Punjab National Bank (PNB) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to Punjab National Bank Q4 FY '25 Earnings Conference Call hosted by Elara Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Palak Shah. Thank you, and over to you, ma'am.

Yes. Hello, everyone, and welcome to Q4 FY '25 Earnings Conference Call of Punjab National Bank. Today, we have with us the entire management of Punjab National Bank headed by Mr. Ashok Chandra, MD and CEO; Mr. Kalyan Kumar, Executive Director; Mr. M. Paramasivam, Executive Director; Mr. Bibhu Prasad Mahapatra, Executive Director; and Mr. D. Surendran, Executive Director. With this brief introduction, I would like to hand over the call to Mr. Ajay Singh, General Manager, to read out the disclaimer statement, post which, MD will address the conference call. Thank you, and over to you, sir.

Good afternoon, everybody. The disclaimer, this presentation contains certain forward-looking statements apart from historical information. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Punjab National Bank undertakes no obligation to update forward-looking statements to reflect events or circumstances after the present date. Thank you.

Good afternoon. I am Ashok Chandra, MD and the CEO of Punjab National Bank. I will just give a snapshot of our performance for financial year '24-'25. First, I will touch the business performance. Global gross business of the bank stood at INR 26.83 trillion as of March '25, with a yearly growth rate of 14%. The global gross deposit stood at INR 15.66 trillion with a Y-o-Y growth rate of 14.4%, and global advances stood at INR 11.17 trillion with a growth rate of 13.6%. We are well above our guide for deposit as well as the credit growth rate, which was 9% to 10% for deposit and 11% to 12% for credit. CD ratio of the bank is at comfortable level at 71.28% as on March '25. Profitability performance. Coming to the profitability numbers, the net interest income stood at INR 42,782 crores with a Y-o-Y growth of 6.7% for financial year '24-'25. NII has reflected marginal dip in Q4 on account of immediate impact of policy rate cuts on asset side. Our domestic NIM is at 3.08% for financial year '25, whereas the global NIM stood at 2.93%. We are in line with our guidance for NIM at 2.9% to 3% for financial year '24-'25. The operating profit for the financial year '24-'25 is INR 26,831 crores, which has improved from INR 24,931 crores in financial year '23-'24 with a growth rate of 7.6%. Our quarterly operating profit is INR 6,776 crores, which has improved from INR 6,416 crores in the same period last year with a growth rate of 5.6%. The net profit for the financial year '24-'25 is INR 16,630 crores, recording a Y-o-Y growth of 101.7% compared to FY '23-'24 at INR 8,245 crores. For the March quarter, net profit stood at INR 4,567 crores against the INR 3,010 crores in Q4 '24-'25 with a Y-o-Y growth rate of 51.7%. Key ratios, return on assets stood at 1.02% for Q4 financial year '25 and 0.97% for financial year '25, achieving the guidance for financial year '25. Return on equity is 19.23% for Q4 financial year '25 and 19.33% for FY '25. Highlights of our asset quality. Bank has done very well under the entire NPA management and the -- preventing the fresh slippages. As far as asset quality is concerned, our gross NPA has reduced from 5.73% in March '24 to 3.95% in March '25. Similarly, the net NPA percentage, which was 0.73% in March '24 has improved to 0.40% in March '25. Guidance for net NPA was below 0.5% for '24-'25, and we have crossed that guidance. The PCR of 95.39% in March '24 was improved to 96.82% in March '25, which is well above our guidance of more than 95% for FY '25. Total fresh slippages during FY '25 was INR 6,761 crores and INR 3,001 crores in Q4. Our guidance for slippages ratio remain below 1% in FY 2025. We are within the guidance, and it is at 0.73%. The total recovery stood at INR 4,733 crore for Q4 2025 and INR 14,336 crores for FY 2025. The credit cost stood at 0.21% for FY 2025 and 0.19% for FY '25, achieving our guidance of credit cost, which is below 0.25% to 0.30% for current financial year. Capital performance, highlights of about our capital. As far as the capital is concerned, the capital adequacy is 17.01% as on 31/3/2025 compared to 15.97% as on 31/3/2024. During Q2 FY '25 bank raised equity capital of INR 5,000 crores through QIP, which increased the CET1 and CRAR by 65 basis points, which are subscribed by 8.3x. During Q3, FY '25 bank raised Tier 2 bonds of INR 3,000 crores and the Government of India shareholding remains above 70%. Our CET1 as on today, it is 12.33%, AT1 is 1.72% and Tier 2 is 2.96%. We have also taken the Board approval for raising Basel III-compliant AT1 bonds and Tier 2 bonds for INR 4,000 crores each. Highlights of our digital performance. Bank is doing extremely well in all the areas of banking, and we have improved a lot of digital penetration in all the critical areas. The bank is focusing on building digital capabilities under the domain of AI/ML and analytics-based business generation, the same has yielded tremendous results for the bank. 94% of the transactions are getting conducted in the digital mode in our bank. The number of activated PNB ONE mobile app users stood at 2 crore 14 lakh as on -- 2.14 crore as on March '25 as against 1.74 crore as on March 2024. The number of WhatsApp banking users has grown by 115% from 31/3/2024 to 61.6 lakh as on 31/3/'25. Sanction under the Digital Lending Journeys were more than INR 23,169 crores, and every fifth loan is getting sanctioned through the digital mode in our bank. We have onboarded 4.29 lakh CBDC customers and 62.93 lakh transactions done through the CBDC app till date. Further, mobile launched through corporate mobile banking app for the business people and we have added more than 99,000 customers on the app now. Almost all the digital lending platform -- digital credit lending platform, we have brought the AI/ML piece like PM Vishwakarma, Svanidhi, Digi Surya Ghar, and we are getting the good traction in almost all the critical areas of the lending. If I touch the HR front, bank has adopted the new HR ecosystem driven by project UDAAN. And in our bank, a lot of the steps have been taken to bring the transparency in the transfer, in the performance appraisal and overall in the ecosystem of the HR management. Last point, which I would like to touch is that the officer or the employee who joins in our bank, the entire life cycle, we are mapping up and good leadership development programs are in place. International Coaching Federation-certified coaches are there. They are also giving coaching to our senior executives of the bank. So a lot of improvements and things -- the transparency, which we have brought in the HRMS side now. Finally, if I can conclude, focus area of the bank this year will be on the customer centricity and enhancing the ease of banking for customers, focus on ambience of branches and ATMs, strengthening our presence in top 100 districts, having 66% of the CASA of the country, focus on product and process improvements across the sector, strengthening market share in the RAM, boosting noninterest income, optimizing costs, strengthening technology and setting up efficient data analytics center, robust cybersecurity framework and making organization ready for ESG and climate risk. Compliance and good conduct will be the core for the growth, transparency in human resources, which I have already touched and maximization of recovery and preventing the fresh slippages. These are the core areas on which the bank is going to work in the financial year '25-'26. Thank you very much, and I'm ready for any discussion or any question, any clarity, if any of the parameters if it is required. I'm there and my entire top management team is with me now. Thank you.

