DIRECTORS’ REPORT 2015-16 During FY’16, the Bank has crossed several landmarks i.e., Rs. 9.65 lakh crore Global Business, Rs. 8.50 lakh crore Domestic Business, Rs. 5.50 lakh crore Global Deposits, Rs. 4.00 lakh crore Net Advances, Rs. 2.00 lakh crore CASA Deposits and Rs. 12,000 crore Operating Profit. A. The Bank’s Global Business reached Rs.9.65 lakh crore as at end of March’16 reflecting a growth of 9.5% on yearly basis. The Bank’s International Business stood at the level of Rs.1,12,123 crore, recording a YoY growth of 11.2%. While the Global Deposits of the Bank at Rs.5.53 lakh crore grew by 10.3%, Net Advances recorded growth of 8.4% to reach Rs.4.12 lakh crore as on 31st March 2016. In terms of Bottom-line parameters, the Bank’s Operating Profit increased from Rs. 11,955 crore as at 31st March’15 to Rs. 12,216 crore as at 31st March’16. In terms of key ratios, Domestic Net Interest Margin at 2.95% for the year ended March’16 remained one of the highest amongst nationalized banks during the period under consideration. Further, the CRAR of the Bank at 11.28% stood above the prescribed regulatory requirement. In this backdrop, your Directors take pleasure in placing the Bank’s Annual Report for 2015-16 along with its audited annual financial statements. B. OPERATIONAL HIGHLIGHTS • The Bank implemented a new strategic approach named ‘Indradhanush’ which charts the seven key reform areas for the Bank so as to adapt, evolve and thrive in the face of increased competition in the Indian banking space. These seven areas are People Development, Increase CASA & Retail Business, Improve CD Ratio through Credit Growth, NPA Management, Improve customer service, Digital PNB and Increase Income & Control Expenditure. The Bank made a significant progress in these areas. • Towards People Development, the Bank has launched new Mobile App based e-Learning Platform named ‘PNB Univ’. It is available on all major Mobile Platforms, besides web based access through Desktop or Laptop to provide a quick access to quality curriculum and high quality training 24x7 right on the palm top. • To unleash the full potential of the newly recruited young, energetic and tech-savvy employees, the Bank has initiated an On-boarding & Mentoring Program titled “PNB Navodaya”. This program will help to channelize employees’ energies towards the Bank’s development and transform them into brand ambassadors for the business growth and organizational goal. • To ensure a consistently superior customer experience and to better align with changing customers’ expectations, the Bank launched slew of innovative digital products and solutions which are as follows: - 'PNB ATM Assist': Unique App enabling the customer not only to locate PNB’s ATM but also to lodge complaints related to ATMs. - 'PNB MobiEase': Mobile app to provide single touch banking. - ‘PNB Sleep Easy’: To disable and re-enable Internet Banking and Mobile Banking password. - ‘Green PIN’: To enable customers obtain duplicate PIN for debit card instantly through SMS request. - Online PPF and RD account opening facility. - Online booking of locker facility anywhere in India through the corporate website. - The Bank has also introduced the facility to register for Mobile Banking through vast network of over 9000 ATMs. - The Bank registered its presence on the social networking sites i.e., Twitter and LinkedIn, with an aim of strengthening “Brand PNB” on social media and to engage with customers in a cost efficient manner. • To improve operational processes, the Bank has successfully migrated the CBS Data Base from M9000 servers to new Sparc Super Cluster (M6-32) servers. Owing to this, the Bank has become the first bank in India to implement 4 node active RAC (Real Application Cluster) setup. • The Bank is in process of introducing ‘PNB Unified Payments Interface (UPI)’ which will allow fund transfer via. Mobile App, link all accounts including those opened with other banks for making transactions and facilitate merchants to pull the transactions through Mobile App as an alternate POS & cash transfer • To improve the recovery, the Bank has created a ‘War Room’ at Head Office wherein round the clock NPA monitoring is undertaken in a systematic manner. • To provide card based transactions services, Micro ATMs have been introduced at Business Correspondent locations. The Bank has become the first bank in the banking industry to start cash deposit through Micro ATMs. • To spread financial awareness across the length and breadth of the country, the Bank flagged off ‘Vitiya Jan Chetna Abhiyan’. This program will also emphasize on creating awareness about the Pradhan Mantri Jan Dhan Yojana, Atal Pension Yojana, Mudra Loans, Pradhan Mantri Jeewan Jyoti Yojana and Pradhan Mantri Jan Suraksha Yojana. • For women development, the Bank has formulated new schemes i.e., PNB Vanita financing scheme, PNB PoWer Savings and Mahila Kaushal Vikas Yojna. • During FY’16, the Bank has inaugurated 32 ‘Akshaya’ branches, managed exclusively by women for the women customers only. • The Ministry of Finance, Government of India, has declared PNB as the first among all banks in deposit mobilized through Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts. C. ASSET QUALITY The Bank’s Gross NPA stood at Rs.55,818 crore in FY’16 (FY’15 = Rs.25,695 crore) and the Net NPA stood at Rs.35,423 crore in FY’16 (FY’15= Rs.15,396 crore). In terms of ratios, Gross NPA ratio stood at 12.90% in FY’16 (FY’15= 6.55%) and Net NPA ratio stood at 8.61% in FY’16 (FY’15=4.06%). The accumulation of stressed assets remained a concern for the Bank. The Bank initiated various measures to arrest the incremental delinquencies and fresh slippages to improve the quality of assets. In all NPAs, account-specifi c resolution strategies were implemented and progress was monitored regularly. Daily progress of recovery in NPAs (outstanding Rs.10 lakh and above) was monitored and placed before Top Management. Further, compromise/negotiated settlements through one-to-one meeting with borrowers was adopted as another vital strategy to tackle NPAs. The Bank also had 17 Asset Recovery Management Branches (ARMBs) which function exclusively for resolving NPAs. Initiatives taken during FY’16: • During FY’16, two mega sale campaigns were organized in which residential, industrial and other miscellaneous categories of properties were put to sale with wide publicity. This increased the number of sales and led to substantial recovery during the year. • The Bank has taken initiative to streamline the entire process of SARFAESI action. During FY’16, rigorous follow up was done by ensuring timely action and main stress was given in taking physical possession of the Immovable Properties (IPs) either with the help of supporting agency or by moving application before the DMM/CMM. This has resulted into increase in the percentage of properties under physical possession of the Bank, thereby, leading to more auctions under Mega Sale Campaigns. • During FY’16, another option available to tackle the rising level of NPAs was utilized by putting some difficult accounts for sale to ARCs. As a result, 15 accounts with outstanding of Rs.1835 crore was sold to ARCs. • Concerted follow up was also made with the Circle Office/FGMOs for having dialogue with the borrower and guarantors which has resulted into higher number of settlement during FY’16 vis-a-vis FY’15. • The Bank also took initiative for identifying Wilful Defaulters and according to Reserve Bank of India guideline, notices were issued to various borrowers who were found to have committed an act of Wilful Default. As a result, during FY’16, 904 borrowers were finally declared as Wilful Defaulters. • During FY’16, in 6898 Rin Mukti Shivirs, cash recovery of Rs. 742.98 crore was obtained from 1,16,825 accounts and upgradation of 49,702 accounts with balance outstanding of Rs.1224.50 crore. Thus, NPAs of Rs.1967.48 crore were resolved in these shivirs. • OTS was marketed as a product for faster resolution of NPAs and OTS in 84104 accounts was approved. Through well defined recovery policy Rs.854.93 crore were recovered in approved OTS cases through