Hong Kong branch of the bank has taken exposure on Credit Linked Notes,
Floating Rate Notes and Fixed Interest bonds etc. These are acquired
under Investment portfolio at foreign offices, which are governed under
Trading Book Policy for PNB Hong Kong. The bank intends to hold such
instruments till its maturity. The aggregate value of such portfolio as
on the date of balance sheet is Rs 257.57 crores (previous year
Rs.235.86).
1. Derivatives
1a. Forward Rate Agreement/ Interest Rate Swap
Nature & Terms of the swaps including information on credit and market
risk: Hedge Swaps: Interest rate swaps for hedging Tier-II Bonds,
Deposits, Floating rate loans & back-to-back swaps. Trading Swaps:
Interest rate swaps market risk: Nil
2c. Disclosure on risk exposure in derivatives
I Qualitative Disclosure
1. The bank uses derivatives products for hedging its own balance sheet
items as well as trading purposes. The risk- management of derivative
operation is headed by a senior executive, who reports to the top
management, independent of the line functions. Trading positions are
marked to market on daily basis.
2. The derivative policy is framed by the Risk Management Division,
which includes measurement of credit risk and market risk.
3. The hedge transactions are undertaken for balance sheet management.
Proper system for reporting and monitoring of risks is in place.
4. Policy for hedging and processes for monitoring the same is in
place.
5. Accounting policy for recording hedge and non-hedge transactions
are in place, which includes recognition of income, premiums and
discounts. Valuation of outstanding contracts, provisioning, collateral
and credit risk mitigation are being done.
6c. Risk Category wise Country Exposure
Banks net funded exposure for risk category-wise country exposures for
each country is less than 1% of banks assets as on 31.03.2011 and as
such no provision is required in terms of RBI Master Cir. No. DBOD NO.
BP.BC.21/21.04.048/2010- 11-10 dated July 1, 2010.
7d. Details of Single Borrower Limit and Group Borrower Limit exceeded
by the bank.
The Bank has not exceeded prudential exposure ceilings in respect of
any Group Accounts and individual borrowers during period 01.04.2010
to 31.03.2011.
8. 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
9. AS -5 Prior Period and Change in Accounting Policy
There were no material prior period income/expenditure items requiring
disclosure under AS-5.
10. 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.
11. 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 01.04.10 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. 87.40 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 2011.
The balance- unrecognized liabilities of Rs 43.60 crores have been
carried forward and the same will be charged off in the next year.
OPENING OF PENSION OPTION TO EMPLOYEES AND ENHANCEMENT IN GRATUITY
LIMITS:
During the year, the Bank reopened the pension option for such of its
employees who had not opted for the pension scheme earlier. As a result
of exercise of which by 33982 employees, the bank has incurred a
liability of Rs.2757.65 crores. Further during the year, the limit of
gratuity payable to the employees of the banks was also enhanced
pursuant to the amendment to the Payment of Gratuity Act, 1972. As a
result the gratuity liability of the Bank has increased by Rs.566.00
crores. These Liabilities are calculated on the basis of actuarial
valuation.
In terms of the requirements of the Accounting Standard (AS) 15,
Employee Benefits, the entire of Rs3323.65 crores. (Rs.2757.65 cr. +
Rs.566.00 cr.) is required to be charged to the Profit and Loss
Account. However, the RBI has issued a circular no.
DBOD.BP.BC.80/21.04.018/2010-11 dated 9th February 2011, on Re-opening
of Pension Option to Employees of Public Sector Banks and Enhancement
in Gratuity Limits-Prudential Regulatory Treatment. In accordance with
the provisions of the said Circular, the Bank has charged off Rs.664.73
crores. representing one-fifth of Rs. 3323.65 crores to Profit & Loss
Account for the year. In terms of the requirements of the aforesaid RBI
circular, the balance amount carried forward, i.e. Rs 2658.92
crores.(Rs3323.65 cr- Rs. 664.73 cr.) does not include any liability
relating to separated/retired employees. Such balance amount carried
forward has been grouped in Schedule 5 under head Others and
correspondingly in Schedule 11 under Others and will be charged off
in subsequent years
Had such a circular not been issued by the RBI the profit of the bank
would have been lower by Rs 2658.92 crores pursuant to application of
the requirements of AS 15.
DISCLOSURE IN ACCORDANCE WITH AS - 15(R):
In line with the accounting policy and as per the Accounting Standard -
15(R), the summarized position of post employment benefits are
recognized in the Profit & Loss A/c and Balance Sheet as under:
XIII. Basis of Actuarial assumption considered
Particulars Basis of assumption
Discount rate Discount rate has been determined by
reference to market yields on the balance
sheet date on Government Bonds of term
consistent with estimated term of the
obligations as per para 78 of AS15R.
Expected rate The expected return on plan assets is
of return on based on market expectations,
plan assets at the beginning of the period,
for returns over the entire life of
the related obligation.
Rate of The estimates of future salary increases
escalation in considered in actuarial valuations taking
salary into account inflation, seniority,
promotion and other relevant factors
mentioned in paras 83-91 and 120(I) of
AS15R.
Attrition rate Attrition rate has been determined by
reference to past and expected future
experience and includes all types of
withdrawals other than death but
including those due to disability.
