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You can view full text of the latest Director's Report for the company.

BSE: 532461ISIN: INE160A01022INDUSTRY: Finance - Banks - Public Sector

BSE   ` 90.50   Open: 87.50   Today's Range 87.50
91.95
+3.95 (+ 4.36 %) Prev Close: 86.55 52 Week Range 58.65
106.80
Year End :2018-03 

DIRECTORS’ REPORT

The Directors take pleasure in placing the Bank’s Annual Report for FY’18 along with its audited Annual Financial Statements.

A. Financial Performance Assets and Liabilities

Total Assets of the Bank increased by 6.32% from Rs, 7,20,331 crore as at 31st March 2017 to Rs, 7,65,830 crore as at 31st March 2018. During the period, the loan portfolio of the Bank increased by 3.39% from Rs, 4,19,493 crore to Rs, 4,33,735 crore. Net Investment increased by 7.27% from Rs, 1,86,725 crore to Rs, 2,00,306 crore as at 31st March 2018. A major portion of the investment was in the Domestic Market in Government Securities.

Your Bank’s Aggregate Liabilities (excluding Capital and Reserves) rose by 6.86% to Rs, 7,24,755 crore as at 31st March 2018. The Deposits rose by 3.3% from Rs, 6,21,704 crore to Rs, 6,42,226 crore during this period.

Net Interest Income

Net Interest Income of your Bank stood at Rs,14,922 crore during FY’18. Interest Income during the year was Rs, 47,996 crore. Interest Expenses was Rs, 33,073 crore out of which Interest expenses on Deposits was Rs, 30,456 crore.

Interest Earned on Investments showed a growth of 10.9% during FY’18. Fee Based Income of the Bank also registered a growth of 10% while Income from Trading Profit recorded a growth of 22.7%.

Operating Profit

Total Income of your Bank increased from Rs, 56,227 crore in FY’17 to Rs, 56,877 crore during FY’18 while Total Expenses increased from Rs, 41,662 crore in FY’17 to Rs, 46,582 crore in FY’18 resulting in an overall Operating Profit of Rs, 10,294 crore during FY’18. However, Bank has posted a Net Loss of Rs, 12,283 crore during FY’18 due to the higher provisioning for Non Performing Assets, MTM losses in treasury portfolio and provisioning on fraud.

Provisions and Contingencies

During FY’18, your Bank has created a higher amount of provisions (other than tax) of Rs, 29,869 crore compared to Rs, 12,554 crore last year. The increase was primarily due to increase in provisions on Non Performing Assets of Rs, 24,453 crore against Rs, 12,704 crore in FY’17 and depreciation on investment of Rs, 2027 crore against Rs, 487 crore last year. Provision Coverage Ratio of the Bank was 58.42% as at 31st March 2018.

Progress on Implementation of IND AS (Indian Accounting Standards)

RBI has deferred implementation of IND AS to FY 2019-20 vide Press Release (2017-18/2642) dated 5th April 2018. The Bank has already 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 has been formed to monitor the progress of the implementation of IND AS and substantial progress has been made in its implementation. Your Bank is now assessing the changes, wherever required in the core banking system and has already initiated formulation of Expected Credit Loss Models.

B. Operational Highlights

During the last quarter of FY’ 18, the Bank faced a serious setback due to a fraud of Rs,14,357 crore at Brady House branch in Mumbai. Despite trying circumstances, the Bank performed creditably and reached several new milestones. Some of the operational highlights of FY ‘18 are listed below:

Financial

- Bank achieved a new landmark with Domestic Business crossing '10 lakh crore.

- CASA Deposits remained highest amongst PSBs with 43.85% share in Domestic Deposits.

- Cost of Deposits declined from 5.33% to 4.96%.

- Retail Advances grew by 15.5% during FY’18 with 16.6% growth in Housing Loan Segment.

- All major goals under Priority Sector achieved during FY’18.

Capital

- During the year, Bank raised Rs, 5000 crore through Qualified Institutional Placement (QIP) to boost capital. Further, the Govt. infused Rs, 5473 crore in March 2018.

