sir, first question, your outlook on treasury, NIM, cost to income?

Okay. Outlook on treasury, if you've seen what we've got, the profit was INR 1,308 crores by June. And the opportunity, if at all it is there, it will be there up to only September end because already, we've seen bond market firming up. On Friday, it has gone by almost 14 basis points -- 11 basis points. And today, again, it has come -- it has gone there. We still have good amount of book where profits can be booked. So our estimate for September will be another INR 700 crores to INR 800 crores, apart from what we've booked in June, that is INR 1,300 crores. So it would be anything between INR 2,000 crores to INR 2,100 crores will be the H1 profit as far as from treasury is concerned. Whereas in the H2, we don't expect anything more than, both quarters together, INR 500 crores. That is the treasury estimate for us. So overall, it will be around INR 2,600 crores.

What's your estimate on NIM, sir?

NIM, currently, we are at 2.59. And it will be anything between 2.4 to 2.5 because provisionings may increase, but NIM will not be impacted. So the earning capability of the bank in terms of the advances disbursed are average advances. So remaining moderate, as per our estimate, we expect NIM to remain at around 2.5 -- between 2.4 to 2.5.

Where do you see the cost-to-income stabilized, thanks to the merger now?

Cost-to-income has already come down a little bit, if you compare year-on-year. It is around 42%, 43%, if I remember exactly. And it will remain there only because the real impact will start after 6 to 7 months.

Yes. But based on the impact, let's assume that it starts from 1st October or maybe 1st January...

1st January, 1st January. Cost-to-income ratio, now currently, we are at 49.41 at this point of time. The benefit will start coming from 1st of January.

Sir, now the assets, which PNB and OBC have in terms of branches, headquarters, so PNB's headquarter is pretty close to OBC current headquarters. There are very many assets, which may be replicating each other. So what's the plan on those?

No. We have already identified certain assets. While specifically, OBC head office we'll be retaining. But if you are aware, in Bhikhaiji Cama, we were having a old head office, that we've already identified for sale. And 1 floor was already sold and other things are in the line. So we have identified quite a good number of assets worth INR 500 crores to be disposed before 31st March 2021.

INR 500 crores. Sir, what about the common ownership in other assets, like insurance and other?

No. Insurance, we have investment in both -- 2 companies. One is PNB MetLife; another is CHOICE, Canara HSBC Oriental Bank of Commerce. IRDA has given approval to us to hold both the companies. So we are at this point of time, during the current year, we don't have any, what you call, plan to sell any of the -- our core -- our investment from these 2 companies.

But this holding period is granted forever or it's for a particular...

As on today, holding period is, what you call, without any time limit.

Without any time limit?

Correct.

Sir, now based on the current estimate between rural and urban economy, your presence in rural economy, specifically Northern India is far greater than any other bank...

North, even East as well. East and Northeast because of merger.

Yes. So now can you give me some throughputs, what are you sensing from your customer base? How is that behaving compared to the SME and large corporate?

We are expecting higher demand from MSE rather, rural -- agriculture and MSE. We are concentrating on investment credit in agriculture in terms of agriculture-allied activities and food processing units across northern part of the country and eastern and northeastern part of the country. Government also has taken initiative in terms of animal husbandry, in terms of agri investment credit. So we are very focused in those areas because we expect good amount of demand from rural segment with respect to agriculture-allied activities and investment credit in terms of particularly food processing. Second, micro and small enterprises also, the demand will increase. While the medium enterprises segment will largely depend on how the large corporate segment demand will be moving ahead, but micro and small, I'm expecting good amount of recovery in terms of the demand, which, again, service will happen through rural and semi-urban branches.

Sir, in the earlier question, you said that integration between all the, I mean, 3 entities, PNB, United and OBC should be over by the year-end 2020, so have we spent -- on the previous call also I had asked you that have we spent on digitization and some enablers where integration and new technology, higher amount, thanks to COVID, than what we had budgeted?

