PUNJAB NATIONAL BANK

Pillar 3 Disclosures under Basel III Framework

For the Period ended 31.12.2019

(CONSOLIDATED)

Table DF-2: Capital Adequacy

(a) (i) Qualitative Disclosures:

1. Capital Adequacy

The bank believes in the policy of total risk management. The bank views the risk
management function as a holistic approach whereby risk retention is considered
appropriate after giving due consideration to factors such as specific risk characteristics
of obligor, inter relationship between risk variables and corresponding return and
achievement of various business objectives within the controlled operational risk
environment. Bank believes that risk management is one of the foremost responsibilities
of top/ senior management. The Board of Directors decides the overall risk
management policies and approves the Risk Management Philosophy & Policy, Credit
Management & Risk policy, Investment policy, ALM policy, Operational Risk
Management policy, Policy for internal capital adequacy assessment process (ICAAP),
Credit Risk Mitigation & Collateral Management Policy, Stress Testing Policy and Policy
for Mapping Business Lines/Activities, containing the direction and strategies for
integrated management of the various risk exposures of the Bank. These policies, inter
alia, contain various trigger levels, exposure levels, thrust areas etc.

The bank has constituted a Board level subcommittee namely Risk Management
Committee (RMC). The committee has the overall responsibility of risk management
functions and oversees the function of Credit Risk Management Committee (CRMC),
Asset Liability Committee (ALCO) and Operational Risk Management Committee
(ORMC). The meeting of RMC is held at least once in a quarter. The bank recognizes
that the management of risk is integral to the effective and efficient management of the
organization.

2.1. Credit Risk Management

2.1.1 Credit Risk Management Committee (CRMC) headed by MD & CEO is the top-
level functional committee for Credit risk. The committee considers and takes decisions
necessary to manage and control credit risk within overall quantitative prudential limit
set up by Board. The committee is entrusted with the job of approval of policies on
standards for presentation of credit proposal, fine-tuning required in various models
based on feedbacks or change in market scenario, approval of any other action
necessary to comply with requirements set forth in Credit Risk Management Policy/ RBI
guidelines or otherwise required for managing credit risk.
2.1.2 In order to provide a robust risk management structure, the Credit Management
and Risk policy of the bank aims to provide a basic framework for implementation of
sound credit risk management system in the bank. It deals with various areas of credit
risk, goals to be achieved, current practices and future strategies. As such, the credit
policy deals with short term implementation as well as long term approach to credit risk
management. The policy of the bank embodies in itself the areas of risk identification,
risk measurement, risk grading techniques, reporting and risk control systems /
mitigation techniques, documentation practice and the system for management of
problem loans.

All loan proposals falling under the powers of GM & above at HO/ Zonal Manager and
Circle Head at field are considered by Credit Approval Committee (CAC).

2.1.3 Bank has developed comprehensive risk rating system that serves as a single
point indicator of diverse risk factors of counterparty and for taking credit decisions in a
consistent manner. The risk rating system is drawn up in a structured manner,
incorporating different factors such as borrower’s specific characteristics, industry
specific characteristics etc. Risk rating system is being applied to the loan accounts with
total limits above Rs.50 lac. Bank is undertaking periodic validation exercise of its rating
models and also conducting migration and default rate analysis to test robustness of its
rating models.

Small & Medium Enterprise (SME), Retail advances and lending to agriculture are
subjected to Scoring models which support “Accept/ Reject” decisions based on the
scores obtained. All SME, Retail loan and Agriculture lending applications are
necessarily to be evaluated under score card system.

Recognizing the need of technology platform in data handling and analytics for risk
management, the bank has placed rating/ scoring systems at central server network. All
these models can be accessed by the users ‘on line’ through any office of the bank.

For monitoring the health of borrowal accounts at regular intervals, bank has put in
place a tool called Preventive Monitoring System (PMS) for detection of early warning
signals with a view to prevent/minimize the loan losses.

2.1.4 Bank has implemented enterprise-wide data warehouse (EDW) project, to cater
to the requirement for the reliable and accurate historical data base and to implement
the sophisticated risk management solutions/ techniques and the tools for estimating
risk components {PD (Probability of Default), LGD (loss Given Default), EAD (Exposure
at Default)} and quantification of the risks in the individual exposures to assess risk
contribution by individual accounts in total portfolio and identifying buckets of risk
concentrations.

2.1.5 As an integral part of Risk Management System, bank has put in place a well-
defined Loan Review Mechanism (LRM). This helps bring about qualitative
improvements in credit administration. A separate Division known as Credit Audit &
Review Division has been formed to ensure LRM implementation.

2.1.6 The risk rating and vetting process is done independent of credit appraisal
function to ensure its integrity and independency. The rating category wise portfolio of
loan assets is reviewed on quarterly basis to analyze mix of quality of assets etc.

2.1.7 Though the bank has implemented the Standardized Approach of credit risk, yet
the bank shall continue its journey towards adopting Internal Rating Based Approaches
(IRB). Bank has received approval from RBI for adoption of Foundation Internal Rating
Based Approach (FIRB) on parallel run basis w.e.f. 31.07.2013. Further, bank has
placed notice of intention to RBI for implementing Advanced Internal Rating Based
(AIRB) approach for credit risk.