negotiated settlements. • Due to the above highlighted initiatives and concerted follow-up for recovery and upgradation, the Bank recovered Rs. 4724.58 crore in accounts slipped during FY’16. • NPA accounts as on 31.03.15 with aggregate outstanding of Rs.1381.66 crore were upgraded to Standard category. Total cash recoveries in NPA accounts amounted to Rs.4261.88 crore. During FY’16, the Bank recovered Rs.2296.95 crore out of the accounts earlier written off (Including Technical Write off). D. INDUSTRIAL RESTRUCTURING The Standard Restructured Advances of the Bank has come down from Rs.38,315 crore for FY’15 to Rs.20,144 crore for FY’16 a) Industrial Rehabilitation The Bank continued its efforts towards rehabilitation of potentially viable sick units to provide the much needed relief to industrial sector by debt restructuring. The Bank has been assigned the role of ‘Operating Agency’ of Board for Industrial and Financial Reconstruction (BIFR) in number of accounts. During FY’16, Draft Rehabilitation Scheme (DRS) were formulated by the Bank as ‘Operating Agency’ of BIFR in four accounts and the Bank has also implemented rehabilitation package in one case sanctioned by BIFR during FY’16. b) Corporate Debt Restructuring (CDR) To ensure timely restructuring of the debt of viable corporates availing credit facilities under consortium / multiple banking, a transparent mechanism is formed under CDR system. During FY’16, one account with outstanding of Rs. 38.38 crore was restructured under CDR. Out of 84 restructured accounts, PNB has been assigned the role of Monitoring Institution in 18 accounts. c) Debt Restructuring Mechanism for Small & Medium Enterprises The Bank has already adopted Debt Restructuring Mechanism for Small & Medium Enterprises (DRM for SMEs) on the lines of CDR since FY’06. During FY’16, the Bank restructured 17 accounts with aggregate outstanding of Rs. 247.10 crore. d) Restructuring-Others The Bank has also put in place a transparent mechanism for restructuring of debts of potentially viable units, which are facing temporary problems due to factors beyond their control even for cases which cannot be covered under BIFR/ CDR/DRM for SMEs. During FY’16, 19 accounts involving Rs.1002.56 crore were restructured/ rescheduled under this category. E. DIGITALIZATION: TOWARDS ‘DIGITAL PNB’ The Bank undertook several initiatives in its continued efforts to provide better, prompt and efficient services to the customers. These initiatives were a step towards cash less society and paperless banking. E.1 Alternative Delivery Channels a) Internet Banking: The Bank has been providing Internet Banking Services with following variants viz., Retail Internet Banking and Corporate Internet Banking. The Internet Banking Customers of the Bank reached 47 lakh as on 31st March 2016. The Bank also updated its Internet Banking Services during FY’16 which are given as under: - Revamped Corporate Internet Banking Module, making it more simple and easy to use. - Launched ‘PNB Sleep-easy’ to block/unblock transaction password of IBS and Mobile Banking when not required. - Hot listing and personalization of Debit Card. - Online resetting of Pin number of Debit Card. - Online application for OD under PMJDY Accounts through IBS. - For strengthening security in Internet Banking services operations, the Bank has implemented Digital Signature as a second factor of authentication for doing transactions in Retail and Corporate Internet Banking. b) Mobile Banking: The Bank is also providing Mobile Banking services to around 24 lakh customers as on 31.03.2016. The Bank has provided Mobile Banking Services with following variants: i. SMS Banking: User has to create SMS in the predefined format(s). ii. Browser Based Mobile Banking: This requires Mobile phone enabled with GPRS or Wi-Fi. iii. Application Based Mobile Banking: The user can download app from respective app store. Currently the Bank is providing Mobile Banking App for Android, iOS, Blackberry and J2ME platforms. iv. National Unified USSD Platform (NUUP): This is offered on a short code *99#, which is a common platform for all banks managed by National Payment Corporation of India (NPCI). During FY’16, the Bank added the following features which are as follows: - PNB MobiEase: Using this mobile app, there is no need to remember syntax for sending SMS for different enquiries (i.e. Balance Enquiry, Mini Statement, Cheque Book request etc.) - Value Added Services: Facility of Mobile and DTH recharge is available through Mobile Banking. - PNB ATM Assist : A Mobile App to locate ATMs of the Bank using GPS and also lodge complaints regarding the functionality of ATMs. - Online User Registration and Password Reset for Mobile Banking without any intervention of branch. - Online application for OD under PMJDY Accounts through Mobile Banking. - PNB introduced hindi version of Mobile Banking. c) SMS Alert Services: As on 31st March’16, around 3.95 crore customers have subscribed for SMS Alerts Services. On an average per day around 29.92 lakh SMS Alerts are generated and delivered to these customers. - SMS Alerts are generated for identified transactions (credit/debit) done at branches, ATM, IBS, Mobile Banking and POS terminals. - In addition, SMS alerts are also sent for non financial activities like Birthdays, Mobile no. registration/modification, address/name change, change of internet banking transaction password, loan installment becoming due, loan installment overdue, FD account maturing, FD account Matured, NEFT (N10) confirmation, RTGS transactions with UTR No, Balance on missed call, etc. - The channel is also leveraged for providing promotional messages such as information on Bank’s products and other services to the Bank's esteemed clients. The Bank has been continuously adding new features such as: - SMS alerts implemented in 5 Regional Rural Banks. - Mandatory/Non-Mandatory Feature Introduced: Customer is provided with option to select from Mandatory and Non-mandatory alerts so that in case customer requires only mandatory alerts, he / she may not be charged. - Call center is provided with facility to access SMS alerts history sent to customer in order to speed up complaint resolution process related to SMS alerts and OTP. - CIBIL Watch Alert: Alerts are sent to branch heads through information provided by CIBIL regarding PNB loan customers approaching some other Bank for loan. - Housing/Car Loan Alert: Alert is sent to customer acknowledging his/her request whenever he/she visits PNB housing/car loan site and submits a request for call back from PNB. - Cheque Presentment Alert: Alert is sent to customer whenever a cheque is presented in his/ her account, providing ample time to respond before the same is cleared. - 15G/15H Alert: Alert is sent to customers requesting submission of 15G/H to avoid deduction of Tax. d) ATMs: The Bank has vast network of 9463 ATMs spread across length and breadth of the country as on 31.03.2016. The various new initiatives taken by the Bank to increase the usage of ATMs are as follows: • E- Surveillance systems have been installed at ATM sites to restrict the incidences of vandalism and burglaries. Till 31.03.2016, 6136 sites are connected and monitored by E- Surveillance. • To decrease the downtime of ATMs on account of electricity failure, Solar UPS are being installed. Till 31.03.2016, 450 Solar UPS were installed at potential sites. • For online ATM monitoring and to take prompt corrective/preventive actions in case of ATMs getting down, ESQ ATM Monitoring System has been installed. e) Self Service kiosk: The Bank has installed 1721 Cash Deposit /Multifunction Kiosk (including PNB Cash Acceptor cum ATM), 383 Electronic Cheque Deposit Machines and 3214 Pass Book Updating Machines across the country. The machines installed in e-lobby are made available to customers 24*7. Customers may access the same as per their convenience. In order to improve the availability of Self Service Area Machines, a real time monitoring tool for remote monitoring of SSA Machines has been implemented for effective monitoring and to reduce down time. E.2 Cheque Truncation System (CTS): Primary