New ECL norms impact on capital to risk weight ratio around 15 bps, says PNB
This story was originally published at 17:08 IST on 18 October 2025
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--PNB: Have sanctioned credit worth INR 1.78 tln, yet to be disbursed
--CONTEXT: Comments by PNB management is post-earnings press conference
--PNB: NIM improvement to take place from Q3 onward
--PNB: Stage 2 of RBI's draft ECL norms could be challenging
--PNB: Stage 1, stage 3 of RBI's draft ECL norms not a challenge at all
--PNB: See ECL norms impact on capital risk weight ratio around 15 bps
--PNB: See no major challenge in ECL norm implementation
--PNB: See 1-2% impact on retail, farm, MSME segment from GST rate changes
By Srijita Bose and Shubham Rana
MUMBAI – Punjab National Bank does not see any major challenge in transitioning to the Reserve Bank of India's proposed norms on expected credit loss accounting, the lender's management said in a post-earnings press conference on Saturday. However, the overall impact of the new norms on the bank's capital to risk weighted assets ratio could be around 15 basis points per year, if they come into effect from April 2027, it said.
The RBI's draft norms on the expected credit loss framework mandate that banks set aside more funds for potential bad loans on implementation. It also mandates that banks classify non-performing financial assets into three categories based on the period for which the asset has remained non-performing and the "realisability of the dues", while continuing to apply existing rules for classifying non-performing assets.
"Stage 1, I don't see any challenges there because...it (the new norms) prescribes the same rate. But stage 2, that is, the 5% we need to provide and that is the challenge. And stage 3 again, since our provision coverage ratio is already 96%, we don't see much challenge in that," Ashok Chandra, managing director and chief executive officer of the state-owned bank, said. Capital to risk weighted assets ratio of the bank rose to 17.19% at the end of September, from 16.36% a year ago.
The expected credit loss framework is designed to be implemented with a suitable glidepath of nearly five years, allowing banks to transition smoothly. The draft norm issued on Oct. 7, as part of the central bank's 21 developmental and regulatory policies for the banking sector, was announced after the Monetary Policy Committee meeting outcome on Oct. 1.
The second-largest public sector bank by deposits said that the pressure on net interest margins owing to the cut in repo rate by 100 basis points during the year was over, and the margins should improve from the current quarter. By the end of the September quarter, the bank's net interest income remained broadly unchanged at INR 104.69 billion from a quarter ago. The bank's global net interest margin in the September quarter was 2.60%, down from 2.70% in the June quarter. The bank's domestic net interest margin was 2.72%, down from 2.84% a quarter ago.
"This outlook is supported by the ongoing repricing of deposits and the favourable impact of the CRR (cash reserve ratio) cuts which will be fully materialised in Q3 (Oct-Dec) and Q4 (Jan-Mar)," the bank said.
Meanwhile, global advances of the bank rose 10% on year to INR 11.70 trillion at the end of the September quarter. The management said that though the bank was running behind its own guidance of growing 11-12% on credit side, demand has started to pick up. The bank has sanctioned INR 1.78 trillion worth of loans which are yet to be disbursed, which could help bring up its credit growth.
In the September quarter alone, the bank sanctioned INR 12.06 trillion worth of loans, out of which INR 10.47 trillion has been disbursed. Outstanding in these loans is INR 7.63 trillion which is close to 65% of the bank's total outstanding loan book, the bank said.
On the other hand, due to change in tax rates in the goods and service taxes, the bank sees growth in its retail, farm, and micro, small, and medium business segments by 1-2%. On Sept. 3, the GST Council overhauled the indirect tax regime as part of next-generation reforms by collapsing the four-slab GST structure of 5%, 12%, 18%, and 28% to a two-slab structure of 5% and 18%. The decision was implemented from Sept. 22. The council also introduced a new GST rate of 40% on sin and luxury goods.
The bank announced its earnings on Saturday, which showed the net profit of INR 49.04 billion beat analysts' expectation of INR 44.74 billion. The net profit for the quarter rose 14% on year and over eight times on quarter. On Friday, shares of the bank had closed at INR 113.70 on the National Stock Exchange, down 2.1% from the previous close. End
Edited by Ashish Shirke
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