Punjab National Bank

NSE:PNB

Q1-2026 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to the Punjab National Bank Q1 FY '26 Earnings Conference Call, hosted by Elara Capital. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Palak Shah from Elara Capital. Thank you. And over to you, ma'am.

[Palak Shah, analyst]

Hello, everyone. [indiscernible] earnings conference call of Punjab National Bank. Today, we have with us the management of the bank headed by Mr. Ashok Chandra, MD and CEO; Mr. Kalyan Kumar, Executive Director; Mr. Parma Savant, Executive Director; Mr. Bibhu Prasad Mahapatra, Executive Director; and Mr. Surendran, Executive Director.

With this brief introduction, I would like to hand over the call to Mr. V.P. Bansi, BGM Strategic Management [indiscernible]. So disclaimer statement, post which MD sir will address the conference. Thank you, and over to you, sir.

[Unknown Executive]

In certain forward-looking statements, apart from historical information, these forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Punjab National Bank undertakes no obligation to update forward-looking statements to reflect events or circumstances after the agenda. Thank you.

[Ashok Chandra, executive]

Good evening, ladies and gentlemen. I'm Ashok Shandra, MD and CEO Punjab National Bank. Warm welcome to this analyst meet. I'll just give the highlights of our business of profitability and key important ratios. The global gross business of the bank stood at INR 27.19 trillion as in June 2025. with a yearly growth rate of 11.6%. The global deposits stood at INR 15.89 trillion, with a Y-o-Y growth rate of 12.9% and Global Advantage stood at 113th a Y-o-Y growth rate of 9.8%. We are well above our guidance of 9% to 10% for deposits. And there has been slight dealt credit behind the guidance of 11% to 12% is there. Of course, we have the sanctioned credit limit to the tune of around INR 1.3 lakh crores, which are to be dispersed. CD ratio of the bank is at 7.09% as on June 2025. The CASA share is 37% as of June 2025, and our CASA deposits has recorded a growth of on Y-o-Y basis. CASA ratio is muted in this particular quarter, but we have mobilized 2.31 lakh new CASA account in Q1 of 25% with total risk CASA accretion to the tune of INR 4,686 crores. Our RAM advantage stands at INR 6.11 trillion which is around 56.6% of the domestic advances. The share of RAM advance was at 55.5% as of June 2024.

Coming to the profitability number. The net interest income stood at INR 20,578 crores with a Y-o-Y growth of 1% for Q1 FY '26, despite 100 basis point cut in the repo rate, and that has been passed to the clients also. Our deposit NIM percentage is at 2.84% for Q1 F1 2026, whereas the global NIM percentage stood at 2.70%, we are well below our guidance. We are below our guidance at our NIM at 2.8% to 2.9% for '25, '26. However, the same is expected to improve from Q3 onwards based on the repricing of deposits and positive impact on account of CRR curves. The operating profit for Q1 F1 2026 is INR 781 crores, which has improved from INR 6,581 crores for Q1 of FY 2025 and be INR 6,776 crores for Q4 of '24, '25. This is 1 time highest in our bank. Y-o-Y growth rate of operating profit is 7.60%. Profit before tax of the bank for Q1 FY 2026 is INR 6,758 crores as against INR 5,269 crores in Q1 of financial year 2025, depicting a Y-o-Y growth rate of 28.3%. However, net profits have reduced to INR 1,675 crores in Q1 FY '26 from the level of INR 3,252 crores in Q1 FY 2025 and INR 4,567 crores in Q4 of FY 2025 on account of shifting to the new tax regime and onetime income tax provision made there upon. Going forward, our net profit will reflect a healthy trend of improvement.

If I can talk about the efficiency ratio, the net profits are lower in this quarter on account of onetime IT provision based on the switching to the new tax regime. As such, our efficiency ratios are not a true reflector for this particular quarter. The same will improve from the Q2 onwards. Return on assets stood at 0.3% for Q1 FY '26 because of the lower net profit and on account of shifting to the new tax regime, the return on equity stood at 6.59% for Q1 FY '26. Earnings per share, not annualized, is INR 1.46 for Q1 FY '26. Our tangible book value per share as on 30th June 2025 is 92.64 which has increased from the level of 73.11 as on 30th June 2024.

If I can talk about the asset quality, bank has done very well in NPA management and reducing the stress level in the portfolio. The asset quality -- the GNPA has reduced to 3.78% as on 30th June 2025 from 4.98% in June 2024 and 3.95% in March 2025. Similarly, the net NPA percentage, which was 0.60% in June 24, has improved to 0.38% in June 2025. We are on track to achieve our guidance for GNPA ratio, our net NPA ratio for 2026 at below [ 3% ] and 0.5%, respectively. Our provision coverage ratio stands at 96.8% as on 30th June 25, which is well above our guidance of more than 96% for FY 2026.

The total rate of slippages during Q1 of FY 2026 was INR 1,886 crores as against the INR 3,001 crore in Q4 2025. Our guidance for slippages ratio was to remain below 1% in FY 2026, we are within our guidance level as slippage ratio for the Q1 126 as which has remained at 0.71%. The total recovery stood at INR 3,356 crores for Q1 2026 as against INR 3,249 crore in Q1 FY 2025. Our recovery continues to be more than the slippages, reflecting the improving asset quality. The credit cost stood at 0.14% for Q1 FY '26 well within our guidance for credit cost, which is below 0.5% for current financial year.

There is 1 highlight I want to bring you to all the numbers who are present here about the asset quality underwriting from the first of July '20 onwards till 30th June 2025, we have sanctioned INR 11.34 trillion loans, out of which we have disbursed around INR 9.84 trillion loans. The outstanding in these loans is INR 7.18 trillion as on 30th of June 2025, which is close to 63% of our total outstanding loan book. And the NPA in this book is hardly INR 3,964 crores, which is only 0.40% of the disbursed amount under risk underwriting. Segment-wise breakup of NPA interest underwriting is under retail 0.38%, agri 0.59%, MSME 1.58%. And for corporate, it is negligible at 0.01% this speaks about the good underwriting, which bank has undertaken.