Major initiatives taken for implementation of IRB approach are as under:

 For corporate assets class, bank has estimated PD based upon model wise
default rates viz. Large Corporate and Mid Corporate borrowers using Maximum
likelihood estimator (MLE). For retail asset class, PD is computed for identified
homogeneous pool by using exponential smoothing technique.

 LGD (Loss Given Default) values have been calculated by using workout method
for Corporate Asset Class as well as for each homogenous pool of Retail Asset
Class.

 Bank has also put in place a mechanism to arrive at the LGD rating grade apart
from the default rating of a borrower. The securities eligible for LGD rating are
identified facility wise and the total estimated loss percentage in the account is
computed using supervisory LGD percentage prescribed for various types of
collaterals and accordingly LGD rating grades are allotted.

 Effective Maturity for different facilities under Corporate Asset Class has also
been calculated as per IRB guidelines.

 Mapping of internal grades with that of external rating agencies grades: Bank has
mapped its internal rating grades with that of external rating agencies grades.
This exercise helps in unexpected loss calculation and PD estimation.

 Benchmarking of Cumulative Default Rates: Benchmark values of cumulative

default rates for internal rating grades have been calculated based on the
published default data of external rating agencies. The benchmark values is used
for monitoring of cumulative default rates of internal rating grades and PD
validation.
  Bank has adopted supervisory slotting criteria approach for calculation of capital
under specialised lending (SL) exposure falling under corporate asset class.

 Bank has put in place a comprehensive "Credit Risk Mitigation & Collateral
Management Policy", which ensures that requirements of FIRB approach are met
on consistent basis.

2.2 Market Risk & Liquidity Risk

2.2.1 The investment policy covering various aspects of market risk attempts to assess and
minimize risks inherent in treasury operations through various risk management tools. Broadly,
it incorporates policy prescriptions for measuring, monitoring and managing systemic risk, credit
risk, market risk, operational risk and liquidity risk in treasury operations.

2.2.2 Besides regulatory limits, the bank has put in place internal limits and ensures adherence
thereof on continuous basis for managing market risk in trading book of the bank and its
business operations. Bank has prescribed entry level barriers, exposure limits, stop loss limits,
VaR limits, Duration limits and Risk Tolerance limit for trading book investments. Bank is
keeping constant track on Migration of Credit Ratings of investment portfolio. Limits for
exposures to Counterparties, Industry Segments and Countries are monitored. The risks under
Forex operations are monitored and controlled through Stop Loss Limits, Overnight limit,
Daylight limit, Aggregate Gap limit, Individual Gap limit, Value at Risk (VaR) limit, Inter-Bank
dealing and investment limits etc.

2.2.3 For the Market Risk Management of the bank, Mid-Office with separate Desks for
Treasury & Asset Liability Management (ALM) has been established.

2.2.4 Asset Liability Management Committee (ALCO) is primarily responsible for establishing
the market risk management and asset liability management of the bank, procedures thereof,
implementing risk management guidelines issued by regulator, best risk management practices
followed globally and ensuring that internal parameters, procedures, practices/policies and risk
management prudential limits are adhered to. ALCO is also entrusted with the job of Base rate /
MCLR / RLLR and pricing of advances & deposit products and suggesting revision of
MCLR/Base Rate/ BPLR/RLLR to Board.

2.2.5 The policies for hedging and/or mitigating risk and strategies & processes for monitoring
the continuing effectiveness of hedges/ mitigants are discussed in ALCO and based on views
taken by /mandates of ALCO, hedge deals are undertaken.

2.2.6 Liquidity risk of the bank is assessed through gap analysis for maturity mismatch based on
residual maturity in different time buckets as well as various liquidity stock ratios and
management of the same is done within the prudential limits fixed thereon. Advance techniques
such as Stress testing, simulation, sensitivity analysis etc. are used on regular intervals to draw
the contingency funding plan under different liquidity scenarios.

2.2.7 Besides stock and flow approach, bank is also monitoring liquidity through Liquidity
Coverage Ratio (LCR) under Basel-III framework. Liquidity Coverage Ratio which promotes
short-term resilience of banks to potential liquidity disruptions by ensuring that they have
sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30
days. The LCR requirement has become binding on the banks with the following
minimum required level as per the time-line given below:
Jan 1, 2015 Jan 1, 2016 Jan 1, 2017 Jan 1, 2018 Jan 1, 2019
Minimum LCR 60% 70% 80% 90% 100%

The LCR of the bank is at comfortable level. The bank is managing LCR at consolidated level at
189.27% during Q’3 2019-20 (based on basis of simple averages daily observation over
previous quarter) against the regulatory requirement of 100%.

2.3 Operational Risk:

The bank adopts three lines of defense for management of operational risk, the first line
of defense represented by various HO Divisions which are Control Units (CU), Business
Units (BU) or Support Units (SU); Second line of defense represented by independent
Corporate Operational Risk Management Function (CORF) being Operational Risk
Management Department (ORMD) to oversee Operational Risk Management, and the
third lines of defense represented by Inspection & Audit Division/ Management Audit
Division (IAD/ MARD) which is a challenge function to the first two lines of defense,
Operational Risk Management Committee (ORMC) headed by MD & CEO with all the
EDs and key divisional heads as members is the Executive level committee to oversee
the entire operational risk management of the bank. All the operational risk aspects like
analysis of historical internal loss data (including near miss events, attempted frauds &
robberies, external loss events), etc. are placed to the ORMC on quarterly basis. Risk
Description Charts (RDCs), annual Risk & Control Self Assessments (RCSAs), Key
Risk Indicators (KRIs) and Business Environment & Internal Control Factors (BEICFs)
are also used to ascertain the inherent and residual risks in various activities and
functions of the bank and initiating necessary corrective actions with respect to
management/mitigation of the operational risks.