site of CTS Western Grid has been shifted from LCC-Mumbai to Belapur. Now all the branches under Western Grid are participating in CTS clearing through the Belapur Site. Complete infrastructure of LCC Mumbai has been shifted to Data Centre-Delhi and DR site of Western Grid is established at Data Centre-Delhi. E.3 IT Security: The Bank has Information Security Policy which is approved by Board and reviewed each year to keep it updated as per latest trend and best practices. • Information System Security Architecture Implementation Committee (ISSAIC) meetings are held on monthly basis to review and recommend implementation of Information security posture. • Website has been made WCAG (Web Compatibility Access Guideline) Version 2.0. • Corporate website has been made IPV6 Compliant. • Security Operations centre has been upgraded from RSA Envision to RSA Security Analytics. • Information Security Audit and Process audit is got conducted from external qualified Information Security auditors on periodical basis. The scope includes external attack and penetration testing, Vulnerability Assessment and Penetration Testing (VAPT), WAN Audit and process audit. • ISO Certification was got upgraded from ISO 27001:2005 to ISO 27001:2013 for data centre, NOC and DR Site. Business Continuity Plan & Disaster Recovery (BCP & DR) • The Bank has well defined Business Continuity Plan (BCP) to provide un-interrupted Customer Services in case of any exigency. • The Bank has fully operational Disaster Recovery Site (DRS) of its Data Centre and other critical applications with well defined Recovery Time Objective (RTO) and Recovery Point Objective (RPO). • DR drill is conducted regularly to keep testing its functional preparedness. As on 31st March'16, DR site is available for 65 applications including critical ones. E.4 Other Initiatives a) Micro ATMs: Under the PMJDY account opening drive, large numbers of saving accounts have been opened and RuPay debit cards have been issued. To provide card based transactions services to such customers, concept of Micro ATMs has been introduced at Business Correspondent locations. Micro ATMs are basically PoS/ Handheld Terminal machines with Magnetic-stripe Card Reader and Encrypted pin-pad. Currently, customer has the facility of cash withdrawal and balance inquiry transaction through Micro ATMs. Transaction happens in online real-time mode and receipt is immediately generated by the Micro ATM. The facility was made live in 4410 Micro ATMs and the Bank is under the process of implementing the same at remaining BC locations. b) Branch-Wise Vacant Locker Status: For getting a locker on rent, customers have to sometimes make number of visits to particular branch to ascertain the position of vacant lockers available. Also, some branches in the same city may have vacant lockers & others may be having waiting list of customers for issue of locker. To address the issue, w.e.f. 24.09.2015, existing & prospective customers have been provided an opportunity to locate branch-wise vacant locker status on the Corporate Website (www.pnbindia.in). Also, a mechanism was put in place to update this vacant locker status on the Bank’s website on daily basis. c) Payment System for PAO/CDDO Files from PFMS: Ministry of Finance, Government of India has taken a decision to process all payments like non plan payment (including PAO/CDDO payments) of various Ministries through PFMS (under Ministry of Finance) and to integrate various standalone systems. These payments are to be digitally signed and sent through PFMS central server. The payment files from PFMS are being processed through PFMS PAO portal. Generation of e-Payment scrolls, Cheque Scrolls, Receipt Scrolls has been integrated in this system from 01.11.15. d) Outward Mandate Management System: To help the branches in garnering business of corporate customers wishing to collect funds from their customers on a regular frequency on the basis of their mandate, an in-house developed Outward Mandate Management System has been put in live w.e.f. 03.02.16. For collecting EMI as per mandate from PNB borrowers, Debit Transaction File (Outward ACH-Debit) can also be generated by service branch through this system. e) Implementation of new Sparc Super Cluster (M6-32) servers: On 18.10.2015, the Bank has successfully migrated the CBS Data Base from M9000 servers to new Sparc Super Cluster (M6-32) servers on 4-Node RAC (Real Application Cluster) Architecture from earlier 2-Node RAC. PNB is the first Bank in India to implement 4 node active RAC (Real Application Cluster) setup. This implementation will help the Bank in future cost savings and provide various operational benefits. f) Zero Data Loss Centre (ZDLC): ZDLC of the Bank started functioning from 29.02.2016. ZDLC will function as Bank’s third line of data defense. The Bank’s transaction data would be simultaneously captured at DC and ZDLC and then subsequently replicated in DR site, thereby guaranteeing 100% synchronization or availability of the transactional data. This will ensure zero data loss for critical transactions, thereby helping the organisation to quell operation risk, reputation risk and enhance stakeholder confidence. F. Management Information System To achieve the objective with which Management Information System Division (MISD) was set up, Enterprise-wide Data Warehouse (EDW) was implemented in 2008. EDW set up has facilitated ready access to data required for Regulatory/Statutory reporting and additionally for analytical purposes. This has reduced workload of field functionaries to a considerable extent and is assisting Top Management in taking timely decisions. Standardized approach for credit risk under Basel – III has been implemented through LADDER (Loans and Advances Data Desk for Evaluation & Reports) system enabling calculation of Risk Weighted Assets (RWAs) in respect of Loans & Advances as per guidelines of RBI. Data of all loan accounts is being transmitted to four Credit Information Companies (CICs) i.e. CIBIL, Equifax, Experian & High Mark on monthly basis from Ladder System. Bureau One solution has been put in place since 2012 enabling the branches to draw Credit Information Reports (CIRs) using Bank’s intranet (CBS network) for taking credit related decisions. CIRs of 14,62,493 prospective borrowers under Consumer category and 26,861 CIRs under Commercial category were drawn from CIBIL, Experian, High Mark & Equifax databases during FY’16 The Bank is required to register the particulars of equitable mortgages with Central Registry. About 4.19 lakh Immovable Properties (IPs) have been registered with CERSAI by the Bank till March 2016. The object is to avoid multiple financing on same IP, thereby preventing perpetration of frauds by mortgaging the same property to more than one financial institution. Anti Money Laundering solution has been implemented to scan the customers at the time of customer acquisition and fund transfer by verifying various Watch Lists. The system also helps in submitting different reports to FIU and other regulatory bodies. G. Branch and Office Network Domestic Presence The Bank has one of the largest Branch Network of 6759 as on 31.03.2016. Around 63% of the Bank’s branches are located in Rural and Semi-Urban areas. To fulfill the banking needs of unbanked areas, 202 new branches were added to the vast network of branches during FY'16. Besides, 32 ‘Women only’ branches named “Akshaya” were opened during FY'16. These branches are managed exclusively by women for the women customers only. International Presence The Bank has its overseas presence in 9 countries by way of 4 branches (2 Hong Kong, one Dubai, & one OBU-Mumbai), 2 Subsidiaries (London & Bhutan), one Associate (at Kazakhstan), one Joint Venture (at Nepal) and 4 Representative Offices (Sydney-Australia, Shanghai-China, Dhaka-Bangladesh and Dubai-UAE). The Bank is also exploring possibilities of overseas expansion in Sri Lanka, Canada, Brazil, Australia and China. H. International Banking The Bank had registered a foreign exchange turnover of Rs. 1,33,881 crore for FY’16 showing a decline of 2.08% on YoY basis mainly due