If I can talk about the capital structure of the bank, as far as the capital is concerned, our capital education is 17.50% as on 30th June 2025, compared to 15.79% as on 30th of June 2024 and 17.01% as on 31st March 2025. Our CET1 and Tier 1 and Tier 2 capital stands at 12.5%. Tier 1, 14.62%, Tier 2, 2.18%.

Lot of digital initiatives bank has undertaken, and I will highlight some of the digital penetration which the bank has taken. The bank is continuously augmenting its digital base and focusing on building digital capabilities under the domain of AI ML and analytics-based business generation and the same is yielding tremendous results for the bank. The sale of digital transactions has reached more than 95% for Q1 FY versus 89% in Q1 FY '25. There is more than 100% increase in UPI transactions done through our mobile application, PNB One. Number of WhatsApp banking users have gone up by over 100% from 34 lakhs as on 30th June 2024 to 69.7 lakhs as on 30th June 2025. Our corporate mobile banking launched on 18th of September 2024, serves to more than 1.4 lakh customers with app rating of 4.1 on play store and 4.2 on Android. Sanctions under DG Lending, Germany has crossed INR 27,900 crores and every fifth lone is sanctioned in the bank through the digital mode. We have onboarded 4.5 lakh CBTC customers and 74.71 lakh transactions are done through the CBDCR a till 30th of June 2025.

Some other key initiative undertaken recently includes our Gen AI chatbot PIHU available on our website, IBS and PNB 1 further various enhancements have been made in the PNB 1 business mobile app. We are promoting the financial inclusion through digital channel with our comprehensive digital SSG journey, DG MSME loans, E-Mudra Loans, E-PM Vishwakarma and Digi Surya Ghar Yojana schemes to further digital push, bank is onboarding a system integrator for full-fledged gen AI implementation. Further, we have plan to launch a unified solution to streamline our more than 100 digital journeys. We are also looking forward to revamp our Internet banking solution and mobile banking applications.

Human resources play a very, very important role in any organization, and bank has done a lot of initiatives under the human resources. Bank has adopted new HR ecosystem, driven by project Udaan we are undertaking this project in 2 parts, namely digital PMS and capacity building. Under digital PMS cares of employees are being revamped to make them more business-oriented and impact-driven, ensuring a stronger alignment with their strategic objectives and operational goals of the bank. Further, we have launched Udaan Mobile app for employees on both Android and iOS platforms to track their progress conveniently. Under capacity building, we are undertaking numerous steps involving leadership development programs Gen AI learning chatbot and comprehensive skill development programs for employees.

My concluding remarks that focus area for the bank is on increasing CASA base in total deposits and ramp share in total advances. The same will help an improvement of NIM and profitability of the bank. Further containment of slippages and robust recovery will remain the priorities of the bank with the digital and HR transformation being undertaken, bank will witness durable growth in business and profitability on a consistent basis. Balance sheet of bank has just strengthened. Bad assets of the bank have reduced substantially and provisioning has increased. Bank will endeavor to increase its market share in both deposits and advances. Thank you very much.

Along with me, my entire top management team is there to answer any of your queries, clarifications or any guidance we are there too.

[Operator]

[Operator Instructions] We have our first question from the line of Akshit Agarwal from Smiths Institutional Research.

[Unknown Analyst]

My first question is on recoveries. There were weaker technical recovery and interest accruals. If you can shed more light on this, that would be great. And how do you see rest of the year? And further, sir, asset quality was benign with reduced credit cost and slippages, but SMA2 ratio picked up marginally, even though overall numbers remain favorable. Can we get more color on this, please? That was my first question.

[Ashok Chandra, executive]

Yes. First, I will touch about the recovery. In this particular quarter, the total recovery is INR 3,356 crores and recovery in the technical write-off is around INR 1,200 crores. And if I add this recovery in TW and the interest is the total amount of INR 1,700 crores. So this is all about recovery. And the guidance for this year already we have given that INR 16,000 crores will be the total recovery, which we will be doing it and within that INR 16,000 INR 1,500 crores per quarter, that is around INR 6,000 crores recovery will happen through the technical write-off.

[Unknown Analyst]

Right, sir. But this quarter, it was slightly weaker. So is it like some seasonal? Or is it like just a kind of this quarter, you would expect better recoveries, rest of the year just more public at this point.

[Ashok Chandra, executive]

Yes. The total recovery target which we have given, definitely, we are going to achieve in the first quarter, always the business and the total activity also remains muted because of the various transfers and all those issues are happening in the first quarter. And with that, I think the team has done very well, and we are able to recover INR 3,300 crores. Going forward, and already, there were some accounts which we are expecting that will happen in the June quarter. Already, those accounts have come down. And in the month of July itself, we have a good number for the Q2. So I'm expecting that the guidance, which we have given, INR 16,000 crores of total recovery, definitely, we are going to talk this number.

[Unknown Analyst]

My second question is on operating expense. I wanted to understand the reason behind elevated operating expense this quarter. was like 16% to 17% year-on-year with other OpEx growing at 22% year-on-year. So is it going to stay elevated for the year? Or is it like there were some one-off going in this quarter or some discount rate or something else?

[Ashok Chandra, executive]

See, what happens in the first quarter, because of the PSLC, which we purchased for the priority sector, that is the PSLC priority sector lending certificate. And that amount itself is around INR 800 crores, INR 850 crores. So that is 1 of the reasons. The operating cost for this particular quarter, you see that some number is high. Otherwise, definitely, there will be a stable expenses will be there in future Q2, Q3 onwards.

[Unknown Analyst]

Right, sir. Just I wanted to squeeze in 1 more question, if that's all right. If we exclude tax -- one-off tax provisions of like INR 33 billion, your ROA would be greater than 1%. With NIMs continue to decline, weak credit growth and treasury gains might not stay at elevated throughout the year. So what are the levers you are going to use to deliver over 1% ROA for the rest of the year?