Wealth Management Services

- To serve growing financial needs of its customeers,, the Bank entered into new distribution arrangements with 3 Insurance Companies and 4 Mutual Funds AMCs (Asset Management Companies). The Bank is well positioned to cross-sell and up-sell a full suite of financial products to its customers.

- Income from Insurance and Mutual Funds (MFs) increased by 31.1% during FY’18.

IT and Digital Initiatives

- Successfully upgraded the CBS platform to Finacle 10.x version for better customer experience.

- The Bank increased its Digital Base with more than 35% rise in Internet Banking Users and more than 45% in Mobile Banking Users. In this direction, the Bank also opened first fully digitalized branch ‘PNBDIGIHUT’.

- Bank launched number of innovative mobile apps in order to facilitate digital transactions such as PNB MobiEase, PNB Rewards, PNB Fin Literacy, PNB Yuva, PNB ATM Assist, PNB m-Banking, PNB Kitty, etc. Further, PNB M-Passbook was launched in FY’18 for customers to access their account statement on mobile phones.

- SWIFT was integrated with Core Banking Solution (CBS), wherein all outward payment SWIFT messages are automatically generated through CBS without any manual intervention.

Transformational Exercise

- Mission PARIVARTAN, a transformational exercise for Business Excellence launched to align Bank’s activities relating to people, process & products more aligned to the Board approved business strategy & vision.

- To ensure a structured approach for implementation of the Mission PARIVARTAN, an independent Division named ‘Mission Parivartan’ has been started. This Division acts as Think Tank of the Bank providing both directional / policy inputs. It acts as a platform to enhance ownership, commitment and involvement of HO Divisions & all internal stakeholders in the policy-development process using a bottom-up approach.

C. Recent developments and steps taken

The fraud at Brady House, Mumbai Branch of the Bank involved certain accounts in the Gems & Jewellery sector where Letters of Undertaking (LOUs)/Foreign Letter of Credit (FLCs) were issued fraudulently and in an unauthorized manner to certain overseas branches of Indian Banks through the misuse of SWIFT system of the Bank.

The fraud is under investigation by various central investigating agencies. The liabilities amounting to Rs, 6586.11 crore on account of LOUs/ FLCs which became due on 31.03.2018 have been fully honoured and paid by the Bank. Further, as a prudent measure Bank has created liability amounting to Rs, 6959.79 crore in the books in respect of balance LOUs/FLCs relating to this fraud which are becoming due after 31.03.2018. After including outstanding amounts under other credit facilities to the above entities, the amount involved works out to Rs, 14356.84 crore. The slippages due to fraud in March'18 were Rs, 7579 crore.

RBI permitted the Bank to make provisions against this fraud @ 25% without debiting "Other Reserves" and provide remaining amount during the first three quarters of the ensuing financial year. However, Bank has made higher than required provisions @ 50% of Rs, 14356.84 crore amounting to Rs, 7178.42 crore.

As soon as the fraud was detected, the Bank took immediate corrective action as required. Further, the Bank is taking appropriate steps against erring employees, legal action against the fraud perpetrators and closely cooperating with the regulators and law enforcement agencies.

The systems and controls have been further strengthened. SWIFT was integrated with Core Banking Solution (CBS), whereby all outward payment SWIFT messages are now automatically generated through CBS without any manual intervention. Besides, additional measures of placing an additional tier of 3rd level authentication, at SWIFT Centre, Mumbai for re-authentication of all outward financial messages only after cross checking details of transactions in CBS and thereafter, allowed to pass through SWIFT Gateway server have been put in place. The concept of Maker-Checker in CBS, Verifier/Authorizer and Re-authorizer in SWIFT application has led to implementation of 8 eyes principle. Auditors were instructed to ensure that 100% messages are cross-checked with CBS.

Technology based offsite audit system for monitoring alerts in CBS is in operation now. Loan appraisal and monitoring system have been segregated. Different verticals have been created for sourcing, initial due diligence, processing, monitoring and recovery of loans for reducing people risk, operational risk and credit risk.

