Punjab National Bank

1.  Disclosure of penalties imposed by the RBI:
 
 During the year no penalty has been imposed by RBI on the bank.
 
 Other Disclosures required by Accounting Standards
 
 2.  AS -5 Prior Period and Change in Accounting Policy
 
 The Bank hitherto has been accounting for interest on unclaimed matured
 term deposits for overdue period at the time of renewal of such
 deposits. In terms of RBI Circular NO.
 DBOD.No.Leg.B.C.34/09.07.005/2008-09 dated August 22, 2008, such
 Interest has been accounted for at Saving bank rate w.e.f 22.8.2008
 till such deposits are renewed. The differential interest for overdue
 period is accounted for at the time of renewal. Due to such change the
 profit for the year is lower by Rs 25.57 Crores.
 
 There were no material prior period income/expenditure items requiring
 disclosure under AS–5.
 
 3.  AS- 9 Revenue Recognition:
 
 Certain items of income are recognized on realization basis as per
 Accounting Policy No. 10(4). However, the said income is not considered
 to be material.
 
 4.  AS 15 - Employees Benefits:
 
 ADOPTION OF AS - 15(R):
 
 The Bank has adopted Accounting Standard 15(R) - Employee Benefits,
 issued by the Institute of Chartered Accountants of India (ICAI), with
 effect from 1st April 2007.
 
 The Bank recognizes in its books of accounts the liability arising out
 of Employee Benefits as the sum of the present value of obligation as
 reduced by fair value of plan assets on the Balance Sheet date.
 
 TRANSITIONAL LIABILITY
 
 The transitional liability as on 01.04.08 on account of other long-
 term employee benefits such as Leave fare concession, Accumulating
 compensating sick leave, Silver jubilee award etc. to the extent not
 charged was amounting to Rs.175.00 crores. A sum of Rs.43.80 crores
 representing one fifth of transitional liability has been charged to
 Profit & Loss A/c of the current financial year ended 31st March 2009.
 The balance-unrecognized liabilities of Rs.131.20 crores have been
 carried forward and the same will be charged off in the next three
 years.
 
 5.  Disclosure of Related Parties as per AS-18 issued by ICAI
 
 Names of the related parties and their relationship with the Bank:
 
 Key Management Personnel:
 
 i) Dr. K.C Chakrabarty, Chairman & Managing Director
 ii) Shri M.V. Tanksale Executive Director (w.e.f. 26.03.2009)
 iii) Shri Nagesh Pydah, Executive Director (w.e.f. 26.03.2009)
 iv) Shri K. Raghuraman, Executive Director (upto 30.09.2008)
 v) Shri J.M Garg, Executive Director (upto 06.11.2008)
 
 Subsidiaries
 
 i) PNB Gilts Ltd.
 ii) PNB Housing Finance Ltd.
 iii) Punjab National Bank (International) Ltd., UK
 iv) PNB Investment Services Ltd
 
 (incorporated on 02.02.09, capital Rs. 5.00 lacs yet to be subscribed)
 
 Associates:
 
 i) Everest Bank Limited
 ii) Principal PNB Asset Management Company Pvt. Ltd.
 iii) Principal Trustee Company Private Limited
 iv) PNB Principal Financial Planners Private Limited
 v) PNB Principal Insurance Broking Pvt. Ltd.
 vi) UTI Asset Management Company Limited
 vii) UTI Trustee Company Pvt. Limited
 viii) Assets Care Enterprises Ltd.
 ix) Principal PNB life Insurance Company Ltd.
 x) Madhya Bihar Gramin Bank, Patna
 xi) Haryana Gramin Bank, Rohtak
 xii) Himachal Gramin Bank, Mandi
 xiii) Punjab Gramin Bank, Kapurthala
 xiv) Rajasthan Gramin Bank, Alwar
 xv) Sarva UP Gramin Bank, Meerut
 
 6.  Accounting for Leases-AS 19 Financial Leases:
 
 a.  Value of assets acquired on financial lease and included in other
 fixed assets (including furniture and fixture).  Value of assets
 acquired during the year under financial lease: Rs.41.65 lakhs. The
 amount of depreciation provided thereon: Rs 22.11 lakhs upto
 31.03.2009. The written down value as on 31.03.2009: Rs. 19.54 lakhs
 
 b.  Minimum Lease Payment due not later than one year: 
 Min. Lease Payment                   Rs. 14.78 lakhs 
 Present value of Min. Lease Payment  Rs. 12.81 lakhs 
 Intt. Included in Min. Lease payment Rs 1.96 lakhs
 
 c.  Minimum Lease Payment due later than one year but not later than
 five years:
 
 Min. Lease Payment            Rs. 4.76 lakhs
 Present value of Min.
 Lease Payment                 Rs. 3.44 lakhs
 Interest included in Min.
 Lease payment                 Rs. 1.32 lakhs
 
 d.  Minimum Lease Payment due
 later than five years:               NIL
 
 e.  Information on operating lease is not ascertained.
 
