Punjab National Bank के अकाउंट के लिये नोट

Mar 31, 2023

During the year ended 31.03.2022 Bank had issued 53,33,33,333 equity shares having Face Value of Rs.2 each for cash to Qualified Eligible Buyers pursuant to Qualified Institutional Placement (QIP), in May 2021, in accordance with the provisions of Securities & Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended, at a premium of ?31.75 per share aggregating f1,800.00 Crore. This has resulted in an increase of Rs.106.67 Crore in the issued and paid up Equity Share Capital and f1,686.38 Crore (Net of share Issue Expenses) in Share Premium Account).

Note: CETI Capital includes Amalgamation Reserve f9268.29 Crore.

RBI vide circular no. DOR.No.CAP.REC.3/21.06.201/2022-23 dated 1st April, 2022 has given discretion to banks to consider Revaluation Reserve, Foreign Currency Translation Reserve and Deferred Tax Asset for purpose of computation of Capital Adequacy as CET-1 capital ratio. The Bank has exercised the option in the above computation.

2 b) Liquidity coverage ratio (LCR)

QUALITATIVE DISCLOSURE ON LIQUIDITY COVERAGE RATIO

The bank has implemented RBI guidelines on Liquidity Coverage Ratio (LCR) from 1^st January 2015.

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (HQLAs) that can be readily converted into cash at little/no loss of value to meet its liquidity needs for a 30 calendar day time horizon under a liquidity stress scenario.

LCR has two components:

i. The value of the stock of High Quality Liquid Assets (HQLA)-The Numerator.

ii. Total Net Cash Outflows: Total expected cash outflows minus Total expected cash inflows, in stress scenario, for the subsequent 30 calendar days - The denominator.

Definition of LCR:

Stock of high quality liquid assets (HQLAs) ^ 100% (w.e.f Total net cash outflows over the next 30 ca lendardays "" 01.04.2021)

For Q4 FY’2022-23, the daily average LCR was 162.29% (based on simple average of daily observations) at consolidated level, as against the regulatory requirement of 100%.

The main drivers of LCR of the bank are High Quality Liquid Assets (HQLAs) to meet liquidity needs of the bank at all times and basic funding from retail and small business customers. The retail and small business customer’s contribute about 67.18% of total deposit portfolio of the bank, which attracts low run-off factor of 5/10% as on 31.03.2023.

Composition of High Quality Liquid Assets (HQLA)

HQLAs comprises of Level 1 and Level 2 assets. Level 2 assets are further divided into Level 2A and Level 2B assets, keeping in view their marketability and price volatility.

Level-lassets are those assets which are highly liquid. For quarter ended March 31, 2023, the Level-1 asset of the bank includes Cash in Hand, Excess CRR, Government Securities in excess of minimum SLR, Marketable securities issued or guaranteed by foreign sovereign, MSF and FALLCR totalling to Rs. 286489.39 cr (based on simple average of daily observations).

Concentration of Funding Sources

This metric includes those sources of funding, whose withdrawal could trigger liquidity risks. It aims to address the funding concentration of bank by monitoring its funding requirement from each significant counterparty and each significant product/instrument. As per RBI guidelines, a "significant counterparty/lnstrument/product" is defined as a single counterparty/lnstrument/product or group of connected or affiliated counter-parties accounting in aggregate for more than 1% of the bank''s total liabilities.

The bank has no significant counterparty (deposits/borrowings) as at 31.03.2023. Top 20 depositors of the bank constitute 4.66% of bank’s total Deposit as on Mar 31, 2023. The significant product/instrument include Saving Fund, Current deposit and Core Term Deposit the funding from which are widely spread and cannot create concentration risk for the bank.

Derivative exposure

The bank has low exposure in derivatives having negligible

Currency Mismatch

As per RBI guidelines, a currency is considered as “significant” if the aggregate liabilities denominated in that currency amount to 5 per cent or more of the bank’s total liabilities. In our case, only USD (18.11 % of bank’s total liabilities) falls in this criteria whose impact on total outflows in LCR horizon can be managed easily as the impact is not large considering the size of balance sheet of the bank.

Degree of centralization of liquidity management and interaction between group’s units

The group entities are managing liquidity on their own. However, the bank has put in place a group-wide contingency funding plan to take care of liquidity requirement of the group as a whole in the stress period.

QUALITATIVE DISCLOSURE ON NET STABLE FUNDING RATIO

The Net Stable Funding Ratio (NSFR) and Liquidity Coverage Ratio (LCR) are significant components of the Basel III reforms. The LCR guidelines which promote short term resilience of a bank’s liquidity profile have been issued vide circular DBOD.BP.BC. No.120/21.04.098/2013-14 dated June 9,2014. The NSFR guidelines on the other hand ensure reduction in funding risk over a longer time horizon by requiring banks to fund their activities with sufficiently stable sources of funding in order to mitigate the risk of future funding stress.

In the Indian context, the guidelines for NSFR were effective from October 1, 2021. The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable funding” (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required ("Required stable funding") (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures. The run-off factors for the stressed scenarios are prescribed by the RBI, for various categories of liabilities (viz., deposits, unsecured and secured wholesale borrowings), undrawn commitments, derivative-related exposures, and offset with inflows emanating from assets maturing within the same time period. The minimum NSFR requirement set out in the RBI guideline for the standalone Bank and for Group effective October 1,2021 is 100%.

The PNB on a consolidated basis at 31st March, 2023 maintained Available Stable Funding (ASF) of f 1256951 Crore against the RSF requirement of ? 842686 crore. The NSFR for the quarter ended March 31,2023 was at 149.16%.

The Available Stable Funding (ASF) is primarily driven by the total regulatory capital as per Basle III Capital Adequacy guidelines stipulated by RBI and deposits from retail customers, small business customers and non-financial corporate customers. Under the Required Stable Funding (RSF), the primary drivers are unencumbered performing loans with residual maturities of one year or more.

3. c) Sale and transfers to/from HTM category:

The total value of sales and transfers of securities to / from HTM category after netting permitted exclusions in terms of RBI Master Circular No. DOR.MRG.42/21.04.141/ 2021-22 dated 25.08.2021 during 1st April 2022 to 31st March 2023 has not exceeded 5% of the book value of investments held in HTM category as on 31.03.2022.

As such no disclosure is to be made in terms of extant RBI guidelines.

(Previous year: The total value of sales and transfers of securities to / from HTM category after netting permitted exclusions in terms of RBI Master Circular No. DOR. MRG.42/21.04.141/ 2021-22 dated 25.08.2021 during 1^st April 2021 to 31^st March 2022 has not exceeded 5% of the book value of investments held in HTM category as on 31.03.2021.

4. e) Divergence in Asset Classification and Provisioning

Disclosure on divergence in Asset classification and provisioning for NPAs is not required w.r.t. RBI’s annual supervisory process for the year ended March 31,2022 based on conditions mentioned in RBI Master Direction no. RBI/ DOR/2021-22/83 DOR.ACC.REC.No.45/21.04.018/2021-22 dated August 30, 2021 (Updated as on February 20, 2023).

(Previous year: As per RBI Circular No.DBR.BP.BC No.32/21.04.018/2018-19 dated April 1, 2019, in case the additional provisioning for NPA assessed by RBI exceeds 10% of the reported profit before provisions and contingencies for the reference period and /or additional gross NPAs identified by RBI exceed 15% of the published incremental Gross NPAs for the reference period, then the banks are required to disclose divergence from prudential norms on income recognition, assets classification and provisioning.

Divergences in terms of above circular, are within threshold limits as specified above, hence no disclosure is required with respect to RBI’s annual supervisory process for FY 2021.

4. f) Disclosure of transfer of loan exposures: Total amount of loan not in default / stressed loans transferred and acquired to / from other entities:

In accordance with RBI circular no. DOR.STR. REC.51/21.04.048/2021-22 dated September 24, 2021, the details of loans transferred/acquired during the FY ended March 31,2023 are given below:

Total Net Funded Exposure as on 31.03.2023 is f52,827.59 Crores. Total assets of the Bank as on 31.12.2022 were f 14,01,797 Crores, 1% of total asset is f14,017.97 Crore. Bank exceeded the exposure to USA beyond f14,017.97 Crores i.e. 1% of Total Assets of the Bank as on 31.12.2022. Hence, provision of f 11.82 Crores is required with respect to country risk exposure as on 31.03.2023:

(Previous year: Total Net Funded Exposure as on 31.03.2022 was ?49214.90 Crores. Total assets of the Bank as on 31.12.2021 were f1304849 Crores, 1% of total asset f13048.49 Crore. Bank exceeded the exposure to UAE beyond f13048.49 Crores i.e. 1% of Total Assets of the Bank as on 31.12.2021. Hence, provision of ?28.94 Crores is required with respect to country risk exposure as on 31.03.2022.

The Bank has framed a policy to manage Currency Induced Credit Risk and has been incorporated in Bank’s Credit Management & Risk Policy 2022-23 as follows:

In terms of RBI guidelines, the Bank has framed a policy to manage currency induced credit risk and has incorporated the same in bank’s current Credit Management & Risk Policy as follows:

“In terms of RBI guidelines, Bank monitors the currency wise Unhedged Foreign Currency Exposure in the books of borrowers at quarter ends along-with the Annualized Earnings before Interest & Depreciation (EBID). The incremental provision (ranging from 0 to 80 bps on total credit exposure, over and above the standard asset provisioning) and capital requirement will depend on likely loss (due to foreign currency fluctuation), that borrowers may face due to their un-hedged forex exposure in their books. Bank maintains separate charge and provisioning requirement on account of such exposures which may impact the cost to the borrowers. Appropriate disclosures in the financial statements of the bank shall also be made.”

The Bank has estimated the liability for Unhedged Foreign Currency Exposure in terms of RBI Circular DBOD.NO.BP. BC.82/21.06.200/2013-14 dated January 15, 2014 and is holding a provision of f 132.35 Crores as on 31.03.2023 (previous year ? 85.48 Crores).

$All these swap deals are with Banks and FI.

@All these swaps deals are Trading swap and the fair value is its mark to market value

The above Trades are Interest rate Swap Deal done with Interbank for f745.00 Crores (previous year f385.00Crores) and with Financial Institution f NIL (previous year f NIL).

Credit Risk (Credit Exposure) for Current Year is f4.08 Crore (previous year ?2.70 Crore).

There are total 40 deals out of which 0 deals are Back to Back Deals, 2 Deals where payment is made at Fixed Contract rate and received at Floating rate and in remaining 38 deals, payment is made at Floating Rate and received at Fixed Contract rate”.

7. c) Disclosures on risk exposure in derivatives 7.c). i). Qualitative disclosures

The Bank uses derivatives products for hedging its own balance sheet items as well as for trading purposes. The risk management of derivative operation is headed by a senior executive, who reports to top management, independent of the line functions. Trading positions are marked to market on daily basis.

The derivative policy is framed by Integrated Risk Management Division, which includes measurement of credit risk and market risk.

The hedge transactions are undertaken for balance sheet management. Proper system for reporting and monitoring of risks are in place. Policy for hedging and processes for monitoring the same is in place.

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.

7. d) Credit default swaps

Since the Bank is not using any proprietary pricing model for pricing Credit default swaps contracts, and it is over the counter contract (OTC), the price is determined by the market dynamics.

As such no disclosure is to be made in terms of extant RBI guidelines for Current & Previous year.

14. f) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

The strategy for Ind AS implementation, including the progress made in this regard:

IND AS roadmap for scheduled commercial banks (excluding regional rural banks), insurers/insurance companies and nonbanking financial companies (NBFCs) was issued by Union

Ministry of Corporate Affairs (MCA) through press release dated 18 January 2016. IND AS was applicable to the Bank in accordance with the MCA press release from financial year 2018-19 which was deferred to financial year 2019-20 vide RBI’s Press Release (2017-18/2642) dated 5 April 2018. RBI has further deferred implementation of IND AS till further notice vide its Circular no DBR.BP.BC.No. 29/21.07.001/2018-19 dated 22.03.2019. The Bank accordingly, has appointed a Consultant to assist in implementation of the Ind AS. The Audit Committee of the Board is being apprised of the progress made from time to time. The Bank has a well-planned strategy for Ind AS implementation and has made substantial progress in this regard. Further, Bank is submitting the Proforma Ind AS Financial Statements to the RBI as per prescribed periodicity.

15. Other Disclosures with respect to certain Accounting Standards15.a) Accounting Standard 5 - Net Profit or Loss for the period, Prior Period Items and Change in Accounting Policy:

During the Current and Previous year there were no material prior period income/expenditure items requiring disclosure under Accounting Standard 5.

The financial results for the year ended March 31,2023 have been prepared following the same significant Accounting Policies and practices as those followed in the annual financial statements for the year ended March 31,2022.

(Previous year: The financial results for the year ended March 31, 2022 have been prepared following the same Accounting Policies and practices as those followed in the annual financial statements for the year ended March 31, 2021, except recognition of commission on Letter of Credit and Bank Guarantee. With effect from April 01, 2021, the commission on Letter of Credit and Bank Guarantee is recognised as revenue to the extent accrued for the period as against recognition done on receipt basis hitherto. This change in accounting policy has resulted in decrease in profit before tax by f 11.67 Crore for quarter ended March 31,2022 and by f207.64 Crore for year ended March 31,2022.

15. b) Accounting Standard 9 - Revenue Recognition

Certain items of income are recognized on realization basis as per Accounting Policy No. 3.5. However, the said income is not considered to be material. (Previous year: Certain items of

income are recognized on realization basis as per Accounting Policy No. 3.5. However, the said income is not considered to be material).

15. c) Accounting Standard 10 - Properties, Plant and Equipment.

Break-up of total depreciation for the FY ended March 31, 2023 for each class of assets:

15.e) i) Defined Contribution Plans: -

The Bank has Defined Contribution Plan applicable to all categories of employees joining the Bank on or after 01.04.2010. The scheme is managed by NPS trust under the aegis of the Pension Fund Regulatory and Development Authority. National Securities Depository Limited (Protean eGov Technologies Limited) has been appointed as the Central Record Keeping Agency for the NPS.

The detail of the contribution is as under-During the Financial Year 2022-2023= Rs 1220.32 Crore (Contribution Includes both Bank Employee contribution) During the Financial Year 2021-2022= Rs 974.43 Crore (Contribution Includes both Bank Employee contribution)

15.e)ii) Pursuant to the revision in family pension payable to the employees of the Bank, covered under 11th Bi- Partite Settlement and joint note dated November 11, 2020, the Bank had estimated additional liability of Rs.3093.95 Crore, of which a sum of Rs.1573.79 Crore was amortized during the financial year 2021-22, in terms of RBI Circular no. RBI/2021-22/105 DOR.ACC.REC.57/21.04.018/2021-22 dated October 04, 2021 and unamortized part of Rs.1520.16 Crore has been fully charged to the Profit & Loss Account during the FY 202223. There is no unamortized expenditure in the Balance Sheet on account of additional family pension.

15.f) Accounting Standard 17 - Segment Reporting

Segment Identification

I. Primary (Business Segment):

The following are the primary segments of the Bank:-

i) Treasury: The Treasury Segment includes the entire investment portfolio and trading in foreign exchange contracts and derivative contracts. The revenue of the treasury segment primarily consists of fees and gains or losses from trading operations and interest income on the investment portfolio.

ii) Corporate / Wholesale Banking: As per the

RBI guidelines RBI/2020-21/53, DOR.No.BP. BC.23/21.06.201/2020-21, dated 12th October 2020, the Corporate / Wholesale Banking segment comprises the lending activities of borrowers having exposure of f 7.50Crores and above.

iii) Retail Banking: The Retail Banking Segment comprises of borrower accounts having exposure of less than f7.50Crores.

iv) Other Banking Operations: Segments not classified under (i) to (iii) above are classified under this primary segment.

II Secondary (Geographical Segment):

i) Domestic Operations- Branches/Offices having

operations in India

ii) Foreign Operations - Branches/Offices having operations outside India and offshore banking units having operations in India.

III. Basis of allocation

The interest income is allocated on the basis of actual interest received from different segments

Expenses not directly attributable are allocated on the basis of Interest income earned by the wholesale banking / retail banking segment/other banking segment

Capital employed for each segment is calculated based on the assets and liabilities of that particular segment

The Bank has certain common assets and liabilities, which cannot be attributed to any segment, and the same are treated as unallocated.

1. Segment Liabilities are distributed in the ratio of their respective Segment Assets.

2. As per RBI Circular RBI/2022-23/19 DOR.AUT.REC. 12/22.01.001/2022-23 dated April 07, 2022, for the purpose of disclosure under Accounting Standard 17, Segment Reporting, Digital Banking Segment has been identified as sub-segment under Retail Banking by Reserve Bank of India (RBI). During the year ended March 31,2023, 8 (eight) Digital Banking Units (DBUs) of the Bank have commenced operations and the segment information disclosed as Digital Banking under Retail Banking Operations is related to the said DBUs.

3. Figures of the previous period have been re-grouped/re-classified wherever necessary.

15. g) Accounting Standard 18 - Disclosure of Related Parties as per Accounting Standard - 18 issued by ICAI:

The deferred tax assets f 1751.69 Crore for the year ended 31.03.2023 (FY 2022-23) is debited to Profit & Loss Account (Previous year: Debited ? 1541.35 Crores).

ii) Current Tax: During the financial year ended 31.03.2023 the bank has debited f 29.38 Crore to Profit & Loss Account (Previous Year: Debited f Nil) on account of current tax after reversal of provision of earlier years of ? 515.94 Crore. Accordingly, the total tax expenses on account of current tax & deferred tax assets charged to Profit & Loss account amounts to f 1781.07 Crore.

iii) Tax Paid in advance/Tax deducted at source appearing under “Other Assets” includes disputed amount adjusted by the department/paid by the Bank in respect of tax demands for various assessment years.

iv) No provision is considered necessary in respect of disputed Income Tax demands of f8475.38 Crore (Previous year f 11427.55 Crore) as in the bank’s view, duly supported by expert opinion and/or decision in bank’s own appeals on same issues, additions / disallowances made are not sustainable.

v) The Bank has evaluated the options available under section 115BAA of Income Tax Act, 1961 and opted to continue to recognise the taxes on income for the financial year 2022-23 as per the earlier provisions of Income Tax Act, 1961.

vi) The current tax expenses and deferred tax expenses are determined in accordance with the provisions of the Income Tax Act, 1961 and as per the Accounting Standard 22- “Accounting for Taxes on Income” issued by the Institute of Chartered Accountants of India respectively. The current Tax in India has been calculated in accordance with the provisions of Income Tax Act 1961 after taking appropriate relief for taxes paid on foreign jurisdiction.

15. k) Accounting Standard 23 - Accounting for Investments in Associates in Consolidated Financial Statements

Since Investments of the bank in its Associates are participative in nature and the Bank having the power to exercise significant influence on their activities, such Investments are recognized in the Consolidated Financial Statements of the Bank.

(Previous year: Since Investments of the bank in its Associates are participative in nature and the Bank having the

power to exercise significant influence on their activities, such Investments are recognized in the Consolidated Financial Statements of the Bank).

15. l) Accounting Standard 24 - Discontinuing operations

During the period from 01.04.2022 to 31.03.2023, the bank has not discontinued operations of any of its branches, which resulted in shedding of liability and realization of assets and no decision has been finalized to discontinue an operation in its entirety which have the above effect.

(Previous year: During the period from 01.04.2021 to 31.03.2022, the bank has not discontinued operations of any of its branches, which resulted in shedding of liability and realization of assets and no decision has been finalized to discontinue an operation in its entirety which have the above effect).

15. n) Accounting Standard 28 - Impairment of assets

A substantial portion of the bank’s assets comprises ‘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 31.03.2023 requiring recognition in terms of the said standard.

(Previous year: A substantial portion of the bank’s assets

comprises ‘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 31.03.2022 requiring recognition in terms of the said standard).

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.

Other Disclosures:

16. Bank’s Disclosure in respect of Credit Exposures where the same had exceeded the Prudential Exposure limits as per Large Exposure (LE) framework prescribed by RBI for Individual/Group Borrowers for the Financial year ended 31.03.2023:

Details of accounts where Bank has exceeded prudential exposure ceilings as per Large Exposure (LE) framework in respect of any Individual and Group Accounts based on

31.03.2023 are as below:-

RBI Circular dated 03.06.2019 has given leverage of 5% over and above the ceiling of 20% of single counterparty under the Bank’s Board Power. Board in its meeting dated 28.03.2017 has approved that bank may in exceptional circumstances consider enhancement of the exposure ceiling for single counterparty classified as Large Exposure upto 5% over and above ceiling of 20%.

$The same was approved by the Board in its meeting dated 04.06.2022

* The same was approved by the Board in its meeting dated 04.06.2021

All the exposure (other than exempted exposure) of Individual and Group Accounts (except as mentioned above) for the financial year ended 31.03.2023 are within the prescribed regulatory limits, as per LE Framework.

(Previous year- All the exposure (other than exempted exposure) of Individual and Group Accounts (except as mentioned above) for the financial year ended 31.03.2022 are within the prescribed regulatory limits, as per LE Framework).

17. Disclosure: Letter of Comfort (LoC) -

“The Bank has issued a Letter of Comfort to Prudential Regulation Authority (PRA), the regulator in United Kingdom, committing that the bank shall provide financial support to its subsidiary, Punjab National Bank (International) Ltd., UK so that it meets its financial commitments as and when they fall due”.

The said letter of Comfort has been renewed on 15.03.2022 after seeking approval of our Board in favor of PRA w.r.t. our subsidiary PNBIL wherein we have reiterated our commitment. The renewal was done as per instruction of PRA and RBI. Further Annual assessment of LOC was also done vide note dated 20.02.2023 placed in Board meeting dated 28.02.2023.

Apart from the above, the Bank has not issued any Letter of Comfort to Group Entities (Excl. RRBs) and therefore, there are no cumulative financial obligations under Letter of Comfort.

18. Disclosure: Letter of Undertaking-

The Bank has provided a Letter of Undertaking for PNB IBU Gift City Branch under Regulation 3(3) of International Financial Service Centre Authority(IFSCA) that:

“Bank will provide support and assistance (including liquidity, whenever needed) and as may be appropriate to enable the banking unit to meet its obligations in the course of its obligation”.

Apart from the above the Bank has not issued any Letter of Comfort for overseas branches and there are no cumulative financial obligations under Letter of Comfort.