[Ashok Chandra, executive]

First of all, with the migration to the new tax regime, that itself is going to help us by around 16 basis points in the ROA. That is the first point.

Second point is the NIM and the NII is muted for this particular quarter. And in fact, in the last meeting also, I had indicated that Q1 and Q2 will be a challenging quarter for maintaining the NIM and the NII. But definitely, the repricing, which is happening in the deposit front, and the deposit rate, which has been reduced, I'm expecting that Q3 onwards, definitely, the bank will have the good operating -- good NIM and good NII. I think the guidance which we have given for the NIM is around 2.8% to 2.9%. Definitely, we are going to hold on to this guidance.

[Operator]

The next question is from the line of Ashok Ajmera from Ajcon Global.

[Ashok Ajmera, analyst]

Yes. Thank you for the opportunity, and compliments to you, Ashok, sir, and all the management of Punjab National Bank, sir, you are firing on all the cylinders. And in the earlier question, you already answered that in spite of being a major recovery person, while in this quarter, the recoveries were less than the overall proportionate for the 1 quarter. And that is a valid point also June quarter being a little subdued quarter from the recovery point of view.

Having said that, sir, I have got a couple of some observations and some questions. Sir, on this -- just 1 is on the tax change in the tax regime. So if I understand correctly, out of this provision, higher provision of the tax of INR 5,083 crores, INR 1,600 crore or INR 1,700 would have been in otherwise also the tax liability, yes. So basically, INR 3,300 crore or INR 3,400 crores has gone from that DTA. So what is the expect calculation because at the year-end, if we take it almost about INR 2,9500 crores of operating profit, according to your guidance of 9% plus. So on that, our tax liability overall will be INR 7,300 something, under the new regime. So can I just understand that what would be the final tax figure in the P&L in FY '26, if that profit assumption is correct?

[Ashok Chandra, executive]

Yes. I will just share some facts about this. You have rightly mentioned that INR 3,324 crores has come out with the DTA, which the provision higher tax was there. Now because of the migration to the new tax regime, that is 24.9% in so it's 25%. So to that extent, INR 3,324 crores we had to sell out and INR 1,700 crores would have gone normally also with the tax rising. So that is the total outgo INR 5,000 crores plus is the outgo for this particular quarter. Now from the new tax regime means -- regime, Q2 onwards, we will have to pay tax at the rate of 25%. And assuming this INR 7,000 crores operating profit, which the bank has shown and the first time we have sold the INR 7,000 crores of operating profit.

And I hope that this trend will continue if I can reduce because 35% is the old tax regime and 25% is the new. So 10% I'm going to save. It means in the absolute number, it is 700 crore minimum every quarter I'm going to see on account of the migration to the new tax regime. So if you can calculate the 3 quarter, it comes to around INR 2,500 crores, net accretion will happen in the net profit. So I think this is the way I perceive and I can project it.

[Ashok Ajmera, analyst]

Yes, sir. Sir, even my calculation also is based on that. Hello? Somebody was talking.

[Ashok Chandra, executive]

Yes. Yes, please.

[Ashok Ajmera, analyst]

Sir, we have performed well in this quarter backed by treasury profits. We have made some treasury profits and also something in the revaluation of investment also. So going forward excuse me, with further rate cut expectations maybe in the later half of this year, maybe 2 cuts of 20 basis points going forward. One thing is that we are going to have some pressure on the margins because of the lag effect in the MCLR back accounts and similarly for the deposits. And other side, we will have a bumper treasury profit if we deal properly in the treasury books.

So having said that, build it treasury profits, which are shown INR 1,816 crores in the profit plus overall, if you see the segment-wise income on the treasury, it is INR 3,415 crores are against INR 1,963 crores in the last quarter. So going forward, we are continuing to see the same trend on the treasury income? Or do you think it will get little muted?

[Ashok Chandra, executive]

In this financial year, since we have built a very strong treasury book now. If you see our entire total portfolio under the treasury itself is around touching INR 5 lakh for old now. And vis-a-vis lower tax -- lower interest rate regime, which also you have highlighted, definitely, I think this book is going to contribute in a very, very bigger way to the overall income of the bank. And we are very confident that good treasury book is going to give us a good income in the Q2, Q3 also now. So that trend will continue.

[Ashok Ajmera, analyst]

On advances on the credit side are -- were a little bit slowed down, though in this quarter, having anything positive itself is a very good positive point, like you are a 1.19% quarterly credit advances have increased but still looking at PNB and your potential of you and your team. I feel that -- I don't think there is any third party proposals which are coming in. There was we have a strong pension pipeline also in many proposals which are in the pipeline. So are we still sticking to that 11%, 12% and we'll be able to achieve even -- I mean that also in the next 3 quarters are -- we feel it's a conservative 1 and you might go to maybe higher breakup 12%, 13% or something on the credit front because I see PNB is now fully fledged again into the -- in the market. And I think you are the most sought after bank today. So looking at this and then, sir, the SMA number a little bit increased in this quarter at INR 1,596 crores against INR 239 crores in March. Is there any specific reason, any one-off account in this? Or is it drive by long term?

[Ashok Chandra, executive]

First, I will touch about the credit growth part. If you see growth we have shown a growth of more than 18%. It is 18.6% growth in MSME. Core retail has grown by 17.7%. What we have missed out in the corporate loan growth, there is a growth. But in fact, both Q-o-Q growth is also there and Y-o-Y growth is also there. But the challenge which has come in the corporate book, that we have on large INR 29,000 crores of sanctions in our book now. And disbursements have started happening, but there are many project financing we have done now in factor we are building up good project financing now, good projects we are undertaking and we are going in a very, very big way for those projects financing. So you know that disbursements also takes time in the project financing in 1 year or 2 years' time it takes. But on that INR 30,000 crores of book is already there with us and going to be disbursed in Q2, Q3 onwards. So this is 1 strong point before us is there. In the project means a total corporate book, if I can talk about the diversified activity which we have taken. HAM, we have taken good proposals.

