Punjab National Bank (PNB), the country’s second-largest public sector bank, is planning to cut exposure to personal loans and home finance, to bridge the gap between higher credit off-take and lower deposits, report agency sources.
“The bank is concerned over the widening gap between resource mobilisation and credit expansion and will soon take decisions on curtailing credit exposure by reducing personal loans,’ PNB chief general manager US Bhargava said. The bank’s asset liability committee (ALCO) will meet later this week to decide on the issue, he added.
PNB’s credit exposure is growing at 28% as against a growth of 20-22% in resource mobilisation. The bank had earlier indicated an increase in prime lending rate (PLR) by 25 to 50 basis points and higher interest rates on all types of personal loans and housing loans.
At present, PNB charges a PLR of 12.25% and the interest rate on personal loans is between 12-13%. A number of banks such as ICICI Bank and HDFC Bank have raised PLR by 100 basis points, while Bank of Baroda had increased interest rates by 75 basis points.
Bhargava said that while loans for the first house of a borrower will be kept in the priority segment, PNB will take steps to discourage buying a second or third house.
The steps taken by PNB followed the recent RBI measure to increase the repo rate (repurchase rate) and the CRR (Cash reserve Ratio). The repo rate is the interest rate at which RBI lends to banks, while CRR is the proportion of cash banks must keep with the RBI. The increase in CRR and repo rate increases the cost of funds for banks, prompting them to hike lending rates. RBI resorted to these measures to curb high inflation in the economy.