Yes. Actually, after amalgamation, one is technology integration, which is an important thing. Otherwise, business integration, we've already done from 1st of April and human integration also we have finished in the months of July and August by transferring the people wherever required based on the, what you call, organization restructuring. Coming to technology integration, simultaneously, we have taken initiative in bringing technology in credit underwriting and credit approval. These 2 are simultaneously taken as an initiative, which is in force. 50% of the segment will be covered from 1st of October, remaining segment will be covered from 1st of January in technology. Simultaneously, the integration of databases of those 2 banks also will be completed. So by March '21, while all technology-related activities will be completed, in the process, we have taken initiative in various technological upgradations, whether it is related to, what you call, early warning signal, fraud assessment area, risk assessment area, credit underwriting approval, all the initiatives have been taken, which are concurrently running. By 31st of December, 90% of the activities will be completed. We have also taken initiative in digital for digital lending. So that we are expecting it to start partially from 1st of October and effectively from 1st of January.

Sir, thanks to your personal touch point where OBC was concerned and PNB integration. What are you sensing on human resource based on retirement or any other schemes which you are carrying out where future cost is concerned where human resource of the entire consolidated bank is concerned?

See, if you look at in a combined entity, our retirements in a year go more than 3,000 number. So the people who retire, their cost is high at the retirement. And the people who enter, they enter at a low cost. So the -- earlier also, I was indicating cost-to-income ratio is expected to get moderated. It gets moderated over a period of time from 1st of January onwards. While the employee strength is required to be maintained because of the business opportunities for the bank, but in the next 2, 3 years, cost-to-income ratio will go down substantially.

Okay. My last question, sir, you've made a new appointment at PNB Housing with Neeraj Vyas handing over to Hardayal, and you've decided to infuse equity in the rights.

Correct.

So now do we have a commitment from PNB that we would not be selling PNB Housing stake in next 2, 3 years or it's stopgap arrangement?

No, I don't say stopgap arrangement. When we have taken a decision from the, what you call, our Board, it is with an objective of showing our commitment and seeing that the real valuation of the company is much higher than what is being traded at this point of time. In fact, if you look at the, what you call, results declared at the end of June, the capital adequacy ratio for PNB Housing Finance was almost 18%, which is well above 15% mandatory from March '21, whereas as on today, 14% is the requirement. However, the capacity to garner the capital is also seen as one of the important factors by the analysts. That is the reason why we wanted to give, what you call, measures to the market saying that, PNB's commitment to PNB Housing Finance is completely full, and there is no question of any condition on that. So we have taken the approval -- subject to approval from RBI to contribute around -- up to INR 600 crores since we are holding 32.62%. So naturally, INR 1,800 crores is the amount of capital the PNB Housing Finance is looking at. We are only waiting for the opportunities to be taken by the company because we see that good amount of opportunity is there for housing loans in the days to come.

So I conclude that PNB current management decision is to be a constructive on the PNB price is concerned, because in last 2 years, various issues have only destroyed the price rather than anything else.

No. I don't like to say anything on that, but the way -- the kind of explanation I've given you, which clearly indicates because all the companies where PNB subsidiaries are there, PNB name is there, there all brand is very critical. And PNB brand is only driving them besides their capability to run the unit. So we would like to see that all the companies go to a position where they are really valued.

[Operator Instructions] Next question is from Mahrukh Adajania from Elara Capital.

Sir, when you were discussing your estimate or guesstimate for slippage, you did mention some weak NBFCs. Sir, those would be the small ones or are there any big ones now?

No. Big ones are not there, small ones only.

Small ones, as in the -- I mean...

Of course, there'll be a few smaller accounts where since -- see, you see NBFC is a smaller segment than MFI, they don't have that much of capability to see the market position because they have to extend the moratorium to their clientele. Whereas, they are not permitted to have any restructuring. When they're not permitted to have restructuring, it is only a matter of asset liability mismatch. Banks have come forward under the government guarantee scheme also to subscribe to their bonds. So while all these measures are available to ensure liquidity at adequate level with these NBFCs, 1 or 2 odd cases may come up. That is the reason why I indicated like that.

Got it. These are MFI segment?

