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Punjab National Bank Directors Report, PNB Reports by Directors
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Punjab National Bank
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Download Annual Report PDF Format 2014 | 2013 | 2012 | 2011 | 2010
Directors Report Year End : Mar '14    Mar 13
The Punjab National Bank aligned its business plan with the cyclical
 movement in Indian economy to overcome the challenging times during
 FY''14. PNB maintained its Number One position amongst nationalised
 banks in terms of Domestic Business, Domestic Deposits, Domestic
 Advances, CASA Deposits and Operating Profit as on 31st March''14.
 Further, the Bank with more than 6200 branches has largest domestic
 network amongst nationalised banks serving more than 8.9 crore
 customers.
 
 During FY''14, the Bank crossed various new landmarks such as Rs. 8 lakh
 crore of Aggregate Global Business, Rs. 4.5 lakh crore Total Deposits, 
 Rs. 3.50 lakh crore Gross Advances, Rs. 1.70 lakh crore CASA Deposits, 
 Rs. 1.40 lakh crore Saving Deposits, Rs. 30,000 crore Current Deposits 
 and Rs. 11,000 crore Operating Profi t. The Bank has achieved reasonable
 performance in overseas operations with Overseas Business and Overseas
 Advances crossing Rs. 70,000 crore and Rs. 40,000 crore respectively.
 
 In terms of profitability ratios, the Bank recorded one of the highest
 Net Interest Margin of 3.44% during FY''14. Further, the capital
 adequacy ratio of the Bank stood at 12.29% as per Basel II and 11.52%
 as per Basel III as at 31st March''14. The Book value per share
 increased from Rs. 884.03 in FY''13 to Rs. 952.50 in FY''14.
 
 In this backdrop, your Directors take pleasure in placing the Bank''s
 Annual Report for 2013-14 along with its audited annual financial
 statements.
 
 A.  FINANCIAL HIGHLIGHTS
 
 A.1 BALANCE SHEET
 
                                                           (Rs. crore) 
 Particulars        31st  Mar''13         31st Mar''14        Growth (%)
 
 Total Business       700356               800666             14.3
 
 Deposits             391560               451397             15.3
 
 Advances             308796               349269             13.1
 
 A.2 PROFIT
 
                                                           (Rs. crore)
 
 Particulars           FY''13              FY''14            Growth (%)
 
 Operating Profit      10907              11384               4.4
 
 Provisions             6160               8042              30.6
 
 Net Profit             4748               3343            - 29.6
 
 A.3KEY RATIOS
 
                                                                (%)
 
 Particulars                    FY''13                      FY''14
 
 Cost of Funds                  5.70                        5.20
 
 Yield on Funds                 8.83                        8.31
 
 Return on Equity              15.19                        9.69
 
 Net Interest Margin            3.52                        3.44
 
 Return on Assets               1.00                        0.64
 
 Cost to Income Ratio          42.81                       45.06
 
 Operating Expenses to
 Average Working Funds          1.72                        1.79
 
 Operating Profit to 
 Average Working Funds          2.30                        2.19
 
 Earnings per share (Rs.)     139.52                       93.91
 
 Book value per share (Rs.)   884.03                      952.50
 
 Provision Coverage Ratio      58.83                       59.07
 
 CRAR - Basel II               12.72                       12.29
 
 CRAR - Basel III               -                          11.52
 
 B.  OPERATIONAL HIGHLIGHTS
 
 - The Bank has received approval from regulator for adoption of
 Foundation Internal Rating Based Approach (FIRB) for Credit Risk on
 parallel run basis. Further, the Bank has also submitted formal Letter
 of Intent for adoption of Internal Models Approach for Market Risk.
 
 - The Bank has submitted formal application to RBI for in-principle
 approval for parallel run of Advanced Management Approach (AMA) for
 Operational Risk on 22.03.2014.
 
 - The Bank has put in place New Automated PMS (Preventive Monitoring
 System) for all borrowable accounts having exposure of more than Rs. 1
 crore across all branches.
 
 - The Bank launched a Special NPA Reduction Campaign from 1st December,
 2013 up to to 31st March, 2014. The campaign is a recovery drive to
 maintain the focus of the Bank on improvement in asset quality.
 Progress of this is being monitored on daily basis.
 
 - The Bank launched a ''PPF campaign'' for the first time from 1st
 January, 2014 to 31st March, 2014 to augment and create vibrancy in PPF
 business. Further to augment fee based income, E-freight and E-stamping
 products initiated during the year.
 
 - To facilitate real time credit into the accounts of PNB Customers,
 the Bank has entered into an arrangement with UAE Exchange under FLASH
 Remit. Indian expatriates who have account with the Bank can credit
 money in their accounts on real-time basis.
 
 - In view of the shortcomings experienced in the off-line technology of
 Technical Services Providers (TSPs) and Business Correspondents (BCs)
 to strengthen the financial inclusion initiative, the Bank has moved
 ahead and acquired its own technology of Kiosk Banking Solution (KBS)
 where BC services are available on-line mode. All transactions are now
 in real time on-line in Core Banking Solution (CBS).
 
 - Under Operational Transformation Exercise, the Bank introduced
 Pragati Productivity Points (PPP) system to measure productivity and
 efficiency in all domestic general banking branches. This is a unique
 initiative of its kind by any bank, which provides a comprehensive
 metric for measuring branch performance and productivity across
 branches with diverse transaction profiles.
 
 C.    DIVIDEND
 
 The Board of Directors in its meeting held on 31st January
 2014 declared the dividend @ Rs. 10 (i.e. 100%) per equity
 share of Rs. 10 each for FY''14.
 
 D.    BUSINESS OVERVIEW
 
 1.    Business
 
 Bank''s total business reached Rs. 8,00,666 crore at the end
 of March''14, registering an absolute increase ofRs. 1,00,310
 crore and a YoY growth of 14.3%. The Bank''s overseas
 business increased by 52% over previous year to reach
 Rs. 73,447 crore.
 
 2.  Resource Mobilization
 
 Bank''s total deposits amounted to Rs. 4,51,397 crore as at the end of
 March''14, showing an absolute accretion of Rs. 59837 crore and a YoY
 growth of 15.3 %. The share of low cost deposits (current   savings) in
 total domestic deposits was 41.3% in FY''14 vis--vis 40.9% in FY''13. As
 on 21st March 2014 i.e., the Last Reporting Friday (LRF) of FY''14,
 PNB''s share in system''s Aggregate Deposits reached 4.98%.
 
 The Bank launched a Saving Deposit Campaign from 01.08.13 to 31.12.2013
 wherein Rs. 2805 crore were mobilized by opening about 11.68 Lac new
 accounts. An NRI Deposit Campaign was also launched from 01.11.13 to
 31.01.2014 to encourage mobilization of NRI deposits in the Bank.
 During the campaign, Rs. 7541 crore was mobilized in 14,499 new accounts.
 PNB Saksham, a new product with two variants, has been launched on
 11.11.2013. The Bank has mobilized Rs. 25.27 crore under the scheme.
 
 3.  Credit Deployment and Delivery
 
 Net advances of the Bank as at the end of March 2014 stood at Rs.
 3,49,269 crore, compared to Rs. 3,08,796 crore as at end March 2013,
 registering an increase of Rs. 40473 crore (YoY growth of 13.1%) over
 last year. Yield on Advances of the Bank stood at 10.36% for the year
 ended March 2014. As on 21st March 2014 i.e., the Last Reporting Friday
 (LRF) of FY''14, PNB''s share in system''s credit reached 4.98%.
 
 PNB is the designated Nodal Bank under Technology Up-gradation Fund
 Scheme (TUFS) of the Ministry of Textiles, Govt. of India. For speedier
 processing of claims under TUFS, a dedicated cell at the corporate office 
 facilitates distribution of subsidy to eligible textile units. The
 Bank has 677 accounts in SSI and Non-SSI category along with 396 SSI
 accounts covered under 15% Credit Linked Capital Subsidy (CLCS) scheme
 under TUFS. During FY''14, the Bank disbursed Rs. 183.15 crore to eligible
 textile units under TUFS.
 
 To strengthen the credit monitoring system, an Independent Division
 viz. Credit Monitoring Division, is functioning at Head Office with a
 General Manager as its vertical Head.  Similarly, nodal officers have
 been appointed in all the FGMOs/COs to have continuous watch over the
 health of the assets. All weak and irregular accounts are monitored
 through Task Force Meetings at different levels of the Bank i.e.
 CO/FGMO & HO on continuous basis. The core issues of weaknesses in the
 accounts are identified and addressed.
 
 i.  Loan Syndication
 
 The Bank has a Syndication Department at Head Office and Syndication
 cells at Mumbai and Chennai. The Bank also has a dedicated Technical
 Cell at Head office which undertakes Project appraisal and Techno
 Economic Viability (TEV) studies. These studies are for internal use
 and for sharing with participating banks as part of syndication
 assignments.
 
 During FY''14, the Bank gave approvals for appraisal/ syndication of
 debt aggregating Rs. 12,578 crore with PNB''s share of Rs. 6201 crore. 
 Total Income booked during FY''14 stood at Rs. 18.54 crore. In addition, 
 Rs. 11.85 crore was received in the form of fees as at 31st March 2014 
 from assignments in hand.
 
 ii.  Retail Credit
 
 The growth of Retail Loan portfolio continues to be the thrust area of
 the Bank. Bank''s policies on product development as per the customer
 requirements, prudent pricing, customisation and aggressive marketing
 are directed towards boosting business under Retail Loan segment. The
 Bank has 79 specialized ''Retail Asset Branches'' with an exclusive focus
 on retail credit.
 
 Retail Credit increased to Rs. 38,864 crore registering YoY growth of
 22.5% as on 31st March 2014. The Core Retail portfolio which comprises
 Housing, Vehicle, Education, Personal, Pensioner, Gold, Mortgage and
 Reverse Mortgage Loan Schemes increased to Rs. 31,930 crore which grew by
 19% (YoY) as on 31st March 2014.
 
 The Housing Loan segment registered a YoY growth of 19% with
 outstanding amount of Rs. 17,038 crore as on 31.03.2014. The outstanding
 under Vehicle Loan increased to Rs. 3577 crore as on 31.03.2014
 registering a YoY growth of 24%. Education Loan segment at Rs.  4258
 crore grew by 6.5%. A noticeable YoY growth of 34% has been witnessed
 under Personal Loan segment along with YoY growth of 16% and 13% under
 Reverse Mortgage and Mortgage Loans respectively.
 