A comprehensive review of the Bank’s Audit system is being undertaken through a reputed institution, National Institute of Banking and Management (NIBM), Pune. Suggested improvements will be incorporated in the Audit System of the Bank to make it more robust and reliable.

D. Asset Quality

The Bank’s Gross NPA stood at Rs, 86,620 crore as at 31st Mar'18 (Rs, 55,370 crore as at 31st Mar’17) and the Net NPA stood at Rs, 48,684 crore as at 31st Mar’18 (Rs, 32,702 crore as at 31st Mar’17). In terms of ratios, Gross NPA ratio stood at 18.38% in Mar’18 (Mar’17:12.53%) and Net NPA ratio stood at 11.24% in Mar’18 (Mar’17: 7.81%).

Initiatives taken during FY’18

- During the year, the Bank formulated two special OTS schemes resulting in the recovery of Rs, 1544 crore in 2,70,633 OTS approved cases with balance outstanding of Rs, 2299 crore.

- The Bank organized Mega Rin Mukti Shivirs to give impetus to recovery especially in small advances.

- Mission Gandhigiri was launched for recovery from borrowers wherein silent protests/demonstrations were made in front of premises of recalcitrant borrowers.

- Key Responsibility Areas (KRAs) have been identified for staff working in Asset Recovery Management Branches (ARMBs), Recovery Teams at CO/ZO level and in the 50 identified branches having large concentration of NPAs.

- As per Reserve Bank of India guidelines, notices were issued to various borrowers identified as willful defaulters. This exercise resulted in declaration of 1089 Wilful Defaulters as on

31.03.2018. Special Desks set up for account specific monitoring which are headed by 3 AGMs who are monitoring all NPAs of Rs, 1 crore & above and ensuring compliance of recovery actions in individual accounts.

E. Industrial Restructuring

The extant instructions on Resolution of Stressed Assets such as Framework for Revitalizing Distressed Assets, Corporate Debt Restructuring Scheme, Flexible Structuring of Existing Long Term Project Loans, Strategic Debt Restructuring Scheme (SDR), Change in Ownership outside SDR and Scheme for Sustainable Structuring of Stressed Assets (S4A) stand withdrawn w.e.f.12.02.2018.

All accounts, including those where any of the schemes have been invoked but not yet implemented, will be governed by the revised framework. Following accounts will continue to be governed under the old framework as the existing resolution schemes have already been implemented.

Sr.

No

Name of the scheme

No. of accounts as on 31.03.2018

Amount outstanding as on 31.03.2018 (in ' Crore)

1

Corporate Debt restructuring

43

4484

2

Scheme for Sustainable Structuring of Stressed Asset

09

1248

3

Change of Ownership outside SDR

02

118

4

Flexi Structuring of Long Term Projects

30

120181

*Amount of loan refinanced

(i) Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (FRR for MSMEs)

In order to provide a simpler and faster mechanism to address the stress in MSME accounts and their revival, Bank has adopted the policy under New Framework for Revival and Rehabilitation (FRR) of MSMEs w.e.f. 14.07.2016 in place of Debt Restructuring Mechanism (DRM) for Small and Medium Enterprises.

During FY’18, 12 accounts, with outstanding of Rs, 55 crore, were restructured under FRR for MSME.

(ii) Restructuring-Others

The Bank has also in place, a transparent mechanism for restructuring of debts of potentially viable units, which are facing temporary problems due to factors beyond their control. This covers the cases which cannot be governed in the schemes under the old framework.

During FY’18, 846 such accounts with outstanding of Rs, 1099 crore have been restructured.

As on 31.03.2018, outstanding in 892 implemented restructured accounts stood at Rs, 7584 crore.

F. IT and Digitalization

The Bank’s journey towards digitalization continues through constant innovations and up gradations of its existing products and services. The Bank has been providing hassle free and convenient banking services to all its customers. Total Number of digital transactions in FY’18 registered growth of more than 25% on YoY basis and the share of digital transactions in total transactions stood at 69%.

