CARE Ratings stated that the rating revision to the debt instruments of Punjab and Sind Bank (PSB) considers the improvement in profitability in FY25 and better asset quality aided by recoveries and lower incremental slippages.

The rating continues to favourably factor in majority ownership of and demonstrated support from Government of India (GoI), comfortable capitalisation levels supported by multiple equity infusions and accretion of profits, and established presence in northern states of India.

PSB is expected to sustain growth in business while maintaining adequate capitalisation and improving asset quality.

The rating continues to be constrained by moderate, albeit improving, profitability with high interest expenses and operating costs and large share of non-earning assets in the form of zero-coupon recapitalisation bonds.

Going forward, the bank is expected to have some pressure on margins due as advances are repriced quickly and deposits will be repriced with a lag.

The rating also factors in PSB's relatively lower proportion of low-cost current account savings account (CASA) deposit ratio and relatively higher geographical concentration in the states of northern India with major presence in New Delhi and Punjab.

CARE Ratings notes that despite improvement in potential weak assets (SMA 1 and 2) in FY25, net stressed assets of PSB remain high in relation to its net worth compared to peer public sector banks.

The agency further said that any significant improvement in the size of the bank and profitability while maintaining comfortable capitalisation and good asset quality would be positive for the rating.

However, factors that could lead to negative rating action include reduction in support or its stake in the bank falling below 51%; deterioration in asset quality parameters over with gross non-performing asset (GNPA) exceeding 5%; and significant decline in capitalisation cushion above the minimum regulatory requirement on a sustained basis.

Punjab and Sind Bank is a mid-sized corporate-focused public sector bank based out of New Delhi that operates through a network of 1,607 branches as on 30 June 2025, with branch concentration in north India. It was nationalised in 1980. However, post many capital infusions over the subsequent years (FY18 onwards), the GoI shareholding had stood at 93.85% as on 30 June 2025.

The scrip had declined 2.20% to end at Rs 28.86 on the BSE yesterday.

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