Punjab National Bank (PNB) Earnings Call Transcript & Summary

Good afternoon, everyone, and thanks for joining in. On behalf of Batlivala & Karani Securities, we welcome you all to Punjab National Bank Third Quarter FY '21 Post Results Conference Call. We have with us today the management of Punjab National Bank represented by Mr. S. S. Mallikarjuna Rao, MD and CEO; Mr. Sanjay Kumar, Executive Director; Mr. Vijay Dube, Executive Director. Mr. A. K. Azad, Executive Director; and other senior officials. [Operator Instructions]. Please note that this call is being recorded. I would now request MD and CEO, sir, to start the call with his opening remarks for third quarter FY '21 results, post which, we will start the Q&A session. Over to you, sir.

Yes. Good afternoon to all of you. I'm Mallikarjuna Rao here, MD and CEO of Punjab National Bank, and I'm joined by my 3 Executive Directors, Mr. Sanjay Kumar, Mr. Dube and Mr. Azad. And besides, I have my top management team sitting here, vertical, in case of queries to be answered by them. Now with this, I would like to just give a brief related to the performance indicators at the end of December 31, 2020, related to Punjab National Bank. We've already kept the presentation in detail in the public domain in our website and also the, what you call, results at the end of September, there is a review -- auditor-reviewed results. We have already uploaded it in stock exchange, where even notes on accounts and the other details are also available in the public domain for your understanding. Though the figures are not known to you -- known to you, I will take only a few minutes to briefly indicate about the performance, so that I can trigger for any questions from your side. Global business of the bank stood at INR 18,09,587 crore as on December 31, as against INR 17,90,640 crore. Similarly, global deposits have stood at INR 10,82,156 crores, and global credit stood at INR 7,27,432 crore. The savings grew by 8.4% year-on-year. CASA has grown by 6.4% year-on-year. Overall composition of CASA stood at 44.66%. Credit growth year-on-year has been flat at 1.5%. Housing loans in retail has grown by 6.5%. Capital adequacy ratio stood at 13.88%, well above the requirement, as at the end of December 30. Further, in January, we have taken a Tier 1 bond, AT-1, what you call, capital of around INR 500 crores. There is another INR 2,500 crores, which we are planning from the market before 31st of March. Operating profit grew by 13.9% year-on-year to INR 6,391 crores. Net profit for the quarter stood at INR 506 crores in December. The global NIM was at 3.09% for Q3. It was 2.49% a year back. Then cost-to-income ratio improved to 43.38% year-on-year from 47.87%. The global cost of deposits has declined to 4.23%. Then global gross NPA stood at 12.99%. Net NPA stood at 4.03%. Provision coverage ratio has improved to 85.16%, including TWO. And excluding TWO, it is at 71%, 72%. So these are the main highlights of the performance. Besides, we have also indicated about what we call the stress asset book in the presentation, including the first slippage, and a pro forma NPA. Because of Supreme Court judgment, the NPAs could not be identified. However, we have marked the accounts and then made the provision accordingly to the extent of 15%, besides derecognizing the interest, details of which are given in the presentation, clearly indicating about the amount. Further, we have also given the amounts related to onetime restructuring invoked, details as well also we have provided in the presentation. Considering the pro forma NPA including the provision done on that, what would have been the gross NPA and net NPA also, we have indicated in the notes on accounts. Further, the credit cost stood at 2.02% (sic) [ 2.05% ] at the end of December. However, if you factor the provision made on pro forma NPA from standard to NPA category, the credit cost goes to almost 2.5%, which we had indicated earlier also when we had given the guidance while interacting with investors, saying that credit cost up to March 2021 will remain at 2.5%. However, in the next year, it could be between 1.25% to 1.5%. That guidance remains. Regarding the restructuring profile, though initially, expectations were high, but it is stepped down at INR 11,998 crores, that is INR 12,000 crores. Entirety, it was invoked at the end of 31st of December in terms of the RBI guideline. Only for MSMEs the window is open up to 31st of March 2021 for undertaking the restructuring. So far in MSME, we have done a restructuring of INR 968 crores. Maximum, even if some more amount comes, it will not be more than INR 1,000 crores before 31st of March. So overall, the restructuring profile will be around INR 12,500 crores to INR 13,000 crores maximum. As of today, already -- as of December already, INR 11,998 crores, that means INR 12,000 crores has been already identified. With respect to the additional provisioning, in order to ensure that there won't be any legacy impact on the Q4, with respect to the provisioning we've already done the provision required on pro forma NPA and other accounts. So we don't carry any legacy to be carried forward. Slippage guidance what we had given earlier, saying that around INR 12,000 crores could be the first slippage in the H2. We will be sticking to that only, even though, as of today, it appears 13,000 is the forma NPA roughly. We are expecting -- the collections have improved a bit in January. We are expecting further improvement. And even overall considering Q4, we are confident that the overall -- the slippage in H2 will be around INR 12,000 crores. So these are the vertical indications from my side. Now, I'm open for the questions from your side.

[Operator Instructions] Yes, and we now have the question from -- first question from Mr. Ashok Ajmera.

Can you hear me?

Yes, we can hear you.

Yes. At the outset, congratulations to you for the very good set of numbers. Of course, just at the leg end, I mean, end of the COVID issue, but still a lot of legacy will be there. And some of this pro forma provisioning and I mean NPA and how it comes off, we'll have to wait for another quarter or 2. But in the present circumstances, it is definitely laudable. Sir, I got just one observation, just on the data point on the profit and loss statement, is that our taxation provision is very high as compared to any other bank. I mean it is growing almost about 45% if you look at the net profit numbers. So is there any reason that why our provision for taxation already so high? Are we making too many provisions which are not allowed under the income tax? Or how it has been calculated, sir? If somebody can throw some light on it.

