Punjab National Bank with a rich legacy spanning 117 years has emerged
 as the second largest bank in the country. Today, PNB is a well
 established brand with a strong technological base touching the lives
 of millions of customers. The Bank has worked assiduously to build its
 front line position, constantly reinventing itself to keep pace with
 the changing banking landscape and customer preferences. While
 successfully managing change, the Bank has remained deeply rooted in
 the principles of good banking.  Resultantly, the fundamentals of the
 Bank have strengthened which augur well for a bright future.
 
 A network of 5189 branches, 5050 ATMs and a customer base of over 60
 million add considerably to the franchise value the Bank enjoys.
 Technology has played an important role in expanding its franchise
 value through customer acquisition and retention, carrying out faster
 and efficient financial transactions in a secure manner and in
 improving customer convenience.
 
 The awards and recognitions received by the Bank bear testimony to the
 efforts and initiatives to remain highly customer-focused, adoption of
 good business practices and extending the reach to the unbanked. It is
 also a reflection of how the Bank has been able to successfully pursue
 business opportunities with acumen while continuing to fulfill its
 social responsibilities.
 
 Organization Structure
 
 Pursuit of strategy requires that organization structure is closely
 aligned with business goals. During the year, Bank took various
 measures aimed at improving organization structure to support effective
 execution of strategy. The Retail Banking Division was bifurcated into
 Retail Assets Division and Resource Mobilization Division. Further, the
 Retail Hubs were reorganized into Retail Asset Branches (RAB) to meet
 the requirements of the retail borrowers and ensure faster delivery of
 retail credit. Presently, 73 RABs are functioning successfully.
 Budgeting process was further strengthened by linking with systems
 growth in a particular area as well as available potential. To face the
 HR challenges in a proactive manner, routine administrative functions
 relating to human resource management were hived-off into a separate
 Personnel Administration Division.
 
 Your Directors take pleasure in placing the Banks Annual Report for
 2010-11 along with its audited annual financial statements.
 
 OUR PERFORMANCE
 
 1.  FINANCIAL HIGHLIGHTS
 
 1.1 BALANCE SHEET
 
                                                         (Rs Crore)
                                         2009-10   2010-11  Growth %
 
 PARTICULARS
 
 Capital & Reserves                        17723     21509     21.36
 
 
 Total Business                           435931    555005     27.31
 
 Deposits                                 249330    312899     25.50
 
 Low cost Deposits (Savings and Current)  101850    120325     18.14
 
 Advances                                 186601    242107     29.75
 
 Retail Credit                             19214     23621     22.94
 
 Priority Sector Credit                    63769     75652     18.63
 
 -% of Adjusted Net Bank Credit (ANBC)     40.55     40.67         -
 
 Agreecultural Credit                      30207     35462     17.40
 
 -% of Adjusted Net Bank Credit (ANBC)     19.53      19.3         -
 
 
 1.2 PROFIT
 
                                                           (Rs Crore)
 
 PARTICULARS                      FY 2009-2010  FY 2010-2011  Growth%
 
 Operating profit                         7326          9056   23.61
 
 Provisions                               3421          4622   35.11
 
 Net profit                               3905          4433   13.53
 
 1.3 INCOME & EXPENDITURE
 
 
                                                           (Rs Crore)
 
 PARTICULARS                      FY 2009-2010  FY 2010-2011  Growth%
 
 Interest income                         21422         26986   25.97
 
 - Interest/discount on advances/bills   16677         21105   26.55
 
 - Income on investments                  4556          5638   23.75
 
 Non-interest income                      3610          3613    0.08
 
 Commission, Exchange & Brokerage         1682          2045   21.58
 
 Net Interest Income                      8478         11807   39.27
 
 Total Income                            25032         30599   22.24
 
 Interest expended                       12944         15179   17.27
 
 - Interest paid on deposits             11966         13795   15.28
 
 Total Operating expenses                 4762          6364   33.64
 
 - Establishment expenses                 3121          4461   42.93
 
 Total Expenses                          17706         21543   21.67
 
 Operating profit                         7326          9056   23.61
    
 Provisions and contingencies             3421          4622   35.11
 
 Net profit                               3905          4433   13.53
 
 
 Note: Difference in total is due to rounding off
 
 1.4.  KEY RATIOS    
                                                   (Percent)
 
 PARTICULARS                           2009-10       2010-11
 
 Average cost of funds                    4.76          4.57
 
 Average yield on funds                   7.88          8.12
 
 Return on Equity                        24.59         22.13
 
 Net Interest Margin                      3.57          3.96
 
 Return on Assets                         1.44          1.34
 
 Cost to Income Ratio                    39.39         41.27
 
 Operating expenses to average 
 Working Funds                            1.70          1.91
 
