Punjab National bank has recently grabbed the second position in terms of business size. The bank has always been a consistent performer. It has the second largest branch network (4,615 branches) in India.
It follows the basic banking principles of maintaining a high share of low cost deposit, opening new branches and keeping a check on the asset quality. Its low cost deposits were around 38.5 percent in the July-September quarter. Low cost deposits comprise current account and saving account (CASA). Such a huge share of Casa deposits indicates that the bank is using its branch network effectively.
Casa has a direct impact on the net interest margin (NIM) since it is the difference between income from loans and cost of deposits. PNB has maintained a NIM of over 3.5 percent in the past 10 years. Maintaining a 3 percent NIM consistently is very rare in the banking industry. Alongwith HDFC, PNB is the only bank to have achieved this in India.
Last year when the interest rates started rising the cost of the deposits increased thus decreasing the NIMs for most of the banks but PNB was not affected by this and maintained a decent NIM.
The bank's asset quality is the best in the industry. Its NPAs constitute around 0.14 percent of its net advances which is one of the lowest in the industry. The bank has been able to keep a check on its bad loans despite its increasing loan book.
The bank has set up 184 domestic branches in the former half of the financial year. it is important for the bank to keep adding branches in order to maintain its share of Casa deposits.