Our renewable energy, we have good proposal advanced smart metering. This is 1 area which is picking up very well in the country. So there, we have taken a lot of good proposals now. Then in it, we have taken good proposals under that. In fact, in the real estate sector also, lease rental discounting, then in the real estate also in it is coming. So that also we have initiated some 1 or 2 proposals, food processing. So I think a very diversified field in the corporate areas we are there. What we are focusing on improving the turnaround time of the sanctioning of the loan. And that is 1 commitment to which we have given to all the corporates that any proposal, which comes to head office with all the waiting and abiding, head office to sanction will happen within fortnights, within 15 days. And this is 1 comfort we are giving to all the corporates. And based on that, I'm seeing a lot of the interest in our bank from the corporate side. And I'm very confident that going forward, you will see the good growth, and we are still sticking to the guidance which we have given. I think we are going to grow at the same speed.

[Ashok Ajmera, analyst]

Thanks for that good assurance on the practically the debt [indiscernible].

[Operator]

Mr. Ashok, I would request you to please rejoin the queue as there are several participants waiting in the queue. The next question is from the line of Mahrukh Adajania from Nuvama.

[Mahrukh Adajania, analyst]

Sir, I have a couple of questions. Firstly, in terms of margins, so most banks are guiding to some sort of a recovery or stabilization in the second half. So that we have been well understood. But in the second quarter, how much do you expect margins to fall? Will it be more than 11 basis points that we have seen in the first quarter? Or will it be lower or higher? Like a rough ballpark would really help.

[Ashok Chandra, executive]

Yes. I think Q1, you have seen that domestic NIM is 2.84%. And the overall, the global NIM is 2.70%. Our guidance is 2.80. Now specifically, if you can talk about the Q2, I think we will be holding to the same level, which is there in the Q1 because the interest rate cost, which has happened, that impact already we have seen in the first quarter. So Q2 also will be having the same level. And we have also improved the advances portfolio. More than that, we have said around 21,000 of the corporate low-yielding book. So I think that also will give us some good income. And definitely, our NIM, what we have done in this particular quarter, I think we are going to hold on to this level now, around 2.7.

[Mahrukh Adajania, analyst]

Because the last reported cut would have been passed only for less than a month, and the full impact will come in the second quarter, even then you would see NIMs holding on?

[Ashok Chandra, executive]

Yes. 2 things which are in favor now. One is a corporate -- I mean, overall loan growth has also happened. And second is, since we have set some low-yielding advances, that is also in our favor. Third point is that we have also reduced the cost of deposit. And that impact also we are going to see in this entire full quarter. because the cost of deposits, the rate reduction in the deposit also happened subsequently, I think in the second month of the Q1. So that impact also we have not seen fully in that particular quarter. So this particular quarter, we are going to see that entire impact on the cost of deposit also. So all those things put together, I am expecting that definitely 2.70. Definitely, we are going to hold on.

[Mahrukh Adajania, analyst]

Got it. And the MCLR has been cut by how much, sir?

[Ashok Chandra, executive]

We have already reduced by 15 basis points. We had 9.05 and today, we are at 8.90.

[Mahrukh Adajania, analyst]

Okay, sir. Sir, my next question is on MSME loans. So some lenders have called out stress in the MSME segment? What are your thoughts?

[Ashok Chandra, executive]

Some lenders have?

[Mahrukh Adajania, analyst]

Called out. So they're saying that NPLs in MSME, of course, they're seeing unsecured MSME, but they're rising.

[Ashok Chandra, executive]

We are not seeing any such movement or any such change in our portfolio. And I think the way the book was behaving earlier the same way it is behaving now also. And the phrase underwriting, which has happened for the last 4 years, in that incremental MSME growth, we are seeing slippages of around 2.5% to 3%.

[Mahrukh Adajania, analyst]

Okay, sir. And do you do any unsecured loans to MSME? How does it work?

[Ashok Chandra, executive]

We don't do that. We don't do that because there are 2 ways of doing the MSME loan. One is that CGTMSE coverage is available. So wherever the collateral security is not there, we advise our people, advise the customers to go for the CGTMSE coverage. So either it is CGTMSE coverage or the [indiscernible] securities are there.

[Operator]

The next question is from the line of Kunal Shah from Citigroup.

[Kunal Shah, analyst]

So firstly, the question on SMA, I think that was getting missed out. So if you look at the increase in the SMA pool, which is there in the MSME, and it -- maybe when you look at it overall, in general, it has gone up maybe a bit, say, when you look at it even agri, there is SMA pool, which has got built up. So how do we read this number of, say, closer to like INR 1,600-odd crores of SMA. And this is again, like more than INR 5 crores. If you can highlight the overall SMA pool, say, even below the INR 5 crores, which you always used to give out a SMA0, SMA1 and SMA2.

[Ashok Chandra, executive]

See, I can give you the full SMA0, 1, 2 of the entire bank irrespective of the amount. See, it was 6.79% last year, okay? And now that has come down to 6.14%. And that includes my -- from INR 1 to INR 1,000, INR 1,000 crores now. So that is a book, and I think there's a good control on the SMA book. And even for the INR 5 crores and above, it is 1.14% is the stress is there in the [indiscernible].

[Kunal Shah, analyst]

Okay. And how would have been this breakup across SMA0, 1, 2?

[Ashok Chandra, executive]

You want through the absolute...

[Kunal Shah, analyst]

Absolute numbers. Yes, absolute and percentage. Yes. You give that every quarter. Yes.

[Ashok Chandra, executive]

Retail, we have INR 28,000 crores. And agri, it is INR 11,600 crores. MSME INR 24,000 crores and all others, the light corporates and all put together, it is INR 5,200 crores. This is the total stress.

[Kunal Shah, analyst]

This is total. Yes, yes. And 012 in particular, overall amount, including all the portfolios. So let's say, yes.