 Operating profit to average 
 Working Funds                            2.62          2.72
 
 Earnings per share (Rs.)               123.86        140.60
 
 Book value per share (Rs.)             514.77        661.20
 
 Ratio of Net NPAs to Net advances        0.53          0.85
 
 NPA coverage ratio                      81.17         73.21
 
 CRAR - Basel II                         14.16         12.42
 
 
 2.  OPERATIONAL HIGHLIGHTS
 
 - Bank leveraged on its 5180 plus branch network to build deep,
 enduring relationships with its 60 million plus customers across all
 the segments.
 
 - Bank’s network of 5050 ATMs along with alternate delivery channels
 account for more than 28% of transactions.
 
 - New set of products and services like PNB Uphaar, PNB Suvidha, World
 Travel Card, etc were introduced during the year.
 
 - In addition to international presence in 9 countries, Bank acquired
 equity stake in Dana Bank of Kazakhstan and is in the process of
 setting up presence in Australia and Canada.
 
 - Under the performance management system, employee performance was
 recognized and incentivized.
 
 - Strengthened pool of management talent as part of succession planning
 exercise with Team 2020 initiatives.
 
 - Streamlined CSR activities to move forward and to make a positive
 contribution towards community.
 
 3.  DIVIDEND
 
 The Board of Directors has recommended a dividend of 220% for the year
 2010-11.
 
 4.  CORPORATE GOVERNANCE
 
 The Bank is committed to best practices in corporate governance and
 recognizes that transparency, ethical behavior, integrity and
 protection of interests of all stakeholders form the keystones of
 governance. Being in the business of financial intermediation, the Bank
 is fully aware of the risks involved. To address this, the Bank has put
 in place elaborate system of risk identification, measurement and
 mitigation. A Risk Management Committee at the Board level monitors the
 risk management process in the Bank.  The Board of Directors has
 oversight on the Bank and ensures that there is right balance between
 business and risk. Further through the Audit Committee, the Board
 ensures strong system of internal control and corporate reporting
 including financial reporting. As a listed entity, the Bank is
 complying with various regulatory requirements. Disclosures are made in
 the financial statements in compliance with Section 29 of Banking
 Regulation Act, 1949, RBI guidelines, Section 49 of the Listing
 Agreement and Accounting Standards and Guidelines issued by the
 Institute of Chartered Accountants of India. These inter-alia, include
 segment reporting, related party disclosures, lending to sensitive
 sectors, restructured loan assets, key business ratios, risk
 management, performance of Bank’s share price, etc.
 
 PNB follows practices that provide its financial stakeholders a high
 level of assurance on the quality of Corporate Governance. This is
 reflected in the ICRA Ltd’s CGR 2 rating which is the highest rating
 assigned to a financial institution in India.
 
 5.  BOARD OF DIRECTORS
 
 As on 31.03.2011 there were 11 Directors on the Board of the Bank
 including Chairman and Managing Director and two Executive Directors.
 
 At the time of appointment/nomination of any Director, the guidelines
 defining the roles and responsibilities of Directors as circulated by
 Government of India/ Ministry of Finance from time to time are made
 available to them. A declaration of “Model Code of Conduct” is being
 obtained from all the Directors in April every year. Deeds of covenants
 as recommended by Ganguly Committee are being entered into with the
 elected directors on the Board of the Bank in terms of instructions of
 Reserve Bank of India/ Government of India every year.
 