Internal Control is an essential pre-requisite for an efficient and effective operational risk
management. Bank has clearly laid down policies and procedures to ensure the
integrity of its operations, appropriateness of operating systems and compliance with
the management policies. The internal controls are supplemented by an effective audit
function that independently evaluates the control systems within the organization.

(ii) Quantitative Disclosures:

(b) Capital requirements for credit risk:

(Rs. in million)
31.12.2019 31.12.2018
Portfolios subject to standardized approach 406280.94 317684.26
Securitization exposure 0.00 0.00
(c)The capital requirements for market risk (under standardized duration approach) :
(Rs. in million)
Risk Category 31.12.2019 31.12.2018
i) Interest Rate Risk 20152.21 17265.98
ii) Foreign Exchange Risk (including Gold) 224.24 305.28
iii) Equity Risk 10866.11 10846.31
iv) Total capital charge for market risks under 31242.56 28417.57
Standardized duration approach (i + ii + iii)

(d) The capital requirement for operational risk:

(Rs. in million)
Capital requirement for operational risk 31.12.2019 31.12.2018
(i)Basic indicator approach 32610.27 31233.78
(ii) The Standardized approach (if applicable) - 30894.76

(e) Common Equity Tier 1, Tier 1 and Total Capital ratios:

Consolidated
31.12.2019 31.12.2018

Common Equity Tier 1 Capital ratio (%) (Basel- III) 10.92 7.47

Tier 1 Capital ratio (%) (Basel- III) 12.18 8.90

Tier 2 Capital ratio (%) (Basel- III) 2.21 2.24
Total Capital ratio (CRAR) (%) (Basel- III) 14.39 11.14

For Significant Bank Subsidiaries:

Common Additional
Tier 1 Total Capital
equity Tier Tier 1 Tier 2 Capital
Name of Capital ratio ratio (CRAR)
1 Capital Capital ratio ratio (%)
subsidiary (%) (Basel- (%) (Basel-
ratio (%) (%) (Basel- (Basel- III)
III) III)
(Basel- III) III)
31.12.2019 31.12.2019 31.12.2019 31.12.2019 31.12.2019

PNB Gilts Ltd 33.01 0.00 33.01 2.42 34.43

Punjab
National
8.84 6.72 15.56 5.93 21.49
Bank
(International)
Ltd.
PNB
Investment NA NA NA NA NA
Services Ltd.
Druk PNB
Bank Ltd. 14.25 0.00 14.25 1.52 15.77

PNB NA NA NA NA NA
Insurance
Broking Pvt.
Ltd.

Table DF- 3: Credit Risk: General Disclosures

(i) Qualitative Disclosures:

(a)
3.1 Any amount due to the bank under any credit facility is overdue if it is not paid on
the due date fixed by the bank. Further, an impaired asset is a loan or an advance
where:

(i) Interest and/or installment of principal remains overdue for a period of more than
90 days in respect of a term loan.
(ii) The account remains out of order in respect of an overdraft/cash credit for a period
of more than 90 days.

Account will be treated out of order, if:

- The outstanding balance remains continuously in excess of the limit/drawing power.

- In cases where the outstanding balance in the principal operating account is less than
the sanctioned limit/drawing power, but there are no credits continuously for 90 days as
on the date of balance sheet or credits are not enough to cover the interest debited
during the same period

(iii) In case of bills purchased & discounted, the bill remains overdue for a period of
more than 90 days

(iv) The installment or principal or interest thereon remains overdue for two crop
seasons for short duration and the installment of principal or interest thereon remains
overdue for one crop season for long duration crops in case of Agricultural loans.

Credit approving authority, prudential exposure limits, industry exposure limits, credit
risk rating system, risk based pricing and loan review mechanisms are the tools used by
the bank for credit risk management. All these tools have been defined in the Credit
Management & Risk Policy of the bank. At the macro level, policy document is an
embodiment of the Bank’s approach to understand measure and manage the credit risk
and aims at ensuring sustained growth of healthy loan portfolio while dispensing the
credit and managing the risk. Credit risk is measured through sophisticated models,
which are regularly tested for their predictive ability as per best practices.

