Punjab National Bank (PNB) Earnings Call Transcript & Summary

Thank you, [ Maki ]. Good afternoon, everyone, and thanks for joining the call. On behalf of Batlivala & Karani Securities, we welcome you to Punjab National Bank 3Q FY '22 Post-Trading Conference Call. We have with us today the management team of Punjab National Bank represented by Mr. S.S. Mallikarjuna Rao, MD and CEO; Mr. Atul Kumar Goel, the Special Officer on Duty; Mr. Sanjay Kumar, Executive Director; Mr. Vijay Dube, Executive Director; Mr. S.K. Saha, Executive Director; Mr. Kalyan Kumar, Executive Director; and other senior officers of the bank. I would now request MD and CEO, sir, to start the call with his opening remarks on 3Q FY '22 results, post which, we will start the Q&A session. Thank you, and over to you, sir.

Right. Good afternoon once again. I'm Mallikarjuna Rao here. I have with me Mr. Atul Goel, who is the MD designate who will be taking charge from 1st of February. Now, with respect to the results, what we have declared yesterday, for the quarter ended 31st December, I would like to just give you the key highlights. Our operating profit has improved by 26.24% on a quarter-on-quarter basis. Net interest income has increased by 22.8% on a quarter-on-quarter basis. Global net interest margin has improved by 54 bps to 2.93% in Q3 FY '22 compared to 2.39% in Q2 FY '22. Cost-to-income ratio has also improved by 660 bps to 51.67% in Q3 over Q2. Fee based income increased by 10.2%. The return on equity improved by 7 basis points. Gross NPA stood at 12.88%. That is a reduction of 75 bps sequentially on quarter-on-quarter compared to September '21. Net NPA stood at 4.9%, that is a reduction of 59 bps compared with the position as on September '21. Provision coverage ratio, excluding TWO, has improved by 200 basis points to 65.17% in December '21 compared to September '21. Capital reconciliation has improved to 14.91%. Now here, I'm using the word really clearly improvement. I would like to give you what is a little more clarification here. The capital reconciliation stood in September was 15.20%. As you are aware, the pension liability, because of the new guideline earlier, for the banks, RBI has permitted them to amortize over a period of 5 years. Accordingly, our overall liability has been INR 3,000 crores -- INR 3,070 crores or INR 3,060 crores, out of which INR 150 crores are already debited to P&L. Remaining amount has been what you can kept for amortization in the next 4, 5 years. However, here, the entire amount is required to be allocated for the capital when taking the capital reconciliation. So roughly around 34 to 36 basis points are the ones which are allocated here. If you look at adjusting the figure of 34 basis points to 14.91%, it was 15.25%, there is an improvement over what was there at this September. Second, retail credit has grown by 7.7%. Agri has grown by 6.2%. These are all year-on-year. MSME has grown by 4.1%. Domestic CASA share stood at 45.65%. There's an improvement of 99 basis points. Savings have grown by 8.76% year-on-year. CASA has grown by 7.59% year-on-year. And further, in terms of the efficiency ratio as well, there has been an improvement in terms of lien, in terms of cash on deposits and other ratios. The growth within the retail also we have seen a good amount of growth in housing loans, vehicle loans, personal loans and gold loans. Composition of RAM has also increased from 51.8% to 54.3% at the end of December '21, 250 bps year-on-year basis. In terms of government regulatory-related planned sector lending, all the requirements under regulatory have been met by us. In terms of profitability, the improvements you will observe on a quarter-on-quarter basis. In terms of year-on-year basis, there has been a, what is a reduction in terms of net interest income as well as operating profit, predominantly because in December, the NPA identification December of 2020, NPA identification was not there for a period of 9 months. NPA was identified only in the month of March, as a result of which we accumulated a position because of the interest, what you call, recognition and other things. The position was elevated at that time. Though we have made provision, it was a provision under standard. But income was recognized, so INR 28,000 crores of NPA has become in March '21 because of that reason. So that -- if you look at consideration, the comparative position is better represented on quarter-on-quarter basis. With respect to asset quality, in absolute terms as well, gross NPA stood at INR 97,259 crores as against INR 1,000,291 crores. In terms of net NPA as well, it has come down to INR 33,879 crores as against INR 36,934 crores, besides the reduction in the NPA ratios. We are very confident that the NPA ratios further will be reduced by March 2022 and even March 2023. In the current GLP of consolidated concerned, even compared with the loan, we are very confident it will come down below 12%. And in case of 4.9%, we are expecting at the very conservative level is less than 4.5%. In fact, our ambition will be to bring it below 4% by March '22 itself. In terms of March '23, further improvement will be there. There are many new areas which in terms of [ real ] transfer [ to India or CL ] or otherwise, they have not taken place. Even if something happens before March, it could be only TWO calls. But in realistic sense, more and more accounts could be transferred in the next financial year. There have been a lot of initiatives we have taken in terms of digitalization as well, and even fintech-related activities, particularly [indiscernible], we've entered into arrangement with 4 companies. And as of today, even though traction is not there, but we are expecting a good amount of traction to move forward because we have done these things very recently. In terms of fintech usage for digital lending, which also we have tested on a pilot basis in the last 4 to 5 months. And we have reviewed in terms of the parameters determinable for preapproved lending, that also we are expecting the traction to move up much better in the current quarter, but much more visible in the next financial year. These are the, what you call, preliminary observations from my side. In terms of the quarterly results, what we have declared. Now I'll be open for the questions from your side. Thank you.