Maybe NBFC as well. I'm not specifically saying unless we identify, but we have only taken an estimate as to how the impact can happen.

Got it. Got it. And sir, the breakdown of moratorium that you gave was for June or July? Now that it [Technical Difficulty]

Hello?

The breakdown of moratorium you gave was for June or July?

June, June, that is, as of 30th June is 29.2%, what we have given in the, what you call, presentation. By July 31, it has come down to 20%.

The next question is from Shashank Verma from Axis Mutual Fund.

Sir, on this moratorium, do we segregate it on the basis of EMIs received versus due? For instance, when we say 21% at the end of July, will these customers be who haven't paid any single EMI of the last 5 months?

Absolutely.

Next question is from [ Deepak Kumar ], an individual investor.

Hello?

Hello?

Sir, what is the watch list for the bank, sir? And what is the adjusted book value, if you take 50% of watch list as NPA?

See, watch list, if you ask me in this year, I don't think you will find anything bigger than what SMA2 we have mentioned. That is INR 10,000 crores and odd we have shown under SMA2, INR 10,641 crores. Now only thing is, we'll have to wait and see up to September and once the Kamath Committee report comes, whether they are excluding any sectors which are under stress for restructuring and how it is going to pan out. Otherwise, as on today, if you ask me the estimate, it is only INR 10,641 crores. Out of that, major amount is in -- if you see agriculture, INR 4,595 crores; MSME, INR 3,130 crores. So the percentage in retail and other accounts, corporate is only INR 1,900 crores. So it is less. Agriculture and MSME -- agriculture -- in MSME, we may undertake restructuring, but may not be entire amount. So the entire watch list hovers around INR 10,000 crores. That's why I estimated around INR 2,000 crores to be slippage for Q2. And similar lines for Q3 and Q4.

And what is the adjusted book value, sir, as on today?

Adjusted book value for what?

Suppose, if I remove this INR 10,000 crores, so you have given in the analyst presentation the book value as INR 83.

No, no. INR 83 is wrong, actually. That was wrongly mentioned, it is INR 52. Adjusted net worth problem was there. Then again, we have published -- corrected figure was published immediately. Probably that is why you would have got the -- now it is INR 53.18. Correct figure is INR 53.18.

INR 53.18? Okay.

Yes.

Next question is from Jai Mundhra.

First is on moratorium. So the -- because a lot of banks have different moratorium practices, so just wanted to understand, even someone had asked, that does this mean that all the moratorium number that we have presented in the presentation, they have not paid any single EMI? Or if someone has taken moratorium, but he keeps on paying something, is that included in that number as well?

Anybody who has paid installments less than 2 installments, we have considered as person who has taken moratorium.

Okay. And this is as of June, sure, sir?

Correct.

And sir, how do you account for working capital moratorium?

That FITL, RBI has permitted to create funded interest term loan, FITL, which will have to be paid before 31st of March 2021. So we'll be carving out during the month of September. Up to 31st of August whatever interest is debited in the CC account, where demand cannot be risen, will be carved out separately so that limit will be -- outstanding will be under the limit and the account can be operated effectively.

Correct. No, so I'm asking, sir, this data of 29% is mainly for term loan only, right?

Yes, yes. It includes CC also, working capital also. Overall book.

Okay. Overall book?

Yes.

Okay. Sure. And sir, your guidance of 2% to 2.5% credit cost, which roughly translates to, let's say, INR 14,000 crore to INR 17,000 crore. Does this include, let's say, 10% restructuring provision because...

Yes, yes, yes. I included that only because practically, even though it is a provision under standard, we would like to include that as well, considering that only I told. Otherwise, INR 8,000 crores [Foreign Language].

Sure. Sure. And sir, any corollary to that, I mean, if you have -- if you would have calculated the aging provisions, assuming nothing happens, let's say, no recovery happens, then what would be the aging provisions that you'd be required for the next 3 quarters?

See, the fraud provision itself is around INR 1,200 crores is still pending, which is to be done in the next few quarters, okay? That is -- notes on accounts we have already given against INR 1,600 crores, so we've provided 425 fresh accounts and remaining is there. And aging provision will also be there in the next few quarters to come. That could be anything around INR 1,500 crores to INR 2,000 crores per quarter.