No, no, no. It is only around 34%, in line with all other banks. It is not a very high provision. Only thing is we can go through the calculation a little more intricately.

Sir, if you look at your profit, sir, it is INR 9,582 crores, on which the provision is -- your tax provision is INR 4,521 crores. It comes to almost about 45% -- 42%, 43% -- 45%.

CFO, can you clarify?

And similarly for the 9 months also.

Yes. My CFO will clarify. CFO, yes, carry on, voice is available to him.

If you go through the issues, we are reversing the DTA, we are reversing. You can see the result. And some of the expenses, which are not additional, we have also accounted for. So according to debt, it is coming on the -- what you are suggesting.

There is a DTA reversal as well because we are -- slowly DTA components, which are becoming due for reversal also we are undertaking. That is why it is appearing. Otherwise, it is only as in line with other banks, it is around 34%, it comes. That's -- it is not very high.

All right, it includes DTA reversal also.

But it's not sudden -- yes. Correct.

If you go to your segment-wise results, sir, again, this treasury income has gone up like from INR 1, 582 crore to INR 2,500 -- INR 2,548 crore. Treasury income has gone up, has taken a big jump, whereas the corporate wholesale book has taken a hit of -- total is INR 1,469 crores. And there is a -- always retail banking also has come down to INR 612 crores as compared to INR 1,370 crores. So is there any -- I mean, reshuffling in the portfolio? I mean in the some of the categorization -- recategorization or it is actually...

No, no, no. See, major reason is interest rate reduction. Interest rates have gone down heavily in the last 6 months. The effect was more in Q3 and all the entire MSME portfolio we have converted to RLLR category, where the interest rates have gone down. So these are the reasons for reduction there. Treasury, like last time also I had given an indication to you. Q1, in the current financial year, we have earned INR 1,300 crores. Q2, we have earned INR 800 crores. Now in Q3, again INR 1,247 crores. In Q4, we expect around again, INR 800 crores. So based on the market position, we have been judiciously, what we call, trading in the book, whereby treasury profits have been there. So if you go through the consistency, H1, it was INR 2,100 crores. And in H2 in the first quarter, Q3, it is INR 1,247 crores and another INR 800 crores, we expect in Q4. So it is in line with our expectation in treasury.

And this is our future expectation is in spite of the recent hike, the jump in the bond yield, you expect the returns to be continue -- still going to be the same, the treasury income for the target?

Bond yield will taper off in next few days because RBI is coming with OMO. Even last time when the OMO came, it was to be finalized but they've scrapped on fifth only because the price which they got probably was not acceptable to RBI. Though we are aware that now it has gone up to 6.11%, 6.12%, 6.13%, but it will go down. We are expecting it to be tapered down with the intervention of Reserve Bank of India. So still, we have the, what you call, availability of profit within our HTM as well as AFS portfolio, but we will utilize to the extent of around INR 800 crores before March.

Okay. All right. Sir, now I come to the advances. Sir, our advances are still muted. And just like other banks, also, our focus is mainly on retail loans. How do you see your corporate in the book now going? Because with this budget, a lot of [indiscernible] have been built up. And a lot of government spending is also going to be there on the infrastructure and other thing, INR 5,54,000 crores of allocation for that. And the promoters also will be bringing in their own money also. So a huge investment is going to take place. And as you have seen, and the market also responded to the budget provisions. So do you want to -- I mean, give some kind of a big, strong advances growth target or something? Are you revisiting the previous things so that we can draw some conclusion on this?

See, in -- yes. In corporate credit, the demand has been very muted. No new investments were coming up. One is because of pandemic. Second, if you remember, tax reforms, government has brought over effective from 1st of October 2019. However, we are not seeing new investments. That is main reason. Though we are concentrating on retail and MSME, we are also focused on corporate credit. So what we are expecting is, overall, by March 2021, the credit growth would be around 4% year-on-year. Whereas at the end of December, our growth has been very muted at 1.5%, but we are expecting the disbursements to take place in the 2 months now, February and March. Thereby, our growth would be moderating to 4% by March 2021. With respect to '21-'22, like the government has come out with various measures in budget, they will be played out and everybody is expecting GDP also to grow anything between 10.5% to 11%. We also expect in PNB, the credit growth would be anything around 10% in '21-'22. So accordingly, we are planning and gearing up with respect to the capital as well.

Sir, last question in this round, what is your collection efficiency ratio in this December quarter?

See, collection efficiency up to November was 92%. December was a little muted. Now again, in January, it has improved. So we are expecting that in the next 2, 3 months, there is January, February, March, our collection efficiency goes beyond 94%.

Okay. So presently, for December whole quarter, it will be around 87%, 88%. Isn't it %?

Correct, correct, correct. 88% or 89% was the whole quarter ended December.

[Operator Instructions] We'll take the next question from Bunty Chawla.

Yes, am I audible, sir?

Yes.

Sir, I need your focus on Page 41 in the presentation. As we have shared, as of 31st December, we have INR 6,807 crores of COVID-19 benefit, out of which INR 2,347 crores has been already shifted to pro forma NPA, so rest amount remains is INR 4,460 crores. How one should see this number? Is it the part of restructure which you already announced, INR 12,000 crores? Or is it still a standard and could move into an NPA in Q4 if the Supreme Court direction is out of the picture? How should one see this?

As of 31st December, it was not NPA. It was the component where the -- whatever advantage of asset classification was provided to that in terms of RBI guideline. But because repayments have come in that category, it continues to be in standard category. So the INR 2,347 crores where recovery has not come based on the record of recovery, it has gone -- it has moved to pro forma NPA where we have done the provisioning. So these accounts of INR 4,460 crores, we expect that they will not slip into NPA. Some part may go out, but I have given the overall indication that the H2, we would like to control the first slippage at INR 12,000 crores. So within that, it will be subsumed.