Alternative Delivery Channels

a) Internet Banking: As at 31st March 2018, under its retail and corporate segments, the Bank has shown growth of 37% in respect of IBS users. In order to further upgrade the existing models, the Bank has introduced Aadhar seeding, PAN seeding and updating E-mail id into accounts through Internet Banking.

b) Mobile Banking: There was a growth of 46% in Mobile banking users during FY’18. Mobile Banking for the customers of DrukPNB, Bhutan was also introduced.

c) ATMs: The Bank has a vast Network of 9668 ATMs with a strong card base of more than 6 crore. The Bank has introduced Dynamic Currency Conversion, Aadhar seeding through pop-up in ATMs and JCB/ UPI card transaction on PNB ATMs. The Bank is offering a host of other services apart from providing basic ATM transaction services.

d) Bank has introduced different digital applications in order to facilitate digital transactions such as PNB

MobiEase, PNB Rewards, PNB Fin Literacy, PNB Yuva, PNB ATM Assist, PNB m-Banking, PNB Kitty, etc. Further, PNB M-Passbook was launched in FY’18 for customers to access their account statement on mobile phone itself.

Important Developments

- The Bank has started initiative of paperless Green PIN instead of printed ATM PIN, Instant Hot-listing of Debit Cards through SMS, Internet Banking and through Interactive Voice Response System (IVRS) at call centers.

- The Bank launched Integrated Fee Portal (IFP) in which the customers are on-boarded for fee payments through Internet Banking Gateway. Customers can make these payments through Internet Banking, Debit card and Credit card anytime.

- The Bank has integrated with NPCI to work as an operating unit under Bharat Bill Payment Operating Unit and it was made live in September 2017.

- The Bank has provided Micro ATM facilities at BC locations for both i.e., On-US and Off-US transactions.

- Information Security: The Bank has Information Security Policy and a well delineated Cyber Security Policy. The Bank has a Cyber Crisis Management Plan to handle any kind of cyber incident.

- Data Centre of the Bank, Network Operating Centres (NOC) and Disaster Recovery (DR) site are ISO 27001:2013 certified for the period 2016-19.

- The Bank organized various Digital Campaigns and Digital Days for increasing the usage of digital products.

- The Bank also launched a first Proof of Concept Model of Digital Branch PNB DIGIHUT at Head Office, Dwarka.

G. Management Information System

During FY’18, 17,40,263 Credit Information Reports (CIRs) of prospective borrowers under Consumer category and around 35,000 CIRs under Commercial category were drawn from CIBIL, Experian, High Mark & Equifax databases.

Around 5.29 lakh Immovable Properties (IP) & Movable properties were registered with Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI) by Bank till March’18.

In PNB Anti Money Laundering (AML), a total of 79 scenarios implemented in production server while in PNB Sponsored Regional Rural Banks (RRBs), a total of 55 scenarios were implemented.

H. Branch and Office Network Domestic Presence

The Bank has the second largest branch network amongst PSBs with 6983 domestic branches as on 31.03.2018 comprising of 1283 Metropolitan, 1392 Urban, 1731 Semi-Urban and 2577 Rural branches. Rural and Semi Urban Branches (RUSU) comprise 62% of the Total Branch Network.

International Presence

At present, Bank has its overseas presence in 8 countries by way of 4 branches (2 in Hong Kong, 1 in Dubai and 1 Offshore Banking Unit (OBU) in Mumbai), 2 Subsidiaries (London & Bhutan), 1 Associate (at Kazakhstan), 1 Joint Venture (at Nepal) and 3 Representative Offices (Shanghai-China, Dhaka-Bangladesh and Dubai-UAE).

I. International Banking

The foreign exchange turnover for FY’18 was Rs,1,46,683 crore registering a growth of 4.17% on YoY basis. As at 31st March 2018, the Bank had 204 branches authorized to handle foreign exchange business and a specialized Centralized Back Office for Trade Finance at New Delhi for handling of trade transactions. The Bank has specialized International Banking Branches at major export centres for extending services to the importer/exporter. Besides, the Bank has 22 Exchange Bureaus at important tourist centres to facilitate encashment of foreign exchange currency notes/traveller cheques by foreign tourists/NRIs.