 The Bank also implemented various schemes of Govt. of India such as
 Credit Risk Guarantee Fund Scheme for Low Income Housing (CRGFSLIH),
 Housing Interest Subsidy Scheme under the name of ''Rajiv Rinn Yojna''
 launched by Ministry of Housing & Urban Poverty Alleviation and
 Education Loan Interest Subsidy under Central Scheme for Interest
 Subsidy sanctioned upto 31.03.2009 and outstanding as on 31.12.2013.
 
 iii.  Priority Sector
 
 The Bank surpassed National Goal of 40% of ANBC in Priority Sector as
 on 31st March 2014. The performance highlights are given in the table:
 
                                                           (Rs. crore)
                              31.3.2013    31.03.2014     YoY Growth
 
 Priority Sector Credit           91076       120008         31.8 
 Of which:
 
 (a) Agriculture Sector           37777        53053         40.4
 
 - Direct                         33809        44406         31.3
 
 - Indirect                        3968         8647         117.9
 
 (b) MSME                         39738        53827         35.5
 (Priority)
 
 (c) Others                       13561        13128         -3.2
 
 - Credit to Weaker               27588        30497         10.5
 Sections
 
 - Credit to Women                14084        14301          1.5
 Beneficiaries
 
 Achievement of National Goals
 
 Parameters                                  % age of ANBC
                                       31st March     31st March
                           Target          2013            2014
 
 Priority Sector Credit    40.00           33.11           42.30 
 Of which:
 
 (a) Agriculture Sector    18.00           13.73           18.70
 
 (b) Direct Agriculture    13.50           12.29           15.65
 
 Credit to Weaker   
 (c)                       10.00           10.03           10.75
 Sections
 
 Credit to Women
 (d)                        5.00            5.12            5.04
 Beneficiaries
 
 Credit to Agriculture
 
 Credit to Agriculture sector increased to Rs. 53,053 crore as on 31st
 March 2014 registering a YoY growth of 40.4%. The ratio of Agriculture
 Advances to ANBC was 18.70%. The achievement under Direct Agriculture
 Advances was Rs. 44,406 crore and surpassed National Goal of 13.5% during
 FY''14. During FY''14, the Bank has disbursed agriculture loans to the
 tune of Rs. 43,884 crore to 24.42 lakh farmers and issued 3.37 lakh Kisan
 Credit Cards.
 
 Initiatives taken by the Bank for increasing fl ow of credit to
 agriculture
 
 - Major initiatives
 
 - On all agriculture loans, interest rates have been reduced to BR  2%
 uniformly.
 
 - The Bank launched two Special Agriculture Credit Campaigns, one
 from 15.06.2013 to 31.08.2013 during Kharif season and second from
 01.11.2013 to 15.01.2014 during Rabi season to increase lending to
 Direct Agriculture. During the campaign period, Rs. 5088 crore was
 disbursed to 3.74 lakh new farmers.
 
 - In order to boost agriculture advances, the Bank celebrated
 Agriculture Day on 18.09.2013, Milk Day on 19.12.2013 and Farmers
 Day on 23.12.2013.  On these three occasions, the Bank disbursed Rs.
 1105 crore to 65,292 farmers.
 
 - Farm Mechanization campaign was also launched from 22.02.2014 to
 25.03.2014. During the campaign, loans ofRs.43.22 crore were disbursed in
 1218 accounts.
 
 - Modifications in existing schemes
 
 - The limit under Kisan Gold scheme has been enhanced to Rs. 20 lakh.
 
 - Various schemes such as financing for setting up of Custom Hiring/
 Service unit, financing against pledge of warehouse receipts issued by
 cold storage and financing the dealer/seller of agriculture inputs
 have been modified.
 
 - Scheme for Purchase of Land has been modified.  Applicant farmers
 have been allowed to purchase agriculture land within a radius of 15
 kms (earlier it was 3-5 kms) from the existing land owned by them.
 
 - Tractor Loans for repair/renovation of tractors has been enhanced to
 Rs. 1 lakh and more than 5 years old tractors are eligible under the
 scheme.
 
 - Other initiatives taken
 
 - Important documents, forms and circulars uploaded on SMILE products
 of Knowledge center website.
 
 - An independent portal developed for online monitoring of 637
 Agriculture officers.
 
 - Up to 31.03.2014, PNB Rupay Kisan card (KCC-Debit Card) were issued in
 5.68 lakh KCC accounts out of 15.12 lakh eligible KCC accounts.
 
 - In order to simplify processing of Agriculture loans- Lending
 Automation Processing System (LAPS) Agriculture module is being
 implemented.
 
 - RBI has allotted Lead Bank Responsibility of three new districts of
 Delhi namely North East Delhi, North West Delhi and East Delhi to PNB
 in July 2013. At present, the Bank has lead responsibility in 63
 districts of the country.
 
 - This year Banks focus is on increasing the share of Investment Credit
 in Agriculture mainly Farm Mechanization, Dairy, Poultry, Plantation,
 Horticulture, Rural Godowns, Cold storages, Input Dealers etc, apart
 from financing under KCC by extending our farmers'' base.
 
 Credit to Weaker Sections & SC/ST
 
 Credit to weaker sections by the Bank increased to Rs. 30,497 crore in
 March, 2014, registering YoY growth of 10.54%. Ratio of Weaker Sections
 advances to ANBC at 10.75% continued to be higher than the National
 Goal of 10%. Credit to SC/ST beneficiaries amounted to Rs. 3384 crore as
 at 31st March 2014.
 
 Credit to Women beneficiaries
 
 The credit to women beneficiaries at Rs. 14301 crore registered 5.04% as
 percentage of ANBC at the end of March 2014. A dedicated Women Cell
 functions at Corporate Office which closely monitors the progress
 under various lending schemes for women beneficiaries and redesigns
 the existing ones as per emerging needs.
 
 Credit to Minority Communities
 
 Bank''s credit to minority communities stood at Rs. 18,923 crore as on
 March''14 and constitutes 15.77% of Priority Sector advances.
 
 Micro Credit
 
 The Bank credit-linked 2,04,826 Self Help Groups (SHGs), extending
 credit amounting to Rs. 18,88.60 crore thus recording YoY growth of
 15.54% as at 31st March''14. The number of deposit-linked SHGs rose to
 2,46,258 in cumulative terms during FY''14. Further, the Bank has
 1,46,545 credit-linked women SHGs and 1,74,587 savings-linked women
 SHGs. During FY''14, a new scheme for promotion/ support of women Self
 Help Groups in Backward & Left Wing Extremism affected districts of
 India has been made operational in 13 identified districts and 4885
 SHGs have been formed under the scheme, out of which 1913 SHGs have
 been credit linked. Further the Bank also implemented National Rural
 Livelihood Mission (NRLM).
 
 Micro, Small and Medium Enterprises
 
 The credit to MSME sector increased to Rs. 75051 crore registering a YoY
 growth of 22.08% in FY''14 and constituted 23.91% of Total Non-Food
 Credit. The advances to Micro Enterprises grew at 30.74% thus reaching
 a level of Rs. 24,716 crore. The Bank''s MSE advances at Rs. 59,213 crore
 surpassed Statement of Intent (SOI) target of Rs. 58,500 crore for March
 2014.
 
 The Bank implemented recommendations of High Level Task Force
 constituted by Hon''ble Prime Minister to address the issue of MSME
 sector:
 
 - Against the envisaged growth of 20% in credit to Micro and Small
 Enterprises, the outstanding MSE advances at Rs. 59,213 crore achieved
 YoY growth of 21.63%.
 
 - The outstanding number of Micro Enterprises Accounts were 4,68,918 as
 on 31st March''14, showing YoY growth of 10.04% against the envisaged
 growth of 10%.
 
 - For speedier appraisal of loan proposals, branches are using the SME
 Scoring Model for loans upto Rs. 50 lakh.
 
 - Liberal moratorium on term loan and working capital has been extended
 by including interest also, during first 6-12 months of operation on
 case to case basis and interest debited during this period is being
 treated as long term funding of project and installments after
 moratorium period are fixed accordingly.
 
 During FY''14, the Bank covered 14,925 cases under the CGTMSE scheme
 with credit outlay of Rs. 870 crore. The Bank is also extending interest
 concessions to MSE accounts and the rate of interest capped at Base
 Rate 4.00% including term premia in the CGTMSE covered accounts.
 
 The Bank is also pro-actively participating in various schemes of the
 Government of India viz., Prime Minister Employment Generation
 Programme (PMEGP), Credit Linked Capital Subsidy Scheme (CLCSS) for
 Micro & Small Enterprises, Khadi & Village Industry Commission (KVIC)
 and Technology Up-gradation Fund Schemes for Textile & Jute Sector
 (TUFS), Subsidy Scheme for Food Processing Industries, etc.
 
 Other Initiatives
 
 - MSME Credit Growth Initiative Branches
 
 MSME Credit Growth Initiative has been launched in 250 branches in
 January 2014. This initiative proposes to reduce turnaround time to 2-4
 weeks and to grow MSME portfolio by 30% from December''13 to
 December''14. MSME advances in these branches have increased to Rs. 37,462
 crore as on 31st March 2014 showing YoY growth of 7.96%.
 
 - PNB Sanjeevani
 
 A New Scheme PNB Sanjeevani has been launched with competitive
 Interest rate and other attractive features. This scheme is for financing 
 professionally qualified medical practitioners.
 
 - Interest Concession to Micro and Small Enterprises
 
 To support new and existing Micro & Small Enterprises, the Bank is
 extending interest concessions of 75 basis points on chargeable
 Interest Rate for loans up to Rs. 25 lakh.
 
 - Concessional Interest rates in various schemes
 
 Concession in interest rate ranging from 2.25% to 3.25 % and concession
 in processing / upfront fee of 50% is available for Food and Agro based
 units. Special concessional rate of interest i.e. Base Rate 1% to Base
 Rate 2% is available to MSME units engaged in manufacturing of
 Agriculture Inputs.  Further concessional rate of interest i.e. Base
 Rate 1.50% to Base Rate 2% is available to Arhtiyas and Commission
 Agents. The interest rate for loan against warehouse receipt reduced to
 Base Rate 1% (inclusive of charges of Collateral Managers).
 
 - MSME clusters
 
 The Bank has adopted the cluster based lending approach and has 55
 clusters to give focused attention to the sector.
 
 - Simplified Loan Application for MSMEs (Manufacturing & Service
 sector) has been made available along with the check list of documents.
 
 - Facility of submission of application on-line by prospective
 borrowers, with the option to track progress of application under MSE
 segment has been provided. Further a concession of 20% in upfront fee
 and processing fee is extended to borrowers who submit application
 on-line.
 
