Punjab National Bank (PNB) is targeting a cost-to-income ratio below 50% in the current financial year, followed by a reduction to around 45% by FY2028-29. Managing Director and CEO Ashok Chandra says the state-owned lender is focusing on controlling operating expenses, improving income generation and strengthening profitability. The bank’s cost-to-income ratio stood at 50.38% in the first half of FY2026-27, compared with 53.3% in the corresponding period last year.
The target comes as PNB reports stronger core operating performance and higher quarterly profit. In the September 2026 quarter, net profit rose 12.8% year over year to ₹5,532 crore, while core operating profit increased approximately 29%. The challenge now is to convert that momentum into sustained efficiency gains while continuing to grow lending, maintain asset quality and manage deposit costs.
Key Takeaways
- FY2027 target: PNB aims to bring its cost-to-income ratio below 50% by the end of the current financial year.
- Long-term goal: The bank is targeting a ratio of approximately 45% by FY2028-29.
- Improving efficiency: The ratio declined to 50.38% in the first half of FY2027 from 53.3% a year earlier.
- Profit growth: Net profit increased 12.8% year over year to ₹5,532 crore in Q2 FY2027.
- Stronger core operations: Core operating profit grew approximately 29% during the September quarter.
- Income target: Management is targeting quarterly profit of around ₹6,000 crore over the coming quarters, supported by stronger operating performance.
What Is PNB’s Cost-to-Income Ratio Target?
PNB’s management has set two milestones for improving operational efficiency. The first is to bring the cost-to-income ratio below 50% during FY2026-27, which ends on March 31, 2027. The second is to reduce it to approximately 45% by FY2028-29.
According to Moneycontrol’s report, Chandra said the bank is concentrating on expense rationalisation and profit maximisation. Management reviews are increasingly focused on the cost of deposits, yields on advances, fee-based income and opportunities to reduce operating expenses.
The targets indicate that PNB wants to improve efficiency through a combination of cost control and stronger income generation rather than relying on a single expense-cutting programme.
| Target period | Cost-to-income ratio goal |
|---|---|
| First half of FY2026-27 | 50.38% actual |
| FY2026-27 | Below 50% |
| FY2028-29 | Approximately 45% |
Source: Moneycontrol, reporting statements by PNB MD and CEO Ashok Chandra.
What Does the Cost-to-Income Ratio Mean?
The cost-to-income ratio measures how much a bank spends to generate its operating income. It is calculated by dividing operating expenses by operating income and expressing the result as a percentage.
For example, if a bank spends ₹50 to generate ₹100 in operating income, its cost-to-income ratio is 50%.
A lower ratio generally indicates that a bank is generating more income relative to its operating expenses. However, the figure should be assessed alongside profitability, loan growth, asset quality and investment in technology and branches.
For PNB, reducing the ratio from 50.38% to below 50% would be a relatively small initial improvement. Reaching approximately 45% by FY2029 would require a more sustained change in the relationship between income and expenses.
The bank could achieve that through faster growth in operating income, slower growth in expenses, or a combination of both. The actual outcome will depend on its business mix, funding costs, fee income and investment requirements.
How PNB Plans to Improve Operational Efficiency
Chandra has identified expense rationalisation and income maximisation as the two main priorities. These involve managing both sides of the bank’s operating performance.
1. Rationalising operating expenses
PNB is reviewing its operating costs to identify areas where spending can be reduced without undermining essential services. This may involve improving productivity, using technology more effectively and monitoring expenditure across business units.
Cost control is particularly important for large banks, which operate extensive branch networks and require significant spending on personnel, technology, compliance and customer service.
The challenge is to remove inefficiencies without weakening customer service or limiting investments needed for future growth.
2. Improving the cost of deposits
Deposits are a major source of funding for banks. The interest paid to depositors directly affects how much a lender earns from the difference between lending income and funding costs.
PNB has been working to optimise its deposit mix and reduce reliance on relatively expensive funding. Its earnings-call commentary also highlighted the use of foreign-currency deposits to help replace higher-cost bulk deposits and certificates of deposit.
Lower funding costs can support margins, although the benefit depends on market interest rates, deposit competition and the pace at which existing deposits reprice.
3. Increasing yields on advances
Advances are loans made by a bank. Improving the yield earned on these loans can help increase operating income, provided the bank maintains appropriate underwriting standards and controls credit risk.
PNB is pursuing growth across retail lending, agriculture and micro, small and medium enterprises (MSMEs), alongside a more selective approach to corporate lending.
The objective is to generate sustainable returns from its lending portfolio rather than pursue loan growth at any cost.
4. Expanding fee-based income
Banks can earn fees from services such as cash management, supply-chain finance, payment services and other transaction-related activities. These revenues can diversify income beyond interest earned on loans.
PNB’s fee-based income increased 16% year over year to ₹1,954 crore in Q2 FY2027, according to its financial results. Continued growth in such services could support the bank’s efficiency targets if the additional revenue is generated without a proportionate increase in expenses.
