PNB has delivered one of its most notable financial turnarounds in recent years, as Punjab National Bank reported a sharp improvement in asset quality during FY26. As of the quarter ended September 30, 2025 (Q2 FY26), the bank’s Gross Non-Performing Assets (GNPA) ratio declined to 3.45%, while Net NPAs (NNPA) dropped to 0.36%. Consequently, these numbers highlight a sustained clean-up compared with the previous financial year and signal improving balance sheet strength.
Importantly, this reduction in bad loans marks a major milestone for a lender that struggled with high NPAs for much of the last decade. In September 2024, GNPA stood at 4.48% and NNPA at 0.46%. Therefore, the year-on-year decline clearly reflects steady progress. Moreover, management attributed this improvement to tighter underwriting standards, disciplined credit monitoring, and consistent recovery efforts. As a result, stress levels across the loan book have moderated significantly.
Another critical factor behind the turnaround has been the bank’s strong provisioning buffer. During September 2025, the Provision Coverage Ratio (PCR) reached 96.91%, including technical write-offs. Not only is this level well above regulatory comfort thresholds, but it also provides resilience against potential future stress. Additionally, by maintaining a tangible PCR above 90%, the bank absorbed shocks effectively and released excess provisions in select periods. Hence, this strategy directly supported profitability.
Meanwhile, recoveries continued to outpace fresh slippages, reinforcing the sustainability of the asset quality improvement. During Q2 FY26, fresh slippages totaled ₹1,955 crore. In contrast, recoveries reached ₹3,920 crore. Consequently, stressed assets declined on a net basis, leading to a further reduction in overall NPAs. This trend, therefore, demonstrates the effectiveness of the bank’s recovery mechanisms.
Furthermore, management highlighted that the annualised slippage ratio stood at 0.71%, which remained comfortably below the full-year guidance of under 1%. This performance stemmed from stronger credit controls, especially within the corporate loan portfolio. At the same time, the bank increased its focus on Retail, Agriculture, and MSME (RAM) lending, which now accounts for nearly 57% of domestic advances. Notably, loans sanctioned since July 2020 under fresh underwriting standards show net NPAs of just 0.41%, underscoring improved credit appraisal quality.
As asset quality strengthened, earnings stability also improved. Lower NPAs reduced provisioning requirements, while higher recoveries eased pressure on profitability. Consequently, credit costs turned negative in Q2 FY26. This shift supported a 14% year-on-year rise in net profit to ₹4,904 crore. Moreover, with slippages under control and recoveries gaining momentum, management expects credit costs to remain benign in upcoming quarters.
Overall, the asset quality turnaround represents a structural shift rather than a temporary improvement. A cleaner balance sheet, robust provisioning, and recoveries exceeding slippages position the bank for stable earnings and stronger returns. Looking ahead, PNB appears better placed to sustain growth and profitability through FY26 and beyond.