(ii) Quantitative Disclosures:

(b) The total gross credit risk exposures:
(Rs. in million)
Category 31.12.2019 31.12.2018
Fund Based 4789594.95 4830263.58
Non Fund Based 538366.16 643070.97

(c) The geographic distribution of exposures:

(Rs. in million)
Overseas Domestic
Category
31.12.2019 31.12.2018 31.12.2019 31.12.2018
Fund Based 227217.63 245807.98 4562377.31 4563854.40
Non-fund based 6303.21 (1870.93) 532062.94 644941.90

(d)
(i) Industry type distribution of Exposures (Fund Based O/S) is as under:

(Rs. in million)
Industry Name 31.12.2019
Consolidated
A. Mining and Quarrying (A.1 + A.2) 18186.37
A.1 Coal 7599.48
A.2 Others 10586.89
B. Food Processing (B.1 to B.4) 104215.39
B.1 Sugar 50219.72
B.2 Edible Oils and Vanaspati 17525.64
B.3 Tea 39.85
B.4 Coffee 23.08
B.5 Others 36407.10
C. Beverages (excluding Tea & Coffee) and Tobacco 5077.68
C.1 Tabacco & tobacco Products 214.22
C.2 Others 4863.46
D. Textiles (a to d) 85829.98
a. Cotton 27634.22
b. Jute 1673.47
c. Man Made 7898.73
d. Others 48623.56
E. Leather and Leather products 7581.51
F. Wood and Wood Products 5442.61
G. Paper and Paper Products 10640.16
H. Petroleum (non-infra), Coal Products (non-mining) and Nuclear Fuels 38348.48
I. Chemicals and Chemical Products (Dyes, Paints, etc.) (I.1 to I.4) 67386.24
I.1 Fertilizers 9181.40
I.2 Drugs and Pharmaceuticals 19631.26
I.3 Petro-chemicals (excluding under Infrastructure) 22087.34
I.4 Others 16486.24
J. Rubber, Plastic and their Products 13963.22
K. Glass & Glassware 1388.48
L. Cement and Cement Products 9538.33
M. Basic Metal and Metal Products (M.1 + M.2) 223365.85
M.1 Iron and Steel 202984.90
M.2 Other Metal and Metal Products 20380.95
N. All Engineering (N.1 + N.2) 40514.17
N.1 Electronics 7336.09
N.2 Others 33178.08
O. Vehicles, Vehicle Parts and Transport Equipments 12155.62
P. Gems and Jewellery 24600.34
Q. Construction 20121.05
R. Infrastructure (a to d) 673155.18
a. Energy 321886.37
b. Transport 166242.10
c. Communication 134287.71
d. Others 50739.00
S. Other Industries 179841.32
T. All Industries (A to S) 1541351.98
Residuary advances 3248242.97
Total Loans and Advances 4789594.95

Industry where Fund-Based Exposure (O/S) is more than 5% of Gross Fund Based Exposure
(O/S):
(Rs. in million)

S.No. Industry Name 31.12.2019

Consolidated
1 Energy 321886.37
(ii) - Industry type distribution of Exposures (Non Fund Based O/S) is as under:
(Rs. in million)
Industry Name 31.12.2019
Consolidated

A. Mining and Quarrying (A.1 + A.2) 526.57

A.1 Coal 335.25
A.2 Others 191.32
B. Food Processing (B.1 to B.4) 6066.92
B.1 Sugar 2298.09
B.2 Edible Oils and Vanaspati 1865.25
B.3 Tea 2.54
B.4 Coffee 0.00
B.5 Others 1901.04
C. Beverages (excluding Tea & Coffee) and Tobacco 367.63
C.1 Tabacco & tobacco Products 8.04
C.2 Others 359.59
D. Textiles (a to c) 5560.07
a. Cotton 918.59
b. Jute 387.01
c. Man Made 227.31
d. Others 4027.16
E. Leather and Leather products 582.88
F. Wood and Wood Products 315.67
G. Paper and Paper Products 1882.97
H. Petroleum (non-infra), Coal Products (non-mining) and Nuclear Fuels 132.95
I.Chemicals and Chemical Products (Dyes, Paints, etc.) (I.1 to I.4) 11759.37
I.1 Fertilizers 2388.21
I.2 Drugs and Pharmaceuticals 3709.20
I.3 Petro-chemicals (excluding under Infrastructure) 1769.06
I.4 Others 3892.90
J. Rubber, Plastic and their Products 2117.32
K. Glass & Glassware 137.37
L. Cement and Cement Products 2249.58
M. Basic Metal and Metal Products (M.1 + M.2) 142123.57
M.1 Iron and Steel 137871.62
M.2 Other Metal and Metal Products 4251.95
N. All Engineering (N.1 + N.2) 36678.06
N.1 Electronics 8059.78
N.2 Others 28618.28
O. Vehicles, Vehicle Parts and Transport Equipments 1380.02
P. Gems and Jewellery 621.24
Q. Construction 40175.73
R. Infrastructure (a to d) 123749.40
a. Energy 60485.70
b. Transport 33528.00
c. Communication 17774.70
d. Others 11961.00
S. Other Industries 33264.50
T. All Industries (A to S) 409691.82
Residuary advances 128674.34
Total Loans and Advances 538366.16

Industry where Non- Fund based Exposure (O/S) is more than 5% of Gross Non-Fund based
Exposure (O/S): (Rs. in million)
S.No. Industry Name Amount – 31.12.2019
Consolidated
1 Iron & Steel 137871.62
2 Energy 60485.70
3 Other Engineering 28618.28
4 Construction (Other Than Infrastructure) 40175.73
5. Transport 33528.00

(e) The residual contractual maturity break down of assets is:

