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You can view the entire text of Notes to accounts of the company for the latest year

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

BSE   ` 88.15   Open: 84.55   Today's Range 84.15
+4.35 (+ 4.93 %) Prev Close: 83.80 52 Week Range 58.65
Year End :2018-03 


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.



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 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 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.


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 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.


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.


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 31st 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.


"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


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.


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.



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.


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 2nd 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)


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.

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.