Punjab National Bank ($PNB)

Ladies and gentlemen, good day, and welcome to the Punjab National Bank Q4 FY '26 Earnings Call hosted by Elara Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to [indiscernible]. Thank you, and over to you.

Hello, everyone, and welcome to Q4 FY '26 Earnings Conference Call of Punjab National Bank. Today, we have with us the management of the bank headed by Mr. Ashok Chandra, MD and CEO; Mr. Paramasivam, Executive Director; Mr. Bibhu Prasad Mahapatra, Executive Director; Mr. D. Surendran, Executive Director; and Mr. Amit Kumar Srivastava, Executive Director. With this introduction, I would like to hand over the call to Mr. Ajay Kumar Singh, Strategic Management and Economic Advisory to read out the disclaimer statement post which the MD will address the conference. Thank you, and over to you, sir.

[indiscernible] Just two minutes time is required. Just give us two minutes.

There is just a 5-minute delay, please wait for [indiscernible].

Yes. At the outset, let me read the disclaimer. This representation 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. Now I request MD sir to address the analysts. MD sir, please.

Good afternoon. ladies and gentlemen. Welcome to the Q4 and financial year '25, '26 analyst meet of the bank. During FY '26, the bank delivered broad-based sustainable performance across all core dimensions: customer service, business growth, asset quality, profitability, and operational efficiency. We met or exceeded our stated guidance for 2025, '26 financial year across most key parameters. The only areas of variance were the CASA ratios and margins, which were largely influenced by liquidity and interest rate dynamics. To drive growth, the bank is sharpening its focus on retail, agriculture and MSME segments through targeted outreach campaigns. A calibrated network expansion is complementing this. We added 144 branches in FY '26 and plan to open 250 more in current financial year. These branches will be primarily in the Southern and Western regions. A new [ journal ] office in Bengaluru has already been officialized to strengthen our presence and execution in the southern region. We are also leveraging digital enablers to accelerate growth and enhance operational efficiency. A key initiative is the DIGI MSME prime exchange launched on our 132nd Foundation Day offering end-to-end digital MSME loans up to INR 10 crores. We remain highly vigilant on asset quality, delivering a staff reduction in both GNPA and in NPA. Our sustained focus on profitability has given sequential growth in operating and net profit, reaching their highest ever levels. Now I will touch upon the segment-wise business figures, profitability, asset quality. First, the business. The bank's financial performance for the period ending March 2026 reflects a steady growth, coupled with ongoing strategic realignment. Our gross global business reached INR 29.7 lakh crores, marking a healthy 10.7% Y-o-Y growth. On the asset side, advances grew by 12.7% Y-o-Y to INR 12.59 lakh crore despite [ INR 18,231 ] crores reduction in IBPC exposure, which we have done concisely. Excluding the IBPC book, underlying average growth remains strong at 15% Y-o-Y, reflecting robust core business momentum. Our retail book, excluding IBPC, grew by 18.2%, MSME by 19.9%, agri priority sector witnessed growth of 16.2%. Future credit growth remains well supported by a strong pipeline. The bank sanctioned over INR 4 lakh crores in corporate credit lines during financial year '25, '26 with INR 1.18 lakh crores is still pending for disbursement. Global deposits of the bank have reached to INR 17.11 lakh crores, up by 9.2% on a Y-o-Y basis. CD ratio of the bank is at comfortable level of 73.6%, which gives us comfort to grow in advances while being mindful of raising high-cost deposits. On account of various customer-centric initiatives and revamped the products, the CASA ratio of the bank has stabilized at around 37% and was consistent around 37% in all the 4 quarters of the financial year. In [indiscernible], we are strategically focused on enhancing our individual saving account balances. Over 35% of our customers are under 30 years of age, giving us a strong foothold in the next [indiscernible] segment. We are focusing on serving them across their financial life cycle with tailored digital [indiscernible], driving long-term relationship value. Coming to the profitability. Our domestic NIM stood at 2.61% for Q4 whereas global NIM stood at 2.47%. In Q3, the impact of the December rate cut was limited to 26 days, where in Q4, it played out over the full quarter. While we had anticipated and offset through moderation in deposit rates, deposit rates remained sticky and did not fully compensate for the compression in yield on advances. We expect the margins to improve moving forward, and our NIM to witness Q-o-Q increase from the level of Q4 '25, '26. We expect our global NIM to remain in the range of 2.6% to 2.7% for financial year '26, '27. Operating profit of the bank increased on sequential basis. Operating profits for the Q4 are INR 7,500 crores as against the INR 6,776 crores for Q4 of 2025. This is [ witnessing ] a growth rate of 10.7%. For the full year, there is a 9.2% growth, well above the guidance of 8% to 9%. Net profit of the bank for Q4 of FY '26 stands at INR 5,235 crores as against INR 4,567 crores for Q4 FY '25, depicting a healthy Y-o-Y growth of 14.4%. Coming to the efficiency ratio. Efficiency ratios of the bank are increasing consistently, our return on SATs at the level of 0.89% for FY '26, as against 0.97% for FY '25, as the bank has taken onetime hit on account of switching to new tax region in the Q1 of '25, '26. In remaining 3 quarters, return on assets has consistently remained above 1% at 1.05% in Q2, 1.06% each in Q3 and Q4. Return on equity stands at 15.67% for FY '26. Our tangible book value per share as of 31st March 2026 is 102.95%, which was significantly improved from the level of 84.83% as