12. SEGMENT REPORTING FOR THE QUARTER YEAR ENDED 31ST MARCH 2011
Note:
1. Segment Liabilities are distributed in the ratio of their
respective Segment Assets.
2. As the operations outside India are less than the threshold limit
of 10%, secondary segment information has not been required to be
furnished.
13. 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:
1. Shri K. R. Kamath, Chairman & Managing Director
2. Shri M. V. Tanksale, Executive Director
3. Shri Rakesh Sethi, Executive Director
(w.e.f. 01.01.2011)
4. Shri Nagesh Pydah, Executive Director
(Upto 31.12.2010)
Subsidiaries
i) PNB Gilts Ltd.
ii) PNB Housing Finance Ltd.
iii) Punjab National Bank (International) Ltd., UK
iv) PNB Investment Services Ltd
v) Druk PNB Bank Ltd.
vi) PNB Principal Insurance Broking Pvt. Ltd.
vii) Principal PNB Life Insurance Company Ltd
viii) JSC Dana Bank
Associates:
i) Everest Bank Limited
ii) Principal PNB Asset Management Company Pvt. Ltd.
iii) Principal Trustee Company Private Limited
iv) Assets Care & Reconstructions Enterprises Ltd.
v) India Factoring & Finance Solutions Pvt. Ltd.
vi) Madhya Bihar Gramin Bank, Patna
vii) Haryana Gramin Bank, Rohtak
viii) Himachal Gramin Bank, Mandi
ix) Punjab Gramin Bank, Kapurthala
x) Rajasthan Gramin Bank, Alwar
xi) Sarva UP Gramin Bank, Meerut
The transactions with the subsidiaries and certain associates have not
been disclosed in view of para-9 of AS-18 Related Party Disclosure,
which exempts state controlled enterprises from making any disclosures
pertaining to their transactions with other related parties, which are
also state controlled.
14. 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 34.60 lakhs upto
31.03.2011. The written down value as on 31.03.2011: Rs 7.05 lakhs
b. Minimum Lease Payment due not later than one year:
Min. Lease Payment Rs. 7.05 lakhs
Present value of Min. Lease Payment Rs. 5.49 lakhs
Intt. Included in Min. Lease payment Rs. 1.56 lakhs
c. Minimum Lease Payment due later than one year but not later than
five years:
Min. Lease Payment -
Present value of Min. Lease Payment -
Interest included in Min. Lease payment -
d. Minimum Lease Payment due later than five years: NIL
e. Information on operating lease is not ascertained.
15. 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
31.03.2011 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.
16. AS-29 Provisions, Contingent Liabilities and Contingent Assets
i) Movement of provisions for liabilities*
ii) Refer Schedule-12 on contingent liabilities
Such liabilities at S.No.(I), (II), (III), (IV), (V) & (VI) are
dependent upon the outcome of Court / arbitration / out of court
settlement, disposal of appeals, the amount being called up, terms of
contractual obligations, devolvement and raising of demand by concerned
parties, respectively. No reimbursement is expected in such cases.
17. 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 2011.
V. Off-balance sheet SPVs sponsored (which are required to be
consolidated as per accounting norms)
Name of the SPV sponsored
Domestic Overseas
NIL NIL
18. Reward Points of Credit Card:
PNB Global Credit Cardholders are rewarded as and when they make
purchase through usage of Credit Card. Reward Points are generated at
the time of usage of Credit Card by Cardholder at Merchant
Establishment. Card holder can redeem the accumulated reward points.
The amount payable on account of reward points is charged to Profit and
Loss account and credited to Sundry Provision Account on daily basis
because such amount is quantifiable.
19. 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 31.03.2005, to be transferred to a Blocked Account.
Accordingly, a sum of Rs.70.95 crores (net of adjustments since carried
out) has been included under Other Liabilities-others in schedule-5.
Claims of Rs. 0.078 lac has been received during the year against Inter
Branch Credit entries Blocked and transferred to General Reserve, has
been met by transfer from General Reserve Rs.0.059 lac and to debit of
Profit and Loss Account Rs. 0.019 lac.
b) Premises include properties amounting to Rs. 10.98 crores (Net of
Depreciation) (previous year Rs. 11.35 crores) {cost Rs. 15.89 crores}
(previous year Rs. 15.89 crores) awaiting registration of title deeds.
Premises include capital work in progress of Rs. 86.09 crores (previous
year Rs.95.85 crores).
c) No provision is considered necessary in respect of disputed Income
Tax and Fringe Benefit Tax demands of Rs.881.43 crores (previous year
Rs. 1480.80 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. 881.43 crores (previous year Rs.1388.24 crores)
has been paid.
d) During the year bank has allotted 15,09,657 equity shares of Rs.10/-
each at a premium of Rs. 1208.82 per share to Govt. of India as
determined by the Board in terms of the Chapter VII of the SEBI
Regulations, 2009, as amended from time to time (the SEBI ICDR
Regulations) on preferential basis. The total amount of capital
received by the bank on this account is Rs.184.00 crores and
consequently the Government holding has increased from 57.80% to
58.00%.
e) The Board of Directors has recommended dividend of
Rs. 22/- per equity share of Rs. 10 each ( 220% of the paid up capital
of the bank), subject to approval by members.
20. Figures of the previous year have been regrouped / rearranged /
reclassified wherever necessary.
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