19. Reward Points of Credit Card -

PNB Global Credit Card holders are rewarded as and when they make purchases 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.

*The provision held against Rewards points in respect of Credit Cards has been worked out at f0.50 for 1 point. As per latest actuary report on Trend Analysis of credit card rewards points redemption provision has been made @25% of accumulated Reward points on estimated basis as in the previous year.

22. As per RBI guidelines, the Bank worked out the amount of Inter Branch Credit entries outstanding for more than 5 years to create a Blocked Account. Accordingly, a sum of fO.OO Crores (previous year fO.OO Crores ) [net of adjustments since carried out has been included under “Other Liabilities-others” in Schedule-5].

23. Premises includes 10 properties amounting to ?3.72Crore (cost) & depreciation amount to Rs. 2.27 Crore are awaiting registration of title deeds.

Previous year: Premises includes properties amounting to f3.72Crore (cost) & depreciation amount to Rs. 2.20 Crore are awaiting registration of title deeds.

24. Premises includes Capital work in progress of f42.37 Crore for the year ended 31.03.2023 (in the previous Financial Year 2021-22, f127.08 Crore).

25. Guidelines given in Micro, Small and Medium Enterprises Development Act 2006 have been complied with for purchases made during the twelve months ended March 2023 (FY 2022-23) and payments have been made to the Vendors in time as per Act. Since there had been no delay in payment, no penal interest applicable during year ended March, 2023 (FY 2022-23)

26. Depreciation on Revalued Portion of Premises for the current financial year ended March, 2023 is f 166.92 Crores (Previous year ended March, 2022 ?144.61

Crores).

27. During the Financial Year ended 31.03.2023 the Bank has Revalued Immovable Properties (forming part of Schedule -10) during the quarter ended 30.06.2022, based on the reports obtained from external independent valuers. As at 31.03.2023 the revaluation surplus (net) amounting to Rs. 1737.65 crore is credited to the revaluation reserves. (In the Previous financial year 2021-22 ended March, 2022 the Bank has not Revalued Immovable Properties.)

28. In compliance of RBI letter no. BPC.7201/21.04.132/2017-18 dated 08.02.2018, Bank has made a provision of ?93.58 Crore (Previous year ?98.95 Crore) being 5 % of the existing outstanding of ?1871.68 Crore (Previous year ^1979.11 Crore) as on 31.03.2023 in respect of Advance to Government of Punjab Long term Loan (LTL).

29. In terms of RBI Letter no. DBR. No.BP. 15199/21.04.048/2016-17 dated June 23, 2017 (RBI List-1) and Letter no. DBR.BP1908/21.04.048/2017-18 dated August 28, 2017 (RBI List-2) for the accounts admitted under the provisions of Insolvency & Bankruptcy Code (IBC), the Bank is holding total provision of ?9297.46 Crore (Aggregate provision of RBI List 1 and List 2 accounts) as on March 31, 2023 (100.00% of Gross NPA advances). (Previous Year ?8,384.09 Crore (Aggregate provision of RBI List 1 and List 2 accounts), 99.78% of Gross NPA advances).

30. The Board of Directors has recommended a dividend of Re.0.65 per equity share (32.50%) for the year ended March 31,2023 subject to requisite approvals.

31. Pursuant to cessation of the operations of the branch at Hong Kong, disposal of its major assets and liabilities, the seed capital and accumulated profits have been repatriated. The impact of closure of operations in this branch on the business of the Bank is not significant.

32. In terms of RBI Circular no. DOR.ACC.REC. No.91/21.04.018/2022-23 dated 13.12.2022, the disclosure relating to item under the subhead ''Miscellaneous Income'' under the head ''Schedule 14 -Other Income'' exceeding one percent of total income, is

a) There is no item under ‘Other expenditure’ in schedule 16: Operating Expenses that exceeds 1% of total income.

b) There is no item under ‘Others (including provisions)’ in schedule 5: Other Liabilities and Provisions that exceeds 1% of total assets.

c) There is no item under ‘Others’ in schedule 11: Other Assets that exceeds 1% of total assets.

33. I. Figures of the previous periods have been regrouped / rearranged / reclassified wherever necessary to conform to current period’s classification.

II. Figures in the bracket wherever given relates to previous year.

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Mar 31, 2022

During the year Bank has issued 53,33,33,333 equity shares having Face Value of Rs.2 each for cash to Qualified Eligible Buyers pursuant to Qualified Institutional Placement (QIP), in May 2021, in accordance with the provisions of Securities & Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended, at a premium of '' 31.75 per share aggregating '' 1,800.00 Crore. This has resulted in an increase of Rs.106.67 Crore in the issued and paid up Equity Share Capital and '' 1,686.38 Crore (Net of share Issue Expenses) in Share Premium Account.

(** '' 534.61 Crore: By way of 2673063327 Equity shares of '' 2.00 each issued to shareholders of erstwhile Oriental Bank of Commerce and erstwhile United Bank of India in lieu shares held by them in erstwhile banks.

'' 3788.04 Crore: By way of QIP: During the FY 2020-21 the Bank issued 1,06,70,52,910 equity shares having Face Value of '' 2 each for cash to Qualified Eligible Buyers pursuant to Qualified Institutional Placement (QIP) in accordance with the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 at a premium of '' 33.50 per share aggregating '' 3,788.04 Crore. This resulted in an increase of '' 213.41 Crore in the issued and paid up Equity Share Capital and '' 3,563.91 Crore (Net of Issue Expenses) in Share Premium Account).

Note: CET I Capital includes Amalgamation Reserve '' 9268.29 Crore.

RBI vide circular no. DBR.No.BP.BC.83/21.06.201/2015-16 dated 1^st March, 2016 has given discretion to banks to consider Revaluation Reserve, Foreign Currency Translation Reserve and Deferred Tax Asset for purpose of computation of Capital Adequacy as CET-1 capital ratio. The Bank has exercised the option in the above computation.

2. b) Liquidity coverage ratio (LCR)

QUALITATIVE DISCLOSURE ON LIQUIDITY COVERAGE RATIO

The Bank has implemented RBI guidelines on Liquidity Coverage Ratio (LCR) from 1^st January 2015.

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (HQLAs) that can be readily converted into cash at little/no loss of value to meet its liquidity needs for a 30 calendar day time horizon under a liquidity stress scenario.

LCR has two components:

i. The value of the stock of High Quality Liquid Assets (HQLA)-The Numerator.

ii. Total Net Cash Outflows: Total expected cash outflows minus Total expected cash inflows, in stress scenario, for the subsequent 30 calendar days - The denominator

For Q4 FY''2021-22, the daily average LCR was 183.92% (based on simple average of daily observations) at consolidated level, as against the regulatory requirement of 100%.

The main drivers of LCR of the bank are High Quality Liquid Assets (HQLAs) to meet liquidity needs of the bank at all times and basic funding from retail and small business customers. The retail and small business customers contribute about 70.91% of total deposit portfolio of the bank which attracts low run-off factor of 5/10% as on 31.03.2022.

Composition of High Quality Liquid Assets (HQLA)

HQLAs comprises of Level 1 and Level 2 assets. Level 2 assets are further divided into Level 2A and Level 2B assets, keeping in view their marketability and price volatility.

Level-1assets are those assets which are highly liquid. For quarter ended March 31, 2022, the Level-1 asset of the bank includes Cash in Hand, Excess CRR, Government Securities in excess of minimum SLR, Marketable securities issued or guaranteed by

foreign sovereign, MSF and FALLCR totalling to Rs. 292135.40 cr (based on simple average of daily observations).

Concentration of Funding Sources

This metric includes those sources of funding, whose withdrawal could trigger liquidity risks. It aims to address the funding concentration of bank by monitoring its funding requirement from each significant counterparty and each significant product/ instrument. As per RBI guidelines, a "significant counterparty/ Instrument/product" is defined as a single counterparty/ Instrument/product or group of connected or affiliated counterparties accounting in aggregate for more than 1% of the bank''s total liabilities.

The bank has no significant counterparty (deposits/borrowings) as at 31.03.2022. Top 20 depositors of the bank constitute 3.67% of bank''s total Deposit as at March 31, 2022. The significant product/ instrument include Saving Fund, Current deposit and Core Term Deposit the funding from which are widely spread and cannot create concentration risk for the bank.

Derivative exposure

The bank has low exposure in derivatives having negligible impact on its liquidity position.

Currency Mismatch

As per RBI guidelines, a currency is considered as "significant" if the aggregate liabilities denominated in that currency amount to 5 per cent or more of the bank''s total liabilities. In our case, only USD (17.80 % of bank''s total liabilities) falls in this criteria whose impact on total outflows in LCR horizon can be managed easily as the impact is not large considering the size of balance sheet of the bank.

Degree of centralization of liquidity management and interaction between group''s units

The group entities are managing liquidity on their own. However, the bank has put in place a group-wide contingency funding plan to take care of liquidity requirement of the group as a whole in the stress period.

3. c) Sale and transfers to/from HTM category

The total value of sales and transfers of securities to / from HTM category after netting permitted exclusions in terms of RBI Master Circular No. DOR.MRG.42/21.04.141/ 2021-22 dated 25.08.2021 during 1^st April 2021 to 31^st March 2022 has not exceeded 5% of the book value of investments held in HTM category as on 31.03.2021.

As such no disclosure is to be made in terms of extant RBI guidelines.

(Previous year: The total value of sales and transfers of securities to / from HTM category during 1^st April 2020 to 31^st March 2021 has not exceeded 5% of the book value of investments held in HTM category as on 31.03.2020 (Excluding following Transactions). [The 5 percent threshold referred to above will exclude (a) the one- time transfer of securities to/ from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning quarter of the accounting year (b) sales to the Reserve Bank of India under pre-announced OMO auctions, (c) Repurchase of Government Securities by Government of India from banks, (d) Sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM in addition to the shifting permitted at the beginning quarter of the accounting year]. As such no disclosure is to be made in terms of extant RBI guidelines).

4. e) Divergence in Asset Classification and Provisioning

As per RBI Circular No.DBR.BP.BC No.32/21.04.018/2018-19 dated April 1, 2019, in case the additional provisioning for NPA assessed by RBI exceeds 10% of the reported profit before provisions and contingencies for the reference period and / or additional gross NPAs identified by RBI exceed 15% of the published incremental Gross NPAs for the reference period, then the banks are required to disclose divergence from prudential norms on income recognition, assets classification and provisioning.

Divergences in terms of above circular, are within threshold limits as specified above, hence no disclosure is required with respect to RBI''s annual supervisory process for FY 2021.

(Previous year: As per RBI Circular No.DBR.BPBC No.32/ 21.04.018/2018-19 dated April 1, 2019, in case the additional provisioning for NPA assessed by RBI exceeds 10% of the reported profit before provisions and contingencies for the reference period and /or additional gross NPAs identified by RBI exceeds 15% of the published incremental Gross NPAs for the reference period, then the banks are required to disclose divergence from prudential norms on income recognition, assets classification and provisioning.

Divergences in terms of above circular, are within threshold limits as specified above, hence no disclosure is required with respect to RBI''s annual supervisory process for FY 2020).

4. f) Disclosure of transfer of loan exposures: Total amount of loan not in default / stressed loans transferred and acquired to / from other entities:

In accordance with RBI circular no. DOR. STR. REC. 51/ 21.04.048/2021-22 dated September 24, 2021, the details of

Total Net Funded Exposure as on 31.03.2022 is '' 49214.90 Crores. Total assets of the Bank (PNB2.0) as on 31.12.2021 were '' 1304849 Crores, 1% of total asset is '' 13048.49 Crore. Bank exceeded the exposure to UAE beyond '' 13048.49 Crores i.e. 1% of Total Assets of the Bank as on 31.12.2021. Hence, provision of '' 28.94 Crores is required with respect to country risk exposure as on 31.03.2022:

(Previous year: Total Net Funded Exposure as on 31.03.2021 was '' 66771.96 Crores. Total assets of the Bank (PNB 2.0) as on 31.12.2020 were '' 1254934.00 Crores, 1% of total asset '' 12549.34 Crore. Bank did not exceed the exposure in any country beyond '' 12549.34 Crores i.e. 1% of Total Assets of the Bank as on 31.12.2020. Hence, no provision was required with respect to country risk exposure as on 31.03.2021).

The Bank has framed a policy to manage Currency Induced Credit Risk and has been incorporated in Bank''s Credit Management & Risk Policy 2021-22 as follows:

In terms of RBI guidelines, the Bank has framed a policy to manage currency induced credit risk and has incorporated the same in bank''s current Credit Management & Risk Policy as follows:

"In terms of RBI guidelines, Bank monitors the currency wise Unhedged Foreign Currency Exposure in the books of borrowers at quarter ends along-with the Annualized Earnings before Interest & Depreciation (EBID). The incremental provision (ranging from 0 to 80 bps on total credit exposure, over and above the standard asset provisioning) and capital requirement will depend on likely loss (due to foreign currency fluctuation), that borrowers may face due to their un-hedged forex exposure in their books. Bank maintains separate charge and provisioning requirement on account of such exposures which may impact the cost to the borrowers. Appropriate disclosures in the financial statements of the bank shall also be made."

@All these swaps deals are Trading swap and the fair value is its mark to market value

The above Trades are Interest rate Swap Deal done with Interbank for '' 385.00 Crores (previous year '' 75.00 Crores) and with Financial Institution '' NIL (previous year '' NIL).

Credit Risk (Credit Exposure) for Current Year is '' 2.70 Crore (previous year '' 1.32 Crore).

There are total 19 deals out of which 0 deals are Back to Back Deals, 2 Deals where payment is made at Fixed Contract rate and received at Floating rate and in remaining 17 deals, payment is made at Floating Rate and received at Fixed Contract rate".

7. c) Disclosures on risk exposure in derivatives 7. c) i) Qualitative disclosures

The Bank uses derivatives products for hedging its own balance sheet items as well as for trading purposes. The risk management of derivative operation is headed by a senior executive, who reports to top management, independent of the line functions. Trading positions are marked to market on daily basis.

The derivative policy is framed by Integrated Risk Management Division, which includes measurement of credit risk and market risk.

The hedge transactions are undertaken for balance sheet management. Proper system for reporting and monitoring of risks are in place. Policy for hedging and processes for monitoring the same is in place.

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.

7. d) Credit default swaps

Since the Bank is not using any proprietary pricing model for pricing Credit default swaps contracts, and it is over the counter contract (OTC), the price is determined by the market dynamics.

As such no disclosure is to be made in terms of extant RBI guidelines for Current & Previous year.

11. Disclosure of complaints

a) Summary Information on Complaints received by the bank from customers and from the Offices of Ombudsman, including ATM complaints

*Total complaints received during the FY 2021-22 are 16525, out of which total non-maintainable/ rejected complaints are 276, therefore, total maintainable complaints received during the FY 2021-22 are 16249. The pendency as on 31.03.2022 is 269.

**Total complaints received during the FY 2020-21 were 18442, out of which total non-maintainable/ rejected complaints were 14, therefore, total maintainable complaints received during the FY 2020-21 were 18428. The pendency as on 31.03.2021 was 798, which are resolved during the year.

Note: Maintainable complaints refer to complaints on the grounds specifically mentioned in Integrated Ombudsman Scheme, 2021 (Previously Banking Ombudsman scheme, 2006) and covered within the ambit of the scheme.

14. f) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

The strategy for Ind AS implementation, including the progress made in this regard:

"IND AS roadmap for scheduled commercial banks (excluding regional rural banks), insurers/insurance companies and nonbanking financial companies (NBFCs) was issued by Union Ministry of Corporate Affairs (MCA) through press release dated 18 January 2016. IND AS was applicable to the Bank in accordance with the MCA press release from financial year 2018-19 which was deferred to financial year 2019-20 vide RBI''s Press Release (2017-18/2642) dated 5 April 2018. RBI has further deferred implementation of IND AS till further notice vide its Circular no DBR.BP.BC.No. 29/21.07.001/2018-19 dated 22.03.2019. The Bank accordingly, has appointed a Consultant to assist in implementation of the Ind AS. The Audit Committee of the Board is being apprised of the progress made from time to time. The Bank has a well-planned strategy for Ind AS implementation and has made substantial progress in this regard. Further, Bank is submitting the Proforma Ind AS Financial Statements to the RBI as per prescribed periodicity."

15. Other Disclosures with respect to certain Accounting Standards

15. a) Accounting Standard 5 - Net Profit or Loss for the period, Prior Period Items and Change in Accounting Policy:

During the Current and Previous year there were no material prior period income/expenditure items requiring disclosure under Accounting Standard 5.

The financial results for the year ended March 31, 2022 have been prepared following the same Accounting Policies and practices as those followed in the annual financial statements for the year ended March 31, 2021, except recognition of commission on Letter of Credit and Bank Guarantee. With effect from April 01, 2021, the commission on Letter of Credit and Bank Guarantee is recognised as revenue to the extent accrued for the period as against recognition done on receipt basis hitherto. This change in accounting policy has resulted in decrease in profit before tax by '' 11.67 Crore for quarter ended March 31, 2022 and by '' 207.64 Crore for year ended March 31, 2022.

(Previous year: The financial results for the year ended March 31, 2021 was prepared following the Accounting Policies and practices as those followed in the annual financial statements for the year ended March 31, 2020, except appropriation of recoveries in NPA accounts. After March 31, 2020, the Bank has changed its accounting policy for appropriation of recovery in NPA accounts from the earlier policy of appropriating recovery first against charges recorded then principal advance amount and balance towards recorded/derecognized income, to the new policy of appropriation of recovery first against the charges recorded, followed by recorded interest/derecognized interest and balance against the principal. This change in accounting policy has resulted in increase in profit before tax by Rs.611.97Crore for year ended March 31, 2021).

15. b) Accounting Standard 9 - Revenue Recognition

Certain items of income are recognized on realization basis as per Accounting Policy No. 3.5. However, the said income is not considered to be material. (Previous year: Certain items of income are recognized on realization basis as per Accounting Policy No. 3.5. However, the said income is not considered to be material).

15. e) i) Defined Contribution Plans: -

The Bank has Defined Contribution Plan applicable to all categories of employees joining the Bank on or after 01.04.2010. The scheme is managed by NPS trust under the aegis of the Pension Fund Regulatory and Development Authority. National Securities Depository Limited has been appointed as the Central Record Keeping Agency for the NPS.

The detail of the contribution is as under-

During the Financial Year 2021-2022= Rs 974.43 Crore

(Contribution Includes both Bank Employee contribution)

During the Financial Year 2020-2021= Rs 747.67 Crore

(Contribution Includes both Bank Employee contribution)

15. e) ii) Bank has estimated the additional liability on account of revision in family pension for employees as per IBA Joint Note dated November 11, 2020, amounting to Rs.3093.95 Crore. However, RBI vide their Circular RBI/2021-22/105 DOR. ACC.REC.57/21.04.018/2021-22 dated 4^th October 2021, has permitted Banks to amortize the said additional liability over a

period of not exceeding 5 (five) years, beginning with financial year ending 31st March, 2022, subject to a minimum of 1/5^th of the total amount being expensed every year. The Bank has opted the said provision of RBI and In addition to providing the minimum amount of Rs.618.79 crore (i.e., 1/5^th of total liability of Rs 3093.95 crore) for the financial year 2021-22,the Bank has further provided additional Past service cost of Rs 955.00 crore during FY 2021-22,aggregating the total amount charged to the Profit & Loss account is Rs 1573.79 crore during the year ended March 31, 2022 and the balance unamortized expense for additional family pension liability of Rs.1520.16 Crore has been carried forward. If the unamortized expenditure had been fully recognised in the Profit & Loss account, the consequential Net Profit for the year would have been Rs.2468 Crore

15. f) Accounting Standard 17 - Segment Reporting

Segment Identification

I. Primary (Business Segment):

The following are the primary segments of the

Bank:-

i) Treasury: The Treasury Segment includes the entire investment portfolio and trading in foreign exchange contracts and derivative contracts. The revenue of the treasury segment primarily consists of fees and gains or losses from trading operations and interest income on the investment portfolio.

ii) Corporate/Wholesale Banking: As per the

RBI guidelines RBI/2020-21/53, DOR.No.BP. BC.23/21.06.201/2020-21, dated 12^th October

2020, the Corporate / Wholesale Banking segment comprises the lending activities of borrowers having exposure of '' 7.50 Crores and above.

iii) Retail Banking: The Retail Banking Segment comprises of borrower accounts having exposure of less than '' 7.50 Crores.

iv) Other Banking Operations Segments not classified under (i) to (iii) above are classified under this primary segment.

II. Secondary (Geographical Segment):

i) Domestic Operations - Branches/Offices having operations in India

ii) Foreign Operations - Branches/Offices having operations outside India and offshore banking units having operations in India.

III. Basis of allocation

The interest income is allocated on the basis of actual interest received from different segments

Expenses not directly attributable are allocated on the basis of Interest income earned by the wholesale banking / retail banking segment/other banking segment

Capital employed for each segment is calculated based on the assets and liabilities of that particular segment

The Bank has certain common assets and liabilities, which cannot be attributed to any segment, and the same are treated as unallocated.

i. Operating lease primarily comprise office premises, which are renewable at the option of the bank normally at the end of every 3 / 5^th years.

ii. As per information available, Non-Cancellable lease as on 31.03.2022: NIL (Previous year: NIL).

The deferred tax assets '' 1541.35 Crore for the year ended

31.03.2022 (FY 2021-22) is debited to Profit & Loss Account

(Previous year: Debited '' 1426 Crores).

ii) Current Tax: After opting certain eligible cases under Vivad se Vishwas Scheme 2020, the Bank has reversed remaining Income Tax provision amounting to '' 700.00 crore during the year ended 31.03.2022, as the same is no longer required. Accordingly for the financial year ended 31.03.2022 the bank has credited '' 681.91 Crores to Profit & Loss Account (Previous year: Debited '' 31.78 Crore) on account of current tax. Accordingly the total tax expense on account of current tax & deferred tax assets charged to Profit & Loss account amounts to '' 859.44 Crore.

iii) Tax Paid in advance/Tax deducted at source appearing under "Other Assets" includes disputed amount adjusted by the department/paid by the Bank in respect of tax demands for various assessment years.

iv) No provision is considered necessary in respect of disputed Income Tax demands of ''11427.55 Crore (Previous year '' 9835.82 Crore) as in the bank''s view, duly supported by expert opinion and/or decision in bank''s own appeals on same issues, additions / disallowances made are not sustainable.

v) The Bank has evaluated the options available under section 115BAA of Income Tax Act, 1961 and opted to continue to recognise the taxes on income for the financial year 2021-22 as per the earlier provisions of Income Tax Act, 1961.

vi) The current tax expenses and deferred tax expenses are determined in accordance with the provisions of the Income Tax Act, 1961 and as per the Accounting Standard 22- "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India respectively. The current Tax in India has been calculated in accordance with the provisions of Income Tax Act 1961 after taking appropriate relief for taxes paid on foreign jurisdiction.