[Operator Instructions] We have our first question from the line of Mahrukh Adajania, an analyst.

So my first question is on your credit cost. Why has it resumed sequentially?

Why are we present sequentially means?

Why has it increased sequentially?

That is because we have done additional provisions in some of the NPA accounts.

Okay. So that's aging based only?

No, much more than what is required from a regulatory perspective.

Got it, sir. Sir, the second...

I need to be clear in one accord, we have provided very high. That is what it comes, 3 accounts.

So you made extra provisions that...

Extra provisions there, even though it is not required as per regulatory.

Got it. So what would be your total provisioning on share right now?

70%.

Okay. So that's one of the highest.

Yes.

And sir, the other question is what would be your outlook on loan growth? So we are seeing good traction this quarter, but going ahead?

Correct. You're absolutely right. If you look at the quarter-on-quarter growth, it was at 2.66%, which is much better if you compare with any other quarter in the past. This is because last time also, if you remember, when I've spoken in the analyst week, we have created a good pipeline of sanctions. It is just a matter of time for disbursement. In fact, this 2.66% also, to a certain extent, is muted because Air India the amount in the last week of December, we have received INR 4,000 crores in the standard category, what we call [ rippling ]. As a result, it is muted to that extent. Otherwise, the growth would have been little bit even better, and the pipeline is still there. As a result, our confidence is around 6% growth at the end of March '22. By March '23, it could be anything around between 8% to 10% [ currently that we have in savings ].

Got it. Sir, what is your outlook specifically on MSME? Because a lot of state-owned banks now are becoming, again -- have lent a lot to the MSME sector again in this quarter. And we heard that there were some MSME schemes also. So while COVID would have impacted this sector, why is there a fresh round of lending aggression there again?

No. First line of lending, if you intrinsically look at that, majority is only emergency line of credit. Even in our case, also around INR 19,000 crores as of today has been sanctioned in the last 1.5 years under the emergency line of credit to MSME. And that is a very important input for the MSME because they are going through tough times because of the COVID. With respect to stress in this segment, if you look at under OTR, under OTR-1 and OTR-2, the restructuring profile of our bank has not been very high. It is together around INR 18,000 crores. And even if we look at understanding whether any amount of slippage has been there, it is also not very high, maximum is INR 1,000 cores to INR 1,100 crores is the slippage overall. In this quarter, it was only INR 500 crores from the OTR-1. So majority of lending to MSME incremental has happened through emergency line of credit where government guarantee is available. And not only that, there also the existing borrowers where the units are working. With respect to normal lending to MSME, there are green shoots where opportunities are there. But it has not been very aggressive as of today. If you look at our growth, it was only 4% growth in MSME, 4.1% growth. But it can be much better in the next few quarters to come, because investment by the private party in large corporate will also create impetus for ancillary industries and MSME impact.

Got it, sir. Sir, just in terms of asset quality, you did mention that you received INR 4,000 crores Air India. So would that be all or is the entire amount now received? And how much provision did you reverse there? And even in terms of future, that is classified still as SMA-2?

Which one?

Future.

Future. Okay. So as far as Air India is concerned, INR 4,000 crores received in December, and the residual amount of INR 900 crores received during the current month. So now it stands without any outstanding balance. It is 0 from the Air India side [indiscernible] has taken over the account from what you call Government of India. So provision [indiscernible] has been there to the extent of around INR 400 crores in terms of Air India, more so in terms of the interest recognition.

Interest recognition. Okay. And future?

Together, it is -- 1 minute, together, how much?

INR 1,100 crores.

INR 1,100 crores.

That's because it was still funded, plus the meaningful provision.

Provision and interest recovery together impacted around INR 1,100 crores.

Okay. So INR 400 crores has gone...

INR 400 crores in interest reversal, INR 400 crores in interest recognition and the remaining in the provision reversal.

Got it. And sir, what is the status of future retail?

Future retail, it is standard as of today because it's a restructured account. But we are waiting for this situation. Now they may default in terms of payments. They've approached the court intervention. We'll wait and see. If required, that is not a very big -- huge outstanding. It is around INR 980 crores, which we can take either way. There won't be any problem. And in case it was to become NPA, we can do that in the month of March, and we can even provide adequately. 20% is already in net provision.

[Operator Instructions] We have our next question from the line of Dave from [ Hauspa ] Securities.

I want to ask you regarding this increase in gross NPA of around INR 4,000 crores. Is that INR 97,000 crores minus INR 94,000 crores, if I'm not mistaken. So what did -- led the increase in this quarter suddenly?

There is no increase. Where is the figure of INR 94,000 crores? INR 97,000 crores is [ true ] figure. Earlier figure was INR 1 lakh.

No, that was in the earlier quarter. I mean sequentially, earlier quarter, the October quarter, right, September quarter?

INR 1 lakh -- INR 1,00,291 crores.

INR 1,00,291 crores, right. So sequentially, I mean...

It has come down to INR 97,000 crores.

INR 97,259 crores.

If you are looking at year-on-year -- are you looking at year-on-year?

