Explained: PNB aims to bring cost-to-income ratio below 50% in FY26

Punjab National Bank (PNB) is targeting to bring its cost-to-income ratio below 50% in the current financial year and further down to approximately 45% by 2028–29, according to Managing Director and CEO Ashok Chandra.

Cost-to-Income Ratio Reduction: The ratio stood at 50.38% in the first half of the current fiscal year, improving from 53.3% in September 2025, driven by a strong focus on expense rationalization and profit maximization.

What is the Cost-to-Income Ratio?

The cost-to-income ratio (C/I ratio) is a key financial metric used to measure a bank’s operational efficiency and profitability. It shows how much it costs the bank to generate every rupee (or dollar) of income. The formula is: Cost-to-Income Ratio = (Operating Expenses / Operating Income) × 100

• Operating Expenses: These are the day-to-day overhead costs of running the bank, such as employee salaries, rent, technology maintenance, utilities, and administrative expenses. (It generally excludes loan loss provisions and taxes).
• Operating Income: This is the total revenue earned by the bank before provisions, combining net interest income (interest earned minus interest paid) and non-interest income (fee income, commissions, and trading revenue).

Lower is Better: A lower ratio indicates higher operational efficiency. For example, a C/I ratio of 50% means that for every 100 rupees the bank earns in operating income, it spends 50 rupees on running its operations, leaving the remaining 50 rupees for provisions, taxes, and net profit.

Higher Means Less Efficient: If a bank has a high ratio (e.g., 60% or above), it means a large chunk of its earnings is consumed by operational costs, leaving less room for bottom-line profit.

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Why is the Cost-to-Income Ratio Important for Banks?

1. Measures Operational Efficiency: It directly highlights how well management controls expenses while growing revenues. A declining C/I ratio (such as Punjab National Bank’s target to drop below 50% and eventually to 45%) indicates that the bank is successfully streamlining its operations and cutting unnecessary overhead.
2. Protects Profitability During Volatile Cycles: Banks often face external shocks, such as fluctuating interest rates, credit losses, or treasury losses (like the Rs 1,000 crore treasury hit PNB absorbed). When revenue streams face pressure, a lean cost structure acts as a cushion, protecting the bank’s net profit.
3. Drives Return on Equity (RoE): Investors and rating agencies closely monitor this ratio. Lower operating costs translate directly into stronger operating profits, boosting overall financial health and shareholder value.
4. Enables Competitive Pricing: Banks with lower cost-to-income ratios have more flexibility to offer competitive interest rates on loans and deposits while still maintaining healthy profit margins.

Also Read: Rs 326 Crore Fraud in Five Banks Led by Punjab National Bank

Other important figures of PNB

• Net Profit increased Y-o-Y by 12.8% to ₹ 5,532 Crore in Q2 FY’27 as against ₹4,904 Crore in Q2 FY’26.
• RoA stood at 1.05% in Q2 FY’27, at the same level as 1.05% in Q2 FY’26.
• Global Net Interest Margin improved to 2.58% in Q2 FY’27 from 2.50% in Q1 FY’27.
• CRAR increased to 17.95% as on September’26 from 17.19% as on September’25.
• Book value per share (Tangible) improved to ₹111.94 in September’26 from ₹95.92 in September’25.
• Global Business grew by 11.9% on Y-o-Y basis to ₹31,18,434 Crore as on September’26 from ₹27,86,673 Crore as on September’25.
• Global Deposits registered a growth of 9.9% on Y-o-Y basis to ₹17,77,240 Crore as on September’26 from ₹16,17,080 Crore as on September’25.
• Global Advances increased by 14.7% on Y-o-Y basis to ₹13,41,194 Crore as on September’26 from ₹11,69,592 Crore as on September’25.
• CD Ratio stood at 75.5% as on September’26 as against 72.3% in September’25.
• GNPA ratio improved by 90 bps on Y-o-Y basis to 2.55% as on September’26 from 3.45% as on September’25.
• NNPA ratio improved by 11 bps on Y-o-Y basis to 0.25% as on September’26 from 0.36% as on September’25.
• Provision Coverage Ratio (including TWO) improved by 41 bps on Y-o-Y basis to 97.32% as on September’26 from 96.91% as on September’25.
• Slippage ratio stands at 0.77% as on Q2 FY’27 as compared to 0.71% as on Q2 FY’26.

Also Read: Net Profit of all Banks in Q2FY27: Check Profit of SBI, BOB, PNB and All Banks in September 2026 Quarter