15. k) Accounting Standard 23 - Accounting for Investments in Associates in Consolidated Financial Statements

Since Investments of the bank in its Associates are participative in nature and the Bank having the power to exercise significant influence on their activities, such Investments are recognized in the Consolidated Financial Statements of the Bank.

(Previous year: Since Investments of the bank in its Associates are participative in nature and the Bank having the power to exercise significant influence on their activities, such Investments are recognized in the Consolidated Financial Statements of the Bank).

15. l) Accounting Standard 24 - Discontinuing operations

During the period from 01.04.2021 to 31.03.2022, the bank has not discontinued operations of any of its branches, which resulted in shedding of liability and realization of assets and no decision has been finalized to discontinue an operation in its entirety which have the above effect.

(Previous year: During the period from 01.04.2020 to 31.03.2021, the bank has not discontinued operations of any of its branches, which resulted in shedding of liability and realization of assets and no decision has been finalized to discontinue an operation in its entirety which have the above effect).

A substantial portion of the bank''s assets comprises ''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 31.03.2022 requiring recognition in terms of the said standard.

(Previous year: A substantial portion of the bank''s assets comprises ''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 31.03.2021 requiring recognition in terms of the said standard).

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.

Other Disclosures:

16. Bank''s Disclosure in respect of Credit Exposures where the same had exceeded the Prudential Exposure limits as per Large Exposure (LE) framework prescribed by RBI for Individual/Group Borrowers for the Financial year ended 31.03.2022:

*RBI Circular dated 03.06.2019 has given leverage of 5% over and above the ceiling of 20% of single counterparty under the Bank''s Board Power. Board in its meeting dated 28.03.2017 has approved that bank may in exceptional circumstances consider enhancement of the exposure ceiling for single counterparty classified as Large Exposure upto 5% over and above ceiling of 20%.

$RBI Circular dated 03.06.2019 has given leverage of 5% over and above the ceiling of 20% of single counterparty under the bank''s Board power. The same was ratified by the board in its meeting dated 05.03.2021 vide Agenda No. A-3.

All the exposure (other than exempted exposure) of Individual and Group Accounts (except as mentioned above) for the financial year ended 31.03.2022 are within the prescribed regulatory limits, as per LE Framework.

(All the exposure (other than exempted exposure) of Individual and Group Accounts (except as mentioned above) for the financial year ended 31.03.2021 are within the prescribed regulatory limits, as per LE Framework).

17. Disclosure: Letter of Comfort (LoC)

"The Bank has issued a Letter of Comfort to Prudential Regulation Authority (PRA), the regulator in United Kingdom, committing that the bank shall provide financial support to its subsidiary, Punjab National Bank (International) Ltd., UK so that it meets its financial commitments as and when they fall due".

The said letter of Comfort has been renewed on 15.03.2022 after seeking approval of our Board in favor of PRA w.r.t. our subsidiary PNBIL wherein we have reiterated our commitment. The renewal was done as per instruction of PRA and RBI.

Apart from the above, the Bank has not issued any Letter of Comfort to Group Entities (Excl. RRBs) and therefore, there are no cumulative financial obligations under Letter of Comfort.

18. Disclosure: Letter of Undertaking

"The Bank has issued a Letter of Undertaking to International Financial Services Centers Authority (IFSCA), GIFT City, Gandhinagar, Gujarat that it will provide necessary Capital support of USD 20.00 Mio.

Further, the bank hereby confirms that it will provide such support and assistance (including liquidity, whenever needed) and may be appropriated to enable the IFSC Banking Unit to meet obligations in the course of the operation".

Apart from the above the Bank has not issued any Letter of Comfort for overseas branches and there are no cumulative financial obligations under Letter of Comfort.

19. Reward Points of Credit Card

PNB Global Credit Card holders are rewarded as and when they make purchases 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.

*The provision held against Rewards points in respect of Credit Cards has been worked out at '' 0.50 for 1 point. Based on past trend of redemption, provision has been made @25% of accumulated Reward points on estimated basis as in the previous year.

22. As per RBI guidelines, the Bank worked out the amount of Inter Branch Credit entries outstanding for more than 5 years to create a Blocked Account. Accordingly, a sum of '' NIL(previous year '' 8.65 Crores) [net of adjustments since carried out has been included under "Other Liabilities-others" in Schedule-5].

23. Premises includes properties amounting to '' 2.48 Crore [Net of Depreciation] {Cost '' 4.12 Crore} are awaiting registration of title deeds (Previous year '' 2.26 Crore)[Net of Depreciation] {Cost '' 4.12 Crore}]

24. Premises includes Capital work in progress of '' 127.08 Crore (previous year '' 82.36 Crore).

25. Guidelines given in Micro, Small and Medium Enterprises Development Act 2006 have been complied with for purchases made during the twelve months ended March 2022 (FY 2021-22) and payments have been made to the Vendors in time as per Act. Since there had been no delay in payment, no penal interest applicable during year ended March, 2022 (FY 2021-22).

26. Depreciation on Revalued Portion of Premises for the current financial year ended March, 2022 is '' 144.61 Crores (Previous year '' 127.57 Crores).

27. During the year ended 31.03.2022 the Bank has not Revalued Immovable Properties (In the Previous financial year the Bank Revalued (appreciation) properties having original cost '' 133.93 Crores by '' 123.99 Crores).

28. In compliance of RBI letter no. BPC.7201/21.04.132/2017-18 dated 08.02.2018, Bank has made a provision of '' 98.95 Crore (Previous year '' 103.77 Crore) being 5 % of the existing outstanding of '' 1979.11 Crore (Previous year '' 2075.40 Crore) as on 31.03.2022 in respect of Advance to Government of Punjab Long term Loan (LTL).

29. In terms of RBI Letter no. DBR.No.BP.15199/21.04.048/ 2016-17 dated June 23, 2017 (RBI List-1) and Letter no. DBR.BP.1908/21.04.048/2017-18 dated August 28, 2017 (RBI List-2) for the accounts admitted under the provisions of Insolvency & Bankruptcy Code (IBC), the Bank is holding total provision of '' 8384.09 Crore (Aggregate provision of RBI List 1 and List 2 accounts) as on March 31, 2022 (99.78% of Gross NPA advances). (Previous Year '' 8,374.53 Crore (Aggregate provision of RBI List 1 and List 2 accounts), 100% of Gross NPA advances)

30. COVID - 19 pandemic across several countries including India has resulted in a significant decline and volatility in global as well as Indian financial markets and economic activities. The Government of India announced a series of lock down measures since March 2020 onwards, which were lifted and re-imposed for activities by various Governments at various points of time depending on the situation prevailing in their respective jurisdictions and the same had resulted in disruption of business and common life.

The situation continues to be uncertain due to new variants of COVID-19 and the Bank is evaluating the situation on ongoing basis. The extent to which the COVID-19 pandemic will impact the Bank''s results will depend on future developments. The major identified challenges for the Bank would arise from eroding cash-flows and extended working capital cycles. The Bank is gearing itself on all the fronts to meet these challenges.

31. The Board of Directors has recommended a dividend of Re.0.64 per equity share (32%) for the year ended March 31, 2022 subject to requisite approvals.

32. I. Figures of the previous periods have been regrouped

/ rearranged / reclassified wherever necessary to conform to current period''s classification.

II. Figures in the bracket wherever given (except Item no.15.(e). - Accounting Standard 15 - Employees Benefits) relates to previous year.

---

Mar 31, 2021

RBI vide circular no. DBR.No.BP.BC.83/21.06.201/2015-16 dated 1st March, 2016 has given discretion to banks to consider Revaluation Reserve, Foreign Currency Translation Reserve and Deferred Tax Asset for purpose of computation of Capital Adequacy as CET-1 capital ratio. The Bank has exercised the option in the above computation.

Amalgamation adjustment reserve arised on account of Amalgamation has been considered under CET-1 for the purpose of calculation of CRAR.

** a) 2673063327 Equity shares of Rs. 2.00 each issued to shareholders of erstwhile Oriental Bank of Commerce and erstwhile United Bank of India in lieu shares held by them in erstwhile banks.

b) by way of QIP.

During the FY 2020-21 the Bank has issued 1,06,70,52,910 equity shares having Face Value of Rs.2 each for cash to Qualified Eligible Buyers pursuant to Qualified Institutional Placement (QIP) in accordance with the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 at a premium of Rs.33.50 per share aggregating Rs. 3,788.04 Crore. This has resulted in an increase of Rs.213.41 Crore in the issued and paid up Equity Share Capital and Rs. 3,563.91 Crore (Net of Issue Expenses) in Share Premium Account.

During the year, Bank has issued Basel III compliant Additional

Tier-I Bonds of Rs.495.00Crore through private placements.

Further, the Bank has also raised Basel III compliant Tier II

Bonds of Rs. 3,994 Crore during FY 2020-21 through private

placements.

Note on Amalgamation

Amalgamation of Erstwhile Oriental Bank of Commerce and

Erstwhile United Bank of India with Punjab National Bank

a. In exercise of power conferred by section 9 of the Banking Companies (Acquisition and Transfer of Undertakings Act, 1970 (5 of 1970) and section 9 of the Banking Companies (Acquisition and Transfer of Undertakings Act, 1980 (40 of 1980), after consultation with the Reserve Bank of India), the Government of India (Gol), Ministry of Finance, Department of Financial Services issued Gazette Notification no. CG-DL-E- 04032020-216535 dated March 04, 2020, approving the scheme of Amalgamation of erstwhile Oriental Bank of Commerce and erstwhile United Bank of India (collectively referred to as Transferor Banks) into Punjab National Bank (hereinafter referred to as Transferee Bank) on March 04, 2020. This scheme came into force on the April 01,2020.

On the commencement of this scheme, the undertakings of the Transferor Banks stand transferred to the Transferee Bank. Undertakings of the transferor banks are deemed to include all business, assets (including tangible and intangible, movable and immovable), liabilities, reserves & surplus and all other rights and interests arising out of such property of the Transferor Banks in relation to the undertakings as were immediately before the commencement of scheme, in the ownership, possession, power or control of the Transferor Banks within or outside India.

b. After taking into consideration the recommendation of the respective Audit Committees, Joint Valuation Report and the fairness opinion issued to the respective banks, the Boards of the respective banks had approved the Share Exchange Ratio (ranking pari passu in all respects and shall have the same rights attached to them as the then existing equity shares of the Transferee Bank, including, in respect of dividends, if any, that declared by the Transferee Bank, on or after the commencement of this scheme) as under:-

i. 1150 equity shares of Rs. 2 each of Punjab National Bank for every

1000 equity shares of Rs. 10 each of Oriental Bank of Commerce.

ii. 121 equity shares of Rs 2 each of Punjab National Bank for every

1000 equity shares of Rs.10 each of United Bank of India.

c. In respect of entitlements to fraction of equity shares, the consideration has been paid in cash.

d. Disclosure as per para 24 of AS 14 - “Accounting for Amalgamations” is as under:

i. The general nature of business of the amalgamating companies i.e. e-OBC and e-UNI is same as that of the business of Punjab National bank i.e Banking;

ii. Effective date of amalgamation for accounting purposes is 01-04-2020

iii. The method of accounting used to reflect the amalgamation:

The amalgamation has been accounted under the “pooling of interest” method of AS-14 issued by the Institute of Chartered Accountants of India on “Accounting for Amalgamations”, and as per the approved Scheme of Amalgamation to record amalgamation of erstwhile Oriental Bank of Commerce and erstwhile United Bank of India with the Bank w.e.f. April 01, 2020.

All assets and liabilities (including contingent liabilities), duties and obligations of transferor Bank have been be recorded in the books of account of Transferee bank at their existing carrying amounts and in the same form as on April 01, 2020, except for adjustments to bring uniformity of accounting policies as required under AS-14.

Accordingly, the difference of Rs.9,268.29 Crore (net-off adjustments) between the net assets of amalgamating banks and the amount of shares issued to shareholders of the amalgamating banks has been recognized as Amalgamation Adjustment Reserve.

Standalone Financial Statement for the year ended 31 March 2021 includes operations of erstwhile Oriental Bank of Commerce and erstwhile United Bank of India which are amalgamated with the Bank w.e.f. 1 April 2020 and hence the figures for year ended 31 March 2021 are not comparable with corresponding year ended 31 March 2020.

‘Others include Special Govt. Securities of ?57769.30Crore (Previous year: ?36931.00Crore) (Net of depreciation, if any) shown under Govt. Securities in Schedule 8. Amounts reported under columns 4, 5, 6 and 7 above may not be mutually exclusive. Others also includes US Treasury, US Securities/Bonds HKMA and China Govt. Bond.

Sale and transfers to / from HTM category

The total value of sales and transfers of securities to / from HTM category during 1st April 2020 to 31st March 2021 has not exceeded 5% of the book value of investments held in HTM category as on 31.03.2020 (Excluding following Transactions).

[The 5 percent threshold referred to above will exclude (a) the one- time transfer of securities to/ from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning quarter of the accounting year (b) sales to the Reserve Bank of India under pre-announced OMO auctions, (c) Repurchase of Government Securities by Government of India from banks, (d) Sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM in addition to the shifting permitted at the beginning quarter of the accounting year].

As such no disclosure is to be made in terms of extant RBI guidelines.

@All these swap deals are Treading swap and the fair value is its mark to market value.

“The above Trades are Interest Rate Swap Deal done with Interbank for ''75.00Crores (Previous year: ''75.00Crores) and with Financial Institution ''NIL (Previous year: ''NIL).

Credit Risk (Credit Exposure) for Current Year ''1.32Crores (Previous year ''1.52Crores).

There are total 3 deals out of which No deal is Back to Back Deal, 2 Deals where payment is made at Fixed Contract Rate and received at Floating rate and in remaining 1 deal, payment is made at Floating Rate and received at Fixed Contract Rate”.

Qualitative Disclosures

The Bank uses derivatives products for hedging its own balance sheet items as well as for trading purposes. The risk management of derivative operation is headed by a senior executive, who reports to top management, independent of the line functions. Trading positions are marked to market on daily basis.

The derivative policy is framed by Integrated Risk Management Division, which includes measurement of credit risk and market risk.

The hedge transactions are undertaken for balance sheet management. Proper system for reporting and monitoring of risks are in place. Policy for hedging and processes for monitoring the same is in place.

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.

1. Banks adopt the Current Exposure Method on Measurement of Credit Exposure of Derivative Products as per RBI instructions.

(vi) As per RBI Circular No.DBR.BPBC No.32/21.04.018/ 2018-19 dated April 1, 2019, in case the additional provisioning for NPA assessed by RBI exceeds 10% of the reported profit before provisions and contingencies for the reference period and /or additional gross NPAs identified by RBI exceeds 15% of the published incremental Gross NPAs for the reference period, then the banks are required to disclose divergence from prudential norms on income recognition, assets classification and provisioning.

Divergences in terms of above circular, are within threshold limits as specified above, hence no disclosure is required with respect to RBI''s annual supervisory process for FY 2020.

Details of Financial Assets sold to Securitisation / Reconstruction Company (SC/RC)/NBFC for Asset Reconstruction.

As per RBI Circular No. DBR.No.BP.BC.18/21.04.048/ 2018-19 dated 1^st January 2019, DOR.No.BP.BC.34/ 21.04.048/2019-20 dated 11^th February 2020 and DOR. No.BP.BC.44/21.04.048/2020-21 dated 06^th August 2020 on restructuring of Advances-MSME sector, the details of restructured accounts as on 31.03.2021 are

COVID - 19 pandemic continues to spread across several countries including India resulting in a significant volatility in Global as well as Indian financial markets and a significant decline in global and local economic activities. The Govt. of India announced a series of lock down measures from March 2020 onwards. Such lockdowns were lifted and reimposed for activities by various governments at various points of time depending on the situation prevailing in their respective jurisdictions. The current second wave of COVID 19 pandemic, wherever the number of new cases have increased significantly in India, has resulted in reimposition of localized/regional lockdown measures in various parts of the country.

The situation continues to be uncertain and the Bank is evaluating the situation on ongoing basis. The extent to which the Covid-19 pandemic will impact the Bank''s results will depend on future developments, which are highly uncertain including among other things, the success of vaccination drive. The major identified challenges for the Bank would arise from eroding cash flows and extended working capital cycles. The Bank is gearing itself on all the fronts to meet these challenges.

In terms of RBI Circular DBR No. BP. BC 45/21.04.048/ 2018-19 dated June 7, 2019 on Prudential Framework for Resolution of Stressed Assets, the Bank is holding additional provision of Rs.2,139.28 Crore as on March 31, 2021 in 15 accounts as detailed below:

I In accordance with the RBI guidelines relating to COVID-19 Regulatory Package dated March 27, 2020, April 17, 2020 and May 23, 2020 and clarification dated May 06, 2020 issued by RBI through Indian Bankers Association, the Bank granted moratorium on the payment of instalments and/or interest, as applicable, falling due between March 01, 2020 and August 31, 2020 to eligible borrowers classified as Standard, even if overdue, as on February 29, 2020. The moratorium peiod, wherever granted, shall be excluded from the number of days past due for the purpose of asset classification under RBI''s Income Recognition and Asset Classification norms.

Disclosure in terms of RBI circular RBI/2019-20/220 DOR. No.BP.BC.63/21.04.048/2020-21 dated April 17, 2020, COVID-19 regulatory Package-- Asset Classification and Provisioning 31^st March 2021:

In accordance with the instructions of RBI circular dated 07.04.2021 on “Asset Classification and Income Recognition following the expiry of Covid 19 regulatory package”, the Bank shall refund/adjust ‘interest on interest'' charged to all borrowers including those who had availed of working capital facilities during moratorium period i.e.01.03.2020 to 31.08.2020, irrespective of whether moratorium had been fully or partially availed or not availed. Pursuant to these instructions, the methodology for calculation of the amount to refunded/adjusted for different facilities shall be finalized by the Indian Bank Association (IBA) in consultation with other industry participants/bodies, which shall be adopted by all the lending institutions. Accordingly, IBA vide its letter dated 19.04.2021 has informed methodology finalised for refund/ adjustment as per Supreme Court judgement.

Accordingly, the Bank has created an estimated liability of Rs.328.00 Crore towards the same and has reduced the same from interest income for the year ended March 31, 2021.

In the order dated September 03, 2020, Hon''ble Supreme Court of India in writ petition Gajendra Sharma vs. Union of India & Others, has directed that accounts which were not declared as NPA till August 31,2020 shall not be declared

as NPA till further orders. Based on the same, the Bank has not classified any account as NPA which was not NPA as on August 31,2020. As a matter of prudence, the Bank made a contingent provision of Rs. 2,519.99 Crore (including Rs. 430.63 crore for derecognised interest) till

31.12.2020. The above order of the Hon''ble Supreme Court of India stood vacated pursuant to order dated

23.03.2021.

In view of the above, as per the instructions of RBI Circular dated 07.04.2021, the Bank has classified these borrower accounts as per extant IRAC norms as on March 31,2021 and reversed the above additional provisions.

p) In terms of RBI Letter no. DBR.No.BP.15199/21.04.048/ 2016-17 dated June 23, 2017 (RBI List-1) and Letter no. DBR.BP.1908/21.04.048/2017-18 dated August 28, 2017 (RBI List-2) for the accounts admitted under the provisions of Insolvency & Bankruptcy Code (IBC), the Bank is holding total provision of Rs.8,374.53 Crore (Aggregate provision of RBI List 1 and List 2 accounts) as on March 31,2021 (100% of Gross NPA advances). (Previous Year Rs.9474.27 Crore; 98.51% of Gross outstanding).

q) As per RBI notification RBI/2021-22/28 DOR.STR. REC.10/21.04.048/2021-22 dated May 5, 2021, Banks are advised that they are permitted to utilize 100 percent of floating provision/countercyclical provisioning buffer held by them as on December 31, 2020 for making specific provisions for non-performing assets with the prior approval of their respective Boards. The Bank has obtained requisite prior approval from its Board of Directors and has utilized floating provision amounting to Rs.384.37 Crore against the requirement for specific provision for non-performing assets in the year ended March 31,2021.

Risk Category wise Country Exposure

Total Net Funded Exposure as on 31.03.2021 is ''66771.96 Crores. Total assets of the Bank (PNB 2.0) as on 31.12.2020 were ''1254934.00 Crores, 1% of total asset ''12549.34 Crore. Bank did not exceed the exposure in any country beyond ''12549.34 Crores i.e. 1% of Total Assets of the Bank as on 31.12.2020. Hence, no provision is required with respect to country risk exposure as on 31.03.2021.

Bank''s Disclosure in respect of Credit Exposures where the same had exceeded the Prudential Exposure limits as per Large Exposure (LE) framework prescribed by RBI for Individual/Group Borrowers for the financial year ended

31.03.2021.

Details of accounts where Bank has exceeded prudential exposure ceilings as per Large Exposure (LE) framework in respect of any Individual and Group Accounts based on Tier - 1 Capital of ''55507 Crores for the financial year ended 31.03.2021 are as below:-

*RBI Circular dated 03.06.2019 has given leverage of 5% over and above the ceiling of 20% of single counterparty under the Bank''s Board Power. The same was ratified by the Board in its meeting dated 05.03.2021 vide Agenda No. A-3.

**As per L & A Circular no. 106/2020 dated 04.06.2020 has allowed increase in Bank''s Exposure to a Group of Connected Counterparties from 25% to 30% of the eligible capital base of the bank valid upto 30.06.2021.

All the exposure (other than exempted exposure) of Individual and Group Accounts (Except as mention above) for the financial year ended 31.03.2021 are within the prescribed regulatory limits, as per LE Framework.

Disclosure of Bouncing of SGL:

Particulars of Bouncing of SGL securities during the period 01.04.2020 to 31.03.2021 is NIL (Previous year: NIL)

Other Disclosures required by Accounting Standards

Accounting Standard - 5 Net Profit or Loss for the period, Prior Period items and Change in Accounting Policy

The financial results for the year ended March 31, 2021 have been prepared following the Accounting Policies and practices as those followed in the annual financial statements for the year ended March 31, 2020, except appropriation of recoveries in NPA accounts.

