Punjab National Bank Management Discussions

MANAGEMENT DISCUSSION & ANALYSIS

I. Industry Structure & Developments

The global economy has displayed remarkable resilience in Financial Year (FY) 2023-24 amidst enduring wars, tight financial conditions and havoc-wreaking climate change. Economies across the world are adapting better than expected and this provides a strong bedrock for the year ahead.

The risk of a global recession has receded, largely because of the strength of the U.S.A. economy. However, mounting geopolitical tensions in West Asia could create fresh near-term hazards for the world economy.

In its latest World Economic Outlook, the International Monetary Fund (IMF) has estimated global growth at 3.2 per cent in 2023, expecting it to remain at that level in 2024 and 2025. There is relative strength in U.S.A. and Indian economy, though Euro Area and China are expected to remain sluggish in Calendar Year (CY) 2024.

As per IMF, world trade volume growth is projected to rebound from 0.3 per cent in 2023 to 3.0 per cent in 2024 and further to 3.3 per cent in 2025. However, it remains below its historical average growth rate of 4.9 per cent (2000-2019). Overall, moderating global inflation and improving economic growth forecasts suggest a reversal of the downward trends. However, the logistical challenges such as shipping disruptions in the Red Sea cast a shadow over the optimistic outlook, and can raise costs and disrupt supply chains in the near term.

A high level of public debt to Gross Domestic Product (GDP) ratio in both advanced and emerging economies also presents another risk to sustainable global growth. Thus, credible fiscal consolidation plans, particularly in Advanced Economies (AEs) are warranted to support future global economic recovery.

On the upside, faster disinflation could lead to easing of financial conditions. There is optimism on the inflation front, as most of the Central Banks can rein in inflation. According to IMF, global headline inflation is expected to fall from 6.8 per cent in 2023 to 5.9 per cent in 2024 and 4.5 per cent in 2025. With disinflation and steady growth, the likelihood of a hard landing has receded, and risks to global growth are evenly balanced.

Amidst sluggish global growth, the Indian economy has shown great strength and stability. The economy has grown at 8.2 per cent in FY 2023-24 (as per Provisional Estimates), marking the highest growth rate among major economies, propelled by robust domestic demand and government-led investments. India is currently the 5^th largest economy in the world, with ambitions of becoming the 3^rd largest by 2027.

The underlying economic momentum remains strong, exhibited by quarterly growth of 8+ per cent for three consecutive quarters. The Reserve Bank of India (RBI) has projected GDP growth at 7.0 per cent for FY 2024-25, supported by robust government and private capital expenditure, enhanced consumption demand, improved financial health of corporates & banks and digitization of the economy. All the high frequency indicators are pointing towards strong and sustained economic growth. Goods and Services Tax (GST) collections crossed the 2-Lakh Crore mark in April 2024. Indias manufacturing Purchasing Managers Index (PMI) was recorded at 58.8 in April 2024, the second strongest expansion since the beginning of 2021. The current account deficit is modest at 1.2 per cent of GDP in the October-December quarter. Retail inflation is stabilizing, staying within RBIs tolerance band of 2-6 per cent for eight consecutive months. Forex reserves rose to an all-time record high of USD 648.56 Billion as on 5^th April, 2024. The financial sector is also sound and well capitalized.

In 2023, while global banking institutes faced testing times, Indian banks have shown great resilience. They have held their ground in the face of an uncertain global macroeconomic environment and interest rate volatility, posting record levels of profitability.

As per the Financial Stability Report (FSR) of RBI, the Return on Equity (RoE) and Return on Assets (RoA) of all Scheduled Commercial Banks (SCBs) continued to improve to reach 12.9 per cent and 1.2 per cent respectively, in September 2023, driven by improved earnings.

Banking sector asset quality has significantly improved in the last few years on account of better lending practices, improved NonPerforming Asset (NPA) management and higher provisioning. There has been a steady improvement in asset quality, with the gross non-performing assets (GNPA) ratio for SCBs falling to 10-year low at 3.2 per cent as on September 2023. Going forward, the banking sectors asset quality is anticipated to improve further on account of healthier balance sheets, higher provisioning and improved credit disbursement standards using new-age technologies.

All the banks are adequately capitalized. The capital to risk- weighted asset ratio (CRAR) at end-September 2023 remained high at 16.8 per cent vis-a-vis the regulatory minimum of

11.5 per cent (including capital conservation buffer) while the common equity tier 1 (CET1) ratio stood at 13.7 per cent as against the regulatory requirement of 8.0 per cent (including capital conservation buffer). In November 2023, the regulator increased risk weights on unsecured personal loans and lending to Non-Banking Financial Companies (NBFCs) with immediate effect. Impact of risk weights on capital adequacy ratio of banks is expected to be around 80-100 bps.

Healthy interest margins, strong credit demand and lower impairments boosted Net Interest Income (NII). Banks are likely to witness pressure on their Net Interest Margin (NIM) going forward due to continued re-pricing of deposit rates. Simultaneously expectations of a rate reversal in the current fiscal could start a downward pressure on lending yields and hence pressure on interest margins is likely to continue during FY 2024-25.

In FY 2023-24, bank credit growth hit a decadal high of around 16 per cent, driven by strong retail demand despite high interest rates, supported by corporate loan book on the back of higher capacity utilization by the private sector. Credit growth is expected to remain healthy at 13-15 per cent in FY 2024-25, driven by strong demand in the services and the retail segments. Rising government and private capex in FY 2024-25 will also lead to increased demand for corporate credit.

Enhanced spending on infrastructure, speedy implementation of projects and continuation of reforms are expected to provide further impetus to growth in the banking sector as rapidly growing businesses will turn to banks for their credit needs.

Furthermore, there has been notable progress in deposit growth, with a healthy increase of 13.5 per cent (including the influence of the merger) during FY 2023-24. However, a slower pace of deposit accumulation carries the potential risk of limiting credit expansion for banks in FY 2024-25. Public Sector Banks (PSBs) are comparatively in a stronger position regarding deposits, boasting a lower average of Loan-to-Deposit Ratio (LDR). Term deposits for Scheduled Commercial Banks (SCBs) experienced a faster growth rate of 13.7 per cent compared to the 12.1 per cent growth observed in demand deposits.

The PSBs are posting stellar growth. The business of PSBs grew on YoY basis by 11.6 per cent in FY 2023-24. The Advances also grew by 13.5 per cent on YoY basis. The cumulative profit of all PSBs crossed Rs. 1.41 Lakh Crore mark for FY 2023-24 from Rs. 1.05 Lakh Crore a year ago, recording a growth of around 35 per cent.

As a result, Nifty PSU Bank Index has delivered 162 per cent returns since March 2022, overshadowing the 24 per cent returns of Nifty Private Bank Index over the same period. The aggregate market capitalization of PSBs has increased from Rs. 5.5 Lakh Crore in March 2021 to more than Rs. 16 Lakh Crore in March 2024.

During pandemic, banking sector liquidity was in surplus as economic activity halted and credit demand was muted. As economic recovery gained pace, demand for credit picked up and liquidity in system started to dry up. While liquidity scarcity led to fluctuations in short term rates, long term rates remained relatively stable in FY 2023-24. Going forward, RBI is expected to continue to proactively manage liquidity till inflation in the economy progressively aligns towards the 4 per cent target.

In the last year, banking sector has witnessed a profound transformation driven by digitalization. The widespread adoption of digital technologies has revolutionized customer interactions, streamlining processes and enhancing operational efficiency. Digital banking platforms have enabled seamless transactions, personalized services and real-time access to financial products, thereby improving customer experience and satisfaction. Moreover, digitalization has facilitated the integration of innovative FinTech solutions, fostering collaborations and partnerships to deliver innovative financial services. As the digital landscape continues to evolve, the Bank remains committed to leveraging technology to meet the evolving needs of the customers and stay at the forefront of industry innovation.

II. Opportunities

Credit growth in FY 2023-24 has been robust and recorded decadal highs and the trend is expected to continue in FY 2024-25. All major sectors viz. agricultural, industry and services continue to register robust credit growth. Sub-segments including food processing, infrastructure, textiles, trade and commercial real estate stand out. The medium-term prospects for credit look promising with sustained growth in personal loans along with the anticipated increase in capex spending - both in the government and private sector. The Centres 50-year interest-free loans to states will boost economic activity in the country and lead to higher credit offtake. Further, the aerospace sector is expected to witness good traction for credit with India opening its space sector to foreign investments. India is attracting Foreign Direct Investment (FDI) in space launches and is aiming for a five-fold increase in its share of the global launch market, which is expected to be worth USD 47.3 billion by 2032. Moreover, with increasing need for electronics driven by the digital transformation across various sectors, from automotives to space to information technology, the demand for semiconductors in India is estimated to reach USD 110 Billion by 2030. This is likely to give a push to manufacturing in the country, thereby generating demand for credit.

With the India Meteorological Department (IMD) forecasting an above-normal monsoon in FY 2024-25, a rise in demand for agricultural loans can be anticipated. In the first eleven months of FY 2023-24, bank loan to agriculture and allied activities rose 20.4 per cent to reach Rs. 20.4 Trillion. With a better rain forecast, a 22-25 per cent growth in agricultural loans is expected during the June-September 2024 period. Demand is likely to be higher on account of working capital requirements for crop production activities, loans for buying farm equipment and term loans and working capital for allied agriculture activities, especially for agriculture storage and financing for food and agro-processing.

Further, large banks had experienced higher delinquencies on part of agricultural credit recently. A good monsoon is expected to lower slippages going ahead and the slippage ratio is set to improve. An above-normal monsoon will accelerate pickup in other types of loans such as vehicle loans and personal loans

in the coming quarters, as higher income due to better harvest will encourage people to buy vehicles and home appliances. Also, there are early signs of revival in the rural economy. Two wheeler sales grew by double digits in FY 2023-24, crossing pre-covid levels, buoyed by sustained demand. In March quarter, Fast-Moving Consumer Goods (FMCG) industry reported 6.6 per cent growth in value terms, driven by 6.5 per cent growth in volumes, with rural India surpassing urban growth for the first time in five quarters.

In case of manufacturing, value of new projects announced in Q4 FY 2023-24 saw a sharp growth of almost 160 per cent YoY amounting to Rs. 6.7 Lakh Crore. Within manufacturing, investments in metal and metal products grew 621 per cent, while those in machinery grew 599 per cent. This is also likely to augur well for bank credit going ahead. Healthy corporate balance sheets, rising optimism, higher demand from the services sector and robust momentum in the infrastructure sector are expected to bolster private investments. Retail & MSME books are seeing healthy traction.