 - For growth in Service Sector, the Bank has Tie ups/MoUs with vehicle
 manufacturers like Tata Motors, Ashok Leyland, Mahindra & Mahindra
 Ltd., Bajaj Auto Ltd., Piaggio Vehicles P Ltd., Volvo Eicher Commercial
 Vehicles Ltd., Hindustan Motors Ltd., TVS Motor Co. Ltd., Asia Motor
 Works, Atul Auto Ltd., JS Auto, ICML Ltd. and Escorts for financing
 transport dealers.
 
 iv.  Financial Inclusion
 
 The following business models are adopted by the Bank for Financial
 Inclusion (FI):
 
 Direct Benefit Transfer (DBT) Scheme
 
 Government of India has extended scheme of Direct Benefit Transfer in
 78 additional districts in phase II w.e.f.  01.7.2013 in addition to 43
 pilot districts in phase I w.e.f.  01.01.2013. At present, 26 schemes
 of central government are being covered. The amount of LPG subsidy is
 also being reimbursed in 293 districts in six phases, launched with
 four pilot districts on 01.06.2013. The Bank has covered all SSAs of
 DBT/ DBTL districts through our banking outlets i.e. bank branches/BC
 locations. The Bank has lead Bank responsibility in 63 districts, out
 of which 8 are amongst the 43 pilot districts covered under Phase I and
 6 districts are covered under Phase II.
 
 On-line Transactions at BC Locations
 
 To provide BC services in on-line mode, the Bank has put in place Kiosk
 Banking Solution (KBS) which is a proprietary software. With this new
 technology, the Financial Inclusion customers can access all basic
 banking services (account opening, cash withdrawal, cash deposit, mini
 statement, balance enquiry and fund transfer) required by them at BC
 location in real time. Now, FI customers can also transact on ATMs and
 Merchant POS outlets. The customers of the Bank (whose biometrics have
 been captured) can now make banking transactions either at any branch/
 ATM or any BC locations across the country. The Bank is also working
 towards offering inter-operability at BC locations of the Bank that
 would further facilitate the making of interbank transactions across
 the country by customers.
 
 The Bank is using Aadhaar Payment Bridge System (APBS) platform of NPCI
 for DBT/ MGNREGA/ National Social Assistance Programme (NSAP) payments.
 Now, the Bank is gearing up for Aadhaar Enabled Payment Services (AEPS)
 for payments by way of Aadhaar authentication from UIDAI data base.
 
 Use of Business Correspondent (BC)
 
 For an efficient and effective BC network, the Bank adopted a mix of
 BC Models using KBS technology for each Sub Service Area (SSA) or Urban
 Ward (UW) within the service area of a base branch. The Bank has 8490
 SSAs across the country. Out of these 2406 SSAs are covered by branches
 and 2549 SSAs are covered by BC locations under on-line KBS technology.
 
 - Common Business Correspondents: As per MOF
 
 directives in respect of Common BC, the Bank has engaged 89 BCAs of M/s
 Vakrangee Finserve Limited, a Common BC in Rajasthan.
 
 - Corporate BC: The Bank has engaged 240 Business Correspondence Agents
 of Corporate BC using KBS technology. The Bank is in process of
 migrating offline TSP based BC model to online Kiosk Banking Solution
 (KBS) based Corporate BC.
 
 - Individual BC: The Bank has 915 Individual BC Agents using KBS
 technology.
 
 - New Initiatives: In addition to providing basic banking facility, new
 facilities viz., Indo Nepal Remittance, Immediate Inter Bank Remittance
 (IMPS), Micro Credit, Micro Deposit Scheme, Micro Pension and Micro
 Insurance have been added and are available at BC locations.
 
 v.  Asset Quality
 
 In all Non Performing Assets (NPAs), account-specific resolution
 strategies were implemented and progress was monitored regularly. Daily
 progress of recovery in NPAs (outstanding Rs. 10 lacs and above) was
 monitored and placed before Top Management. Further
 compromise/negotiated settlements through one to one meeting with
 borrowers was adopted as another vital strategy to tackle NPAs. The
 Bank also has 17 Asset Recovery Management Branches (ARMBs) and 20
 Special Asset Recovery Cells (SARCs)which function exclusively for
 resolving NPAs.
 
 Initiatives taken during FY''14
 
 - The Bank has launched a Special NPA Reduction Campaign from 01.12.13
 to 31.03.2014. The campaign''s progress is monitored on daily basis.
 Besides this the Bank has a regular staff Incentive Scheme called
 Prayaas to promote recovery in NPAs and written off accounts.
 
 - Engagement of retired bank officials as Resolution Agents on
 commission basis in accounts up to Rs. 1 crore.
 
 - During FY''14, in 4891 Rin Mukti Shivirs, cash recovery of Rs. 269 crore
 was obtained from 70263 accounts and up-gradation of 19501 accounts
 with balance outstanding of Rs. 266 crore. Thus, NPA of Rs. 534 crore 
 were resolved in these shivirs.
 
 - OTS was marketed as a product for faster resolution of NPAs and OTS
 in 61,398 accounts was approved.
 
 - Online Portal for monitoring of DRT Cases and SARFAESI has been
 launched.
 
 - At the instructions of Department of Financial Services, Ministry of
 Finance, Govt. of India, a Special Committee of the Board has been
 constituted by CMD, EDs and GOI Director to monitor the progress of
 recovery in NPA accounts on regular basis and submit its report to the
 Board on Monthly basis.
 
 - The Bank recovered Rs. 1792 crore in freshly slipped accounts.
 
 - Accounts with aggregate outstanding of Rs. 1429 crore were upgraded to
 standard category. Total cash recoveries in NPA accounts amounted to Rs.
 2611 crore.  Through well defined recovery policy Rs. 588 crore were
 recovered in approved OTS cases through negotiated settlements. During
 FY''14, the Bank recovered Rs. 515 crore out of the accounts earlier
 written off.
 
 a.  Industrial Rehabilitation
 
 During FY''14, Draft Rehabilitation Scheme (DRS) was formulated by the
 Bank acting as ''Operating Agency'' of BIFR in 2 accounts. The Bank has
 also implemented rehabilitation package in one case sanctioned by BIFR
 during FY''14.
 
 b.  Corporate Debt Restructuring (CDR)
 
 During FY''14, 43 accounts with outstanding of Rs. 6381.30 crore were
 restructured under CDR and out of these, the Bank has been assigned the
 role of Monitoring Institution in 8 accounts.
 
 c.  Debt Restructuring Mechanism for Small and Medium Enterprises
 
 During FY''14, the Bank has restructured 290 accounts with aggregate
 outstanding of Rs. 339.43 crore.
 
 d.  Restructuring-Others
 
 The Bank has also put in place a transparent mechanism for
 restructuring of debts of potentially viable units, which are facing
 temporary problems due to factors beyond their control even for cases
 which cannot be covered under BIFR/ CDR/DRM for SMEs. During FY''14, 49
 accounts involving Rs. 2850 crore were restructured/ rescheduled under
 this category.
 
 4.  Risk Management
 
 The Bank has a robust credit risk framework and has placed credit risk
 rating models on central server based system ''PNB TRAC, which provides
 a scientific method for assessing credit risk rating of a client. The
 Bank is undertaking periodic validation exercise of its rating models
 and also conducting migration and default rate analysis to test
 robustness of its rating models. Further, the mapping of internal
 rating grades to external rating agencies grades has been undertaken.
 The output of the rating models is used in the decision making of the
 Bank (viz. sanction, pricing, loaning powers besides audit, review &
 monitoring of credit portfolio). The Bank has set a desired portfolio
 distribution in terms of Low Risk, Medium Risk & High Risk categories
 and the actual portfolio is being monitored on quarterly basis and the
 same is placed to the Risk Management Committee (RMC) of the Board. The
 Bank has developed and placed on central server scoring models in
 respect of retail banking and SME sector advances.  These processes
 have helped the Bank to achieve quick & accurate delivery of credit,
 bring uniformity in the appraisal and facilitate storage of data &
 analysis thereof. A scoring model for farm sector has also been
 developed.
 
 The Bank has in place a well defined organizational structure for
 market risk management functions, which looks into the process of
 overall management of market risk viz. interest rate risk & foreign
 exchange risk and implements methodologies for measuring and monitoring
 the same. Tools like stress testing, duration, modified duration, VaR,
 etc. are being used effectively in managing risk in the Treasury
 operations. The Bank monitors various investment limits on real time
 basis.
 
 Asset liability management of the Bank is done on proactive basis to
 manage any eventuality. Though liquidity position in the system
 remained tight during the year, the Bank managed to tide over the
 situation through proactive liquidity management through various
 prescribed tools like Repo etc.  The liquidity situation of the Bank is
 comfortable. With Core Banking Solution (CBS) covering entire branch
 network, the Asset Liability Management in respect of all assets and
 liabilities is being done on daily basis. Interest rates in respect of
 assets and liability products are fixed on scientific basis as per
 extant regulatory guidelines.
 
 The Bank has robust operational risk management framework with a
 well-defined Operational Risk Management Policy. The Bank is
 identifying, measuring, monitoring and controlling/ mitigating the
 operational risk by analyzing historical loss data, Risk & Control Self
 Assessment Surveys (RCSAs), Key Risk Indicators (KRIs) and Scenario
 Analysis etc. The Bank has also introduced an on-line Op-Risk Solution
 under Enterprise wide Data Warehouse (EDW) and placed it on central
 server to take care of various aspects of data capturing and management
 information system at various levels.
 
 Regulatory Guidelines
 
 The Bank has migrated to New Capital Adequacy Framework (NCAF),
 popularly known as Basel II w.e.f March 2008 and approaches prescribed
 by the ''Regulator,'' namely Standardized Approach under Credit Risk and
 Basic Indicator Approach under Operational Risk have been implemented.
 Standard Duration Approach for Market risk has been adopted by the Bank
 since March 2006. As per the RBI guidelines, relevant risk management
 policies such as Risk Management Philosophy & Policy, Credit Management
 & Risk Policy, Investment Policy, ALM Policy, Operational Risk
 Management policy, Policy for Mapping Business Lines/ Activities,
 Outsourcing Policy, Business Continuity Plan, Credit Risk Mitigation &
 Collateral Management Policy, Internal Capital Adequacy Assessment
 Process (ICAAP) Document, Stress Testing Policy, Group Risk Management
 Policy etc., have been got approved by the Board and have since been
 implemented.
 