After March 31,2020, the Bank has changed its accounting policy for appropriation of recovery in NPA accounts from the earlier policy of appropriating recovery first against charges recorded then principal advance amount and balance towards recorded/derecognized income, to the new policy of appropriation of recovery first against the charges recorded, followed by recorded interest/derecognized interest and balance against the principal. This change in accounting policy has resulted in increase in profit before tax by Rs.611.97Crore for year ended March 31,2021.

Accounting Standard - 9 Revenue Recognition:

Certain items of income are recognized on realization basis as per Accounting Policy No. 3.5. However, the said income is not considered to be material.

Accounting Standard - 10 Properties, Plant and Equipment.

“The Bank has Defined Contribution Plan applicable to all categories of employees joining the Bank on or after 01.04.2010. The scheme is managed by NPS trust under the aegis of the Pension Fund Regulatory and Development Authority (PFRDA). National Securities Depository Limited has been appointed as the Central Record Keeping Agency for the NPS.

The details of contribution is as under:-

During the financial year ended March 31,2021 = ?747.67 Crores [Bank Employee contribution] (Previous year: ?391.68 Crores (Bank Employee contribution))

16. Accounting Standard - 17 Segment Reporting

Segment Identification

I. Primary (Business Segment):

The following are the primary segments of the Bank:-

i. Treasury

The Treasury Segment includes the entire investment portfolio and trading in foreign exchange contracts and derivative contracts. The revenue of the treasury segment primarily consists of fees and gains or losses from trading operations and interest income on the investment portfolio.

Corporate / Wholesale Banking

As per the RBI guidelines DBOD.No.BP.BC.81/21.04.018/ 2006-07 dated 18^th April 2007, the Corporate / Wholesale Banking segment comprises the lending activities of borrowers having exposure of Rs. 5.00 Crores and above.

. Retail Banking

The Retail Banking Segment comprises of borrower accounts having exposure of less than Rs. 5.00 Crores.

Other Banking Operations Segments not classified under (i) to (iii) above are classified under this primary segment.

Secondary (Geographical Segment)

i Domestic Operations - Branches/Offices having operations in India

ii. Foreign Operations - Branches/Offices having operations outside India and offshore banking units having operations in India.

. Basis of allocation:

The interest income is allocated on the basis of actual interest received from different segments

Expenses not directly attributable are allocated on the basis of Interest income earned by the wholesale banking / retail banking segment/other banking segment.

Capital employed for each segment is calculated based on the assets and liabilities of that particular segment.

The Bank has certain common assets and liabilities, which cannot be attributed to any segment, and the same are treated as unallocated.

Segment Liabilities are distributed in the ratio of their respective Segment Assets.

Figures of the previous period have been re-grouped /reclassified wherever necessary.

*Figures are related to standalone Bank''s financials for pre-amalgamation period, hence not comparable with post amalgamation financials.

17. Disclosure of Related Parties as per AS -18 issued by ICAINames of the related parties and their relationship with the Bank:

Key Management Personnel (KMP):

i) Shri CH S S Mallikarjuna Rao, Managing Director & CEO

ii) Dr. Rajesh Kumar Yaduvanshi, Executive Director, up to

08.10.2020

iii) Shri Sanjay Kumar, Executive Director

iv) Shri Vijay Dube, Executive Director

v) Shri Agyey Kumar Azad, Executive Director, up to

30.04.2021

vi) Shri Swarup Kumar Saha, w.e.f. 10.03.2021 Subsidiaries:

i) PNB Gilts Limited

ii) Punjab National Bank (International) Ltd.UK

iii) PNB Investment Services Ltd.

iv) Druk PNB Bank Ltd. Bhutan

v) PNB Cards and Services Ltd*

Incorporated on 16.03.2021. The Capital was infused on

06.04.2021

Associates:

i) PNB Metlife India Insurance Company Ltd@

ii) JSC (Tengri Bank), Almaty, Kazakhstan"

iii) PNB Housing Finance Limited

iv) Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd.#

v) India SME Asset Reconstruction Co. Ltd.*

vi) Dakshin Bihar Gramin Bank, Patna

vii) Himachal Pradesh Gramin Bank, Mandi

viii) Punjab Gramin Bank, Kapurthala

ix) Sarva Haryana Gramin Bank, Rohtak

x) Prathama UP Gramin Bank, Moradabad

xi) Assam Gramin Vikas Bank, Guwahati

xii) Bangiya Gramin Vikas Bank, West Bengal

xiii) Manipur Rural Bank, Imphal

xiv) Tripura Gramin Bank, Agartala

xv) Everest Bank Limited, Kathmandu, Nepal

@PNB has acquired 30% stake in PNB Metlife India Insurance Company Ltd at consideration of ''700.48/- as brand equity.

"AFR revoked license of JSC Tengri Bank w.e.f. 18.09.2020. Temporary Administrator has filed law suit for liquidation process of JSC Tengri Bank on 28^th September 2020. On 15.02.2021, the decision on liquidation of JSC Tengri Bank came into force by the Appeal Court. On 19.02.2021, the Liquidation commission of Tengri Bank published information of liquidation of the Bank.

#After amalgamation Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd become an associate of PNB w.e.f. 01.04.2020.

*Earlier PNB 1.0, eOBC and eUNI had investment of 9%, 1.90% and 10% respectively in India SME Asset Reconstruction Co. Ltd (ISARC). Post-merger, ISARC has been classified as an associate of PNB w.e.f. 01.04.2020. PNB 2.0 is having share holding of 20.90% as on date.

I. Figures of the previous year have been regrouped /

rearranged / reclassified wherever necessary.

II. Figures in the bracket wherever given relates to previous

year.

III. Figures of previous year relates to standalone Bank''s

financials for pre-amalgamation period, hence not comparable with post amalgamation financials

18. Accounting Standard AS -19 Lease

i. Operating lease primarily comprise office premises, which are renewable at the option of the bank normally at the end of every 5th years.

ii. Amount of lease payment recognized in P & L Account for operating lease is ?790.74Crores.

iii. As per information available, Non-cancellable lease as on 31.03.2021: Nil

(ii) Current Tax: During the financial year ended 31.03.2021 the bank has debited to Profit & Loss Account ''31.78 Crores (Previous year: debited ''1784.58 Crores) on account of current tax. The current Tax in India has been calculated in accordance with the provisions of Income Tax Act 1961 after taking appropriate relief for taxes paid on foreign jurisdiction.

(iii) Tax Paid in advance/Tax deducted at source appearing under “Other Assets includes disputed amount adjusted by the department/paid by the Bank in respect tax demands for various assessment years.

No provision is considered necessary in respect of disputed Income Tax demands of ''9835.82 Crore (Previous Year: ''1131.50 Crore) as in the bank''s view, duly supported by expert opinion and/or decision in bank''s own appeals on same issues, additions / disallowances made are not sustainable.

The Bank has evaluated the options available under section 115BAA of Income Tax Act 1961 and opted to continue to recognise the taxes on income for the financial year 2020-21 as per the earlier provision of Income Tax Act 1961.

21. Accounting Standard 23- Accounting for Invest ments in Associates in Consolidated financial Statements

Since Investments of the bank in its Associates are participative in nature and the Bank having the power to exercise significant influence on their activities, such Investments are recognized in the Consolidated Financial Statements of the Bank.

22. Accounting Standard 24 - Discontinuing Operations

During the period from 01.04.2020 to 31.03.2021, the bank has not discontinued operations of any of its branches, which resulted in shedding of liability and realization of assets and no decision has been finalized to discontinue an operation in its entirety which have the above effect.

23. Accounting Standard 28 - Impairment of Assets

A substantial portion of the bank''s assets comprises ‘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 31.03.2021 requiring recognition in terms of the said standard.

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.

Note: Maintainable complaints refer to complaints on the grounds specially mentioned in BO Scheme 2006 and covered within the ambit of the scheme.

*Out of 14 Awards issued during the FY 2019-20, amounts in 13 Awards have been paid to the complainant during the FY 2019-20 and Appeal has been filed in 1 Award by the Bank and the same is pending at RBI level for disposal.

**Out of 12 Awards issued during the FY 2020-21, amounts in 8 Awards have been paid during the FY 2020-21, amount in 1 Award issued on 19.03.2021 has been paid on 16.04.2021 and Appeal has been filed in 3 Awards.

29. Disclosure of Letter of Comfort (LoC) issued by Bank

“The Bank has issued a Letter of Comfort to Prudential Regulation Authority (PRA), the regulator in United Kingdom, committing that the bank shall provide financial support to its subsidiary, Punjab National Bank (International) Ltd., UK so that it meets its financial commitments as and when they fall due”.

Apart from the above, the Bank has not issued any Letter of Comfort and therefore, there are no cumulative financial obligations under Letter of Comfort.

The Prudential Regulatory Authority (PRA), regulator of UK, has vide its letter dated 02.09.2015 put the Bank under ‘watch list''. There were no specific restrictions or penalties. PRA vide its letter dated 12.02.2021 has removed PNBIL from its ‘watch list''.

30. (i) Disclosure in respect of Insurance broking agency and Bancassurance Business including Mutual Fund Business undertaken by the bank:

36. Unhedged Foreign Currency Exposure (UFCE):

The Bank has framed a policy to manage currency induced credit risk and has been incorporated the same in bank''s current Credit Management & Risk Policy as follows:

“In terms of RBI guidelines, Bank monitors the currency wise Un-hedged Foreign Currency Exposure in the books of borrowers at quarter ends along-with the Annualized Earnings before Interest & Depreciation (EBID). The incremental provision (ranging from 0 to 80 bps on total credit exposure, over and above the standard asset provisioning) and capital requirement will depend on likely loss (due to foreign currency fluctuation), that borrowers may face due to their un-hedged forex exposure in their books. Bank maintains separate charge and provisioning requirement on account of such exposures which may impact the cost to the borrowers. Appropriate disclosures in the financial statements of the bank shall also be made.”

38. Liquidity Coverage Ratio (LCR)QUALITATIVE DISCLOSURE ON LIQUIDITY COVERAGE RATIO

The bank has implemented RBI guidelines on Liquidity Coverage Ratio (LCR) from 1^st January 2015.

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (HQLAs) that can be readily converted into cash at little/no loss of value to meet its liquidity needs for a 30 calendar day time horizon under a liquidity stress scenario.

LCR has two components:

(i) The value of the stock of High Quality Liquid Assets (HQLA)-The Numerator.

(ii) Total Net Cash Outflows: Total expected cash outflows minus Total expected cash inflows, in stress scenario, for the subsequent 30 calendar days - The denominator.

For Q4 FY''2020-21, the daily average LCR was 190.97% (based on simple average of daily observations) at consolidated level, as against the regulatory requirement of 90%.

The main drivers of LCR of the bank are High Quality Liquid Assets (HQLAs) to meet liquidity needs of the bank at all times and basic funding from retail and small business customers. The retail and small business customer''s contribute about 72.15% of total deposit portfolio of the bank which attracts low run-off factor of 5/10% as on 31.03.2021.

Composition of High Quality Liquid Assets (HQLA)

HQLAs comprises of Level 1 and Level 2 assets. Level 2 assets are further divided into Level 2A and Level 2B assets, keeping in view their marketability and price volatility.

Level-1assets are those assets which are highly liquid. For quarter ended March 31, 2021, the Level-1 asset of the bank includes Cash in Hand, Excess CRR, Government Securities in excess of minimum SLR, Marketable securities issued or guaranteed by foreign sovereign, MSF and FALLCR totalling to Rs. 323041.48 cr (based on simple average of daily observations).

Level-2A & 2B assets are those assets which are less liquid and their weighted amount comes to Rs. 9810.15 cr (based on simple average of daily observations). Break-up of daily observation Average HQLA during quarter ended March 31, 2021 is given hereunder:

Concentration of Funding Sources

This metric includes those sources of funding, whose withdrawal could trigger liquidity risks. It aims to address the funding concentration of bank by monitoring its funding requirement from each significant counterparty and each significant product/ instrument. As per RBI guidelines, a “significant counterparty/Instrument/

product” is defined as a single counterparty/Instrument/product or group of connected or affiliated counter-parties accounting in aggregate for more than 1% of the bank''s total liabilities.

The bank has no significant counterparty (deposits/borrowings) as at 31.03.2021. Top 20 depositors of the bank constitute 3.69% of bank''s total Deposit as at March 31, 2021. The significant product/ instrument include Saving Fund, Current deposit and Core Term Deposit, the funding from which are widely spread and cannot create concentration risk for the bank.

Derivative exposure

The bank has low exposure in derivatives having negligible impact on its liquidity position.

Currency Mismatch

As per RBI guidelines, a currency is considered as “significant” if the aggregate liabilities denominated in that currency amount to 5 per cent or more of the bank''s total liabilities. In our case, only USD (12.36% of bank''s total liabilities) falls in this criteria whose impact on total outflows in LCR horizon can be managed easily as the impact is not large considering the size of balance sheet of the bank.

Degree of centralization of liquidity management and interaction between group''s units

The group entities are managing liquidity on their own. However, the bank has put in place a group-wide contingency funding plan to take care of liquidity requirement of the group as a whole in the stress period.

---

Mar 31, 2019

* Information given in 1 (i to iv) has been given as per Basel III Capital Regulations.

** Figures includes Rs.368.69Crore (Rs.126.52Crore) as Equity Capital and Rs.14435.31 Crore (Rs.10346.48Crore) as Share Premium.

RBI vide circular no. DBR.No.BP.BC.83/21.06.201/2015-16 dated 1st March, 2016 has given discretion to banks to consider Revaluation Reserve, Foreign Currency Translation Reserve and Deferred Tax Asset for purpose of computation of Capital Adequacy as CET-1 capital ratio. The Bank has exercised the option in the above computation.

‘Others include Special Govt. Securities of Rs.20955.52Crore (Rs.7463.42Crore) (Net of depreciation, if any) shown under Govt. Securities in Schedule 8. Amounts reported under columns 4, 5, 6 and 7 above may not be mutually exclusive.

1a. Sale and transfers to / from HTM category

The total value of sales and transfers of securities to / from HTM category during 1st April 2018 to 31st March, 2019 has not exceeded 5% of the book value of investments held in HTM category as on 31.03.2018 (Excluding following Transactions).

{The 5 percent threshold referred to above will exclude (a) the one- time transfer of securities to/ from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning quarter of the accounting year (b) sales to the Reserve Bank of India under pre-announced OMO auctions, (c) Repurchase of Government Securities by Government of India from banks, (d) Sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM at the beginning of April, July, October 2018 and January 2019. In addition to the shifting permitted at the beginning quarter of the accounting year i.e. 1st April 2018}

As such no disclosure is to be made in terms of extant RBI guidelines.

The above Trades are Interest Rate Swap Deal done with Interbank for Rs. 250.00Crores (Previous year Rs. 319.83Crores) and Financial Institution Rs. 0.0Crores (Previous yearRs.19.83Crores). Credit Risk (Credit Exposure) for Current Year is Rs.3.36Crore and for previous year it was Rs. 9.77Crore. There are total 10 deals out of which 0 deals are Back to Back Deals, 8 Deals where payment is made at Fixed Contract Rate and received at Floating rate and in remaining 2 deals, payment is made at Floating Rate and received at Fixed Contract Rate.

2b. Disclosure on risk exposure in derivatives

I - Qualitative Disclosure

The Bank uses derivatives products for hedging its own balance sheet items as well as for trading purposes. The risk management of derivative operation is headed by a senior executive, who reports to top management, independent of the line functions. Trading positions are marked to market on daily basis.

The derivative policy is framed by Integrated Risk Management Division, which includes measurement of credit risk and market risk.

The hedge transactions are undertaken for balance sheet management. Proper system for reporting and monitoring of risks are in place. Policy for hedging and processes for monitoring the same is in place.

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.

3a. Details of financial assets sold to Securitisation I Reconstruction Company (SC/RC) for Asset Reconstruction.

6h. In accordance with RBI Circular DBR.No.BP. BC. 108/21.04.048/2017-18 dated 06.06.2018, the bank has retained advances of Rs.1718.41 Crore as standard asset on 31st March 2019. In accordance with the provisions of the circular, the bank has not recognized interest on these accounts and is maintaining a standard provision of Rs.85.92Crore in respect of such borrowers.

As per RBI Circular No. DBR.No.BP.18/21.04.048/2018-19 dated 1st January 2019 on restructuring of Advances-MSME sector, the details of restructured accounts as on 31.03.2019 are as under:

#lncludes Rs.420.66Crore in respect of exposure (including investment) in One borrower which is also considered as Infrastructure in line with paragraph 3 of RBI circular DBOD. BP.BC.No.42/08.12.015/2009-10 dated September 9, 2009.

3b. Risk Category wise Country Exposure

Total Net Funded Exposure as on 31.03.2019 is Rs.43412.20Crores. Total assets of the bank as on 31.12.2018 were Rs.747806.10Crores, 1% of which comes to Rs.7478.06Crore. Total net funded exposure of two countries namely Hongkong and UAE amounting to Rs.8857.37Crore & Rs.9495.27Crore respectively, is more than 1% of the total assets of the Bank as on 31.12.2018. In case, total net funded exposure of the bank on HongKong & UAE happens to be more than 1 % of total assets as on 31.03.2019, provision of Rs.14.09Crore for Hongkong and Rs.16.31 Crore for UAE has been made in terms of RBI guidelines. As per Export Credit Guarantee Corporation of India (ECGC) classification, HongKong is in the “Insignificant Risk Category" i.e.‘A1’and UAE is in the “Low Risk Category” i.e. ‘A2’.

3c. Bank’s Disclosure in respect of Credit Exposures where the same had exceeded the Prudential Exposure limits prescribed by RBI for Individual/Group Borrowers as on 31.03.2019

Details of accounts where Bank has exceeded prudential exposure ceilings in respect of any Group Accounts and Individuals Borrowers during the period 01.04.2018 to 31.03.2019 as below:-

1. Food Corporation of India, 2. HDFC Ltd, 3. Reliance Industries Ltd, 4. Reliance Jio Infocomm ltd, 5. Air India Ltd, 6. JSW Steel Ltd, 7. SIDBI.

However there are 3 accounts where exposure is exceeding the prudential ceiling i.e. 15 % of capital funds as on 31.03.2019, details of the same are as under: -

4.A. Disclosure of penalties imposed by the RBI:

1. RBI vide order dated 01.02.2019 has imposed a monetary penalty of Rs.10.00million (NIL) on observance of noncompliance with various directions issued by RBI on monitoring of end use of funds, exchange of information with other banks and on restructuring of accounts.

2. RBI vide order dated 25.02.2019 has imposed a monetary penalty of Rs.20.00million (NIL) on observance of non-compliances with directions related to implementation of SWIFT related operational controls.

[Penalties imposed by RBI under the provision of Section 46(4) of the Banking Regulation Act, 1949, for contraventions of any of the provisions of the Act or noncompliance with any other requirements of the Banking Regulation Act, 1949; order, rule or condition specified by Reserve Bank of India under the Act.]

4.B. Disclosure of Bouncing of SGL:

Particulars of Bouncing of SGL securities during the period 01.04.2018 to 31.03.2019 is NIL (NIL)

Other Disclosures required by Accounting Standards

5. AS -5 Prior Period and Change in Accounting Policy

There were no material prior period income/expenditure items requiring disclosure under AS-5.

6. AS-10 Properties, Plant and Equipment.

Break-up of total depreciation for the year ended March, 2019 for each class of assets

7. AS- 9 Revenue Recognition:

Certain items of income are recognized on realization basis as per Accounting Policy No. 3(5). However, the said income is not considered to be material.

* RBI vide its communication DBR.No.BP.BC.9730/21.04.18 /2017-18 dated April 27, 2018 has given the option to Banks to spread additional liability on account of enhancement in gratuity limits from Rs. 10.00 lakhs to Rs. 20.00 lakhs from 29.03.2018 under the Payment of Gratuity Act 1972, over four quarters beginning with the quarter ended March 31, 2018. The bank exercised the option and charged Rs. 63.45 crores during the quarter March 31, 2018 and deferred Rs. 190.00 crores to the ensuing financial year. The said amount of Rs. 190.00 crores has been recognized in the current financial year. Accordingly, the comparitive numbers for Gratuity has been adjusted to the extent permitted by RBI in Table VI, VII & VIII.

Defined Contribution Plans:-

“The Bank has Defined Contribution Plan applicable to all categories of employees joining the Bank on or after 01.04.2010. The scheme is managed by NPS trust under the aegis of the pension Fund Regulatory and Development Authority. National Securities Depository Limited has been appointed as the Central Record Keeping Agency for the NPS.

The details of contribution is as under: -

During the FY 2018-19 = Rs.327.10Crores (Bank Employee contribution)

During the FY 2017-18 = Rs.285.45Crores (Bank Employee contribution)

Note:

1. Segment Liabilities are distributed in the ratio of their respective Segment Assets.

2. Figures of the previous period have been re-grouped /reclassified wherever necessary to make them comparable.

8. 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) Shri Sunil Mehta, Managing Director & CEO

ii) Shri K. Veera Brahmaji Rao, Executive Director, Remained upto 18.01.2019 (ceased to be Director)

iii) Shri Sanjiv Saran, Executive Director, Remained upto 18.01.2019 (ceased to be Director)

iv) Shri Lingam Venkata Prabhakar, Executive Director,

v) Shri Agyey Kumar Azad, Executive Director, w.e.f. 22.01.2019

Subsidiaries:

i) PNB Gilts Ltd.

ii) PNB Investment Services Ltd.

iii) PNB Insurance Broking Pvt Ltd*.

iv) Punjab National Bank (International) Ltd., UK.

v) Druk PNB Bank Ltd, Bhutan.

*Steps are being taken for winding up of the company as the license has already been surrendered on 14.02.2011.

Associates:

i) Principal PNB Asset Management Company Pvt. Ltd (Stake sold on 24.08.2018)

ii) Principal Trustee Company Private Limited (Stake sold on 24.08.2018)

iii) PNB Housing Finance Ltd.

iv) PNB Metlife India Insurance Company Ltd.

v) JSC (Tengri Bank) Almaty, Kazakhstan .

vi) Madhya Bihar Gramin Bank, Patna* up to 31.12.2018

vii) Dakshin Bihar Gramin Bank, Patna** w.e.f. 01.01.2019

viii) Sarva Haryana Gramin Bank, Rohtak.

ix) Himachal Pradesh Gramin Bank, Mandi.

x) Punjab Gramin Bank, Kapurthala***

xi) Sarva UP Gramin Bank, Meerut.