of 31st March 2025. We are quite mindful of improving our cost-to-income ratio, and the same has remained at reduced to [ 51.79% ] in FY '26 as against 54.59% in FY '25. Coming to asset quality. Our asset quality is improving consistently, and our GNPA has reduced to 2.95% as of 31st March 2026 from 3.95% in March 25. Similarly, the net NPA percentage, which was 0.40% in March '25, has reduced to 0.29% in March '26. We are well within our guidance for gross NPA as well as net NPA ratio. Our PCR stands at 97.14% as of March '26, which is well above our guidance of more than 96% for financial year '25, '26. Total fresh slippages during Q4 2026 was INR 2,674 crores as against INR 2,904 crores in Q4 of FY '25. Our guidance for slippage ratio was to remain below 1% in FY 2026, and we are well within our guidance level as slippage ratio for the full year is 0.60%. Total recovery stood at INR 4,082 crore for Q4 2026 and for the financial year is INR 15,501 crores. Our recovery is 2.4x of the slippages in FY 2026 reflecting our commitment to our improving asset quality. We have made additional floating provision of INR 270 crores on a potential basis in Q4 of financial year '25, '26. I will provide -- I will talk about some underwriting standards. I will provide an analysis on underwriting standards, which will provide confidence regarding the asset quality and underwriting standards of the bank. From 1st of July 2020 to 31st of March 2026, almost 5.75 years. We have sanctioned around INR 14.28 lakh crores loans, out of which we have disbursed INR 12.46 crores. [indiscernible] as of 31st March is INR 8.75 lakh crores, which is close to 69.5% of our total outstanding loan book. The NPA in this book is hardly INR 5,034 crores, which is only 0.40% of the disbursed amount under [indiscernible] underwriting. I will talk about the capital. Our capital adequacy is 17.74% as on March 2026 compared to 17.01% as of March 2025, which is 73 basis points above March 2025. Our CET1 capital stands at 13.62% against a regulatory requirement of 8%. Tier 1 capital stands at 15.15% against the regulatory requirement of 9.5% and tied to capital stands at 2.59% as of 31st March 2026. More than 85% of the total externally rated at above INR 25 crores and above. [indiscernible] and more than 12%, 52% are triple a rated, which indicates our balances [ extends ] from a risk point of view. Institutional participation has strengthened progressively throughout the year, underpinned by our proactive and structured investor outreach across both global and domestic markets. [indiscernible] Holdings increased from 5.71% to 6.39% while domestic investors and mutual fund shareholding rose from 14.67% to 15.95%, signaling a rising condition in bank strategy, performance and future trajectory. I will talk about digital banking. Punjab National Bank is rapidly evolving into [indiscernible] financial powerhouse leveraging advanced AI, machine learning and analytics to drive unprecedented operational efficiency and growth. We have established end-to-end [indiscernible] across most lending products which are being leveraged to scale digital lending and drive growth. We have strengthened and disbursed more than INR 20,873 crores through digital [ mold ] in Q4 to 4.8 lakh customers. Every third loan is being sanctioned in [ distal ] mode in our bank. On a gross basis, bank has crossed a digital sanction of INR 1 lakh crore, demonstrating commitment for faster technology-enabled credit solutions. The digital first approach has shifted the landscape of the bank's operations with additional transactions now accounting for more than 95% of all transactions. The flagship PNB ONE mobile app [ leaps ] the chart, offering 350-plus features and enterprise-grade security like mobile threat detection and [indiscernible]. There is a very good traction in our corporate mobile app's CNB ONE business, which serves to 3 lakh customers with more than 200 features. Number of [ mobile ] banking users have grown by 77% from INR 61.5 lakhs as of March '25 to INR 1.09 crores as of March '26. Combined with a robust mobile banking platform and an Internet banking ecosystem, PNB is delivering a highly accessible secure and automated banking experience built for the scale of modern India. Human resources under UDAAN transformation initiative, the bank is driving growth through a robust objective performance framework aligned with strategic strategies. We have revamped the digital performance management system to strengthen accountability, integrating new age metrics such as conduct risk and customer feedback alongside launching the [indiscernible] to accelerate women's leadership development. We have also announced the tentative dividend. I think we need to wait for the AGM approval, but the board has approved INR 3 for every INR 2 of the face value or the share holding -- almost it comes to 150% of the face value. While concluding, Punjab National Bank is sharpening it's strategic focus on core franchise strength with the targeted efforts to build a stronger CASA-base and expand the RAM portfolio supporting better margins and operating efficiency. A disciplined approach towards risk management anchored on containing slippages and accelerated recoveries continues to reinforce asset quality trends while digital and workforce transformation are resetting operating capabilities. Bankers are still -- 3 important verticals, credit card, cash management services and supply chain finance. We will see lots of transaction in current financial year in big segments. With these structural levels in place, the bank is poised to sustain growth momentum and progressively strengthen its competitive positioning across all the segments. Thank you very much. Along with me, all my executive directors and the entire management of our bank is there here. And I welcome any clarity or any queries or anything which you would like to discuss about the financial results of our bank '25, '26. Thank you very much.