The Bank is also having an International Service Branch at New Delhi for handling inward remittances for the Bank as a whole. During FY ’18, the Bank handled remittance business of more than Rs, 54,000 crore.

J. Business Diversification

- Mutual Fund: Besides the existing tie-ups, the Bank during FY’18 tied-up with four new Mutual fund Asset Management Companies namely LIC Mutual Fund Asset Management Limited, Reliance Nippon Life Asset Management Limited, Tata Asset Management Limited and Birla Sun Life Mutual Fund.

During FY’18, the Bank mobilized Total Business of Rs,8242 crore and as at 31st March 2018, Assets under Management (AUM) stood at Rs,812 crore. The Bank earned brokerage of Rs,6 crore via. Mutual funds selling.

- Insurance Business

1. Life Insurance Business: The Bank’s earnings from Life-Insurance business during FY’18 amounted to Rs, 144 crore as against Rs,110 crore during FY’17, showing growth of 31%. Total Business mobilized since inception was Rs, 5880 crore from 709714 policies and total earnings amounted to Rs,502 crore.

2. Non-Life Insurance Business: During FY’18, the Bank entered into tie-ups with three Companies for Non Life Insurance i.e., New India Assurance Co. Ltd, Bajaj Allianz General Insurance Co. Ltd & Religare Health Insurance Co. Ltd. The revenue earned increased 29% from Rs, 28 crore in FY’17 to Rs, 36 crore during FY’18.

- Depository Services: The Bank earned an income of Rs,74 lakh during FY ’18 for providing Depository Services.

- Online Trading Services: An income of Rs, 33.17 lakh was received from the Associates such as M/s. SMC Global Securities Ltd., M/s. IDBI Capital Services Ltd. and M/s. Net worth Stock Broking Ltd. on account of Online Trading Activities during FY’18.

- Merchant Banking: During FY ’18, the Bank handled more than 9,98,000 ASBA applications against 187 issues, thereby blocking an amount of Rs, 2952 crore and earning notional income of more than Rs, 5 crore with commission income of Rs, 1.05 crore.

- Credit Card: There was 25% growth in Credit Card issuance. The Bank’s credit card base of 3,19,641 as at 31.3.2018,is the 2nd largest amongst PSBs.

During FY ’18, the Bank launched its new credit card variant i.e., PNB RuPay Platinum Credit Card with significant customer benefits including accidental death/total disability insurance cover. The Bank also launched PNB INSTA PAY EMI at POS and E-commerce scheme i.e. PRE-PURCHASE EMI towards facilitating cardholders to convert purchases into EMI at the time of purchase of products itself.

The Bank earned a Net Profit of Rs, 25 crore from the credit card issuance business.

- Merchant Acquiring Business: As at 31st March

2018, the Bank has installed 56,746 PoS terminals and integrated 493 Internet Payment Gateways.

- Multi level EMI facility in PoS terminals: PoS

terminals are customized with Multi Level EMI facility which is activated by the service provider of the Bank on the specific request of the merchant.

who are non-account holders are provided Internet Payment Gateway Services under this tie-up.

- BHARAT QR CODE & BHIM AADHAAR PAY: The

Bank launched Bharat QR Code and BHIM Aadhaar Pay platforms, a new Government driven project towards creation of a less cash economy. Under the platform, 47,535 merchants were on-boarded.

K. Government Business

National Highways Authority of India (NHAI) launched E-Toll collection programme for hassle free transit at toll plazas by issuing FAStags to vehicle owners. Accordingly, the Bank successfully implemented the National Electronic Toll Collection (NETC) programme of NHAI. The Bank is participating in NETC as issuer for issuing FAStags to vehicle owner and has already acquired one Toll Plaza (Mada-Nasri, Jammu) on pilot basis with plans to acquire more in the near future.