to slowdown in global economies and continuous decline in the country exports. At present, the Bank has more than 200 branches authorised to handle foreign exchange business and a Centralized Back Office for Trade Finance at New Delhi specialized for centralized handling of trade transactions. The Bank has specialized International Banking Branches at major export centres for extending services to the importer/ exporter customers. Besides these Authorised Dealers (AD) branches, the Bank has 22 Exchange Bureaus at important tourist centres to facilitate encashment of foreign exchange currency notes/travellers cheque by foreign tourist/NRIs. The Bank is also having International Service Branch at New Delhi for handling inward remittances for the Bank as a whole. During FY’16, the Bank handled remittance business of about Rs.57,886 crore, showing growth of about 4% on YoY basis. The Bank has Rupee Drawing Arrangements (RDA) with 38 exchange Houses (32 in the Gulf, 2 in Singapore, 2 in the USA, 1 in Australia and 1 in Canada) to facilitate remittance from NRIs. The Bank also has web based remittance arrangements under Money Transfer Service Scheme (MTSS) and has arrangements with 6 Money Transfer Organizations Worldwide. The Bank has actively implemented Gold monetization Scheme (GMS) launched by Government of India in FY’16 and systems and procedures have been put in place. I. Operations Division Organizational Restructuring: Organizational structure plays a vital role in performance of any organization. To improve the productivity and hence delivery, number of Circle Offices has been increased from 69 to 76. Existing 3 tier structure, with Circle Offices linking head office to the branches, is being changed to 4 tier structure where Zonal Offices will monitor the performance of Circle Offices and report to the Head Office. Business Processes: Business processes are being continuously reworked at the micro levels to provide seamless banking experience to customers e.g. request issue of personalized cheque books through ATMs, relaxation in inter-sol (branch) cash withdrawals and transfer transactions, introduction of payee’s name in SMS sent on presentation of cheque for clearing, etc. Employee Suggestion Scheme: To encourage innovative and progressive ideas through employees, Employee Suggestion Scheme is in vogue for existing as well as retired employees. Customers can also send suggestions through feedback or email to customer care centre at care@pnb.co.in. J. New Initiative Division To improve the customer service and increasing business prospects, the Bank took up many initiatives which are as under: • Towards brand positioning and connecting with the customers/visitors on social media, the Bank has made its presence on Twitter & LinkedIn. On social media, the Bank launched various facilities for customers/visitors viz., regular updates on offers, customer care services including grievances redressal, etc. • The concept of Digital village was evolved under which the village will be wi-fi enabled along with OffSite e-lobby having ATM, Cash Deposit Machine, Electronic Cheque Deposits Machine, Passbook Updation Machine, PC with internet connection and TV display unit. • 121 new Offsite e-lobbies started at institutional and cantonment areas to acquire business and improve service delivery. • Skill development programmes like computer literacy, carpentry, advanced farming techniques etc. are being conducted with focus on creating job opportunities and promote inclusive growth. • For bringing more efficiency in the ATM functioning and profitability, “ATM Profitability Model” was designed. This is in-house designed software to monitor the functioning of ATMs Pan India with an aim to minimize/eliminate the pay out. • In order to communicate effectively with its customers and staff continuously, the Bank is coming out with concept of ‘Reach in Reach out’ which will be akin to TV Channel. • The Bank is also planning to launch Tab Banking for acquisition of new customers using the newly set up marketing vertical and “PNB YUVA” for youth with an objective to bring them in the Bank’s fold through Mobile app. K. Business Diversification • Mutual Fund: The Bank is distributing and marketing Mutual Fund products of Principal PNB AMC & UTI AMC. During FY’16, the Bank mobilized total amount of Rs.3457 crore and Asset under Management stood at Rs.580 crore which earned brokerage of Rs.3.38 crore. Total amount mobilized during FY’16 was Rs.2653 crore and Asset under Management Rs.515 crore. • Insurance Business 1. Life Insurance Business: As a corporate agent of PNB MetLife India Insurance Co. Ltd., the Bank mobilized premium of Rs.964 crore (Fresh Business Premium of Rs.411 crore & Renewal Business Premium of Rs.553 crore) during FY’16 from 1,12,200 policies, as against total premium of Rs.677 crore mobilized during FY’15, thus showing a growth of 42%. The Bank’s earnings from Life-Insurance business during FY’16 amounted to Rs.85 crore as against Rs.60 crore during FY’15, showing growth of 42%. Total business mobilized under Life Insurance business since inception is Rs.2840 crore, from 4,45,048 policies and total earning amounted to Rs.248 crore. 2. Non-Life Insurance Business: Under Insurance tie-up with Oriental Insurance Co. Ltd. for Non- Life Insurance business, the premium collection amounted to Rs.208 crore from 5.15 lakh policies mobilized by the Bank, which earned revenue of Rs.24.51crore as against Rs.21.87 crore, during FY’15 showing a growth of 12%. Premium collected during FY’15 was Rs.193 crore from 4.40 lakh policies, thus showing a growth of 8%. The Bank registered a growth of 31% in selling of customized health insurance policy ‘PNB-Oriental Royal Mediclaim’ and 1,58,175 policies were sold during FY’16 as against 1,20,797 policies sold during FY’15. • Depository Services: Depository Services as Depository Participants of NSDL & CDSL is being provided through all branches covering more than 3500 centres across India. The Bank earned an income of Rs.79.60 lakh during FY’16 for providing Depository Services. • Online Trading Services: Online trading facility is also being provided through the Bank’s associates viz. M/s. SMC Global Securities Ltd., M/s. IDBI Capital Services Ltd. and M/s. Networth Stock Broking Ltd. An income of Rs.19.81 lakh was received from these associates on account of online trading activities during FY’16. • Merchant Banking: As Category-I Merchant Banker, the Bank handled 42 assignments of Dividend Payment/ Interest Payments during the FY’16 and earned a float income of Rs.2.95 crore. Being Self Certified Syndicate Bank (SCSB), Applications Supported by Blocked Amount (ASBA) facility for submitting of application in public issues (IPO/FPO/ Right Issue) has now been made available from all the branches of the Bank. This facility is also available online to Bank’s CASA account holders (both retail and corporate IBS users). ASBA facility is also available for Syndicate/Sub syndicate Members of SEBI. During FY’16, the Bank collected applications for Rs.812 crore for 93 assignments handled by the branches. • Credit Card: Credit Cards of the Bank have consolidated its market share during the year. The Bank achieved a growth rate of 35.32% in issuance of cards during FY’16 The Bank also introduced Chip cards with PIN and One Time Password (OTP) to facilitate e-commerce transactions. To enhance customer awareness about security aspects, various steps are being regularly taken including sending text messages to cardholders of the Bank. Issuance activity has become an independent profit centre. Profit from the activity increased to Rs.524 lakh during the year and contributed to fee based income. • Merchant Acquiring Business: Merchant Acquiring Business through installation of Point of Sale (PoS)/ GPRS Terminals and Integration of Internet Payment Gateway (Debit/Credit Cards) launched in February 2010 has completed 6 years. The Bank installed 13,699 PoS terminals and integrated 176 Internet Payment Gateways. • RuPay Card: The Bank has taken membership of National Payment Corporation of India (NPCI) for acceptance of RuPay