No, sequentially. I'm talking about this sequentially, October...

It has come down.

Yes. Year-on-year also come down?

No. No, year-on-year what you're telling is INR 94,779 crores, or even INR 97,000 crores. You need to be referring to March results where accumulation of 9 months NPA identification because of Supreme Court judgment has happened where the NPA accretion was around INR 25,000 crores, INR 28,000 crores, [ special region ]. That was the reason. That is why December '21 is not comparable. Sequentially, later on, if you look at [ it has been adjusted in NPA ].

Of course, of course. And the extra INR 500 crores provision you declared on that NPA, right, you have provided for. This schedule, you have provided any notes of accounts, the schedule -- in the schedule of notes of accounts, you have shown the breakup that the INR 500-plus crores has been provided excess. So that there the excess portion is related to that SC -- Supreme Court judgment?

No, no, no. Supreme Court judgment has come in March only. And that metric closes there, already NPA has been identified. Extra provisioning is related to different factors, for example. As I've indicated earlier, we have done extra provisioning in terms of Srei account. Even though the requirement is lower, we have made additional provision. And currently, the provision coverage is 70% in terms of that account. So wherever there is a requirement, we have provided additionally much more than what is the regulatory requirement. If you're reading the notes on accounts of December '20, you may be finding this figure. This INR 500 crores for the extra provisioning only for the sake of our pro forma NPA. But not now, it is not related to December '21.

We have the next question from the line of [indiscernible].

Congratulations on the wonderful numbers. What I wanted to ask you is how much of your NPAs have you transferred to NARCL? And how much are you planning to in the near future as in by Q4 FY '22 and '23?

See, so far, we have not answered anything because NARCL is able to take share. Originally, identified it was roughly around INR 8,000 crores, out of which more than INR 7,500 crores was totally written off accounts, TWO accounts. However, after scrutiny by the NARCL and discussion IBA had with various banks, this amount will be transferred for them into our pre-tranche, since pre-tranche could be anything around INR 2,200 crores to INR 2,300 crores, and the next tranche will be little more than INR 4,000 to INR 5,000 crores, and the remaining out of the INR 8,000 crores will be transferred mid first tranche. There is a delay in functioning because of anticipation of final approval from RBI. We are also waiting for the same. Once it happens, these transfers of the money can take place, though the amount of transfer will not impact the balance sheet because they're under TWO. However, there can be a positive impact on the profitability. There is on the amount of what we receive in this cash component of 15%.

We have the next question from the line of Aditya Ranjan Pattanayak from HCL Capital.

[indiscernible] how you distribute now, your [indiscernible] asset allocation.

Voice is not clear. We are unable to understand.

Right now, it is clear.

It is clear, but it is reverberating. You can continue. Let me see how I can understand.

Okay. My question, how are your asset allocation in the distribution because we're currently near around 90% and above -- or above 90% now, below triple asset class. So there is...

No, I'm not able to understand what you're talking to. Are you talking about rating? Okay, INR 100 crores and above, we have given the details to you. INR 100 crores and above, we have given the vertical details in the presentation at Page 11. At BBB and above it is 91.92%; and the BB and below, it is 5.86%. Ungraded, it is 2.22%. That is the status which we have indicated. Any further...

[ That 1% ] increase in this quarter-on-quarter, do you think that how you increase or do you increase further? Or you [indiscernible]?

No increase. What increase. That is better rated, 91%. It is because our consciously considering only AAA category and AA category, that is the reason why you will find this. In AA margin it will increase, AAA also marginal increase, but the better increase was there in EA. The reason is that we have reduced our exposure in BBB and below, as a result of which you have found that difference. So there is a qualitative increase in terms of the higher-rated advances, about INR 100 crores. And this will improve further as well.

We have the next question from the line of Sneha from Subhkam Ventures.

Two questions from my side. Just wanted to know, considering how do you see the overall credit cost from here on? Second question is, what is the outlook on the asset quality? Basically, what is your guidance on the slippages as well as how much we are expecting recoveries and upgrade going ahead?

Right. See, regarding overall credit costs, if you look at currently, we don't have any bigger stack to become NPA from the corporate segment. Only from RAM segment, whatever is coming is coming. However, we wanted to strengthen the balance sheet effectively if there is an opportunity for increasing the provisioning. If you look at technically as well, the credit costs remaining for 9 months at 1.72 at the end of December could have been lower as well if you look at provision requirements only complying to the regulatory position. However, we have done additional provisioning. As a result, credit cost appears to be high in NPA accounts. But in reality, it was with an approach of strengthening the balance sheet, particularly where we have given Srei where we increased the provision up to 70%. Even we will do 100% by March depending upon the availability. Even at that time, it appears to be higher provisioning in the NPA category, wherever substantive requirement is there. But overall, if you look at our guidance, we'll remain 1.5%, because we are very confident that the control on slippages will be there. If you observe the slippage control, slippage, first slippage is also from March '21 onwards. In June, it was more than INR 8,800 crores. In September, it was INR 6,800 crores. Whereas now it is around INR 3,800 crores. So there has been a very good improvement in asset quality. Collections improvement has been there. So our guidance will remain around 1.5 in terms of the credit cost. So what was your second question?

Asset quality.

