Informist, Thursday, May 8, 2025

By Pratiksha and Priyasmita Dutta

NEW DELHI – Though Punjab National Bank may have to pay back JSW Steel Ltd. a hefty amount should the Supreme Court's Friday order regarding liquidation of Bhushan Power & Steel Ltd. takes effect, a two to three times rise in Bhushan Power & Steel Ltd.'s valuation will come handy and provide a cushion to the state-owned bank, its Executive Director M. Paramasivam said.

"If at all, BPSL (Bhushan Power & Steel) undergoes a resolution, it is not a concern," Paramsivam told Informist. "It is not scrap material. It is functioning and will fetch at least 2-3 times the value of what they have sold (for) earlier."

Bhushan Power & Steel had reported a net loss of INR 8 million in 2019-20 (Apr-Mar), the year in which JSW Steel's resolution plan for the company was approved. Since then, Bhushan Power's profitability has improved and has posted a net profit of INR 6.74 billion in FY24, up fourfold from the previous year.

Paramasivam said the bank's immediate plan of action will be to file for a review petition in the Supreme Court once the lenders discuss the matter and reach a consensus. "It will all happen within a period of a week or a maximum of 10 days, everything will be in final shape," he said.

The bank will "follow the law of the land", and if the liquidation, if at all, takes place, Punjab National Bank will make the necessary payments, the executive director said. "Whatever provisioning for reversal happens will be fixed accordingly," he said.

Last week, the apex court set aside JSW Steel's resolution plan for Bhushan Power & Steel and ordered the liquidation of the debt-ridden steel maker. The apex court said JSW Steel's resolution plan was illegal and should not have been accepted by the committee of creditors.

As a result of the order, the committee of creditors will have to pay back JSW Steel the amount they received following the acquisition. Punjab National Bank had received around INR 30 billion out of the total payout of INR 194 billion.

Talking about the bank's financial performance in the quarter ended March, Paramasivam said the jump in slippages was a "one-off" and will "definitely be under control" in FY26. In the March quarter, the state-owned bank's fresh slippages rose around 40% on year to INR 29.04 billion.

On the lender's growth plans for FY26, Paramsivam said Punjab National Bank will exceed its deposit growth guidance of 9-10%, which he said is "just a broad guidance based on industry standards". The bank's deposits were up 14% in FY25, higher than the 10% growth posted by the Indian banking sector as a whole.

While it is too early to talk about the quantum of additional increase in deposit growth in FY26, Paramasivam said the lender should be able to post a 3% sequential growth in liabilities in Apr-Jun. As on Mar. 31, the lender's domestic deposits grew 2.5% on quarter and 13.3% on year to INR 15.11 trillion.

To drive deposit growth, the bank will focus on increasing current-account and savings account deposits and retail term deposits, he said, adding that the lender wants to reduce the size of its wholesale deposits. At the end of FY25, current account and savings account deposits accounted for 38% of the bank's total deposits. In comparison, at the end of FY25, the country's largest state-owned lender State Bank of India's total domestic deposits were INR 51.67 trillion and current account and savings account deposits accounted for 40% of the total.

Punjab National Bank Wednesday reported a net profit of INR 45.67 billion for Jan-Mar, up over 50% on year and marginally higher than the December quarter. Thursday, shares of Punjab National Bank ended at INR 91.36 on the National Stock Exchange, down 3.0% from the previous close.

On the impact of the Reserve Bank of India's revised Liquidity Coverage Ratio framework, Paramasivam said the bank expects to improve its liquidity coverage ratio to 142% from the current 135% by Apr. 1, 2026, when the new norms take effect. The central bank had said the banking system's LCR ratio would improve by 600 basis points as of data on Dec. 31.

The regulator said in April that banks will have to assign an additional 2.5% run-off factor for retail deposits which are enabled with internet and mobile banking facilities, lower than the 5.0% increase proposed in the draft guidelines in July. On the other hand, funding from non-financial 'other legal entities' such as trusts, partnerships, and Limited Liability Partnerships will attract a lower run-off rate of 40% as against 100% proposed in the draft norms.

Paramsivam said state-owned banks have a larger pool of such deposits than private sector banks and the reduced run-off factor on 'other legal entities' would help the bank. "We will see a positive impact of 5.75% from that particular measure," he said.

The run-off factor is the expected net cash outflow on a deposit in case of a crisis. The LCR ratio is expressed as a percentage of the so-called High Quality Liquid Assets, largely government securities, held against the net cash outflows over the next 30 calendar days.

Paramasivam also said that the state-owned lender plans to spend INR 30 billion for technological innovations in FY26, INR 2 billion higher than the plan for FY25. End

US$1 = INR 85.71

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

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