[Operator Instructions] The first question is from the line of Mahrukh Adajania from Nuvama.

Sir, I had a couple of questions. Firstly, if you see your slippage, then it's higher than what we've seen since Q1 FY '24. So now will this be the normalized rate of slippage? Or were there any one-offs? That was my first question, and I have a few others.

The overall slippages, if I can talk about, it is 0.73%. And the guidance which we had given for '24-'25 was below 1%. So we are well within the guidelines. Of course, we have seen some slippages happening in the Q4, which is above normal. And mostly we have analyzed those slippages and that has happened in the agri and the MSME segment. And in the agri and MSME segment also the slippages which has happened, it is below the [ LR ] segment. So we have strengthened our system now. And already in this particular month, April itself, we have made a recovery of around INR 288 crores out of those fresh slippages, which has happened in the Q4. So I think definitely, we will be maintaining the slippages ratio, which we have given the guidance this year that below 1% will be the slippages ratio. And the INR 3,000 crore slippages, which has happened in the Q4, definitely, that was an outlier. And going forward, we are expecting that quarterly, our slippages will be in the range of around INR 1,500 crores to INR 1,700 crores.

Okay, sir. And my other question is that a lot of banks have given many details about one big loan transfer to NARCL. So how did that get affected in our book? What were the entries like ICICI, Axis, all of them have given details on how much has been reversed through provisions, if there was anything in interest income that has been taken, the amount, et cetera. So if you could just explain because that's a lumpy account, right? And it's public, like everyone knows which account has been transferred to NARCL that way.

Correct, madam. See, what happened in the financial year '24-'25 through NARCL, we have made a recovery of INR 458 crores in the last quarter and in the Q4, which is the account which you are talking about and INR 863 crores total recovery, which we have made through the NARCL.

Okay. But so that has been shown as a reversal of provisions?

Yes. Yes, madam.

Has there any -- has anything gone by...

That is the reason, madam, if you see our recovery in the technical write-off is in this quarter, Q4 is INR 1,800 crores. And if you see our recovery in the Q3, it was INR 763 crores. So there has been significant improvement in the TWO recovery in the last quarter. And it is because of that one big account recovery.

Okay. But that was -- you said it's only INR 458 crores that way, right? So...

Yes. Yes, correct.

Okay. And that has what has gone through the other income line.

Yes, madam.

And nothing has gone through the interest income line, right, NII line, right?

NII -- the total -- the NPA recovery through that NII route is around INR 700 crores.

Okay. And last quarter, it was how much, sir?

Last quarter also, see, every quarter, around INR 600 crores to INR 700 crores, it goes in the interest income through that recovery channel.

Okay, sir. Sir, I have just one last question on margins. So our margins did decline a lot in this quarter for reasons explained, right? But that there was a repo rate cut. But also, sir, the deposit cost has gone up a lot. Would that be because of your special deposit schemes? What explains the rise in deposit cost like the deposit cost that you show in the press.

Yes, yes. I think that was one of the reasons. We had one special deposit scheme. But what I feel now with the declining scenario of the deposits and the credit, I think definitely, the cost of deposit, which had already it is reached at the peak level, I think we are going to bring it down now because already we have withdrawn that special deposit scheme, which was there. And the different segment also, we are going to revisit our deposit rate and maybe some corrections we will be making in the deposit front. So I'm expecting that from the Q3 onwards, definitely, that impact will be visible on the NII and the NIM front.

Got it. But in Q1, it's likely that NII -- NIM can fall, that way?

It will be. Will not fall. We will remain in the same level because the deposit cost is almost bottomed out now. And going forward, I don't see any rise in the cost of deposit, rather the deposit cost will come down. So Q1, mostly, we will be at the same level. But definitely, going forward, Q2, Q3 onwards, we see improvement in our NII as well as the NIM.