Electric Vehicle (EV) sector in the country is also on the verge of witnessing a boom - with EV adoption expected to surge over the next few years. Strategic partnerships and investments aimed at bolstering Indias EV manufacturing capabilities and charging ecosystem are already taking place and the banking sector is expected to benefit from it. As per NITI Aayog, the two-wheeler EV market size is going to be as large as Rs. 35,000-40,000 Crore by FY 2025-26, with the EV financing market for this segment expected to touch Rs. 13,000-15,000 Crore.

In the past two years, Metaverse has been gaining traction in the banking industry. With virtual banking experience becoming the norm, the industry is set for another revolution with Metaverse. Using technologies such as Augmented Reality (AR) and Virtual Reality (VR), banks will be able to reinvent their product offerings and how they interact with their customers.

Further, many financial institutions are leveraging Artificial Intelligence (AI) to automate and streamline their previously time-consuming manual processes such as fraud detection, risk management and customer service to improve efficiency and reduce operational costs. As a result, many financial firms have turned to AI to help them stay competitive and achieve greater profitability. AI also helps enhance customer service through chatbots and virtual assistants, providing quick and personalized responses to customer inquiries. Chatbots help in improving customer service in addition to cost savings by reducing the load from other channels such as contact centres, internet banking, etc.

Going ahead, AI is likely to replace traditional models and provide real-time data analysis and insights, enabling financial institutions to make quicker and more informed decisions. AI- powered analytics and predictive modelling can help financial

institutions assess risks, identify investment opportunities and optimize business strategies.

Further, a renewed thrust will be accorded to Green and Sustainable Banking, aiming to direct resources towards initiatives that align with Environment, Social and Governance (ESG) goals. This will entail a number of collaborations and partnerships between banks and renewable-focussed companies.

Several partnerships and collaborations between banks and Fintech firms are also likely to propel the banking industrys growth. Banking-as-a-Service (BaaS) has enabled fintechs to offer the core banking services to their customers. Fintechs are able to build products on the back of the legacy banking infrastructure and enhance customer experience. Fintechs are also acting as a technical partner to banks wherein a bank purchases a customised white-label solution from the fintech to create a seamless experience for its customers.

Additionally, India has been entering into several economic cooperation agreements and trade pacts which are expected to provide a major boost to the economy. India recently signed a Free Trade agreement (FTA) with the European Free Trade Association (EFTA). As per external research, Indias imports of goods from countries with which it has a free trade agreement like the UAE, South Korea and Australia has grown by 38.0 per cent from 2019 to 2024 while Indias exports to the FTA partners has risen by 14.5 per cent during the same period. This presents immense potential for credit growth for the banking sector as well.

III. Threats

Despite global headwinds, Indian banking sector has displayed notable resilience in the last year marked by record levels of profitability backed by sustained credit growth and robust capital buffers. In 2024, the industry looks forward with cautious optimism. Stable interest rates, a strong GDP and decreasing inflation are expected to have a positive impact on lending and deposit activities. The focus on technology and infrastructure investments opens up opportunities for expansion. However, certain risks loom on the horizon.

Deposit growth for the banking system is expected to slightly moderate to 12-13 per cent in FY 2024-25 from 13.5 per cent in FY 2023-24, further intensifying the competition for deposit accretion, especially for low-cost Current Account Savings Account (CASA) deposits. Deposit accretion at slower pace present a challenging scenario and poses a downside risk to credit offtake. If the deposit growth is not in line with the credit growth, banks may have to borrow from other sources which might hit the margins and profitability.

Deposit growth is expected to continue to lag credit growth that is anticipated to remain around 13-15 per cent. The Credit to Deposit (CD) ratio has been generally hovering around 80 per cent since September 2023. For the fortnight ended 22^nd March, 2024, it stood at 80.3 per cent, reaching a decadal high which

is mainly driven by a merger of the big banking entity. This can also be seen as increasing lenders reliance on bulk deposits if growth in granular deposits is slow in picking up. Bulk deposits are high cost deposits which are also volatile in nature.

However, PSBs are better placed in terms of deposits, with average CD ratio lower than private banks. As a result, select private banks are already paying much higher interest for savings deposits unlike PSBs, which, being adequately capitalised, are better positioned to drive credit growth without the need for raising much deposits.

In addition, the rapid improvement in banks financial metrics, seen over FY 2020-21 to FY 2023-24, is likely to reach an inflection point in FY 2024-25, given that net slippages continued to decline and credit costs trended lower in FY 2023-24. The improving return on assets over FY 2020-21 to FY 2023-24 is likely to reach an inflection point with some pressure on margins.

Banks are likely to witness pressure on their NIM going forward due to continued re-pricing of deposit rates. Simultaneously, expectations of a rate reversal in the next fiscal could start a downward pressure on lending yields and hence, pressure on interest margins is likely to continue during FY 2024-25.

Although there is a concern regarding PSBs asset quality and re-emergence of stress scenario, fresh Gross NPA of the banking system has been on a downward trend which is expected to continue going forward as well. Owing to previous experience, reform measures, capex etc. the corporate book asset quality is expected to hold up and slippages are likely to remain granular.

Rising global economic uncertainties also pose a significant risk for the banking industry. The implications of increasing geopolitical instability for banks include heightened risk exposure, volatility in financial markets and challenges in managing cross-border operations. Any escalation in geopolitical conflicts can lead to disruptions in supply chain, contributing to inflationary pressures and currency fluctuations. Moreover, fluctuations in oil prices, often influenced by geopolitical tensions, further compound these challenges for banks, as they navigate the implications for industries and regions heavily reliant on oil.

Increasing reliance on technology exposes banks to elevated cybersecurity risks, necessitating stringent security measures. Rapid digitization and deploying emerging technologies like Artificial Intelligence (AI), Machine Learning (ML) pose several risks for the banks such as phishing attacks, data privacy concerns, ransomware attacks etc. This, in turn, has implications for banks reputation and trust with the customers. Banks need to invest in infrastructure to make themselves ready to face such emerging threats in an increasingly dynamic environment.

Going forward, banks will also face competition from other entities including Fintechs, small finance banks, payment banks etc. necessitating adaptability and innovation at their end to meet the expectations of customers and other stakeholders. Changing customer demographics and expectations pose a major challenge for banks. Providing excellent service and hyper-personalization via improved data analytics will prove to be the key to customer retention.

Finally, unprecedented climate events also pose physical and transition risks to the industry. Therefore, banks need to build future ready, climate risk-resilient systems to mitigate the impact of climate change.

IV. Outlook

Bank credit is expected to grow in the range of 13-15 per cent year-on-year (YoY), while deposits are expected to grow 12-13 per cent YoY in FY 2024-25. Deposit growth, although improving has lagged credit growth for FY 2023-24 and consequently is anticipated to play a leading role in FY 2024-25 as banks take further efforts to shore up their liability franchise and ensure that lagging deposit growth does not constrain the credit offtake. With likely decline in Fixed Deposits rate, deposit base is expected to shift towards CASA deposits and banks might see healthy uptick in CASA deposits.

The banking sector is expected to continue its healthy performance. Stable interest rates, robust GDP growth and declining inflation could positively influence lending and deposit activities. The emphasis on technology and infrastructure investments creates avenues for further growth in bank credit.

The corporate lending segment will continue to see a healthy pick-up in demand, due to rising working capital requirement and a push in both public and private capex. Increase in private capex plans is expected to augment banks corporate lending growth.

Banks net interest margins are expected to compress on expectations of a rate cut in the second half of FY 2024-25, however, benign credit costs and lower operating expenses would provide support. Credit growth and profitability metrics are expected to continue to remain healthy.

Going ahead, PSBs are anticipated to report healthy earnings growth owing to stable margins, controlled opex, moderate treasury gains and benign credit cost. Opex is expected to decrease, as wage-related provisions were made in Q3 FY 2023-24. Treasury performance is likely to remain robust, supported by a decline in bond yields and buoyant capital markets.

Asset quality is showing marked improvement and is likely to continue on its downward trajectory. For the nine months ended FY 2023-24, the banking industry saw a drop in GNPA to 1.9 per cent (from 5.4 per cent in FY 2019-20), marking robust asset quality improvement. PSBs nearly halved their GNPAs to

3.7 per cent in 9M FY 2023-24 from 7.4 per cent in FY 2021-22, while private banks maintained NPAs below industry average at 2.0 per cent, indicating improvement in their fiscal health. The ongoing improvement in asset quality is expected to continue, with controlled slippages, complemented by robust recoveries, upgrades and sales to the National Asset Reconstruction Company Ltd (NARCL), which will enhance asset quality ratios. Healthy PCR and a significant reduction in the SMA pool bode well for credit costs.

V. Segment-wise or Product-wise Performance

The performance of major business segments of the Bank is analyzed below:

1. Resource Mobilization

The Domestic deposits of the Bank increased to Rs. 13,33,365 Crore as at end of March 2024. Savings deposits increased to Rs. 4,80,298 Crore, while CASA increased to Rs. 5,52,499 Crore. The share of CASA deposit to Domestic deposit stood at 41.44 per cent as at end of March 2024.

In the current banking scenario of mounting competition, Retail banking products play a major role in enhancing the business growth of the Bank. In order to remain competitive, the Bank has identified anchor products and special focus is given to mobilize more business under the segment. The deposit under customer specific segment viz. PNB Power savings account (for women) increased to Rs. 11,840 Crore with a YoY growth of 20 per cent and PNB Rakshak increased to Rs. 2,391 Crore with a YoY growth of 14 per cent.

Further, Savings Deposit scheme Unnati has also been identified as an anchor product, where the deposit increased to Rs. 3,72,747 Crore registering a YoY growth of 4 per cent.

