This story is from July 19, 2018

May get Rs 20,000 crore from asset sale, IBC cases: PNB MD

Punjab National Bank managing director and CEO Sunil Mehta believes the worst is over and the bank will be able to raise enough funds on its own to meet the capital requirement.
May get Rs 20,000 crore from asset sale, IBC cases: PNB MD
NEW DELHI: After initiating a series of steps to fix systems and policies in the wake of a record Rs 14,000-crore fraud allegedly orchestrated by diamond traders Nirav Modi and Mehul Choksi, Punjab National Bank managing director and CEO Sunil Mehta now appears much more relaxed. He believes the worst is over and the bank will be able to raise enough funds on its own to meet the capital requirement. Excerpts:
Q: How was business in Q1?
A: Domestic credit was grown by 11% and deposits were up around 5%.
The bank has done a substantially good job on recovery of NPAs. Last year, our recovery was Rs 5,600 crore, while in the first quarter alone we have recovered more than Rs 8,000 crore. That shows the bank has got the capacity and capability to come out of the situation in the shortest possible time. We have more ambitious plans for recovery as we are targeting Rs 22,000 crore in the financial year and another Rs 4,500 crore is to come through upgradation of loans.
Q: What is the plan on monetising non-core assets? Why are you holding on to PNB Gilts?
A: We have lot of other non-core assets — PNB Investment Services, PNB International and joint ventures in Bhutan, Nepal and Kazakhstan. We are not going to unlock value in all non-core assets. We are going in a very conscious way, where we think the investment has matured and has already given the maximum value, we will unlock value. Wherever we think there is upside available in future, we will not dispose them. We have already appointed a merchant banker for PNB Housing Finance, we are going for listing of Metlife, where we will sell a small stake. We have sold our stake in Crisil. All this was planned well in advance last year.

Q: How much do you hope to generate from monetisation of non-core assets and what is your capital requirement?
A: We will generate Rs 8,000-10,000 crore from sale of noncore assets. A similar amount is going to come from writeback from NPAs as most of the large insolvency cases are nearing resolution and some have been resolved. The government is moving as per the recapitalisation plan. Last year, we got Rs 5,500 crore and we will get whatever is planned as per our book size. We have not asked for more capital. Banks should be able to generate capital on their own. The insolvency law has made banks and borrowers more proactive and that is a good thing.
Q: What are your other focus areas?
A: This year, we also want to focus on increasing Casa (current and savings bank accounts) and churning our portfolio for qualitative lending so that it results in reduction in risk weight. We will not shrink our balance sheet, we will take out high risk-weighted assets and deploy in lower risk-weighted assets. Last year, our credit grew by over Rs 20,000 crore but our risk weight went up by only Rs 3,000 crore. This will help us conserve capital.
Q: Will that lead to lower lending to real estate companies and some other sectors?
A: No. It is not sector-specific. If the risk weight is high and the returns are equally high, we will retain the asset. We are working on a new model. We will look at the company rating, pricing or the return that we are getting and collaterals that are being offered.
Q: Which are the sectors where you see stress and have you reduced your exposure to gems and jewellery?
A: Power is a sector where there is some stress but the government is taking it up in a proactive way. A bad experience with one or two people does not make the entire sector bad. If Tanishq comes to us, we will obviously lend to it. Our exposure to gems and jewellery sector was less than 1%. So, it was not significant.
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