And sir, we are maintaining 10% provision on that also?

Yes. Now in this account, also, we are maintaining the 10% provision in terms of the RBI guideline. So there won't be any legacy issue on P&L.

Yes. That was very helpful, sir. Secondly, as you have already highlighted, INR 12,000 crores of restructured assets, 10% of provision has already been done by 31st of December or some part is remaining? And secondly, on this also, how one should see going forward in FY '22 the fresh slippages achieved out of this restructure and on a normal basis?

See, in terms of onetime restructuring, the component, which is part of pro forma NPA, we have already provided a 15%. Now INR 1,206 crores is the amount where we have provided as of 31st December because we have invoked their yet-to-be restructured during the current quarter. So roughly around INR 1,000 crores would be the, what you call, impact the provision requirement in Q4 related to restructuring. But anyway, we'll be able to manage. That is why we did not keep any legacy related to pro forma NPA, where we have provided completely by December itself. Now with respect to how this restructured profile is going to play out in '21-'22, we'll have to wait and see. The reason is thoroughly after going through the accounts, only the restructuring is done. And within the restructuring as per the RBI guideline, the moratorium can be given maximum up to 2 years. So accordingly, when it is happening, I'm not expecting much of an area coming under NPA -- under stress during '21-'22, except in the category of MSME and retail, these are the components where we may see some of the accounts missing. For example, in personal loan category, invocation is done to the extent of INR 2,000 crores. And another INR 2,000 crores I'm expecting in MSME, already INR 968 crores is restructured, maybe another INR 1,000. So out of this INR 4,000 crores, there could be anything around INR 1,500 crores to INR 2,000 crores, which may slip in '21-'22, overall in the year. In corporate book, I don't expect because we'll be taking care properly after getting the RP for rating and also undertaking the, what you call, moratorium applicable under restructuring. Since we will be doing that, we don't expect to be under stress immediately.

That was very helpful, sir. Thirdly, on the COVID provision, if I -- on the balance sheet, if I move the standard assets, which is minimal requirement, and you've already done the restructure against the -- provisioning against the restructure. And so can you share the number -- COVID provisioning, if you can say, separately stood on the balance sheet as of 31st December 2020? If you can share that number.

That is Page #41, INR 446 crores is COVID provision. Page #42, INR 2,304 crores is related to pro forma NPA and Page #43 gives you completely the entire provision held under standard category amounting to INR 3,041crores, including the derecognized interest of INR 431 crores.

Okay, sir, okay. Lastly, sir, if you can share the SMA-0, -1, -2 number? How it has moved as of December and if you compare with the pre-COVID level? So if you can share that comparison, that will be very helpful. That's it from my side.

SMA-0 -1 -2, it will not be very clear for us to discuss at this point of time because the pro forma NPA has already been there because of the Supreme Court judgment, that is why in Page #39, we have given the stress asset book comprising fresh slippage, then total slippage in 9 months, what we are invoked figure, pro forma NPA and total stress we have given you there, INR 26,382 crores in Page #39. SMA-0, -1 and -2 in the last 6 months may appear to be very high, which we are concentrating for collection efficiency. The more appropriate figure would be once we calculate that at the end of March because it's an ongoing exercise. Postpandemic problem has been there. While we were declaring the figures earlier in Q1 and Q2, in Q3, it would be difficult because we have not identified properly, the NPA itself. That is the reason why we did not give the figures, but more appropriate figures will be available by the end of March.

But that was, sir, very helpful. I truly agree that number could be not correct to see. But if you can share just the pre-COVID number if I need to see how that number has been pre-COVID level? If you can say just that number.

At the end of June, our SMA-2 was INR 15,000 crores, if you remember. That was almost pre-COVID figure only, even though 3 months into COVID. That is the range generally we carry in the combined position in SMA-2, anything between INR 10,000 crores to INR 15,000 crores. It was in Q2 when we declared it was INR 19,000 crore. In Q3, it was a little high than vertical, a little higher than that, but we did not give the figure because it give understanding -- distort the position of understanding since we have already given the pro forma NPA, which otherwise should have become NPA.

[Operator Instructions] The next question we'll take, Vignesh.

Am I audible?

Yes, you're audible. Go ahead.

Okay, okay. Sir, congratulations for your numbers. Sir, I want to ask, you recently launched a QIP. But it didn't get full -- or it didn't get fully subscribed. Sir, can you tell me what is the reason?

No, on the contrary, I will still -- I've got INR 3,788 crores. The reason is we are very bold to come...

But you launched INR 7,000 crores, no?

No, no, no. We were very bold to come to the market and declare that we want INR 7,000 crores. Other than State Bank of India, have you seen any bank coming with such a large QIP? Because we wanted to indicate the market that we have that kind of an appetite. And we have coined that QIP into 2 parts, INR 3,500 crores with greenshoe of INR 3,500 crores. Now I got INR 3,788 crores, more than the issue signed, then immediately we have closed that. So it is not correct to say that it is -- it did not get fully subscribed. I do agree that greenshoe option, money has not come, but it was a bold statement from PNB, indicating that we have a large amount of appetite for QIP and boldly, we have gone into the market, even though some of the investors have advised us that you can go for INR 4,000 crores or INR 3,000 crores. Because we don't want to have a second-thinking in that. That was the reason why we came to the market. So it has been very successful INR 3,788 crores, we have got it, and we are even contemplating for the remaining amount at the appropriate time.