(Rs. in million)
Maturity Pattern Advances* Investments Foreign Currency
(Gross) Assets*
Next day 38810.78 240.94 19927.36
(69583.59) (2438.77) (48580.54)
2 - 7 days 41577.03 15800.08 18336.22
(81780.86) (4185.89) (19343.72)
8 -14 days 16299.09 5162.23 10349.25
(49265.40) (1549.88) (19143.15)
15- 30 days 79577.31 36728.71 18560.20
(92095.31) (8248.75) (51274.89)
31days - 2months 92821.71 22523.67 37059.35
(76339.47) (23128.14) (20027.65)
Over 2 months & upto 3 Months 87666.24 21675.92 38697.31
(75338.94) (32692.85) (14934.87)
Over 3 Months to 6 months 205207.64 70948.40 33715.14
(107498.64) (28625.11) (55501.76)
Over 6 Months & upto 1 year 263110.40 113126.32 51144.80
(209178.92) (64918.70) (39376.93)
Over 1Year & upto 3 Years 2102676.13 220165.24 92067.45
 (2216938.35) (245989.22) (65061.75)
Over 3 Years & upto 5 Years 446995.37 139170.31 54810.88
(519395.99) (247863.24) (86271.55)
Over 5 Years 931483.00 1887239.57 32421.90
(894106.85) (1421578.80) (20026.32)
Total 4306224.69 2532781.37 407089.85
(4391522.32) (2081219.35) (439543.13)
*Figures are shown on net basis.
Figures in brackets relate to previous corresponding year.

(f) The gross NPAs are:

(Rs. in million)
Category 31.12.2019 31.12.2018
Sub Standard 180972.68 201396.92
Doubtful – 1 124737.57 130839.16
Doubtful – 2 265625.09 310409.63
Doubtful – 3 50515.98 20381.81
Loss 176377.50 143133.48
Total NPAs (Gross) 798228.82 806161.00

(g) The amount of Net NPAs is:

(Rs. in million)
Particulars 31.12.2019 31.12.2018
Net NPA 310575.92 363261.95

(h) The NPA Ratios are as under:

NPA Ratios Consolidated
31.12.2019 31.12.2018
% of Gross NPAs to Gross Advances 16.67 16.69
% of Net NPAs to Net Advances 7.21 8.27

(i) The movement of gross NPAs is as under:

(Rs. in million)
Movement of gross NPAs 31.12.2019 31.12.2018
i) Opening Balance at the beginning of the year 813757.42 897038.92
ii) Addition during the period 184108.19 141385.45
iii) Reduction during the period 199636.79 232263.37
iv) Closing Balance as at the end of the period (i + ii - iii) 798228.82 806161.00
 (j) The movement of provision with a description of each type of provision is as under:
(Rs. in million)
Name of Write-
Any other
Provisions Provision back of
Opening Write-off adjustment
made excess Provision
balance as made including
during provision as on
on during the transfers
the during 31.12.2019
01.04.2019 period between
period the
provisions
period
Float Provision- 3602.50 0.00 0.00 0.00 0.00 3602.50
NPA
Provision for assets 5286.91 0.00 0.00 0.00 0.00 5286.91
sold to SCs/RCs
Provision for Bonus 131.65 0.00 0.00 0.00 (69.20) 62.45
Main Account Indo 0.05 0.00 0.00 0.00 0.00 0.05
Commercial Bank
Provision for arrears 7137.17 698.56 0.00 0.00 0.00 7835.74
to employees under
Wage Revision
Provision for Staff 80.60 8.50 0.00 0.00 0.00 89.10
Welfare
Provision for 64.99 0.00 0.00 0.00 (0.37) 64.62
Impersonal heads
Provision for Leave 18470.16 12.58 3.63 0.00 (556.36) 17922.75
Encashment
Provision for 2717.20 0.00 0.00 0.00 (697.90) 2019.30
Pension Fund
Sundries Liabilities 3959.14 0.00 0.00 0.00 (2479.83) 1479.31
Account -Interest
capitalization (FITL-
Standard )
Sundries Liabilities 313.35 0.00 0.00 0.00 (33.31) 280.04
Account -Interest
capitalization (FITL-
NPA )
Provision for 22841.03 221.93 0.00 0.00 (234.92) 22828.04
Standard Assets
Provision for 350.90 0.00 0.00 0.00 (165.70) 185.20
Standard
Derivatives
Provision for 1971.33 0.38 0.00 0.00 (1918.53) 53.18
Gratuity
Provision for LFC 2115.90 26.60 0.00 0.00 0.00 2142.50
Provision for Sick 739.20 0.00 0.00 0.00 (19.90) 719.30
Leave
Provision for NPA 503364.59 152072.46 90576.37 82295.96 0.00 482564.73
(excluding Standard
Assets)
Provision for Income 1262.13 0.00 0.00 694.40 (8.40) 559.33
Tax/ Taxation
Provision Others 7468.76 0.00 0.00 0.00 (4568.72) 2900.04
Provision for 36.66 55.10 16.28 0.00 (2.19) 73.29
expenses

(k) The amount of non-performing investment is:

(Rs. in million)
Particulars 31.12.2019 31.12.2018
Amount of non-performing investment 25699.60 25079.47

(l) The amount of provisions held for non-performing investment is:

(Rs. in million)
Particulars 31.12.2019 31.12.2018
Amount of provision held for non-performing investment 18717.10 22759.93

(m) The movement of provisions for depreciation on investments is:

