PNB’s Build­ing Up Cap­i­tal for any Fu­ture M&As: MD

The Economic Times - - Money -

In­dia’s sec­ond-largest bank, Pun­jab Na­tional Bank, which posted a 12% rise in net profit to ₹ 343 crore in the June quar­ter of 2017, has taken var­i­ous mea­sures to plug sticky loans and is gear­ing up for a con­sol­i­da­tion. Speak­ing to San­gita Mehta, MD, Su­nil Mehta, elab­o­rates on the bank’s war room for bad loans, the set­ting up a spe­cial syn­di­ca­tion cell and plans to sell non-core as­sets. Edited ex­cerpts:

Why has PNB given em­ploy­ees tar­gets based on the ‘av­er­age’ ba­sis in­stead of a quar­ter-end or year-end ba­sis? In the year-end or quar­ter-end tar­gets, ev­ery­one will go for bulk busi­ness and they will end the year without keep­ing in mind its im­pact on prof­itabil­ity. But once they start work­ing on an av­er­age ba­sis, it will be mainly de­pen­dent on their cus­tomer ser­vices and how much sta­ble busi­ness they have. On av­er­ages, it is not sim­ple to achieve year-end tar­gets. Also, it means peo­ple have not worked only for quar­ter-end re­sults, they have worked through­out the quar­ter to achieve those re­sults. Also, the gov­ern­ment has done away with the sys­tem of MoU with all banks for busi­ness growth.

At a time when there is hardly any de­mand for new loans, why has PNB started a spe­cial loan syn­di­ca­tion cell? Spe­cial loan syn­di­ca­tion cell is a con­cept we in­tro­duced re­cently af­ter analysing mar­ket con­di­tions. Nearly 6-7 banks have lim­i­ta­tions in lend­ing to their ex­ist­ing cus­tomers be­cause of the im­po­si­tion of prompt cor­rec­tive ac­tion by RBI. This lim­its their abil­ity to lend to their ex­ist­ing cus­tomers. Fur­ther, some banks have cap­i­tal shortage and do not have the cap­i­tal to grow their loan book. For­tu­nately, PNB is bet­ter placed in those two ar­eas. So, we are tar­get­ing cus­tomers of those banks that do not have the ca­pac­ity to give ad­di­tional but have good cus­tomers. We are not try­ing to take over their busi­ness. We are going to meet the in­cre­men­tal re­quire­ments of their ex­ist­ing good cus­tomers. So, what­ever space is left by PSU banks and which is taken over by pri­vate sec­tor banks… our bank is try­ing to chip into that space.

The gov­ern­ment has asked banks to raise cap­i­tal by sell­ing non-core as­sets. What has PNB done? Our non-core as­sets are val­ued at ₹ 10,000 crore and we are think­ing of sell­ing about ₹ 1,000 crore this fis­cal year. We have a lot of sub­sidiaries


like PNB Hous­ing Fi­nance, PNB Gilts, and they are listed. So, even if we sell a small por­tion, we can get ₹ 1,000 crore. We are not in dis­tress. We are ad­e­quately cap­i­talised in the cur­rent fi­nan­cial year. We are build­ing up cap­i­tal so that next year, even if merg­ers come, we are strong enough to ab­sorb any­thing.

What are your cap­i­tal-raising plans? We have al­ready taken ap­proval to raise ₹ 3,000 crore. We will go to mar­ket when it be­comes a win-win sit­u­a­tion to ex­ist­ing share­hold­ers and add value to new share­hold­ers. Gov­ern­ment eq­uity is right now 65%. So, that will get di­luted due to fresh is­sue. It might be through QIP (qual­i­fied in­sti­tu­tional place­ment) or a rights is­sue or an IPO. We have not asked for any ad­di­tional cap­i­tal from the gov­ern­ment. We are not ask­ing them but if the gov­ern­ment has merger or amal­ga­ma­tion plans they might bring in cap­i­tal on their own.

Have you iden­ti­fied any bank for merger? There is noth­ing on the cards. But things are brew­ing and the Niti Aayog is work­ing on it…there are some think tanks work­ing on it. So, let them give us some op­tions, we will def­i­nitely work on it.

What kind of banks will fit your ac­qui­si­tion plan? Given a choice, I will def­i­nitely ac­quire banks which have syn­ergy in terms of geog­ra­phy and busi­ness sys­tems. The in­ten­tion of the gov­ern­ment is that there should be three or four big-sized banks like SBI. How can that hap­pen un­less you serve pan-In­dia? So, for pan-In­dia ser­vice, ge­o­graphic dis­tri­bu­tion will be a key fac­tor.

What are the ini­tia­tives taken by the bank for bad-loan res­o­lu­tion? We have cre­ated two war rooms. One is a call cen­tre type of set-up. They call in­di­vid­ual bor­row­ers and in­di­vid­ual branches. If they see your ac­count is going to NPA, they start tak­ing steps to pre­vent slip­pages. They will talk to the bor­rower and find out the so­lu­tion and work on it. The other war room is for re­cov­ery that deals with ac­counts that have al­ready be­come NPAs. Here, we have to de­cide on re­cov­ery mech­a­nism like SARFAESI or fil­ing a case in the Debt Re­cov­ery Tri­bunal or frauds where we file an FIR.

What are the ini­tia­tives to re­cover loans through one-time set­tle­ment? Close to ₹ 20,000 crore are small ad­vances in the doubt­ful cat­e­gory for which we have spe­cially de­signed one-time set­tle­ment scheme. For loans like ₹ 1 lakh, ini­ti­at­ing le­gal ac­tion is of no use. So, in­stead of going legally, we have in­tro­duced a scheme of 50% re­bate. The branch man­ager has been em­pow­ered to ac­cept ₹ 50,000 and give a no-due cer­tifi­cate. We have launched two schemes and set dead­lines of Septem­ber 30 and De­cem­ber 31 of this year.

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