[Operator Instructions]

Sir, I want to ask -- I have seen your list of investors of QIP. Sir, LIC is there. No big like foreign investors. Why they are not trusting the bank and their numbers? Sir, how could you -- investors -- so how could you motivate to invest in PNB? There is a lot of confidence problem in PNB. Can you please tell me?

I don't see any problem in PNB. Probably it is the perception. So we will have to erase that perception. We can erase the perception only through consistent performance of PNB. PNB has been performing consistently in the current financial year, which in the beginning of the financial year also, we've indicated that we will have moderate profit in 2021 and moderate profit by making the provisions very high level by increasing the, what you call, provision coverage ratio. Accordingly, in Q1, we declared a profit of INR 323 crores. Q2, we declared a profit of INR 623 crores. And Q3 we declared a profit of INR 506 crores, and our guidance of INR 2,000 crores profit for the entire year will remain. With respect to gross NPA, consistently, we have reduced. With respect to net NPA, consistently, we have reduced. With respect to provisioning coverage ratio, consistently, we have increased. So for the investors, it's not only that we'll be speaking to them, but more than speaking to them, we need to deliver in terms of the performance. Then only the perception will increase. Now I cannot ask somebody why you're thinking that PNB's perception is wrong. It is for him to have a perception. But our endeavors will be to erase. Coming back to the list of investors, out of INR 3,788 crores what we have taken, LIC has invested only INR 1,500 crores and all other banks, commercial banks and otherwise, their investment is only roughly INR 270 crores or INR 300 crores. So out of that, if you imagine more than INR 2,000 crores has come from investors only. There could be foreign investors, there could be other investors. So foreign institutional investors have invested almost 43% in that. So I don't see any reason why people think that there is still a negative perception on PNB. Even if it is there, our endeavors will be to talk to them regularly and display our performance so that, that will erase the perception.

We'll take the next question from Rahul Nandwani.

Yes, sir. In terms of a recovery, what kind of recoveries are you seeing next quarter or possibly in the next 6 months from your big NCLT accounts or probably say even Dewan and any other big NCLT account?

See, in the next, what you call, 3 months, that is in Q4 of the current financial year, we have marked around 17 accounts under NCLT with a cash recovery of INR 3,727 crores, debt reduction of INR 9,400 crores. INR 9,450 crores, debt will be reduced and INR 3,727 crores will be the cash recovery out of 17 NCLT accounts. This does not include DHFL. DHFL, we may expect a recovery of around INR 1,600 crores or INR 1,700 crores because our exposure is INR 3,688 crores in that account. However, since formalities are there before everything is completed, we have not properly accounted in Q4. It could come in Q4 and it could come in Q1 of the next financial year. Other than NCLT, we also have an expectation of recovery in NPA accounts, cash equity of more than INR 3,000 crores. Roughly every quarter, we clock INR 3,000 crores. But postpandemic, December has been very slow, even September as well. But we are seeing good amount of movement in the current quarter. So accordingly, our anticipation is, there could be around INR 2,500 crores to INR 3,000 crores of cash recovery other than in NCLT cases.

Okay. Sure. Sure, sir. Sir, on your collection efficiency, what kind of trends are you seeing on that collection efficiency?

Collection efficiency this quarter should be much better. Up to November, it was around 91%, 92%. By quarter ended December, it moderated to 88%, 89%. Now once again, we anticipate it could go up to 94% during the current quarter.

Sir, versus your peer banks, let's say, even private banks or SBI, their collection efficiency was closer to 97% or so. So why is it lower for us?

It is only 2%, 3%. See, I've given an estimate to you. During the current quarter, it could be higher than that. But as far as December was concerned, 92% we achieved up to November. In December, it was a little less. As a result, it moderated to 88% to 89%. So we are expecting it to be much better in the current quarter.

Okay. Sure, sure. And lastly, sir, on your SMA-1, -2 book, how is that book trending, SMA-1, -2?

As I indicated earlier also, it would not be appropriate for me to discuss on SMA-1 -- -0, -1 and -2 because pro forma NPA, we have already given the figure, restructuring figure also we have given. Reason is it is a postpandemic situation. And the Supreme Court judgment also has impacted the recovery. As a result, it would be appropriate for us to estimate the figures at the end of March. That is why we've not given. Otherwise, quarter-wise, our generally SMA-2 stands at INR 15,000 crores to INR 16,000 crores. Q1, it was INR 15,000 crores, Q2 it was INR 19,000 crores. So Q3, we did not come up because pro forma NPA was there.

[Operator Instructions] There seems to be no response. We'll go to the -- yes, so meanwhile, sir, we'll take a few questions from the chat, which has come up. First is the, sir, breakup of the pro forma slippages for 9 months into retail, agri, corporate.

That I think we had given already on. One minute. [Foreign Language] See, pro forma NPA, INR 12,919 crores. Sector-wise, if you look at in agriculture, it is INR 2,182 crores; MSME, INR 6,049 crores; retail, INR 2,798 crores; and the others, INR 1,890 crores. Sponsor, could you get it?

Yes, sir, I got it. And second is, sir, on staff cost, have we done the full adjustment on bipartite settlement? How should we see the fourth quarter, next quarter, staff cost, assuming you will still maintain?

No, we are not -- there's no requirement now. As far as bipartite settlement is concerned, we have done fully. Normally, yes, 15 what comes every quarter only will come in the next quarter.

Sure. And there is a question on amalgamation. How many branches is still to be rationalized or identified for rationalization? What would be the OpEx cost for next year?