Further developments under Government Business are as under:

1. Tie-up with Government e-Market for integration of systems for seamless e-procurement by Government Departments.

2. Talks are at an advanced stage for the partnership with Indian Postal Payments Bank (IPPB) for distributing of credit products.

3. Centralised on-line Collection & Disbursement (COCD) Portal extended to Department of Handicrafts for disbursing Interest subsidy, Margin Money, CGTMSE Fee, etc.

L. Treasury Operations

Gross Investment as at 31st March 2018 stood at Rs, 1,97,328 crore up from Rs, 1,83,297 crore as at 31st March 2017 registering a YoY growth of 7.65%. The average investments in FY’18 were Rs, 2,03,844 crore as against Rs, 1,75,774 crore in corresponding period last year. The Interest income from investment portfolio increased to Rs,13,806 crore in FY’18 from Rs, 12,439 crore in FY’17. The Bank actively traded in sovereign bonds, Non-SLR bonds and Equity throughout the financial year. Total Trading profit (including derivatives) increased from Rs,2654 crore in FY’17 to Rs, 3254 crore in FY’18.

Fixed Income (SLR/NSLR): During FY’18, the Bank booked trading profit of Rs, 1455 crore from sale of investments in fixed income against Rs, 2214 crore during corresponding period previous year as yields started moving northwards during later half of FY’18.

Equity: The Bank booked Rs, 340 crore trading profit registering a growth of 102.9% over previous year. Apart from that the Bank also booked one time profit of Rs, 1232 crore from sale of stake in PNB-Housing Finance Limited (PNBHFL). Total Profit in the equity segment amounted to Rs, 1573 crore while the dividend income for FY’18 stood at Rs, 139 crore.

Forex: Exchange Profit increased from Rs, 547 crore in FY’17 to Rs, 724 crore in FY ’18 due to thrust on increasing merchant turnover and volume, and also due to various customer-centric initiatives.

M. Customer Care

During FY’18, the Bank introduced an On-line Grievance Redressal Management Program called Centralized Grievance Redressal Management System (CGRMS). Customers can lodge their requests/complaints in the CGRMS through Bank’s website, Internet Banking Service, Mobile Banking Service and Mobile App.

All Circle Offices and over 1862 SAP enabled branches are entered in CGRMS wherein the customer gets an immediate automatic acknowledgement and can keep a track of his complaint also.

- Customer Service Committees have been set up in all the branches and Circle Offices to look into the quality of services rendered and to critically examine the feedback/suggestions for improvement.

- The Bank has constituted teams of officials at Customer Care Centre at various administrative levels to pay incognito visit to branches to assess their standard of service. During FY’18, 6695 such visits were made across India and observations of the visiting officials shared with the concerned branch and the Circle Office for taking corrective steps.

All 53,331 complaints (i.e. 315 complaints outstanding as on 1.4.2017 and 53,016 complaints received during FY ’18), were redressed to the satisfaction of the complainants. 1862 complaints pending as on 31.03.2018 have since been resolved.

N. Implementation of Official Language Policy

The Bank achieved most of the parameters fixed by the Government of India, Ministry of Home Affairs, Department of Official Language for FY’18.

During FY’18, the Bank was awarded several prizes for its excellent performance in the use of Hindi which includes ‘Rajbhasha Kirti shield’- the top most prize scheme of Govt. of India. In addition, Town Official Language Implementation Committees situated in different locations of the country and other Non-Government Organizations also awarded 72 prizes in ‘A’ region, 71 prizes in region ‘B’ and total 27 prizes in region ‘C. The staff members also received 40 prizes in individual capacities.