[Operator Instructions] The first question is from the line of Ashok Ajmera from Ajcon.

Thanks for giving this opportunity. Complements to Ashok [indiscernible] and the entire team of the Punjab National Bank for achieving most of the, I mean, parameters or guidance or the most of the parameters and especially very heartening to note that the credit growth for FY '26 has been 12.7%, which is better than even the guidance which was given. And everybody was apprehensive about that, which you achieved. Very good. Even reasonably good deposit growth also and good business growth also. Having said that, sir, I have got a couple of data points and some discussions, some comments of yours just two points. So if you look at the slippages in this quarter, the slippages in this quarter has gone up a little bit higher by almost about INR 800 crores and SMA-2 numbers have come down from INR 1,800 crores to INR 450 crores, in which measure in MSME and agri, which has come down. So does it mean that many of these accounts have slipped -- because you have given only SMA-2 numbers. So we would like to also know the overall color on the SMA book because of the present situation and also about the slippages, sir. This is the first question.

Thank you very much, Ajmera. First, I will touch the slippages part. See, in this financial year, the slippages is INR 2,758 crores and if you compare it with the last financial year, '24, '25, that time, the slippage was [ INR 3,051 ], almost INR 3,000 crores. And we have seen the trend almost every year because of the review renewal that falls in this particular month -- the quarter from January to March. And most of these MSME loans and agri loans that comes for the review renewal. And because of those things, sir, in this particular quarter, there will be slightly elevated slippages will happen compared to the Q1, Q2 and Q3. But still, if you see the overall slippages which has happened in the bank, it is well within the guidance which we had given, 0.60%, our guidance was below 1%. So we have kept the slippages fully under control. And I will give you the figure also. In the retail, INR 439 crores has slipped compared to INR 490 crores has slipped in '24, '25 in the same quarter. I agree it is INR 1,069 crores which was INR 1,400 crores, which have slipped in '24, '25 and MSME, INR 1,100 crores or whereas it was INR 995 crores. So almost in all parameters, we have brought it down, and it is fully under control. Absolutely, there is no challenge. Now SMA-2, you have mentioned that INR 5 core [indiscernible] which we have given in the analyst presentation, but I will give you -- what is the total SMA-0, 1, 2. The actual number is 3.30%. It is lowest ever in our bank now. So the -- everything is fully under control. Retail, it is 8.21%, agri it is 3.06%, MSME it is 6.43%, others it is 0.28%. So almost all segments put together, grand total is [ 103.30% ] for SMA-0, 1, 2 irrespective of the amount.

That is a point well taken, sir, and you explained it very well. Sir, just now you said the guidelines have been finalized by RBI. So we have been talking about it for the last 4 to 6 quarters about the preparedness of the bank, every bank on the [ scene ]. So now the guidelines having come out in full and finally, where do we stand to take care of the additional provisions, which will be required? Like you already said that you have got a floating provision additional of INR 2,045 crores. Is it to take care of the ECL provisions only? And how are we prepared? And how do we plan to take care of that in the coming years.