The next question is from the line of Ashok Ajmera from Ajcon.

Congratulations to the entire team of PNB. You are firing on all the cylinders because I think the business growth is phenomenal, 14% looking at if you compare with the other banks and especially the credit and deposit growth, of course, which has led to the higher business growth. Your deposits are 4.47%, which is I think growth is one of the highest, and even the credit growth also with 3.6%. Though in this quarter it is only 0.6%, on the whole fantastic performance on all this. Now having said, most of the public sector banks, also including even State Bank, has also declared their results and everywhere we have seen that there may be -- first of all, they have moderated their targets for the credit, like banks like largest bank has also reduced the credit target from 14%, 16% to now 12% in FY '26. You are going very strong. So going forward, sir, for FY '26, especially in this quarter, which is going to be, I mean, a lean quarter, even just now we finished Bank of Baroda analyst call also in the morning. So there seems to be some pressure especially in this quarter also, the current quarter. So sir going forward, where do we stand sir in PNB because excellent performance and I think all past legacy, all negative things have gone and the banks have started performing very well on all fronts. So this is the first question, sir, how do you see going forward the business growth, deposit, credit growth and from where it is going to come?

Thank you, Ajmera. And if you can talk about the growth, credit growth already we have given the direction that '25-'26 also we are going to grow at a rate of around 11% to 12% in the credit and deposit also around 10% growth, which we are envisaging. And definitely we are going to achieve that. Rather, we will cross the projection which we are giving now. And why I'm talking about the growth? The reason is that INR 115,000 crore sanctions are already there with us. There are disbursement which is going to happen for the loan sanctioned in '24-'25 is around INR 85,000 crores. And in this financial year, like from 1st April till today, we have given a sanction of INR 28,000 crores in the corporate book. And this I'm talking about the corporate book only where we have given the sanction. And the INR 28,000 crores, which we have given the sanction, that disbursements are also pending now. So I'm expecting that INR 115,000 crores of sanction, which is already there, definitely that disbursements are going to happen in the Q1, Q2 and Q3 onwards. Then there are another INR 21,000 crores of the new business group proposal, NBG, we call it. Already we have given the approval. And for that, we are waiting for the proposals to come and then we will give the sanction. So we have INR 135,000 crores of corporate book in place, and I'm expecting with this, at least 50% disbursements are going to happen. With that itself, we will be able to grow at a speed of more than 10%. Now second initiative, which bank has taken about the retail agri and MSME segment. And if you can recall that a lot of initiative bank had taken in the month of February, we had -- 6th and 7th of February, we had launched an outreach campaign for the housing loan and the retail activity, 13th of February for the MSME and 1st of March, which we had done for the [ SHG ] and the agri. And all those things have done very well. And because of that, if you see our RAM sector has also grown at a speed of 16% to 17% in different segments. So we are going to push this RAM segment very high now. And I think there also the growth in all the retail, agri and MSME, I'm expecting that there will be growth of more than 15% to 16%. So all things put together, I am expecting that the entire credit growth in the bank will be in the range of more than 12%.

Point well taken, sir. Sir, you are the master of recovery, especially in one of the -- I mean your parent bank, you did excellent well -- excellently I mean, performed. So on the recovery front, sir, now recovery -- normal recovery and recovery from written off accounts. So would you like to give some color on that for FY '26 and especially in this coming 1 or 2 quarters? And coupled with the decision of the Supreme Court on Bhushan Power and Steel, how do you see it affecting those recoveries which have already taken place? And where do we stand on that?

See, overall recovery in the Q4, if you see, we have more than INR 4,700 crores of recovery. And in that INR 1,800 crores has come from the technical write-off. And if you can recall during the analyst meet in the month of last quarter, I had already indicated that there will be around INR 1,500 crores to INR 1,600 crores of technical write-off recovery will happen. And our overall recovery in the Q4 also, we had projected that INR 4,000 crores to INR 5,000 crores of recovery will happen and that we have done it now. Team has made it possible. Going forward also, I can give you the color for that, around INR 16,000 crores of recovery, I'm expecting in the financial year '25-'26. In that, the technical write-off recovery every quarter, I'm expecting that minimum INR 1,500 crores will happen. So these are projections which I'm giving and that is in line with the guidance which we have given to the analyst.

What is the total write-off book, sir?

Total write-off book? It is around INR 92,000 crores.

INR 92,000 crores. So we expect about INR 6,080 crores. So about 6% to 7% of the total book, maybe 5.5% to 6.5%. That's very good, sir.

This is a minimum, which I'm talking about. That's the minimum recovery that is going to happen. See, this INR 91,000 crores, INR 92,000 crores, the book which we are holding it, in that, there are very, very crude assets are also there where we are not going to expect much recovery in that, yes. There are things which has gone in the liquidation also. So all put together it is INR 91,000 crores. So -- but actual recovery which is going to happen is almost out of 50% of that only the recovery is going to happen. And there we are going to recover around INR 6,000 crores.

10%, yes. So sir, next is on the NARCL, SRs issued by NARCL, which is government guaranteed. Now as per RBI directive, you can value it at the fair value. So how much profit have we taken on that on SRs issued by NARCL till date for SRs in the last quarter?

Yes, it is around INR 1,200 crores.

Which has gone straight to the bottom line, sir.

Yes, yes. And that has been neutralized with the MTM, which we have done in the treasury.