Asset quality is improving. And you must have seen in terms of the percentage improvement in gross NPA as well as net NPA, 12.18% gross NPA. We are very confident at the conservative level by March '22, to bring it down below 12% -- below 11%, how much is it now, 11.88%?

12.88%.

12.88%. It will be below 12%. And in case of net NPA as well, currently is at 4.9%. It could be -- even we can try for below 4%, even though the conservative target could be below 4.5%. Because we are seeing a good amount of credit growth, good amount of recovery, as a result of which there will be an impact on the gross and net NPA in a downward overall outstanding. And '22, '23 also will be very good in terms of controlling the, what you call, gross or net NPA ratios as well as improving the asset quality.

Okay. Sir, when you mentioned about the growth, which growth is coming from the [indiscernible] segments, sir?

Yes, all segments may. Generally, you see quarter-to-quarter, there may be a shift here and there. Particularly for the December quarter, there has been a shift towards RAM segment, that is where the composition of RAM has improved to 54% from 51% year-on-year. In the month of October, we have launched a campaign of 6 -- particularly 6 segment, particularly on RAM segment: retail, MSME and agriculture, by identifying certain clusters for MSME growth. So even though the growth percentage is 4.1%, there has been a good amount of recovery, as well as a result of which the fresh sanctions are muted. We have done even what you call emergency line of credits in MSME sanctions. Corporate also, we have grown well, we have sanctioned very well. But because of pressure of interest rate, some of the outstandings have been shifted from one bank to the other. And also, there has been a recovery during the month of December to the extent of INR 67,000 crores unexpected in terms of the corporate, including the, what you call Air India, which has a little reduced the outstanding of the corporate. Otherwise, as a big bank, large bank, we look at every segment to grow, or that is great delivery to happen in every segment.

How do you see the overall treasury income moving from here and considering the yields remain elevated from your...

It will be reduced definitely, if you look at treasury income has gone down [ 4.2 ] year-on-year. In the current year also, it has come down. September '21 it was around INR 748 crores, and the December number is INR 614 crores. So it will remain -- if you even closely adopt our revenue from it [indiscernible] get in the presentation. As per RBI guidance from HTM, we can sell up to 5%. That is like an available amount, which we did not do that. We have only used up to 1.4%. Still there is 3.6% available, which we will do in the next quarter. So in the current quarter, even in March quarter as well, we are confident of [indiscernible] a little over INR 500 crores to INR 600 crores in treasury. But in the next few months to come, few quarters to come our next financial year, it will be muted. It will not be as valued what we were earning in the last 1.5 years because of firming up of the vertical interest rates. Nevertheless, even we will have a control on MTM as well.

Okay. And how do you see the overall margins to the timing considering the other goods for the retailers for this mix for the current calendar year?

Margins -- net interest margin has been under stress in the last 1.5 years because of the high liquidity, pushing the interest rates low on credit. Commensurate reduction did not take place. Simply deposit was the main reason across the banking industry and still there is no exception. So coming for the future, if you look at in December, we've improved our NIM to December quarter in isolation to 2.92%. Whereas overall, it remained at 2.68%, what you call globally, and domestically 2.75%. So by March also, our NIM will be more than 2.75% overall. That is at the minimum level what we are looking at. But in the next year, definitely, there will be an improvement. We would have been very happy to touch around 2.9% to 2.95%, which we can do it in the next year. Because we had a very tough time during the last 1.5 years in terms of pressure on interest rates, which is slowly easing out because of RBI's policy of sucking the liquidity and firming up in the market in terms of demand [ rates ].

Okay. And sir, last question is considering the growth. Any plans to raise capital going ahead?

There is no requirement. If you look at our capital at the end of September, it was 16.2%. As of March, it was 14.91%, but I have given an explanation whereupon 34 basis points were allocated further unamortized the figure of our pension liability. As a result of vis-à-vis the capital allocation, our capital ratio appears 14.91%; however in reality it could have been 15.25%. Even if the approval, what we have taken from the Board for raising INR 6,000 crores from the market, we have already done that. Two of those were from Tier 2 and further was from 81 bonds we have taken from the market. So as of now, even for initiating the credit growth between 8% to 10% during year 2022, '23, the capital that we currently have is more than sufficient.

And your view on any expectations on the budget?

Budget, I don't think capital allocation is one area that is probably [indiscernible] required. Because of particularly the [ zero ] coupon capital what they have given, where RBI has come out by reducing the net present value, as a result of fixed capital equity has come down to a couple of banks. In those cases, probably government may support. That is from the capital perspective. From otherwise banking perspective, I don't think any specific vertical announcement could be there in the budget. But budget should -- what we expected might continue on the decisions and declarations what they have done in the earlier budget related to allocation for infrastructure in terms of port segment, the aviation segment and the road segment. And also, there are green shoots where probably private investment could come in industries, which did not happen even after tax reforms that have come from first of October 2019. So this will give opportunity for increase the investment in industry as a result ancillary and MSME, as a result, job creation. So the challenge in front of the government, I believe, which is even eloquently discussed in the public domain, is job creation. Probably they will be concentrating more on that area during this budget.

Okay, okay. Any value on the restructure book that some of the accounts are slipping into the [ NCAs ]?

