The Rs 250 crore capital raise planned by Punjab & Sind Bank (PSB) this fiscal will not only help in future expansion plans and act as a buffer against any eventuality but will also help make a difference in perceptions about the lender.
Speaking to FE, Swarup Kumar Saha, managing director and CEO, PSB, said: “As a bank, we need to prove that we are able to raise capital on our own. That will make a big difference in perception.”
Further, Saha said it will also build a cushion for the future. “Growth capital can be sustained by internal accruals and from fundraising. I am looking at 13-14% growth. The RBI has issued draft guidelines on expected credit losses, which may come at any time,” he noted.
The lender has already sought approval from the government, which is the majority stakeholder in the capital raise. The timing of the issue will depend on the market situation and the advice of merchant bankers.
Saha said the lender is adequately capitalised for now. The bank’s capital adequacy ratio was 17.1% as of March 31, 2023, marginally lower than 18.54% a year ago. However, the common equity tier-1 (CET-1) ratio has improved to 14.32% as of March 31, 2023 from 12.77% a year ago.
As of now, the bank plans to go for an equity raise. “I need to keep in mind the public shareholding. My dilution will not be much, but at least it is my intent to dilute the stake of the government and increase the public shareholding, which is only 1% if we take out LIC’s stake as well,” he noted.
Punjab and Sind Bank reported a 32% year-on-year increase in its net profit to Rs 456.99 crore in the quarter ended March 31, 2023.
Saha said the bank is focusing on a transformation to place it in a unique position, use more technology for its processes, launch new products and penetrate more markets. “These are broad areas in which I think the transformation will happen. It takes its own time and so by March 2025 we should be in a better position on this journey,” Saha said.
“Though it is the smallest PSB, we want to make it the most efficient bank. We want to garner more liability resources on the current account and savings account,” he said. Some of the future digital initiatives will include online current account opening. Further, technology will play a big part in the transformation of underwriting skills, he said, adding that another focus area would be enhancing the capability of analysing data.
“Our market share among PSBs is less than 1% at present,” he noted. The lender is planning to open about 40 branches in the current fiscal after opening 28 branches in FY23.