It is my pleasure to present the Annual Report of your Bank for the
 financial year (FY) 2010-11. While in most parts of the world financial
 systems continue to be under strain, prospects for Indian financial
 system remain bright with GDP growth estimated at 8.6% in 2010-11. As
 Indias second largest bank, Punjab National Bank is well-positioned to
 benefit from the improving growth prospects of the economy and deliver
 value to customers and shareholders.
 
 PNB has inherited sound banking tradition of 117 years and has a large
 domestic footprint and presence in 9 global jurisdictions. This, along
 with more than 6 crore customers and strong technological base, gives
 us an edge over our peers. Your Bank has always undertaken sustainable
 business by supporting the productive sectors of the economy, promoting
 innovative and customer-friendly products and services and following
 responsible business practices. In order to maintain our front-line
 position, we need to keep re-inventing our business strategy, without
 compromising with our core philosophy of prudent banking.
 
 Now let me share with you PNBs operational and financial performance
 during the FY 2010-11. I am happy to inform you that backed by strong
 business and earnings performance, the Bank once again emerged as the
 number ONE nationalized bank in the country.
 
 Financial year 2010-11 was an eventful year with the Bank crossing
 number of milestones. While total business crossed Rs.5.55 lakh crore
 at the end of March 2011 compared to Rs. 4.36 lac crore last year,
 registering Year- on-Year (YoY) growth of 27.3%, global deposits
 reached Rs. 3.12 lac crore (25.5%) and global gross advances touched
 Rs. 2.42 lac crore (29.7%).
 
 Growth in the credit was mainly driven by Retail and MSME. Under retail
 credit segment, Education Loans, Auto Loans and Housing Loans with
 growth of 24% were the major contributors. Loans to MSME sector, which
 is thrust area of the Bank, registered a growth of 29.3%.
 
 Bank also paid equal attention to asset quality. Gross NPA ratio stood
 at 1.79% at the end of March2011. Similarly, Net NPA to Net Advances
 ratio stood atO.85%.
 
 Along with increased business, Banks productivity indicators have
 shown improvement. While Business per employee grew to Rs. 10.17 crore
 in March2011 from Rs. 8.08 crore at the end of March 2010, Business
 Per Branch showed improvement to Rs. 104.8 crore from Rs. 87.1 crore at
 end March2010.
 
 During the year, your bank has shown excellent financial performance.
 Operating profit stood at Rs. 9056 crore for the FY ended 2010-11,
 growing by 23.6% from Rs. 7326 crore last year. Net Profit at Rs. 4433
 crore registered a growth of 13.5%. Interest income rose by 33.2%,
 while income from Commission, Exchange and Brokerage posted growth of
 21.5%.
 
 The improved financial performance has resulted in better earnings
 performance. For the FY ended 2010-11, Net Interest Margin (NIM) stood
 at 3.96% compared to 3.57% in FY 2009-10. With better profit
 performance, Return on Assets (RoA) and Return on Equity (RoE) stood at
 1.34% and 22.13%, respectively. Bank will continue its focus on
 sustaining the high earnings performance by keeping strict control on
 costs and revenue maximization.
 
 Banks Capital to Risk Asset Ratio (CRAR) complying with Basel II
 requirements stood at 12.42 % (Tier-I capital: 8.44%; Tier- II Capital:
 3.98%) at the end of March 2011. Bank is confident of successfully
 meeting the challenges of migrating to Basel III prescriptions.
 
 Recognizing that technology holds the key for outreach and maximizing
 the large franchise value, your Bank has been taking various
 initiatives.  With well developed alternative delivery channels, the
 Bank has been focusing on channel management aimed at customer
 convenience.
 
 I am happy to state that your Bank has earned awards and accolades
 during the year in appreciation of excellence in services, Corporate
 Social Responsibility (CSR) practices, transparent governance
 structure, best use of technology and good human resource management
 practices. Your Bank has been conferred with the Gold trophy of SCOPE
 Meritorious Award for Best Managed Bank, Financial Institution or
 Insurance Company for 2009-10 by Her Excellency the President of
 India. PNB has found place in the league tables in various categories.
 PNB figures as one of the top 5 banks in India according to The
 Banker magazine, London.  The Bank ranks at 257th position amongst
 worlds Top 1000 Banks. As per Forbes magazine, PNB tops the list of
 nationalized banks with a global ranking of 653. The Bank is ranked
 24th Best Company amongst top 500 Indian Companies as per Economic
 Times. Business World recognized PNB as the 3rd best large bank and 5th
 Fastest Growing Bank for 2010, while Business Today ranked it as 14th
 Most Valuable Public Sector Companyfor 2010.
 
 PNB will continue to make investments in technology, new products, risk
 management and towards expanding franchise value. Such investment will
 facilitate the Bank to retain competitive advantage. Indias demography
 is undergoing significant changes. With rapid economic growth, rising
 incomes and changes in customer expectations, banking services have to
 be refashioned. We will have to offer consistent banking experience to
 the customers irrespective of the channel he or she may prefer to use.
 Our products and services will have to be user-friendly, innovative,
 competitive and seamlessly integrated across channels. As business
 opportunities expand, the bank will have to remain alert, nimble-footed
 and execute its strategy effectively. With its inherent strengths and
 support from stakeholders, I am quite confident that your Bank will
 successfully meet the challenges and touch new frontiers in business
 growth and performance.
 
 With warm regards,
 
                                                      Yours sincerely,
 
                                                         (K.R. Kamath) 
                                          Chairman & Managing Director