• PNB expects a Rs 90 billion ($1.03 billion) hit from RBI’s new credit loss rules
• Impact may lower capital ratio by 0.85 percentage points, manageable through profits
• Provisions mainly for high-risk loans in retail, agriculture, and SME sectors

Punjab National Bank (PNB), India’s third-largest state-owned lender by market value, expects to face about Rs 90 billion (around $1.03 billion) impact as it adapts to new credit loss rules mandated by the Reserve Bank of India (RBI). This transition, planned over five years starting April 2027, will require banks to set aside money to cover potential loan defaults earlier than before.

Ashok Chandra, CEO of PNB, said the bank has already estimated the effect and does not expect surprises. The bank’s capital to risk assets ratio (CRAR), a key measure of financial strength, is likely to fall by 0.85 percentage points due to these changes. However, with a current CRAR of 17.19%, the bank is confident it can absorb this impact through its normal profits.

The new rules focus on expected credit loss (ECL), meaning banks must prepare for potential loan risks before loans actually become bad. Most provisions will apply to 'stage-two' loans, which are high-risk but not yet non-performing. These loans largely come from PNB’s retail, agriculture, and small and medium enterprise (SME) portfolios.

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PNB recently reported a strong second quarter, with a net profit of Rs 49.04 billion, up 14% from last year. Chandra expects the bank’s full-year profit for 2026 to exceed Rs 150 billion, indicating it is well-positioned to handle the new requirements.