PNB identifies 53 corporate accounts for sale to ARCs

Taking a step towards cleaning up its balance sheet, the Punjab National Bank (PNB) has identified 53 corporate non-performing loans worth Rs 6,300 crore for sale to asset reconstruction companies (ARCs).

The state-owned bank, which has substantial exposure to stressed sectors such as steel, will desist from additional lending to these sectors till the tide turns.

"We have heavy exposure to textiles and chemicals as well. We will be cautious on these sectors, too," said Usha Ananthasubramanian, PNB's managing director and chief executive.

On selling bad loans to ARCs, Ananthasubramanian said the bank was building a pipeline of such assets for sale. Besides recoveries, it is one of the routes to improve asset quality profile. In the past, the bank was less active is offloading non-performing assets (NPAs) to ARCs.

The PNB stock closed at Rs 71.95 a share on the BSE on Tuesday, down 0.3 per cent from the previous close. Last week, the bank reported a net loss of Rs 5,367 crore for the March 2016 quarter. Its gross NPA grew to Rs 55,818 crore (12.9 per cent) at the end of March 2016 from Rs 25,684 crore in FY15, compared to 6.55 per cent a year ago. Its net NPAs, too, doubled to 8.61 per cent from 4.06 per cent.

PNB's provisions for bad loan and contingencies grew to Rs 10,485 crore in the fourth quarter of FY16 from Rs 3,834 crore a year ago. The provisions coverage ratio was 51.06 per cent as on March 31, 2016.

As much as a quarter of the Rs 55,818 crore of dud loans that PNB had reported in the March quarter came from the steel sector. Five steel accounts alone accounted for bad loans of Rs 12,500 crore, the PNB chief said.

On the measures the bank is taking to stop its balance sheet from worsening further, she said the bank has created a war-room with a general manager in charge to track and make recoveries. Three general managers are looking after recovery efforts. Since April 1, the bank has recovered Rs 1,800 crore out of our first quarter target of Rs 5,000 crore.. Stating that the steel sector is still not out of the woods, she said the bank expects around Rs 7,000 crore of letters of credit (LCs) to get devolved in the year.

Punjab National Bank