 The Bank is gearing itself to adopt the advanced approaches in due
 course of time under different risks and the estimation of various risk
 elements is already in progress. The Bank has received approval from
 RBI for adoption of Foundation Internal Rating Based Approach (FIRB)
 for Credit Risk on parallel run basis. The Bank has already got an
 approval for migration to The Standardized Approach (TSA) under
 Operational Risk on parallel run basis. PNB is the fi rst bank in India
 to get an approval for migrating to the TSA for Operational Risk. Based
 on Letter of Intent fi led by the Bank for migration to Advanced
 Measurement Approach (AMA) for Operational Risk, RBI advised the Bank
 to submit detailed application for the same. Accordingly, the Bank has
 submitted formal application to RBI for in-principle approval for
 parallel run of AMA on 22.03.2014. The Bank has also submitted formal
 Letter of Intent for adoption of Internal Models Approach (IMA) for
 Market Risk.
 
 The Bank adopted the Basel III guidelines from 01.04.2014 in line with
 the Reserve Bank of India''s guidelines. The Bank has taken necessary
 steps to implement the various provisions as required under Basel III
 guidelines issued by RBI. Capital planning is being carried out keeping
 in view the various requirements under Basel III.
 
 Major initiatives in the area of Risk Management during the year
 
 - The Bank availed the service of M/s KPMG for carrying out the
 external audit of risk management systems. Final audit report in
 respect of Credit, Market, Operational risk, ALM systems and ICAAP has
 been submitted. The findings are helping in further upgrading and 
 refining our Risk Management Systems.
 
 - The Bank has started conducting Group Risk Management Committee
 meetings at quarterly intervals wherein representatives from
 domestic/overseas subsidiaries participate. Discussion on Group Risk
 mitigation, adoption of advanced approach on group- wide basis,
 group-wide capital planning and related items are discussed in the
 aforesaid meeting.
 
 - The Bank has raised Basel III compliant Tier II bonds of Rs. 1500 crore
 from the market during FY''14. The Bank has also obtained Credit Ratings
 of its Tier II bonds from various rating agencies. The awarded ratings
 from M/s CRISIL, ICRA and India Ratings are CRISIL AAA/Stable, ([ICRA]
 AAA (hybrid instrument) (Stable)) and IND AAA / Stable respectively.
 
 - The Bank has put in place New Automated PMS (Preventive Monitoring
 System) for all borrowal accounts having exposure of more than Rs. 1
 crore across all branches.
 
 - In view of increased and diversified portfolio growth, Board has
 approved 10 non-default rating grades in place of existing seven
 default-rating grades. Credit Risk Rating Framework now has 10
 non-default rating grades. All accounts having total limits (Fund Based
   Non Fund Based) above Rs. 50 lacs are subjected to risk rating, except
 accounts in exempted categories.
 
 - The Bank has put in place facility rating framework for assigning
 rating to facilities sanctioned to borrower based on default rating and
 securities available. This will help the Bank to price facilities
 availed by borrowers in scientific and transparent manner.
 
 5.  Information Technology
 
 I.  Implementation of Core Banking Solution (CBS)
 
 The Bank has vast network of 6410 service outlets covered under CBS
 with more than 894.85 lacs customers'' accounts.  PNB has been a pioneer
 Bank in integrating all its branches under the Core Banking Network.
 
 II.  Alternate Delivery Channels
 
 a) Internet Banking Services
 
 The Bank''s internet banking service is catering to around 24.96 lacs
 customers with its retail and corporate modules as on 31st March''14.
 The Bank has been constantly adding new features to its Internet
 Banking Services. These include the revamping of User Interface of both
 Retail and Corporate IBS Modules, making it simpler and easy to use,
 Online User Registration, Online Password Reset, Change of User ID and
 capturing of leads through Internet Banking for various products
 offered by the Bank.
 
 The Bank has strengthened its security in Internet Banking services
 operations. One Time Password (OTP) as a second factor of
 authentication for doing transactions in retail internet banking has
 been started. Further, customer induced limits for retail and corporate
 customers has been introduced.  Now customer induced options are
 provided for fixing a cap on the value/mode of  transactions/
 beneficiaries. In the event of customer wanting to exceed the ap, an 
 additional authorization in the shape of OTP (One Time Password) has 
 been introduced. A system of alerts is introduced when a beneficiary
 is added.
 
 b) SMS Alert Services
 
 SMS Alerts Services have been successfully deployed in the Bank for
 both retail and corporate customers and SMS alerts are being generated
 for identified transactions (credit/ debit) done at branches, ATM,
 IBS, Mobile Banking and POS terminals. Presently around 2.46 crore
 customers have subscribed for SMS Alerts facility and on an average
 around 17.87 lacs SMS alerts are generated every day.
 
 c) Mobile Banking Services
 
 Mobile Banking is a delivery channel with different functionalities,
 entities and relationships with respect to other banking channels.
 There are two levels of mobile based service. One is the basic level
 which includes services like balance enquiry, SMS alert for any debit
 or credit transaction in the account, status of last transactions and
 related services.  Second is the advanced level, which includes
 processing of financial transactions like payments, transfers and stop
 payments. Presently 97481 customers have subscribed for Mobile banking
 facility. As on 31st March''14, 202110 transactions per month amounting
 to Rs. 108.76 crore per month both incoming and outgoing were carried
 out.
 
 III.  Cheque Truncation System (CTS)
 
 During FY''14, CTS has been implemented at 20 MICR locations in the
 states of Maharashtra, Goa, Madhya Pradesh, Gujarat and Chhattisgarh
 under Western Grid.
 
 IV.  IT Security
 
 The Bank has an Information Security Policy, which is approved by Board
 and reviewed each year to keep it updated as per latest trend and best
 practices. It is also having an Information System Security
 Architecture Implementation Committee (ISSAIC) which meets on monthly
 basis to review & recommend implementation of Information security
 posture.
 
 a.  Security Operations Centre (SOC)
 
 To monitor information security events across the Bank''s network, the
 Bank has established a Security Operations Centre (SOC) which is fi rst
 of its kind that has been set up by any Indian Bank.
 
 b.  ISO 27001
 
 Bank''s critical infrastructure, like Data Centre, Network Operation
 Centre & Disaster Recovery Data Site are ISO 27001 certified.
 
 c.  Cyber Crime Monitoring Cell (CCMC)
 
 CCMC co-ordinates the activities related to disputed/ suspected
 transactions, using internet banking (IBS), mobile banking and ATM/
 Debit Cards, with all the related department/divisions/branches and
 with the affected customers.
 
 During 1st April, 2013 to 28th Feb, 2014, cases reported to us and
 amount involved are as under:
 
                                    Amount      Amount Reversed/
 No. of Incidents                Involved (Rs.)        Frozen (Rs.)
 
    923                         6,62,53,780        3,37,22,307
 
 d.  Business Continuity Plan & Disaster Recovery (BCP & DR)
 
 The Bank has a well defined Business Continuity Plan (BCP) to provide
 un-interrupted customer services in case of any exigency in the
 branches. The Bank has fully operational Disaster Recovery Site (DRS)
 of its Data Centre with well defined Recovery Time Objective (RTO) and
 Recovery Point Objective (RPO). DR drill is conducted regularly to keep
 testing its functional preparedness.
 
 V.  New IT Based Products/Services
 
 - Kiosk Banking Solution has been made live across the Bank and RRBs
 through internet and intranet.
 
 - Automation of Fund Transfer Orders (FTOs) for MGNREGA has been
 implemented in all RRBs.
 
 - Migration of Parvatiya Gramin Bank with Himachal Gramin Bank was
 successfully completed.
 
 - HORTNET Project: Customisation has been done for Maharashtra. Through
 this portal, subsidy from horticulture department is being processed
 for Maharashtra State.
 
 - XOOM - RDA (Rupee Drawing Arrangement): The application is developed
 to automate the payments of beneficiaries in India. The software makes
 total automation of the payments, which was handled by IBB Branch
 manually.
 
 - Bureau-One is an application through which credit information report
 from bureaus like Equifax, Experian and CIBIL can be generated under a
 single-login on PNB intranet.
 
 6.  Transaction Banking
 
 The Bank has undertaken several initiatives in its continued efforts to
 provide better, prompt and efficient service to the customers.
 
 a) Cash Deposit Machine (CDM) for convenience of small depositors,
 depositing cash up to Rs. 30,000/-, 1411 CDMs/ Multifunction Kiosks have
 been installed in various branches of the Bank. As of now 45% cash
 transactions up to Rs. 30,000/- are happening through CDMs. These 
 machines have also helped to relieve the congestion at branches.
 
 b) Electronic Cheque Deposit Machines (ECDM) - As per MOF guidelines
 ECDMs have been installed in 685 urban and metro branches. These ECDMs
 provide an automated proof of deposit of cheque by issuing cheque-image
 based receipt to customer, specifying the branch in which the cheque is
 deposited along with the date and time of deposit.
 
 c) Queue Management System (QMS) - In 407 branches, QMS has been
 installed to regulate the fl ow of customers without standing in queue
 for getting their work done.
 
 d) Pass Book Updating Machines (PUM) - For better customer service,
 1409 PUMs have been installed in various branches across the country.
 
 e) Bank has launched following 3 new Debit Cards during the current
 year:
 
 i) Pungrain RUPAY debit Card for farmers: Bank has started issuing
 Pungrain Rupay debit Cards to farmers also in the Punjab from current
 season.
 
 ii) HSAMB RUPAY Debit Cards for Arhtiyas of Haryana State: The Bank
 started issuing Haryana State Agricultural Marketing Board (HSAMB)
 cards to Arhtiyas in designated Mandis in the state of Haryana. This
 debit card can be used by Arhtiyas for Grain Procurement/ Sale at the
 mandis as well as at the ATMs/ POS within India.  These cards have
 enhanced security features including second factor authentication.
 
 iii) Bank has launched EMV chip based Global Debit Card which cannot be
 cloned. A second factor of authentication is enabled, which requires
 keying in PIN at POS by customer with OTP (One Time Password), to make
 the card more secure.
 
 f) More than 43 lacs debit cards were issued during the year taking the
 ATM/debit card base to 250 lacs.
 
 g) Bank''s ATM Network during the year went up to 6940 as on 31st March
 2014. All the newly added ATMs have feature of biometric functionality
 in addition to existing 680 ATMs.
 
 h) The Bank has a tie-up arrangement for providing payment
 services such as Tech-Process Payment Services Citrus Payment Solution,
 Times of Money, Pay TM and Pay U. The basis of revenue Sharing is 60
 (Bank): 40 (Aggregators) basis.
 
