Atul Kumar Goel, CEO of Punjab National Bank (PNB), announced on Thursday that the bank would increase repo-linked lending rates from next month, according to a PTI report.
The decision came after the Reserve Bank of India (RBI) hiked the repo rate by 40 basis points (bps) last week in response to rising inflation.
According to PTI, Goel, MD and CEO of the state-owned lender, told reporters that interest rates would almost certainly rise further.
“With the repo rate increasing by 40 bps … so according to our policy, from June 1, the loan rate will increase by the same amount. So the loan rate will definitely increase a bit,” Goel said.
The repo rate is the cost of borrowing short-term money from the RBI.
Lenders at the city headquarters have raised interest rates on fixed-term deposits in fixed buckets to 0.60 percent starting May 7, PTI reported.
Following the RBI rate hike, several banks have already raised repo-linked lending rates for their customers. Some have even increased their deposit rates.
Goel said the bank’s quarterly earnings declined due to the increase in provisions for the quarter ended March 2022 and fiscal year, PTI reported.
The bank’s net profit fell 66% to Rs 202 crore in the March quarter. However, net profit for FY 2021-22 increased by 71% to Rs 3,457 crore.
According to Goel, demand in the economy has returned to pre-epidemic levels and sectors such as steel, cement and road infrastructure are performing well.
There is a strong demand in the automobile segment. Because of COVID-19 everyone wants to buy their own car. This is why the car market has grown by about 25%. (Segment debt). There is also good demand in the home sector. In addition, we expect house loan demand to grow by 15%, PTI reported.
“As I told you before, there is good demand in the steel, cement industry … lots of road projects are coming. We are very optimistic, this year will be very good in terms of debt growth.” He said.
On the asset quality front, lenders have seen an improvement, with Gross Non-Performing Assets (GNPA) down 11.78% of total growth in March 2022, down from 14.12% a year earlier, PTI reported.
Net performing assets or bad debt fell from 5.73 percent to 4.8 percent. However, the lender has allocated Rs 4,851.47 crore for bad loans and subsidiaries in Q4 FY22, which is higher than the previous Rs 3,540.32 crore.
However, provisions and accessories for the March quarter rose to Rs 4,851.47 crore from Rs 3,540.32 crore in the previous quarter, PTI reported.
“As far as NPA additions are concerned, for the whole of FY2021, it was Rs 28,100 crore which is down to Rs 24,744 crore (FY22).