*Madhya Bihar Gramin bank remained in existence till 31.12.2018.

**After amalgamation of Bihar Gramin Bank with Madhya Bihar Gramin Bank vide Notification no. 5014 dated 21.12.2018, Dakshin Bihar Gramin Bank came into existence w.e.f. 01.01.2019.

‘“Similarly, In state of Punjab, Malwa Gramin Bank and Sutlej Gramin Bank got amalgamated with Punjab Gramin Bank, Kapurthala w.e.f. 01.01.2019 vide GOI notification no. 5015 dated 21.12.2018

Joint Venture:

i) Everest Bank Limited, Kathmandu, Nepal.

9. AS -19 Accounting Of Lease

Financial and Operating Lease:

The Bank has not entered into any transaction of Financial Lease. Operating Lease primarily comprises of office premises, which are renewal at the option of the Bank. Lease payment for assets taken on operating lease is recognized as an expense in the Profit and Loss Account.

(ii) Current Tax: During the year the bank has debited to Profit & Loss Account Rs.17.15Crores (Previous Year Rs.-71.15Crores) on account of current tax. The current Tax in India has been calculated in accordance with the provisions of Income Tax Act 1961 after taking appropriate relief for taxes paid on foreign jurisdiction.

10. AS 23- Accounting for Investments in Associates in Consolidated financial Statements

Since Investments of the bank in its Associates are participative in nature and the Bank having the power to exercise significant influence on their activities, such Investments are recognized in the Consolidated Financial Statements of the Bank.

11. AS 24 - Discontinuing Operations

During the period from 01.04.2018 to 31.03.2019, the bank has not discontinued operations of any of its branches, which resulted in shedding of liability and realization of the assets and no decision has been finalized to discontinue an operation in its entirety which will have the above effect.

12. AS 28 - Impairment of Assets

A substantial portion of the bank''s assets comprises ‘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 31.03.2019 requiring recognition in terms of the said standard.

ii) Refer Schedule-12 on contingent liabilities

Such liabilities at S.No.(l), (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.

*ln case of 1 award acceptance of award not given by complainant. As per clause 12(8) of BO, scheme 2006, the award shall lapse and be of no effect unless the complainant furnishes to the bank within 30 days from the date of receipt of copy of the award, a letter of acceptance of the award in full and final settlement of the claim.

**ln 2 cases in which appeals were filed in the earlier years, appeals are still pending as on 31.03.2019 and in 2 other cases appeals have been filed during the current year.

13. The Bank has issued a Letter of Comfort to Prudential Regulation Authority (PRA), the regulator in United Kingdom, committing that the bank shall provide financial support to its subsidiary, Punjab National Bank (International) Ltd., UK so that it meets its financial commitments as and when they fall due.

Apart from the above, the Bank has not issued any Letter of Comfort and therefore there are no cumulative Financial obligations under Letter of Comfort.

The Prudential Regulatory Authority (PRA), regulator of UK, has vide its letter dated 02.09.2015 put the Bank under ‘watch list’. There are no specific restrictions or penalties. PNB infused fresh capital of USD 20 million on 2nd June 2017 to help it to meet the minimum regulatory capital requirements.

14. Reward Points of Credit Card & Debit Card

i) PNB Global Credit Cardholders are rewarded as and when they make purchases 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.

*The provision held against Rewards points in respect of Credit Cards has been worked out at ? 0.50 for 1 point. Based on past trend of redemption, provision has been made @25% of accumulated Reward points on estimated basis as in the previous year.

The provision held against Loyalty Reward Points has been worked at ?.0.25 for 1 point. Which has further been valued at 15% on estimated basis as in previous year

The accrual under Loyalty Program has ceased with effect from 01.08.2018 and all reward points have been deemed expired after 30.09.2018.

** The provision amount held, pertains to payment that has been put on hold on account of certain data extraction activities pending as a part of the Exit Management with the Vendor. The same will be cleared once all the relevant activities have been completed.

‘Only the SPVs relating to outstanding securitization transactions may be reported here

15. Credit Default Swaps

Since the Bank is not using any proprietary pricing model for pricing CDS contracts, and it is over the counter contract (OTC), the price is determined by the market dynamics. As such no disclosure is to be made in terms of extant RBI guidelines.

’Reflected as "Contingent Liability - Others, items for which the bank is contingently liable" under Schedule 12 of the financial statements.

16. Unhedged Foreign Currency Exposure (UFCE):

The Bank has framed a policy to manage currency induced credit risk and has been incorporated in current bank''s Credit Management & Risk Policy as follows:

“In terms of RBI guidelines, the Bank monitors the currency wise Un-hedged Foreign Currency Exposure in the books of borrowers at quarter ends along-with the Annualized Earnings before Interest & Depreciation (EBID). The incremental provision (ranging from 0 to 80 bps on total credit exposure, over and above the standard asset provisioning) and capital requirement will depend on likely loss (due to foreign currency fluctuation), that borrowers may face due to their un-hedged forex exposure in their books. Bank maintains separate charge and provisioning requirement on account of such exposures which may impact the cost to the borrowers. Appropriate disclosures in the financial statements of the bank shall also be made.”

17. Liquidity Coverage Ratio (LCR)

QUALITATIVE DISCLOSURE ON LIQUIDITY COVERAGE RATIO

The bank has implemented RBI guidelines on Liquidity Coverage Ratio (LCR) from 1st January 2015.

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (HQLAs) that can be readily converted into cash at little/no loss of value to meet its liquidity needs for a 30 calendar day time horizon under a liquidity stress scenario

LCR has two components:

i. The value of the stock of High Quality Liquid Assets (HQLA)-The Numerator.

ii. Total Net Cash Outflows: Total expected cash outflows minus Total expected cash inflows, in stress scenario, for the subsequent 30 calendar days - The denominator.

Definition of LCR:

Stock of high quality liquid assets (HQLAs^ £ 100%

Total net cash outflows over the next 30 calendar days

ForQ4 FY’2018-19, the daily average LCR was 121.27% (based on simple average of daily observations) at consolidated level, as against the regulatory requirement of 100%.

The main drivers of LCR of the bank are High Quality Liquid Assets (HQLAs) to meet liquidity needs of the bank at all times and basic funding from retail and small business customers. The retail and small business customer’s contribute about 67.51% of total deposit portfolio of the bank which attracts low run-off factor of 5/10% as on 31.03.2019.

Composition of High Quality Liquid Assets (HQLA)

HQLAs comprises of Level 1 and Level 2 assets. Level 2 assets are further divided into Level 2A and Level 2B assets, keeping in view their marketability and price volatility.

Level-1 assets are those assets which are highly liquid. For quarter ended March 31, 2019, the Level-1 asset of the bank includes Cash in Hand, Excess CRR, Government Securities in excess of minimum SLR, Marketable securities issued or guaranteed by foreign sovereign, MSF and FALLCR totalling to Rs. 115635.14 cr (based on simple average of daily observations).

Level-2A & 2B assets are those assets which are less liquid and their weighted amount comes to Rs. 6896.33 cr (based on simple average of daily observations). Break-up of daily observation Average HQLA during quarter ended March 31, 2019 is given hereunder:

Concentration of Funding Sources

This metric includes those sources of funding, whose withdrawal could trigger liquidity risks. It aims to address the funding concentration of bank by monitoring its funding requirement from each significant counterparty and each significant product/ instrument. As per RBI guidelines, a "significant counterparty/ Instrument/product" is defined as a single counterparty/ Instrument/product or group of connected or affiliated counterparties accounting in aggregate for more than 1% of the bank''s total liabilities.

Total deposits mobilized from significant counterparty(s) were 0.47% of total liabilities of the Bank as at March 31,2019. Top 20 depositors of the bank constitute 3.02% of bank''s total liability as at March 31, 2019. The significant product/ instrument includes Saving Fund, Current deposit, Core Term Deposit, and Interbank term deposit, the funding from which are widely spread and cannot create concentration risk for the bank.

Derivative exposure

The bank has low exposure in derivatives having negligible impact on its liquidity position.

Currency Mismatch

As per RBI guidelines, a currency is considered as “significant" if the aggregate liabilities denominated in that currency amount to 5 per cent or more of the bank’s total liabilities. In our case, only USD (8.27% of bank''s total liabilities) falls in this criteria whose impact on total outflows in LCR horizon can be managed easily as the impact is not large considering the size of balance sheet of the bank.

Degree of centralization of liouiditv management and interaction between group’s units

The group entities are managing liquidity on their own. However, the bank has put in place a group-wide contingency funding plan to take care of liquidity requirement of the group as a whole in the stress period.

18. Other Notes

a. I. As per RBI guidelines, the Bank has worked out the amount of inter Branch Credit entries outstanding for more than Five years to be transferred to Blocked Account. Accordingly, a sum of Rs.2.72Crores (net of adjustments since carried out) has been included under “Other Liabilities-others” in Schedule-5.

II. No claim has been received during the period ended March 2019 (01.04.2018 to 31.03.2019) against Inter Branch Credit entries, Blocked and transferred to General Reserve.

b. Premises includes:-

I. Premises includes properties amounting to Rs.2.52Crore (Net of Depreciation) {Cost Rs.8.15Crore} are awaiting registration of title deeds.

II. Premises includes Capital work in progress of Rs.40.93Crore.

III. A conversion fee of Rs.5.29Crore deposited with Delhi Development Authority for a leasehold property is capitalized and Rs.22.85Crores deposited with DDA against conversion fee, E-stamping of Rs.73.26Lacs for execution of conveyance deed, free hold deed is pending for execution at DDA.

IV. An extension fee of Rs.1.95Crore paid to Haryana Urban Development Authority (HUDA) for a property is capitalized as per policy, construction on the plot is yet to be started.

a. Depreciation on Revalued Portion :Rs.16.18Crore depreciation charged for Q-4 FY 2018-19 and Total depreciation charged during FY 2018-19 is Rs.64.73Crore.

b. Tax Paid in advance/Tax deducted at source appearing under Other Assets includes disputed amount adjusted by the department/paid by the Bank in respect tax demands for various assessment years.

No provision is considered necessary in respect of disputed Income Tax demands of Rs.267.52Crore (previous year Rs.1260.92Crore) as in the bank''s view, duly supported by expert opinion and/or decision in bank''s own appeals on same issues, additions / disallowances made are not sustainable.

c. Bank has not revalued Immovable properties (forming part of Schedule 10) during the current Financial Year. As such there is no impact on Balance sheet for current FY 2018-19.

d. The guidelines given in Micro, Small and Medium Enterprises Development Act 2006 have been complied with for purchases made during the Financial Year 2018 2019 and payments have been made to the Vendors in time as per Act. Since there had been no delay in payment, so no penal interest has been paid in FY 2018-19.

e. Information under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, in terms of the provisions of Regulation 52(4) for unsecured bonds issued by bank excluding Debt instruments eligible for meeting capital requirement: (Year ended March 2019)

f. In compliance of RBI letter no. DBR NO.BP.13018/ 21.04.048/ 2015-16 dated 12.04.2016 and BPC.7201/ 21.04.132/ 2017-18 dated 08.02.2018, Bank has made a provision of Rs.65.53Crore being 5 % of the existing outstanding ofRs.1310.55Crore as on 31.03.2019 in respect of restructured Food Credit advance availed by State Government of Punjab.

g. Provisioning pertaining to fraud accounts due to amendment in provisioning norms as per RBI Circular no. RBI/2015-16/376 DBR.No.BP.BC.92/21.04.048/2015-16 dated 18.04.2016:

h. “IND AS roadmap for scheduled commercial banks (excluding regional rural banks), insurers/insurance companies and non-banking financial companies (NBFCs) was issued by Union Ministry of Corporate Affairs (MCA) through press release dated 18 January 2016. IND AS was applicable to the Bank in accordance with the MCA press release from financial year 2018-19 which was deferred to financial year 2019-20 vide RBI’s Press Release (2017-18/2642) dated 5 April 2018. RBI has further deferred implementation of IND AS till further notice vide its Circular no DBR.BP.BC.No. 29/21.07.001/2018-19 dated 22.03.2019. However, the Bank had commenced the process of IND AS (Indian Accounting Standards) implementation since financial year 2016-17.

A steering committee headed by the Executive Director and comprising of General Managers from various cross functional areas of the Bank to monitor the progress of the implementation is formed. The Bank has a well-planned strategy for Ind AS implementation and has made substantial progress in this exercise. The Bank has completed a diagnostic study to identify the differences between the current accounting framework and IND AS. Based on this diagnostic study, the Bank has quantified the impact and filed the pro-forma financial statements for the half year ended September 2016 and quarter ended June 2017 with the Reserve Bank of India. From the quarter ended June 2018, Bank is compiling the proforma Ind AS Financial Statements every quarter and submitting to RBI as per their requirement. Bank is now assessing the changes, wherever required in the core banking system and has already initiated formulation of Expected Credit Loss Models. Hence, the Bank will implement Ind AS once the transition date is conveyed by RBI. ”

i. During the year, the bank has made preferential allotment of following equity shares in accordance with the provisions of SEBI (Issue of Capital and Disclosure Requirements Regulations, 2009), for which details are as under: -

j. During the Financial Year 2018-19 the bank has allotted 90226683 equity shares of Rs.2.00 each to the Employees of the Bank under PNB-ESPS at a premium of Rs.69.93 per share (including discount of Rs.17.98 per share) as approved by the Board and the shareholders in terms of the SEBI (Share Based Employee Benefits) Regulations, 2014, as amended from time to time. The total amount received by the bank on this account is Rs.649.00 crores which includes Rs.18.04Crores as equity capital and Rs.630.96Crores as premium.

k. RBI vide its circular dated April 2, 2018 and June 15, 2018 has permitted banks an option to spread Mark to Market (MTM) loss on AFS and HFT investment for the quarters stated therein equally over four quarters commencing with the quarter in which the loss is incurred. Accordingly, the bank has availed the option and charged Rs.1208.71 Crores to the Profit & Loss account during the year and there is no unamortised balance as on 31st March 2019.

l. Changes in accounting policy:

1. The Impact due to change in Significant Accounting Policies in valuation of NPI Debentures and Preference shares would result in a higher depreciation of Rs.60.00Crore.

2. There is no material impact due to change in accounting policy on Depreciation on fresh additions to assets and assets sold/disposed off.

m. As per RBI Letter no. DBR.No.BP.15199/21.04.048/2016-17 dated 23rd June, 2017and letter no DBR.No.BP.1908/ 21.04.048/2017-18 dated 28th August, 2017 for the accounts covered under the provisions of Insolvency and Bankruptcy code (IBC), the bank is holding total provision of Rs.11940.15Crores as on 31st March 2019 (84.63% of total outstanding) including additional provision of Rs.433.93 crores in said accounts made during the year ended on March 31, 2019.

n. During the year Bank has made remaining provision of Rs.7167.31 Crores (including exchange fluctuation) in respect of Fraud detected at Brady House Branch Mumbai in certain accounts of Gems & Jewellery Sector during 2017-18.

o. The Bank has availed dispensation for deferment of provision in respect of frauds reported during the year of Rs.2647.85Crores requiring additional provision of Rs.1052.78Crores in terms of option available as per RBI circular no DBR No.BP.BC.92/21.04.048/2015-16 dated 18.04.2016.Accordingly an amount of Rs.390.38Crores has been charged to profit and loss account and an amount of Rs.662.40Crores have been charged to reserves & deferred for adjustment in subsequent quarters.

p. Pursuant to the proposed bipartite agreement on wage revision (due with effect from November 2017), a sum of Rs 123.21 crore has been provided during the quarter towards wage revision on estimated basis. (Cumulative provision; Rs.713.71 Crores).

q. In terms of RBI Circular No.DBR.BP.BC. No.50/21.06.201/2016-17 dated 2nd February, 2017 the Bank has made payment of Interest on Additional Tier -1 Bonds of Rs.451,87Crore by debiting Statutory Reserves.

r. Based on the review and certainty of availability of future taxable income,the bank has recognised net Deferred Tax Assets of Rs.2440.90Crores for the quarter and Rs.5365.35Crores for the year ended 31stMarch, 2019in accordance with Accounting Standard-22, “Accounting for Taxes on Income” issued by The Institute of Chartered Accountants of India.

19. 1. Figures of the previous year have been regrouped / rearranged / reclassified wherever necessary.

2. Figures in the bracket wherever given (except Item no. 15: AS 15 - Employees Benefits) relates to previous year.

3. Figures given in the bracket in Item No. 15: AS 15 -Employees Benefits are in negative.

Notes

1 Direct taxes paid (net of refund) are treated as arising from operating activities and are not bifurcated between investing and financing activities.

2 All figures in minus represents "Cash Out Flow"

---

Mar 31, 2018

7. IMPAIRMENT OF ASSETS

The carrying costs of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors.

An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.

After impairment, if any, depreciation is provided on the revised carrying cost of the asset over its remaining useful life.

A previously recognized impairment loss is increased or reversed depending on changes in circumstances.

However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

8. EMPLOYMENT BENEFITS

- PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit & Loss A/c.

- GRATUITY:

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

- PENSION:

Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

The Bank operates a New Pension Scheme (NPS) for all officers/ employees joining the Bank on or after 01.04.2010. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with a matching contribution from the Bank. Pending completion of the registration procedures of the employees concerned, these contributions are retained. The Bank recognizes such annual contributions as an expense in the year to which they relate. Upon the receipt of the Permanent Retirement Account Number (PRAN), the consolidated contribution amounts are transferred to the NPS Trust.

- COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave (PL) and Sick Leave (including unveiled casual leave) are provided for based on actuarial valuation.

- OTHER EMPLOYEE BENEFITS:

Other Employee Benefits such as Leave Fare Concession (LFC), Silver Jubilee Award, etc. are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective countries.

9. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS & BALANCES:

Transactions involving foreign exchange are accounted for in accordance with AS 11, “The Effect of Changes in Foreign Exchange Rates”.

9.1 Except advances of erstwhile London branches which are accounted for at the exchange rate prevailing on the date of parking in India, all other monetary assets and liabilities, guarantees, acceptances, endorsements and other obligations are translated in Indian Rupee equivalent at the exchange rates prevailing as on the Balance Sheet date as per Foreign Exchange Dealers'' Association of India (FEDAI) guidelines.

9.2 Non-monetary items other than fixed assets which are carried at historical cost are translated at exchange rate prevailing on the date of transaction.

9.3 Outstanding Forward exchange spot and forward contracts are translated as on the Balance Sheet date at the rates notified by FEDAI and the resultant gain/loss on translation is taken to Profit & Loss Account.

Foreign exchange spot/forward contracts/deals (Merchant and Inter-bank) which are not intended for trading/Merchant Hedge and are outstanding on the Balance Sheet date, are reverse re-valued at the closing FEDAI spot/forward rate in order to remove revaluation effect on exchange profit. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the life of the contract.

9.4 Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.

Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognized as income or as expense in the period in which they arise.

Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/ losses are recognized in the Profit and Loss Account.

9.5 Offices outside India / Offshore Banking Units:

i. Operations of foreign branches and off shore banking unit are classified as "Non-integral foreign operations" and operations of representative offices abroad are classified as "integral foreign operations"

ii. Foreign currency transactions of integral foreign operations and non-integral foreign operations are accounted for as prescribed by AS-11.

iii. Exchange Fluctuation resulting into Profit / loss of non-integral operations is credited /debited to Exchange Fluctuation Reserve.

10. TAXES ON INCOME

Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - Accounting for Taxes on Income respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.

Deferred Tax adjustments comprises of changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognized by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognized in the profit and loss account. Deferred tax assets are recognized and re-assessed at each reporting date, based upon management’s judgment as to whether their realization is considered as reasonably/virtually certain.

11. Earnings per Share:

The Bank reports basic and diluted earnings per share in accordance with AS 20 -‘Earnings per Share’ issued by the ICAI. Basic Earnings per Share are computed by dividing the Net Profit after Tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding for the year.

12. Provisions, Contingent Liabilities and Contingent Assets:

- In conformity with AS 29, “Provisions, Contingent Liabilities and Contingent Assets”, issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when it has a present obligation as a result of a past event, and would result in a probable outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

- Contingent Assets are not recognized in the financial statements.

13. Bullion Transactions:

The Bank imports bullion including precious metal bars on a consignment basis for selling to its customers. The imports are typically on a back-to-back basis and are priced to the customer based on price quoted by the supplier. The Bank earns a fee on such bullion transactions. The fee is classified under commission income. The Bank also accepts deposits and lends gold, which is treated as deposits/advances as the case may be with the interest paid / received classified as interest expense/income.

14. Segment Reporting

The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in compliance with the Accounting Standard 17 issued by ICAI.

4c. Sale and transfers to / from HTM category

The total value of sales and transfers of securities to / from HTM category during 1st April 2017 to 31^st March, 2018 has exceeded 5% of the book value of investments held in HTM category as on 31.03.2017 (Excluding following Transactions).

{The 5 percent threshold referred to above will exclude (a) the one- time transfer of securities to/ from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning of the accounting year (b) sales to the Reserve Bank of India under preannounced OMO auctions, (c) Repurchase of Government Securities by Government of India from banks, (d) Sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM at the beginning of April, July, October 2017 and January 2018 in addition to the shifting permitted at the beginning of the accounting year, i.e. April, 2017}

The above Trades are Interest Rate Swap Deal done with Interbank for Rs, 319.83 Crores (Previous year Rs, 348.72 crores) and Financial Institution Rs, 19.83 Crores (Previous year Rs, 23.72 Crores). Credit Risk (Credit Exposure) for Current Year is Rs, 9.77 Crore and for previous year it was Rs, 12.25 Crore. There are total 14 deals out of which 02 deals are Back to Back Deals, 02 Deals where payment is made at Fixed Contract Rate and received at Floating rate and in remaining 10 deals, payment is made at Floating Rate and received at Fixed Contract Rate.

5c. Disclosure on risk exposure In derivatives

I - Qualitative Disclosure

The Bank uses derivatives products for hedging its own balance sheet items as well as for trading purposes. The risk management of derivative operation is headed by a senior executive, who reports to top management, independent of the line functions. Trading positions are marked to market on daily basis.