[Ashok Chandra, executive]

See this is the total around INR 69,000 crores is the 0, 1, 2 book is there now. In that SMA 0 itself is INR 43,000 crores. I can tell you the trend, which is there. Most of this -- the INR 43,000 crores in that retail, it still is INR 17,800 crores. So what happens the Viki loan, housing loan even for 1 day also, if it goes -- it becomes the SMA 0 now. And within 1 week of that, it again, the repayment comes and it comes out of the SMA-0. So SMA 0 is 43,000, SMA 1 is INR 13,200 crores and SMA-2 is INR 12,700 crores. Hello?

[Operator]

I think the participant has been moved from the queue. I will now move to the next question. The next question is from the line of Piran Engineer from CLSA.

[Piran Engineer, analyst]

Congratulations on the quarter. [indiscernible] 38 crores. Yes, sir. Am I audible?

[Ashok Chandra, executive]

Yes. Now you can repeat it, please.

[Piran Engineer, analyst]

Yes. So sir, last year, our slippages in MSME were INR 638 crores. And now it is 966, and it has been above INR 900 crores for the last 2 quarters. It's on an increasing trend. So what exactly is happening on the ground?

[Ashok Chandra, executive]

See, these slippages which has happened in the MSME is 10 lakh and below category. And most of these loans are under the Mudra loans, for which the government guarantee is also available, 75% of the outstanding, we are going to get back in that particular category. So that is only slippages, which is happening. Otherwise, MSME book INR 10 lakh and above is fully behaving well. We have a good underwriting, the structure is there. And INR 10 lakh and above, we have centralized setup at 138 centers in the country. All those proposes come under that MSME sale and there only the processing and the disbursement happens. So I don't see any challenge in this entire book.

[Piran Engineer, analyst]

And sir, the sourcing for the INR 10 lakh and above happens through specialized branches or your regular liability branches?

[Ashok Chandra, executive]

It is happening through the digital -- all the branches. But now we have initiated the digital sanction of up to INR 10 lakh now. And this, we have initiated just 2 months back, and another 2, 3 months' time, manual sanction and disbursement up to 10 lakh category is going to be totally stopped in the bank. All those Mudra loans up to INR 10 lakh will happen through the digital system itself. And we have done these digital loans in the different categories. And those loans are sanctioned by the digital setup, the BRE is so strong. It hooks behaving very well. So going forward also, maybe another 2, 3 months' time, the entire INR 10 lakh loan, all those loan will happen through the digital BRE.

[Piran Engineer, analyst]

Okay. Okay. And sir, these -- our employees go on the ground and source these loans or we get it through DSS?

[Ashok Chandra, executive]

No, no, no.

[Piran Engineer, analyst]

Or customer walks into the branch with these?

[Ashok Chandra, executive]

There are 2 things. One, the customer marks into the branch. And the branch itself, they source the proposal. There is no DSA or third-party involved in this Mudra loans.

[Operator]

Okay. Okay. Understood, sir. Sir, just 1 other question on OpEx guidance for FY '26. This quarter, it was INR 8,700 crores. What will it be for the full year, approximately, if you can guide us?

[Ashok Chandra, executive]

I think if you see our -- the operating profit we have -- this quarter, we have posted an operating profit of INR 7,000 crores. And I'm very confident that going forward also, this trend will continue.

[Piran Engineer, analyst]

I'm say operating expenses, not profit.

[Ashok Chandra, executive]

Operating expenses also. It is -- yes, this particular quarter, there is 1 hit that is the priority sector lending certificate. That is the PSLC because of the shortfall in the priority sector, we go to the market and purchase that to achieve that priority sector target. Because of that money in this particular quarter, there is 1 sales there in the operating expenses. Otherwise, we have a stabilized operating expenses, both in the employee side also and the -- other than the employee expenses also. So I don't see any major -- any big changes going to happen in the operating expenses.

[Piran Engineer, analyst]

Okay, okay. Okay.

[Ashok Chandra, executive]

Yes, in the Q4 also, our operating expenses was INR 8,687 crores and Q1 of this also is INR 8,765 crores we are almost in the same range, except that 1 hit where we have said around INR 800 crores PSLC certificates. But that only the some -- the cost has gone up.

[Piran Engineer, analyst]

So now if I remove that INR 800 crore PSLC, it will be roughly INR 8,000 crore operating expense. So I assume that level for the rest of the year?

[Ashok Chandra, executive]

INR 8,000 crore to INR 8,200 crores.

[Operator]

The next question is from the line of Jon Gao from Scofield.

[Unknown Analyst]

Congratulations on good set of numbers. Just on margins, do you mind share with us what's number one, the recovery or written off there in the interest income line? And also how much is tax refund and just on tax refund this quarter?

[Ashok Chandra, executive]

Yes. Recovery in technical write-off and the interest all put together is INR 1,0700 crores.

[Unknown Analyst]

Sorry, the INR 1,700 crores, how much of that is in the NII, net interest income?

[Ashok Chandra, executive]

Interest income is -- see, INR 1,200 crores is the technical right of recovery and INR 500 crores is the interest recovery.

[Unknown Analyst]

So we have INR 500 crores interest recovery and another INR 550 crores of interest tax refund.

[Ashok Chandra, executive]

Yes, yes. And this INR 500 crore in the interest recovery, in every quarter, we are recovering in the interest to the extent of around INR 500 crores to INR 700 crores. Every quarter, that figure is there.

[Operator]

[Operator Instructions] The next question is from the line of Bhavik Shah from InCred Capital.

[Bhavik Shah, analyst]

Sir, last quarter, we had AFS provisions of around INR 1,400 crores. And this quarter, it is INR 1,150 crores. Is it fair to assume you stabilize at this run rate for the entire year?

[Ashok Chandra, executive]

Yes, yes. Sir, we have taken the calculation from the Acuron. And just on that only, we have factored this. I don't see that in any of this quarter, we are going to exceed this amount.

