PNB Expects Rs 5000 Cr ‘Slippages’ In Q4; But No Employee Will Be Fired Due To Mergers

The Punjab National Bank (PNB) Merger with United Bank and Oriental Bank of Commerce came into effect from April 1, 2020.

S S Mallikarjuna Rao, Managing Director and Chief Executive Officer of the bank, in an exclusive interview with Moneycontrol said the merged entity expects fresh slippages of an estimated Rs 5,000 crore in Q4. 

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Rs 5000 Cr Slippage in Q4!

Rao said, “Originally, if you look at our expectation prior to the amalgamation, of the Rs 19,000 crore slippages expected for the full fiscal year, about Rs 15,800 crore has happened till December. So, in the fourth quarter we expect around Rs 3,200 crore.”

Additionally Rs 1,800 crore could come in due to the COVID-19 impact on industries. Hence in total as of now the estimate is that about Rs 5,000 crore fresh slippages could come for PNB in the fourth quarter. But this estimate  can be accounted for till Jan-March quarter. The final figure could differ as the year progresses. The fresh slippages in Q4 from the two amalgamated banks, are roughly estimated to be Rs 2,000 to Rs 2500 crore.

About 75% of this amount might come from SME and retail. The bank is expecting no large corporate accounts to turn NPAs in Q4.

No Retrenchment of Employees!

No pink slips will be offered to the employees from the other two banks. Rao said, “We require all employees. Secondly, even if there is an overlapping of roles and responsibilities, those employees will be relocated across branches.” The overlapping will mainly happen in controlling offices but these people can be relocated.

The PNB has become the second biggest lender in the country, and for the same they will require a maximum workforce. As per the amalgamation document, all the employees of merged banks are employees of PNB with effect from April 1. However, if any employee wishes to discontinue working he/she can opt for that, though no such resignation has been received yet. 

Nirav Modi Scam!

PNB went through a painful phase post the Nirav Modi scam surfaced, Rao addressed this saying, “ There are two things here. One is the impact on the balance sheet (on account of the scam), and the other is getting the recoveries in the account. Impact in the balance sheet has been addressed fully because we have provided (for the losses) fully.”

When inquired about the money recovered from the scame, he said, “ So far, nothing. Only thing is that assets worth Rs 1,000 crore has been confiscated by the CBI (Central Bureau of Investigation) recently. They have given permission to us to apply to the courts for the sale of these properties. We have already done that. But there are some legal hurdles before we go for the auction.” He also stated that the recovery process is long-drawn as the cases are going in both India and England. Around Rs 13,000-14,000 crores is at stake from both Nirav Modi and Mehul Choksi cases.

Additionally he said, “Time frame will depend upon how soon we are able to identify the assets that can be auctioned. If that happens within the country, where you have visibility, you can go through the legal process to monetize those assets. But, with respect to those outside the country, you have to consider foreign treaties and concerned laws. It is very difficult for me to make an estimate on that.”

The RBI Moratorium and PNB!

PNB assured that they will be deferring the loan EMIs automatically under the RBI moratorium scheme. Rao also stated that messages have been sent to all borrowers.

As PNB is a Public Sector Bank (PSB) Rao informed Moneycontrol that they won’t be having any problem with ALM (asset-liability management) of PNB on account of this moratorium plan. He assured saying that the bank has sufficient liquidity of Rs 10,000 crore.

The Effect of 21-day Lockdown!

When inquired about the cash flow impact following the lockdown Rao said, “ Our expectation is that everything should get settled by May 31. The normalcy in operations should take another one month and beginning July 1, the uptick will happen.”