The derivative policy is framed by Integrated Risk Management Division, which includes measurement of credit risk and market risk.

The hedge transactions are undertaken for balance sheet management. Proper system for reporting and monitoring of risks are in place. Policy for hedging and processes for monitoring the same is in place.

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.

MSME

"Note-column No. 6 includes:

1. Rs, 211.16 lac decrease in o/s of sub-Standard advances is on account of netting of recovery and additional debit/ facility for 4 downgraded account which is continued as restructured account.

2. Decrease in provision of sub-standard assets of Rs, 405.93 lac is on account of netting of increase & decrease in additional provision, DFV & FITL of downgraded account which is continued as restructured account;

3. Decrease in o/s of doubtful assets for Rs, 300.01 lac is on account of netting of recovery and additional facility/debit for existing doubtful accounts;

4. Decrease in o/s of doubtful assets of Rs, 835.79 lac is on account of netting of recovery and additional debit/facility for 6 accounts downgraded from Std / sub-std to doubtful category;

5. Decrease in provision of doubtful assets of Rs, 918.96 lac is on account of netting of increase & decrease in additional provision, DFV & FITL of 6 downgraded account which is continued as restructured account;

6. Rs, 245.37 lac decrease in o/s of eligible Standard advances is on account of netting of recovery and additional debit/ facility;

7. Decrease in provision of standard assets of Rs, 650.95 lac is on account of netting of increase & decrease in DFV & FITL of existing std accounts

Column no. 2 includes;

8. Rs, 3.67 lac increase in o/s of sub-Standard advances on account of netting of recovery and additional debit/ facility;

9. Increase in provision of sub-standard assets of Rs, 8.34 lac on account of netting of increase & decrease in DFV & FITL of existing sub-std accounts

NON CDR

1. Figure under Serial No. 2 (Fresh Restructuring during the period), in Sub Standard column, the amount given is on account of increase of Rs,13833.08 Lakh in balance outstanding in existing sub standard accounts. Likewise, amount of Rs,5357.93 lakh is on account of increase in balance outstanding in Loss Asset account.

2 Figures under Serial No. 6 (write off of restructured accounts), includes decrease of Rs,65570.51 lakh and Rs,16780.73 lakh in outstanding and provision, in eligible standard accounts, during the period. Figures under Serial No.6 (Write off of restructured accounts), In Sub Standard Accounts, is decrease in balance against Provision, includes Rs,14087.97 lakh in existing sub standard accounts. Likewise, in doubtful accounts category, outstanding includes decrease of Rs,63.97 lakh (outstanding) in existing doubtful accounts and Rs,70042.16 lakh of fresh slipped (DB) accounts from Standard Category. In loss accounts category, Rs,1020.63 Lakh is the decrease in the provision of 1-account.

3 Figures under serial no. 5 (down-gradation of restructured accounts ), in Sub Standard Column, the amount outstanding includes Rs,70228.02 lakh and provision includes Rs,239.66 lakh, in 9-accounts, which are slippage from ineligible standard accounts to sub standard. Likewise, in Doubtful Account, outstanding includes Rs,7070.28 lakh in outstanding in 1-account, which has slipped from ineligible standard accounts to DB category. In Loss Category Accounts, one account slipped from ineligible standard category to Loss category, with amount outstanding of Rs,14948.00 lakh.

9c. Risk Category wise Country Exposure

Total Net Funded Exposure as on 31.03.2018 is Rs, 48993.04 Crores. Total assets of the bank as on 31.12.2017 were Rs, 771277.72 Crores, 1% of which comes to Rs, 7712.78 Crore. Total net funded exposure of two countries namely Hongkong and UAE are Rs, 9868.70 Crore & Rs, 16946.50 Crore respectively, is more than 1% of the total assets of the Bank as on 31.12.2017 i.e. Rs, 7712.78 Crore. In case total net funded exposure of the bank on Hong Kong & UAE happens to be more than 1% of total assets as on

31.03.2018, provision of Rs, 13.07 Crore for Hongkong and Rs, 21.67 Crore for UAE has been made in terms of RBI guidelines. As per Export Credit Guarantee Corporation of India(ECGC) classification, Hong Kong country is in the Insignificant Risk Category i.e. A1 and UAE is in the Low Risk Category i.e. A2.

9d. Bank’s Disclosure in respect of Credit Exposures where the same had exceeded the Prudential Exposure limits prescribed by RBI for Individual/Group Borrowers during 01.04.2017 to 31.03.2018.

“The Bank has not exceeded prudential exposure ceilings in respect of any Group Accounts and Individual Borrowers during the period 01.04.2017 to 31.03.2018 except M/S HDFC Ltd”.

Other Disclosures required by Accounting Standards

11. AS -5 Prior Period and Change in Accounting Policy

There were no material prior period income/expenditure items requiring disclosure under AS-5.

13. AS- 9 Revenue Recognition:

Certain items of income are recognized on realization basis as per Accounting Policy No. 3(5). However, the said income is not considered to be material.

17. 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) Mrs. Usha Ananthasubramanian, Managing Director

& CEO, Remained upto 05.05.2017.

ii) Shri Sunil Mehta, Managing Director & CEO, w.e.f.

05.05.2017.

iii) Shri K.V. Brahmaji Rao, Executive Director

iv) Dr. Ram S. Sangapure, Executive Director, Remained upto 28.02.2018.

v) Shri Sanjiv Sharan, Executive Director.

vi) Shri L. V. Prabhakar, Executive Director, w.e.f.

01.03.2018.

Subsidiaries:

i) PNB Gilts Ltd.

ii) Punjab National Bank (International) Ltd., UK.

iii) PNB Investment Services Ltd.

iv) Druk PNB Bank Ltd, Bhutan.

v) PNB Insurance Broking Pvt Ltd*.

*Steps are being taken for winding up of the company as the license has already been surrendered on 14.02.2011.

Associates:

i) Principal PNB Asset Management Company Pvt. Ltd.

ii) Principal Trustee Company Private Limited.

iii) PNB Metlife India Insurance Company Ltd.

iv) PNB Housing Finance Ltd.

v) JSC (Tengri Bank) Almaty, Kazakhstan .

vi) Madhya Bihar Gramin Bank, Patna.

vii) Sarva Haryana Gramin Bank, Rohtak.

viii) Himachal Pradesh Gramin Bank, Mandi.

ix) Punjab Gramin Bank, Kapurthala.

x) Sarva UP Gramin Bank, Meerut.

Joint Venture:

i) Everest Bank Limited, Kathmandu, Nepal.

The deferred tax assets Rs, 7113.72 crore for FY 2017-18 (Rs, 1483.56 crore) is credited to Profit and Loss Account.

20. AS 23- Accounting for Investments in Associates in Consolidated financial Statements

Since Investments of the bank in its Associates are participative in nature and the Bank having the power to exercise significant influence on their activities, such Investments are recognized in the Consolidated Financial Statements of the Bank.

21. AS 24 - Discontinuing Operations

During the period from 01.04.2017 to 31.03.2018, the bank has not discontinued operations of any of its branches, which resulted in shedding of liability and realization of the assets and no decision has been finalized to discontinue an operation in its entirety which will have the above effect.

22. AS 28 - Impairment of Assets

A substantial portion of the bank’s assets comprises ‘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 31.03.2018 requiring recognition in terms of the said standard.

*Excluding provisions for others Figures in brackets relate to previous year.

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.

commitments as and when they fall due.

Apart from the above, the Bank has not issued any Letter of Comfort and therefore there are no cumulative Financial obligations under Letter of Comfort.

The Prudential Regulatory Authority (PRA), regulator of UK, has vide its letter dated 02.09.2015 put the Bank under ‘watch list’. There are no specific restrictions or penalties. PNB infused fresh capital of USD 20 million on 2^nd June 2017 to help it to meet the minimum regulatory capital requirements.

31. Reward Points of Credit Card & Debit Card

i) PNB Global Credit & Debit Cardholders are rewarded as and when they make purchases through usage of Credit & Debit Card. Reward Points are generated at the time of usage of Credit & Debit 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.

*The provision held against Rewards points in respect of Credit Cards has been worked out at Rs, 0.50 for 1 point. Based on past trend of redemption, provision has been made @ 25% of accumulated Reward points on estimated basis as in the previous year.

*The provision held against Loyalty Reward points has been worked at Rs,.0.25 for 1 point, which has further been valued at 15% on estimated basis as in the previous year.

33. Credit Default Swaps

Since the Bank is not using any proprietary pricing model for pricing CDS contracts, and it is over the counter contract (OTC), the price is determined by the market dynamics. As such no disclosure is to be made in terms of extant RBI guidelines.

34. Transfers to Depositor Education and Awareness Fund (DEAF):

In compliance to RBI Circular No. DBOD.NO. DEAF. CELL. BC.114/30.01. 002/2013-14 dated 27.05.2014, the Bank has transferred the following amount to RBI, as per Depositor Education and Awareness Scheme, 2014.

35. Unhedged Foreign Currency Exposure (UFCE):

The Bank has framed a policy to manage currency induced credit risk and has been incorporated in current bank’s Credit Management & Risk Policy as follows:

“In terms of RBI guidelines Bank monitors the currency wise Un-hedged Foreign Currency Exposure in the books of borrowers at quarter ends along-with the Annualized Earnings before Interest & Depreciation (EBID). The incremental provision (ranging from 0 to 80 bps on total credit exposure, over and above the standard asset provisioning) and capital requirement will depend on likely loss (due to foreign currency fluctuation), that borrowers may face due to their un-hedged forex exposure in their books. Bank maintains separate charge and provisioning requirement on account of such exposures which may impact the cost to the borrowers. Appropriate disclosures in the financial statements of the bank shall also be made.”

*1. PNB Housing Finance Ltd. 2. PNB Gilts Ltd. 3. Principal PNB Asset Management Co. Pvt. Ltd. 4. PNBIL LTD. 5. DRUK PNB BANK LTD

37. Liquidity Coverage Ratio (LCR)

QUALITATIVE DISCLOSURE ON LIQUIDITY COVERAGE RATIO

The bank has implemented RBI guidelines on Liquidity Coverage Ratio (LCR) from 1^st January 2015.

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (HQLAs) that can be readily converted into cash at little/no loss of value to meet its liquidity needs for a 30 calendar day time horizon under a liquidity stress scenario.

LCR has two components:

i. The value of the stock of High Quality Liquid Assets (HQLA) - The Numerator.

ii. Total Net Cash Outflows: Total expected cash outflows minus Total expected cash inflows, in stress scenario, for the subsequent 30 calendar days - The denominator.

Stock of high quality liquid assets (HQLAs) _

^ 100%

Total net cash outflows over the next 30 calendar days

For Q4 FY’2017-18, the daily average LCR was 111.23% (based on simple average of daily observations) at consolidated level, as against the regulatory requirement of 90%.

The main drivers of LCR of the bank are High Quality Liquid Assets (HQLAs) to meet liquidity needs of the bank at all times and basic funding from retail and small business customers. The retail and small business customers contribute about 69.01% of total deposit portfolio of the bank which attracts low run-off factor of 5/10%.

Composition of High Quality Liquid Assets (HQLA)

HQLAs comprises Level 1 and Level 2 assets. Level

2 assets are further divided into Level 2A and Level 2B assets, keeping in view their marketability.

Level - 1 asset are those assets which are highly liquid. For quarter ended March 31, 2018, the Level-1 asset of the bank includes Cash in Hand, Excess CRR, Government Securities in excess of minimum SLR, Marketable securities issued or guaranteed by foreign sovereign, MSF and FALLCR totaling to Rs, 98548.64 cr (based on simple average of daily observations).

This metric includes those sources of funding; whose withdrawal could trigger liquidity risks. It aims to address the funding concentration of bank by monitoring its funding requirement from each significant counterparty and each significant product / instrument. As per RBI guidelines, a “significant counterparty/Instrument/product” is defined as a single counterparty/Instrument/product or group of connected or affiliated counter-parties accounting in aggregate for more than 1% of the bank’s total liabilities.

Total deposits mobilized from significant counterparty(s) was 1.42% (March 31, 2017: Nil) of total liabilities of the Bank as at March 31, 2018. Top 20 depositors of the bank constitute 4.48% of bank’s total liabilities as at March 31, 2018. The significant product/ instrument includes Saving Fund, Current deposit, Core Term Deposit, and Inter-bank term deposit, the funding from which are widely spread and cannot create concentration risk for the bank.

Derivative exposure

The bank has low exposure in derivatives having negligible impact on its liquidity position.

Currency Mismatch

As per RBI guidelines, a currency is considered as “significant” if the aggregate liabilities denominated in that currency amount to 5 per cent or more of the bank’s total liabilities. In our case, only USD (9.09% of bank’s total liabilities) falls in this criteria whose impact on total outflows in LCR horizon can be managed easily as the impact is minuscule considering the size of balance sheet of the bank.

Degree of centralization of liquidity management and interaction between group’s units

The group entities are managing liquidity on their own. However, the bank has put in place a group-wide contingency funding plan to take care of liquidity requirement of the group as a whole in the stress period.

---

Mar 31, 2017

1. IMPAIRMENT OF ASSETS

The carrying costs of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors.

An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.

After impairment, if any, depreciation is provided on the revised carrying cost of the asset over its remaining useful life.

A previously recognized impairment loss is increased or reversed depending on changes in circumstances.

However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

2. EMPLOYMENT BENEFITS

- PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contribution are charged to Profit & Loss A/c.

- GRATUITY:

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

- PENSION:

Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

The Bank operates a New Pension Scheme (NPS) for all officers/ employees joining the Bank on or after 01.04.2010. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with a matching contribution from the Bank. Pending completion of registration procedures of the employees concerned, these contributions are retained. The Bank recognizes such annual contributions as an expense in the year to which they relate. Upon receipt of the Permanent Retirement Account Number (PRAN), the consolidated contribution amounts are transferred to the NPS Trust.

- COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave (PL) and Sick Leave (including unveiled casual leave) are provided for based on actuarial valuation.

- OTHER EMPLOYEE BENEFITS:

Other Employee Benefits such as Leave Fare Concession (LFC), Silver Jubilee Award, etc. are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective countries.

3. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS & BALANCES:

Transactions involving foreign exchange are accounted for in accordance with AS 11, “The Effect of Changes in Foreign Exchange Rates”.

4 Except advances of erstwhile London branches which are accounted for at the exchange rate prevailing on the date of parking in India, all other monetary assets and liabilities, guarantees, acceptances, endorsements and other obligations are initially recorded at a notional rate and translated in Indian Rupee equivalent at the exchange rates prevailing as on the Balance Sheet date as per Foreign Exchange Dealers'' Association of India (FEDAI) guidelines.

5 Non-monetary items other than fixed assets which are carried at historical cost are translated at exchange rate prevailing on the date of transaction.

6 Outstanding Forward exchange spot and forward contracts are translated as on the Balance Sheet date at the rates notified by FEDAI and the resultant gain/loss on translation is taken to Profit & Loss Account.

Foreign exchange spot/forward contracts/deals (Merchant and Inter-bank) which are not intended for trading/Merchant Hedge and are outstanding on the Balance Sheet date, are reverse re-valued at the closing FEDAI spot/forward rate in order to remove revaluation effect on exchange profit. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the life of the contract.

7 Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.

Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognized as income or as expense in the period in which they arise.

Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/losses are recognized in the Profit and Loss Account.

8 Offices outside India / Offshore Banking Units:

i. Operations of foreign branches and off shore banking unit are classified as "Non-integral foreign operations" and operations of representative offices abroad are classified as "integral foreign operations"

ii. Foreign currency transactions of integral foreign operations and non-integral foreign operations are accounted for as prescribed by AS-11.

iii. Exchange Fluctuation resulting into Profit / loss of non-integral operations is credited /debited to Exchange Fluctuation Reserve.

9. TAXES ON INCOME

Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - Accounting for Taxes on Income respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.

Deferred Tax adjustments comprises of changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognized by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognized in the profit and loss account. Deferred tax assets are recognized and re-assessed at each reporting date, based upon management''s judgment as to whether their realization is considered as reasonably/virtually certain.

10. Earnings per Share:

The Bank reports basic and diluted earnings per share in accordance with AS 20 -‘Earnings per Share'' issued by the ICAI. Basic Earnings per Share are computed by dividing the Net Profit after Tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding for the year.

11. Provisions, Contingent Liabilities and Contingent Assets:

- In conformity with AS 29, “Provisions, Contingent Liabilities and Contingent Assets”, issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when it has a present obligation as a result of a past event, and would result in a probable outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

- Contingent Assets are not recognized in the financial statements.

12. Bullion Transactions:

The Bank imports bullion including precious metal bars on a consignment basis for selling to its customers. The imports are typically on a back-to-back basis and are priced to the customer based on price quoted by the supplier. The Bank earns a fee on such bullion transactions. The fee is classified under commission income. The Bank also accepts deposits and lends gold, which is treated as deposits/advances as the case may be with the interest paid / received classified as interest expense/income.

13. Segment Reporting

The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in compliance with the Accounting Standard 17 issued by ICAI.

14c. Sale and transfers to / from HTM category

The total value of sales and transfers of securities to / from HTM category during 1st April 2016 to 31st March, 2017 has exceeded 5% of the book value of investments held in HTM category as on 31.03.2016 (Excluding following Transactions).

{The 5 percent threshold referred to above will exclude

(a) the one- time transfer of securities to/ from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning of the accounting year (b) sales to the Reserve Bank of India under pre-announced OMO auctions, (c) Repurchase of Government Securities by Government of India from banks, (d) Sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM at the beginning of April, July, October 2016 and January 2017, in addition to the shifting permitted at the beginning of the accounting year, i.e. April, 2016}

Disclosure in terms of extant RBI guidelines (excess of book value over market value for which provision is not made) is as follows:

The above Trades are Interest Rate Swap Deal done with Interbank for Rs. 348.72 Crores (Previous year Rs. 1173.72 crores) and Financial Institution Rs. 23.72 Crores (Previous year Rs. 23.72 Crores). Credit Risk (Credit Exposure) for

Current Year is Rs. 12.25 Crore and for previous year it is Rs. 22.72 Crore. There are total 14 deals out of which 2 deals are Back to Back Deals, 2 Deals where payment is made at Fixed Contract Rate and received at Floating rate and in remaining 10 deals, payment is made at Floating Rate and received at Fixed Contract Rate.

5c. Disclosure on risk exposure in derivatives

I - Qualitative Disclosure

1. Bank discusses their risk management policies pertaining to derivatives with particular reference to the extent to which derivatives are used, the associated risks and business purposes served. The discussion also include:

a. The structure and organization for management of risk in derivative trading.

b. The scope and nature of risk measurement, risk reporting and risk monitoring systems.

c. Policies for hedging and/or mitigating risks and strategies and processes for monitoring the continuing effectiveness of hedges/mitigates; and

d. 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.

9c. Risk Category wise Country Exposure

Total Net Funded Exposure as on 31.03.2017 isRs,45931.04 Crores. Total assets of the bank as on 31.12.2016 wereRs,713975.31 Crores, 1% of which isRs,7139.75 Crore. Total net funded exposure of two countries namely Hong Kong & UAE amounting toRs,9325.40 Crore &Rs,8900.38 Crore respectively, is more than 1 % of the total assets of the Bank as on 31.12.2016. Total net funded exposure of the bank on Hong Kong & UAE is more than 1% of total assets as on 31.03.2017 also. Hence provision ofRs,12.15 Crore for Hong Kong andRs,13.23 Crore for UAE has been made in terms of RBI guidelines. As per Export Credit Guarantee Corporation of India(ECGC) classification, Hong Kong is in the Insignificant Risk Category i.e. A1 and UAE is in the Low Risk Category i.e. A2.

*As certified by the Management

9d. Bank’s Disclosure in respect of Credit Exposures where the same had exceeded the Prudential Exposure limits prescribed by RBI for Individual/ Group Borrowers during 01.04.2016 to 31.03.2017.

“The Bank has not exceeded prudential exposure ceilings in respect of any Group Accounts and Individual Borrowers during the period 01.04.2016 to 31.03.2017.”

10. Disclosure of penalties imposed by the RBI:

a. During the period 01.04.2016 to 31.03.2017, Reserve Bank of India (RBI) has imposed an aggregate penalty of Rs. 30 million ( Rs. Thirty Million only) on the bank in exercise of powers conferred under Section 47 (A) (1) (c) read with Section 46(4) (i) of the Banking Regulation Act 1949.

The Bank has taken necessary preventive measures/ comprehensive action plan to avoid its recurrence.

(The above data is as certified by the Management)

b. The following SGL securities were bounced during the period ended 31.03.2017 (w.e.f. 01.04.2016 to 31.03.2017).

* Bouncing due to shortage in Principal A/c of RBI E-Kuber. However, Rs. 1,800.00 Crore of Security was available with the Bank in other folder of RBI E-Kuber maintained with RBI.

** Similar nomenclature of two different securities has caused this error. Balance in Security 8.62 MH SDL 2023 (ISIN: IN2220120116) was available but the deal was done for 8.62 MH SDL 2023 (ISIN: IN2220120108).

RBI had imposed a Penalty of Rs. 1.00 Lacs for bouncing of this SGL dated 09.03.2017 for which RBI has debited our Account on 12.05.2017 and said Penalty on SGL bouncing stands paid.

Other Disclosures required by Accounting Standards

11. AS -5 Prior Period and Change in Accounting Policy

There were no material prior period income/expenditure items requiring disclosure under AS-5.

12. AS- 6 Depreciation accounting

Break up of total depreciation for the year ended March, 2017 for each class of assets

13. AS- 9 Revenue Recognition:

Certain items of income are recognized on realization basis as per Accounting Policy No. 3(5). However, the said income is not considered to be material.

14. AS 11- Changes in foreign exchange rates: Movement of foreign currency translation reserve

15. AS 15 - Employees Benefits:

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 employment benefits is as under:

B. Defined Contribution Plans

The Bank has Defined Contribution Plan applicable to all categories of employees joining the Bank on or after 01.04.2010. The scheme is managed by NPS trust under the aegis of the pension Fund Regulatory and Development Authority. National Securities Depository Limited has been appointed as the Central Record Keeping Agency for the NPS. During the FY 2016-17, the Bank has contributed Rs 113.16 crores (Previous year Rs 87.17 cr)

C. Changes in Fair Valuation of Plan Assets

In accordance with AS-15 issued by ICAI, during the year while considering the fair value of plan assets relating to pension and gratuity fund being long term benefits of employees, interest accrued on investments has also been taken into account as against principal amount in earlier years. Consequent to this, employer contribution to pension and gratuity funds representing excess of fair value of plan assets over present value of obligation amounting to Rs.2026.60 crores has been credited to “Payments to and Provisions for Employees- Employee Cost ” during the year. Figures of previous year are not comparable to that extent.

