The country’s second largest private sector bank by market value said its profit declined compared to the same period last year. Market expectations were higher, but increased provisioning reduced net earnings for the quarter.

A key factor behind the profit miss was a sharp rise in provisions following an annual supervisory review by the banking regulator. The review led to additional buffers being set aside for certain loan categories.

Bank officials clarified that some loans earlier classified under agriculture and priority sectors did not fully meet regulatory norms. Although these loans were not stressed or overdue, the classification issue required higher provisions.

The bank stated that it has fully complied with regulatory directions and made all required provisions during the quarter. Management emphasized that the move was precautionary and aimed at strengthening balance sheet resilience.

Alongside the earnings announcement, the board approved the reappointment of current chief executive Sandeep Bakhshi for another two year term. His new term will begin in October 2026, extending leadership continuity at the bank.

Bakhshi has been leading ICICI Bank since 2018 and is credited with improving asset quality and simplifying operations. His reappointment was viewed as a signal of stability amid regulatory scrutiny.

Despite the profit decline, ICICI Bank reported solid growth in net interest income during the quarter. Higher domestic loan growth supported revenue expansion even as costs increased.

Loan growth remained strong across key segments, reflecting continued demand during the festive season. Deposits also recorded steady growth, supporting the bank’s funding base.

Net interest margin, a crucial profitability indicator, remained stable during the quarter. This suggests that the bank has managed interest rate movements effectively despite changes in the broader rate environment.

Asset quality showed marginal improvement, with a slight decline in gross non performing assets. This indicates that underlying credit conditions remain stable despite the provisioning impact.

India’s major lenders have generally seen strong credit demand driven by consumption, infrastructure spending, and tax relief measures. Lower benchmark interest rates have further encouraged borrowing across sectors.

While the quarterly results fell short of expectations, analysts noted that the bank’s fundamentals remain intact. Strong loan growth, stable margins, and improving asset quality continue to support long term prospects.

Earnings face pressure. Leadership continuity assured.

The proposal reflects ongoing efforts to modernise financial regulation while supporting stability in the banking system.

The Reserve Bank of India outlined the draft framework in a statement, inviting feedback from stakeholders before implementation.

The revised norms are expected to come into effect from April 1, 2027, allowing banks adequate time to prepare for the transition.

Under the proposed changes, banks would no longer be required to calculate separate onshore and offshore net open positions.

Instead, a unified approach would be adopted to simplify reporting and improve clarity in risk assessment.

The central bank indicated that the move is intended to ensure consistent implementation of foreign exchange exposure rules across regulated entities.

Uniform standards can help reduce complexity and improve comparability across banks operating in diverse markets.

Another key element of the proposal allows banks to exclude certain structural foreign exchange positions from net open position calculations.

These include long-term foreign currency investments in subsidiaries, overseas branches, and affiliated but non-consolidated entities.

Such exclusions recognise the strategic nature of these investments, which are typically held for operational or expansion purposes rather than trading.

This approach aims to provide a more accurate reflection of a bank’s actual risk profile.

The Reserve Bank also proposed modifications to the shorthand method used for calculating foreign exchange risk.

These changes are designed to align domestic practices more closely with internationally accepted regulatory frameworks.

One notable adjustment involves treating open positions in gold separately within foreign exchange risk calculations.

This reflects global standards that recognise gold’s unique role and price dynamics in financial markets.

In addition, banks would be required to include all accumulated or unremitted surplus from overseas operations in their net spot positions.

This measure seeks to ensure that potential risks associated with overseas earnings are fully captured.

Regulatory experts note that these proposals reflect a balanced approach to risk management.

By refining calculation methods, the central bank aims to enhance transparency without placing undue operational burden on banks.

The proposed framework also supports improved capital planning for banks.

More accurate measurement of foreign exchange exposure allows institutions to set aside capital more efficiently against potential risks.

Foreign exchange risk management is particularly important for banks with international operations or significant exposure to global markets.

Clear and consistent rules help such institutions manage volatility arising from currency movements.

Market participants are expected to review the proposals closely and provide feedback during the consultation period.

Industry input can help fine-tune the framework before it is finalised.

The Reserve Bank has emphasised that the changes are part of its broader effort to keep India’s financial regulations aligned with evolving global norms.