Okay. So earlier whatever MTM was done. And last question on the treasury front. Now since the treasury is giving phenomenal income and now also at least 2 rate cuts, everybody is agreeing up to 50 basis points coming from RBI. So going forward, we will have a phenomenal -- I mean, tremendous income from treasury book. So any color on the treasury operations for FY '26 and with this kind of windfall, which will come in, how do you look at it and how good it will affect the profitability?

I think see, understanding the rate transition, which was going to happen in the month of March and June, we have built up a good treasury book now, both SLR and non-SLR book also, and we are going to get good dividend out of this investment which we have made in the treasury now.

And sir, how much MTM profit has gone from the AFS book, which has gone directly to the reserve?

We have that data. Just one minute, our CFO is here.

He's talking of the foreign valuation?

AFS valuation.

The market profit from AFS book, which now as per RBI valuation norms, revised valuation norm goes to AFS reserve. What is that figure sir?

Just one minute. We will give you. So we have created 2 things. One is about the general reserve, which is INR 2,098 crores and AFS reserves we have done INR 379 crores.

Will you repeat that second number sir? 300?

INR 2,098 crores, in the beginning, at the time of transition. During the entire year, we have done an AFS reserve INR 379 crores for the entire year.

INR 379 crores.

The next question is from the line of Jai Mundhra from ICICI Securities.

Sir, I wanted to check what is the amount of wholesale deposits that we have?

Wholesale deposit?

Yes.

That is more than INR 3 crores -- INR 280,000. Yes, including CD, it is INR 280,000 crores.

Right. So sir, in your entire deposits of INR 15 lakh crore, right, roughly, give or take, let's say, INR 3 lakh crores is such which will reprice on a faster basis, right, which is only 20% of the overall deposits. Whereas on your loan book, you have very high proportion which at least, let's say, the loans which have been to EBLR and T-Bill, which is roughly 50% or over 50% book, which will reprice or which have already started repricing, right? So in that context, you could have significant margin pressure, right? I mean this quarter margin -- I mean, the margin for this quarter ending is 2.81% global margins. And we are saying that full year, we should be around 2.8%, 2.9%. So it looks like that may be very optimistic aspiration.

See, the total term deposit also which we are holding it, there is a percentage of the deposit for more than 1 year is also not very high. So we are expecting that the deposit which is there for 3 months' time, most of our deposits are in the range of 6 months to 9 months. And that is the reason, in fact, I'm telling also that our pressure on the cost of deposit will bottom out or it will come down from Q3, Q4 onwards. So till Q2, definitely, there is going to be some pressure. But at the same time, the cost of deposit, which is there as of now, that is not going to be up now because that is the highest level we have reached now. Now under no circumstances, this level is going to up because the deposit rate scenario is already it is down now. And we are expecting that whatever the new acquisition that is happening in the system, that is far, far below the rate which we were prevailing earlier. So keeping that in mind and the long-term impact of the deposit, which is there in our system, I don't see that in the long run we will have any pressure on our NII and the NIM.

Okay. So sir, actually, let me ask you, we have already passed on the repo rate cuts, right? I mean, so this quarter till March end, you would have passed on some impact of the Feb core repo rate cut on the loan side, right? So now sir, let us say if in cumulative, there are 100 basis points of rate cut, what is your sense that your yield, your blended yield on advances, how much should it decline? Should it decline by, let's say, 60 basis points on that let's say, from fourth quarter to maybe fourth quarter, by that time, 100 basis points -- I mean so 100 basis points of repo rate cut, what should be the blended decline in your loan yields, assuming everything is more or less static?

I think we need to go deep into that, and we need to do some calculation for that. And generally, I can throw the figure to you. We'll have to factor those things and then only we can calculate. So I think we can discuss with you separately, and we can give you the entire calculation. What are the RLLR is there, MCLR is there and how it is going to be if a further 50 basis point rate cut happens, how it happens now. I think we can have a one-to-one discussion, and I can share all those details to you.

Sure, sure, sir. And sir, is there any strategic discount that you offer to your customer, which contractually you can reduce that? Is there such mechanism? Or you think more or less the EBLR linked loans will have a complete pass-through?

Well, Jai, I didn't get that question.

So let's say, I'm saying, sir, on your loans which are linked to EBLR, so far, RBI has cut by 50 basis points. Let us say RBI also cuts by another 50 basis points. So there is a 100 basis point cumulative cut. Do you have any contractual mechanism wherein you may choose to pass on only 75 basis points, saying that you are increasing the spread or you are reducing the strategic discount that you would have offered to those customers? Or it will be simply more or less 100 basis points pass-through to at least to the EBLR customers? MCLR and all those things may change.

See, more or less where it is straight away the rates are fixed with the EBLR, definitely, we need to pass on when we are passing on that benefit. But there are certain schemes in the retail segment like housing loan is there and vehicle loan is there, where we have given some strategic discount. There we are -- we can revisit if the further rate cut happens, then strategic discount, which we have given because of some campaigns we are launching it. So we are giving further discount in our RLLR. There, we will revisit and we will find out what best improvement can be done now. But wherever the straightaway methods are there, where RLLR based -- the lendings are there, definitely, when we are reducing the -- because of the repo rate, we have to pass on this benefit to all these people.

Right. Understood. And lastly sir, I could not understand the security receipts treatment. So we had INR 1,200 crores, INR 1,300 crores of security receipts, which were above the book value of INR 1,200 crores, INR 1,300 crores. So that should have been in P&L, right? You said that you have neutralized that gain by MTM. So if you can just explain.