See, if you see our capital position, and the CRAR and the CET1. Both these parameters, the capital is 17.74% in the CRAR and the CET1 is also 13.60%. So we have enough cushion to take care of any requirement, which will come on account of implementation of ECL from 1st April 2027. That is the first thing. Second, keeping in view that additional provision, which is likely to come, we have already kept more than INR 2,000 crores, which are already -- you have also mentioned INR 2,045 crores in precise. It is kept for the floating provision that can take care of my ECL requirements or any eventuality, which comes because of the [indiscernible]. So we have enough room to take care of anything which happens in the system. And since I have already mentioned the underwriting standards of our bank and the SMA position. So we do not see any much challenge in implementation of the ECL from 1st April 2027.

Okay. So the one thing I observed in the employee cost, which has gone tremendously -- I mean, down as compared to the last quarter of INR 5,089, to INR 3,747 crores. Does it mean that in the earlier quarters, a little more provision for the employee cost, I mean, were taken? Or is it because of the rate change in the pension and other [indiscernible]? What is the reason which can be for INR 1,342 crores reduction in this quarter and which is added to the profit and having -- if that would not have been there, then our profitability would have been terribly affected.

[indiscernible] see in the financial ratios, there is always [indiscernible] this happens. See, how -- I will tell you why and how it has happened. One is there are some additional provision which was kept during the Q1, Q2 and Q3, definitely some blowback has happened because of the additional [indiscernible]. AS-15 also, what has happened, bond yield has gone up. Now if it would have reduced, it would have increased my treasury income. Now my treasury income is very, very subdued in this quarter. So sir, impact will be there. So that impact has come on the AS-15 positive. So in the entire system, some there, some challenges there, somewhere some opportunity also will come. Now in the Q1, Q2 and Q3, we had calculated as per the yield, which was prevailing at that point of time. Now that [indiscernible]. So that has affected my treasury income. But that has put me in the game by the actual calculation, which has happened through the actuarial. So we need to see the overall how the bank is performing. And it is not a onetime the operating profit has happened in this particular [indiscernible] Q1, Q2, Q3, Q4, all 4 quarters. We are more than INR 7,000 crores of operating profit, more than INR 5,000 crores of the net profit we are giving. So you see the consistency will be there. And you see our chart, whether it is a net profit, operating profit or the ROA, all those ratios, if you see, very, very consistent growth is there, and I can assure you to you and the entire investors who are here that this persistency will be there in the system.

Yes, a point well taken. But the treasury income has gone down, and that is what is reflected here. Because of that reduction, the treasury income loss is offsetted by the reduction in the employee cost. Sir one thing, we again see in the taxation also, sir. In the first quarter, it was taken of INR 5,083 crores coming into the new regime. But thereafter, it is INR 1,700 crores then INR 1,200 crores and again, now INR 1,852 crores. So is that some other factors because in this quarter, the profit before tax has increased only by INR 745 crores. On that, the tax has increased by INR 621 crores. Almost 90% of the -- 85% of the additional profit before tax. So is there any still some items which are going into tax or some of the items which we do not know about?

Yes, I will ask my CFO, Mr. Grover, to answer this question.

Sir, last quarter, our -- this rate of -- actually, we are paying at the rate of 25.168% last [ quarter 3 ] so it was 19.44%. We also conveyed earlier in this investor meet that quarter 3, we got refund of about [ INR 506.01 ]. [indiscernible] release of the earlier provisions, which were made in anticipation of our higher tax outflow. So last quarter was the reversal. And this quarter, 26.16% is our rate against our 25.168%. [Foreign language]

Even beyond '25 [ 17% ] also, it is more by about INR 60 crores, INR 70 crores. But...

[Foreign Language]

Now one point last is on the NIM that -- you had given a very good target of the NIM of 2.3% to 2.9%, but we have ended up to 2.57%. And that is what is the scenario I mean everybody is [indiscernible]. But going forward, you have given the 2.6% to 2.7%. Can we not think of, again, giving the guidance of 2.8% or 2.9% something and try to achieve it rather than slimming down or lowering down the NIM target? This is one. Second is last is -- now what is happening in the [indiscernible] crisis, the war which is going on between Iran and U.S. and Israel, have you started seeing any impact on our accounts, especially the MSMEs, some pressure is being seen or we are almost neutral on that or muted on that?