Debit card on PNB Point of Sale terminals. Now, in addition to acceptance of cards having logo VISA or MasterCard / Maestro, PNB POS terminals accept RuPay Debit card for all face to face transactions. • KAIRON Project of Punjab Govt. for Grain Procurement: PUNGRAIN, a food grains procurement agency of Punjab Government has launched Kisan Arhtia Information and Remittance Online Network (KAIRON) project whereby they are making payments to the farmers through Arhtiyas using RuPay Debit cards with the help of National Payment Corporation of India (NPCI). The Bank actively participated in the project and has done a business of Rs.4150 crore as Acquiring Bank and Rs.2111 crore as Issuing Bank during FY’16. • Bhamashah (e-Mitra) Project: The Bank successfully participated in e-Mitra Project of Rajasthan Government and succeeded in obtaining the Project, whereby the Bank is going to install 10000 PoS terminals. Service Level Agreement (SLA) was signed and process of implementation has since started. • Multi level EMI facility in PoS terminals: At present, PoS terminals of the Bank are not customized with Multi Level EMI facility. In the present scenario, many customers prefer to avail EMI facility. The Bank is going to start the Multi Level EMI facility on the PoS terminals. Draft Agreement relating to it has been sent to M/s Worldline for the purpose of execution. • Launch of NFC Contactless Dual Interface debit card: The Bank is going to introduce NFC (Near Field Communication) technology in PNB PoS terminals. In NFC enabled PoS terminals, the card holders can make payments by just waving his card near the PoS terminal instead of dipping or swiping the card L. Government Business To bring in effi ciency in pension disbursement, we have provided the following facilities:- • Introduced Digital Life Certifi cate (DLC) and e-PPO which is a step towards digitization and error-free pension delivery system. • Approved CPPC at Allahabad for entire army pensioners • Set up service centres for pensioners, e.g., for armed forces at Allahabad, for naval personnel at Mumbai and air-force personnel at Delhi • Created exclusive e-mail IDs armypension@pnb.co.in; airforcepension@pnb.co.in and navypension@pnb.co.in so that pensioners of these wings of armed forces can post their grievances/ references. • Sending reminders through SMS to pensioners to submit life certifi cate • Organized Aadhaar seeding Camps across India for convenience of pensioners and updated Aadhaar & Mobile numbers in their pensioner data. The Bank introduced Sukanya Samriddhi Yojana, Kisan Vikas Patra Scheme and on-line opening of PPF accounts. These products are made available through 5990 SOLS of our Bank. The Bank started 20 new projects for receipt and payment of Govt. dues. The Bank established relationship with State Governments for VAT collections in all States except in North- Eastern, J&K, and Goa. For increasing efficiency in cash management, the Bank has made action plan to set up Mega Currency Chest / Cash Processing Centre and reducing the number of Currency chests from 195 to 109 in phased manner. Govt. Business Income for FY’16 stood at Rs.102.99 crore compared to Rs.84.92 crore in FY’15. Claims lodged in Jan’16 for Rs.11.67 crore with SBI/EPFO/RBI which pertains to FY’16. M. Treasury Operations During the period under review, Gross Investment as on 31st March 2016 stood at Rs.1,54,727 crore as againstRs.1,49,266 crore as on 31st March 2015 and registered a YoY growth of 3.66%. The average investments as on 31st March 2016 was Rs.1,62,855 crore as against Rs.1,41,340 crore in corresponding period last year. The Interest income from investment portfolio increased from Rs.10,563 crore for FY’15 to Rs.11,935 crore for FY’16. The Bank actively traded in sovereign bonds, Non-SLR bonds and equity throughout the financial year. The liquidity position of the Bank was comfortable throughout FY’16 and the funds were managed through CBLO, Repo and Forex market swaps. The Bank complied with all the requirements of CRR/SLR stipulated by the Regulator. Fixed Income (SLR/NSLR): FY’16 started on a bearish note on the back of unfavourable global factors like Grexit (Greece exit from Euro), China’s devaluation of its currency and fear of US FED hike. In September Monetary policy, the regulator announced a rate cut of 50 bps following which yields softened by around 25 bps along with SLR and HTM cut. However, market could not sustain at these levels and yields hardened on account of excess supply in the market mainly in State Development Bonds and expected supply of DISCOM bonds under scheme Ujwal DISCOM Assurance Yojana (UDAY). This huge demand supply mismatch along with fear of Government not sticking to its fiscal consolidation path and expectations of higher Government borrowing numbers further put pressure on the yields. However, Budget announcement gave a big respite to the market as Government stuck to its fiscal deficit target and borrowing numbers came much below the market expectations. After the Union Budget 2016-17, 10 year benchmark yields softened by around 40 bps. During FY’16, the Bank booked trading profit of Rs.418.63 crore profits from sale of investments in Fixed Income. Equity: During FY’16, Markets declined around 9% and Nifty corrected from its high of 9116 (Mar’15) to low of 6825 (Feb’16) due to Global events like Fed rate hike, China market sell-off, Yuan devaluation, falling crude prices and weak Corporate earnings. However, Markets have shown some recovery after Budget as Government stuck to its Fiscal Defi cit roadmap. On Global front, dovish stance of Fed and renewed FIIs buying supported the market sentiments. Indian Equity Market has been relatively resilient during this period compared to other Major Emerging Market Economies because of its strong fundamentals and domestic consumption story. The Bank booked Rs.204 crore Trading Profit in Equity segment and Dividend income increased to Rs.115.50 crore in FY’16 from Rs.95.70 crore in FY’15. Forex: There has been an increase in Forex Income Expenditure due to changing accounting policy. Now the income/ expenditure on swaps is being reposted on gross basis instead of net as was being done previously. Net Forex income has increased from Rs.681.50 crore as on March 2015 to Rs.1319.60 crore as on 31st March, 2016 showing an increase of 93.63% mainly on account of deployment of surplus of liquid fund by way of short term loans in Dollar Market. However, Exchange Profit decreased from Rs.397.72 crore in March 2015 to Rs.385.98 crore in March 2016. N. Customer Care The Bank continued to accord top priority to providing prompt and efficient service to its customers for FY’16 also. The Bank formulated a Grievance Redressal Policy. Efforts were made to redress the grievances of the customers within the framework laid down in the Grievance Redressal Policy. Systems and procedures for the grievances redressal mechanism are reviewed at regular intervals to remove systemic deficiency, if any, which help in further improving the customer service. Initiatives undertaken during FY’16 for improvement in customer service • 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 the Bank’s website, Internet Banking Service and Mobile Banking Service. Complaints received at Head Office, all the Circle Offices and over 1,862 SAP enabled branches are entered in CGRMS. Through this system, the customer gets an immediate automatic acknowledgement and can keep a track of his complaint also. • The position of complaints received by the Bank is reviewed by a Sub-Committee of the Board on quarterly basis. The meetings of the Sub-Committee are presided over by Managing Director and CEO. All the Executive Directors, Directors representing Offi cers’ Association, Ministry of Finance and the shareholders’ Directors are members of the Sub-Committee and General Managers of selected business and control Divisions are permanent invitees to the above committee. The above committee held four meetings during FY’16 and reviewed the position of complaints received by the Bank and also complaints received by Chief Customer Service Officer (Internal