I ask my CFO to explain it to you.

I think you are correctly observed, but we have taken the entire benefit of this in the revaluation of this entire SRs. We have either released the provision or we have reevaluated the NAV value. So this amount is INR 1,326 crores. But what impact we have done, we have another securities where we have some MTM losses as well. So those we have provided, especially one of the big investment we have. So the net result is reflecting INR 182 crores positive in the P&L.

Okay, understood. All the very best. I'll engage you, sir, on separately for this yield sensitivity.

Definitely, we will come out. Yes.

The next question is from the line of Kunal Shah from Citigroup.

Sorry, so again, to clarify on this SRs, this INR 182 crores, which is the profit on revaluation of investments, that is the net amount which is getting reflected after INR 30 crores of credit coming from the government-guaranteed SRs. So there would have been some knock of INR 1,100-odd crores, which would have been taken, INR 1,150-odd crores on M2M on other SRs. So that's right?

Yes, yes. Absolutely right.

Okay. Perfect. Got it. And secondly, coming on to this deposit question again. So you mentioned like this were largely the special deposit schemes which have now been withdrawn. But what was the tenure of these deposits? And I think maybe just prior to the rate cut, we have contracted them at a very high rate. So what is the average tenure of particularly the special deposit schemes, special deposit rates which were [indiscernible]?

It was 400 days deposit at...

So then we will at least take like 1 year to reflect.

Yes. That's the reason I'm telling that impact of this rate cut in the deposit will take at least Q3 onwards, Q4 onwards only we will see the impact.

Yes, yes. Got it. But still like maybe 400 days, so it will be almost like more than a year. And given that this was on for almost like last 4 months, it will take a slightly longer period as well, yes?

Yes.

Yes. And getting on to the SME slippages as well as agri. So no doubt you indicated, but there is a sharp increase, which is there in both of that when we look at it on a 9 months and the full year number, particularly agri also sharp price and SME. These are like less than INR 10 lakh loans as you indicated. But any color in terms of where this is flowing from? Is it like the area of stress and the initiatives which we are taking to manage this going forward and this will not repeat or this will be contained at the current level?

No, I'm very confident that the level which you have seen, I think that is the maximum level it has touched. It won't cross the limit which has happened in the Q4 because in agriculture, if you see the March quarter itself, it was INR 1,400 crores. And that is the highest it has happened in the last 1.5 years. And there is a maximum...

Segments, particularly this INR 1,400 crores, like within agri, which is this product segment, which is contributing to the maximum pain?

These are all the KCC loans. And in that, there was some repeated, restructured loans are also there. So we also didn't allow to do anything in that. So we allow to flip it and then we can do the recovery measures also. And in the first month of the '25-'26 itself, we have made a recovery of around INR 288 crores. So -- and that is the highest level it has happened. It is not going to happen in the Q1 or Q2 onwards now. And this quarter, I have already given the direction that it will be around INR 1,500 crores to INR 1,600 crores -- the total slippages going to happen now.

The next question is from the line of [ Vinit Jain ] an individual investor.

[Foreign Language]

[Foreign Language] And then future course of action -- the law of the land [Foreign Language] and the effect is in the working condition. I don't see any challenge in the future also any recovery.

The next question is from the line of Ashlesh Sonje from Kotak Securities.

The first question is on asset quality, especially on the recoveries part. You indicated you guided for a recovery amount of about INR 16,000 crores for next year against a recovery of about INR 14,300 crores, which you have done in this year. So what changes next year, sir, that you are confident about the higher recovery?

See, one thing which is -- if you can see in the recovery in the Q4, where we put a lot of focus and the drive happened across the bank, and we have seen the recovery of INR 4,700 crores, which is highest in all the 4 quarters. The recovery under the technical write-off itself is around INR 1,800 crores. So that gives a lot of strength to us that if we can put focus and the head office and the circle office and our general office, if they start monitoring the account on a regular basis, connecting with the NPA borrowers, I think definitely, this number is achievable and we are going to achieve that.

Okay. And just a follow-up, you are not assuming any big chunky recoveries from your side?

Chunky assets are not there now. I think all the recovery will be in the range of around -- smaller accounts, definitely, there are a lot of plenty of accounts are there and around in the range of around INR 25 crores to INR 50 crores, plenty of recoveries are going to happen.

Okay. Sir, secondly, on the margin front, on the housing loan front, you seem to be growing that book quite well. And you -- it seems like PNB is offering a rate of interest of about 8%. Given the expected pressure on yields due to the repo rate cut, is it possible that you might consider a hike in the interest rate on the housing loans?

This rate, as of now, what we are giving, we will continue for that. And then we will see what further repo rate cut happens and then the discount which we have given over the RLLR. I think we'll revisit that. We'll see that. As of now, we don't have any plan to do that. See, housing loan, generally, we give this rate with a provision that the team of our bank will connect with the people. And along with the housing loan, a lot of other things also come into kitty, their personal account also come. And once that personal account comes, then a lot of other lending activity also happens. So this is not a stand-alone, we should see the interest rate in the housing loan.

And just one clarification. When do you expect the MCLRs to decline for the bank?

MCLR, one cut we have already given and 10 basis point cut has already happened. That is from 1st of May.

Sorry, one more question. On the tax rate change, when do you anticipate that? Anything in the pipeline?

