Credit Rating

Ref No: PSB/HO/Shares Cell / 54 /2026-27 October 6, 2026 BSE Limited, National Stock Exchange of India Ltd., Department of Corporate Services, Exchange Plaza, C – 1, Block – G, 25th floor, Phiroze Jeejeebhoy Towers, Bandra Kurla Complex, Bandra (East), Dalal Street, Fort, Mumbai – 400 051. Mumbai – 400 001. SYMBOL: PSB SERIES: EQ SCRIP ID : PSB SCRIP CODE : 533295 Dear Sir, Reg: Rating by India Ratings We hereby inform that India Ratings vide Press Release dated October 6, 2026 has reaffirmed the Rating of the Infrastructure Bonds issued by the Bank as detailed hereunder: Instrument Type Rating / Outlook Infrastructure Bonds of Rs 3000 crore IND AA/Stable (Reaffirmed) The Press Release is enclosed for reference. We request you to take note of the above pursuant to Regulation 30 and 51 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Yours faithfully Saket Mehrotra Company Secretary Head Office: 21, Rajendra Place, New Delhi-110008 Corporate Office: NBCC Office Complex, Block 3, East Kidwai Nagar, New Delhi – 110023 Email: complianceofficer@psb.bank.in India Ratings Affirms Punjab and Sind Bank’s Infrastructure Bonds at ‘IND AA’/Stable Oct 06, 2026 | PUNJAB AND SIND BANK | Public Sector Bank India Ratings and Research (Ind-Ra) has affirmed Punjab and Sind Bank’s (PSB) infrastructure bonds as follows: Details of Instruments Size of Rating Regulator of Date of Coupon Maturity Rating Instrument Type Issue (INR Assigned with Instrument Issuance Rate Date Action million) Outlook/Watch Infrastructure Refer ISIN IND - - - 30,000 Affirmed bonds* annexure AA/Stable *Details in Annexure Analytical Approach Ind-Ra has factored in the availability of support from the government of India (GoI; holds 93.85% stake) to arrive at the rating due to PSB’s systemic importance to the GoI. Detailed Rationale of the Rating Action The affirmation reflects the continued improvements in the bank's capital position and operating buffers in FY26, indicating its enhanced ability to absorb the impact of any rise in credit costs. Furthermore, the rating reflects the continued improvement in PSB’s systems and processes, improved profitability buffers and movement towards a granular loan portfolio. Following the implementation of centralised processing centres (CENMARG) for granular ticket sizes across the retail, agri and micro, small and medium enterprises (RAM) segments, PSB has witnessed continued improvements in asset quality. Furthermore, the bank’s digital transformation initiatives are likely to enhance operational efficiency and support customer acquisition, thereby providing an opportunity to further scale up the franchise. PSB’s ability to strengthen its low-cost deposit franchise, particularly through current account savings account (CASA) mobilisation, and sustain targeted loan growth amid continued competitive pressures in deposit mobilisation remains a key monitorable. List of Key Rating Drivers Strengths Adequate capital buffers; improvement in internal accruals Improved operating performance driven by structural reforms Improved profitability; however, margins incrementally need to catch up Weaknesses Consistent improvement in asset quality, albeit monitorable Need to strengthen low-cost liability franchise Detailed Description of Key Rating Drivers Adequate Capital Buffers; Improvement in Internal Accruals: PSB is a well-capitalised public sector bank, with a common equity tier-1 (CET-1) ratio of 16.56% in 1QFY27 (FY26: 15.92%; FY25: 15.59%) and a capital adequacy ratio of 17.61% (17.42%; 17.41%). The GoI continues to hold a majority stake in PSB at 93.85% as of 1QFY27. The bank reported return on asset (ROA) of 0.79% in FY26 (FY25: 0.67%) and aims to improve it to around 1% in the medium term. Moreover, during 1HFY25, in lieu of regulatory requirements, the bank took a revaluation hit of INR42.5 billion on recapitalisation bonds of INR116.7 billion, which was adjusted through general reserves. Every year, about INR4.5 billion (until the recap bonds are paid) will be reverted to shareholder reserves. Improved Operating Performance Driven by Structural Reforms: Around 2015, PSB was primarily a community- focused bank, with higher concentration in Punjab and Uttar Pradesh, and faced higher agriculture delinquencies. Following the asset quality review cycle, the non-bank financial company crisis during 2016-2020, and the impact of COVID-19 in FY21, PSB reported aggregate losses of INR50.1 billion between FY18 and FY21, requiring the GoI to infuse INR101 billion during FY21-FY22. Subsequently, PSB implemented several measures to strengthen its profile, including the centralised loan origination system in FY20, which reduced the underwriting load at branches, and the launch of CENMARG in August 2022. CENMARG facilitates the underwriting decisions for retail, agri and micro, small and medium enterprises loans above certain ticket sizes through centralised processing centres. Following these initiatives, asset quality in the RAM segment improved with gross non-performing assets (GNPA) of 0.95% as of 1QFY27 (1QFY26: 1.79%) in the retail segment, 7.54% (9.59%) in the agri segment and 3.87% (7.20%) in the micro, small and medium enterprises segment. The bank’s ongoing digital transformation initiatives have strengthened customer engagement, transaction activity and digital acquisition capabilities. Its digital platform, PSB UNiC, continues to witness increasing customer adoption, aided by a broad suite of digital services and streamlined customer journeys. Ind-Ra expects ongoing investments in the digital infrastructure to enhance operational efficiency, support customer acquisition and improve scalability of the bank's retail franchise. Improved Profitability; However, Margins Incrementally Need to Catch Up: The bank reported net interest income of INR38.1 billion in FY26 (FY25: INR37.8 billion), supported by an improved net-loans-to-deposit ratio of 79.5% (75%). However, the reported net interest margin (NIM) declined to 2.55% in FY26 (FY25: 2.85%) largely due to higher corporate exposure (39.98% as of 1QFY27) and competitive pressures in the MSME segment. Despite this, the bank continues to grow its advances at a healthy pace. Following the turnaround in FY22, the bank reported profit after tax of INR13.22 billion in FY26 (FY25: INR10.16 billion), with gross advances growing at 18.29% yoy to INR1,178.23 billion. The management has guided for advances growth of 16%-18% yoy in FY27. The structural changes, along with improved underwriting and digital initiatives, resulted in an increase in profit after tax in FY26. Furthermore, the pre-provision operating profit increased to INR21.82 billion in FY26 (FY25: INR20.75 billion). Ind-Ra expects the bank’s profitability to continue to improve over the medium term due to these structural changes. However, margins could remain under pressure in the near term. Moreover, the bank’s advances mix has changed over the past few years, with the share of the RAM segment increasing to 60% of the advances in 1QFY27 from 47.2% in FY20. The bank has guided for the RAM segment to contribute more than 60% of the total advances in FY27. Furthermore, the credit profile of the corporate advance mix above INR50 million has improved, with the share of ‘A’ and above ratings at 60.7% as of 1QFY27 (1QFY26: 58.2%). The cost-to-income ratio reduced to 61% in FY26 (FY25: 61.2%; FY24: 72.2%, FY23: 62.9%, FY22: 63.2%). The increase to 72% in FY24 was largely attributable to the bipartite wage settlement cost of INR4 billion. Also, a substantial decline in average credit costs, as per Ind-Ra’s calculation methodology, to 0.40% in FY26 (FY25: 0.82%) supported profitability. Overall, Ind-Ra expects the profitability to sustain and improve further in the near-to-medium term. However, the impact of expected credit loss implementation remains a key monitorable while according to the management, the current level of capitalisation is [Showing first 8,000 characters — download PDF for full document]