Ombudsman) on quarterly basis. • The Bank also constituted “The Standing Committee on Customer Service”, which is chaired by the Executive Director with General Managers of several business and control Divisions of the Bank. The committee also has three eminent non-executives (one senior citizen/ one pensioner/one woman representative) drawn from the public as members. The committee meets every quarter to evaluate feed-back on quality of customer service received from various quarters. The committee also reviews comments/feed-back on customer service and implementation of Code of Bank’s Commitments to Customers received from BCSBI. The Standing Committee on Customer Service held four meetings during FY’16. • Customer Service Committees have been set up in all the branches and Circle Offices to look into the quality of customer service rendered and to critically examine the feedback/suggestions for improvement in customer service. These committees meet once in a month where staff and the invited customers interact freely on service related issues. Two nominated non-official members representing customers are invited in the Circle Level Customer Service Committee Meeting on quarterly basis. • The Bank has established state-of-the-art Contact Centres at Gurgaon and NOIDA to provide tele-banking services to its customers on 24 x 7 x 365 basis through two renowned Service Providers. In addition to these two Primary Sites, the Bank also established two Secondary Contact Centres at Mangalore and Bhopal to provide tele-banking services to its customers in 5 regional languages besides Hindi and English. • The Bank constituted teams of officials at Customer Care Centre at Head Office, Circle Offices and Zonal Offices to pay incognito visit to branches to assess their standard of service. During FY’16, officials of the Bank made 4205 incognito visits to branches Pan India. Deficiencies pointed out by the visiting officials are being shared with the concerned branch and the Circle Offi ce for taking corrective steps for removal of the same. This helps in further improvement in customer service. • Theme Based Meetings are conducted at monthly intervals in all branches on a common date on a pre-decided Themes, details of which are provided by Customer Care Centre, HO to improve awareness of field staff about the Bank’s products and services and to sensitize the staff about the issues of utmost importance as well as the changes taking place in the industry and the Bank. • The Bank is publishing a monthly magazine titled “Customer Speak” in which selected complaints filed by customers and the action taken and resolution provided to the complainants are also mentioned. Letters issued by customers appreciating the service of officials of the Bank are also published in this magazine. Besides, the Bank’s guidelines on important issues pertaining to customer service, products and services are highlighted in this magazine for the benefit of field staff. Due to various initiatives taken by the Bank to improve the customer service, the number of complaints received during FY’16 came down to 29,654 as compared to 29,759 complaints received during FY’15. Out of total number of 29,827 complaints, (i.e., 173 complaints outstanding as on 1st April 2015 and 29,654 complaints received during FY’16) 29,610 complaints were resolved as at 31st March 2016. The number of complaints pending as on 31.03.2016 was 217 which have since been resolved. No award has been passed by any Office of the Banking Ombudsman during FY’16. O. Implementation of Official Language Policy The Bank has been leading in the area of implementation of Official Language and achieved almost all the targets in all parameters fixed by the Government of India, Ministry of Home Affairs, Department of Official Language for FY’16. All the bilingual CBS and HRMS computers are under Hindi Interface. By adopting this bilingual system, implementation of Rajbhasha is increasing. In addition, the Bank is using Unicode fonts for Hindi correspondence at all levels. During FY’16, the Bank has been awarded with more than 50 awards for its excellent performance in the use of Hindi which includes some of very significant awards namely Rajbhasha Kirti Puraskar (First in ‘A’ region) – a top most award scheme of Govt. of India, RBI Rajbhasha Shield Competition (First in ‘A’ region and Second in ‘B’ region) and other Regional level awards of Ministry of Home Affairs. In addition, Town Official Language Implementation Committees situated in different locations of the country and other Non-Govt. Organizations have also awarded the Bank offices. The Bank is successfully convening the Town Official Language Implementation Committees constituted by Govt. of India in Delhi, Bharatpur, Kanpur, Chandigarh, Dharamshala, Sriganganagar, Bulandshahar, Dehradun, Gorakhpur, Kurukshetra, Rohtak, Muzaffarnagar, Hoshiarpur, Hamirpur and Bathinda. The Draft and Evidence Committee of Parliament on Official Language inspected Ernakulam Circle on 9th January, 2016 and the third sub-committee of Committee of Parliament on Offi cial Language visited Bharatpur circle on 15th February, 2016. The Committee not only expressed satisfaction but also appreciated the efforts made by the Bank for progressive use of Hindi. The Bank celebrates 'Hindi Maah' in the month of September every year. Various competitions are organised at all India, local and Circle levels in which staff members of all cadres participate enthusiastically. The winners are awarded with prizes in the Rajbhasha function. The Bank has its own Lala Lajpat Rai Rajbhasha Shield Yojana for its various HO Divisions, Circle Offi ces, Training Centres, Zonal Audit Offices, etc. Under the scheme, every year, offices are awarded with prizes for doing excellent work in the area of Rajbhasha implementation. This year also, the Bank organised Hindi Maah and other programmes/competitions and awards and prizes were given. Sixth collections of articles received in the competitions on writing namely PNB Pravah: Ek Aur Kadam has been published. Under Moulik Hindi Pustak Lekhan Yojana of the Bank, cash incentives were awarded to staff members for writing original books in Hindi on Banking and Non-banking subjects. All the staff members, working in the Bank or retired from bank services, can participate under this scheme. P. PNB’s Subsidiaries and Regional Rural Banks a. PNB Housing Finance Limited (PNBHFL) The housing finance industry continues to be very competitive and has given excellent growth over last few decades. Inspite of a very challenging year, the Company has achieved its highest ever loans disbursements and profitability. On the basis of total loan assets, Company is now ranked 5th largest Housing Finance Company (HFC). The Company is also ranked the 2nd largest deposit taking housing finance company. The Company has earned this distinction in a short span of five years since starting Business Process Re-engineering project through a PPP model. To keep pace with its rapid expansion in business, which require huge Tier I capital, the Company has started the process of getting itself listed towards the end of 2nd quarter of FY’17. The Company will shortly come out with its initial public offer which will be in the vicinity of Rs. 2500 crore. The Company sanctioned 43,040 loan applications worth Rs.23,011 crore (Annual growth in sanction number 59% and sanction amount 53%). Loans worth Rs.14,456 crore were disbursed (Annual growth of 53%). The loan book of the Company reached Rs.27,177 crore (Annual growth of 62%) and Assets Under Management reached at Rs.27,555 crore (Annual growth of 59%). The Deposits of the Company reached Rs.7,115 crore (Annual growth of 45%). The Company earned Total income of Rs.2697 crore which grew by 52% on YoY basis. Operating Profit for the year increased by 76% to reach Rs.588.20 crore. Further, Profit before tax for the year was at Rs.503.09 crore (Annual growth of 70%) and Profit after tax was Rs.326.47 crore (Annual growth of 66%). Total loan delinquencies were 1.48% of End Period Net Receivables (ENR), which is the best in the industry; Gross NPAs were Rs.59.81 