Which one?

On the tax rate -- shift to the new tax regime. Yes.

This financial year, definitely, we are going to adopt the new tax rule now, mostly by Q1 or Q2. By Q2, definitely, the new tax regime will be in place.

The next question is from the line of Rakesh Kumar from [indiscernible].

So a couple of questions, sir. Firstly, like you were discussing on the deposit cost number that there is an acceleration because of a special deposit scheme. But if I look at your reported deposit cost number, it was close to 5.1% in first quarter, increase was 8 bps in the second quarter and then 6 bps. And then all of a sudden in this quarter, 12 bps. So it is not -- it doesn't seem that it is just because of a special deposit scheme what we had and what stands withdrawn right now, but still we have seen 12 bps increase in the deposit cost. So is that there is a large mobilization that we did in third quarter? Is that the reason? Or there is some other reason why the deposit cost has increased by around 12 bps this quarter?

Yes, yes. That is also one of the reasons. There was some bulk deposit and the CD was mobilized in the third quarter. And that impact also we have seen. But we have reduced the CD in this particular quarter, almost around INR 10,000 crores to INR 12,000 crores of CD we have reduced in this particular quarter itself. And that is one of the reasons if you see the quarter-to-quarter deposit growth is slightly lower than the earlier quarter now. So we are mindful of taking the deposit at a reasonable cost. And I don't see going forward, any further improvement increase will be there in the deposit cost of deposits.

It looks very contrary, sir, that we have a credit growth of 0.6%. There is no credit growth actually in the domestic credit growth on a sequential basis. And as you said that we have kind of set some high cost, maybe the bulk deposit. If we are setting the high-cost bulk deposit, actually, something reverse would have happened on the deposit cost number. But still with this kind of balance sheet growth, we are reporting with a 13 bps decline in increase in the deposit cost, margin decline of around 12 bps. Numbers are not fitting in completely. I don't know what is happening here.

No, no, in the deposit, any impact, suppose we have mobilized some low-cost deposit in the month of February and March. The impact of that deposit -- cost of deposit will be visible only after Q2 and Q3 onwards because there are deposits which we have taken for 1-year period, 9-month period. So actual impact will be in the Q2 and Q3 itself because all the low-cost deposits, which we have mobilized in the March and the now also, that actual impact will be happening only after the Q3.

Okay. Okay. And sir, if you look at total accumulated provision number, we had around INR 66,000 crores in the March '21. Now we have accumulated provision of around INR 40,000 crores. Written-off loan outstanding remains the same. So obviously, the propensity or the resources what we have to do the recovery from here on, that has come down drastically. So one thing is that what is the interest income accrual that we have done from NPA recovery and TWO recovery in this quarter and this year and how that number will pan out in '26? Because the recoverable pool has come down quite sizably. So if you can throw some light.

Correct. The technical write-off recovery in Q4, it was INR 1,800 crores. And overall total recovery in the Q4 was INR 4,700 crores. That is the total recovery we have done.

Of the total recovery, NPA recovery or TWO recovery, what is the interest accrual that we have done?

I'm telling you. So INR 1,800 crores is a technical write-off. Other than that, INR 700 crores every quarter, INR 600 crores to INR 700 crores recovery goes in the interest. So any recovery which we are doing it in every quarter in the NPA account, around INR 600 crores to INR 700 crores goes to the NII. And we are also projecting that going forward also minimum INR 1,500 crores of technical recovery will happen in every quarter. And we are projecting that total recovery will be around INR 16,000 crore in the entire year in '25-'26.

Got it. And the interest income accrual ratio will be the same, kind of.

That is the same. That is the trend which we are seeing it for the almost last 6, 7 quarters, INR 600 crores to INR 700 crores, it goes in the interest income.

And considering, sir, that the provision that we have taken for employee expenses this quarter and for this year, what is the discount rate assumption that we are working with now?

6 pointers.

When we talk about this other government bond rate, any and plainly, that is applicable to the public, it is 6.57%. But there is close on 31st March '25. That was the best to share our debt, 6.57%.

6.57%. This is by our CFO, Mr. Jain.

Okay. Got it. Got it. For gratuity, pension, both?

This is the basis. There is the actually which had the date -- decide on that [indiscernible] and everything, cumulatively.

Okay. And the [ PPO ] and the plan asset numbers are broadly same for pension?

We get the [ PPO ] number and then any difference we provide for the current quarter.

And I can tell you that sufficient provision has been made in all the pension and gratuity.

I'm also quite delighted that what you said or the previous MD said that kind of provisioning they were doing for is 15, we did not see any jump in that number in Q4. So that is quite commendable.

Yes. We plan for the entire year, and you could have seen that we are doing it in a very proportional manner. We foreseen all the changes and then we have provided [indiscernible] in any particular quarter.

The next question is from the line of Gaurav Kochar from Mirae Asset.

Yes. Sir, I have 2 questions. First is, again, sorry, you're harping this on margins. Sir, you mentioned that in the first half, at least there would be some pressure on margins. You exited the year at 2.81% in the fourth quarter. So is it fair to assume that in 1H, your margins will be lower than this? And in the second half, you may recoup back to this 2.81% number that you reported in the fourth quarter?

First half, we will be in the range of 2.8% to 2.9% and going forward, definitely, we will be trying to reach between 2.9% to 3%.