[Foreign Language] I will touch that. See, we could have done that 2.8% to 2.9%. But considering the prevailing situation, which is there and the deposit rate, which is still at a very elevated level. And then in the first month and first quarter of this financial year also, we do not see much change happening in the deposit front. As far as the rate is concerned. The deposit is available, there is no challenge in the liquidity. Rate is a little bit high. And you are seeing [indiscernible] environment, the bond rate is very high. So things are totally different at this point of time. So we thought that instead of giving 2.8%, 2.9% and showing a very [indiscernible] picture and coming down. We thought that to keep that 2.6% to 2.7%, we will watch the situation for Q1 and Q2 and then if it is any required to be modified, we will do -- we'll take your call in the third quarter of this financial year. Now coming to the stress. As of now, we have not seen any challenge in our book now. In fact, we had interaction with my exporters and importers of all these affected areas. And we had conducted twice [indiscernible] with all those people. And we have also told them that any challenge, which comes in the system, we are there to protect them. We are there to help them. And any such eventuality comes, definitely, bank is there to take care of those requirements.

The next question is from the line of Mahrukh Adajania from [ Tara ] Capital.

On your provisions, see earlier also, there was a write-back from [ ILFS-1 ] of the accounts, and you had not taken it into the numbers. And now other banks this year this quarter have taken another account, sterling biotech in their numbers as a write-back. Have we accounted for the write-backs on these two accounts in our numbers now? Were they both accounted for in 4Q? And under which line item?

Sterling has been factored madam, sterling is technically right-off account. So that amount is factored in our operating profit. The ILFS is still -- it is in the standard provision, it is kept. We have not taken up in our -- the operating profit -- so we will see that maybe Q1 or Q2 depending upon the situation, or we will take back in the operating profit.

And there was a reversal in your standard asset provision also this quarter, right? It's a negative number. So what was that for?

That is because of the 7 June circular implementation the restructuring, which we keep it or -- and the account gets upgraded. So both things the reversal happens around [indiscernible] NPL will also -- reversal has happened because of the RBI modified guidelines.

No, sorry, I didn't get that. Sorry, sir, could you please explain again?

There was a release of INR 727 crores which was left in the standard account provision because of the large borrower account framework under the guidelines of RBI which the RBI modified that guidelines, and it was effective from 1st of January 2026. So because of that, there is a release of INR 727 crores in the standard account of provision has happened.

The next question is from the line of Jayant Kharote from Axis Capital.

So first question is on the LCR. What was the average LCR during the quarter? And what is the comfort for the next year at what levels do you want to run it?

Around 125%, we would like to keep it. And we are at the -- almost at the same level as on March '26. 125%.

Great. Sir, the second question is in your guidance. I can see that you are building in an NII growth of 7% despite the fact that we expect the NIM to be slightly better and credit growth of 12% to 13%, which means essentially you are running down your non-loan assets, right? It could be investment book or others. But your LCR doesn't have that headroom. So how do you plan to achieve that?

See, two things, which we are planning now, and we have already started working on that. One is if you see our -- the CASA growth and especially in the CASA -- SB individual. There has been a very significant growth has happened. 9.2% growth has happened in the SB individual front, which is the core deposit and last year, a lot of initiative in the bank has suggest entire [indiscernible] products of the bank was revamped. And more than 40 lakh new quality accounts were opened. And in that good traction has happened because of that 9.2% growth has happened. And we are expecting in those accounts further accretion will happen and the new account will get opened. So one is that we are expecting the good traction should happen in the half of deposit this quarter. Second is the retail term deposit. The bank is putting a lot of focus now because of these two things, we are expecting that cost of deposits going forward, it will come down. Second important aspect from the asset side is that we have started putting last year onwards. Focus on mobilization in the RAM portfolio, retail agri and MSME. And we have seen the impact that is happening. 20% every quarter, there has been a growth in the MSME front. And we know that MSME is the largest contributor and highest contributor in the profitability of the bank, not only our bank and all the banks. High yield will be highest in the MSME segment. So there, we want to build up a good portfolio. Second is the agri sector, we have grown at 16% in the agri priority sector. Retail, we have grown at 18%. So core retail, agri and MSME, last year, a lot of activities have happened. A lot of outreach plans have happened. And because of that, this growth we have seen and this momentum is going to continue in this financial year also. Already in the [ 5 month ] itself, massive outreach activity for the retail has happened in the more than 200 centers. We have mobilized INR 9,000 crores of the retail portfolio in the lead we have generated. 27th of April, we had the MSME outreach activity at MSME clusters at 200 centers, 220 centers in the country. We have mobilized INR 21,000 crores of lead under that MSME segment. And then [indiscernible] March, we are going to out agri -- the expo at more than [ 200 ]. So these are the activities which we are doing it that the dependency on the corporate loan book as of now, which is there to the extent of around 46% to 47%. We want to bring that share down to -- in the long term, it is 40%. Short term, it is 42% and in the RAM, we want to bring it to 60% in the long run and around 58% in the -- this financial year. So if that composition happens, automatically, [ my yield ] on advances will go up, and that will contribute in a bigger way in our NII.