(Rs. in million)
Movement of provisions for depreciation on investments 31.12.2019 31.12.2018
i) Opening balance at the beginning of the year 40247.99 31426.65
ii) Provisions made during the period 338.79 12546.14
iii) Write-off made during the period 93.24 150.12
iv) Write-back of excess provisions made during the period 3340.84 5065.24
v) Closing balance as at the end of the period 37152.70 38757.43
(i + ii –iii-iv)

(n) NPA and provisions maintained by major industry or counterparty type as on 31.12.2019
(Rs. in million)
Name of major industry or Amount of NPA Specific and Specific provisions
counter-party type (if available, past general and write-off during
due loans be provisions the current period
provided separately)
A. Mining and Quarrying 4156.90 3129.26 0.00
B. Food Processing 22358.62 13628.29 0.00
C. Textiles 26880.83 12269.00 0.00
D. Chemical & Chemical 0.00
6079.96 3448.27
Products
E. Cement and Cement 0.00
1268.02 667.92
Products
F. Basic Metal and Metal 0.00
91079.72 59686.67
Products
G. Rubber ,Plastic and Their 0.00
1489.36 872.91
products
H. All Engineering 19154.34 6374.55 0.00
I. Gems and Jewellery 90184.72 11671.76 0.00
J. Construction 9165.05 6931.16 0.00
K. Infrastructure 117148.48 67580.70 0.00
L. Computer Software 7.50 7.50 0.00
M. Other Industry 10210.74 9003.55 0.00
N. Residual Other Advances 109.78 20.91 0.00
O.Trading 24.91 20.08 0.00
P Beverages &Tobacco 1899.31 1161.58 0.00
Q.Leather and Leather 0.00
317.39 187.66
Products
R. Wood and Wood Products 1380.24 655.47 0.00

S. Paper and Paper products 1538.61 1005.48 0.00

T. Petroleum(non infra),Coal
Products(Non mining) and 3420.15 2573.61 0.00
Nuclear Fuels

(o) Geography-wise NPA and provisions as on 31.12.2019

(i)
(Rs. in million)
Amount of NPA Overseas Domestic
(Outside India) (In India)
798228.82 33143.32 765085.50

(ii)
(Rs. in million)
Provisions Overseas Domestic
(Outside India) (In India)
Specific provisions 12599.75 15752.70
General Provisions 13256.91 444557.87

Table DF- 4 - Credit Risk: Disclosures for Portfolios Subject to the Standardized
Approach

Qualitative Disclosures:
(a)
4.1. Bank has approved the following seven domestic credit rating agencies accredited
by RBI for mapping its exposure with domestic borrowers under standardized approach
of credit risk.

- Brickwork
- CARE
- CRISIL
- ICRA
- India Ratings
- Acuite (Erstwhile SMERA)
- INFOMERICS

Bank has also approved the following three international credit rating agencies
accredited by RBI in respect of exposure with overseas borrowers.
- FITCH
- Moody’s
- Standard & Poor
 These agencies are being used for rating (Long Term & Short Term) of fund based/
non fund based facilities provided by the bank to the borrowers. The bank uses
solicited rating from the chosen credit rating agencies.

The ratings available in public domain are mapped according to mapping process as
envisaged in RBI guidelines on the subject.

(ii) Quantitative Disclosures:

(b) For exposure amounts after risk mitigation subject to the standardized approach,
amount of a bank’s outstanding (rated and unrated) in the following three major risk buckets as
well as those that are deducted are as under:

(Rs. in million)
Particulars 31.12.2019 31.12.2018
i) Below 100% risk weight exposure outstanding 4168316.06 3930173.96
ii) 100% risk weight exposure outstanding 884259.74 971615.28
iii) More than 100% risk weight exposure outstanding 596892.97 671912.73
iv) Deducted 0.00 284.79

Table DF - Disclosures in respect of computation of leverage ratio:

(Rs. in million)
31.12.2018 31.03.2019 30.06.2019 30.09.2019 31.12.2019
Capital Measure 365459.30 323538.00 324621.00 514790.48 512204.52

Exposure Measure 8206450.56 8339797.74 8124768.68 8586055.92 8736321.69

Leverage Ratio 4.45% 3.88% 4.00% 6.00% 5.86%
 QUALITATIVE DISCLOSURE ON LIQUIDITY COVERAGE RATIO

The bank has implemented RBI guidelines on Liquidity Coverage Ratio (LCR) from 1st
January 2015.
The LCR standard aims to ensure that a bank maintains an adequate level of
unencumbered High Quality Liquid Assets (HQLAs) that can be readily converted into
cash at little/no loss of value to meet its liquidity needs for a 30 calendar day time
horizon under a liquidity stress scenario.
LCR has two components:
i. The value of the stock of High Quality Liquid Assets (HQLA)–The Numerator.
ii. Total Net Cash Outflows: Total expected cash outflows minus Total expected
cash inflows, in stress scenario, for the subsequent 30 calendar days - The
denominator.
Definition of LCR:
Stock of high quality liquid assets (HQLAs) ≥ 100%
Total net cash outflows over the next 30 calendar days