 7.  Management Information System
 
 To achieve the objective with which Management Information System
 Division (MISD) was set up, Enterprise- wide Data Warehouse (EDW) had
 been implemented with technical support from TCS. EDW set up has
 facilitated ready access to data required for Regulatory/Statutory
 reporting and additionally for analytical purposes. Overall business
 process related functions, generation of various MIS reports, including
 adhoc requirements are being looked after by MISD. This has reduced
 workload of field functionaries to a considerable extent and is
 assisting Top Management in taking timely decisions. EDW has also come
 up with some dashboard reports with business parameters and delinquency
 identifiers.
 
 Standardized approach for credit risk has been implemented through
 BASEL  II module of LADDER (Loans and Advances Data Desk for
 Evaluation & Reports) System thus enabling calculation of Risk Weighted
 Assets (RWAs) in respect of Loans & Advances as per guidelines of RBI.
 
 The Bank has also embarked upon a project of Centralised Ladder, where
 all the data of CBS will fl ow to LADDER system automatically at HO
 level only. With this, all the processing of Ladder data will be done
 at central level only (against the present process of processing the
 Ladder data at decentralized locations and then aggregating it). This
 will be one step further ahead in automation.
 
 Data of all loan accounts is being transmitted to four Credit
 Information Companies (CICs) i.e. CIBIL, EQUIFAX, EXPERIAN & HIGH MARK
 on monthly basis through CIBIL Module, an extension of Ladder System
 ,thus enabling the branches to draw Credit Information Reports (CIRs)
 for taking credit related decisions. 8,14,816 CIRs of prospective
 borrowers under Consumer category and 21,819 CIRs under Commercial
 category were drawn from CIBIL, Experian, High Mark & Equifax databases
 during FY''14.
 
 MISD is handling the issue of registering the particulars of equitable
 mortgages with Central Registry. The Bank has registered about 3.90 lac
 Immovable Properties (IP), with CERSAI, till 31st March 2014. The
 object is to avoid multiple financing from same IP, thereby preventing
 perpetrators of frauds by mortgaging the same property to more than one
 financial institution.
 
 8.  Human Resources Management
 
 The Total Number of Bank''s employees including those in the
 subsidiaries were 65,541 at the end of March 2014.
 
 						Cadre-wise Staff Strength
 
 Cadre                March 2013                  March 2014
 
 				 Number    %                Number     %
 
 Officer              23610     37.30            23811      36.33
 
 Clerks               25449     40.21            26864      40.98
 
 Sub Staff
 (incl. PTS)          14233     22.49            14866      22.69
 
 Total 63292 65541
 
 The Bank has taken several initiatives during the year in the areas of
 Manpower Planning, Recruitment, Succession Planning, Leadership
 Development and Staff Welfare.
 
 Manpower Planning
 
 For FY''14, Manpower Plan was finalised well in time in a scientific
 manner, taking into account impending retirements, future
 branch/activity, business expansions & other requirements.
 
 Recruitment Planning
 
 Based on the Manpower Plan approved by the Board, an extensive
 recruitment plan is prepared with blue print of the whole project from
 the date of advertisement till the date of joining of the new recruits.
 
 Succession Planning
 
 In order to address the Human Resource gaps arising in critical
 positions due to retirements in the coming years, the Bank has created
 Leadership Development Forums (LDF) which facilitates identification
 of potential successors for various critical positions in the Bank
 considering their skills and aptitude.
 
 Age Profile of the Employee
 
 Due to intensive manpower planning and judicious recruitment, there has
 been a decline in average age of the employees in each cadre. This
 change has been reflected in table given below:
 
 Average Age as on    Officer   Clerical   Sub-staff   All
 
 31st March 2010      50.18     49.82      46.89       49.29
 
 31st March 2011      50.37     49.62      45.91       49.02
 
 31st March 2012      50.14     44.93      44.48       46.75
 
 31st March 2013      49.49     44.70      42.41       45.96
 
 31st March 2014      49.12     43.00      40.54       44.66
 
 PNB University Initiative
 
 The two batches of Management Trainees consisting of 192 officers
 joined the Bank during FY''14, through Manipal Global Education Services
 (MaGE), Bangalore as part of the PNB University Initiative.
 
 Welfare Schemes for Staff
 
 The Bank continued its employees welfare schemes. The Bank also added
 one Holiday Home at Shimla taking the tally of Holiday Homes to 19.
 
 Reservation Policy
 
 The Bank follows the reservation policy for SCs, STs and OBCs as
 prescribed by Government of India from time to time.
 
 				    Strength of SC/ST/OBC Employee 
 CADRE               MARCH 2013                  MARCH 2014
 
 			SC      ST    OBC              SC     ST     OBC
 
 Officer        4227    1416   1410            4400   1496    1710
 
 Clerks         4700    1114   2774            5153   1243    3714
 
 Sub Staff
 (incl. PTS)    6032     774   2333            6338    828     2675
 
 Total         14959    3304   6517           15891   3567     8099
 
 Promotions
 
 During FY''14, all promotion processes were completed in the first
 quarter of the year i.e. up to June 2013. Number of Officers promoted
 in different cadres is as under:
 
 1.  Scale II to III : 959
 
 2.  Scale I to II : 1166
 
 During FY''14, following number of employees in workmen cadres were
 promoted:
 
 1.  Clerks to Officers : 723 (Seniority Channel) in JMG Scale-I : 380
 (Selectivity Channel)
 
 2.  Sub staff to Clerks : 782
 
 Industrial Relations
 
 Industrial relations in the Bank continued to be cordial with issues
 raised by Workmen Union/Officers'' Association being attended to
 immediately. Various meetings were held with the representatives of the
 majority Officers'' Association/ Workmen Union during the year to
 discuss various issues and resolve problems.
 
 Training Activities
 
 The training system of the Bank is functioning effectively for
 enrichment of Knowledge, Skills and Attitude of staff at all levels in
 line with the organisational objective to transform the Bank to a
 customer centric and technology driven leading pan-India Bank with
 global footprints. The Bank has a State of Art infrastructure to cater
 to the training needs of the employees in different cadres.
 
 In view of large scale recruitments in 2013-14 also, ''Induction
 Training Programmes'' of 2 - 24 weeks were conducted for all newly
 recruited officers and workmen to make them branch ready before
 joining their duties in the field. In addition, for the existing
 employees'' trainings in key subject areas like Credit, Agriculture,
 SME, Foreign Exchange, Information Technology, NPA Management, Risk
 Management, etc. were conducted. All SC/ST employees aspiring for
 promotion to higher grade/scale were provided pre-promotion trainings.
 Similarly newly promoted officials in different grades/ scales were
 covered under post-promotion trainings both in functional and
 management skill areas so as to equip them to take up higher
 responsibilities. Besides, Faculty Development Programmes (FDP) was
 also organized for enhancing the training skills of in-house faculty.
 
 Further, as a part of succession planning in the Bank and to enhance
 Leadership qualities amongst Senior/Top Management Grade Officers, the
 bank has constituted a Leadership Development Forum (LDF), under which
 immediate/near future training needs of the executives are identified
 and specific/specialized trainings imparted in- house and at outside
 Institutes. During the year, the Bank has imparted trainings to 513
 identified executives under LDF.
 
 During FY''14, the Bank imparted 1,77,423 man days training to 45,041
 employees through in-house training. In addition, 7323 man days
 training was imparted to 1913 officers at reputed outside institutes
 in India and abroad.
 
 E-Learning
 
 The Bank has an exclusive Knowledge Centre website, comprising of
 e-circulars of all HO Divisions and a knowledge repository with the
 latest banking and economic updates. This web-site is available to the
 staff both through CBS network as well as via internet.
 
 The Bank''s e-learning platform PNB Gyanuday is accessible to all
 employees across the country and abroad.  This is an interactive mode
 of learning that covers Banking topics on various focus areas viz.
 Credit, Foreign Exchange, Retail Banking, CBS/IT, KYC (Know Your
 Customers)/ AML (Anti Money Laundering), Marketing, Risk Management and
 Resolution of NPAs, etc.
 
 9.  Branch and Office Network
 
 Domestic Presence
 
 The Branch Network of the Bank as on 31.03.2014 is 6201. These include
 5636 General Banking Branches, 241 Specialized Branches, 1 Extension
 Counter and 323 Service Back Offices. But for the 1 Extension Counter
 mentioned, all others have been upgraded to full-fl edged branches.
 
 Bank is constructing a state of the art building at Dwarka with the
 objective of housing all Head Office Divisions except Information
 Technology & Treasury Divisions. Apart from this, the Bank will be
 constructing another state of the art building for the IT Division and
 Central Staff Training College at Gurgaon.
 
 An MIS portal has been developed for capturing all kinds of information
 from the field, about the premises owned/ leased by the Bank. It will
 reduce correspondence, time and manpower and allow better control on
 lease related issues such as expired / expiring lease, disputed/suit fi
 led cases, etc.  The MIS portal for Bank owned properties has been made
 live
 
 International Presence
 
 The Bank has its overseas presence in 10 countries by way of 5 branches
 (Hong Kong (2), Dubai, Kabul & OBU-Mumbai), 3 Subsidiaries (London,
 Bhutan & Kazakhstan) 1 Joint Venture (at Nepal) and 5 Representative
 Offices (Sydney, Shanghai, Oslo, Dubai & Almaty) as on 31st March''14.
 
 10. International Banking
 
 The Bank has 189 branches to handle forex business and a Centralised
 Back Office at Delhi for all the back-end functions relating to forex
 trade transactions. There are nine International Banking Branches at
 major cities for servicing importer/exporter customers. The Bank has
 also set up 22 Exchange Bureaus at important tourist centres. As a
 result, the Bank registered a forex turnover of Rs. 131,191 crore for FY''
 14 showing annual growth of 6.56%.
 
 To handle inward remittances, the Bank has an International Service
 Branch at Delhi. During FY''14, the remittance business handled by the
 Bank was Rs. 54303 crore, showing a YoY growth of 28.54%. Further the
 Bank has Rupee Drawing Arrangements (RDA) with 32 exchange houses (28
 in the Gulf, 2 in Singapore. 1 in Australia and 1 in the USA) to
 facilitate remittances from NRIs. The Bank also has web based
 remittance arrangements with 6 Money Transfer Organisations under Money
 Transfer Service Scheme (MTSS).  To facilitate real time credit into
 the accounts, the Bank has an arrangement with UAE Exchange Centre LLC,
 Abu Dhabi under FLASH Remit for real time account credit.
 
 11. Operations Division
 
 Operations Division at Head Office was formed w.e.f.  01.04.2013 to
 pursue the initiatives under Operating Model Optimization pillar of
 Organisational Transformation and Business Excellence Program 2011
 named PNB PRAGATI.
 