We have identified 500 branches for rationalization. Over 275 branches have already been approved. We're going to switch -- more than 50 branches have been merged. Remaining will be merged within 3 months' time. Because after we give the decision, it takes 3 months for giving notice and merging the, what you call, database of the branches where we are doing. So by March end, we will complete 275 branches merger. And by June, the remaining 225. So overall, 500 branches we have identified and merged -- they will be merged. Those licenses will be used to open branches in different locations where business potential is there. More importantly, southern part of the country and western part of the country.

[Operator Instructions] The next question is from [ Thakson Bonn ].

Am I audible?

Yes, you are audible.

Sir, if I heard you correctly in your opening remarks, you said you're planning to raise INR 25 billion from the market before March 2021. Is that correct?

Absolutely right. That is in AT-1 bonds.

Okay. That is from the AT-1 bonds. Okay. And sir, I missed the provision coverage that you mentioned on the restructured book. Can you please repeat that?

Restructured book what? No, I had given a stress book there which contains the restructured category under OTR. Normal restructured advances, we have given in the presentation, Page #38, but stress book is fresh slippage, that is INR 2,433 crores; OTR invoked, INR 11,030 crores; pro forma NPA, INR 12,919 crores. Overall is INR 26,382 crores, against which we have either provided 15% or 10%. Only in invoked category, those restructured 10% is provided. There is still INR 1,000 crores provision required to be done in Q4 for the accounts which are invoked but restructuring needs to be completed during Q4.

Understood. So for invoked, there is 10% provisions only that you have made, right?

Yes.

Overall, in our presentation, Page #43, we have INR 3,041 crores provision we are holding, already done as of 31st December.

Got it. And sir, could you please repeat the pro forma slippage breakup that you gave? I missed that. If you could kindly repeat that?

Yes. It is totaling INR 12,919 crores, comprising agriculture, INR 2,182 crores; MSME INR 6,049 crores; retail, INR 2,798 crores; and others, INR 1,890 crores.

Am I audible, sir?

Yes, you are audible.

So sir, as you have said that the SMA-2 numbers maybe are not the right proxy to look at, at this current point of time. But if you can just give us a sense on the SMA-2 number, even excluding the pro forma NPA. Or in the other way, so let's say, you are saying that your collection efficiency is 94%. I mean you are expecting for maybe the next -- this quarter, which is Q4. So let's say, the rest, 6% will be your -- basically the overdue book, right? So out of which, there will be a significant portion on the SMA-2 number? Am I right, sir?

Correct, correct. So if you calculate that way, it comes to around INR 15,000 crores to INR 16,000 crores. See, that is why I did not indicate. Difficult because pro forma NPA is INR 12,000 crores, OTR we have seen around INR 11,000 crores. In OTR, everything is not, what you call, NPA or pro forma NPA, majority is standard only, but some of them could be in SMA-2 because we have invoked. That is why I indicated that it will not be a proper figure at the end of December because some account is invoked, it has to be standard. And while we implement the restructuring, the amount -- recovery has to come, but it could be SMA-1, SMA-2. So these figures will not be properly playing out until we complete the process of restructuring and identification. That is why I said March figure would be much better. However, going by what you've indicated of logic regarding collection efficiency and removing these figures, so SMA-2, generally, in our book, it is around INR 15,000 crores to INR 16,000 crores.

Right. Right. Got it, sir. My next question is, sir, on the Slide #40 and Slide #38. So the MSME restructuring, what you have given on Slide #40, is there any overlap with the already MSME restructured book, which is around INR 30 billion or roughly INR 3,000 crore, which is mentioned in the...

No, no, there's no overlap.

Okay. So this is -- this INR 968 crores...

See, INR 968 crores is specifically restructured during the Q3, particularly under that -- after the first COVID, whereas the restructured book, Page #38 indicates about the window of MSME being open from 1st of January 2019 for the restructured.

Right. Right. Got it. And my last question is, sir, any view on the subsidiary monetization? Any expectation on that front?

See, in case of [ UKMC ] we've already monetized, 3% stake we sold, and we got INR 167 crores of profit. Noncore assets, in terms of real estate, we have already identified. INR 500 crores realization we are expecting before June. We have already initiated the process of auction. We'll have to wait and see how the response is coming, but we are looking at around INR 500 crores of monetization by June 2021.

Any expectation on, sir, PNB MetLife?

No, PNB MetLife is a nonlisted entity. Currently, we have 30% there. Similarly, Choli is Canara HSBC Oriental Bank of Commerce insurance company, we have a 23% stake. That is also unlisted. So in order to have a better understanding of the investment value, they should go for listing first. So they probably are contemplating for the same. Once they are listed only, we will think on those lines. But currently, we continue to hold 30% there and 23% here in both the insurance companies.

We'll take the next question from Jayant.

Sir, I just had one question. On the INR 19,000 crore SMA-2 book, which you mentioned in Q2, a, does that make up only INR 5 crores and above corporate accounts or retail and MSME also? And b, would that have any of the restructured or pro forma NPA?

No, no, Q2 figure of INR 19,000 crore is everything. It is not related to INR 5 crores and above. Q1 also, when we have given INR 15,000 crores figure, that was covering all the accounts. So now this stress is played out in Q3 in terms of pro forma NPA, when I had given the details, majority is from RAM only retail, agriculture and, what you call, MSME. Out of INR 12,919 crores, the other category, our corporate category is only INR 1,890 crores. So in corporate, in the restructuring OTR book, INR 9,000 crores is already reserved for restructuring, where -- up to 31st of December. So if you look at the combination of all these things, the current position in SMA-2 will be played out by 31st March in a proper manner. Did I answer your query?

Yes. Sir, actually I was asking that in the Q2 number, what part of that Q2 number would include the pro forma NPA and the restructured?