Sure, sir. And last clarification, sir. I mean, BB -- and thanks for a lot of clarification -- a lot of data points in this presentation. The BB and below book that we have showed in the slide number, I think, 16, sir, right? So this INR 22,006 crores, these are all -- this is the breakup of standard loans only, right? BB and below INR 40,000 crores?

Correct, correct.

It does not include NPA, right? Because those would have been taken out of this book anyway?

Correct. Correct. Correct.

Next question is from [ Upvan Gupta ], an individual investor.

Sir, my point is that in the month of July, a fraud account was declared in respect of Dewan Housing Finance Limited. The issue is why this declaration was deferred since all the relevant information was already available on the fraud and even some other public sector banks had already declared this as fraud account kind of much before our own bank?

Yes. What is the question?

Sir, my question is that declaration was made in month of July that Dewan Housing Finance is a fraud account, INR 3,500 crores.

Correct.

Why this declaration was deferred since all the relevant information was already available on record? And even some of the public sector banks...

No, no, what happens, there is a procedure to be followed. One is RFA has been noted down by various banks, including our bank. Then, the next level is to undertake the investigation internally by every bank. We don't declare just because other bank has declared, we have to complete the process of investigation and other factors. That was one of the reasons because if you look at even Dewan Housing, if I remember exactly, the earliest was only in February or January 2020 when the fraud was declared. And the other banks have started declaring continuously later on that. So we declared in the beginning of the month of July.

Right. So we were the kind of latest on that?

What happened?

My point is, we were latest on that?

Latest means? Late, late. You mean to say late?

Right.

Delayed, delayed.

Right.

That is because of the internal process to be completed in all the 3 banks.

Probably, the books and accounts for financial year '19/'20, with the quarter 4 results, they were not kind of fair in depicting this point, which was already available on the books, but it was depicted a bit late?

No. Even if we had taken that figure, the provision, RBI gives the dispensation. We were already holding as an NPA account provision up to 45% at that point of time when we declared the, what you call, as a fraud. Even if it was required to make the further provisioning, there would not have been much of an impact on the balance sheet.

Not on the balance sheet, but from a perspective point of view, it would have made a difference because fraud is obviously at a much higher degree than a provision.

I don't think, because ultimately, you have to complete every process before you declare. So we had to complete the process in all the 3 banks together, and accordingly, we declare the, what you call, fraud.

Right. And sir, can you assure us that in future, probably these kind of frauds or probably like the Modi case or something, there's -- the systems are in place to keep a check on all this, and this may not happen in future?

See, you have seen, whatever Modi case you are referring, it is a one-off case. Definitely, we agree that there was a procedural lapse, which has contributed to this happening. But since then, if you have seen, there has been constant effort by the bank to improve upon the internal processes and tightening the position to see that such kind of operational lapses do not occur. So what as a CEO of the bank I can assure you that bank is in that direction. We have already put lot of checks and balances in the system to see that these are identified. Now if you are linking the case of delay in DHFL to, what you call, Nirav Modi, I don't think -- both are completely different. In case of DHFL, we are aware of that when the administrator was appointed in the November-December, then it was PNB 1.0, we have started the investigation, then we have also completed with respect to other 2 banks. After some of the banks have declared fraud, our process also got completed, and we have done that. So to assure you, what you're expecting, yes, bank has taken lot of measures to position lot of checks and balances in the system to control such kind of things, including technological upgradations.

Sir, just the last point. Do you think that, obviously, kind of as available on record, there was some kind of misappropriation or operational lapses in case of the Modi scam. Do you think the auditors were also involved because we can't see anything on that in the audit report at that time?

No. At this point of time, I cannot comment. It is actually some of the cases are in the judicial stage, which are running. But...

Right. But they are the watchdogs of the banks when they are auditing the books.

No, no. Look -- listen to me, internally, we have completed our process of self-accountability and taken action against all those who are involved in the exercise. So the auditor-related issues, we have already flagged the issues to the relevant areas, now it is for their domain to look at.