Sir, this would be baked in your NIM guidance of 2.6% to 2.7% , right?

We are definitely. Yes, definitely, we are going to do that.

So I'm just trying to understand why would you guide for an NII growth of only 7% then when you're expecting NIM expansion at 12%, 13% credit growth.

You were talking about NII? Okay. See, when we are talking about this growth to happen and it is not that the entire scenario will get changed. And when my NIM will be in the range of 2.6% to 2.7%. So I don't think -- and we should not expect that NIM will grow at 10% to 12%. It will not happen. So if my NIM is just growing by 10 basis point improvement, it's going to happen, then definitely, I think the NII also will be in the same range. We are going to revisit [indiscernible] present situation. We have kept this for the next two quarters. We'll watch the situation how the deposit rate happens in the system and how the credit outflow happens. And based on that, we'll revisit in the month of October.

Sir, just one data point. I don't know if you've given already, what was the adjustment in the employee cost on the yield hardening, the amount?

Total impact of -- positive impact is INR 2,121 crores.

INR 2,121 crores?

Yes.

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

Continuing the previous question, sir, it looks like mathematically, the guidance, if you were to break down, so loan growth will remain at 12%, 13% and NII, we are saying will be lower than credit growth. So then mathematically, NIM should decline, right? So how would these 3 things [ steady ] is the NII growth rate slower than credit growth, then [indiscernible] NIM should decline or if NIM is expanding, then NII growth should be higher than credit growth. So that is the question, sir. The NIM number is exit quarter does not look like that, but just wanted a clarity there.

No. See, we have kept this NII at 7% at a conservative level because the portfolio under the deposit and portfolio under the asset side -- still a lot of things have to happen in the system. See, our overall RAM growth -- RAM here in the overall credit is around 54%. Now in this financial year, we are trying to [indiscernible] 54% to 56%, 57% we are trying to reach now. If that happens, there will be some improvement in our yield on advances because as of now, Bank is totally -- we were towards the corporate side. We had -- in fact, one year back, we were having around almost 49%, 50% in the corporate loan book, which we have brought it down to around 46% now. So the moment my corporate loan book starts coming down and it comes to around 40% and the RAM there become 60%, I think the lever of the NII will definitely -- it will improve now because then we will have a total visibility at what rate we have put it and what rate the [indiscernible] started, I think that is going to continue. Corporate loan book, every day, there is a challenge. So there is uncertainty in the corporate loan book. And that is the reason we can't -- the forecast that my NII can grow at 12% to 13% since our credit growth is happening at 12% to 13%. That doesn't happen. So we need to rebalance and design our portfolio in such a way that there has to be sustainable growth in the interest side, it should be there. So that is the reason we have kept some conservative level at the NII.

Okay, sure. And secondly, sir, in this portfolio, core retail, core RAM and the reported RAM, it looks like that IBPC portfolio is still INR 70,000 crores. Is that the number normally correct?

No. It has come down to INR 32,000 crores down.

Okay. And this will come down to almost a negligible level by, let's say, FY '27 end?

Yes. See, last year, almost INR 19,000 crores, we have said, and that too in the retail segment because this was all the low-yielding advances. So despite that, we have grown reasonably well. So what we are doing is, we are going to replenish all those IBPC [indiscernible] as whatever is there at the lower end and around INR 18,000 to INR 20,000 crores from the [indiscernible]. We want to totally come out of this IBPC business. In fact, going forward, a lot of things you will see happening in the retail agri and MSME side, the core activities.

Right. So sir, I'm just looking at the Slide 10. So which shows that retail INR 80,000 crores in retail, excluding IBPC's [ 251 ]. So roughly INR 29,000 there and agri -- and agri PS. Okay. So only agri PS is prior to sector, right? The difference is not the IBPC, the only [indiscernible] retail.

Only in the retail. It is only in the retail.

Sorry, coming back to main question. So there are two components. One is yield, which you explained as the core retail portfolio improves, there will be uptake in the yield. On the cost, on the model side, this quarter, the cost of deposit has only declined by 4 basis points. Maybe there was some activity on the wholesale bulk deposit short term also. How should one look at cost of deposits, Will your cost of deposits keep declining? Or they will be broadly stable or they will start moving up, how to look at cost of deposit?