[Bhavik Shah, analyst]

Okay. Okay. And sir, our net worth has increased by INR 400 crores, while our PAT was around INR 1,600 crores. So can you explain then the walk-through of what goes into that INR 4,600 crores?

[Ashok Chandra, executive]

Net worth has increased. Yes, one element is there in that. revaluation we have done, and that figure has also -- and because of that, it has gone up.

[Bhavik Shah, analyst]

Sir, what would be your outstanding AFS reserve?

[Ashok Chandra, executive]

Outstanding?

[Bhavik Shah, analyst]

AFS reserve. The revaluation would have gone to the AFS reserve, right?

[Ashok Chandra, executive]

Yes, yes. Yes, you go to the AFS reserve. Yes, it has gone to INR 800 crores now.

[Bhavik Shah, analyst]

So that's the outstanding?

[Ashok Chandra, executive]

Yes. Last year, in the same quarter, it was INR 33 crores, which has gone to INR 800 crores now.

[Bhavik Shah, analyst]

Okay, sir. Okay. And sir, we have INR 10 lakh crores of term deposits in that, how much is the bulk deposit about INR 3 crores?

[Ashok Chandra, executive]

That figure is around INR 2.5 lakh crores. You have that exact figure. Yes, INR 2.8 lakh crores. .

[Bhavik Shah, analyst]

INR 2.8 lakh crores. And sir would be at what average rate? 6.5%, 6.4% or [indiscernible]?

[Ashok Chandra, executive]

All at different rates and because all these are taken at a different period and different rate. So very difficult to capitalize at what rate it is there. But now the bulk deposit rate itself of 100 basis points, we have brought it down last quarter means Q4, it used to range between 7.8% to 7.5%. Now the multi-market rate is around 6.7 to 6.78%. And we are not there in the bull deposit market also. PNB's not there in the market or the [indiscernible].

[Bhavik Shah, analyst]

So will it materially reprice next quarter again?

[Ashok Chandra, executive]

Yes, definitely.

[Bhavik Shah, analyst]

Okay. And then I just have a last question, if I can squeeze in?

[Ashok Chandra, executive]

Yes.

[Bhavik Shah, analyst]

So, we saw a standard provision of INR 300 crores this quarter. and a write-back from investment of over INR 400 crores. If you could just explain on what were the dose for that would be great.

[Ashok Chandra, executive]

See, a standard account provision. Yes. Whatever we do as the seventh June circular, there was 1 account which was figured under the seventh June. And because of that, we have made some additional progress.

[Bhavik Shah, analyst]

Okay. And the write-back from investments? INR 200 crores?

[Ashok Chandra, executive]

Yes, because of the MTM and the RFPs and all which the margins has happened. So again, the evolution has happened. And because of that, there is some write-back is there.

[Operator]

The next question is from the line of an Vansh Solanki from RSP Ventures.

[Vansh Solanki, analyst]

Very good. My question is on asset quality, mostly even post that pretty core for this quarter is around 14 bps, okay. And in last 3, 4 quarters also, we see the similar range of 10 to 20 bps things going on. and you have guidance given guidance of the bits of the credit cost. So can you think that this 10 to 20 bps in motion normalize like you can lower the guidance of the 0.58% is there chances? Is this a normalized trend or what?

[Ashok Chandra, executive]

Credit cost, the guidance which we have given is 0.50 for the entire year, right? And in this particular quarter, our credit cost is 0.14%. And we will remain well below the 0.5%. I think that is assurance I can give you.

[Unknown Analyst]

Okay. Okay. And can you just mention the same sanction book which you mentioned the first, but I just -- the wages breakdown. Can you just mention again?

[Ashok Chandra, executive]

Yes, yes. We have 1 lakh 29 crore of sanction booked under the corporate segment. And in that INR 43,000 crores is the sanction which we have done up to March 25. INR 48,000 crores sanction, which we have done in this financial year, that is the first quarter itself. So both put together INR 91,000 crores is there and INR 38,000 crores is the sanctions is in the pipeline, which we are going to do it. All put together is INR 129,000 crores is the book which is there with us now. for which the disbursements are going to happen.

[Operator]

The next question is from the line of Tarak Tucker from Food Capital. Mr. Tarak, please go ahead. As Mr. Tarak is not down the line, I would request to move to the next question. The next question is from the line of Sushil Choksey from Indus Equity Advisors.

[Sushil Choksey, analyst]

Sir congratulations, team DNA were very stable and good guidance. Sir, my first question is your RAM quarter is visible at 17%, 18%. How do you visualize here on RAM advances? And what is the [indiscernible]?

[Ashok Chandra, executive]

See, RAM -- within the RAM, if you can share some figures. MSME has grown by 18.6%. And core retail has grown by 17.7%. Bank has initiated a lot of things in that RAM now. One is that massive outreach activity is happening in our bank where from the top management, including MD and EDs and everybody is participating, and they are visiting the centers, conducting the outage activity and this is happening for the retail, agri, MSME, just on 25th of March 25th of July, we have conducted the MSME outreach activity. 11th of July, we conducted the Agri outreach activity and the 17th July, that was for the retail exco. So these activities are generating a lot of good leads and then the leads are getting processed at the centralized hub and getting sanction now. This we have seen in the last quarter also, and those leads got converted and it has given a very good growth in this ramp sector now. So this activity is going to continue. Second, we are bringing a lot of digital footprint in the RAM sector now. So all those things are going to facilitate. One is that improving the turnaround time. And second, the penetration and outreach activity, visibility of our bank that we are also a very serious player in the RAM sector now. So all those things put together, I am expecting that there will be very good growth under the entire overall RAM.

[Sushil Choksey, analyst]

So what is the yield on RAM I am asking?

[Ashok Chandra, executive]

Yes. The MSME, the separate figures are there. Like for retail, it is varying in the range of around 8.6%. Agri it is, 8.82%. In SME, it is 10.14%.

[Sushil Choksey, analyst]

Rate is above 9%.