No, we don't have. I believe if you look at the restructuring book itself, is very low in our bank compared to our debt outstanding. It is around INR 18,000 crores, both together OTR-1 and OTR-2. And so far, cumulatively, there has been a slippage of INR 1,200 crores. And in this quarter, it is only around INR 500 crores. We don't have really large concern in that area. Collections have improved, units are doing well.

We have the next question from the line of Shashank Verma from Axis Mutual Fund.

I had a couple of questions. First, on this SMA-2, what will be the number for less than INR 5 crore accounts, sir, less than INR 5 crores?

It is around INR 14,000 crores.

Okay. Because last quarter, this number used to be, I think, INR 7,500 crores. So...

No, no, no. It was high. And also the last time, INR 7,500 is more than INR 5 crores. Here today, there is INR 11,300 crores.

Yes, because of Air India. Okay.

Indicated to you in Air India as well.

One thing, sir, on your notes to your account, there's this restructuring of MSME advances under that Feb '20 circular. The amount seems to have reduced from INR 2,700-odd crores to INR 1,200-odd crores. What will this reduction be on account of?

No. Some of the vertical amount could be because of identification of NPA, and some of them we have invoked but then not implemented.

Okay. So this amount either would have slipped or would be included in -- I mean this would have slipped, right? Because -- or it would have come back, is what you are saying?

No, that's the amount. If you're looking at an MSME, what you call perspective, the slippage overall has been only [ INR 765 crores ] in the entire year. If you look at for the current quarter, it is around what we can see, INR 300 crores.

Sir, one last question from my side, on this ECLGS. So last, you said that the number is INR 19,000-odd crores today. I think that was 14 -- sorry, Correct me if I'm wrong. And this was INR 14,000 crores last quarter, will -- I mean is it done now? Or I mean is there something else which needs to be pending for implementation, et cetera?

No, no, no. There's no personnel implementation because in GECL, it is a matter of sanction and disbursement. So INR 19,000 crores overall are one net. Overall disbursement is around INR 16,000 crores. And the sanction is INR 19,114 crores. So recently, if you look at various industry representatives have represented to RBI for the extension of this time, we'll have to wait and see. Otherwise, it is a good profile. Existing accounts where units are running, they needed the support which we have extended. As you rightly said, last time, it was INR 14,000 crores.

We have the next question from the line of Abhijeet Sakhare from Kotak Securities.

So first one is again a clarification on SMA-2. If I recall, you said ex Air India, that number was INR 12,000 crores as of second quarter. And you just said that, that number is now INR 14,000 crores. So has it actually increased, excluding Air India?

No, it has decreased, it has decreased. The amount was high last time also when we have given to you, it was level INR 5 crores only. Including Air India, it was almost INR 7,000 or INR 8,000 crores at that time.

No, I was talking about the accounts, including accounts less than INR 5 crores.

I do agree. That is what I'm saying. There's no increase in the reduction. Earlier, it was much higher to that. Total figure, if you look at -- 1 minute, and I will give you SMA-2. December '21 is INR 19,537 crores, including everything that is compared the INR 5 crores and above and INR 5 crores and below. And as well in September, it was INR 27,000 crores.

INR 27,000 crores.

Yes, there is a reduction of INR 8,000 crores. And in there also, where the collections have improved, if you look at the real slippage, it was very low at the end of December. So going forward, by March, this figure will be further reduced.

Understood. The second question is on lending rates. We have an exhibit on the breakup across MCLR reporting loans. So what would be the average lending rates across these different benchmarks?

Different benchmarks. That data I'll have to check and give it to you properly. Okay, 1 minute. No, he is asking for the average rate in each benchmark. We haven't calibrated that. We are lower overall, but then we can come back to you on this. We'll look at -- in each category, for example, BPLR, MCLR, RLLR, this category.

7.1% on an overall basis.

Correct.

What I was looking for is, let's say, how much higher is MPLR versus let's say [indiscernible], on the average?

One other thing is you can average, just get some weighted average regarding the composition. But then we will calculate and then come back to you.

[indiscernible] the highest amount in the computation.

So if you look at the percentage, it is very high in terms of the MCLR at 44.7%.

Right.

In the composition.

Yes. Okay, understood. And sir, on this one, is it possible to know what's the incremental lending rate that we are doing on the corporate side in the last couple of quarters?

Incremental lending rate at the corporate side is very low at this point of time. So at least it is better in the last 1 month because, in December, when RBS started at VRRR, the price at which we were getting the rate when we are putting money with RBI was 4 point -- 3.97, so that has bettered the position. Now still a lot of improvement in record we are expecting that beyond after February, there would be a better improvement in the minimum level of lending for the incremental towards the corporate.

But do you expect that the transition from CLR away from MCLR would still put pressure on the overall lending rates even if the overall system lending rates continue to go up?

It will [indiscernible] high liquidity has got very [ unwieldy ] competition, and we shifted towards other benchmark, even other than RLLR, for example, GSEC-based and then delivery-based. Those rates are lower compared to the rates offered in MCLR and RLLR. So we shifted towards that has been what you call high if you compare even from March '21 onwards. So I expect this to continue for some more time. When the liquidity gets renewed, all those things will get backtracked. Then we will also be very careful in offering the rates under [ KB-led activity linked ] and then recycling.