 Under PNB Pragati initiative, efforts are being made to organize model
 branches with state- of-the-art infrastructure and manpower support to
 provide unique banking experience to the customers. This model ensures
 a customer centric system of delivery of products and services through
 the main Pragati modules of Self Service Area, Queue Management System,
 Receptionist, Customer Service Executive and Business Development
 Executive. As at 31.03.2014, 388 branches of the Bank were designated
 as Pragati branches.
 
 One of the key objectives of PNB Pragati Branches is to decongest the
 branches and to enable the customers to do routine transactions, like
 small value cash transactions, updation of their passbooks and cheque
 deposit, on their own and at their convenience. To achieve this
 objective, Bank has put in place 1411 Cash Deposit Machines, 1409
 Passbook updation machines, 685 Cheque Deposit machines and 6940 ATMs
 in its branches across the country.
 
 In order to monitor the implementation of Pragati initiatives in
 branches, a Star certification system has been put in place under
 which branches can strive to obtain a Star 1 - Star 5 status, depending
 on their progress in implementing Pragati.  As at the end of 31st
 March''14, more than 75 % of the Pragati branches migrated to Star 3.
 
 Pragati Productivity Points (PPP) system has been introduced to measure
 productivity and efficiency in all domestic general banking branches
 of the bank. This is a unique initiative of its kind by any bank, which
 provides a comprehensive metric for measuring branch performance and
 productivity across branches with diverse transaction profiles.
 
 12.  New Initiative Division
 
 - As part of the new initiative, the Bank has started state of art
 contact centre with the new feature of out bound calls.
 
 - Soft calls for recovery: The irregular accounts under Retail, MSME,
 Agriculture, etc. are being followed up with borrowers by making soft
 calls through Contact centre. The calls are being made for reminding
 the borrowers to pay the installments in arrears.
 
 - Customer Feedback on Pragati branches: A mechanism has been developed
 to assess customer satisfaction on the services at Pragati branches and
 to improve products & services by utilizing the suggestions. A poster
 has been displayed at the Pragati branches inviting the customers to
 send SMS Happy or Unhappy to number 5607040 after getting service
 at the branch. The Unhappy customers are sent a response expressing
 concern. If required, the matter is escalated to the Circle Heads
 through the Centralised Customer Grievance Redressal Mechanism. The
 majority of such complaints are resolved within 24 hours.
 
 13.  Business Diversification
 
 Mutual Fund: During FY''14, the Bank mobilized a total of Rs. 2463 crore
 registering a YoY growth of 10.65%. The Bank''s earning from this
 business stood at Rs. 2.05 crore during FY''14 as against Rs. 1.97 crore
 during FY''13.
 
 Insurance Business: As a corporate agent of PNB MetLife India Insurance
 Co. Ltd., the Bank mobilized premium of Rs.487 crore (Fresh Business-Rs.
 273 crore & Renewal business- Rs. 214 crore) during FY''14, from 92,986
 policies, as against premium of Rs. 451 crore mobilized during FY''13. The
 Bank''s earnings from Life-Insurance business during FY''14 amounted to Rs.
 46.29 crore as against Rs. 37.75 crore during FY''13, showing YoY growth
 of 22.62 %.
 
 Similarly, under Insurance tie-up with Oriental Insurance Co.  Ltd. for
 Non-Life Insurance business, the premium collection in FY''14 amounted
 to Rs. 181 crore from 4.11 lac policies earning revenue of Rs. 20.30 crore
 as against Rs. 15.89 crore during FY''13, showing a growth of 27.75 %.
 Bank sold 98,596 ''PNB-Oriental Royal Mediclaim'' policies, during FY''14
 as against 84,152 policies sold during FY''13, thus registering a YoY
 growth of 17.16%.
 
 Depository Services: Depository Services as Depository Participants of
 NSDL are being provided through 661 authorised branches covering 259
 centres across India. The Bank has earned an income of Rs. 88 lacs during
 FY''14 for providing Depository Services.
 
 On line trading facility: Referral income of Rs. 25 lacs has been
 received from online trading activities during FY''14.
 
 Merchant Banking: As Category-I Merchant Banker, the Bank has handled 6
 assignments as Banker to the Issue and 75 assignments of Dividend
 Payment/Interest Payments during FY''14. The fl oat income increased
 from Rs. 5.79 crore in FY''13 to Rs. 17.62 crore in FY''14.
 
 Door Step Banking: Under the facility of Door Step Banking, cash is
 picked up from the premises of customers. Door step banking is
 currently being provided to about 786 customers and has helped in
 garnering Current Account business.
 
 Credit Card: The Bank has entered the premium card market with the
 launch of Platinum Credit Cards carrying host of offers viz. welcome
 gift, concierge services, discount offers, etc. To enhance the security
 level of credit cards, the Bank is now issuing only EMV Chip cards with
 PIN.
 
 Merchant Acquiring Business: Under this, the Bank has installed 10970
 POS terminals and integrated 106 Internet Payment Gateways.
 
 14. Government Business
 
 Govt. Business Income for FY''14 stood at Rs. 91.66 crore as against Rs.
 74.14 crore during FY''13. The Bank has completed scanning of all PPOs
 and images of same have been uploaded on Central Data Server, which can
 be retrieved whenever necessary. It will bring efficiency and enable
 prompt resolution of pensioners'' grievances, if any.
 
 A month long PPF campaign was launched for the first time on 1st
 January 2014 to augment and create vibrancy for PPF business. E-freight
 and E-stamping products were initiated during the year.
 
 The Bank has extended an exclusive facility to Indian Naval pensioners
 to open pension accounts at their convenient location from branch
 located in Mumbai at Indian Navy Centralised Pension Office. All
 initial formalities are completed there, including scanning of PPO and
 uploading the same along with data into system. The pensioner is saved
 from hassle of visiting home branch for pension. Pensioners can submit
 their life certificates at any branch of the Bank without visiting
 home branch.
 
 The Bank has introduced certain new products during the year in
 different States like e-SBTR in Maharashtra, collection of VAT in
 Andhra Pradesh through e-mode and physical collection of VAT in all the
 branches of our Bank in the States of Delhi, Orissa and West Bengal and
 collection of sale proceeds of Indian Made Foreign Liquor (IMFL) at
 Andhra Pradesh.
 
 15.  Treasury Operations
 
 Gross Investment as on 31st March 2014 stood at Rs. 1,40,466 crore and
 registered a YoY growth of 7.79%. The average investments up to 31st
 March 2014 was Rs. 1,37,382 crore as against Rs. 1,27,249 crore in
 corresponding period last year.  The Interest Income from investment
 portfolio as on 31st March 2014 increased to Rs. 10,231 crore as against
 Rs. 9,530 crore for the FY''13. The Bank actively traded in sovereign
 bonds, Non-SLR bonds and equity throughout the financial year. The
 liquidity position of the Bank was generally comfortable throughout
 FY''14 and our funds were managed through CBLO, Repo and Forex market
 swaps. The Bank complied with all the requirements of CRR/SLR
 stipulated by regulator.
 
 16.  Internal Control System
 
 a.  Credit Audit and Review
 
 Credit Audit & Review Division (CARD) was formed in January 2002 as a
 part of Loan Review Mechanism (LRM) to examine compliance with extant
 sanction and post-sanction processes/procedures laid down by the Bank
 from time to time in high value borrowal accounts. In terms of the said
 policy, credit audit for FY''14 has been undertaken for loan accounts
 (risk rated standard assets) with exposure of Rs. 10 crore and above,
 Weak (''C'' & ''D'' risk rated) accounts with exposure of Rs. 3 crore and
 above and an additional 5% of the accounts selected at random with
 exposure between Rs. 5 crore to Rs. 10 crore and outstanding balance of 
 Rs. 3 crore and above (in circles where either nil or a few loan accounts
 fall under purview of credit audit). Also credit audit was done of
 borrowal accounts taken-over from other banks, with exposure of Rs. 1
 crore and above, with the first audit being conducted within three
 months of take-over.
 
 During FY''14, credit audit of overseas loan accounts in PNB Hong Kong,
 PNB, DIFC, Dubai and Overseas Banking Unit, SEEPZ, Mumbai was also
 undertaken.
 
 As against RBI requirement of at least 30% to 40% of credit portfolio
 being reviewed every year, during FY''14, credit audit of above accounts
 covered 61.19% of Bank''s domestic and overseas credit portfolio (Fund
 based and Non Fund based).
 
 b.  Internal Audit
 
 The main objective of Internal Audit System is to bring accuracy and
 effectiveness in the internal control. To achieve this objective,
 various types of Audits are conducted viz. Risk Based Internal Audit
 (Onsite and Offsite), Revenue Audit, Information System (IS), Credit
 Audit, Snap Audit, Segment Audit, Compliance Audit and FEMA audit.
 Inspection & Audit Division (IAD) at the apex level, with its 13 Zonal
 Audit Offices (ZAOs) ensures Quality Growth by identifying potential
 risks and measurement and mitigation of risks in the branches.
 
 Recently, the Bank started regular audit of non concurrent specialized
 offices viz Retail Asset Branches (RAB), Asset Recovery Management
 Branches (ARMB), MICR Centres and Back Offices (RCC & CDPC) through
 e-RBIA. A dedicated e- RBIA Central Help Desk is also working to impart
 help to field functionaries. A dedicated cell for surveillance has
 been set up at IAD and at each ZAO to bring more effectiveness in
 control aspect through Remote Audit.
 
 Under Risk Based Internal Audit (RBIA), branches are categorized as Low
 Risk (4618), Medium Risk (898) and High Risk (5) as on 31.03.2014. For
 the calendar year ended 31.12.2013, Revenue Audit in all the Branches
 has been completed.
 
 As on 31st Dec''13, concurrent audit in the 940 Branches (including 8 HO
 Divisions) covers 73.57% of advances, 57.69% of deposits and 64.64 % of
 bank''s total business, which is in line with RBI guidelines. Cyber
 Crime Reporting Cell established at IAD takes care of cyber crime
 related complaints pertaining to disputed transactions in the
 customers'' accounts and hoax calls through use of alternate delivery
 channels viz. ATM Debit Cards / Credit Cards / Internet banking /POS,
 etc.
 
 c.  Know Your Customer(KYC)/Anti Money Laundering(AML)
 
 The procedure for opening new accounts has since been modified in the
 system and now new customers are being accepted only after complying
 with the KYC guidelines. The debit operations in non compliant
 customers'' account have been ring fenced.
 