[Ashok Chandra, executive]

Yes.

[Sushil Choksey, analyst]

Okay. Sir, based on your INR 12,000 crores of tensions, which is mobile project financial pipeline, where do you see your CD ratio at the end of mature and what would be the balance between corporate and RAM at the end of the year?

[Ashok Chandra, executive]

So the share of corporate and RAM will be with the initiative I'm expecting somewhere around 58% to 59% under the retail and remaining 40% to 41% turns the corporate.

[Sushil Choksey, analyst]

The initiatives the bank is taking in digital and empowering the ramp sector with a lot of digital initiate to improve your tax and a lot of other initiatives. What is that did expect will incur for this year and we plan to incur additional expenditure to improve the benefits to PMP account holders from various initiatives on types of [indiscernible]. Any other measures?

[Ashok Chandra, executive]

The faster the benefits which we have given is the -- despite the stress on our income, we have were the minimum balance charges. Now there is no minimum balance charges, whatever categories accounts have been opened, even if it goes below that level, it is totally free, no charges on that. Second, for entire CASA product, whether it is a salary or nonsalary, senior citizen, youth, women farmers, for the military people. We have come out with the special scheme and in every such account, we are providing some add-on facility like health checkup facility free, life insurance free accidental insurance is free, OTT subscription, so many things we have built in along with that account. And all these things are being passed onto the account holders, many open that accounted as now. So these are the things third point is the digital initiative like our PNB mobile app, it is such a wonderful lab that if you're opening account and if you download a rep, you need not visit the branch for any banking activity. Everything is possible and hassle free now. I think these are the benefits that is there for anybody who is banking with PNB.

[Sushil Choksey, analyst]

So what is the extent of it.

[Operator]

Mr. Sushil, I'm sorry to interrupt. May I request you to rejoin the queue as there are several participants waiting in queue. Thank you. The next question is from the line of Roshni Munshi from CLSA.

[Roshny Munshi, analyst]

My first question is, I just wanted to check if the benefit of 100 bps of rate repo PAT has been completely transmitted to the borrowers so far?

[Ashok Chandra, executive]

Yes, it has already been passed on. In fact, in our banks, there is a guideline that today, if the MPC decides to rate card and if it is announced by I think the next working day itself, it is getting implemented straight away.

[Roshny Munshi, analyst]

Got it. Got it. And also 1 last data keeping question. Could you please tell us the MCLR EBLR and fixed rate loan mix?

[Ashok Chandra, executive]

Yes, we have around 56% CLR sitting our repooling the treasury linked that amount -- that composition is around 56%. The remaining all is the fixed rate base rate and the MCLR.

[Roshny Munshi, analyst]

Okay. So 56% is ECLR and everything else, you will just like to classify it as MCLR fixed rate and all. Okay.

[Ashok Chandra, executive]

Yes.

[Unknown Analyst]

Can you elaborate how much is MCLR, is that possible?

[Ashok Chandra, executive]

MCLR rate you want, rate of interest?

[Unknown Analyst]

No, no. What percent of the mix is MCLR?

[Ashok Chandra, executive]

MCLR is 30%. 30%.

[Operator]

The next question is from the line of Harsh Modi from JPMorgan.

[Harsh Modi, analyst]

How would you characterize the impact of change in PSL norms on your bank's earnings? And how do you expect that going forward?

[Ashok Chandra, executive]

PSL norm, you're talking about the changes which has happened in the housing loan and other segment, right?

[Harsh Modi, analyst]

Yes. And the expectations of further changes, there are some proposals?

[Ashok Chandra, executive]

Yes, yes, yes. See, 1 change which has happened, I think a very marginal improvement has happened because of the housing loan projector, the revisit has happened. So let us see what are the other changes are being proposed and how it gets implemented. I think we need to wait and see. Generally, I can react that what are the final benefit that is going to come to the bank.

[Operator]

The next question is from the line of Jai from ICICI Securities.

[Jai Prakash Mundhra, analyst]

Sir, the first question is on bulk deposit, like the last quarter and this quarter also, we had 2.8 trillion, INR 2.8 lakh crores of bulk deposit. Because this deposit is going to be short tenured. Have you seen a significant repricing in the Q1? I mean have you started seeing benefits on the bulker pricing, right? If you can quantify how much interest savings can happen in Q2.

[Ashok Chandra, executive]

See, the bulk deposit already around 100 basis point dip has already happened in the system. And in our bank, also the same thing is because earlier the bulk deposit was in the range of around 7.8% to 7.9%, which has come down to 2.7% to 2.75% -- sorry, 6.7 to 6.75%. So almost 100 basis points deep has already happened. And definitely, the impact of that -- it will be visible in our bank also from the Q3 onwards. Real impact will be visible.

[Jai Prakash Mundhra, analyst]

Okay. Sure, sir. And sir, interest cost, right, in this quarter, I mean, 1 is the small number. So you have 3 components: interest on deposits, interest on others and RBI others. So there is some sharp INR 200 crores, INR 300 crores decline interest paid on borrowings. Have you retired these borrowings? Or -- so INR 500 crores has come down to INR 193 crores. Or this may be this is going to go back to INR 500 crores. because the third line item is more or less similar at INR 800 crores, but there is a dip in the interest on borrowings?

[Ashok Chandra, executive]

See, this borrowing happens in the market also in the addressable market on the day-to-day activity when we borrow. That amount has -- considerably, it has come down in this particular quarter. Because we have the liquidity surplus, so we were not boring in the market.

[Jai Prakash Mundhra, analyst]

Okay. Sure. And lastly, sir, yes. Sir, last question is actually your global margins and domestic margin. your global book is less than 5% of overall book. But still, it creates a 10 basis point impact on the overall 15 basis point impact on the overall bank. It looks like that the overseas margins are like 0.5% or even below. Is that the math or?