Almost major. The reason is INR 6,000 crores in Q2 is part of the pro forma NPA. And there are few accounts on the corporate which are coming to OTR. So account-to-account mapping, we have not done, but that is the major account. And remaining accounts we have recovered the money. There may continue to be Q2 -- continue to be SMA-2, some of them.

So only INR 6,000 crore was part of that?

INR 6,600 crores to be exact. Actually, if you go through retail and MSME in the INR 19,000 crores, this figure was almost around INR 8,000 crores. So that is the composition. I don't exactly remember. We'll have to see. I'll just tell you, I'm having the booklet.

INR 10,000 crores. Around INR 10,000 crores.

INR 10,000 crores. Q2, SMA-2 what we had given is INR 19,137 crores. Out of that, MSME itself is INR 6,600 crores and retail is INR 3,371 crores. That means INR 10,000 crores of the composition from retail and MSME and majority part, either it's coming OTR or a pro forma NPA currently.

We'll take the next question from Abhijeet.

The first question is on Bhushan and DHFL. What are the pending issues which are causing delays?

Which one, which one?

On Bhushan and DHFL recovery.

Bhushan is only because Supreme Court has not given the judgment so far. There is a, what you call -- the hearing is over, but then it is held for judgment. However, judgment not coming forward does not hinder the process of settlement if the party has to pay the money. So in the JLF, already discussions have taken place. We expect the money to be received before 31st March. So at this point of time, I don't see any legal reason for a delay in terms of Bhushan Power. With respect to DHFL, there is a process. In the process, RBI approval is required, and the NCLT has to approve after we submit to the NCLT. So these 2 processes may take 45 days to 60 days. That is why we did not return. It could happen before 31st March or it could happen somewhere in the first -- Q1 of the next financial year.

Okay. Sir, second one was have we received the amount disbursed under the ECLGS?

Yes, we have done around INR 14,000 crores. We have done sanctions. INR 11,000 crores is the disbursement.

Okay. And any plans to invest money in PNB Housing over the next few quarters or next year?

No, that intention, we are already in the public domain. We have taken approval from the Board and we requested RBI. We await RBI's approval. Anything around INR 500 crores, we are looking at for investment there. But that has already been in the public domain for quite some time. Probably RBI was also looking at whether PNB has the capability. Now that we have gone to the market, taken INR 4,000 crores in Tier 2, INR 500 crores in AT-1, INR 3,788 crores in Tier 1 -- what you call, QIP. We have announced our capital by going to the market, to a greater extent. That is why our capital adequacy ratio stood at 13.88%. So we await the clearance -- final clearance from RBI.

Sure. Sir, last question is, what is the share of reporting book as percentage of overall book?

That we've already indicated, around 18%, if I remember exactly. For -- wait. [Foreign Language] The percentage, 13% -- 13.33%.

And that's still largely base rate?

Which one?

The rest of book is currently level, yes?

MCLR is 45%. RLLR is 13.33% and there is a base rate also from 10% is there. So altogether, 100%. So RLLR, we have around 13.33%. And foreign currency and others 11.56%.

The next question will be again have -- is a follow-up from Mr. Jayant.

Actually, I just wanted last quarter you'd given a number of the loans that have not paid any EMI as on date. That number was around 4.5% last quarter. What has that number trended to?

No, once again, that number will be distorted, no, because pro forma NPA is there and then OTR is there. So that is why we did not call out those figures, SMA-2, SMA-0, SMA-1 and that kind of figure because it was not giving any definitive understanding because of these kind of various calculations of carving out the amount under pro forma NPA and OTR. So the better position would be by March, we'll come to know about everything. See, if you want to take the figure, it is INR 3,418 crores where no installment has been paid.

And just one follow-up. On the pro forma NPA number, what was the movement this quarter?

Pro forma NPA.

Pro forma NPA, what is that?

The movement this quarter, sir, Q2 versus Q3, what was the accretion?

Q2 versus Q3. No, Q3, that is what, INR 12,919 crores, what we have indicated is at the end of Q3. And out of that even, we have received a recovery in current, what you call, month. Some of the accounts may not be in that pro forma NPA. That's why I was indicating overall in H2, INR 12,000 crores will be the expected fresh slippage, overall together in H2. Though in H2, currently in Q3 itself, it appears to be INR 12,919 crores.

So this pro forma NPA number at the end of last quarter was how much?

INR 12,919 crores, 12 9 1 9.

Last of December.

That is 31st December. If you're talking about Q2, it was INR 3,300 crores, which we already mentioned in the booklet.

We'll move to the next question from Abhijeet.

No, I'm sorry. I was done.

So the next question is from Mahrukh.

Sir, I had a couple of questions. Firstly, that the restructuring amount that you have given, that is purely standard, right? It doesn't include any pro forma GNPA, right? The INR 12,000 crores of...

No, it includes...

No, that will be -- it includes that we have taken under pro forma NPA also, for example, I'll tell you. If you look in Page #43, provision on OTR implemented on 31/12 in personal and other segment at 10% on INR 238 crores and MSME segment, 5% on INR 1,026 crores. These 2 categories are nothing but pro forma NPA.

Okay. So can you tell me the exact amount of restructuring overlapping with pro forma NPA?

One minute.

INR 11,998 crores is the restructuring. So how much of that overlaps with pro forma NPLs?

The pro forma NPA is, sir, out of OTR is INR 2,160 crores.

2 1 6 0.

2 1 6 0, exactly.

Okay. Got it, sir. Sir, my other question is that if you see the 9-month NPL, it's running much higher than INR 10,000 crores, including pro forma, of course, including pro forma. So INR 124 billion is the pro forma itself. And then you have debit to existing accounts and other slippages for the first 3 quarters. So if you add all that up, it's around INR 180 billion, whereas our guidance for the whole year is INR 100 billion. So are you expecting such a sharp pullback in the fourth quarter? Is recovery going to be that very strong?