New Schemes in FY 2023-24:

Bank has launched following new deposit schemes for various segments of the society:

a. PNB Expert Current Account Scheme: A segment focussed scheme helps the Bank in running dedicated marketing campaigns for the targeted segment. As such a new Current Account scheme for Professionals titled as "PNB Expert Current Account (CAEXP)" has been introduced. The scheme is a specialized banking offering designed to cater to the unique financial needs of professionals such as Chartered Accountants, Company Secretaries, Doctors, Architects, Lawyers, Cost Accountants, Valuers, Interior Designers & Fashion Designers. It also becomes easier for the field team to pitch the product to the targeted segment as the name of the scheme and features are aligned to the customers.

b. PNB Pragati Current Account Scheme: Aspirational customers are being offered the "Pragati Current Account Scheme", curated for the aspirational customers whose businesses are growing and they are willing to maintain a higher monthly average balance to get the benefit of enhanced features and freebies in the account that will be suitable for their business.

c. Current Account Collection scheme: Guidelines issued by RBI includes directions for opening of collection account by borrowers availing credit facilities from banking system. To facilitate this, a new product titled "Current Account Collection scheme" (CACOL) has been introduced.

d. Soundbox for Bharat QR Code (PNB E-Swar): Bharat QR Code is a Quick Response code displayed at the merchant location to accept digital payments towards sale of goods or services to customers through use of mobile applications linked to Debit Card/Credit Card & Unified Payments Interface (UPI). The Bank has introduced Soundbox device (PNB E-Swar) at merchant location where Bharat QR codes are issued or required for digital transactions which provide immediate audio notification on every successful transaction.

e. Do-it-Yourself (DIY) journey in Point Of Sale (POS) & Bharat QR (BQR) Business: In order to enhance merchants banking experience and to speed up the merchant onboarding process, Do-it-Yourself journey for POS & BQR through PNB ONE application and Banks corporate website has been introduced. The merchant will be able to complete the onboarding online without visiting branch and POS/BQR shall be installed at merchant location.

2. Credit Deployment and Delivery

Gross Global Advances of the Bank stood at Rs. 9,83,325 Crore in March 2024 registering a YoY growth of 11.15 per cent. Fresh Corporate Sanctions with external rating A and above formed a major part of the sanctions. Similarly, Bank has improved its CD Ratio to 71.8 per cent as on 31^st March, 2024 from 69.1 per cent as on 31^st March, 2023.

Two tier organisational structure of Corporate Credit is a specialised Credit Delivery Structure equipped with dedicated Credit desks ensuring consistent and responsible lending practices. The structure is functioning to meet the customer expectation by augmenting three pillars viz; Customer Ecstasy, Timely delivery and Fair Lending Practices. The 2 tier structure is being catered by 2 Extra Large Corporate Branches (ELCBs) and 13 Large Corporate Branches (LCBs), opened in different parts of the country. These 15 ELCBs/LCBs constitute approx. 46.42 per cent of total domestic credit.

3. Retail Credit

Retail assets business has witnessed considerable growth during past 2-3 years after COVID-19 era. The growth has been fuelled by consistent improvement in economic condition, rising middle class, urbanization, rising disposable income, technical innovation for dissemination of product, competitive environment at macro level, whereas at micro level, product differentiation, marketing strategies, launch of digital channel for retail loan, implementation of specialized verticals, cross selling opportunities etc. have contributed to the growth story. Delinquency in retail assets are under control and receding on account of improving credit underwriting standards.

During the FY 2023-24, Total Retail Credit portfolio of the Bank increased to Rs. 2,22,574 Crore registering a robust YoY growth of 12.6 per cent. Out of this, the Core Retail Credit has increased to Rs 1,58,246 Crore in FY 2023-24 showing a YOY growth of 15.2 per cent.

Further, within the Core Retail Credit portfolio, Housing Loan increased to Rs. 93,694 Crore from Rs 81,863 Crore, Vehicle loan increased to Rs. 20,692 Crore from Rs. 16,478 Crore and Personal loan was at Rs. 20,766 Crore from Rs. 18,152 Crore registering YOY growth of 14.5 per cent,

25.6 per cent and 14.4 per cent respectively.

New Initiatives

a. The Bank is continuously offering competitive features as well as rate of interest for various retail asset products.

b. Focused & dedicated approach to increase portfolio of home loan in overall retail asset portfolio has been adapted.

c. Distinctive approach is being pursued for increasing big ticket loan under education loan scheme.

d. Increased tie-up and handholding with lead sourcing channels such as Car dealers, Home builders, Marketing Associate (MA), Marketing Consultant (MC), Retail Loan Counsellors (RLC) and usage of property search sites has led to uninterrupted flow of retail loan leads.

e. PNB Cards & Services Limited (PNBCSL), a subsidiary of the Bank, has been roped in to source home loan, car loan and education loan leads from across country and a dedicated centralized PNB Loan Point (PLP) has been set up for processing these leads.

f. An arrangement with NBFCs has been done to venture into business of co-lending under home loan (Priority sector).

g. 57 dedicated Customer Acquisition Centers (CACs) have been set up across the country for sourcing retail loan leads and facilitating tie-up with corporate institutions, home builders, etc.

h. A new scheme PNB Matritva has been launched for providing financial assistance through Personal Loan with longer repayment period for working women during perinatal period.

Digital initiatives

a. Digi Home, a digital way of offering home loan product, was launched in October 2023. The product offers online, paperless and seamless home loan digitally.

b. PNB Swagat, a digitally available personal loan product, was launched in October 2023. It provides end to end journey till disbursement for personal need to customers, who are new to bank.

c. Digi car, again a digital channel for car loan, was launched in March 2024 to facilitate customers with ease of availing car loan at their convenience.

d. An application "PNB Aarambh" was launched to facilitate acquiring of customers on-the-go, outside branch environment and provisionally offer them with Retail Asset Products based on certain minimum information given by them.

e. A new loan scheme digital personal loan was launched for existing customers, who have fully repaid Home loan/Car Loan/Education Loan/ Personal Loan.

4. Priority Sector

Shouldering the responsibility of social banking, the Bank has surpassed all the Priority Sector (PS) goals this year. As per the Economic Survey 2022-23, the agriculture sector in India has grown at an average annual growth rate of

4.6 per cent during the last six years. The Bank has major contribution in this development by providing finance to the sector.

The outstanding position of Priority Sector, Agriculture and sub-sectors as on 31^st March, 2024 on quarterly average basis is as under:

Achievement of National Goals

(Amount in Rs. Crore)

Sector	No. of Beneficiaries (Nos.)	31.03.2024 (Amount)	PSL Target	% Achievement to Adjusted Net Bank Credit (ANBC)
Priority Sector	73,96,431	3,33,011	40.00%	40.57%
Out of which:
Agriculture Sector	51,37,208	1,49,925	18.00%	18.27%
Small & Marginal farmers	42,19,336	82,808	10.00%	10.09%
Micro entp.	15,26,360	66,943	7.50%	8.16%
Weaker Sections	52,51,053	1,11,402	12.00%	13.57%

Performance Highlights of FY 2023-24

a. Credit to Priority Sector stood at Rs. 3,33,011 Crore as on March 2024. The percentage of Priority Sector Advances to ANBC is 40.57 per cent as against the prescribed National Goal of 40.00 per cent.

b. Credit to Agriculture (PS) sector stood at Rs. 1,49,925 Crore as on March 2024. The percentage of Agriculture Advances to ANBC is 18.27 per cent against the prescribed National Goal of 18.00 per cent.

c. Loans to Small/Marginal Farmers (SF/MF) stood at Rs. 82,808 Crore as on March 2024. The percentage of advances to SF/ MF farmers to ANBC is 10.09 per cent as against the prescribed National Goal of 10.00 per cent.

d. Credit to Micro (PS) Enterprises stood at Rs. 66,943 Crore as on March 2024. The percentage of advance to Micro (PS) Enterprises to ANBC is 8.16 per cent as against the prescribed National Goal of 7.50 per cent.

e. Advances to Weaker Section stood at Rs. 1,11,402 Crore as on March 2024. The achievement is 13.57 per cent as against National goal of 12.00 per cent of ANBC.

Government of India is launching various programmes for the benefit of farmers from time to time. KCC Saturation campaign was launched in February 2020. Govt. of India has also launched various schemes under Atma Nirbhar Bharat package in 2020. The schemes like Agriculture Infrastructure Fund (AIF), Animal Husbandry Infrastructure Development Fund (AHIDF) and Pradhan Mantri Formalisation of Micro Food Processing Enterprises Scheme (PMFME) has helped Banks in targeting and financing under various activities under Farm credit and pre & post-harvest management. Since all these schemes are part of Agriculture and priority sector, these have helped in achieving Priority Sector targets also. In addition to this various other programmes like National Rural Livelihood Mission (NRLM), National Urban Livelihood Mission (NULM), etc. are also helping in increasing the Priority sector advances.

Agriculture Infrastructure Fund (AIF)

To ensure certainty of returns to the farmers through price support, promote crop diversification and improve market infrastructure, Government is focussing on investment in infrastructure facilities through Agriculture Infrastructure Fund.

62,625 projects with aggregate sanction of Rs. 31,270 Crore were financed under the scheme, out of which PNB sanctioned 4,728 projects amounting Rs. 4,458 Crore upto 31^st March, 2024.

Kisan Credit Card Scheme (KCC)

In order to bring all the farmers under the ambit of availing KCC facility, Government of India (GOI) launched KCC-Saturation drive w.e.f. 1^st February, 2020. The total accounts sanctioned by the Bank till 31^st March, 2024 under KCC-Saturation is 15,74,093 accounts amounting to Rs. 23,751 Crore.

Strategies to enhance Agriculture Credit

a. Agriculture Investment Credit

i. Financing Food & Agro processing units like Rice Mills (in States like West Bengal, Chhattisgarh, Punjab), Dal Mills, Atta and Edible Oil (in States like Rajasthan), etc., in identified areas based on the geographical potential. Further, the Bank is also providing competitive Rate of Interest (ROI) using cluster-based methodology for specific geographical areas to garner fresh business under the segment.

ii. Agriculture Infrastructure like Cold storage units, Rural Godowns, Warehouses, etc.

iii. Animal Husbandry Infrastructure Development Fund

(AHIDF): The activities eligible under the scheme includes Dairy Processing Units, Meat Processing Units, etc.

iv. Financing under PMFME (PM Formalisation of Micro Food Processing Enterprises): Smaller ticket-size advances to Micro Enterprises are covered under the scheme.

v. Financing under National Livestock Mission (NLM): The

scheme seeks to achieve employment generation through entrepreneurship development in Small Ruminants, Poultry and Piggery Sector along with establishment of fodder processing units.

b. Agriculture Gold Loan

i. Special Gold loan cell has been formed to exclusively focus on increasing Gold loan portfolio.

ii. The Bank is exploring Lead generation in Rural areas through Business Correspondents (BCs) network.

iii. Documentation has been simplified.

iv. Centralized follow-up is being done for ensuring availability of Gold safe in Authorized branches.

v. Publicity of Gold loan products from Head Office level in different parts of the country.

vi. Special focus in 8-9 States in addition to Southern States, where potential is more under Gold Loan Segment like Rajasthan, Punjab, West Bengal, etc.

c. Self Help Group (SHG) Financing

i. The Bank is focusing on financing SHGs as per the geographical potential where there are more opportunities for financing under SHG like Eastern and Southern States.

ii. Credit linkage of new eligible groups and providing higher dosage to eligible accounts are the focus areas for increasing portfolio during FY 2023-24.

iii. The Bank has entered into Memorandum of Understanding (MoU) with 8 State Rural Livelihood Missions (SRLMs) for lead generation. Further, tie-ups are being explored in other States also.

iv. The applications of more than Rs. 10.00 Lakh are explored to increase the ticket size.

v. Focus will be given to financing of individual women member of SHGs in line with Lakhpati Didi initiative.