 The Bank has developed a clear Customer Acceptance Policy laying down
 explicit criteria for acceptance of customers.  Now in order to assist
 the branches, the facility of Online Scanning of Prospective
 Customers at the time of opening the account itself, has been
 introduced in all the branches of the Bank.
 
 For the purpose of risk categorization, individuals (other than High
 Net Worth) and entities whose identities and sources of wealth can be
 easily identified and transactions in whose accounts by and large
 confirm to the known profile, may be categorized as low risk.
 
 Anti-Money Laundering Standards
 
 As an Anti-Money Laundering (AML) measure and in order to monitor
 transactions in the accounts of the customers, Bank had installed
 software  finDNA- customized by M/s TCS Ltd. The software (finDNA)
 enables watch list scanning; verifies customer identity, facilitates
 generation of automated alerts for scrutiny. The system generated
 alerts are being monitored on daily basis and in case of suspicion,
 Suspicious Transaction Report (STR) is being submitted to Financial
 Intelligence Unit-India [FIU-IND]. The alerts are being generated on
 the basis of pre-determined scenarios customized in the finDNA.
 
 Through the Cash Transaction Report, the Bank reports Cash Transaction
 Report, report of all transactions involving receipt by non-profit
 organizations of value more than Rs. 10 lac or its equivalent in foreign
 currency and report of Foreign Wire Transfer of more than Rs. 5 lac or
 its equivalent in foreign currency to FIU-India. Financial Intelligence
 Unit-India has developed a utility i.e. fin-NET Project and now
 Suspicious Transaction Reports, Counterfeit Currency Reports and Cash
 Transaction Reports are being submitted to them on-line.
 
 d.  Management Audit
 
 The Bank has in place a Risk Based Management Audit (RBMA) system for
 conducting audit of its administrative offices. During FY''14, based on
 approved Annual Audit Plan, MARD conducted management audit of 37 HO
 Divisions, 69 Circle Offices (COs), 13 Field General Managers'' Offices 
 (FGMOs), 7 Zonal Audit Offices (ZAOs), 3 Training Establishments,
 3 Regional Rural Banks (RRBs), 3 Domestic Subsidiaries and 3 Overseas
 Subsidiaries besides audit of other activities listed above.
 
 e.  Compliance
 
 Bank has appointed a Chief Compliance Officer in the rank of a General
 Manager. In order to have better control on compliance risk and
 plugging off leakages in the compliance, review of each Circle and
 sensitisation of compliance officers at various levels has also been
 undertaken.
 
 Bank has taken an initiative and developed an in-house web based portal
 for online submission of breaches of compliance directives/instructions
 by branches /Circle offices/FGMOs and HO Divisions for any non
 compliance and penalty (ies) imposed by regulators.
 
 f.  Vigilance
 
 In compliance with the directives of the DFS, MoF, the Green Vigilance
 Software (Vigilance Management Information System), introduced in the
 last FY has been made fully operational in FY''14, enabling navigation
 of vigilance related cases by Disciplinary Authorities(DAs) & CVO till
 finalization of the cases, thereby enhancing speedy disposal, greater
 transparency, reduced paperwork & promoting e-governance.
 
 Due to effective follow up with the disciplinary authorities, number of
 cases more than one year old has been brought down to 4 as on
 31.03.2014. Total number of vigilance cases, including new additions
 has come down from 777 as on 31.03.2013 to 573 as on 31.03.2014.
 
 During FY''14, the officials from Vigilance Department and Vigilance
 Officers posted at ZAOs visited 1089 branches and explained the
 importance of preventive/proactive measures. The Chief Vigilance Officer 
 also visited 12 Circles during FY''14 and Preventive/ Proactive
 Vigilance seminars were organised in the Circle Offices. All officials 
 acting as Disciplinary Authorities at different levels have been
 trained.
 
 As a preventive measure, the department is reiterating the guidelines
 from time to time to the field whenever gross negligence/frauds are
 observed to preclude the recurrence of such events.
 
 Vigilance Awareness Week (VAW) was observed from 28.10.2013 to
 02.11.2013. The theme of the year was Promoting Good Governance -
 Positive Contribution of Vigilance. During the VAW, Shri J. M. Garg,
 Vigilance Commissioner, CVC, addressed the senior officials of the
 Bank about measures to be adopted for promoting good governance.
 
 The Institute of Public Enterprises (IPE) conferred Vigilance
 Excellence Award 2013-14 upon PNB at the Golden Jubilee Celebration
 Function of IPE at Hyderabad on 06.03.2014 for spearheading a robust
 vigilance set up, implementing Green Vigilance Software and reducing
 the number of vigilance cases.
 
 17.  Right To Information Act
 
 During FY''14, the Bank received 8066 applications, of which 6160
 applications were provided information and 1887 applications were found
 exempted under the provisions of the Act.
 
 18.  Implementation of Official Language Policy
 
 The Bank has achieved almost all the targets in all parameters fixed
 by the Govt. of India, Ministry of Home Affairs Department of Official
 Language for the year 2013-14.  During the year, the Bank has been
 awarded with several prizes for its excellent performance in the use of
 Hindi, which includes the prestigious Indira Gandhi Rajbhasha Shield 
 a top most prize scheme of Govt. of India, RBI Rajbhasha Shield and
 other regional level prizes of Ministry of Home Affairs. In addition,
 Town Official Language Implementation Committees and other Non-Govt.
 Organisations have also conferred awards upon the Bank.
 
 The third sub-committee of the Committee of Parliament on Official
 Language visited Branch Office-Piparia on 13th April, 2013, Branch
 Office-Champawat on 19th June, 2013 & Head Office on 1st July, 2013.
 The Committee not only expressed satisfaction but also appreciated the
 efforts made by the Bank for progressive use of Hindi.
 
 This year also, the Bank organised Hindi Maah. Programmes/ competitions
 were held and awards were given. Four collections of articles received
 in the competition on creative writing, have been published in the year
 2013-14. Under Moulik Hindi Pustak Lekhan Yojana of the Bank, cash
 incentives were awarded to staff members for writing original books in
 Hindi on banking and non-banking subjects.
 
 19. Customer Care
 
 The Bank has adopted Code of Commitment to Customers 2014 formulated by
 Banking Codes and Standards Board of India (BCSBI). The details of the
 Code are available on the Bank''s website www.pnbindia.in.
 
 The Bank has defined four polices for promoting good customer service.
 They are 1) Customer Compensation Policy; 2) Grievance Redressal
 Policy; 3) Cheque Collection Policy; and 4) General Management of
 Branches. These policies are available on bank''s corporate website
 www.pnbindia.in. Efforts are made to ensure that maximum number of
 complaints is redressed within shortest possible time.
 
 The Bank has a Citizens'' Charter for its customers, which is available
 on the Bank''s website and sets benchmarks for prompt delivery of
 banking services.
 
 The number of complaints received during FY''14 was 38,869 in addition
 to complaints already pending i.e. 236, at the beginning of FY''14. The
 number of complaints redressed was 38,913 and at end of 31st March
 2014. The number of complaints (which are pending as on 31.03.2014) is
 192.  However, these have since been resolved.
 
 The number of unimplemented awards at the beginning of FY''14 was zero;
 the awards passed by Banking Ombudsman during FY''14 were 13 while the
 awards implemented during FY''14 were 9. The number of unimplemented
 awards, as at the end of 31st March 2014, was four.
 
 Initiatives undertaken during the year
 
 - In line with the recommendations of Damodaran Committee on Customer
 Service, regarding setting up of an internal ombudsman in banks, Shri
 R.C. Khurana, Ex. General Manager, Bank of India was appointed as Chief
 Customer Service Officer (CCSO) as the Internal Ombudsman for ensuring
 that the minimum number of cases get escalated to the Banking
 Ombudsman.  Unresolved complaints are automatically escalated to CCSO''s
 office after 21 days to enable them to monitor such complaints. Prime
 objective of Chief Customer Service Officer (CCSO) scheme is to ensure
 that customers'' confidence in Internal Grievance Redressal Mechanism
 is strengthened.
 
 - Theme Based Meetings are conducted in all branches on a common date
 at monthly intervals to bring about awareness of the Bank''s products
 and schemes and for improving knowledge and skills of the staff.
 
 - All Circle offices & FGM offices have been provided a dedicated
 computer system with internet connection at the reception counter
 exclusively for customers to facilitate them to fi le on-line
 complaints by using the Bank''s portal. The indicator board On Line
 Complaint cum Feedback Kiosk is displayed at the counter.
 
 - The Centralised Grievance Redressal Management System (CGRMS) has
 been made live. CGRMS has also been integrated with Alternate Delivery
 Channels viz.  Bank''s website, IBS, Mobile Banking & ATM for lodging
 complaints/ service requests by customers.
 
 20. PNB''s Subsidiaries and Regional Rural Banks
 
 a.  PNB Housing Finance Limited (PNBHFL)
 
 The company has completed 25 years of its working in FY''14. During the
 25th year, the Company reached many milestones. The loan book of the
 Company crossed Rs. 10,000 crore to reach Rs. 10,591 crore, and registered 
 a YoY growth of 60%. Deposits crossed Rs. 1700 crore, to reach Rs. 1712 
 crore, and registered a YoY growth of 63%. Total income crossed Rs.1000 
 crore to reachRs.1112 crore, and registered a YoY growth of 68% and Profit 
 After Tax (PAT) crossed Rs. 125 crore to reach Rs. 127.44 crore, and 
 registered a YoY growth of 39%.
 
 The Company had started its transformation journey in July 2010 with a
 Business Process Re-engineering Project (BPR).  In less than 4 years,
 the Company has successfully completed major portion of BPR, while the
 business has kept growing at above industry average growth rate. In the
 last 4 years, yearly fresh sanctions have increased more than 6 times,
 loan book has grown 4 times and deposits have grown 5 times.  The
 Company has successfully managed its loan portfolio and brought down
 both delinquencies and NPAs over the years. As on 31st March ''14, the
 Company has just 1.10% of its portfolio which is delinquent with a
 Gross NPA ratio of 0.32% and a Net NPA ratio of 0.16%.
 
 The Company has a network of 32 branches which are linked to three
 zonal hubs through hub and spoke model. During FY''14, the Company
 introduced many new products such as 3 years fixed interest rate, 5
 years fixed interest rate and 10 years fixed interest rate products.
 Besides, the Company introduced many programmes for salaried and self
 employed borrowers. All new loan products and programmes have received
 a warm response from the market.
 