Note:

Segment Liabilities are distributed in the ratio of their respective Segment Assets.

Figures of the previous period have been re-grouped /reclassified wherever necessary to make them comparable.

17. 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) Mrs. Usha Ananthasubramanian, Managing Director & CEO

ii) Shri K.V.Brahmaji Rao, Executive Director.

iii) Dr .Ram S.Sangapure, Executive Director.

iv) Shri Sanjiv Sharan, Executive Director ( w.e.f. 15.09.2016)

Subsidiaries:

i) PNB Gilts Ltd.

ii) Punjab National Bank (International) Ltd., UK

iii) PNB Investment Services Ltd.

iv) Druk PNB Bank Ltd, Bhutan.

v) PNB Insurance Broking Pvt Ltd*.

Associates:

i) Principal PNB Asset Management Company Pvt. Ltd.

ii) Principal Trustee Company Private Limited

iii) PNB Metlife India Insurance Company Ltd.

iv) PNB Housing Finance Ltd.

v) JSC Tengri Bank, Almaty, Kazakhstan

vi) Madhya Bihar Gramin Bank, Patna.

vii) Sarva Haryana Gramin Bank, Rohtak

viii)Himachal Pradesh Gramin Bank, Mandi

ix) Punjab Gramin Bank, Kapurthala

x) Sarva UP Gramin Bank, Meerut.

*Steps are being taken for winding up of the company as the license has already been surrendered on 14.02.2011.

Joint Venture:

Everest Bank Limited, Kathmandu, Nepal

21. AS 23- Accounting for Investments in Associates in Consolidated financial Statements

Since Investments of the bank in its Associates are participative in nature and the Bank having the power to exercise significant influence on their activities, such Investments are recognized in the Consolidated Financial Statements of the Bank.

22. AS 24 - Discontinuing Operations

During the period from 01.04.2016 to 31.03.2017, the bank has not discontinued operations of any of its branches, which resulted in shedding of liability and realization of the assets and no decision has been finalized to discontinue an operation in its entirety which will have the above effect.

23. AS 28 - Impairment of Assets

A substantial portion of the bank''s 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 31.03.2017 requiring recognition in terms of the said standard.

24. AS-29 Provisions, Contingent Liabilities and Contingent Assets

*Excluding provisions for others Figures in brackets relate to previous year.

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.

* Out of 15564 complaints, 315 complaints other than ATM stands resolved as on date.

** Appeal filed in both the cases

The awards passed by the BO as stated above are those where appeals have been filed, the consolidation of data received from various offices regarding of status of awards filed is in progress.

The Bank is in the process of implementing centralized controls to ensure that data of complaints and awards is generated automatically for reporting.

29. The Bank has issued a Letter of Comfort to Prudential Regulation Authority (PRA), the regulator in United Kingdom, committing that the bank shall provide financial support to its subsidiary, Punjab National Bank (International) Ltd., UK so that it meets its financial commitments as and when they fall due.

The Prudential Regulatory Authority (PRA), regulator of UK, has vide its letter dated 02.09.2015 put the Bank under ‘watch list''. There are no specific restrictions or penalties. PNB infused fresh capital of USD 100 million on 31st March 2017 to help it to meet the minimum regulatory capital requirements.

Apart from the above, the Bank has not issued any Letter of Comfort and therefore there are no cumulative Financial obligations under Letter of Comfort.

32. Reward Points of Credit Card & Debit Card

i. PNB Global Credit & Debit Cardholders are rewarded as and when they make purchases through usage of Credit & Debit Card. Reward Points are generated at the time of usage of Credit & Debit 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.

*The provision held against Rewards points in respect of Credit Cards has been worked out atRs,0.50 for 1 point. Based on past trend of redemption, provision has been made @ 25% of accumulated Reward points on estimated basis as in the previous year.

*The provision held against Loyalty Reward points has been worked atRs,0.25 for 1 point, which has further been valued at 15% on estimated basis as in the previous year.

34. Credit Default Swaps

Since the Bank is not using any proprietary pricing model for pricing CDS contracts, and it is over the counter contract (OTC), the price is determined by the market dynamics. As such no disclosure is to be made in terms of extant RBI guidelines.

35. Transfers to Depositor Education and Awareness Fund (DEAF):

In compliance to RBI Circular No.DBOD.NO.DEAF. CELL.BC.114/30.01.002/2013-14 dated 27.05.2014, the Bank has transferred the following amount to RBI, as per Depositor Education and Awareness Scheme, 2014.

*Reflected as "Contingent Liability - Others, items for which the bank is

contingently liable" under Schedule 12 of the financial statements.

36. Unhedged Foreign Currency Exposure (UFCE):

The Bank has framed a policy to manage currency induced credit risk and has been incorporated in bank''s Credit Management & Risk Policy 2017-18 as follows:

“In terms of RBI guidelines Bank should monitor the currency wise Un-hedged Foreign Currency Exposure in the books of borrowers at quarter ends along-with the Annualized Earnings Before Interest & Depreciation (EBID). The incremental provision (ranging from 0 to 80 bps on total credit exposure, over and above the standard asset provisioning) and capital requirement will depend on likely loss (due to foreign currency fluctuation), that borrowers may face due to their un-hedged forex exposure in their books. Bank shall maintain separate charge and provisioning requirement on account of such exposures which may impact the cost to the borrowers. Appropriate disclosures in the financial statements of the bank shall also be made.”

^Atonal exposure of the bank are Rs. 556869.31 crores as on 31.03.2017.

38. Liquidity Coverage Ratio

QUALITATIVE DISCLOSURE ON LIQUIDITY COVERAGE RATIO

The bank has implemented RBI guidelines on Liquidity Coverage Ratio (LCR) from 1st January 2015.

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (HQLAs) that can be readily converted into cash at little/no loss of value to meet its liquidity needs for a 30 calendar day time horizon under a liquidity stress scenario.

LCR has two components:

i. The value of the stock of High Quality Liquid Assets (HQLA) - The Numerator.

ii. Total Net Cash Outflows: Total expected cash outflows minus Total expected cash inflows in stress scenario for the subsequent 30 calendar days - The denominator.

Definition of LCR:

Stock of high quality liquid assets (HQLAs)

-- 100%

Total net cash outflows over the next 30 calendar days

The LCR requirement has become binding on the banks with the following minimum required level as per the time-line given below:

As at 31.03.2017, against the regulatory requirement of 80%, bank is maintaining LCR at 143.16% (average of daily observation over the previous Quarter) at consolidated level (including domestic & foreign subsidiaries).

The main drivers of LCR of the bank are High Quality Liquid Assets (HQLAs) to meet liquidity needs of the bank at all times and basic funding from retail and small business customers. The retail and small business customers contribute about 69.08% of total deposit portfolio of the bank which attracts low run-off factor of 5/10%.

Composition of High Quality Liquid Assets (HQLA)

HQLAs comprises of Level 1 and Level 2 assets. Level

2 assets are further divided into Level 2A and Level 2B assets, keeping in view their marketability.

Level-1 assets are those assets which are highly liquid. For quarter ended Mar 31, 2017, the daily observation average over the previous quarter Level-1 asset of the bank includes Cash in Hand, Excess CRR, Government Securities in excess of SLR, sovereign securities besides MSF & FALLCR and Marketable securities totaling Rs. 135969.40 cr.

Concentration of Funding Sources

This metric includes those sources of findings, whose withdrawal could trigger liquidity risks. It aims to address the funding concentration of bank by monitoring its funding requirement from each significant counterparty and each significant product / instrument. As per RBI guidelines, a "significant counterparty/Instrument/product" is defined as a single counterparty/Instrument/product or group of connected or affiliated counter-parties accounting in aggregate for more than 1% of the bank''s total liabilities.

The bank has no significant counterparty (deposits/ borrowings) as on 31.03.2017. The share of largest depositor in bank''s total deposits is around 0.29% whereas the contribution of top 20 depositors is around 3.29% only. The significant product / instrument includes Saving Fund, Current deposit, Core Term Deposit, and Inter-bank term deposit, the funding from which are widely spread and cannot create concentration risk for the bank.

Derivative exposure

The bank has low exposure in derivatives having negligible impact on its liquidity position.

Currency Mismatch

As per RBI guidelines, a currency is considered as “significant” if the aggregate liabilities denominated in that currency amount to 5 per cent or more of the bank''s total liabilities. In our case, only USD (8.63% of bank''s total liabilities) falls in this criteria whose impact on total outflows in LCR horizon can be managed easily.

Degree of centralization of liquidity management and interaction between group’s units

The group entities are managing liquidity on their own. However, the bank has put in place a group-wide contingency funding plan to take care of liquidity requirement of the group as a whole in the stress period.

QUANTITATIVE DISCLOSURES

QUANTITATIVE DISCLOSURE ( On consolidated basis (including domestic & foreign subsidiaries)

39. 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 31.03.2012, to be transferred to a Blocked Account. Accordingly, a sum ofRs,28.35 crores (net of adjustments since carried out) has been included under “Other Liabilities-others” in Schedule-5.

No claim has been received during the period ended March 2017 (01.04.2016 to 31.03.2017) against Inter Branch Credit entries, Blocked and transferred to General Ledger.

b. During the current financial year the Bank has revalued immovable properties (forming part of Schedule 10) based on the reports obtained from external independent valuers. The revaluation surplus amounting toRs,964.24 crore is credited to revaluation reserve.

c. Premises includes properties amounting toRs,2.75 crore (Net of Depreciation) (previous yearRs,1.66 crore) {CostRs,7.47 crore} (previous yearRs,7.47 crore) having revalued amount ofRs,104.68 crore (Net of Depreciation up to March 17), are awaiting registration of title deeds. Premises include capital work in progress ofRs,340.32 crore (previous yearRs,238.85 crore).

d. Tax Paid in advance/Tax deducted at source appearing under “Other Assets includes disputed amount adjusted by the department/paid by the Bank in respect tax demands for various assessment years.

No provision is considered necessary in respect of disputed Income Tax demand ofRs,674.50 Crore (previous yearRs,1155.79 Crore) as in the bank''s view, duly supported by expert opinion and/or decision in bank''s own appeals on same issues, additions / disallowances made are not sustainable. Against these disputed demands,Rs,674.50 crores (previous yearRs,1155.79 crores) has been paid.

e. During the Financial Year 2016-17 the bank has allotted 164370768 equity shares ofRs,2/- each to Government of India at a premium ofRs,126.49 per share as determined by the Board in terms of the Chapter VII of the SEBI (ICDR) Regulations, 2009, as amended from time to time on preferential basis. The total amount received by the bank on this account isRs,2112 crores which includesRs,32.87 crores as equity capital andRs,2079.13 crores as premium. Consequently the Government holding has increased to 65.01 % as against 62.08% before preferential allotment.

f. The guidelines given in Micro, Small and Medium Enterprises Development Act 2006 have been complied with for purchases made during the Financial Year 2016- 2017 and payments have been made to the Vendors in time as per Act. Since there had been no delay in payment, so no penal interest has been paid in FY 2016-17.

g. Information under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, in terms of the provisions of Regulation 52(4) for unsecured bonds issued by bank excluding Debt instruments eligible for meeting capital requirement.

h. In compliance of RBI letter no. DBR. NO.BP.13018/21.04.048/2015-16 dated 12.04.2016, Bank has made a provision ofRs,209.07 crore being 15 % of the existing outstanding ofRs,1393.79 crore as on 31.03.2017 in respect of restructured Food Credit advance availed by State Government of Punjab.

i. Balances in ATMs / with cash replenishing agencies is being reconciled, impact of which is not expected to be material.

j. Provisioning pertaining to fraud accounts due to amendment in provisioning norms as per RBI Circular no. RBI/2015-16/376 DBR.No.BP. BC.92/21.04.048/2015-16 dated 18.04.2016:

k. The Strategy for IND AS Implementation

IND AS roadmap for scheduled commercial banks (excluding regional rural banks), insurers/insurance companies and non-banking financial companies (NBFCs) was issued by Union Ministry of Corporate Affairs (MCA) through press release dated 18 January

2016. IND AS is applicable to the Bank in accordance with the MCA press release from financial year 201819. In pursuance to this Reserve Bank of India (RBI) had issued notification (RBI/2015-16/315DBR.BP.BC. No.76/21.07.001/2015-16) dated 11 February 2016 for implementation of IND AS. The Bank has commenced the process of IND AS (Indian Accounting Standards) implementation from financial year 2016-17.

A steering committee headed by the Executive Director and comprising of General Managers from various cross functional areas of the Bank to monitor the progress of the implementation is formed. The Bank has a well-planned strategy for its implementation and has made substantial progress during the year. The Bank has completed a diagnostic study to identify the differences between the current accounting framework and IND AS. Based on this diagnostic study the Bank has quantified the impact and filed the pro-forma financial statements for the half year ended September 2016 with the Reserve Bank of India. The Bank is now assessing the changes, wherever required in the core banking system. Bank has also commenced the formulation of the Expected Credit Loss Models. With the annual financial statements under the current accounting framework being finalized, the Bank will commence the preparation of the Opening Balance Sheet for the IND AS transition.

40. Figures of the previous year have been regrouped / rearranged / reclassified wherever necessary.

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Mar 31, 2015

1A. Sale and transfers to / from HTM category

The total value of sales and transfers of securities to / from HTM category during 1st April''14 to 31st March''15 has not exceeded 5% of the book value of investments held in HTM category as on 31.03.2015.

{The 5 percent threshold referred to above will exclude the one- time transfer of securities to/ from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning of the accounting year and sales to the Reserve Bank of India under pre-announced OMO auctions}

As such no disclosure is to be made in terms of extant RBI guidelines.

2A. Disclosure on risk exposure in derivatives

I - Qualitative Disclosure

1. The bank uses derivatives products for hedging its own balance sheets 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.

9c. Risk Category wise Country Exposure

Total Net Funded Exposure as on 31.03.2015 is Rs.35047.52 crore. Total assets of the bank as on 31.12.2014 were Rs.574860.12 crore, 1% of which comes to Rs.5748.60 crore. Total net funded exposure of two countries namely Hong Kong & UAE amounting to Rs.10108.46 crore & Rs.7690.88 crore respectively, is more than 1% of the total assets of the Bank as on 31.12.2014. Total net funded exposure of the bank on Hong Kong & UAE is more than 1% of total assets as on 31.03.2015 also. Hence provision of Rs.14.38 crore for Hong Kong & 9.23 crore for UAE has been made in terms of RBI Master Cir. No.DBOD.No.BP.BC.12/21.04.048/201 1- 12 dated July 1, 2011. As per Export Credit Guarantee Corporation of India(ECGC) classification, Hong Kong is in the Insignificant Risk Category i.e. A1 and UAE is in the Low Risk Category i.e. A2.

9d. 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 the period 01.04.2014 to 31.03.2015, except exposure ceiling to State Bank of India.

10. Disclosure of penalties imposed by the RBI:

During the year (01.04.2014 to 31.03.2015), no penalty has been imposed by RBI on the bank under the provision of Section 46(4) of the Banking Regulation Act, for contraventions of any of the provisions of the Act or non-compliance with any other requirements of the Banking Regulation Act, 1949; order, rule or condition specified by Reserve Bank under the said Act.

Other Disclosures required by Accounting Standards

11. AS -5 Prior Period and Change in Accounting Policy

There were no material prior period income/expenditure items requiring disclosure under AS-5. Amendments have been made in the Policy on Sale of Financial Assets, regarding treatment of loss and profit made on sale of accounts. However the change in the Policy has no impact on profit during the year from 01.04.2014 to 31.03.2015.

12. AS- 6 Depreciation accounting

Break up of total depreciation for the year ending March 2015 for each class of assets

13. 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.

15. AS 15 - Employees Benefits:

ADOPTION OF AS - 15(R):

The Bank has adopted Accounting Standard 1 5(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.

OPENING OF PENSION OPTION TO EMPLOYEES AND ENHANCEMENT IN GRATUITY LIMITS

During the year 2010-11 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 the option by 33982 employees, the bank has incurred an additional liability of Rs.2757.65 crore. Further during the year 2010- 11 the limit of gratuity payable to the employees of the banks was also enhanced pursuant to the amendment to the Payment of Gratuity Act, 1 972. As a result the gratuity liability of the Bank has increased by Rs.566.00 crore. These additional Liabilities (Rs.2757.65 crore Rs.566.00 crore, total Rs.3323.65 crore) were calculated on the basis of actuarial valuation.

As per the Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs.3323.65 crore 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 the prudential Regulatory Treatment consequent upon the Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits. In accordance with the provisions of the said Circular, the Bank had charged off Rs.664.73 crore (Rs.551.53 crore for pension and Rs.113.20 crore for gratuity) representing one-fifth of Rs.3323.65 Crore to Profit & Loss Account for this year 2014-15 (Rs.2658.92 crore already charged proportionately in previous years i.e. 2010-11 to 2013-14). The transitional liability for pension and Gratuity stands fully charged off as on date.

Further the provision for employee benefits has been calculated by the actuary on basis of pre wage revision salary.

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:

17. 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. Shri K. R. Kamath, Chairman & Managing Director (up to 27.10.2014).

ii. Shri Gauri Shankar , Executive Director ( Additional charge of Managing Director & CEO w.e.f. 09.02.2015).

iii. Shri K.V.Brahmaji Rao, Executive Director.

iv. Dr .Ram S.Sangapure, Executive Director.

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, Bhutan.

vi. PNB Insurance Broking Pvt Ltd*.

vii. JSC SB PNB Kazakhstan

Associates:

i. Principal PNB Asset Management Company Pvt. Ltd.

ii. Principal Trustee Company Private Limited

iii. PNB Metlife India Insurance Co. Ltd

iv. Madhya Bihar Gramin Bank, Patna.

v. Sarva Haryana Gramin Bank, Rohtak

vi. Himachal Pradesh Gramin Bank, Mandi

vii. Punjab Gramin Bank, Kapurthala

viii. Sarva UP Gramin Bank, Meerut.

* Steps are being taken for winding up of the company as the license has already been surrendered on 14.02.2011.

Note: Assets Care & Reconstructions Enterprise Ltd has ceased to be an Associate of the Bank w.e.f. 09.09.2014, since the share holding of Punjab National Bank has reduced to 15.30% from 30%.

Joint Venture:

i. Everest Bank Limited, Nepal

(Rs.in Crore)

Salary arrears under Legal cases/ Particulars negotiation contingencies

Balance as at 1st April 1020.00 18.21 2014

Provided during the 1.81 630.00

Amounts used during the NIL NIL period

Reversed during the 1.97 period 356.00

Balance as at 31.03.2015 1294.00 18.05

Timing of outflow/ - - uncertainties

* Excluding provisions for others

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 liability is expected in such cases.

30. The Bank has issued a Letter of Comfort to Prudential Regu- lation Authority (PRA), the regulator in United Kingdom, committing that the bank shall provide financial support to its subsidiary, Punjab National Bank (International) Ltd., UK so that it meets its financial commitments as and when they fall due. However, no financial obligation has arisen out of such arrangement during the financial year ending 31st March 2015.

The detail of Letters of Comfort / Letters of undertaking issued and outstanding as at 31st March, 2015.

V. Off-balance sheet SPVs sponsored by the Bank (which are required to be consolidated as per accounting norms) Bank has not sponsored any SPV (Domestic as well as overseas) during the financial year ended 31.3.2015.

33. Reward Points of Credit Card & Debit Card

i. PNB Global Credit & Debit Cardholders are rewarded as and when they make purchases through usage of Credit & Debit Card. Reward Points are generated at the time of usage of Credit & Debit 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.

B. QUALITATIVE DISCLOSURE ON LIQUIDITY COVERAGE RATIO

1. Main drivers of LCR

As at 31.03.2015, against the regulatory requirement of 60% of LCR, the bank is at a comfortable level of quarterly average of 96.79% at whole bank level (including foreign branches).

The main drivers of LCR of the bank are sufficient high quality liquid assets (HQLAs) to meet liquidity needs of the bank at all times and basic funding from retail and small business

72% of total deposit portfolio of the bank which attracts low run-off factor of 5/10%.

2. Intra period changes as well as changes over time

There has not been any intra period changes in LCR. However, increase in LCR on quarter ended March,2015 was due to shedding of bulk deposits and increase in quarterly inflows from Term loans.

3. Composition of High Quality Liquid Assets (HQLA)

HQLA comprises of high quality unencumbered assets that can be readily converted into cash at little/no loss of value or used as collateral to obtain funds in a range of stress scenarios. HQLAs comprises of Level 1 and Level 2 assets. Level 2 assets is further divided into Level 2A and Level 2B assets, keeping in view their price volatility.

Level-I assets are those assets which are highly liquid. As on 31.03.2015, the Level-I assets of the bank includes Cash in Hand, Excess CRR, Excess SLR, besides MSF & FALLCR totalling Rs. 62829.80 cr.

Level-2A & 2B assets are those assets which are less liquid and their weighted amount comes to Rs. 3460.45 cr.

4. Concentration of Funding Sources

This metric includes those sources of fundings, whose withdrawal could trigger liquidity risks. It aims to address the funding concentration of bank by monitoring its funding requirement from each significant counterparty and each significant product / instrument. As per RBI guidelines, a "significant counterparty/Instrument/product" is defined as a single counterparty/Instrument/product or group of connected or affiliated counterparties accounting in aggregate for more than 1% of the bank''s total liabilities.

The bank has no significant counterparty (deposits/borrowings) as at 31.03.2015.The share of largest depositor in bank''s total liability is 0.45% whereas the contribution of top 20 depositors is 4.10% only. The significant product / instrument includes Saving Fund, Current deposit, Core Term Deposit, Certificate of deposit and Inter-bank term deposit which are 25%, 5%, 41%, 1% and 2% of bank''s total liability respectively, the funding from which are widely spread and cannot create concentration risk for the bank.

5. Derivative exposure

As on 31.03.2015, the back to back swap deals are having negative MTM of Rs. 4.42 cr. while trading swap deals are having negative MTM of Rs. 13.82 cr which is not having significant impact on liquidity management.