Digital Initiatives or Lending through Digital Platform

i. Kisan Tatkal Rinn: It has been made live since 22^nd March, 2023 and Rs. 600 Crore has been sanctioned during the FY 2023-24.

ii. Digital Gold Loan: It has been made live since 5^th November, 2023 and Rs. 350 Crore has been disbursed during the FY 2023-24. The journey took time to stabilize and the progress is expected to pick up during the FY 2024-25.

iii. DP Review & Enhancement: This has been made live since 9^th January, 2024 and is expected to pick up during the FY 2024-25. However, 548 accounts have been enhanced under the journey and more than 75,000 accounts have been reviewed. The accounts with correct Mobile number fed in the system and where disbursed amount including applied interest is repaid within a year of the disbursement are eligible for DP enhancement.

Corporate Social Responsibility (CSR) Activities

a. Farmers Training Centres (FTCs): The Bank has established 12 Farmers Training Centres. FTCs provide training on agriculture & allied activities which include organic farming, fertilizer management, bee keeping, dairy farming, mushroom production, maintenance of tractor and other farm machineries, processing and preservation of fruits and vegetables, computer courses, beauty parlour, candle and soap making, papad

making, making of soft toys, cutting, tailoring & embroidery, etc. These Training Centres have been equipped with the Mobile Van having Soil testing facilities at the farmers fields and LED for audio visual display of informative video clips to the farmers. The Bank spent Rs. 446 Lakh under this during FY 2023-24. Since inception, FTCs have imparted training to 18,28,024 persons by conducting 61,555 training programs.

b. Rural Self Employment Training Institutes (RSETIs): There are 78 RSETIs under aegis of Ministry of Rural Development (MoRD) and 2 Rural Development Centres (PNB initiatives) operating in India which are engaged in providing training to rural population and their families for skill upgradation to undertake self-employment ventures/jobs. During the FY 2023-24, 60,721 persons were trained in these centers out of which 47,911 belong to Below Poverty Line (BPL) families and 47,899 were women. Total number of trained candidates since inception is 6,02,566 out of which 2,91,211 were from BPL families and 4,04,491 were women. Our RSETIs are focusing for settlement of participants by ensuring adequate credit for inclusive growth. Total settled candidates are 4,14,042 since inception. The Bank spent Rs. 3,857 Lakh under this during FY 2023-24.

c. Financial Literacy Centres: The Bank has 175 Financial Literacy Centers (FLCs). Total number of enquiries made during the period from 1^st April, 2023 to 31^st March, 2024 is 1,87,255. The Target groups of the programmes conducted by FLCs are Farmers, Self Help Groups, Micro and Small Entrepreneurs, Senior Citizens etc. Total number of seminars/programmes/camps conducted by FLCs on Financial Education, Preventive Counselling and Customer Rights from 1^st April, 2023 to 31^st March, 2024 is 8,072 and number of persons attended these programs are 2,95,558.

5. Micro, Small and Medium Enterprises (MSME)

The MSME sector forms the backbone of our industrial sector and is an important growth engine for the economy that promotes entrepreneurship, inspires innovation and boosts employment generation.

As at the end of the March 2024, credit to MSME segment stands at Rs. 1,39,288 Crore. The advance to Micro and Small Enterprises stood at Rs. 1,13,336 Crore.

The Bank has disbursed Rs. 21,475 Crore in FY 2023-24 under the Pradhan Mantri MUDRA Yojana (PMMY) as against Rs. 20,367 Crore in FY 2022-23.

a. Details of initiatives being taken to boost MSME business

i. Cluster Based Financing: The Bank has adopted Cluster based lending approach and 58 clusters have already been approved with customized schemes having concessional pricing, service charges, relaxed lending norms etc. As on 31^st March, 2024 total 939 accounts of Rs. 2,795 Crore has been sanctioned.

ii. Partnership-led growth: The Bank is endeavouring to increase market presence and expand the outreach through entering into partnership agreement with different market players. The details are mentioned below:

• Tie-Ups with OEMs (Original Equipment Manufacturers) for Commercial Vehicle/ Construction Equipment (CV/CE): The Bank has tie-up arrangement with 20 reputed Commercial Vehicle/Construction Equipment Manufacturers to position the Bank as preferred financier. Further, the Bank is under process of having more such tie up arrangements. 3,972 accounts for Rs. 254 Crore have been sanctioned under Tie-Ups with OEMs for Commercial Vehicle & Commercial Equipment (CV/CE) as on 31^st March, 2024.

• Tie-up arrangement for Supply Chain financing to the dealers of RMCs (Reputed Manufacturing Companies): The Bank

has made tie up arrangement with major corporates namely, Indian Oil Corporation Ltd, Ashok Leyland Limited, Action Construction Equipment Limited (ACEL), Patanjali Ayurveda

Ltd, Daimler India Commercial Vehicle Limited, Steel Authority of India Limited and Volvo Eicher Commercial Vehicles Limited. As on 31^st March, 2024, 1,771 accounts for Rs. 1,542 Crore have been sanctioned. Further, the Bank is under the process of entering into more such tie ups.

• Tie-up with Fin-Tech Companies: For end-to- end lending (sourcing to collection & recovery), the Bank has Tie-up with M/s Integra Micro System Pvt. Ltd for PM SVANidhi.

iii. Lending through TreDS Platform: The Bank is using all the three platform of TReDS i.e. (1) RXIL (2) M1xchange & (3) A.TReDS. TReDS is an institutional mechanism set up for financing of trade receivables of MSMEs from corporate and other buyers including Government Departments and Public Sector Undertakings (PSUs). Centralized Hub at Delhi has been established to undertake operations on TReDS platform effectively. A total of 2,141 bills amounting to Rs. 981 Crore is outstanding on Treds as on 31^st March, 2024.

iv. Cash Flow based Financing - GST Express: The

scheme provides hassle free credit to meet working capital requirement to GST registered business enterprises. Unique feature of the scheme is that there is no requirement of submitting financial statements and the quantum of loan permitted is from Rs. 10 Lakh to Rs. 500 Lakh. 13,992 accounts for Rs. 8,602 Crore is sanctioned under the scheme as on 31^st March, 2024.

v. e-GST: The module is a near to Straight Through Process (STP) product having loan amount from Rs. 10 Lakh to 1 Crore, wherein Cash Credit Facility shall be allowed based on 25 per cent of the sales reported in the GST returns (GSTR-3B) or the trade related credit summation in current accounts in the last one year, whichever is lower. As on 31^st March, 2024, number of accounts were 278, and sanctioned amount was Rs 69.37 Crore.

vi. PNB Tatkal: The scheme provides hassle free credit from Rs. 1 Lakh to Rs. 25 Lakh to meet financial requirements related to business activity or expansion of business wherein proposals are invariably routed through pslbloansin59minutes. com portal and borrower gets In-Principle sanction in 59 minutes.

2,054 accounts for Rs. 328 Crore has been sanctioned under the scheme as on 31^st March, 2024.

vii. MSME Prime Plus: A flag ship scheme under the name of MSME Prime Plus has been launched by consolidating four MSME schemes namely, PNB Udyog Scheme, PNB Seva Scheme, PNB Vyapar Scheme and PNB Contractor Scheme.

To be more competitive and acceptable in the market, the Bank is offering:

a. Concessional Rate of Interest and Service Charges;

b. Relaxed collateral norms and margin criteria;

c. Features like MSME Vishesh (Auto increase of Working Capital Limits);

d. Open Term Loan (A pre-approved term loan facility which provides flexibility to the existing units enjoying credit facilities from the Bank); and

e. Car Loan in the name of Firm/Company for personal use;

As on 31^st March, 2024, 26,776 accounts for Rs. 40,693 Crore has been sanctioned under the scheme.

viii. Pre-Approved Business Loan (PABL): This module Is a straight through digital lending to MSME segment to provide loan facility from Rs.1 Lakh to Rs. 10 Lakh under Business loan to those customers who are maintaining current account with the Bank and it is completely system driven. Loan assessment is based on Trade Related Credits (TRC) arrived in current accounts through credit summation in last 12 months and the PABL Score. Keeping in view of the success of Pre-Approved Personal Loan (PAPL), it is expected to garner a good number of business under this module.

As on 31^st March, 2024, number of accounts were 11,199 and sanctioned amount was Rs 653.44 Crore.

ix. e-RENEWAL Scheme: To increase efficiency of the appraisal process, reduce Turn Around Time (TAT) and to provide ease to small borrowers, e-RENEWAL Scheme has been implemented. It is a process of automatic renewal of working capital limit having exposure up to Rs. 10 Lakh.

Further, a functionality of STP of Easy renewal has been implemented where customer will give his/her consent through SMS only and the entire journey will be completed digitally without any Branch involvement.

During the FY 2023-24, a total of 68,862 accounts of Rs. 2,944 Crore were renewed.

x. PNB e- Mudra Scheme: To meet out credit need of the Micro and Small entrepreneur through Digital

platform, a straight through process, e-Mudra Scheme for loan up to Rs. 1,00,000 has been implemented and made live on 4^th March, 2023. The module is rule based processing & sanctioning, which is completely system driven.

