PNB will streamline the NPAs after merger, Said CEO

State-owned Punjab National Bank (PNB) is looking to recalibrate its non-performing loan classification and branch network following its merger with United Bank of India (UBI) and Oriental Bank of Commerce (OBC), said PNB managing director and chief executive officer S.S. Mallikarjuna Rao.

Rao said the Reserve Bank of India asked it to harmonise the bad loan accounts of the three banks and the ensuing provisions after the merger. PNB has already provided for ₹1,500 crore in the third quarter, but will have to set aside another ₹700-800 crore in the fourth quarter. The bank made a provision of ₹4,445.36 crore for bad loans at end-December, compared to ₹2,565.77 crore a year-ago.

“If a single borrower has exposure among three banks, and it is an NPA, we need to look at what kind of asset it is. Suppose it is substandard with PNB, and doubtful with OBC, I’ll have to make them doubtful—so, there will be an increase in provisioning requirement. Second, provisioning increase also happens through ageing. Sometimes the NPA date in both banks, even though the borrower is same, could be different. As a result, aging will happen. We have studied all those things and, according to that, provisioning was done in December. A little amount is left to be done by March, and that could be ₹700-800 crore.”

“Our objective is not to close down branches. At the same time, we cannot run a branch which is just side by side, or over and above. So, our objective will be to first find out the branches of three banks which are located within 500 metres. Then, we will rationalise those before 30 June, 2020. The licences which get freed up will be used in opening branches elsewhere. From 1 July we will study more comprehensively regarding the rationalization based on the business,” he said.