The LCR requirement has become binding on the banks with the following minimum
required level as per the time-line given below:
Jan 1, 2015 Jan 1, 2016 Jan 1, 2017 Jan 1, 2018 Jan 1, 2019
Minimum LCR 60% 70% 80% 90% 100%
For Q3 FY’2019-20, the daily average LCR was 189.27% (based on simple average of
daily observations) at consolidated level, as against the regulatory requirement of
100%.
The main drivers of LCR of the bank are High Quality Liquid Assets (HQLAs) to meet
liquidity needs of the bank at all times and basic funding from retail and small business
customers. The retail and small business customer’s contribute about 67.88% of total
deposit portfolio of the bank which attracts low run-off factor of 5/10% as on 31.12.2019.
Composition of High Quality Liquid Assets (HQLA)
HQLAs comprises of Level 1 and Level 2 assets. Level 2 assets are further divided into
Level 2A and Level 2B assets, keeping in view their marketability and price volatility.
Level-1assets are those assets which are highly liquid. For quarter ended December 31,
2019, the Level-1 asset of the bank includes Cash in Hand, Excess CRR, Government
Securities in excess of minimum SLR, Marketable securities issued or guaranteed by
foreign sovereign, MSF and FALLCR totalling to Rs. 189338.73 cr (based on simple
average of daily observations).

Level-2A & 2B assets are those assets which are less liquid and their weighted amount
comes to Rs. 7001 cr (based on simple average of daily observations). Break-up of
daily observation Average HQLA during quarter ended December 31, 2019 is given
here under:

Average
%age
High Quality Liquid Assets (HQLAs)
contribution
to HQLA
Level 1 Assets
Cash in hand 0.91%
Excess CRR balance 0.44%
Government Securities in excess of minimum SLR
39.45%
requirement
Government securities within the mandatory SLR
requirement, to the extent allowed by RBI under MSF 7.02%
(presently to the extent of 2 per cent of NDTL)
Marketable securities issued or guaranteed by foreign
sovereigns having 0% risk-weight under Basel II 1.22%
Standardized Approach
Facility to avail Liquidity for Liquidity Coverage Ratio –
47.39%
FALLCR (presently to the extent of 13 per cent of NDTL)
Total Level 1 Assets 96.43%
Total Level 2A Assets 3.38%
Total Level 2B Assets 0.19%
Total Stock of HQLAs 100.00%

Concentration of Funding Sources

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

The bank has no significant counterparty (deposits/borrowings) as at 31.12.2019. Top

20 depositors of the bank constitute 3.32% of bank’s total liability as at December 31,
2019. 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 (6.21% of bank’s total liabilities) falls in this criteria
whose impact on total outflows in LCR horizon can be managed easily as the impact is
not large considering the size of balance sheet of the bank.

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

units

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

(a) Common Equity Tier 1, Tier 1 and Total Capital ratios:

Punjab National Bank

Solo
31.12.2019 31.12.2018

Common Equity Tier 1 Capital ratio (%) (Basel- III) 10.64 6.93
Tier 1 Capital ratio (%) (Basel- III) 11.85 8.25
Tier 2 Capital ratio (%) (Basel- III) 2.18 2.27
Total Capital ratio (CRAR) (%) (Basel- III) 14.03 10.52

(b)
(i) Industry type distribution of Exposures (Fund Based O/S) is as under:
(Rs. in million)
Industry Name 31.12.2019
Solo
A. Mining and Quarrying (A.1 + A.2) 15127.77
A.1 Coal 4686.27
A.2 Others 10441.50
B. Food Processing (B.1 to B.4) 103084.78
B.1 Sugar 50219.72
B.2 Edible Oils and Vanaspati 17525.64
B.3 Tea 39.85
B.4 Coffee 23.08
B.5 Others 35276.49
C. Beverages (excluding Tea & Coffee) and Tobacco 4671.48
C.1 Tabacco & tobacco Products 214.22
C.2 Others 4457.26
D. Textiles (a to d) 84998.59
a. Cotton 27634.22
b. Jute 1673.47
c. Man Made 7898.73
d. Others 47792.17
E. Leather and Leather products 7581.51
F. Wood and Wood Products 5113.10
G. Paper and Paper Products 10633.44
H. Petroleum (non-infra), Coal Products (non-mining) and Nuclear Fuels 35894.52
I. Chemicals and Chemical Products (Dyes, Paints, etc.) (I.1 to I.4) 66096.02
 I.1 Fertilizers 9181.40
I.2 Drugs and Pharmaceuticals 18445.49
I.3 Petro-chemicals (excluding under Infrastructure) 22087.34
I.4 Others 16381.79
J. Rubber, Plastic and their Products 13963.22
K. Glass & Glassware 1388.48
L. Cement and Cement Products 9483.43
M. Basic Metal and Metal Products (M.1 + M.2) 220498.79
M.1 Iron and Steel 201757.72
M.2 Other Metal and Metal Products 18741.07
N. All Engineering (N.1 + N.2) 38041.69
N.1 Electronics 7336.09
N.2 Others 30705.60
O. Vehicles, Vehicle Parts and Transport Equipments 10921.94
P. Gems and Jewellery 23344.30
Q. Construction 16228.68
R. Infrastructure (a to d) 671700.20
a. Energy 320524.10
b. Transport 166242.10
c. Communication 134195.00
d. Others 50739.00
S. Other Industries 134697.56
T. All Industries (A to S) 1473469.50
Residuary advances 3240091.19
Total Loans and Advances 4713560.69

Industry where Fund-Based Exposure (O/S) is more than 5% of Gross Fund Based Exposure
(O/S):

(Rs. in million)