Okay. sir, assuming that we have only passed 25 basis points in this quarter and that too from February when the rate cut happened, there would be further repricing of that plus the additional April month 25 basis point repo rate cut that we will be seeing. These are the 2 right now which we have already seen. But if there are further rate cuts, that will also have impact on the 1H sort of -- and as you mentioned, sir, your deposit repricing will happen with a lag. So what will result in NIM expansion from here? So 2.81%, if you're saying we will maintain this, what will offset the pressure on the yield?

Slightly definitely, yield will further -- it will come down because with the downward interest rate scenario, definitely yield will come down. But at the same time, I'm expecting that my deposit rate and the cost of deposit will also come down. We have already revisited our deposit rate. And going forward also, we will study the market because liquidity is enough in the system now. And if any further rate cut happens, I think we will review our deposit rates once again, and we will make some corrections in our deposit rate. And all these things, the impact we will be able to see from the Q3 quarter onwards.

Okay. Okay. Got it. And just my second question was with respect to the overall ROA guidance. You mentioned that '26 you want to make ROA of more than 1%. So just trying to understand, based on your guidance, the margins will fall by around 10 basis points. And this year, we had revaluation of investment, SR recovery, et cetera, which may not recur in the next financial year. Also, the credit cost in this year was 90 basis points, and you mentioned for next year, you are seeing less than 50 basis points. So therefore, there could be some increase in credit cost. So -- and this year, we made an ROA of 0.97%. So assuming your sort of numbers, that also keeps the ROA lower less than 0.9%. So what will drive the ROA expansion from here? Is there anything else that you believe could drive ROA from here?

Always, there will be something in the kitty, which is going to help now. One is recovery from the technical write-off, which we are going to drive it in a very, very big way. Last year, the technical write-off recovery, which we have made. This year, already, we are projecting that every quarter, we are going to make a recovery through the technical write-off is quarterly it is INR 1,500 crores. So with this itself, we are going to raise around INR 6,000 crores, which is going to directly to my operating profit. Second, our investment book and treasury has become very, very strong. We were understanding that the rates are going to come down. So we have built a good volume and good book of the SLR and non-SLR. And the recent OMO operation, which is happening, in every OMO operation, we are making good profit now. So the treasury income and the recovery through the technical write-off, I think that is going to play an important role. Overall recovery also since our total -- the provision coverage ratio is more than 97% and the tangible PCR is also more than 90%. So today, other than TWO also, whatever recovery we do, it is going to help us in the write-back of provision. So these are the things which is going to help us in this financial year in improving my ROA.

The next question is from the line of Bhavik Shah from InCred Capital.

[indiscernible] [Technical Difficulty]

Shall we take the next question?

Yes, madam, please.

The next question is from the line of [ Apurva ] from MS.

So just a data keeping question on -- if you could help me with the SMA-1 loans below INR 5 crores?

SMA book?

Yes.

INR 1 crore to INR 5 crores and above?

Less that INR 5 crores? If you could help me with the SMA-1 plus 2 numbers.

Less than INR 5 crore in percentage terms. Total it is there. What is the percentage?

Percentage, 6.79% total.

6.79%.

Total SMA and total gross credit is 6.79%.

So 6.7% is our total percentage for all the loans put together.

Okay. And what would be the SMA 1 plus 2 number? Could you give me the number?

22 to 28.

1 and 2 figure, madam?

SMA-1 is INR 22,828 crores.

Percentage?

Percentage, I have to calculate.

No problem. The number -- so SMA-1 is INR 22,828 crores.

SMA-1 is INR 22,828 crore. SMA-0 is INR 49,859. And SMA-2 is INR 3,279 crores.

The next question is from the line of Piran Engineer from CLSA.

Just a couple of questions. You mentioned that INR 1,300 crore SR, you mentioned some breakup, INR 458 crores and INR 863 crore? Can you just once again repeat, [Foreign Language] what is INR 458 crores and what is INR 863 crores?

See, INR 1,325 crores. The SR, we got it to our book now. And there was 1 account where we need to mix the M2M provision. So that amount was around INR 1,100 crores. So we have netted from INR 1,300 crores to INR 1,100 crores, and that is a net impact we have given in our income.

See, that I got, which is INR 182 crores. But you gave the INR 458 crores number and INR 863 crore number also. I think one went into other income and one went into -- I think INR 863 crores went into...

No, that is a recovery through the NARCL. NARCL. Recovery -- NARCL for the Q4 was INR 458 crores. And overall in the entire financial year, recovery was INR 863 crores that I was talking about.

Okay. But this is not to do with that one large account that we are all referring to?

Yes, yes, yes.

Okay. Okay. Understood, sir. And also what sort of OpEx growth are we expecting for FY '26 versus FY '25?

Guidance, you can.

Yes, guidance, like OpEx growth for FY '26?

See, I can tell you we have given the guidance for our 14 parameters, okay? So credit growth, we are expecting around 11% to 12%. Deposit growth, we are expecting 9% to 10%. And if I come to the operating profit, that is 8% to 9% we are expecting. Net interest income, 7%; NIM 2.8% to 2.9%. NPA percentage-wise, if I can tell you, gross NPA, we are projecting below 3% and net NPA 0.3% [indiscernible] CR already we are at around 95%, 96%. So we will be maintaining this level. Credit cost below 0.5%. And ROA is above 1%. Slippages ratio, below 1%.

The next question is from the line of Nalin Shah from NVS Brokerage.