 7.  AS 28 - Impairment of Assets
 
 A substantial portion of the banks assets comprise of ‘financial
 assets to which Accounting Standard 28 Impairment of Assets is not
 applicable. In the opinion of the bank, there is no impairment of its
 assets (to which the standard applies) to any material extent as at
 31.03.2009 requiring recognition in terms of the said standard.
 However, as a measure of abundant caution, an ad-hoc provision of Rs
 5.00 crores already made in earlier years is continued in the accounts.
 
 8.  Other Notes
 
 a As per RBI guidelines, the Bank has worked out the amount of inter
 Branch Credit entries outstanding for more than 5 years, pertaining to
 the period up to 31.03.2004, to create a Blocked Account. Accordingly,
 a sum of Rs. 41.36 crores (net of adjustments since carried out) has
 been shown separately under Other Liabilities-others in schedule-5.
 
 As against claims of Rs. 1.85 lacs, received during the year, against
 Blocked Account of Inter Branch Credit entries, pertaining to the
 period up to 31.03.1999, a sum of Rs.1.38 lacs has been transferred
 from General Reserves and balance Rs. 0.46 lacs has been debited to
 Profit and Loss Account.
 
 b.  There are current and old unadjusted entries outstanding in inter
 branch and central office account, balances with Reserve Bank of India
 and Other banks (including foreign banks), suspense, sundries, bills
 payable, currency chest transfers, clearing, remittance in transit etc.
 pending identification / adjustment having inter-se effect in balances.
 The bank is taking continuing steps to review / adjust the outstanding.
 Reconciliation of entries outstanding as on 31.03.2009 in inter branch
 accounts is in progress and in the opinion of the management
 consequential impact thereof on revenue/ assets/liabilities will not be
 material.
 
 c.  The classification of advances, as certified by the incumbent in
 charge has been incorporated in respect of unaudited branches.
 
 d.  The Bank has issued a Letter of Comfort in respect of its
 subsidiary Punjab National Bank (International) Ltd. in UK, to
 Financial Services Authority (FSA), the regulator in United Kingdom,
 committing that the bank shall provide financial support to Punjab
 National Bank (International) Ltd., UK so that it meets its financial
 commitments if they fall due. However, no financial obligation has
 arisen as on 31st March 2009.
 
 e.  Premises includes properties amounting to Rs. 12.78 crores (Net of
 Depreciation) {Cost Rs.17.37 crores} awaiting registration of title
 deeds. Premises include capital work in progress of Rs. 75.86 crores.
 
 f.  No provision is considered necessary in respect of disputed Income
 Tax and Fringe Benefit Tax demands of Rs.1155.15 crores (previous year
 Rs. 846.14 crore) as in the banks view, duly supported by expert
 opinion and/or decision in banks own appeals on same issues, additions
 / disallowances made are not sustainable. Against these disputed
 demands, Rs. 1094.83 crores (previous year Rs.801.13 crores) has been
 paid.
 
 g.  i) In terms of Agriculture Debt Waiver and Debt Relief scheme,
 2008, framed by Government of India, an amount of Rs. 1149.89 crores
 has been waived and preliminary claim has been lodged with Reserve Bank
 of India, against which bank has received the 1st installment of Rs.
 467.17 crores, being 41% of claim lodged. Further, an amount of Rs.
 935.87 crores, has been worked out as eligible under the scheme for
 debt relief, subject to fulfillment of conditions attached thereto, for
 which claim will be lodged with Reserve Bank of India. The said claims
 are subject to certification by Statutory Central Auditors.
 
 ii) In respect of Debt Relief, bank has made a provision of Rs. 60.00
 Crores against loss in Present Value terms on amount receivable from
 eligible farmers by utilizing the existing provision held under IRAC
 Norms.
 
 h. The bank has made an ad-hoc provision of Rs. 500 crores (previous
 year Rs. 100 crores) during the current financial year making
 cumulative provision of Rs. 600 crores, pending finality on the wage
 revision negotiations, and for post retirement medical benefits.
 
 i. The bank is claiming the interest subvention in short term
 production crop loans on the outstanding balances.  Certain
 observations, including on the modalities of claiming interest
 subvention observed by the Auditors have been referred to RBI and are
 awaiting reply. In the opinion of the Management, it will not have any
 material impact on the financials of the Bank.
 
 j. The Bank has implemented Basel II during the year 2007-08.  In
 respect of calculation of Capital Adequacy Ratio as per Basel –I and
 Basel-II the discrepancies/data errors noticed/ reported were addressed
 at COs/HO level. Based on this exercise, the Bank is of the view that
 un-rectified deficiencies will not have significant impact on the
 overall reported Capital Adequacy Ratio.
 
 k. During the year certain advances given to realtors have been
 considered as standard, even though there was shortfall in the actual
 value of the security considered as stipulated in the sanction. In view
 of the Management there is no threat to recovery.
 
 l. Premises of the bank (other than those under dispute) capitalized on
 or before 31.03.2006 have been revalued at Rs. 2148.76 crores on
 01.04.2007 as per the values determined by the approved valuers and the
 resultant net appreciation of Rs. 1263.80 crores has been credited to
 the Capital Reserve (Revaluation Reserve) Account.
 
 m. The Board of Directors has considered dividend of Rs. 20 per equity
 share of Rs. 10 each (200% of the paid up capital of the bank).