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Informist, Monday, Oct. 20, 2025

 

By Shubham Rana and Priyasmita Dutta

 

NEW DELHI – Punjab National Bank may look to raise around INR 40 billion by March to meet payment obligations for instruments maturing in this period, particularly in the December quarter, said D. Surendran, executive director at the bank. The fund-raising will also help the bank keep its capital adequacy ratio at the current level of over 17%, Surendran said.

 

India's second-largest public sector lender by deposits has maturities of around INR 30 billion due in Oct-Mar, Surendran told Informist after the release of September quarter financial results. "So, we may go to the extent of our requirement, may be around 4,000 (INR 40 billion)," he said. "...it may be 3,000, (INR 30 billion) it may be 3,500 (INR 35 billion) only to that extent," the executive director said Saturday. "And absolutely, we don't want to further come down below 17% in terms of our capital adequacy which is very good to healthy ratio."

 

The public sector bank Saturday reported a net profit of INR 49.04 billion for the September quarter, up 14% on year. The bank's shares Monday ended nearly 4% higher at INR 118.10 on the National Stock Exchange.

 

PNB's capital adequacy ratio as of September end was 17.19%, lower than 17.50% a quarter ago, but higher than 16.36% end-September 2024. The bank is looking for an appropriate time to raise the funds and is currently studying the market, Surendran added. "...because it is for long-term, we are looking for the opportune time when to source the amounts."

 

In the June quarter, the board of PNB had approved a fund-raising plan of INR 80 billion for 2025-26 (Apr-Mar) with INR 40 billion earmarked for Tier-I capital and INR 40 billion for Tier-II. Managing Director and Chief Executive Officer Ashok Chandra had said in July that the bank may raise only INR 10 billion–INR 15 billion this fiscal. 

 

The bank has not yet raised funds as part of this plan. It has, however, raised INR 9 billion through its 10% stake sale in Canara HSBC Life Insurance Co. Ltd. in the life insurer's initial public offering earlier this month. In FY25, it had raised equity capital of INR 50 billion through a qualified institutional placement and INR 30 billion using Tier-2 bonds.

 

The Delhi-based lender is keen on venturing into mergers and acquisitions financing after the Reserve Bank of India earlier this month allowed banks entry into this space.

 

While the bank is yet to formulate a policy on the financing of M&As, it will not be a hurdle if the lender sees a suitable opportunity, Surendran said. The bank is open to financing M&As this year itself if an opportunity arrives, he added.

 

"Suppose some new companies are announcing the acquisition. When they look for bank finance, definitely, we have to expedite our process, complete that so that we'll be in the market to acquire that," he said. "Definitely we will be there. Time is not a constraint for us. We can make a policy and get it approved through the board."

 

Punjab National Bank will also hold discussions with other lenders and the Indian Banks' Association to come up with a broader policy since M&A financing will usually be done by a consortium of banks.

 

Asked about the trajectory of the bank's margins, Surendran said the net interest margin will rise going ahead from 2.60% in the September quarter. Even if the RBI's Monetary Policy Committee lowers the repo rate by another 25 basis points, having already lowered it by 100 bps to 5.50% this year, it may not impact the bank much, Surendran said.

 

"Almost 60% of the bank's deposits have already been repriced. Only 40% of the deposits remain to be repriced. We will be comfortable once 75% to 80% of the deposits are repriced, we are in a very comfortable position," he said.

 

The bank aims to increase its net interest margin to 2.7% in the December quarter from 2.6% in the September quarter. "Then if possible Q4 we should take it to 2.75% or 2.8%. That's what our plan is," Surendran said. The bank's net interest margin guidance for FY26 is 2.8-2.9%.

 

The reduction in the cash reserve ratio is also helping the bank with additional funds without impacting the margins, Surendran said. The RBI has lowered the cash reserve ratio by 50 bps already and is scheduled to reduce it by another 50 bps to 3.0% of net demand and time liabilities in the fortnights beginning Nov. 1 and Nov. 29. "The reduction (in CRR) is giving us some incremental lending opportunity," Surendran said. The bank reported loan growth of 10.1% as of Sept. 30, lower than its guidance of 11-12% of FY26.

 

Surendran said the bank has INR 1.79 trillion of sanctioned corporate loans, which are yet to be disbursed. The majority of the total loans sanctioned are for sectors such as power, renewable energy, hotels, educational institutions, road, steel, cement, and other infrastructure goods.

 

"We hope that in the normal scenario, the pipeline is sufficient for our expected growth. We want the corporate segment to see double-digit growth, we want to grow at 10%," the executive director said. The bank's loans to corporates grew 7.9% on year to INR 4.82 trillion as of September end.

 

The bank's focus on foraying into the M&A financing will also help it scale up the corporate loan book, Surendran said. "So these are new opportunities, new avenues, everything is there."  End

 

Edited by Akul Nishant Akhoury

 

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