O. PNB’s Subsidiaries and Regional Rural Banks

a. PNB Gilts Limited

The Company’s Profit before Tax stood at Rs, 55.28 crore during FY’18. In Treasury Bills, the Company exceeded the committed ratio of 40%, achieving 42.48% and 40.91% in H1 and H2 respectively. The Company’s total turnover ratio (secondary market) stands at 83 times for treasury bills and 284 times for government-dated securities as on March 31, 2018 against the minimum RBI stipulation of 10 times and 5 times respectively.

b. Punjab National Bank International Limited (PNBIL)

The Operating Profit before provisions, tax and dividends for FY’18 decreased by $6.87 million to $11.93 million in FY’18 from $18.80 million in FY’17. The total income decreased by $21.52 million (32.27%) from $ 66.68 million to $ 45.16 million. Net Interest Income fell by $.4.51 million and Net trading income by $ 2.30 million. The Cost to Income Ratio increased to 56.39% from 46.70% due to lower income and slight reduction in cost.

c. Punjab National Bank Investment Services Limited (PNBISL)

During the year ended as on 31st March’18, the Company earned Fee Based Income of Rs, 6.00 crore with a total income of Rs, 9.21 crore. Profit before Tax (PBT) for FY’18 stood at Rs, 3.90 crore as against Rs,6.33 crore for FY ’17.

d. PNB Housing Finance Limited (PNBHFL)

During the year, the Company sanctioned loans of Rs, 55,582 crore in respect of 1.02 lakh applications as compared to Rs, 32,225 crore in respect of 0.64 lakh applications in the previous year, recording a growth of 72% in sanction amount.

Total loans outstanding as at 31st March 2018 were Rs, 57,014 crore recording a growth of 48% over the last year. The company’s Total income earned was Rs, 5517 crore showing YoY growth of 41% while Net Interest Income for the year stood at Rs, 1593 crore showing YoY growth of 54%.

e. DRUK PNB Bank Ltd. Bhutan

Total Business of the Bank increased to Rs, 1726 crore as on 31.03.2018 from Rs,1435 crore as on 31.03.2017, showing a YoY growth of 20.23%. CASA Ratio of the Bank stood at 47.85% as on 31.03.2018. The Bank is currently operating with a network of 7 Branches and 21 ATMs. Profit of the Bank increased from Rs, 17.62 crore during FY’17 to Rs, 18.99 crore during FY’18, showing a YoY growth of 7.78%.

f. Regional Rural Banks (RRBs)

There are Five Regional Rural Banks which are sponsored by the Bank and PNB’s proportion of ownership is 35% in each RRB.

Performance of RRBs as on 31.03.2018

(Amt. in Rs, crore)

Performance of RRBs

31st

March’17

(Audited)

31st

March’18

(Audited)

YoY

Growth%

Aggregate Deposits

40092

44523

11.05

Aggregate Advances

21791

25965

19.15

Aggregate Net Profit

280

311

10.99

Branches under CBS

100%

100%

Profit Per Employee (' lakh)

3.13

3.19

1.99

No. of Loss Making Branches (being 12 month old or more)

127

59

P. Awards and Accolades

The Bank won many prestigious awards from prestigious domestic and overseas institutions, prominent ones being, Dun & Bradstreet Banking Awards 2017 for Best Public Sector Bank under Government Scheme participation-Pradhan Mantri Mudra Yojana (PMMY) and National Award in SHG-Bank Linkage for the year 2016-17 under Large Category Bank by Ministry of Rural Development, Govt. of India.

PNB regained its Number One slot amongst Nationalized Banks and 2nd place amongst Public Sector Banks (PSBs) with overall rank at 191st amongst Top 1000 World Banks by ‘The Banker’ in 2017.

Q. Future Business Plan of the Bank

The FY’18 was a year of reforms and revival. On the economic front, global conditions improved while the Indian economy showed signs of greater growth momentum in the second half of FY ’18. On the banking front, a host of measures were announced to revamp the Indian banking model.

The reform process in the banking sector started with the announcement of recapitalization package of Rs,2.11 lakh crore for Public Sector Banks (PSBs). The Government and the Regulator also focussed on tackling the stressed assets under the Insolvency & Bankruptcy Code (IBC) with emphasis on quick resolution.

Many international agencies have forecast a favorable outlook for the Indian Economy with improved growth on the back of continued implementation of structural reforms that aim at raising productivity and incentivizing private investment. This augurs well for the Indian banking sector considering the strong linkages between the financial sector and the real economy.