crore i.e. 0.22% of ENR and Net NPAs were Rs.38.06 crore i.e. 0.14% of ENR during FY'16. The Company has achieved Net Interest Margin (NIM) of 3.08%, Return on Total Assets (RoA) of 1.45% and Return on Equity (ROE) of 17.08%. The Company had faced tough competition on interest rates from peer HFCs and commercial banks. The Company has managed good NIM through efficient funds management and resource planning. During FY’16, the Company has achieved the distinction of raising Rs.500 crore of Green Bonds through IFC Washington for promoting green housing projects in India. The Company was felicitated for ‘Outstanding Contribution to CSR’ at the CREDAI Conclave 2015 by Hon’ble Union Minister Shri Rajiv Pratap Rudy. The Company was also awarded the ‘Housing Finance Company of the Year’ at the 8th Annual Real Estate Summit and Awards hosted by Franchise India and ET Now. The Company was honoured for its IT transformation journey by EMC Corporation in an event held in partnership with Cisco, VM Ware, etc. b. PNB Gilts Limited During FY’16, the yields on Government securities trended down, with the ten-year benchmark yield moving down to 7.46% as on 31st March 2016 as against previous year close of 7.74%. Though the yields on point to point basis declined, the market remained highly volatile with the yields moving up for major part of the year. This was despite an accommodative stance by RBI with a cut in repo rate of 75 basis points. Inflation was well contained and Current Account Deficit was comfortable with a slump in global prices of oil and gold. Internationally too, the major economies like Euro zone, China, Japan were on an easing path whilst USA raised the rates. The main reason for this directional mismatch was the demand supply gap in the government securities and enhanced supply of normal State Developmental Loans. The uncertainty hanging over the issuance of UDAY bonds also weighed heavily on market. Further, despite accommodative Monetary Policy stance, RBI kept the system liquidity in deficit mode with average liquidity deficit of more than rupees one lakh crore. It was only from February end onwards, with the completion of Government borrowings and aggressive OMO purchases by RBI that this demand-supply mismatch was reversed. This was further aided by the fiscal deficit pegged at 3.5% for FY’17, reduction in small savings rate, lower retail inflation and a positive early expectation of a normal monsoon. Accordingly the yield on 10- year benchmark Government security which opened the year at 7.74%, touched a high of 7.99% and closed the year at 7.46%. Against the backdrop of extreme volatile market conditions, the Company managed to post a Profit Before Tax of Rs.51.47 crore as on 31st March 2016. The Company fulfilled all its obligations as a Primary Dealer in both primary and secondary markets. The total outright turnover stood at Rs.3.76 lakh crore, whereas, the total Networth of the Company rose to Rs.731.22 crore as on 31st March 2016 from Rs.718.06 crore as on 31st March 2015. c) Punjab National Bank International Limited (PNBIL) Financial Year 2015-16 was a year of consolidation for the PNBIL. During the year, PNBIL adopted holding business strategy with increased focus on strengthening the Corporate and Risk Governance frameworks. PNBIL also endeavoured for revision in various Credit Risk, Capital and Liquidity Management policies. In order to demonstrate effective 3 Lines of Defence, PNBIL has revised its Corporate Governance structure, appointed Chief Risk Offi cer (CRO), Chief Finance Officer (CFO) and Company Secretary. PNBIL created/revised structure of the various committees including Nomination and Remuneration Committee, Credit Approval Committee, Risk and Compliance Committee, Credit Risk Oversight Committee. PNBIL has also created a separate Credit Monitoring and Recovery Department for the effective management of stressed assets. This is the ninth year of operations for PNBIL and it achieved a total business figure of $2,834 million. Operating Profit for FY'16 amounted to $38.26 million as against $41.49 million in FY'15. Decrease in operating profit was mainly on account of reduced treasury income by $4.35 million. During FY’16, total lending stood at $1,476 million as compared to $1,555 million in 2015. Net Interest Income has shown improvement which increased by $2.90 million signifying better margins. Net trading income decreased by $4.19 million due to market rate movements. Expenditure increases were due to the PNBIL upgrading its governance and control environment and investing in systems to enable it to meet the increasing regulatory challenges faced by all banks. Many of the PNBIL’s customers have been adversely affected this year by the slow economic growth in India, the delay in flow of funds to the much awaited infrastructure projects and the global slowdown. This has resulted in increased gross impaired advances to $144.99 million ($82.53 million in 2015) necessitating the need for the PNBIL to take a higher level of impairment provisions. In addition to this, PNBIL took the opportunity to further finetune its impairment recognition and provision methodology resulting in an additional impairment provisioning of $71.85 million. The net impaired advances have accordingly reduced from $47.03 million in 2015 to $36.37 million in 2016. PNBIL is the first among Indian Bank subsidiaries/branches that launched tax saver Cash ISA product and Contactless Master Debit card, which are one of the most popular products of the PNBIL. Strategic integration, parental support, continuous innovation, customer centric approach, niche positioning and competitive advantage in its targeted customer base are the key strengths PNBIL is enjoying in UK. PNBIL has its own dedicated treasury at London and a back office in India. PNBIL is complying with all regulatory and capital adequacy guidelines of Prudential Regulation Authority of UK. Offering basic banking products and relationship banking continues to be the strong selling point for the Bank. PNBIL has built a strong brand image in the UK market. d. Punjab National Bank Investment Services Limited (PNBISL) PNB Investment Services Ltd (PNBISL) is a wholly owned subsidiary of Punjab National Bank. The Company commenced its operation on 8.6.2009. The Company has its offices at Mumbai, Delhi, Chennai, Ahmedabad and Hyderabad. The Company is engaged in providing Merchant Banking and Corporate Advisory services like Financial Appraisal, Techno- Economic viability Study, Debt Syndication and Corporate Debt Restructuring besides providing Trusteeship services. During FY’16, the Company earned fee based income of Rs.7.51 crore with a total income of Rs.10.93 crore as against a fee of Rs.11.13 crore and Rs.14.53 crore respectively for FY'15. Profit Before Tax during FY’16 stood at Rs.6.11 crore as against Rs.10.70 crore for FY’15. There has been an improvement in the revenue generated from the Merchant Banking and Trusteeship segments during FY'16. However, due to the withdrawal of the regulatory forbearance by RBI for restructured loans with effect from 1st April 2015 and general economic downturn and no major CAPEX projects coming up, there was a drop in business in CDR and syndication business. Hence, the overall revenue of the Company declined in the FY'16. With the introduction of alternate debt resolution mechanism through flexible restructuring and strategy debt restructuring scheme, the Company has taken initiatives and started working in the segment to enhance its revenue. Primary Capital Markets segment is witnessing a revival and the Company keeping pace with the development in this segment has bagged a couple of IPO assignments and is hopeful of creating its visibility and increase its revenues in Merchant Banking segment. The Company hopes for a better and improved industrial environment in the country to bag more business in Merchant Banking, Credit Appraisal and Debt syndication segments, thereby significantly enhancing its revenues. e. DRUK PNB Bank Ltd., Bhutan The Subsidiary completed 6 years of successful operations in 2016 registering a growth in total