As on 31^st March, 2024, number of accounts were 11,278 and sanctioned amount was Rs 108.17 Crore.

xi. Extensive use of PNB LenS: The Bank had developed/ customized Information Technology (IT) based solution i.e. PNB LenS - The Lending Solution for loan management. After implementation of Loan Management System (LMS), assessment process is standardized which has strengthened the credit underwriting. Now, the module for processing of the application under Mudra and MSME loans (fresh/ renewal/enhancement/review) upto Rs. 25 Crore are available through PNB LenS. Total 3,47,360 applications (MSME + Mudra) have been sanctioned, amounting Rs. 85,225 Crore from 1^st April, 2023 to 31^st March, 2024.

b. Government Sponsored Schemes

Special economic and comprehensive package of Rs. 20 Lakh Crore to fight COVID-19 pandemic in India was announced by Honble Prime Minister under the Aatma Nirbhar Bharat Abhiyan. To provide relief to stressed sectors by helping sustaining the employment and meet liabilities, the Bank has taken various initiatives to enable MSMEs to promptly address their business continuity and remain firmly on their feet during the crisis and also enable them to move forward in its aftermath, such as:

i. PM Street Vendors Atma Nirbhar Nidhi (PM SVANidhi): This is a Central Government Scheme launched by Ministry of Housing and Urban Affairs formalized for Street vendors providing finance upto Rs 10,000 which opened up new opportunities for this section to move up the economic ladder. The scheme was launched on 2^nd July, 2020 and it is available to all street vendors engaged in urban areas as on or before 24^th March, 2020. Lending under the PM SVANidhi Scheme is extended till December 2024. Credit Guarantee and interest Subsidy claims on all loans will be paid till March 2028.

In addition to this, Ministry of Housing and Urban Affairs has extended the benefit of existing scheme to provide enhanced loan (2nd tranche of Rs. 20,000 and 3rd tranche of Rs. 50,000) to PM SVANidhi beneficiaries on timely repayment of earlier loan under PM SVANidhi Scheme.

As on 31^st March, 2024, a total of 6,85,439 applications have been sanctioned out of which 6,45,708 (94.20 per cent) have been disbursed.

e-PM SVANidhi - To make the PM SVANidhi loan more flexible and easily accessible to all eligible urban street vendors, e-PM SVANidhi scheme is launched for all applicants who are having KYC complied saving and current account with the Bank based on Aadhar/ Pan available in Core Banking System (CBS). Under the scheme, the loan is sanctioned without any manual intervention and the amount is disbursed directly into the Savings/Current account of the borrower. The scheme was made live on 24^th August, 2023. As on 31^st March, 2024, number of accounts were 29,286 and sanctioned amount was Rs 29.81 Crore.

ii. Contactless loan through Psbloansin59minutes. com: A portal for in-principle approval for MSME loans upto Rs. 5 Crore within 59 minutes is in place in the name of psbloansin59minutes.com. The Bank has on-boarded this portal and it has been made live. Further, the Bank has also on-boarded Mudra loans on the Mudra Portal launched by M/s Online PSB Loans Ltd. The Bank has already configured all flagship MSME products on this portal to maximize in-principle sanctions.

As on 31^st March, 2024, total of 90,856 applications were disposed of, out of 93,847 applications received for MSME & MUDRA loans.

c. Awards received during the quarter

i. MSME Banking Excellence Award 2023 ceremony organized by Chamber of Indian Micro, Small and Medium Enterprises (CIMSME), New Delhi: Punjab National Bank has been awarded as Best MSME friendly Bank & Runner Up in Best Bank for creating Awareness in MSME Banking Excellence Award 2023 Ceremony organized by Chamber of Indian Micro, Small and Medium Enterprises (CIMSME), New Delhi.

6. Financial Inclusion (FI)

The Bank has been the pioneer in taking initiative in the area of financial inclusion. The Bank is providing Business Correspondents (BCs) services since 2012 & implementing comprehensive Financial Inclusion Program through effective utilization of BCs in Sub Service Area (SSA) & non SSA area. SSA is a cluster of few villages and is linked to one base branch of the Bank.

Some of the FI initiatives include:

a. The Bank has implemented Pradhan Mantri Jan Dhan Yojana (PMJDY) and other financial inclusion initiatives through BCs pan-India. Overdraft facility up to Rs. 10,000 in PMJDY accounts is provided to eligible account holders (age group 18-65).

b. Biometric based e-KYC account opening and Aadhar seeding at BC Locations.

c. Social security schemes, i.e. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY) facilities, are available at BC locations, branches, as well as through Internet Banking/Mobile Banking. The Progress of Social Security Schemes till 31^st March, 2024 is as under:

i. PMJJBY: 63.82 Lakh customers enrolled.

ii. PMSBY: 254.54 Lakh customers enrolled.

iii. APY: 38.53 Lakh customers enrolled.

As on 31^st March, 2024, Bank has 33,614 BC Agents/Bank Mitras providing basic banking services in Rural, Semi-Urban, Urban and Metro centres depending upon the requirement of the Bank. The BC Agents/Bank Mitras use PAX/Laptop/ Desktop/Mobile/Tab etc. for providing the banking services. At present, following services as per EASE agenda of Department of Financial Services (DFS) is available at BC locations through Kiosk Banking Solution:

a. Savings Account Opening

b. Term Deposit Receipt (TDR)/ Recurring Deposit (RD) opening, Renew TD/RD

c. Cash Deposit (own bank)

d. Cash Withdrawal (on us), Cash withdrawal (off us)

e. Fund transfer (own bank), Fund transfer (other Bank— Aadhaar Enabled Payment System (AEPS)/RuPay card)

f. Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT), Indo-Nepal Remittance

g. Balance enquiry (own bank), Balance enquiry (other bank)

h. Apply for RuPay debit cards, Block debit card

i. Enroll for social security schemes i.e. micro accidental death insurance (PMSBY), micro life insurance (PMJJBY), pension scheme (APY)

j. Aadhaar seeding

k. Self Help Group (SHG): For formation & promotion, including credit linkage

l. Passbook update, Mini statement

m. Cheque collection

n. Request new cheque book, Stop payment of cheque, Cheque status enquiry

o. Request for SMS alert / email statement (registered mobile number/e-mail).

p. Recovery/Collection up to bank approved limits.

q. Loan request initiation for Retail/Mudra/Agriculture

r. Request initiation for Current account opening

s. Request initiation for Third Party Products

VI. Risks & Concerns

Risk is an integral part of the Banks business operations. The Bank is exposed to major risks namely credit risk, market risk, operational risk, liquidity risk, interest rate risk, among others and has put in place measures, policies, systems and procedures to manage and mitigate those risks. The Bank also has a reliable internal controlling environment to manage materials risks such as Reputational risk, Strategic Risk, IT Risk, Cyber Risk, Compliance Risk, ESG Risk, Climate Risk, Conduct Risk and other residual risks. The Board of Directors of the Bank has constituted various SubCommittees of Board and/or Functional Committees to look into different areas of strategic importance.

1. Credit Risk Management

The Bank has a robust Credit Risk management framework and has developed comprehensive risk scoring/rating system that serves as a single point indicator of diverse risk factors of counterparties for taking credit decisions in a consistent manner. The Bank has in-house credit risk rating models for risk assessment of borrowers and has also developed and implemented scoring models for Retail advances, MSME and Farm sector advances. In addition, the Bank has developed separate credit scoring models to capture the peculiarity of specific lending schemes designed for a particular segment such as PNB Sampatti, PNB GST express loan, Pre-Approved Personal Loan scheme, e-Mudra and lending under co-lending arrangements with NBFCs.

The Bank undertakes periodic validation exercise of its credit risk rating and scoring models to ensure their efficacy. The Bank also conducts migration and default rate analysis to test robustness of its credit risk rating models. Output of credit rating and scoring models is linked to decision making which includes credit sanctioning, pricing, loaning powers alongside audit, review & monitoring of credit portfolio. The Bank has put in place several policies covering various aspects of credit risk management to have a uniform set of effective lending practices.

In pursuance of overarching objective of automation of processes and increased compliance, the Bank has launched various digital retail lending products targeting different customer segments. These products are based on rule-based, system driven processing & sanctioning, which shall be end-to-end or near end-to-end. Separate scorecards have been developed to assess the risks for these products.

The Bank has also launched E-Renewal Scheme, an automatic/Straight Through Process (STP) for renewal of credit facilities for working capital credit facilities having exposure up to a certain threshold.

The Bank has in place a fully digitized and automated Early Warning monitoring tool PNB SAJAG 2.0 for effective monitoring of advances above Rs. 1 Crore and early detection of deterioration in health of loan accounts. The system monitors the accounts on 133 Early Warning Signals (EWS) - including all EWS prescribed by Reserve Bank of India (RBI) and Department of Financial Services (DFS).

The Bank has established a separate Industry Research Desk under Credit Intelligence and Support Department (ClaSD), which carries out in-house risk assessment of industries and prepares industry outlook for more than 150 industries based on calculated industry risk scores. Output of industry risk assessment exercise is translated into Industry Handout which presents executive summary and brief of various industry risk parameters. Further, Up, Stable and Down trends in Industry Outlook is also provided by encapsulating significant developments in industries during the quarter.

A dedicated Market Intelligence Unit has been created under Credit Intelligence and Support Department (CIaSD). The unit provides Market Intelligence Report on different classes of borrowers above certain threshold.

These processes help to achieve quick & accurate delivery and monitoring of credit, bring uniformity in the appraisal and facilitate storage of data & analysis thereof.

2. Market risk and Asset Liability Management

The Bank has in place a well-defined organizational structure for market risk management which looks into the process of overall management of market risk viz. interest rate risk, equity price risk and foreign exchange risk and implements methodologies for measuring and monitoring the risks to keep the investment portfolio healthy and liquid.

Mid-office of Treasury Operations, looks after market risk of the investment Portfolio of the Bank and reports to Group Chief Risk Officer (GCRO) to ensure the independence of its functioning from treasury operations. Further, Market Risk Management Committee (MRMC) a functional committee of the Bank, is also in place to look after the overall management of Market Risk.

Mid Office monitors various risk positions through statistical tools like VaR, stress tests, risk limits like M-Duration, PV01, exposure limit etc. to effectively manage the Investment portfolio. In order to make the monitoring robust and system driven, tools/limits have been automated in Finacle treasury application for better monitoring and management of Market Risk. Further, in

order to incorporate the impact of riskiness of exposure in different countries, Country Risk Premium has been incorporated in the pricing structure for effective pricing.

The Bank has a separate Asset Liability Management Cell that manages and monitors liquidity risk and interest rate risk proactively. To assess liquidity risk for short term resilience, the Bank computes and monitors Liquidity Coverage Ratio (LCR) on daily basis. For long term resilience, the Bank computes and monitors Net stable Funding Ratio (NSFR) on monthly basis.

The Bank keeps a close eye on development in the global markets and scans its portfolio on regular basis to protect itself from similar kind of risk incidents. The Bank carries out detailed stress testing for liquidity risk on quarterly basis. Stress test is a tool that helps in assessing the Banks liquidity profile and the adequacy of liquidity buffers in case of bank-specific, market-wide and combined stress events. Stress test is conducted using severe but plausible scenarios and its impact on liquidity position is assessed under low, medium and high stress scenarios. Similarly, the Bank also conducts liquidity stress test and impact on LCR, followed by preparation of Contingency Funding Plan to tide over liquidity crunch if at all it arises. The Bank manages its assets on a continuous basis in a way to withstand liquidity requirements at all times.

