A week after reporting the worst set of numbers in the nation’s banking history with a net loss of Rs5,367 crore for the March quarter, Punjab National Bank on Tuesday said it will be cautious on troubled sectors like steel till a lasting solution is found.
As much as a quarter of the Rs55,818-crore of dud loans that PNB had reported in the March quarter came from the steel sector. Just five steel accounts alone contributed to over Rs12,500 crore in bad loans, the country’s second largest state-run bank said.
“We have been bitten very largely by the steel sector. So, we have decided to keep away from those sectors where we have been bitten until that sector turns around.
“Apart from steel, we have heavy exposure to textiles and chemicals as well... We will be cautious on these sectors too,” PNB Managing Director and Chief Executive Usha Ananthasubramanian told a select media meet here.
She further said, “There are certain areas, certain industries which you may have to shut shop or not be an active player. In some of them like steel, we have huge exposure and we will certainly be pruning them, irrespective of the promoters/promoter groups.”
The New Delhi-based lender had reported gross non-performing assets of 12.9 per cent in the March quarter, almost double from what it had a year ago at 6.55 per cent, while its net NPAs too more than doubled to 8.61 per cent from 4.06 per cent.
This had the bank setting aside Rs11,380 crore for bad loans, which included Rs385 crore for discoms and Rs167 crore for losses on Punjab food-grain related loans.
Explaining the rationale behind the decision, she said earlier banks looked more at the names of the promoters, but today, “since we are bitten so badly, we are in the process of having high collateralised or good quality proposals”.
“There are certain sectors to be avoided and there are certain sectors even if we do not have expertise like nuclear power, we may hire consultants,” Ananthasubramanian said, adding that there is a conscious decision on processing of proposals and upskilling of its employees.
Stating the the steel, textiles and chemicals are the worst hit, where the bank has high exposure, she said in the banking business nobody can afford to claim that the bad days are over.
“We are working in a dynamic environment. If steel is able to pick up, possibly something else will get impacted. But the conscious attempt is to repair these assets,” she said.
She also pointed out that most of the troubled steel accounts are too big to be allowed to go under or even invoke SDR, because they are very large assets.
She said the only way forward is finding a lasting solution “We also have to understand that the problems of the steelcompanies are not their making alone,” asserted Ananthasubramanian.
On the measures that the bank is taking to stop its balance-sheet from worsening further, she said it has created a war-room with a general manager in charge to track and make recoveries.
“Since April 1, we have recovered Rs1,800 crore out of our first quarter target of Rs5,000 crore,” she said.
On asset sales to ARCs, Ananthasubramanian said the bank has identified 53 accounts worth Rs6,600 crore for this quarter.
Stating that steel sector is still not out of the woods, she said she expects around Rs7,000 crore of letters of credit (lCs) to get devolved in the year.
She said the bank has nine SDR accounts worth Rs5,458 crore as of now and none of them have reached a resolution.
Similarly, under the 5/25 scheme, the bank has restructured 17 accounts worth Rs7,239 crore. Under the Uday scheme, it has resolved Rs4,700 crore worth of SEB loans and has an NPA of Rs1,620 crore from one of the UP discoms, Ananthasubramanian said.
The PNB counter closed down 0.3 percent at Rs71.95, taking its market capitalisation down to a paltry Rs14,128.10 crore on the BSE on Tuesday whose benchmark Sensex closed down 0.3 per cent to 25,305.47.