6. Currency Mismatch

As per RBI guidelines, a currency is considered as "significant" if the aggregate liabilities denominated in that currency amount to 5 per cent or more of the bank''s total liabilities. In our case, only USD falls in this criteria which has insignificant impact on total outflows in LCR horizon.

7. Degree of centralization of liquidity management and interaction between group''s units

The group entities are managing liquidity on their own, however the bank has put in place a group-wide contingency funding plan to care of liquidity requirement of group as a whole in the time of stress.

37. Credit Default Swaps

Since the Bank is not using any proprietary pricing model for pricing CDS contracts, and it is over the counter contract (OTC), the price is determined by the market dynamics. As such no disclosure is to be made in terms of extant RBI guidelines.

38. Transfers to Depositor Education and Awareness Fund (DEAF):

In compliance to RBI Circular No. DBOD.NO.DEAF.CELL. BC.1 14/30.01.002/2031-14 dated 27.05.2014, the Bank has transferred the following amount to RBI, as per Depositor Education and Awareness Scheme, 2014.

39. Unhedged Foreign Currency Exposure (UFCE):

The Bank has framed a policy to manage currency induced credit risk and has been incorporated in bank''s Credit Management & Risk Policy 2014-15 as follows:

"In terms of RBI guidelines on ''Capital and Provisioning Requirements for Exposures to entities with Un-hedged Foreign Currency Exposure'', Bank shall monitor the currency wise un-hedged foreign currency exposure in the books of borrowers at quarter ends along-with the Annual EBID. The incremental provision (ranging from 0 to 80 bps on total credit exposure, over and above the standard asset provisioning) and capital requirement will depend on likely loss (due to foreign currency fluctuation) that borrowers may face due to their un- hedged forex exposure in their books. Bank shall maintain separate charge and provisioning requirement on account of such exposures which may impact the cost to the borrowers. Appropriate disclosures in the financial statements of the bank shall also be made."

41. 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 31.03.2010, to be transferred to a Blocked Account. Accordingly, a sum of Rs.117.98 crores (net of adjustments since carried out) has been included under "Other Liabilities-others" in Schedule-5.

Claims of Rs.0.093 lacs has been received during the period (01.04.2014 to 31.03.2015) against Inter Branch Credit entries, Blocked and transferred to General Reserve. This has been met by transfer from General Reserve Rs.0.069 lacs and Rs.0.024 lacs to debit of Profit & Loss Account.

b. Premises include properties amounting to Rs.2.99 crore (Net of Depreciation) (previous year Rs.4.34 crore) {Cost Rs.7.47crores} (previous year Rs.8.70 crore) are awaiting registration of title deeds. Premises include capital work in progress of Rs.77.24 crore (previous year Rs.26.63 crore)

c. Tax Paid in advance/Tax deducted at Source appearing under "Other Assets includes disputed amount adjusted by the department/paid by the Bank in respect tax demands for various assessment years.

No provision is considered necessary in respect of disputed Income Tax and Fringe Benefit Tax demands of Rs.1056.21 Crore (previous year Rs.800.67 crore) as in the bank''s view, duly supported by expert opinion and/or decision in bank''s own appeals on same issues, additions/disallowances made are not sustainable. Against these disputed demands, Rs.1056.21 crores (previous year Rs.800.67 crore) has been paid.

d. During the year the bank has allotted 4420731 7 equity shares of Rs.2/- each to Government of India at a premium of Rs.194.80 per share as determined by the Board in terms of the Chapter VII of the SEBI (ICDR) Regulations, 2009, as amended from time to time on preferential basis. The total amount received by the bank on this account is Rs.870 crores which includes Rs.8.84 crores as equity capital and Rs.861.16 crores as premium. Consequently the Government holding has increased to 59.86 % as against 58.87% before preferential allotment.

e. As per the information compiled by the Management, the guidelines given in Micro, Small and Medium Enterprises Development Act 2006 have been complied with for purchases made during the Financial Year 2014-15 and payments have been made to the Vendors in time as per Act. Since there had been no delay in payment so no penal interest had been paid during FY 2014-15.

10. Figures of the previous year have been regrouped/rearranged/ reclassified wherever necessary.

---

Mar 31, 2013

1a. Sale and transfers to/from HTM category

The total value of sales and transfers of securities to/from HTM category during April''12 to March''13 has not exceeded 5% of the book value of investmetns held in HTM category as on 31.03.2013. As such no disclosure is to be made in terms of extant RBI guidelnes.

1b. 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.

2a. 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 01.04.2012 to 31.03.2013".

3. 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

4. AS -5 Prior Period and Change in Accounting Policy

There were no material prior period income/expenditure items requiring disclosure under AS-5. However, with effect from 1st January ''2013 the bank has changed its policy in the order of priority in appropriating of recoveries made from Non - Performing accounts, resulting reduction of Rs. 59.44 crore in gross Non- Performing accounts as well as in profit for the financial year.

5. 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.

6. 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.

OPENING OF PENSION OPTION TO EMPLOYEES AND ENHANCEMENT IN GRATUITY LIMITS

During the year 2010-11 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 2010-11 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 were calculated on the basis of actuarial valuation.

In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs.3323.65 crores (Rs. 2757.65 cr. Rs. 566.00 cr.) were 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 had charged off Rs. 664.73 crores (Rs. 551.53 crore for pension and Rs. 113.20 crore for gratuity) representing one-fifth of Rs. 3323.65 crores to Profit & Loss Account for this year 2012-13 (Rs.1329.46 crore already charged in previous years i.e. 2010-11 & 2011-12). In terms of the requirements of the aforesaid RBI circular, the balance amount carried forward, i.e. Rs. 1329.46crores. (Rs. 3323.65 cr- Rs. 1994.19 cr.) (Rs. 1103.06 crore for pension and Rs. 226.40 crore for gratuity) 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 (2013-14 & 2014-15).

7. 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) Shri K. R. Kamath, Chairman & Managing Director

ii) Shri Rakesh Sethi, Executive Director

iii) Ms. Usha Ananthasubramanian, Executive Director

iv) Shri S.R. Bansal, Executive Director (Since18.06.2012) 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, Bhutan.

vi) PNB Insurance Broking Pvt Ltd.

vii) PNB Life Insurance Company Ltd. ***

viii) JSC SB PNB Kazakhstan Associates:

i) Everest Bank Limited, Nepal.

ii) Principal PNB Asset Management Company Pvt. Ltd.

iii) Principal Trustee Company Private Limited

iv) Assets Care & Reconstructions Enterprise Ltd.

v) India Factoring & Finance Solutions Pvt Ltd

vi) PNB Metlife India Insurance CO Ltd

vii) Madhya Bihar Gramin Bank.

viii) Haryana Gramin Bank

ix) Himachal Gramin Bank, Mandi*

x) Punjab Gramin Bank.

xi) Rajasthan Gramin Bank **

xii) Sarva UP Gramin Bank.

* Himachal Gramin Bank has been amalgamated on 15.02.2013 into a new entity Hiamchal Pradesh Gramin Bank (HPGB), Mandi. Share (Rs. 35.00lacs 97.40 lacs total Rs.132.40 lacs) of SBI in erstwhile Parvatiya Gramin Bank has not been capitulated to SBI. Hence, the stake of PNB is 26.42% in the capital of HPGB, Mandi and that of SBI is 8.58% as on 31.03.2013. **Rajasthan Gramin Bank, Alwar sponsored by our Bank has been amalgamated into new entity Baroda Rajasthan Kshetriya Gramin Bank w.e.f 01.01.2013.

PNB has received back its 35% share in Capital and Share Capital Deposit Account in erstwhile Rajasthan Gramin Bank in the month of March, 2013 amounting to Rs. 1610.27 lacs ***The Company is under liquidation and the balance of assets available with the company has been distributed amongst the shareholders. The company is finally required to be wound up by the Hon''ble High Court.

8. Accounting for Leases - AS 19 Financial Leases:

a. Original value of assets acquired on financial lease and included in other fixed assets (including furniture and fixture): Rs. 41.65 lakhs The amount of depreciation provided upto 31.03.2013 thereon: Rs. 41.65 lakhs.

The written down value as Rs. 1.00 on 31.03.2013

b. Minimum Lease Payment due not NIL later than one year:

c. Minimum Lease Payment due later than one year but not later than five years: NIL

d. Minimum Lease Payment due later than five years: NIL

e. Operating leases : NIL

9. Accounting Standard 23- Accounting for Investments in Associates in Consolidated financial Statements

Since Investments of the bank in its Associates are participative in nature and the Bank having the power to exercise significant influence on their activities , such Investments are recognized in the Consolidated Financial Statements of the Bank.

10. Accounting Standard 25- Interim Financial reporting

The Bank is adopting the format prescribed by the RBI for the purpose of half yearly review of its accounts as per RBI Circular No. DBS.ARS.No.BC 13/08.91.001/2000-01 dated 1 7th May 2001.

11. AS 28 - Impairment of Assets

A substantial portion of the bank''s 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 31.03.2013 requiring recognition in terms of the said standard.

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 liability is expected in such cases.

12. 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 201 3.

13. Reward Points of Credit Card and Debit Card

i) PNB Global Credit & Debit Cardholders are rewarded as and when they make purchase through usage of Credit & Debit Card. Reward Points are generated at the time of usage of Credit & Debit 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.

14. No SGLs were bounced during the financial year 2012-13

15. 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 31.03.2008, to be transferred to a Blocked Account. Accordingly, a sum of Rs.108.56 crores (net of adjustments since carried out) has been included under "Other Liabilities-others" in schedule-5.

Claims of Rs. 0.287 lac has been received during the year 2012-13 against Inter Branch Credit entries Blocked and transferred to General Reserve.This has been met by transfer from General Reserve Rs. 0.215 lac and Rs. 0.071 to debit of Profit and Loss Account.

b. Premises include properties amounting to Rs. 4.71 crores (Net of Depreciation) (previous year Rs.10.86 crores) {Rs. 7.88 crores} (previous year Rs.16.01 crores) are awaiting registration of title deeds. Premises include capital work in progress of Rs.173.61 crores (previous year Rs.113.76 crores).

c. No provision is considered necessary in respect of disputed Income Tax and Fringe Benefit Tax demands of Rs. 807.27 crores (previous year Rs.1160.87 crore) as in the bank''s view, duly supported by expert opinion and/or decision in bank''s own appeals on same issues, additions / disallowances made are not sustainable. Against these disputed demands, Rs. 772.37 crores (previous year Rs. 1160.87 crores) has been paid.

d. During the year the bank has allotted 14294713 equity shares of Rs.10/- each to Govt of India at a premium of Rs. 863.05 per share 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 received by the bank on this account is Rs. 1248 crores which includes Rs. 14.29 crores as equity capital and Rs. 1233.71 crores as premium. Consequently the Government holding is now 57.87% as compared to 56.10% before preferential allotment.

e. Financial impact due to change in the policy regarding appropriation of recoveries:

With effect from 1st January 2013 the bank has changed its policy in the order of priority in appropriating of recoveries made from Non -Performing accounts, resulting reduction of Rs. 59.44 crore in gross Non-Performing accounts as well as in profit for the financial year.

f. The Board of Directors has recommended dividend of Rs. 27/- per equity share of Rs. 10 each (270% of the paid up capital of the bank), subject to approval by members.

16. Credit Default Swaps

Since the Bank is not using any proprietary pricing model for pricing CDS contracts, and it is over the counter contract (OTS ) , the price is determined by the market dynamics..As such no disclosure is to be made in terms of extant RBI guidelines.

17. Figures of the previous year have been regrouped / rearranged/ reclassified wherever necessary.

---

Mar 31, 2012

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 31-03-2012 is Rs 301.10 crores (previous year Rs257.57crores).

(Figures in brackets relate to previous year)

*Others include Special Govt. Securities of Rs. 357.56 crore (net of depreciation) shown under Govt. Securities in Schedule 8.

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

1c. 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.

2c. Risk Category wise Country Exposure

Bank's net funded exposure for risk category-wise country exposures for each country is less than 1% of bank's assets as on 31.03.2012 and as such no provision is required in terms of RBI Master Cir. No. DBOD NO. BPBC.12/21.04.048/2011- 12 dated July 1, 2011.

2d. 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 01.04.2011 to 31.03.2012".

3. 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

4. AS -5 Prior Period and Change in Accounting Policy

There were no material prior period income/expenditure items requiring disclosure under AS-5.

5. AS- 6 Depreciation accounting

Break up of total depreciation for the year for each class of assets

6. 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.

7. AS 11- Changes in foreign exchange rates:

Movement of foreign currency translation reserve

-included under "Other Assets"-Schedule 11 and provided for.

8. 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.

In case of Other Long term employee benefits (LFC, Sick leave, Silver Jubilee Award etc.) the transitional liability outstanding for these benefits as on 01.04.2011 was Rs 43.60 crores. The same has been charged to Profit & Loss account during the current year.

OPENING OF PENSION OPTION TO EMPLOYEES AND ENHANCEMENT IN GRATUITY LIMITS

During the year 2010-11 the Bank reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result 33982 employees had exercised the option, the bank incurred a liability of Rs.2757.65 crores. Further during the year 2010-11 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 had increased by Rs.566.00 crores. These Liabilities were 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. (Rs2757.65 cr. Rs566.00 cr.) were required to be charged to the Profit and Loss Account. However, the RBI has issued a circular no. DBOD.BPBC.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 had charged off Rs664.73 crores representing one-fifth of Rs 3323.65 crores to Profit & Loss Account for this year (Rs664.73crore already charged in previous year). In terms of the requirements of the aforesaid RBI circular, the balance amount carried forward, i.e. Rs1994.19 crores.(Rs3323.65 cr- Rs1329.46 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

DISCLOSURE IN ACCOERDANCE 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:

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.

3. Figures of the previous period have been re-grouped / reclassified wherever necessary on change in basis of allocation of expenditure.

9. 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) Shri K. R. Kamath, Chairman & Managing Director

ii) Shri M.V. Tanksale, Executive Director (upto 28.06.2011)

iii) Shri Rakesh Sethi, Executive Director

iv) Ms. Usha Ananthasubramanian (w.e.f. 19.07.2011) 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 Insurance Broking Pvt Ltd.

vii) PNB Life Insurance Company Ltd.

viii) JSC SB PNB Kazakhstan Associates:

i) Everest Bank Limited

ii) Principal PNB Asset Management Company Pvt. Ltd.

iii) Principal Trustee Company Private Limited

iv) Assets Care & Reconstructions Enterprise 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

10. AS 28 - Impairment of Assets

A substantial portion of the bank's 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 31.03.2012 requiring recognition in terms of the said standard.

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.

11. 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 2012.

12. 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.

13. 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 31.03.2007, to be transferred to a Blocked Account. Accordingly, a sum of Rs.85.92 crores (net of adjustments since carried out) has been included under "Other Liabilities-others" in schedule-5.

Claims of Rs. 0.327 lac has been received during the year 2011-12 against Inter Branch Credit entries Blocked and transferred to General Reserve, has been met by transfer from General Reserve Rs.0.23 lac and to debit of Profit and Loss Account Rs. 0.81 lac.

b. Premises include properties amounting to Rs. 10.86 crores (Net of Depreciation) (previous year Rs.10.98 crores)

{Cost Rs 16.01 crores} (previous year Rs. 15.89 crores) are awaiting registration of title deeds. Premises include capital work in progress of Rs. 113.76 crores (previous year Rs.86.09 crores).

c. No provision is considered necessary in respect of disputed Income Tax and Fringe Benefit Tax demands of Rs.1160.87 crores (previous year Rs. 881.43 crore) as in the bank's view, duly supported by expert opinion and/ or decision in bank's own appeals on same issues, additions / disallowances made are not sustainable. Against these disputed demands, Rs. 1160.87 crores (previous year Rs.881.43 crores) has been paid.

d. During the year the bank has allotted 1,58,40,607 equity shares of Rs. 10/- each to LIC of India and 65,25,919 to Govt of India at a premium of Rs 993.69 per share 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 received by the bank on this account is Rs.2244.91crores which includes Rs.22.37crores as equity capital and Rs.2222.54 crores as premium. Consequently the Government holding is now 56.10% as compared to 58% before preferential allotment.

e. Other Reserves- Additions during the year:

Additions in other reserves include Rs.60crores pertaining to write back of provision created earlier in the year 2008 on the basis of present value towards agriculture debt waiver relief reversed to General Reserves as per RBI Guidelines.

f. The Board of Directors has recommended dividend of Rs.22 per equity share of Rs. 10 each (of the paid up capital of the bank), subject to approval by members.

14. Figures of the previous year have been regrouped / rearranged/ reclassified wherever necessary.

---

Mar 31, 2011

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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Mar 31, 2010

1. 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.

2b. Risk Category wise Country Exposure

Bank’s net funded exposure for risk category-wise country exposures for each country is less than 1% of bank’s assets as on 31.03.2010 and as such no provision is required in terms of RBI Master Cir. No. DBOD NO. BP.BC.17/21.04.048/2009-10 dated July 1, 2009.

3c. 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. However, the exposure ceiling stipulated for individual borrowers at 15% of capital funds has been exceeded in following individual account during the period 01.04.2009 to 31.03.2010:

4. 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

5. AS -5 Prior Period and Change in Accounting Policy There were no material prior period income/expenditure items requiring disclosure under AS–5.

6. AS- 6 Depreciation accounting

Break up of total depreciation for the year for each class of assets

7. 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.

8. AS 11- Changes in foreign exchange rates: Movement of foreign currency translation reserve

9. 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 01.04.09 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.131.20 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 2010. The balance- unrecognized liabilities of Rs.87.40 crores have been carried forward and the same will be charged off in the next two years.

10. 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:

a. Shri K. R. Kamath, Chairman &

Managing Director (w.e.f. 28.10.2009)

b. Dr. K. C. Chakrabarty, Chairman &

Managing Director (upto14.06.2009)

c. Shri M. V. Tanksale, Executive Director

d. Shri Nagesh Pydah, Executive Director

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.

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 (upto 20.01.2010)*

vii) UTI Trustee Company Pvt. Limited (upto 20.01.2010)*

viii) Assets Care Enterprises Ltd.

ix) Principal PNB Life Insurance Company Ltd.

x) India Factoring & Finance Solutions Pvt. Ltd.

xi) Madhya Bihar Gramin Bank, Patna xii) Haryana Gramin Bank, Rohtak

xiii) Himachal Gramin Bank, Mandi xiv) Punjab Gramin Bank, Kapurthala

xv) Rajasthan Gramin Bank, Alwar xvi) Sarva UP Gramin Bank, Meerut

*The Bank has sold 6.5% of its stake in UTI Assets Management Co. Ltd. and UTI Trustee Pvt. Ltd. on 20.01.2010 thus bringing down its stake in both these companies to 18.5%.

11. 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 28.35 lakhs upto 31.03.2010. The written down value as on 31.03.2010: Rs. 13.30 lakhs

b. Minimum Lease Payment due not later than one year: Min. Lease Payment Rs. 13.29 lakhs Present value of Min. Lease Payment Rs. 11.52 lakhs Intt. Included in Min. Lease payment Rs. 1.77 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.

12. AS 28 – Impairment of Assets

A substantial portion of the bank’s 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 31.03.2010 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.

13. AS-29 Provisions, Contingent Liabilities and Contingent Assets

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.

14. 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 2010.

15. Disclosure in respect of Bancassurance Business undertaken by the bank:

(In terms of RBI circular DBOD.No.FSD.BC.67/24.01.001/ 2009-10 dated January 7, 2010)

16. 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. 55.24 crores (net of adjustments since carried out) has been included under “Other Liabilities-others” in schedule-5.

Claims of Rs. 1.33 lacs 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. 1.00 lac and to debit of Profit and Loss Account Rs. 0.33 lacs.

b. Premises include properties amounting to Rs. 11.35 crores (Net of Depreciation) (previous year Rs.12.78 crores) {Cost Rs. 15.89 crores} (previous year Rs. 17.37 crores) awaiting registration of title deeds. Premises include capital work in progress of Rs. 95.85 crores (previous year Rs.75.86 crores).

c. No provision is considered necessary in respect of disputed Income Tax and Fringe Benefit Tax demands of Rs. 1480.80 crores (previous year Rs. 1155.15 crore) as in the bank’s view, duly supported by expert opinion and/ or decision in bank’s own appeals on same issues, additions / disallowances made are not sustainable. Against these disputed demands, Rs. 1388.24 crores (previous year Rs.1094.83 crores) has been paid.

d. The bank has made an ad-hoc provision of Rs 300.00 crores (previous year Rs. 500 crores) during the current financial year making cumulative provision of Rs. 900.00 crores, pending determination of final liability on account of wage revision and for certain other employee benefits. Impact of exercisable pension option is not ascertainable at the close of the financial year.

e. In terms of RBI circular No. DBOD.BP.BC.NO.133/ 21.04.018/2008-09 dated 11.05.09; un-reconciled credit entries of Nostro Accounts less than US $ 2500 or equivalent, amounting to Rs. 9.10 crores have been credited to “Other Income” and appropriated to General Reserve.

f. (i) In terms of RBI circular DBOD No. BP.BC.82/ 21.04.048/2009-10 dated 30.03.2010, the last date for payment of 75% of the overdue portion of the other farmers under Agriculture debt waiver and Debt relief scheme 2008 has been extended from 31.12.2009 to 30.06.2010 and the banks are allowed to treat such accounts as standard assets. However, as a prudent measure, bank has classified such accounts amounting to Rs. 338.13 crores as NPA.

(ii) In terms of the Agricultural Debt Waiver and Debt Relief Scheme, 2008 framed by Government of India, an amount of Rs. 190.07 crores has been worked out as receivable under the scheme towards debt relief as on 31.03.2010, for which claim will be lodged with Reserve Bank of India after due certification by the SCAs.

g. Profit on sale of investment (Schedule 14) includes an exceptional item of Rs. 152.82 crores on account of the profit on sale of stake in wholly owned subsidiary, PNB Housing Finance Ltd. and in associates UTI Asset Management Co. Ltd. and UTI Trustee Co. Pvt. Ltd.

h. The Board of Directors has recommended dividend of Rs.12/- per equity share of Rs. 10 each (120% of the paid up capital of the bank), subject to approval by members, in addition to interim dividend of Rs.10 per equity share paid during the year.

17. Figures of the previous year have been regrouped/rearranged/ reclassified wherever necessary.