The Bank also computes and report Interest Rate Risk in Banking Book (IRRBB) to RBI on quarterly basis. IRRBB refers to current and prospective risk to banks capital and earnings arising from adverse movement in interest rates that affects its banking book position.

3. Operational Risk Management

Bank has in place a well-defined organizational structure and framework for operational risk management functions. The Bank is identifying, measuring, monitoring and controlling/mitigating the operational risk through tools viz. Internal/External Loss Data, Near Miss Events, Risk Control & Self-Assessment surveys (RCSAs), Key Risk Indicators (KRIs), Risk Based Assessment for Money Laundering & Terrorist Financing Risk and Scenario Analysis. The Bank has a robust mechanism in place to analyse the operational risk in product/activities/process and systems before introducing/modifying existing processes through approvals at various levels. The Bank has in place sound and responsive practices to ensure effective oversight, due diligence and management of risk arising from outsourcing of financial services along with Business Continuity Plan that leads to readiness in tackling serious business disruption. The Bank has implemented Statistical Analysis Software (SAS), an online Operational Risk Solution under Enterprise wide Data Warehouse

Project and placed it on central server to take care of various aspects of data capturing and management information system at various levels to provide technological support for managing entire Operational Risk of the Bank.

The Bank has newly established IT and Information Security Risk Management vertical under risk function for effective IT and information security risk management bank wide.

4. Internal Capital Adequacy Assessment Process (ICAAP) & Stress Testing

The Bank has in place a comprehensive policy on Internal Capital Adequacy Assessment Process (ICAAP), which is reviewed annually and ICAAP document is put up to the Board on half yearly basis. ICAAP addresses both the Pillar-I and Pillar-II risks and to have a holistic view of impact of various risks which the Bank is exposed to, and an exercise is carried out to quantify/assess all such risks. The risk management processes are covered at length in the ICAAP document. The document is prepared on both solo and consolidated basis at the group level.

The Bank also has put in place comprehensive Policy on Stress Test to identify the vulnerabilities and assess capital/liquidity requirements under adverse but plausible scenarios. Stress tests are conducted across whole gamut of risks namely Credit risk, Market risk, Operational risk, Concentration risk, IRRBB, Liquidity risk, Country risk, Group risk, Pension Obligation risk, etc. on a regular basis. The Bank has recently upgraded the stress testing framework to make the estimates more accurate, forward looking and granular. The retail and MSME portfolios have been further segregated into 1,000+ risk homogeneous micro clusters (based on account characteristics, demographics etc.) and linked with macro-economic variables.

5. Risk Appetite Framework

The Bank has a comprehensive Risk Appetite Framework in place. The Framework sets out the Risk Appetite Statement along with governance and monitoring mechanism for its effective implementation within the Bank. Risk Appetite has been defined in terms of different key risk parameters along with the Risk limit and Risk threshold level for each parameter. Actual risk levels are monitored against the approved limits on an ongoing basis.

6. Group Risk

Risk Management at Group Level is to manage the risks of the Bank as part of the group and assess the potential impact of other group entities on the overall risk profile of the Bank. The Bank has group risk governance framework/ structure which is based on pyramid approach, starting

with Group Risk Policy at top and progressing through risk appetite, governance, processes and risk reporting. The Bank has formed a Group Risk Management Committee for effective management of group risk. The Bank has a strong Group Risk oversight of all the group entities, including the group risk assessment of Subsidiaries, Associates and Joint Venture (JVs), Impact of stress testing of subsidiaries and overseas branches on consolidated level, Liquidity Risk Management through Group Liquidity Coverage Ratio (LCR), Consolidated Prudential Report (CPR), Prudential limit and Contingency Funding Plan (CFP). Further Group ICAAP is prepared to assess the various risks (both Pillar I and Pillar II) the group is exposed to, mitigation of these risks and to arrive at an internally computed level of capital adequacy consistent with these risks.

7. Climate Risk

Climate-related risks refer to the potential risks that may arise from climate change or from efforts to mitigate climate change, their related impact and the economic and financial consequences. It can impact the financial sector through two broad channels i.e., physical risks and transition risks: a) Physical Risk refers to the economic costs and financial losses resulting from the increasing frequency and severity of extreme climate change-related weather events, longer-term gradual shifts of the climate and indirect effects of climate change such as loss of ecosystem services b) Transition Risk refers to the risks arising from the process of adjustment towards a low- carbon economy. To accelerate work towards Climate Risk Management, a dedicated Climate Risk Management Cell is formed. For active management of climate risk, the Bank has put in place an implementation plan and components which are targeted for development through these action areas which are as follows: a) Net Zero Ambition, b) Risk Management, c) Operations and d) Climate Risk Governance.

Further, Sustainability and Resilience Committee (SARC) is formed for facilitating governance of sustainability related activities. The Bank has put in place Green Deposit Policy and has also framed Financing Framework for Green, Social and Sustainability Linked Activities/Projects which has been externally reviewed by third party.

The Bank has developed in-house capabilities for effectively managing climate risks. The Bank has done physical risk assessment of the entire portfolio for assessing the vulnerability of its assets. The Bank has also carried out transition risk assessment of borrowers by capturing carbon emissions data (including Scope 1 & Scope 2 emissions). The Bank has in place framework on Greenhouse Gas (GHG) measurement based on GHG protocol and methodology for Financed emissions computation based on Partnership for Carbon Accounting Financials (PCAF) standards. Further, the Bank is preparing to disclose on CDP Platform from FY 2023-24 onwards. The

Bank has also formulated a qualitative climate risk strategy taking into account the best practices related to climate risk management. The Bank has also put in place Climate Risk Stress Testing Methodology. Bank is in the process of developing Environmental, Social and Governance (ESG) Rating Model which will be used to take informed decisions, once sufficient evidence is in place. Capacity building with respect to climate risk is being carried out at various levels of the Bank on an ongoing basis.

However, many constraints are also faced, such as low availability of India specific data, absence of Indian Taxonomy, insufficient evidence to assess the viability and returns potential of Green sectors, etc.

Regulatory Guidelines

The Bank has adopted Standardized Approach for Credit Risk, Standardized Duration Approach for Market Risk and Basic Indicator Approach for Operational Risk for computation of Risk Weighted Assets (RWA) under Basel III norms.

The Bank also plans to migrate to advanced approaches for computation of RWA/Capital charge for Credit, Market and Operational Risks subject to approval from the regulator. The Bank is calculating & reporting its capital and RWA as per Foundation Internal Ratings Based (FIRB) to RBI on quarterly basis. The Bank has submitted a formal Letter of Intent for adoption of Advanced Internal Rating Based (AIRB) Approach for Credit Risk and Internal Models Approach (IMA) for Market risk. Necessary actions required in this regard have been initiated.

The Bank is calculating Expected Credit Loss (ECL) as per Indian Accounting Standard (Ind AS)-109 on quarterly basis and the results are submitted to RBI in prescribed Proforma on halfyearly basis.

The Bank has developed Risk Adjusted Return on Capital (RAROC) framework which provides the Bank with a single scale for comparing the return on capital for a credit proposal to enable credit decisions. The framework helps in assessing whether returns generated by the business proposition are commensurate with the risk perceived, thereby maximizing the value of shareholders equity.

VII. Cyber Security Centre of Excellence (CCoE)

The inception of CCoE (Cyber Security Centre of Excellence) in April 2023 signifies a pivotal step towards bolstering our cyber security framework and operational efficiency. Situated at the Banks Data Center, CCoE oversees a suite of over 30 security technology products, aligning with RBI Circular guidelines and industry best practices. The CSOC (Cyber Security Operation Centre) ensures real-time monitoring of cyber security and network devices, employing advanced correlation rules and alerts to detect anomalies promptly.

Cyber Security Setup:

1. The Bank has implemented the latest technology security solutions to safeguard against external threats through robust measures taken for perimeter, end point and server security.

2. The Bank has collaborated with renowned vendors for attack surface monitoring to bolster resilience against threats.

3. Threat Intel Feed from various sources has been implemented to identify and counteract potential cyber threats effectively.

4. The Bank conducts Red Team Exercises to evaluate and improve cyber defense mechanisms, including publicfacing assessments, phishing simulations and readiness for ransomware and malware attacks.

In the upcoming year, the Bank plans to implement modern security solutions. Adherence to best practices includes periodic upgrades of perimeter devices and leveraging existing hardware capacities for a robust cyber environment.

By consolidating these initiatives under the Cyber Security Centre of Excellence, the Bank aims to cultivate a strong cyber security culture and proactively mitigate emerging threats.

VIII. Physical Security

The Bank has well established security and fire safety set-up with clear-cut delegation of authority and responsibility to the Security Organization functioning at Head Office and at the field level.

Security Organization functions through various instructions/ guidelines which are consolidated in the form of Physical Security Policy and Fire Safety Policy. Security Organization ensures physical safeguarding of the Banks asset, its fire safety arrangements and safety of its staff/customers.

All the Banks branches are strengthened with the latest security and fire safety gadgets such as Closed-Circuit Television (CCTV) System with 90 days recording, Burglar Alarm System, Fire Alarm System, auto dialers, Passive Infrared (PIR) sensors, light sensors, portable fire extinguishers, modular fire extinguishers etc. Furthermore, Branches dealing with locker facility are strengthened with additional CCTV cameras and hard disc with a provision to store CCTV recording till 180 days.

The Bank has a system of guarding all the branches as per their Physical Security Risk profile categorized into High Risk, Medium Risk and Low Risk branches and there is a provision to post security guards in High Risk branches.

For the safety of vital installations like Server Rooms, DR Sites, two layer physical security arrangements, Early Fire Detection and Alarm System, Fixed Firefighting System, Clean Gas based Fire Suppression System in server rooms and various types of Fire-Extinguishers are provided.

In accordance with the Standard Operating Procedures on Hiring of Customized Cash Vans, adequate number of Customized Cash Vans are hired in each Zone which are equipped with Global Positioning System (GPS) tracking system, fire extinguisher and CCTV system. The movement of Cash vans is controlled at Currency Chest level.

