PNB expects NIM pick-up from Q3 with access to more CRR funds, imminent cut in deposit rates

PNB Managing Director and CEO Ashok Chandra
| Photo Credit: Arrangement

Punjab National Bank (PNB) expects a pick-up in its net interest margin (NIM) from the third quarter as the Reserve Bank of India’s decision to reduce cash reserve ratio (CRR) will provide access to more funds to lend, Managing Director and CEO Ashok Chandra said here on Wednesday.

Another factor bound to help improve NIM is an imminent lowering of deposit rates by the public sector lender in the backdrop of the central bank also recently slashing repo rate by 0.5%.

The RBI decision to reduce CRR by 100 basis points, in phases from September to November, will see PNB getting an additional around ₹15,000 crore of funds that otherwise were not earning interest. “We will be able to deploy that… generate interest income,” said Mr .Chandra, who was in Hyderabad for an MSME and SHG outreach programme organised by the bank.

In the first two quarters, the NIM was expected to be 2.8-2.9%, something the bank had projected anticipating changes to the repo rate, he said during a media interaction.

On how deposit rates will move, the PNB MD and CEO said discussions on revisiting the rates, something other banks were also mulling in the backdrop of the repo rate cut, have begun. “We are going to take it in to asset liability committee meeting on June 30 as the 100 basis point repo rate cut [in recent months] has [improved] liquidity in the system. Inflation is [projected to be lower] at 3.7%. So, we are going to study… and re-price [deposits],” he said.

This is the time for lower interest regime. “Once lending rates are down, definitely everybody will have to reduce deposit rate [too], he said.

To queries on corporate credit offtake, he said “We have ₹1.35 lakh crore book.” A lower interest regime is only expected to push up the demand, Mr. Chandra said, adding renewable energy, steel and infrastructure are sectors on which PNB is bullish.

Enhancing credit to Retail, Agriculture and MSME (RAM) remain a priority. PNB is keen increase the share of RAM to 57% this fiscal from 53% in FY25, he said, adding the outreach programmes are a way of achieving the target.