[Ashok Chandra, executive]

You are absolutely right. It is in the same range. It is in the range of around 0.45, 0.50. I think we are revisiting our strategy and we will see that because finally, outcome has to be that how it is going to improve my NIM. So we will revisit that portfolio is very small, but definitely, it affects my bottom line.

[Jai Prakash Mundhra, analyst]

Right. And sir, if I may ask 1 more question on retail loans, right? So a, if you can build your INR 2 lakh crore of retail core retail within which you have given for housing, education and vehicle loan, but still there is some INR 70,000 crores others, right, which could be mortgage or personal loan or something else if you have that number, that breakup. And you had that strategy of growing in-house retail, right, versus the DSA or versus pool buyout. How is that strategy shaping up?

[Ashok Chandra, executive]

So that has picked up very well. And if you see the housing loan growth within the entire retail, it has grown more than 17%. Y-o-Y? So that [indiscernible] for project approvals and improving the turnaround time thereby.

[Jai Prakash Mundhra, analyst]

Right. And if you have that number, retail book breakup, that will be the last [indiscernible] during the quarter.

[Ashok Chandra, executive]

I can give you. Housing outstanding is INR 1 lakh 6,000 crores. Retail is INR 27,000 crores. Education is INR 8,500 crores and mortgage is INR 16,400 crores. Personal loan, INR 22,500 crore. Gold loan, INR 3,400 crores under the retail segment. Credit card, INR 1,200 crores.

[Operator]

The next question is from the line of Nitin Aggarwal from Motilal Oswal.

[Nitin Aggarwal, analyst]

I have a few questions. One is on the PSLC expense that we have incurred this quarter. So can you talk about as to what steps bank is taking to ensure like that we don't incur a PSLC shortfall in the following years? Because some of the PSU banks are making really a decent income on the PSLC certificate that they are selling. So why is sort of missing out on that front? And what are the steps that you think that will help us?

[Ashok Chandra, executive]

We have taken a lot of states now because I know that many of the public banks, they are making money out of this. And a bank like ours having 10,200 branches we were missing out this year, massive activities have been started and the self-help group 1 segment, which takes care of the small and marginal farmer category also. And the 40% of the agriculture target of 18% also it falls under both these categories. And there only, we are missing the target. So we are going in an aggressive way for the self-help group onboarding now. And the benefit of self-held Group is 1 is that yield is also very good. NPA percentage is just around 1%. And the man the financial inclusion point of view also. So this is 1 segment we are going in a very aggressive way. And if you see the figures, the Y-o-Y figure under this -- the self-help group, almost INR 4,000 crores have been added. It was INR 8,500 crores last year by June '24. Now it is INR 12,000 crores plus now. So this is 1 segment which we are going to do it in a very, very big way. Even for the farmers also, the KCC and more we are going to focus on the food processing, rural go down, the core story is a lot of activities, which we have started. And I am very confident that going forward, we have already created a road map or totally coming out of the PSLC purchasing. And within 3 years road map, I think we are going to come out of this entire PSC borrowing from the market. next year itself, I am expecting that to the extent of around INR 300 crores, we are going to save from the income side now with the initiative which the bank has taken under the agreement.

[Nitin Aggarwal, analyst]

Right, sir. That's very good to know. And sir, secondly, some qualitative color around treasury because this quarter, we have seen most banks reporting very strong treasury gains and benefiting from how the bond yields move, the OMOs and other things. So any qualitatively, can you talk about as to what can we expect in the second quarter around treasury? Can there be a sharp fall versus what the first quarter has been? Or is there more room that you still see for PNB or for other PSU banks space as a whole that they can sustain this run rate? Any qualitative color around that?

[Ashok Chandra, executive]

Yes. Since our bank, we have built in a very good strong treasury book, which was an extent of around INR 5 lakh is our treasury book. And already reducing the market scenario when the interest rates are falling, definitely, the treasury book is going to behave very well. And not only this quarter, this quarter, definitely, we have made good money. I think going forward also in the entire -- this financial year, treasury book is going to support in a very, very big way in the operating profit.

[Nitin Aggarwal, analyst]

Okay, sir. And sir, lastly, on the business growth and particularly on CD ratio. So we have seen some banks like unwinding the deposit book and the CD ratios for many PSUs have increased now to somewhere [indiscernible]. So while PNB continues to deliver a very stable growth, maintaining a balance between credit and deposit growth. So what are the thoughts on that front? Like will we look to utilize the room that we have?

[Ashok Chandra, executive]

Yes. Yes, we will continue to hold on this level. Rather, we are expecting that there will be some improvement in our CD ratio. Right now around 7.28% is there. I'm expecting by end of this year, somewhere around 73%, definitely, we should be able to do that. But growth in the deposit and the advances are very, very stable and the activities and the initiatives the bank has taken. I'm very sure that there will be good credit growth. And the CASA initiative, which the bank has taken. I'm expecting that there will be very good CASA. And within that CASA, there will be a stable SB individual growth will be there in the bank.

[Operator]

That was the last question for the day. I now hand the conference over to the management for closing comments.

[Ashok Chandra, executive]

Thank you very much. My only submission is that since in this particular quarter, we have migrated from the old tax regime to the new tax regime. And that is the reason the impact which we are seeing on the net profit, if you see our PBT, profit before tax is INR 6,758 crores, and which is 28.3% Y-o-Y growth is there. And first time, we have crossed a INR 7,000 crores of operating profit. And going forward also, this trend is going to continue with a lower tax regime, then the 10% tax we are going to save with that itself a INR 700 crore, every quarter, we are going to generate the net profit. So we are very bullish that going forward, the migration which we have done, and we have taken a very conscious call because whatever MAT benefit was there. We had nullified everything, and this was the right opportunity and right time for us to migrate to the new taxes. So we have taken a very cross call, which will have the benefit on our ROE going forward. I think all of you should believe in these things. And definitely, I think the trust which you have is reposed in our bank, I think this should continue. From the management side, we are committed for the growth. We are committed for the bottom line and for the asset quality. Thank you very much.

[Operator]

On behalf of Elara Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.