In order to meet any kind of disaster, the Bank has a well- established Business Continuity & Contingency Plan (Non-IT). Offices upto Branch level have Emergency Response Team to respond immediately to any kind of contingency like Fire incident, Earthquake, Terrorist attack, etc. Arrangements have been made to train Bank staff at training centers through Security and Fire Safety videos. Moreover, Demonstration boards for Security and Fire safety have been set up at major training centers. In addition to above, firefighting and evacuation drills are carried out by the Banks Fire Officers and Security Officers at all Admin offices once a year and when visiting branches/ other offices.

A team of dedicated Security Officers and Fire Officers are posted at Zonal Offices & Circle Offices with prime responsibility to carry out audit of physical security measures at branches, installation and maintenance of Security gadgets and to liaison with Police/State authorities in respect to Physical Security and Fire Safety. They act as advisor to respective Zonal Head/ Circle Head in all matters related to Physical Security/safety, movement of cash and Fire Safety.

Dedicated Fire Safety & Security Demonstration & Training centers are established in Staff Training Centers for staff awareness.

IX. Internal Control System

1. Internal Audit

During FY 2023-24, Risk Based Internal Audit (RBIA) was commenced/conducted in 8174 branches/offices. During FY 2023-24, 1700 branches/offices were covered under Concurrent/Continuous audit, covering 56.61 per cent of the total business of the Bank as on 31^st March, 2023.

Information Security (IS) Audit was conducted in 166 offices/units. Foreign Exchange Management Act (FEMA) Audit was conducted in 243 eligible branches/offices i.e. Authorized Dealer (AD) branches & Trade Finance Centres. All branches were subject to revenue audit.

2. Offsite Monitoring

For strengthening of Offsite Monitoring of branches/ offices, the Bank has implemented an Alert System i.e. Offsite Surveillance System (OSS) & also formed Data Analytics team i.e. Offsite Surveillance Unit (OSU).

a. Offsite Surveillance System (OSS): Internal audit functions of the Bank and Offsite Surveillance System (OSS), have been automated through an

online application i.e. eTHIC to bring out fairness, objectivity, transparency and innovation in the Internal Audit System.

Presently 68 scenarios are operational for generating alerts including 6 new scenarios identified by the Bank during FY 2023-24 based on various activities being undertaken by the officials at all Service Outlets (SOLs) in CBS in the form of transactions for customers as well as Office accounts.

b. Offsite Surveillance Unit (OSU): OSU is a dedicated Data Analytics Team which is conducting data dump analysis on regular basis and suggesting enhancement in system & procedure for mitigating the identified operational risk.

3. Risk Based Internal Audit of Administrative Office

The Bank has prescribed Risk Based Internal Audit system for conducting audit of its Administrative Offices.

The audit captures risk perceptions inherent in various areas of functioning of administrative offices including decision making process, communication system, efficient resource utilization and ways & means used to achieve the goals, etc. All Head Office (HO) Divisions, Domestic & Overseas subsidiaries are audited on annual basis. All other administrative offices are audited on annual basis except Low risk rated offices, which are subject to audit once in two years.

During FY 2023-24, audit of 238 administrative offices comprising 138 Circle Offices, 22 Zonal Offices, 22 Zonal Audit Offices, 9 Regional Rural Banks, 30 Head Office Divisions, 3 domestic subsidiaries and 14 Staff Training Colleges was conducted.

4. Credit Audit and Review

During FY 2023-24, Credit Audit has been undertaken for all eligible loan accounts both domestic and overseas. In terms of Credit Audit and Review Policy, during FY 2023-24, the coverage of audit is 55.89 per cent of the Banks total credit portfolio as on 31^st March, 2023 against Reserve Bank of India and Banks policy requirement of at least 30-40 per cent in a year. The Bank has also digitalized Credit Audit process under Credit Audit Online Program (Credit Audit Module) which is a transparent, effective, accurate and time saving tool for better monitoring of Credit Audit.

5. Know Your Customer (KYC)/Anti Money Laundering (AML)

To ensure meticulous compliance of guidelines on KYC by all Branches/Offices while dealing with new as well as existing customers, the Bank has a transparent Know Your

Customer (KYC) Policy in line with regulatory guidelines issued by RBI on various KYC related parameters such as KYC Updation, Identification of Beneficial Owners, Unique Customer Identification Code (UCIC), Central KYC (CKYC) etc. are implemented in form and content. For strict compliance of extant KYC guidelines, CASA Back offices have been established for centralized opening of Savings & Current accounts. Further, Document Management System (DMS) has been procured for digitalization of customer documents.

For effective monitoring of transactions of the customers, the Bank has implemented an Anti-Money Laundering (AML) system for generation of AML alerts on day to day basis based on the pre-defined scenarios, as advised by Indian Banks Association (IBA)/Financial Intelligence Unit - India (FIU-IND) from time to time.

To bring greater awareness amongst the Bank staff about KYC and Anti-Money Laundering (AML)/Combating the Financing of Terrorism (CFT) compliances such as Online basic course on KYC in PNB UNIV - the Banks learning portal - has been made mandatory for staff members at branches and one session is mandatorily taken on KYC AML in every training program at training centres.

Digital Initiative

An online facility for KYC updation through Video based Customer Identification Process (V-CIP) application has been made available in Internet Banking Services (IBS) and PNB One Mobile Banking Services of the Bank for individual customers who are due for periodic KYC updation or KYC non-compliant. The eligible customers are redirected from IBS and PNB One to V-CIP.

Uploading the documents of Central KYC Registry (CKYCR): In terms of Prevention of Money Laundering Act, 2002 and RBI Master Direction on KYC, customers KYC details/documents pertaining to all new individual accounts opened on or after 1^st January, 2017 have to be invariably uploaded with Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI) within 10 days of opening the accounts. Further, vide amendments made on 18^th December, 2020 by RBI, in addition to individual accounts, CKYCR has also been extended to Legal Entities (LEs) as well for uploading the KYC data pertaining to accounts of LEs opened on or after 1^st April, 2021 on CKYCR. Moreover, RBI has also mandated CKYCR for accounts of individuals opened prior to 1^st January, 2017, at the time of periodic KYC updation or earlier; when updated KYC information is obtained from customer.

Accounts opened through automated channels like Document Management System (DMS), BC agents, Tabs, Video based Customer Identification Process (V-CIP) and branch based e-KYC are directly pushed to CERSAI centrally.

Facility for opening of Current accounts and Saving accounts of Legal Entities and simultaneously uploading the data onto CKYCR has also been customized on DMS through which the process of CKYCR uploading of LE records, on an ongoing basis, has been automated on DMS. Current accounts of Proprietors have also been enabled to be opened through Tab Banking and Video- KYC. These shall be directly pushed to CKYCR through DMS without any involvement at branch level, integration for which is under process with DMS.

Re-KYC for Individuals through Document Management System (DMS) has been made LIVE for all the branches w.e.f. 21^st November, 2023 for automated CKYCR uploading process.

6. Vigilance

The Bank believes that an organization is as strong and honest as its people. The employees are the face of an organization and the Bank assures all its stakeholders including employees, customers, shareholders and regulator/ government bodies that the entire team of the Bank is committed to work with highest level of integrity and probity in all types of its official dealings and conducts.

The Bank is committed towards maintaining the highest standards of integrity in all its operations/dealings, which can be reflected in its policies, procedures and practices that are designed to ensure that the Bank operates with the highest standard of integrity and transparency at all times.

Vigilance is applicable to every individual working in the organization irrespective of his/her position in the administrative hierarchy. The main objective of vigilance administration is to maintain integrity and efficiency of an organization and its scope includes prevention and detection of corruption, misconduct and malpractices, streamlining the system through systemic improvements and punitive actions. Due to efficiency achieved through preventive vigilance measures, effective monitoring mechanism and supervisory oversight over cases, the cases received by the Bank during the year have been taken care of.

In addition to the above, the Bank has taken various initiatives to improve the efficiency of Vigilance Administration in the FY 2023-24 like:

a. Vigilance Awareness Week (VAW) - 2023 was observed by the Bank from 30^th October, 2023 to 5^th November, 2023 with the theme Say no to corruption, commit to the Nation to promote awareness as well as commitment of Bank towards integrity and transparency and during the VAW-2023.

i. Approx. 4.65 Crore impression were made to the public by way of various programmes like workshops/walkathons/seminars/public gatherings/ nukkad nataks/preventive vigilance functions/CSR Activities etc.

ii. Public Interest Disclosure & Protection of Informer (PIDPI) awareness campaigns were made through display of banners in all branches. 4,528 Gram Sabhas and various other financial literacy programs were organized.

iii. Training on Thematic Areas of Vigilance Awareness Week was conducted under Train the Trainer Capsule for the bank officials. Approx. 21,000 officials were benefitted through these training programmes.

b. During the last year in line with the Central Vigilance Commission (CVC)s advice of focusing on leveraging of IT systems:

i. The Bank has adopted the vision of Honble Prime Minister and has digitalized the process of obtaining vigilance clearances on various occasions like on Retirement, Voluntary Retirement Scheme (VRS), Foreign visit, Promotion, Sabbatical leaves etc.

ii. The Bank has revamped the process of submission of Assets and Liabilities by the officials, which will ease the process by reducing the time taken in feeding the details by the officers and will also provide hassle-free and transparent data for processing of assets and liabilities by the competent authorities, hence avoiding back and forth queries.

In addition, various training sessions/seminars have been organized pan-India, wherein the Chief Vigilance Officer, as well as senior officials from Vigilance Department have interacted on Vigilance matters. Preventive Vigilance Sessions are made part of induction of Management Trainees and Mid-Career training programmes. Total 475 training sessions have been conducted on preventive/ punitive vigilance in the last one year.

The Vigilance Department of the Bank has been publishing an e-magazine, PNB Vigil, and conducts online quiz on preventive vigilance for staff for deeper awareness of issues of importance. This leads to efficiency in operations and thereby adding value to the customer satisfaction and better compliance culture in the organization.

X. Right to Information (RTI) Act

The Bank believes that transparency is the key towards building sustainable trust with the existing and potential customers of the bank. The bank is committed towards this objective by implementing the provisions of RTI Act in letter and in spirit.

The results of the Banks proactive approach and suo-moto disclosures can be seen by the overall reduction of RTI related matters during the FY 2023-24. During the period of 1^st April 2023 to 31^st March 2024, the Bank received 5,446 RTI related application, a decrease of 19 per cent from previous years 6,797 RTI related matters.

In addition, bank conducted training sessions and workshops on Pan India basis of its 161 Central Public Information Officers (CPIOs) to interact on effective and timely disposal of RTI matters.