business from Rs.967.55 crore as at 31.3.15 to Rs. 2344.81 crore as at 31.03.2016. In terms of customer base also, the Subsidiary achieved encouraging results with number of accounts surpassing 90,000 mark as on 31st March’16, an increase of over 17% over last year. Net Profit increased to Rs.21.76 crore during FY’16 from Rs.10.71 crore during FY’15. The Subsidiary not only registered satisfactory business growth, but also maintained the quality of assets and liabilities much better than the Industry average (Gross NPL estimated at over 10%). The retail deposit base of the Subsidiary, which is considered to be stable deposit, is above 81% of the total deposits, while the performing advances are 96% of total advances. f. Regional Rural Banks (RRBs) At present, five RRBs are sponsored by the Bank. These RRBs are operating in five States, namely, Bihar, Haryana, Himachal Pradesh, Punjab and Uttar Pradesh covering 74 districts with a network of 2301 branches. The aggregate paid-up capital of these Regional Rural Banks stood at Rs.199.30 crore. Central Government, State Governments and PNB contributed in paid-up capital of these RRBs in the ratio of 50: 15: 35, respectively. The Bank’s contribution towards capital of these RRBs was Rs.69.76 crore. The combined networth of RRBs as on 31st March 2016 was Rs.2929 crore. During the year, the aggregate business of all RRBs increased from Rs.45,630 crore in FY'15 to Rs.52,133 crore in FY'16 showing an increase of Rs.6503 crore (YoY growth: 14.25%). The aggregate deposits and aggregate advances as on 31.03.2016 stood at Rs.33,492 crore (YoY growth: 14.72 %) and Rs.18,641 crore (YoY growth: 13.42 %). The aggregate Net Profit of the RRBs as on 31.03.2016 stood at Rs.320 crore. All PNB sponsored RRBs were in Profit. The Gross NPAs of the RRBs increased from Rs.692 crore to Rs.764 crore (4.10% of Total Advances) during FY'16. During FY’16,157 new branches were opened by RRBs, taking the total network of Branches to 2301 with all being on CBS and total numbers of employees were 8714. The figures pertaining to FY'16 are un-audited. Progress in opening of accounts under PMJDY as on 31.03.16 stood at 32,99,189 accounts, out of which RuPay debit cards were issued in 22,86,660 accounts. Balance outstanding in these accounts was Rs.653.70 crore. Total number of accounts having zero balance as on 31.03.2016 stood at 1,63,750. The RRBs sponsored by the Bank are actively participating in economic development of the areas of their presence. With the implementation of Core Banking Solution (CBS), rural customers are also getting benefit of latest technology thus providing services to the rural poor under Financial Inclusion Plan at their doorsteps. RRBs are also opening NRE/NRO accounts. The facility of Micro ATMs, RTGS, NEFT, RuPay ATM cards/ KCC cards, KIOSK Banking Solution (KBS) under FIP, Aadhaar Payment Bridge System (ABPS) under DBT etc. is also being provided to customers in all the RRBs. Q. Awards and Accolades During FY’16, in recognition of its performance and initiatives, PNB received various awards, some of which are: • Golden Peacock National Training Award 2016 by Institute of Directors. • Social Banking Excellence Awards 2015 under Rural Banking Category (Large Bank) by ASSOCHAM. • Best Bank Award for PMJDY (Large Bank)-Winner of Banking Excellence Awards 2015 by CIMSME. • ABP News Brand Excellence Awards 2015 under Banking Financial Services and Insurance Category by CMO Asia with World Marketing Congress • Inspiring Work Place Awards 2015 under the category Best HR and Talent Management Practices by The Banking Frontiers. • Agriculture Leadership Award 2015 by Agriculture Today Group. • FICCI CSR Awards 2014 by Federation of Indian Chambers of Commerce and Industry (FICCI). • Skoch of Merit Award for the project- Transaction Monitoring System for internet banking with OTP and adaptive authentication. R. Future Business Plan of the Bank The Bank has been realigning its business strategies to the changing macroeconomic scenario. Despite unfavourable macroeconomic condition, the Bank was able to maintain good operating profit and efforts for healthy Capital to Risk Weighted Asset Ratio (CRAR) in FY’16. Speeding up the recovery of bad loans, increasing qualitative credit and garnering capital are going to be the focus areas for the Bank in the coming financial year 2016-17. Apart from that, the Bank would focus on augmenting fee based income and mobilizing CASA (current account, savings account) Deposits on sustainable basis. With increased competition, it is important to guard market share in low cost CASA deposits and retail credit. The Bank will work towards anticipating growth opportunities first and move fast to tap the opportunities. Hence, bettering customer service and marketing of products & services will be the key growth enablers for the Bank. Digitalization is an area where the Bank will lay sharp focus on an ongoing basis. It will not only reduce operating cost but also improve customer service. Hence, the Bank will take measures to move towards a Super Smart Bank and the Bank for the Gen Next. The Bank will continue to lay emphasis on lending to Priority sector, MSME and promoting Financial Inclusion as it traditionally does. Digitalization of Business Correspondent (BC) network, improving automation of MSME loan processing will also be focused upon in FY’17. It is expected that the business environment in the economy will improve and demand for credit from the Bank will increase in H2 FY’17. The reform measures adopted by the Government to transform India, boost infrastructure, create self-employment, promote Micro Industries and Housing will prove beneficial for the Bank. The development of industrial corridors, manufacturing zones and ‘smart cities’ will further boost investment climate of the country. Along with these, Make in India, Startup India, Housing for all by 2022 will create financing opportunities for banks. With improvement in the credit demand, the bank will also take measures to meet the Capital requirement under the Basel III. Hopefully, FY’17 will turn out to be the year of ‘Growth & Strength’ for the Bank. S. Board Of Directors As on 31.03.2016, there were 11 Directors on the Board of the Bank including 4 whole time Directors i.e. One Managing Director & CEO and three Executive Directors. During FY’16, the following changes took place in the composition of Board of Directors: • Mrs. Usha Ananthasubramanian was appointed as Managing Director & CEO of the Bank w.e.f. 14.08.2015. • Shri Gauri Shankar completed his tenure as Executive Director due to attaining the age of superannuation as on 31.03.2016. • Shri Prem Narain and Ms. Hiroo Mirchandani were appointed as Shareholders’ Directors on the Board of the Bank for a period of three years w.e.f. 02.05.2016. However, Shri Prem Narain ceased to be Director on the Bank’s Board w.e.f. 29.08.2015 due to resignation. • Shri Rajinder Mohan Singh was elected as Shareholders’ Director on the Board of the Bank for a period of three years w.e.f. 01.07.2015. • Shri Sudhir Nayar, was elected as Shareholder Director on the Board of the Bank w.e.f. 19.12.2015. • Shri Tara Chand Jhalani, Workmen Employee Director completed his tenure on 07.03.2016 on the Board of the Bank. The Board wishes to place on record its appreciation for the valuable contribution made by Shri Gauri Shankar, Executive Director, Shri Prem Narain and Shri Tara Chand Jhalani, Directors. T. Directors’ Responsibility Statement: • The Directors confirm that in the preparation of the annual accounts for the year ended March 31, 2016: - The applicable Accounting Standards have been followed along with 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 March 31, 2016; - Proper and suffi cient 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. U. ACKNOWLEDGEMENT The Board expressed 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 confi dence 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 look forward to their continued involvement in achieving the future goals. For and on behalf of Board of Directors Usha Ananthasubramanian Managing Director & CEO |