 As per recommendations of Ganguly Committee, Directors are imparted
 training to make them more responsive to the organization, the business
 environment and emerging developments/challenges in the banking sector.
 As part of their
 
 training, Directors are nominated to training programmes in reputed
 Institutions like Centre for Corporate Research and Training (CCRT),
 Navi Mumbai, Institute of Company Secretaries of India, Institute of
 Directors, etc.
 
 During the Financial Year 2010-11, four Directors were nominated for
 various training programmes viz. “Masterclass for Directors leading to
 Certified Corporate Directorship”, “Conference on Corporate Compliance”
 and “Role of Independent Directors - Issues & Solutions”.
 
 6.  CHANGES IN THE BOARD OF DIRECTORS
 
 During the year 2010-11, the following changes took place in the
 composition of Board of Directors of the Bank:
 
 - Shri L.M. Fonseca, RBI Nominee Director ceased to be Director on
 30.07.2010 on expiry of his term.
 
 - Shri Jasbir Singh, RBI Nominee Director was appointed on the Board of
 the Bank on 30.07.2010.
 
 - Shri Nagesh Pydah, Executive Director, demitted the office on
 31.12.2010 on his elevation as Chairman & Managing Director of Oriental
 Bank of Commerce.
 
 - Shri Rakesh Sethi was appointed as Executive Director of the Bank on
 01.01.2011.
 
 - Shri M.A. Antulay, part time non-official Director ceased to be
 Director w.e.f 27.02.2011 on completion of his tenure.
 
 - Shri G.P. Khandelwal, part time non-official Director ceased to be
 Director w.e.f 27.02.2011 on completion of his tenure.
 
 The Board welcomes Shri Rakesh Sethi, new Executive Director and Shri
 Jasbir Singh, new Director and wishes to place on record the valuable
 services rendered by Sh. Nagesh Pydah, Sh. L.M.  Fonseca, Sh. M.A.
 Antulay and Sh. G.P. Khandelwal.
 
 BOARD COMMITTEES
 
                                               (As on 31.03.2011)
 
 No.  NAME OF THE COMMITTEE
 
 1.  Management Committee
 
 2.  Audit Committee of Board
 
 3.  Risk Management Committee
 
 4.  Share Transfer Committee
 
 5.  Shareholders’ /Investors’ Grievance Committee
 
 6.  Customer Service Committee
 
 7.  I.T. Committee
 
 8.  PA Committee
 
 9.  Director’s Promotion Committee
 
 10.  Appellate Authority and Reviewing Authority
 
 11.  Special Committee of Board to monitor and follow up fraud cases
 involving Rs.1.00 crore and above.
 
 12.  Committee of Directors to Review Vigilance and Non Vigilance cases
 
 13.  HRD Committee of Directors
 
 14.  Remuneration Committee
 
 15.  Nomination Committee
 
 16.  Steering Committee for Vision 2013
 
 17.  Insurance Joint Venture Committee
 
 The details of various meetings held up to 31st March, 2011 are as
 follows:
 
 S.  Meeting              Number of  
 No                        Meetings                     
 
 1  Board Meeting               15    
 
 2 Management Committee         22   
 
 3 Committee of Directors        4    
 to review vigilance &
 non-vigilance cases
 
 4 Audit Committee of Board     10   
 
                                       
 
 5 Risk Management Committee     4    
                                         
 
 6 Special Committee             6    
 of Board to Monitor
 and Follow Fraud cases
 of Rs. 1.00 crore and above
 
 7 IT Committee of the Board     5  
 
 8 P.A. Committee                5
 
 9 Customer Service              4
 Committee
 
 10 Share Transfer Committee    24
 
 11 Shareholders/ Investors    6
 Grievances Committee
 
 12 Directors Promotion          2
 Committee
 
 13 Steering Committee           4
 Vision 2013
 
 14 Insurance Joint Venture      4
 Committee
 
 
 7.  ACKNOWLEDGMENTS
 
 The Board of Directors thank 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 also wishes to place on record its appreciation for the
 valuable contribution of the members of the Bank’s staff at all levels
 and look forward to their continued enthusiasm in meeting the future
 goals.
 
                              For and on behalf of Board of Directors 
                                       CHAIRMAN AND MANAGING DIRECTOR