Actually, it's Kriti Tripathi from NVS Brokerage. Yes. First of all, congratulations on your [indiscernible] performance. Just wanted to ask 2 questions. First is that given such strong performance in FY '25, and although you have been giving conservative guidance, but the performance has been exceptionally throughout the year. So can we expect an ambitious target for FY '26 as well in the similar lines or so? And the second question is on the dividend front. So while the payout is appreciated, can we expect a more liberal dividend policy going forward given the years -- strong years like FY '25? So just...

Yes. One is that the guidance which we have given, we always feel that whatever guidance we give to the analysts and to the outside stakeholders, I think definitely we should be able to cross that guidelines. So that is one of the reasons we are giving the conservative guidelines, and we are very mindful of the guidelines, and we are going to cross this guidance this year also. Last year also, we have given 11% to 12% guidance in the credit, and we have touched almost around 14% growth. Deposit also, we have given 9% to 10%, and we have crossed 15%. This year also, we are giving the same guidance, but I am 100% sure that we are going to cross this guidance. Now to your question of the dividend this year also, if you see with a share of INR 2, we have given INR 2.90. Last year, it was INR 1.5. So almost this year, we have doubled. So we are expecting that next year, again, we will be showing a good performance. And definitely, the -- all the stakeholders will be rewarded.

The next question is from the line of Ankit from [indiscernible]

Sir, my question is, sir, provisions are on very high side and also the fresh slippages. Sir, can you explain what will be the reason?

The provisions are not very high side. I mean the slippages also, it is overall slippages is only 0.73% the entire financial year. And provision also, we are already at 97% under the PCR. So the credit cost, if you see, it is already very, very minimal.

Sir, it has risen from 3.9% to 5.9% according to the results. I think it's quarter-on-quarter or Y-o-Y? Quarter-on-quarter?

Quarter-on-quarter.

And slippages also gone, INR 1,700 crores to INR 3,000 crores.

That is correct. See, one particular quarter, this is Q4, there has been some -- the slippages have happened in the agriculture, particularly agriculture segment and some MSME segment, some slippages have happened. And that is almost outlier. It will not happen in every quarter now because last 2 years, if you see quarter-to-quarter, we have maintained the slippages in the range of INR 1,700 crores to INR 1,800 crores. And that is the thing which we are expecting in the Q1 onwards also. So that is one quarter where it has happened because of some legacy, some accounts were there some 4, 5 years back, some I think agriculture structured -- repeated restructured accounts were there. So those accounts have slipped in this particular quarter. And in the slippages, already around INR 288 crores of recovery has already happened out of these slippages.

Okay. Sir, are you seeing any stress in the economy likewise, according to this 4, 5-year slippages or any new loans, are you seeing any stress environment? How is the environment in the business community?

No, no, no. I am not seeing any further stress in the system. And today, if you see my SMA book, none of the corporate accounts are appearing even in the SMA-0 also, especially for the INR 50 crores and above accounts. We don't have any such account in that particular bracket. There is another one study which we have done from accounts which was sanctioned from 1st July 2020 till today. And what is the NPA that has happened. Almost around INR 9 lakh crore sanction has happened from 1st July 2020 to 31st March 2025. [Foreign Language].

Hello?

Yes, I can give you -- are you connected now?

Sir, actually, the participant line has been disconnected.

You can connect him. He wanted some clarification.

Yes. Give me a moment. Sir, actually, that participant is no longer in the queue. So shall I proceed or take that as the last question.

Yes, yes.

The next question is from the line of Aditi Nawal from RSPN Ventures.

I just have one data housekeeping question. So if I look at the OpEx number for this quarter, especially the other expenses, that is slightly on the higher side sequentially. So is there any one-off or is there any expense that you want to specifically call out?

No, no, which part you are talking about, which area?

Other...

Operating expenses.

Operating expenses. Okay. So you are talking about other operating expenses?

Yes.

So you are seeing from Q-o-Q or...

Both actually sequentially as well as year-on-year. So INR 2,500-odd crores going to around INR 2,900-odd crores.

This is not any abnormal things which has happened. It is usual expenses that is there in the system. That is the thing which has happened. Not any unusual or any other thing which is there in the system.

So it's a normal BAU expense?

Yes, yes.

So this can be like the [indiscernible] going forward?

No, it will remain in like this only. There will not be any much fluctuation. And these are only a normal course of things. See, INR 400 crores in a year increase is not a very, very big thing for organization like ours.

But even sequentially, there is a INR 400-odd crore jump, sir?

No, no. See, the Q4 of FY '24, it was INR 2,565 crores, right? And Q4 of '25, it is INR 2,900 crores. So Y-o-Y variation is INR 339 crores. Yes, it is Y-o-Y variation.

My point was that even in quarter 3, the other operating expenses was around INR 2,560-odd crores. So sequentially, that is around [indiscernible].

Monthly also, you are telling that INR 2,560 crores to INR 2,900 crores. But overall, things also, it is almost in the same range and it is not of any unusual entry. It is business cost and business running things, which is there.

Ladies and gentlemen, I take that as the last question. And I would now like to hand the conference over to management for closing comments. Over to you, sir.

So thank you very much to all the well wishers of our bank and all the stakeholders of our bank. Please repose the faith in our bank. And on behalf of the entire PNB team, I can assure you that going forward also, we will see the same momentum in all the business areas of the bank, and there will be qualitative improvement in all the ratios. So thank you very much once again.

On behalf of Elara Securities India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.