I think we are seeing and we are very closely watching our incremental cost of deposit. And I have compared the January, February, March and April [indiscernible] there had been some decline happening in the incremental cost of it all. That is one part. Second part is that '24, '25, we had one special scheme, which I had mentioned last time also, 7.25% and 7.75% [indiscernible]. Almost 95% of those COGS also have been repriced by end of the Q2. So [indiscernible] new deposits, which we are [indiscernible], and that to [indiscernible] it is happening at a lower cost. So we are expecting that the Q1 and Q2. Definitely, there will be some improvement on account of this in our NII. So maybe around 5 basis points I'm expecting that definitely some improvement it will happen in the cost of deposit side.

Right. Sure. And secondly, sir, on, let's say, -- on the SME book and ECL, sir, last quarter, we had said that INR 9,000 crores to INR 10,000 crores was the provisioning shortfall as per the draft guidelines. Now if you had a chance to look at the final circular, does that -- you see a transition impact of INR 9,000 crores to INR 10,000 crores. Does that broadly number remains or there is a revision to that?

I think for the final number, I think we just wait for another two quarters because already we have onboarded the digital platform now. And the modeling is also in place. But I can assure you one thing that the credit -- the capital adequacy which the bank is having and the floating provision, which we have kept, it is sufficient to take care of my ECL requirement, which will start from the first [indiscernible]. Absolutely, we don't see any challenge and any threat on our balance sheet at all.

Right. Sir, capital is very robust and maybe all time high, and that NPA anyway has been coming down.

And one more thing I will tell you to ask this capital side, See, last year, we had taken a provision for INR 4,000 crores CET1 and INR 4,000 crores of [indiscernible]. INR 8,000 crores of capital raising, which we had planned, and we had taken the approval from the board. And we didn't get an opportunity or didn't feel that we should go to the market, and we have not raised any capital last year. Despite that, INR 5,489 crores got matured, [ INR 81,495 ] crores and tied to INR 5,000 crores maturity was there. With all those things and not raising the capital, our capital position is 17.7% now. So to some extent, the interest of which we were paying on these bonds, that also we have calculated at how much additional gain, which we are going to happen because of [indiscernible] of the bond. That amount is coming to around INR 175 crores. That accrual will happen in this financial year. So we are very mindful. And in fact, this year also INR 5,890 crores, 81 bond plus [indiscernible] is -- they are completing [indiscernible] and we are not going to raise any capital.

Okay, sure. And sir, if you have this number in absolute rupees crore for SMA-0, 1 and 2, you have given 3% for total. But I just needed the 0, 1 and 2 separately at the bank level.

I will give you.

Yes. Sir. And then I have one question.

What you want, the retail segment-wise want or SMA-0, 1, 2, [indiscernible]?

0, 1, 2 Sir.

Okay. SMA-0 is INR 24,643 crores. SMA-1 is INR 13,970 crores. And SMA-2 is INR 2,922 crores. All put together, it is INR 41,534 crores, 3.30%. This is irrespective of amount the entire SMA-0, 1, 2 portfolio.

Right. And last question, sir, on AFS reserves, right? So we have had some, I think, INR 500 crores of revaluation and a negative number. But last quarter, we also had one listed investment, which keeps fluctuating. So was it due to that? And what was the change in AFS results -- I mean what is the outstanding AFS result as of March 31 versus maybe December 31?

It is only because of that particular asset, which you are mentioning, mainly because of that one is the [indiscernible].

Look, sir, we had taken the NPL in last quarter also. And then this, again, we had an NPL it.

What has happened to see [indiscernible] what has happened because of the crisis, market has -- [ EPS ] have [ fall down ] [indiscernible] and we take the figure high on March '26. So now it has [indiscernible] has gone up now. So that is a challenge in the system.

Right. And sir, you explained the number for outstanding AFS results as of March and maybe as of December, that will be it from my side, sir.

AFS reserves. You can give them. Yes. We'll give you. I'll give you.

The next question is from the line of Parameswaran Subramanian from Investec.

Sir, firstly, on the ECL, I think you spoke about the onetime adjustment rough numbers about that. But on a -- say, on a run rate credit cost basis, have you evaluated what can be the impact? So like you're saying the credit cost is below 0.4 is your guidance for FY '27. But if you were to implement ECL, how much say would the impact be on your run rate credit cost?