Understood. The last question is, are we expecting any sizable recoveries on the corporate side in the next few quarters?

No, not very bigger accounts are there, except that today where we are -- our average export is around INR 2,800 crores, but we don't know when. It will take some time. But fintech is one case where we are expecting recovery, our exposure investment is roughly around...

INR 1,200 crores.

INR 1,200 crores in that account.

[indiscernible] 50%.

And we can get a good amount of recovery, which is in the final stages. Our anticipation in NCLT is roughly around INR 1,000 crores recovery before March. And a non-NCLT mid-corporate segment around INR 2,000 crores, and the general recovery involving RAM and other things, around INR 2,000 crores. So overall, INR 5,000 crores, which we are expecting by March '22, that is in Q4.

We have the next question from the line of [ Rahul Jain ].

I have 2 questions. So one, sir, what will be your outstanding nonspecific provisions as on December? Second is on the restructuring. So what is the outstanding restructure book, including COVID 1.2, 2.0 MSME and any other restructuring? And also on the slippages strength, can you give us the breakup of segment and slippages in the PPT. You have shown the press slippages breakup. But for overall, including the debit in existing NPA accounts, what will the total segment will take up?

Okay. Coming to nonspecific provisioning, it is not very high because what we were provisioning is standard advances and restructured standard advances and the standard advances where the resolution is to take place in terms of our guidance, [indiscernible] quite the [indiscernible] provisions. If for now, there is a provision that serves them other than the regulatory requirement [indiscernible] what we have done like I already indicated in [indiscernible]. Today we have increased the provision. There are a couple of accounts where we have increased the provision much more than required so that we can protect the balance sheet in a better manner in terms of the recoveries, which we focus in those accounts. So non-NPA category specific provision other than these categories is not there. Then what was the other question you asked? Restructured book is already -- I've indicated to you, 17,854, including OTR-1 and OTR-2. OTR-1 is INR 5,892 crores and OTR-2 INR 11,862 crores.

We have the next question from the line of [ Ankit Bansal ].

My question is, sir, what are your targets of net NPA and gross NPA for Q4 and for the whole year?

Q4, it should be less than 12% for gross NPA. And for net NPA, very aggressively, less than 4%.

Okay. Sir, my next question will be -- sir, what I'm seeing your results and seeing overall growth, sir, but the shareholder value is not increasing. So what steps are you taking to increase the shareholder value, their positivity, company net [indiscernible]? How could you keep the positivity of shareholders in the PMV?

Right. See, 50% of the answer to your question lies with you only and 50% with me. The reason is the more and more analytical understanding of our results and the kind of confidence shown by the analysts will get percolated into the market for any impetus and positivity to be created. Second reason was the public sector space share market has been topsy-turvy in the last for many, what you call, months, more than 1, 2 years. Except probably there are 3 scripts, State Bank of India, Bank of Baroda and Canara Bank, in the last 1.5 years, there has been some stability in terms of the price, frankly, what you call, admitting it for you. Now coming to the role of ours, we will be working very hard and support because it is not that we have not worked very hard. There were occasions where our price has moderated very well, even it has gone across INR 50 at some point of time in the last 6 months, but again, it has come down. So the kind of negative legacy which we have inherited from 2017, '18 onwards, we are working towards shedding that very consciously, but it is taking time. Now if you look at -- clearly analyze the balance sheet, we don't have many skeletons in the Board. And the large corporate segment, we are not seeing any slippages. Growth has been very steady. Capital, we have improved over a period of time. Now we have the capability to lend, even to grow at 8% to 10% time. So I expect that in '22, '23, the growth is expected -- the share market price also would improve. The most important thing is when you talk about higher NPA, at the same time, it is an advantage for us that we can show a good amount of recovery with 85 -- 82% of provision coverage ratio, including TWO, and more than 60% the recoveries will go towards increasing the profitability. So some areas we would like to embark on talking to the people by showing the results so that we can improve the market price. If you look at the guidance, what we have given in the last 1.5 years, in terms of profitability in other areas, we have achieved that. 2021, we gave a guidance of INR 2,000 crores we have done. '21, '22, we gave a guidance of profitability, profit between INR 4,000 crores to INR 5,000 crores. Already for 9 months, we have achieved INR 3,250 crores and our profit could be even more than INR 4,000 crores and touching INR 5,000 crores by March. So we are achieving what we are giving the guidance. It's just a tough analytical understanding of our balance sheet and positivity coming into the market. 50% are more on the analyst side and what you call on our side as well, whatever responsibility is that, we'll take it for that.

We have the next question from the line of Jai Mundhra from Batlivala & Karani Securities.

I have 2, a couple of questions, sir. First is on ECLGS. So the quantum has increased by around -- if I look at quarter-on-quarter, it has increased rather sharply by around 30% to this number that we have shown in the presentation. Is it fair to assume that you have given loans to the people who -- I mean because the scheme was liberalized, so ECLGS 1.0, it was extended by 1 more year and you could have disbursed additionally 10%. So I mean a large proportion would have gone there. Is this the right understanding?