S.No. Industry Name Amount – 31.12.2019

Solo
1 Energy 320524.10

(ii) - Industry type distribution of Exposures (Non Fund Based O/S) is as under:

(Rs in Million)
Industry Name 31.12.2019
Solo
A. Mining and Quarrying (A.1 + A.2) 526.57
A.1 Coal 335.25
A.2 Others 191.32
B. Food Processing (B.1 to B.4) 6064.13
B.1 Sugar 2298.09
B.2 Edible Oils and Vanaspati 1865.25
B.3 Tea 2.54
B.4 Coffee 0.00
B.5 Others 1898.25
C. Beverages (excluding Tea & Coffee) and Tobacco 365.68
C.1 Tabacco & tobacco Products 8.04
C.2 Others 357.64
D. Textiles (a to c) 5560.07
a. Cotton 918.59
b. Jute 387.01
c. Man Made 227.31
d. Others 4027.16
E. Leather and Leather products 582.88
F. Wood and Wood Products 301.08
G. Paper and Paper Products 1882.97
H. Petroleum (non-infra), Coal Products (non-mining) and Nuclear Fuels 132.95
I.Chemicals & Chemical Products(Dyes,Paints etc) 11748.10
I.1 Fertilizers 2388.21
I.2 Drugs and Pharmaceuticals 3702.56
I.3 Petro-chemicals (excluding under Infrastructure) 1764.43
I.4 Others 3892.90
J. Rubber, Plastic and their Products 2117.32
K. Glass & Glassware 137.37
L. Cement and Cement Products 2249.58
M. Basic Metal and Metal Products (M.1 + M.2) 142123.38
M.1 Iron and Steel 137871.51
M.2 Other Metal and Metal Products 4251.87
N. All Engineering (N.1 + N.2) 36678.06
N.1 Electronics 8059.78
N.2 Others 28618.28
O. Vehicles, Vehicle Parts and Transport Equipments 1132.01
P. Gems and Jewellery 621.24
Q. Construction 39889.68
R. Infrastructure (a to d) 123749.40
a. Energy 60485.70
b. Transport 33528.00
c. Communication 17774.70
d. Others 11961.00
S. Other Industries 33082.88
T. All Industries (A to S) 408945.35
Residuary advances 125366.69
Total Loans and Advances 534312.04

Industry where Non- Fund based Exposure (O/S) is more than 5% of Gross Non-Fund based
Exposure (O/S):
(Rs in Million)
S.No. Industry Name Amount -31.12.2019
Solo
1 Iron & Steel 137871.51
2 Energy 60485.70
3 Other Engineering 28618.28
4 Construction (Other Than Infrastructure) 39889.68
5. Transport 33528.00

(c) The NPA Ratios are as under:

NPA Ratios Solo
31.12.2019 31.12.2018
% of Gross NPAs to Gross Advances 16.30 16.33
% of Net NPAs to Net Advances 7.18 8.22
 HO: NEW DELHI
Annexure-A

LCR Disclosure Template as at 31.12.2019

QUANTITATIVE DISCLOSURE ( On consolidated basis (including domestic & foreign subsidiaries)
Rs. in Crore
31.12.2019 30.09.2019
Total Total
Total Unweighted Total Weighted Unweighted Weighted
Value (average)* Value (average)* Value Value
(average)* (average)*
Based on the simple average of daily
62 Data Points 62 Data Points
observations
High Quality Liquid Assets
1 Total High Quality Liquid Assets (HQLA) 196339.73 172864.30
Cash Outflows
2 Retail deposits and deposits from small 468031.49 43683.29 453145.61 42734.02
business customers of which :
(i) Stable deposits 62397.24 3119.86 61457.02 3192.47
(ii) Less stable deposits 405634.25 40563.43 391688.58 39541.56
3 Unsecured wholesale funding, of which: 134192.23 71700.33 130275.27 69695.72
(i) Operational deposits (all counterparties) 0.00 0.00 0.00 0.00
(ii) Non-operational deposits 134192.23 71700.33 130275.27 69695.72
(all counterparties)
(iii) Unsecured debt 0.00 0.00 0.00 0.00
4 Secured wholesale funding 0.00 0.00
5 Additional requirements, of which 76960.29 6723.34 75453.89 5907.48
(i) Outflows related to derivative exposures and
14.33 14.33 5.22 5.22
other collateral requirements
(ii) Outflows related to loss of funding on debt
0.00 0.00 0.00 0.00
products
(iii) Credit and liquidity facilities 76945.96 6709.01 75448.67 5902.27
6 Other contractual funding obligations 0.00 0.00 0.00 0.00
7 Other contingent funding obligations 56558.73 1730.31 55272.27 1685.28
8 Total Cash Outflows 123837.26 120022.51
Cash Inflows
9 Secured lending (e.g. reverse repos) 31610.55 0.00 21814.77 0.00
10 Inflows from fully performing exposures 19642.58 15955.48 19644.37 16083.58
11 Other cash inflows 4146.52 4146.52 7238.62 7238.62
12 Total Cash Inflows 55399.65 20102.00 48697.76 23322.20
Total Adjusted Value
13 TOTAL HQLA 196339.73 172864.30
14 Total Net Cash Outflows 103735.26 96700.31
15 Liquidity Coverage Ratio (%) 189.27% 178.76%
* Simple averages of Daily observations over previous quarter