No, no, no. See, while I agree with you that for guidance, which was given almost at the end of Q2 or even around -- at the end of Q1 was INR 10,000 crores, during the month of August when we interacted, at the time I had given. But subsequently, we have moderated because of the restructuring and the other Supreme Court judgment getting elongated. But in H2, we will have INR 12,000 crores to take, so we will stick to that. Fresh slippage in H2...

So what is it now?

No, currently, in H2 itself is now INR 13,000 crores -- sorry, Q3 itself is INR 13,000 crores. So overall in H2, we are confident that it will remain at INR 12,000 crores.

Oh, so really lower than 3Q?

Correct, lower than Q3.

Okay. So Q3 is at around INR 125 billion, but total of Q3 plus Q4 will be INR 130 billion, something like that?

Correct.

Okay, sir. Sir, and my other question is, there -- if you see the pro forma slippage, there is a fair bit of slippage in agri and MSME. So why had that happened? Why had that...

No, major area of concern is only that area because Supreme Court judgment got delayed, there has been a, what you call, thinking in the minds of the people that nothing will become NPA. With continuous follow-up in the retail category and MSME category only we could get recoveries. Originally, the figures were huge in month of December. During the December because of collections only it has come down, though the collection was a little impacted. In large corporate segment, there is a clear awareness, even if the judgment is delayed, they will have tough time if they don't pay the money. That is the reason why the impact is more there in retail MSME. But in the current month, there has been a lot of improvement. From that only confidence I'm indicating to you that the overall slippage in the H2 will be controlled.

Got it, sir. Sir, and because of these farming agitations, is there going to be any impact on slippage in 4Q, especially in the agri segment?

It is an area of concern, definitely, but the repayment is due in the month of June, generally, in agriculture. So whatever was due by December, some of them, what you call, we could not get recovery. That is why INR 2,182 crores is appearing in the pro forma NPA. We'll have to wait and see how it, what you call, turns out.

There will be a fair bit of repayments due in the March quarter, correct, sir?

Not very high, not very high. Generally, the repayments in agriculture come in June and December.

June and December, okay, sir. Got it. And sir, if you could give us -- I know that the corporates, there's not too much stress. But if you could give a flavor of what -- how many very large accounts are under corporate restructuring? And any hint on the sector they are in?

Only in -- see, if you look at 1 group or 1 big account, it is only, if I remember, INR 900-crores-odd future retail. Any other account, is there, bigger than that?

I'm afraid not, there is not.

There is not, there isn't.

Future Group is the main group.

Yes, main. Out of, see, INR 9,000 crores comprising 71 or 73 accounts and individual group account is only -- highest is INR 980 crores or INR 970 crores belonging to this Future Group.

Got it. And sir, what is the...

The other accounts, INR 400 crore, INR 500 crore. Yes, please?

Got it, sir. And sir, what about Srei, as in it's obviously standout because of the court judgment, but which -- where does this account move now? If the...

See, INR 2,600 crores, our exposure is there in both the accounts, that is Srei Infrastructure and Srei Equipment Finance. We closely watch that. Equipment Finance is a better-placed account rather than Infrastructure. There is NCLT judgment not to identify that account as an NPA. So it is under close watch but in any case, we'll have to wait and see, but we are counting on that to probably slip into the category.

[indiscernible]

Yes. And because of the NCLT case, the recovery which is coming is held in escrow account that is yet to be distributed. So these vertical particulars will be known by March end. However, we are counting on them as a account under stress.

Before I move to next question, there's 1 or 2 questions from chat. One is the reason for higher agri GNPA in third quarter. I think you had mentioned that, but if you can repeat.

You're talking to me?

Yes, sir, there is a question as to why is the...

What I told is gross NPA has come down to 12.99%. Net has come down to 4.4% -- 4.04%. However, pro forma NPA is not counted in NPA. That is the reason why in the notes on accounts, we mentioned that our gross NPA and net NPA would have been so and so, so and so had the pro forma NPA been identified. And that figure is plus 14% in gross NPA and net is around 4-point...

5.65%. 5.65%, sir.

5.65%. Overall, our guidance will be, we are confident of controlling gross NPA below 14% and net NPA below 5% by March 2021. That is what even I have indicated at the end of Q2 itself.

Right. Sir, there is a question, sir, as to why is the agri slippages high in this quarter? And what can be the near-term agri slippages from the fourth quarter perspective?

No, that is because -- the recovery is not forthcoming. See, the recovery culture has been initiated to certain extent by, what you call, this debt revival. And even though they said certain state governments have promised to pay the money to the banks, the money entirety has not come. Though without, what you call, remarking anything negatively, for example, a state like Madhya Pradesh, they have finalized everything, but the money has not come to the bank. So residual portion of the account is NPA. Similarly, there are other state governments. That is one reason. Second reason is because of this farmers' agitation and then Supreme Court judgment not coming forth, it has also vitiated. That is the reason why this slippage in pro forma NPA is INR 2,182 crores in agriculture.

Right, sir. There's a question on the expected credit cost less provisioning for fourth quarter and FY '22?

Right. The credit cost in Q3, we have indicated 2.02%. But in reality, if you count the provisioning, what we have done in pro forma NPA and bring it under NPA provision, the credit cost would go to 2.5%, which the indication I had given earlier as well that up to March '21, the credit cost will remain in the range between 2.25% to 2.5%. That is what is the guidance we had given earlier also. In year '21-'22, it could be anything between 1.25% to 1.5%.

Right. And there is a question, sir, from BB and below book, out of INR 41,465 crores of BB below book, is there any PSU exposure where you are not worried? What is the outlook on this book?