Such alignment supports investor confidence and enhances the resilience of the banking sector.

Banks are likely to use the transition period to update internal systems and risk management processes.

Early preparation can help ensure a smooth shift to the revised methodology once it comes into force.

Overall, the proposed changes signal a measured and forward-looking approach to financial regulation.

They aim to strengthen risk oversight while supporting the continued growth and international integration of India’s banking system.

Despite the shift, the bank’s leadership has assured stakeholders that its strong operational performance, healthy profitability, and sound capital base will help it absorb the change effectively without disruption to its growth trajectory.

Confident Outlook Amid Regulatory Transition

PNB Managing Director and CEO, Ashok Chandra, confirmed in an interview that the bank has already made preliminary assessments and is fully prepared for the transition.

“The impact comes to around 90 billion rupees,” Chandra said. “The bank has done a rough estimate as this new framework was already in the pipeline. I don’t see any further deviation.”

The RBI’s updated guidelines, released earlier this month, require Indian banks to adopt an Expected Credit Loss (ECL) model starting April 1, 2027.

Under this system, banks will proactively set aside funds to cover potential loan defaults, replacing the current model where provisions are made only after a default occurs.

The ECL framework aligns Indian banking practices more closely with international standards, making risk management more forward-looking and robust.

Strong Financial Foundation

PNB’s readiness for this transition is underpinned by its strong financial position. As of September 30, the bank reported a Capital to Risk-Weighted Assets Ratio (CRAR) of 17.19%, which is in line with the Indian commercial banking average of 17.3%, according to the RBI’s latest Financial Stability Report.

Even after factoring in the estimated 0.85 percentage point impact on its capital ratio due to the new provisions, PNB’s capital strength remains solid.

“Our internal accruals and operational profits will be sufficient to manage the transition,” Chandra affirmed. “PNB is well-poised to take care of all upcoming requirements. We see this as part of our natural growth and regulatory evolution.”

The CEO highlighted that the expected credit loss provisions will mainly apply to stage-two assets in PNB’s retail, agriculture, and small and medium enterprise (SME) portfolios.

These assets represent loans where repayments have been delayed but have not turned into non-performing accounts — a manageable category for a bank of PNB’s scale and resilience.

Profitability and Growth Momentum

Despite tightening regulations and a competitive banking landscape, PNB continues to deliver solid financial performance. The lender recently reported a net profit of 49.04 billion rupees for the second quarter, reflecting a 14% year-on-year increase.

The bank projects its 2026 fiscal year net profit to exceed 150 billion rupees, demonstrating continued operational efficiency and prudent risk management.

PNB’s consistent profitability has been driven by growth in retail lending, digital transformation, and a renewed focus on customer service and sustainable banking.

The institution has also strengthened its recovery mechanisms and tightened credit monitoring processes to minimize potential defaults — a move that will further cushion the bank against the upcoming ECL transition.

The introduction of the ECL framework marks a significant evolution for the Indian banking sector. By proactively estimating potential credit losses, banks like PNB will be better equipped to manage risks, ensure financial stability, and enhance investor confidence.

Experts believe PNB’s early acknowledgment of the framework’s financial implications demonstrates responsible governance and transparency — traits that are increasingly valued by regulators, investors, and customers alike.

The bank’s approach sets a positive precedent for the rest of the industry as it moves toward compliance with the new RBI standards.

Future-Ready and Resilient

As the country’s third-largest state-owned bank by market capitalization, PNB has been actively modernizing its operations to meet future challenges.

The bank’s focus on digital banking, financial inclusion, and green finance initiatives aligns with India’s vision for a sustainable and technology-driven financial ecosystem.

The transition to the ECL framework, though financially significant, is being viewed by PNB’s leadership as a long-term opportunity to strengthen its balance sheet and enhance transparency in credit risk assessment.

“Change brings opportunity,” Chandra noted. “This is a step forward for the entire banking industry, and we are ready for it.”

With a resilient capital position, growing profitability, and strategic foresight, Punjab National Bank stands well-positioned to navigate the evolving regulatory environment.

Its proactive stance and disciplined approach reaffirm its reputation as a stable and trustworthy financial institution dedicated to supporting India’s economic progress.