No, I don't like to subscribe to the view that it is liberalized. It is more [ canvass ] has been increased. More coverage has come. Earlier, some of the people generally requiring the GECL were not eligible. If you look at successfully GECL 1.0, 2.0, 3.0 and 4.0, it is more of covering -- more and more what I call MSME borrowers rather than liberalizing the determining factors for selecting them. So that way, the amount of sanctions, what we have increased is more attributable to what we call GECL -- what you call [ canvass ] in covering more records. For example, this tourism industry and then other industry where -- and even the amount of the ongoing INR 50 crores, INR 100 crores, these are all the reasons why we have engaged. Quality is very good. Absolutely there is no problem.

Okay. Understood. And second, sir, I mean you had given the total of restructuring book of around INR 17,850 crores.

Correct.

If you have -- this breakup into corporate, retail, agri and MSME, maybe if you have that breakup, [ maybe ]?

In just for Tier 1, it was INR 5,892 crores overall, which comprises INR 652 crores from MSME category and the corporate category is INR 4,777 crores. Personnel was INR 459 crores and others were INR 4 crores. That is related to OTR-1. And in terms of OTR-2, it is personnel INR 4,933 crores, small business INR 1,056 crores; MSME, INR 5,873 crores; whereas corporate was none during OTR-2. So total for OTR-2 was INR 11,862 crores, OTR-1 was INR 5,892 crores. If you want to, what we call combined figure, corporate remains INR 4,777 crores, MSME is 5,000 -- INR 6,400 crores. Personnel segment is INR 5,400 crores. Small business is around INR 1,100 crores. That is the position.

Right. And sir, if I were to include this MSME in Feb -- I mean the earlier scheme of MSME, it is over and above this, right?

Absolutely, that was INR 4,500 crores. Overall, before OTR-1, the restructuring what we have done in MSME, if I remember exactly, it is INR 4,500 crores.

Right. But that number has come down, right? I mean that number...

You're right, it has come down.

So whatever is outstanding, I should be just adding on top of this number?

Correct, correct.

Right. And there is no erstwhile SDR for those accounts, right?

No, nothing is there.

Because -- okay, sure. And sir, have you completed the divergence exercise for this financial year because -- or sorry, previous financial year? And is there any...

March '21, there has to be the report. But March '20 is already done.

No, no, March '21, sir.

'21, there has to be the report. So I don't expect anything. We don't expect anything. Even in case of one account, we're [indiscernible].

Okay. Understood. Because the other -- I mean one bank had shown, IDBA had shown some divergence in their -- I mean they have reported some NPA in their divergence.

I must not have received the report. We are [indiscernible]

Correct. Okay, okay. And any -- sir, do we have breakup of the slippages, like INR 2,000 crores or INR 2,400 crores kind of slippages? How much is core...

That is retail, 7 lakh, 4 crores. Agriculture, 9 lakh 3, MSME, INR 1,480 crores and other INR 344 crores.

Sorry. So other is 430, right?

No, no, 344, 3-4-4.

Okay. And retail is 709?

Yes, agriculture is 900, retail is 700. And 1,480 -- roughly INR 1,500 crores is the estimate.

Sure. Sure. Okay, sir. And last question, sir, if I see your AFS duration, right? It looks like the presentation -- in the presentation, it looks like your AFS duration has gone up versus last quarter. So I just wanted to check, in the probably likely hardening yield environment, why would you want to position that way? It looks like -- or is this right reading, or no, because...

Currently, investment profile, [indiscernible] is around INR 10 crores. Every 1 bps hike in the interest rate impact will be around INR 10 crores.

Okay. If I look at Slide 14, where you have given the AFS and HFT duration, from 2.38 it has become 2.71, right? So...

Correct.

And your AFS has also increased slightly. So would this be a very aggressive treasury stance in case -- depending on whatever happens to the rate? You have made your portfolio more aggressive that -- in that one, whichever way the cycle turns.

No. If you look at here, there is one difference in -- for example, when the interest reduction scenario when you are booking the profit, you may not be acquiring the assets at this point of time, considering that it may not be viable. Whereas when the rates are firming up, you may look at an opportunity for acquiring. So it could be a balance factor, which would have come to represent the position of 2.71% from 2.38%. But it is not a trend. What I would like to say is this is not a trend.

[indiscernible] hike in interest.

No, there is a duration of [indiscernible]. What is the duration.

We have the next question from the line of Ashok Ajmera from Ajcon Global Services.

Congratulations and compliments to you, Mr. Mallikarjuna, as a signing of you have given the excellent rate of the numbers as we were very much disappointed during the last quarter. I think the results were not up to the expectation. But this time, there's a lot of improvement on the overall operating profit side, net profit side, provisioning, improvement in the asset quality. So my compliments to you. And we welcome the new MD and CEO coming in from 1st of February, Atul-ji, and all the best to you. Sir, having said that, I have got some -- one is that small data number calculation. If you look at our advanced figures, it is INR 6 lakh, 92,807 in the balance sheet. And your advances total is INR 7 lakh, 55,306. So if you take out the non-provided figures between the gap between the gross NPA and net NPA, then there is a difference of INR 880 crores. Can I know in which account this INR 880 crores is lying, or...

But how you are calculating 6 92? Our advance is 7 lakh, 55,306.