PNB’s Latest Financial Performance
PNB’s efficiency plan comes amid stronger earnings in the second quarter of FY2026-27. Its results for the quarter ended September 30, 2026, showed growth in net profit, net interest income and core operating profit.
| Financial metric | Q2 FY2027 | Year-over-year change |
|---|---|---|
| Net profit | ₹5,532 crore | +12.8% |
| Net interest income | ₹11,601 crore | +10.8% |
| Operating profit | ₹7,532 crore | +4.2% |
| Fee-based income | ₹1,954 crore | +16.0% |
| Cost-to-income ratio | Approximately 50.45% | Improved from 51.20% |
Source: PNB’s September 2026 financial results and earnings-call commentary. The cost-to-income ratio in the quarterly earnings call was reported at approximately 50.45%; the first-half figure of 50.38% covers a different reporting period.
The results show that PNB’s core income streams have been expanding. However, operating profit grew more slowly than net profit, and treasury income declined during the quarter. This reinforces the importance of maintaining stronger underlying income rather than depending on movements in financial markets or one-off gains.
PNB also reported a global net interest margin of 2.58% for Q2 FY2027, compared with 2.50% in the preceding quarter. Its gross non-performing asset ratio improved to 2.55% as of September 2026, while its net NPA ratio stood at 0.25%.
These indicators provide context for the efficiency drive: the bank is seeking to improve its operating economics while continuing to expand business and manage credit risk.
PNB Targets Quarterly Profit of ₹6,000 Crore
Alongside the cost-to-income ratio goals, Chandra said PNB is targeting quarterly profit of around ₹6,000 crore over the coming quarters.
The bank reported net profit of ₹5,532 crore for Q2 FY2027, its highest quarterly profit at that time. Management pointed to the growth in core operating profit as evidence of stronger underlying business performance.
However, treasury income fell to ₹753 crore in the September quarter from ₹1,769 crore a year earlier, reflecting a decline of approximately ₹1,000 crore. Despite this pressure, the bank maintained operating profit growth.
The ₹6,000-crore target is a management objective rather than a guaranteed result. Achieving it will depend on income growth, funding costs, operating expenses, credit provisions and market conditions.
What Could Make the 45% Target Difficult?
Reducing the cost-to-income ratio to 45% requires sustained improvement, not simply one strong quarter.
First, competition for deposits can keep funding costs elevated. If deposit rates remain high, the bank may find it harder to improve margins even as its lending portfolio expands.
Second, investments in technology, branches, compliance and customer service can increase expenses in the short term. Some spending may be necessary to support long-term productivity and growth.
Third, revenue is not always predictable. Treasury results can fluctuate with interest rates, while loan growth and fee income depend on demand and competition.
Finally, a bank must balance efficiency with prudent lending. Aggressive cost reductions or pursuit of higher-yielding loans could be counterproductive if they weaken service quality or increase credit risk.
For these reasons, the ratio should be tracked alongside net interest margin, operating profit, fee income and asset quality.
The Bigger Picture
PNB’s targets reflect a wider effort among Indian banks to improve returns from their existing business, manage funding costs and increase productivity. A lower cost-to-income ratio can help a bank retain more operating income before provisions and taxes, potentially supporting profitability and its capacity to invest.
The bank’s progress will depend on whether it can expand fee income and core lending revenue faster than expenses while maintaining healthy asset quality. The reduction to below 50% in FY2027 is the near-term milestone; the approximately 45% goal by FY2029 is the more demanding test of whether efficiency gains can be sustained.
FAQs
1. What is PNB’s cost-to-income ratio target for FY2027?
Punjab National Bank aims to reduce its cost-to-income ratio below 50% by the end of FY2026-27, which concludes on March 31, 2027.
2. What is PNB’s cost-to-income ratio target for FY2029?
PNB is targeting a cost-to-income ratio of approximately 45% by FY2028-29, according to MD and CEO Ashok Chandra.
3. What was PNB’s cost-to-income ratio in the first half of FY2027?
The ratio stood at 50.38% in the first half of FY2026-27, compared with 53.3% in the corresponding period of the previous financial year.
4. How much profit did PNB report in Q2 FY2027?
PNB reported net profit of ₹5,532 crore for the quarter ended September 30, 2026, representing a 12.8% year-over-year increase.
5. How can PNB reduce its cost-to-income ratio?
PNB is focusing on expense rationalisation, deposit-cost management, better yields on loans, higher fee-based income and stronger operating productivity. The results will depend on how these measures perform alongside market conditions and business growth.
Looking Ahead
PNB’s next priority is to bring its cost-to-income ratio below 50% by the end of FY2027 while sustaining the growth in core operating profit. Quarterly results will show whether improvements in funding costs, fee income and operating expenses are translating into a more efficient business model.
By FY2029, the bank aims to reach approximately 45%. Achieving that target would require continued progress across income generation and cost management, while preserving asset quality and investing in the systems needed to serve customers and support future lending growth.
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