PNB to transfer Rs 8,000 crore loans to bad bank by July

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NARCL, which was initially proposed by the Indian Banks Association (IBA), and later endorsed by the government in the Union Budget, is expected to be operational by July 2021.  

PNB to transfer Rs 8,000 crore loans to bad bank by July

India's second-largest public sector lender Punjab National Bank (PNB) will transfer the first tranche of bad loans valued at Rs 8,000 crore to the proposed bad bank - the National Asset Reconstruction Company (NARCL) next month, according to the bank’s managing director SS Mallikarjuna Rao.

NARCL, which was initially proposed by the Indian Banks Association (IBA), and later endorsed by the government in the Union Budget, is expected to be operational by July 2021.

NARCL will help in aggregating the loan book of stressed assets from all banks, and facilitate an easy process of auctioning through the Swiss challenge method.

On the asset quality front, PNB had gross NPAs of Rs. 104,423.42 crore in FY21 (vis-a-vis Rs. 73,478.76 crore in FY20) and net NPAs valued at Rs. 38,575.70 crore (vis-a-vis Rs. 27,218.89 crore in FY20).

In Q1 FY22, PNB expects substantial recovery from DHFL (subject to NCLAT clearance) and an overall recovery of around Rs. 8,000-10,000 crore in Q1FY22, said Rao.

PNB declared a standalone net profit of Rs. 586.33 crore for the quarter ended March 31, 2020. PNB would show a credit growth of 8 percent in FY22, and estimates to report a net profit of not less than Rs. 6,000 crore (60 bn) next year, Rao said.

PNB’s board of directors has decided to exit Canara HSBC Oriental Bank of Commerce Life Insurance Company (CHOICE), and the sale process would take around 1-1.5 years. The bank has also decided to exit Asset Reconstruction Company (India) Limited (Arcil).

The public sector lender aims to raise funds through a QIP. During FY21, the bank had made a QIP placement of Rs. 3,788.04 crore. In FY21, PNB issued Basel III compliant additional tier-I bonds of Rs. 495 crore through private placements.

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