Yes, yes. What I'm telling, that INR 6,92,807 crores in your balance sheet is one such figure. The cost provision in balance sheet, that is [indiscernible] -- sir, let me give the numbers. The difference between the gross NPA, net NPA, INR 63,379 crores, so it becomes a total of INR 7,56,186 crores which should be your advances number. But it is INR 7,55,306 crores, so there is a gap of INR 880 crores.

We'll look at that immediately. I'm not able to get the point. However we look at, what calculation you have done, we'll just verify that, how it could be a gap of INR 880 crores.

Okay, sir. Because point is very clear. Yes, the gap between the gross NPA and net NPA, and the balance sheet advances to be added, and that should be your advances figures. But anyway, this is -- I leave it for the calculation and coming back, somebody CFO, Mr. Dilip Jain can come back to me on that. Sir, I also have an observation that when the amortization of the revision of the family pension you have done as per the RBI rule of only providing INR 619 crores and leaving the balance of INR 2,475 crores. What was the need for the auditor to put it as an emphasis matter? Because that way, there are many circulars of RBI. And if they are provided for properly, the provisions are followed. There is no need of any emphasis on that particular point.

What happens, generally, these people follow how the results are declared for other banks. If in any other bank they show it as an emphasis matter, they will also increase. It is like an innocuous observation because it is absolutely a dispensation given by the RBI.

Yes, of course. Some banks like Elara Bank has provided for the entire 5 years in this year only, this quarter only. So that's a different thing.

Correct.

But even if you have followed -- anyway, this is also another point for this year too.

We've taken note of this then. In fact, what better -- what we have decided this time is to provide for the NPA accounts in a higher level rather than required, that is what we have done. But in the days to come or months to come, quarters to come, if it permits, we will do aggressively vertical allocation from the even this pension liability as well, though we may not keep for 5 years at this concession, given by RBI.

Sir, I have no problem with you are providing lesser [indiscernible], as per RBI. Only my -- I'm also a chartered accountant. If you followed something as per RBI circular, there is no need for emphasis on that particular point.

Correct, correct.

That is my point. You are asking the -- another, why transfer NPA to a transfer of INR 2,421 crores where then the reversal of the provision of INR 860 crores, isn't it? What is the total reversal in this quarter overall of the provisions on any such account?

[indiscernible]

There is a drop in the aviation advances from, I think, INR 6,462 crores to INR 1,883 crores. This drop is...

INR 4,000 crores has been paid.

Yes, fully paid. Okay. All right, sir. That is a good clarification. Sir, looking at your advances growth trend, the advances of the NBFCs are growing INR 89,000 crores to INR 92,000 crores. And also you are going into the, I think, a little bit of the real estate sector. Whether this trend is going to continue. You have still -- out of your pictorial allocation, something is still available for NBFCs today?

No. NBFCs, our growth has been strictly in AAA and AA category. Whatever incremental we have given from INR 89,000 crores to INR 92,000 crores was in the AAA and AA category. We were very conscious of that. See, in NBFC always potential is available, but we are very careful in moving, what you call, in terms of the exposure. When our loan book is overall increasing the percentage-wise NBFC also increases. There are other segments where we are looking for opportunities for lending, which will happen.

Point well taken, sir. Certainly you, in Srei, you have done the, I think, a provision for almost about 70% now, 40 plus 30. Is there any specific reason? Because do you feel that the recoveries will not be even 30%, 40% or 50% [indiscernible]?

No, no, no. That is not the reason. That is not the reason. The reason is providing this, once it is settled, we'll get it right back. If you look at many of the accounts where we do provide 100%, instead of waiting for the RBI aging process, we earn them earlier than that. It has nothing to do with the expected recovery in the account. We always want to have write-back once the settlement takes place.

Okay. Sir, let me sir on the SR, INR 1,767 crores of SR under the various categories and rated and finally, some figure is non-rated because beyond certain years, you won't require rating. How much provision have you made against this SR?

It is close to 90%.

90% basis provision.

How much, sir?

2017 onward, entire SRs have been fully provided for. And earlier to that, close to 88% have been provided for. Overall, it's roughly around 90%.

Overall, it comes to 90%.

Okay. That's great, sir. Sir, on the profitability front, on the segment-wise, if you see, sir, your treasury has given the profit of INR 2,023 crores, the income, treasury income. And the trading profit is INR 614 crores. And even if you take even the last quarter also of INR 2,441 crores and INR 1,049 crores of dealing, trading profit, it only amounts to about 2.77% to 3.37% on the amount invested on the treasury, which is INR 3 lakh 79,761. So do you feel that this kind of -- between 2.75% to 3.3% from the treasury is a good enough amount, and the money to remain invested into the treasury asset?

Mr. Ajmera, you have not taken into account the interest on investment also. Interest on investment and trading profit, both taken, you have to arrive at the return on investment. You are taking the trading profit in isolation.

No. And also the income from treasury?

Yes. You have to add -- out of our interest income, you should take interest on investment. And then...

What would be the total on the INR 3 lakh, 79,000.

The return on treasury is 6.24%.

6.24%.

Ladies and gentlemen, that was our last question. I now hand the conference over to Mr. Suraj Das for closing comments.

Thank you. On behalf of Batlivala & Karani Securities, we thank Punjab National Bank management for giving us the opportunity to host the call. Thank you, everyone. Have a good day.

Thank you. Thank you very much.

Thank you. On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Yes, thank you.