 During FY''14, the Company is ranked amongst the Top 5 housing finance
 companies in India. In order to meet growing business needs, the Board
 has approved infusion of additional equity capital of Rs. 1000 crore over
 the period of 2-3 years.
 
 b.  PNB Gilts Limited
 
 Despite the market turbulence, PNB Gilts Ltd. continued to perform
 well. It fulfilled all its commitments as a Primary Dealer. The Total
 Profit Before Tax (PBT) amounted to Rs. 90.70 crore in FY''14 as against
 Rs. 88.76 crore in FY''13.  The increase in profit was due to a judicious
 mix of nimble trading technique and astute prognosis of market
 conditions.  The Company posted trading Income of Rs. 31.41 crore during
 FY''14. Further, the total outright turnover increased to Rs. 3,08,978
 crore as against Rs. 1,98,139 crore in the preceding year. During FY''14,
 company made bonus issue of equity share in the ratio of 1:3 thus
 increasing the paid-up capital to Rs. 180.01 crore. The total Net Worth
 of the Company as on 31st March 2014 stands at Rs. 662.53 crore.
 
 c.  Punjab National Bank International Limited (PNBIL)
 
 During FY''14, total business of PNBIL increased to 18 million as on
 31st March 2014, registering a YoY growth of 20.69%. Deposits increased
 to 32 million (2013:99 million), while Advances increased to
 86 million (2013: 36 million). Reduction in wholesale deposits on
 account of availability of alternate source of funds at a cheaper rate
 was one of the main reasons for moderate growth under customer
 deposits. Operating profit of PNBIL rose to $ 27.91 million
 registering a YoY growth of 32% during FY''14.
 
 Offering basic banking products and relationship banking continues to
 be the strong selling point for the PNBIL.  The Indian Rupee (INR)
 Remittance scheme of the Bank has stabilized and gained popularity
 among the ethnic population. The Bank has built a brand image in the UK
 market. PNBIL also established a dedicated in-house Help Line Service
 Centre with a view to improve its relationship banking and customer
 service. The Bank is in the process of switching over from Maestro Card
 to Master card, having contactless drawing facility and already started
 replacing the existing cards. More than 27,000 debit card holders of
 PNBIL have the option to withdraw money from any ATM having Maestro/
 Master Card logo. Strategic integration, parental support, niche
 positioning and competitive advantage in its targeted customer base are
 the key advantages the Bank is having in UK. PNBIL migrated from Basel
 II framework to Basel III framework w.e.f. 1st January 2014 in
 compliance with Capital Requirement Regulations and Directives of the
 European Parliament and the national regulator - Prudential Regulation
 Authority of UK.
 
 d.  Punjab National Bank Investment Services Limited (PNBISL)
 
 During FY''14, PNBISL earned Total Income of Rs. 11.14 crore, including
 fee based income of Rs. 8.08 crore. In view of the current market
 scenario, the Company is mainly focusing on providing financial
 advisory services relating to preparation and implementation of
 Corporate Debt Restructuring proposals and conducting Techno Economic
 Viability Study.
 
 PNBISL has recently added a new business activity Lenders Engineering
 Services in its kitty of services, to enlarge its customer base and
 increase its visibility. The Company has also empanelled itself with
 most of the major public sector banks and a few private sector banks,
 to provide professional services under its verticals of Project
 Appraisal/Conducting of Techno Economic Viability Study and preparation
 of Financial Packages for Restructuring under Bilateral/CDR
 arrangement.
 
 e.  Regional Rural Banks
 
 At present, there are five PNB sponsored RRBs, which are operating in
 five States, namely, Bihar, Haryana, Himachal Pradesh, Punjab and
 Uttar Pradesh, together covering 74 districts with a network of 1927
 branches. During FY''14, 187 new branches have been opened by RRBs.
 
 In terms of Gazette Notification dated 29th Nov 2013 from Ministry of
 Finance, Department of Financial Services, Govt. of India, Gurgaon
 Gramin Bank, Gurgaon (sponsored by Syndicate Bank) and Haryana Gramin
 Bank, Rohtak, (sponsored by Punjab National Bank) have been amalgamated
 into a single Regional Rural Bank called Sarva Haryana Gramin Bank
 covering all the 21 districts of Haryana State.
 
 The aggregate paid-up capital of these Regional Rural Banks stood at Rs.
 199.31 crore. Central Government, State Governments and PNB contributed
 towards paid-up capital of these RRBs in the ratio of 50: 15: 35
 respectively. The Bank''s contribution towards capital of these RRBs
 stood at Rs. 69.76 crore. The combined net worth of PNB sponsored RRBs as
 on 31st March 2014 stood at Rs. 2497 crore.
 
 During FY''14, the aggregate business of all RRBs increased to Rs. 40561
 crore showing a YoY growth 14.13%. The aggregate deposits and aggregate
 advances as on 31.03.2014 increased to Rs. 25607 crore (YoY 11.43 %) and
 Rs. 14954 crore (YoY 19.06 %).The Net profit of all sponsored RRBs as on
 31.03.2014 increased to Rs. 258 crore (YoY 10.53%). However, the Net
 Profit of Rs. 258 crore excludes Rs. 59.19 crore of erstwhile Gurgaon
 Gramin Bank (from 01.04.13 to 28.11.13). The gross NPA of the RRBs has
 increased to Rs. 452 crore during FY''14.
 
 Now RRBs are opening NRE/NRO accounts. The facilities of NEFT, RuPay
 Debit & KCC cards, KIOSK Banking Solution (KBS) under FIP, Aadhar
 Payment Bridge System (ABPS) under DBT etc. are also being provided to
 customers in all the RRBs.
 
 21. Awards and Accolades
 
 During the year, in recognition of its performance and initiatives, PNB
 received various awards, some of which are:
 
 - Appreciation Certificate for CSR Activities by ASSOCHAM.
 
 - Global CSR Excellence and Leadership Awards for Organisations with
 Best CSR Practices by ABP
 
 News.
 
 - Banking, Financial Services & Insurance Award under Bank with
 Leading Financial Inclusion Initiatives category by ABP News.
 
 - IBA Banking Technology Awards-Best Risk Management and Security
 Initiatives by Indian Banks'' Association.
 
 - IBA Banking Technology Awards-Best Customer Management Initiatives
 PSU (1st Runner Up) by Indian Banks'' Association.
 
 - IBA Banking Technology Awards-Best Use of Technology in Training and
 E-Learning (2nd Runner Up) by Indian Banks'' Association.
 
 - Best Public Sector Bank Branch: BO - Kulapully, Kozikhode by State
 Forum of Bankers'' Club, Kerela.
 
 - Life Time Achievement Award 2013 to Shri K. R. Kamath by Dainik
 Bhaskar Group.
 
 - Most Innovative Mass Retail Lender for Under-served segments (Special
 Mention) in BANCON 2013.
 
 - Skoch Digital Inclusion Award - Financial Inclusion Project by Skoch.
 
 - Best Bankers'' Award under the Category Agriculture Credit and
 Inclusion by The Sunday Standard.
 
 - 3rd Asia''s Best CSR Practices Awards- Best CSR Practices Overall by
 World CSR Day.
 
 - 4th Asia''s Best Employer Brand Awards 2013- Excellence in Training by
 Employer Branding Awards.
 
 - Banking Technology Excellence Awards - Customer Management and
 Business Excellence Initiatives by IDBRT, Hyderabad.
 
 - The Ministry of Consumer Affairs, Govt. of India has awarded the Bank
 with fi rst position among Public Sector Banks for financing against
 Negotiable Warehouse receipts.
 
 22. BOARD OF DIRECTORS
 
 As on 31.03.2014, there are 15 Directors on the Board of the Bank
 including 4 Whole Time Directors i.e. Chairman and Managing Director
 and three Executive Directors.
 
 During the Year 2013-14, the following changes took place in the
 composition of Board of Directors:
 
 - Shri Gauri Shankar was appointed as Executive Director of the Bank on
 07.10.2013.
 
 - Shri K.V. Brahmaji Rao was appointed as Executive Director of the
 Bank on 22.01.2014.
 
 - Dr. R. S. Sangapure was appointed as Executive Director of the Bank
 on 13.03.2014.
 
 - Shri B.P. Kanungo was appointed in place of Shri N.S.  Vishwanathan
 as RBI Nominee Director on the Board of the Bank on 31.05.2013.
 
 - Shri D.K. Saha, was appointed in place of Shri Pradeep Kumar as 
 Officer Employee Director on the Board of the Bank vide notification dated
 26.06.2013.
 
 - Smt. Aradhana Misra, was appointed as Part- time Non-official
 Director of the Bank vide notification dated 21.11.2013.
 
 - Shri Gautam Premnath Khandelwal was appointed as Part-time Non-
 official Director of the Bank vide notification dated 24.01.2014.
 
 The Board welcomes Shri Gauri Shankar, Shri K.V. Brahmaji Rao, Dr. R.S.
 Sangapure, Executive Directors, Shri B.P.  Kanungo, RBI Nominee
 Director, Shri D.K. Saha, Offi cer Employee Director, Smt. Aradhana
 Misra and Shri Gautam Premnath Khandelwal as Part-time Non-official
 Directors on the Board of the Bank.
 
 The Board also wishes to place on record its appreciation for the
 valuable contribution made by Shri Rakesh Sethi, Smt. Usha
 Ananthasubramanian, Shri S.R. Bansal, Executive Directors and Sh. N.S.
 Vishwanathan, RBI Nominee Director.
 
 23.  Directors'' Responsibility Statement:
 
 The Directors confirm that in the preparation of the annual accounts
 for the year ended March 31, 2014:
 
 - The applicable accounting standards have been followed along with
 proper explanation relating to material departures, if any;
 
 - The accounting policies, framed in accordance with the guidelines of
 the Reserve Bank of India, were consistently applied;
 
 - Reasonable and prudent judgment and estimates were made so as to give
 a true and fair view of the state of affairs of the Bank at the end of
 the financial year and of the profit of the Bank for the year ended
 March 31, 2014;
 
 - Proper and sufficient care was taken for the maintenance of adequate
 accounting records in accordance with the provisions of applicable laws
 governing banks in India, and
 
 - The accounts have been prepared on the principle of going concern
 basis.
 
 24.  Acknowledgement
 
 The Board expressed thanks to the Government of India, Reserve Bank of
 India, Securities and Exchange Board of India, Stock Exchanges, Bank''s
 customers, public and the shareholders for valuable support, continued
 patronage and confidence reposed in the Bank.
 
 The Board wishes to place on record its appreciation for the valuable
 contribution made by the members of the Bank''s staff at all levels and
 look forward to their continued involvement in achieving the future
 goals.
 
                                For and on behalf of Board of Directors
 
                                                          (K R Kamath )
                                           Chairman & Managing Director
Source : Dion Global Solutions Limited
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