The various reform measures including recapitalization plan and announcements in the Union Budget have set detailed contours for ‘Enhanced Access and Services Excellence (EASE)’ towards responsive and responsible banking. The Bank launched “MISSION PARIVARTAN” a People, Processes & Products transformation exercise for business excellence encompassing ten focus areas having thrust on enhanced profitability through improved access, efficiency and productivity.

The Bank with its large size, extensive distribution network and strong push towards digitalization is well positioned to take advantage of the growth opportunities across the economy. Under the present circumstances, the Bank is focusing on adjustments that are conducive to improving risk management, improved accountability and profitability. The Bank is also re-engineering its internal processes, making them more efficient, robust and leveraged on innovative technology advancements to enhance customers’ experience.

The Business Strategy for next year will be based upon 'Business Growth with capital conservation'. The thrust will be on conservation of Capital through focus on Retail Credit growth, recovery, churning of portfolio and increasing quality assets. Nearly 63% of the bank branches are in rural and semi-urban areas and with the rural consumption story being robust Tier 3 and Tier 4 cities will be targeted for rural financing. Rural credit will provide opportunities in both Agri-financing and in rural retail segments.

Going forward, the Bank will continue its concerted efforts in addressing the asset quality concerns and strengthening its balance sheet to reinvigorate credit growth. The Bank will also maintain focus on strengthening supervisory, monitoring and audit systems besides nurturing competitive efficiency. Simultaneously, it shall strive for promoting digitalization, managing technology-enabled financial innovations and dealing with cyber-security risks through targeted strategic initiatives. These actions are the prerequisite for delivering better returns to the stakeholders, in a tangible and sustainable way.

R. Board Of Directors

As on 31st March 2018, there were 11 Directors including 4 whole time Directors i.e. One Managing Director & CEO and three Executive Directors as on 31.03.2018.

During FY’18, the following changes took place in the composition of Board of Directors:

- Shri Sunil Mehta was appointed as Managing Director & CEO of the Bank w.e.f. 05.05.2017 in place of Smt. Usha Ananthasubramanian. He assumed the office on 05.05.2017.

- Smt. Usha Ananthasubramanian demitted office of Managing Director & CEO on 05.05.2017 on account of her appointment as Managing Director & CEO in Allahabad Bank.

- Dr. Ram S. Sangapure completed his tenure as Executive Director and demitted office on attaining the age of superannuation on 28.02.2018.

- Shri Ravi Mital was appointed as Government Nominee Director on the Board of the Bank w.e.f. 04.07.2017 in place of Shri Anil Kumar Khachi who ceased to be Director from 04.07.2017.

- Shri Sanjay Verma was elected as Shareholders’ Director on the Board of the Bank for a period of three years w.e.f.15.06.2017.

The Board wishes to place on record its appreciation for the valuable contribution made by Smt. Usha Ananthasubramanian, Managing Director & CEO, Dr. Ram

S Sangapure, Executive Director and Shri Anil Kumar Khachi, Government Nominee Director.

S. Directors’ Responsibility Statement

The Directors confirm that in the preparation of the annual accounts for the year ended 31st March’18:

- The applicable Accounting Standards have been followed alongwith proper explanation relating to material departures, if any;

- The accounting policies, framed in accordance with the guidelines of the Reserve Bank of India, were consistently applied;

- Reasonable and prudent judgment and estimates were made so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit of the Bank for the year ended 31st March’18;

- Proper and sufficient care was taken for the maintenance of adequate accounting records in accordance with the provisions of applicable laws governing banks in India, and;

- The accounts have been prepared on the principle of “going concern” basis.

T. Acknowledgement

The Board expresses thanks to the Government of India, Reserve Bank of India, Securities and Exchange Board of India, Stock Exchanges, Bank’s customers, public and the shareholders for valuable support, continued patronage and confidence reposed in the Bank.

The Board wishes to place on record its appreciation for the valuable contribution made by the members of the Bank’s staff at all levels and looks forward to their continued involvement in achieving the future goals.

For and on behalf of Board of Directors

Sunil Mehta

Managing Director & CEO