Just one minute. BB and below is around INR 41,465 crores at the end of December.

Unrated government account is INR 10,615 crores.

Unrated, we have around INR 45,000 crores. Out of that, government accounts are INR 10,615 crores where guarantee is there. They are not unrated. Is it clear? Or any other detail you wanted?

No, no, I think, sir, so out of unrated, INR 10,000 crore is the sovereign/PSU, right?

Correct. Correct. Correct.

And anything in BB and below book, sir? And what is the outlook there?

BB and below is only because the pandemic the rating downgrade has taken place. But outlook, we don't have much of a concern in that area. In fact, if you look at out of the INR 41,465 crores, there are certain accounts which are already under NPA. For example, INR 8,900 crores is an NBFC category. Out of that, INR 4,637 crores is already under NPA. So NPA figures are also included in that.

C- and D-rated.

C- and D-rated. C- and D-rated, there are 30 accounts amounting to INR 4,455 crores. So that is the only area of concern for us.

And sir, just to -- on SME, sir, just to reconfirm, I mean, that is my question, just to reconfirm. So SMA-2, if I were to exclude pro -- first is the SMA-2 number that we disclosed is for all ticket size?

Correct.

Okay. And excluding the pro forma slippages, and potential restructuring, if I were to exclude both pro forma slippages and potential restructuring under OTR, that number is INR 15,000 crores. Is that right? Or there's some further basis?

Yes, correct, correct. It could be around INR 15,000 crores roughly.

Sure, sir. All right. Okay, sir. And we have -- we'll move to the last 2 questions. [Operator Instructions]

Can you hear me?

Yes, I can hear you. Please.

Sir, this question is about capital raise. You mentioned that you are planning to raise INR 2,500 crores of AT-1. Are you also planning to raise some equity capital now?

See, QIP, out of INR 7,000 crores, once we have taken the approval, we have taken from the market INR 3,788 crores. So there is still INR 3,200 crores left. We will definitely go to the market at the appropriate time. Our approvals are valid as of today.

Could you throw some light...

Yes, tell me.

Okay. Okay. No, I was just thinking like you raised QIP, you're planning to raise AT-1. So what is that?

See, we have taken approval of INR 14,000 crores from the Board, which is valid as on today. Out of INR 14,000 crores, AT-1 is INR 3,000 crores, Tier 2 is INR 4,000 and INR 7,000 QIP. Tier 2, INR 4,000 crores, already, we have taken in 3 tranches ending November. And AT-1, out of INR 3,000 crores, we have risen INR 500 crores. INR 2,500 crores, we'll be definitely taking before March. With respect to QIP, against INR 7,000 crores, we have taken INR 3,788 crores from the market. With respect to the residual INR 3,200 crores-plus amount, we'll wait for an appropriate time to come to the market again because approvals are valid as on today. We don't have to do anything, except engaging with the investors and BRLMs and move into the market. Otherwise, we are adequately capitalized, our capital was 13.88% at the end of December. So it can take care of not only the regulatory requirement but also growth capital required for '21-'22 as well.

[Operator Instructions] And meanwhile, sir, there is a question in the chat that the book value that we have shown is 1 book value is INR 53, and there is the 2 book values, which is INR 53 and INR 79. What is the difference?

Correct. Correct.

Intangible because of the tangible, we have taken a total.

One is included the DTA, another is excluded the DTA.

Correct. Deferred tax assets, we have excluded and brought the book value for INR 56 -- INR 53.

Right. Thank you, sir. We don't have any response from the participant. Yes, so at this point of time, we'll conclude the session. I request you to, sir -- I would request you to give a concluding remark. Good day, everyone, and have a good day. Yes.

Right. Thank you very much. The concluding remarks are that under the pandemic of circumstances, it has been really tough for every bank, if you have seen, particularly the public sector space, because majority of the lending, if you look at where MSME or otherwise, it happens at the public sector space only. So we have seen the tough times. However, the guidance -- kind of guidance what we had given in the beginning of the financial year of 2021, we are able to stick to that in terms of profitability, in terms of increasing the provisioning coverage ratio, in terms of maintaining the asset quality at proper level. The only challenge what we have faced is related to credit growth. Even if you look at commercial banks, they have grown at a little over 6%, whereas our growth by December has been only 1.5%. That is the only area of concern, which we are confident of overcoming in the current, what you call, quarter. However, during the same period, we had additional challenge of amalgamation of 2 banks with us. And accordingly, database migration we have completed for both the banks by December itself. So the resources, consultation on that area, assimilating all the 2 banks and creating a 1 bank with a completely revamped organization structure were also challenges for us, but we have achieved them, overcome them, everything by December itself in terms of technology integration as well. So we see Q4 as a springboard for increasing the vertical business, both in credit and deposits. But deposits is not a worry because we carry around INR 30,000 crores of liquidity continuously. That is the reason why we were not conscious in getting term deposits while our CASA has grown by 6% and savings has grown by more than 8%, 8.5%, which is a healthy concern. That ultimately has brought down the cost of deposits. So in performance parameters, a lot of positives in the last 9 months. And even asset quality has improved, control has come on the ratios. Profitability has also improved. Except one factor where our credit growth has been flat at 1.5% year-on-year, all other parameters have been good, which credit growth also, we would like to see 4% growth at least by March 2021 year-on-year. So with these concluding remarks, I thank every one of you who have participated and the B&K Securities as well. We look forward to any further interaction required from your side. Thank you.

Thank you, sir. On behalf of Batlivala & Karani Securities, we thank PNB bank management for giving us the opportunity to host the call. Thank you, everyone, and have a good day.

Thank you.