[Operator Instructions] Next question is from Jayant from Crédit Suisse.

Sir, actually, I had another question on the employee provisions. How much did we take on the wage settlement this quarter? And how much is left now overall employee provisioning?

So this quarter in the notes on accounts, we have mentioned there's more than INR 200 crores that we have taken the provisioning in this current quarter. And I don't think it'll have an impact because we have been doing the provisioning more than 10% -- looking at more than 10% increase. This quarter, we have done INR 206.19 crores and cumulative provision as on today what we are holding is INR 1,572 crores at this point of time. So it is sufficient to take care of the requirements.

Next question is from Atul Kumar from Quantum Asset Management.

One question was related to credit growth. How are you looking for the current year? And if you can mention it separately by retail, corporate, et cetera?

Right. See, credit growth, if you ask me, what estimate we had indicated to while declaring the results of the March, we are, as on today, sticking to that estimate of 4% to 6%. We will review only by October. Out of the 4% to 6%, we are expecting the growth in RAM segment that is more importantly, retail and MSME, anything around 6% to 8%. Because the corporate book increase depends upon utilizing the existing limits and also depends upon the new demand coming up in terms of the investment. So these 2 are very critical factors. If you look at even our case, more than INR 50,000 crores to INR 60,000 crores approvals and sanctions are there, but utilization has not taken off. Various, what you call, accounts are there, NBFCs are there, government-owned companies are there. So it all depends upon the requirement. But still, we expect that the growth compared to March position of our credit book, which was around INR 760 crores, we're expecting anything around 4% to 6% of the growth, of which 8% growth could come from retail and MSME segment.

Okay, sir. And in terms of disbursement, especially on the retail side or RAM side as compared to what you were on a pre-COVID level to right now, that would be like what's the level of those kind of levels?

Pre-COVID, if you look at by March, retail, we've grown almost by 15% last year. So when I'm saying 8% growth, roughly, in the residual part of the financial year, the effective annualization will be around 16%. So it is on the same lines.

Okay. Okay. And finally, on the NCLT side also you mentioned that after roughly -- whatever your recovery expectations, roughly about INR 8,000 crores coming from the NCLT account and as we hear that recently the courts, et cetera, are not functioning, so I mean, if you could just...

In that INR 8,000 crores -- actually, INR 8,000 crores is the recovery and the reduction. That means reduction in the lending area. Even though our real recovery other than NCLT could be further another INR 8,000 crores, what we are expecting. In NCLT, because one account itself is there where Supreme Court case hearing is going on, where our stake is almost INR 6,500 crores, out of which our expectation of recovery will be almost INR 4,000 crores. So that is the reason why we are estimating that there are few more accounts which are in the final stage, because of COVID, they got delayed. So we are confident of getting that much of recovery.

Ladies and gentlemen, that was the last question for today. I will now hand the conference over to Mr. Bhavik Shah for closing comments.

On behalf of Batlivala & Karani Securities, we thank Punjab National Bank management for giving us the opportunity to host the call. Thank you, everyone, and have a good day. May I request the MD sir to kindly give the closing comments. Thank you.

Once again, thank you, B&K Securities for handling this. Like when we conducted the analyst meet in the month of February this year by declaring the results of December, we promised the analysts based on the feedback given by them that we will be more transparent or we'll bring more disclosures in our presentation. Accordingly, we attempted in March. Now also we have shown. We'll be very happy to receive further feedback from you people so that if there is any further more clarity required in terms of disclosures, we can bring in that. Our objective is to reach out to the analysts as frequently as possible, not definitely only at the time of declaration of results. So any opportunity in future as well, we are open. Bank is also focusly planning for going to the market for QIP. At that point of time, again, we'll be in touch with the analysts. Thank you very much for the opportunity given to us to showcase before you all. Probably, we tried our best to give clarifications to all your queries. There were 2 queries which were left, which we will share with you very shortly with the B&K Securities, you can pass on to them. Thank you very much, once again, for conducting the analyst meet.

Thank you very much.