Yes, we have roughly calculated. And I will tell you that for ECL, let us wait for another two quarters. By July, I think we will have a very clear visibility that what is going to happen in our system. But rough calculation, which we have done, we are perfectly in line with the capital requirement, what is to be done and the asset quality, what should be there. We are perfectly -- we don't have any challenge. Floating provision, we have already kept more than INR 2,045 crores. So rough calculation, which bank has done, we are able to meet all those things, which is going to happen in the system from 1st April 2027. Actual number, let us wait for some time, and then we will discuss about the actual number which is there in the system.

Just a follow-up on that. I think capital, I think we appreciate, right, that we are varying capitalized but the question is more how it affects your ROE? Will you be able to deliver over 1% ROE even...

Yes. Absolutely. Why? I will tell you. See, we have 97% PCR, right? Stage 3, I think sufficient releases can happen in the system now once we get -- once the ECL gets implemented. So having 97% floating provision in the system and [ 17.474 ] the capital adequacy. I think these 3 things should give the confidence to all the investors that perfectly bank is very, very compatible position. And that, too, has to be implemented in 5 years. We don't require 5 years, I can tell you. We will do it in 1 or 2 years [indiscernible].

Perfect. I look forward to the more detailed numbers that you'll discuss on next quarter. Sir, secondly, on your NIM. So last quarter, you had given this -- on [indiscernible] repricing, you had given some rough numbers, that 70% of your term deposit [indiscernible]. Where are we now roughly?

So now those higher -- yes, those special deposits, which I had mentioned in our previous call, that is almost 95% have been repriced in the end of March. But we have not seen much the traction happening or the reduction happening in the cost of the [indiscernible] so what has happened, we were expecting that the February and March, the deposit rate will come down because of the reported card and the inflation scenario. But that has not happened in the system. It's still the deposit rate is a little bit elevated. So that is one of the reasons, by the impact which we are not able to see in our NII and the name. But I will tell you, incremental -- the deposit, incremental deposits, which we are mobilizing it in the month of February, March and April, every month, there has been a deduction now. Of course, 2 to 3 basis point reductions are happening in the month.

Fair enough. So this improvement in NIM that you're talking about, 2.6% to 2.7% will mainly be funding cost or it will mainly be the mix that you're talking about on the loan book?

Both I'm taking. One is the deposit side. And second is the RAM share which we are planning to increase and the activity which we are doing it. Both side, it will improve.

Fair enough, sir. Sir, one last question, sir, on the wage revision. So Finance Ministry has started asking the public sector banks to start the negotiations. So by when can we -- and where are we positioned, say, if you have any rough numbers that we can talk about [indiscernible]?

See, the wage revision due [ itself ] is the first November 2027. So financial year, '26, '27, it doesn't impact at all.

So it is not -- you will not start making provisions for this?

No.

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

Firstly, just a clarification on the AS-15 provision number you gave of about INR 2,100 crores. Is that the amount of provision that you have reversed in this quarter? it was a negative provision, which we made in this quarter.

Yes, correct. My CFO will respond to you.

So we have a total provision of INR 1,814 crore AS-15 for this financial year. There was a reversal, but now to that extent, it was in 3 digits only. It was up to INR 736 crores.

But in this quarter, the provision towards AS-15 was a negative INR 2,100 crores. Is that, understand, that correct?

No. [indiscernible]. First quarter, it was INR 1,185 crores we made the provision. Second quarter, we have again made a provision of INR 700 crores. Quarter 3, again, we made [indiscernible] of INR 700 crores. And this time, because of the hardening of the [indiscernible], there was no need of making a further provisions in AS-15. So we treat it as a prepaid AS-15 to the strength of INR 736 crores, and the balance INR 18,014 crores has been booked as an expenditure in the employee cost.

Sir secondly, if you can share what is the average yield on your corporate book versus the average yield on the RAM book so that we can get a sense of how much benefit you can get from a loan mix?

Yes. Corporate yield is 7.55%. And MSME yield is 9%. And if you see our domestic yield, that is 8.23%. So corporate loan book gives us lower [indiscernible] domestic yield of all the sectors.

That was the last question for the day. I now hand the conference over to the management for closing comments.

Thank you very much to all the time the investors and analysts. I thank the way you are [ reporting ] it in our bank. On behalf of the entire bank, I can assure you that we have a very, very robust system in place and we are mindful of growth, profitability and asset quality. I think the [indiscernible] which you have maintained may request that you maintain the same trust and confidence in PNB. We will continue to give the very consistent profit performance. Thank you very much.

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