XI. Discussion on Financial performance with respect to operational performance

As at the end of 31^st March, 2024, Banks Gross Global Business stood at Rs. 23,53,038 Crore with Gross Global Advances at Rs. 9,83,325 Crore and Global Deposit at Rs. 13,69,713 Crore. Current and Saving Deposits (CASA) was at Rs. 5,52,499 Crore with domestic CASA share at 41.44 per cent. In addition, Banks Operating Profit was at Rs. 24,931 Crore with the Net Profit of Rs. 8,245 Crore for the FY 2023-24.

XII. EASE Performance

EASE is an initiative by Department of Financial Services (DFS), Ministry of Finance (MOF), Government of India (GOI) as part of the PSB Reforms Agenda and is continuing under its 7^th iteration. Over the years, it has become deeply ingrained in all PSBs strategic decisions.

Journey from EASE 1.0 to its current version, has witnessed a transformative shift, emphasizing digital customer experience, analytics-driven business improvement, tech and data-enabled capability building and HR operations enhancement.

The Bank has embraced the EASE framework wholeheartedly and continuously achieving significant milestones, reflecting our dedication for driving meaningful reforms and enhancing customer convenience in the banking sector.

During EASE 5.0, the Bank has done well in areas related to building analytics capabilities, comprehensive digital collection management system, fraud resilience, cyber security, adopting modern technology capabilities, customer centric digital offerings and employee development. The Bank had secured overall 3^rd position amongst all PSBs under EASE performance index with 2^nd position under two themes i.e., "Digitally - enabled customer offerings", and Big data and analytics.

During EASE 6.0, the Bank has introduced various Digital Journeys across Retail, Agriculture and MSME (RAM) sector along with implementing novel HR reforms. Through this proactive approach, the Bank has moved up by one place and overall secured 2^nd rank amongst PSBs during December 2023 quarter along with 1^st rank under two themes i.e. Digital and analytics-driven business improvement and Tech and data- enabled capability building.

Some achievements under these reforms include digital lending journeys for KCC, Housing loan, Vehicle loan, Business loan, Financial Supply Chain Management, Enhanced MSME and Agri functionalities in Mobile Banking and Internet Banking, New age features for NRIs in Mobile Banking, Analytics based collections approach, Customer Services through non-base branches, Open API technology for vendor on-boarding, Target setting tool for branches, Role clarity tool for employees and One-to-One coaching for high potential successors.

To summarize, the Banks journey under EASE reform agenda, started from 2018, has achieved needed impetus to excel in areas such as Human resource development, technology, collaboration and customer service.

XIII. Material Developments in Human Resources (HR)/Industrial Relations front including number of people employed

1. Human Resources Management

Total number of employees: Staff strength given in the following table are for the Bank for March 2023 and for March 2024 including those on deputation in the subsidiaries.

Cadre wise Staff Strength

Cadre	31.03.2023		31.03.2024
	Number	% of Total Staff	Number	% of Total Staff
Officer	51309	49.28%	51488	50.31%
Clerks	28984	27.84%	28080	27.43%
Sub Staff (incl. PTS)	23827	22.88%	22781	22.26%
Total	104120	100.00%	102349	100.00%

Reservation Policy

The Bank follows the reservation policy for Scheduled Castes (SCs), Scheduled Tribes (STs), Other Backward Castes (OBCs) and Person with Disabilities (PWD) as prescribed by Government of India from time to time. Besides, as per norms, the Bank has taken various steps like maintaining reservation roster, separate liaison officer etc.

Strength of SC/ST/OBC/PWD Employees

(in numbers)

Cadre	31.03.2024
	SC	ST	OBC	PWD
Officer	10319	3956	13237	1488
Clerks	5566	1596	7644	893
Sub-Staff	8725	1578	5741	497
Total	24610	7130	26622	2878

Age Profile of the Employees

The average age of overall employees has come down over the years. The movement of cadre-wise average age in the last two years is as under:

(Average age in years)

Average Age as on	Officer	Clerical	Sub Staff	Over All
March 2023	39.23	38.40	36.86	38.46
March 2024	39.28	38.67	37.45	38.70

Industrial relations

Industrial Relations in the Bank continued to be cordial with Officers Association/Workmen Unions. Various physical meetings at Circle/Zonal/Head Office level were held with representatives of majority Officers Association/ Workmen Unions during the year to promptly resolve the issues raised by union/association.

2. Training Activities

The Banking sector plays a crucial role in economic growth of the country. As a result, it is crucial not only to have the appropriate technology, systems and processes but also employ individuals with necessary skills, attitude, abilities and adaptability for the Bank to thrive in an ever-changing world. Therefore, a HR capability building framework is in place to help staff members in improving their knowledge/skills to enhance efficiency and productivity. Training processes are carefully planned and aligned with the organizational goals. Knowledge Enhancement of the employees is achieved through Hybrid Mode, i.e., traditional (in-person training) and online learning, through various modes of trainings such as classroom training, on the job trainings, on-location programs, workshops, mentoring, coaching, e-learning, virtual classes, video tutorials, conclaves, etc. In addition to this, experiential learning is also being emphasized upon through various activities.

The Bank undertook a number of measures for capacity building among employees aligned with their life cycle for their overall development. The life-cycle of the Bank employee starts with an Induction program. The purpose of Induction training in the Bank is to orient the new employees to the organization, its culture, policies and procedures. To promote conducive environment in the Bank for learning and to equip the existing manpower with appropriate skills and knowledge for the Banks growth and development, following measures were taken in the FY 2023-24:

a. Tailor-made training programs to suit employees

life cycle

i. Programs ranging from induction to cadre change, role change and upskilling were conducted for employees of the Bank across all cadres and scales.

ii. Customized programs for First Time Circle Heads and First Time Branch Heads were conducted to facilitate their seamless switch to new roles.

iii. Cadre change programs were conducted for employees on elevation to next cadre.

iv. Intensive Credit and Forex programs were curated and conducted to develop a line of officers equipped with necessary skills to work in the domain of credit and forex.

v. Second Innings programs were conducted for superannuating employees to help them transition to post-retirement life.

b. Leadership Development Program under PNB Udaan

i. With a view to have a competitive edge in the evolving business environment, the Bank is seeking to evolve the 3 Ps, i.e., People, Product and Processes. For the development of first P, i.e., People, the Bank launched an ambitious Human Resource Transformation project, UDAAN, under which Leadership Development Programs (LDP) were conducted for all officers (900 plus) of Scale V and above.

ii. The program was conducted in 3 forums, each followed by one to one coaching to develop behavioural competencies among these executives to plug the gap areas as identified by the psychometric tests.

c. Capacity Building beyond classroom

i. The Bank, while recognizing the need for continuous up-gradation of knowledge of its employees, offers incentive to staff members on their acquiring specific higher/professional qualifications in terms of the approved scheme. The number of approved courses under the Scheme for providing incentive to Staff Members for acquiring Specialized Qualifications/qualifying Specific Courses, was increased. Further, for the first time, self-paced e-learning courses from various accredited agencies like Coursera, Udemy, etc., were introduced to enable staff to obtain specialized skills/courses/certifications.

ii. The customized Learning Management System (LMS) version 5.0 was rolled out, which is our inhouse platform developed to offer knowledge snippets in the shape of courses to employees accessible anytime, anywhere. The system is capable for 15,000 Sharable Content Object Reference Model (SCORM)/Video content user concurrency and 30,000 assessment concurrency. The system also has the potency for Job family wise marks management with an interface available in both Hindi and English languages. Marks scored by employees in LMS are given due weightage in employees performance appraisal.

d. Specialized Programs

i. A specialized program on Digital Marketing was conducted in collaboration with the faculties from IIMs to equip the participants with the nuances and stages of Digital Marketing.

ii. A series of programs were conducted for Front Desk officials on Customer Services and soft skills. External faculties were engaged to enhance customer handling skills and language skills of the staff to converse with the customers.

e. Promoting inclusivity

i. Agenda of Learning & Development vertical is not just to cater to functional learning of staff, but also to motivate the workforce by different methods such as seminars as a part of training agenda. One such initiative taken last year was conducting Womens Conclave for lady executives in the Bank in Senior Management where eminent women speakers were called to motivate the women workforce in the Bank. Further, trainings and webinars are also conducted on Gender Diversity and Prevention of Sexual Harassment (POSH) at workplace. An e-course on POSH has also been designed and made available for all the employees to sensitize them on the issue.

ii. The Bank is also looking at ways to make differently abled staff more productive by honing their skills under initiative of finding ability in disability by conducting training programs on Follow-up for irregular loan accounts.

iii. As per statutory requirement, pre-promotion training was imparted to 17,921 eligible employees in FY 2023-24.

f. Knowledge Enablers

I. PNB Digital Library, which is a centralized repository for a wide range of referral booklets and videos, was launched with the objective of providing all knowledge resources meticulously organized for the easy access to our field staff.

ii. For improving competencies of the workforce, job family wise information has been reorganized at one place in a new dashboard named PNB Gyan Kosh. The dashboard has been customized to segregate learning material/documents to enable easy access to relevant information specific to their job roles and responsibilities. Revamping the same as per New Job family framework is under process.

iii. New product launch booklets and videos prepared: The Bank has embarked on the journey of Digital Transformation and many new initiatives to promote Digitalization have been taken by the Bank. Learning & Knowledge Management Centre (LKMC) has prepared 87 launch videos and booklets for new products & procedures in FY 2023-24 for easy understanding and quick reference of the field functionaries.

WAY FORWARD

Indian economy is at the cusp of sequential growth and banking sector is pivotal to the economic growth of India. Banks have strong fundamentals and are well positioned to play the part. The Indian economy was the fastest growing major economy in the world in FY 2023-24 on the back of robust consumption, increased government capex and strong macro fundamentals and it will continue to be the fastest growing economy among the G-20 nations in 2024. In FY 2023-24, Indias economy expanded at 8.2 per cent in Q1, 8.1 per cent in Q2, 8.6 per cent in Q3 and 7.8 per cent in Q4, surpassing all estimates, and overall it has registered growth at 8.2 per cent in FY 2023-24 (as per Provisional Estimates).

The banking sector is experiencing a transformation through the digitization and modernization of its systems with the advent of new and agile technologies. By harnessing the power of Artificial Intelligence (AI), Machine Learning (ML) and Cloud Technologies, banks can enhance their operational efficiency. This, in turn, enables them to streamline the digital on-boarding process for customers and expedite loan disbursals. Moreover, these advanced technologies serve as valuable decision-making tools, allowing banks to assess the behavioural patterns of their customers. Additionally, the utilization of AI and ML in credit appraisal not only improves the credit delivery mechanism but also aids in fraud prevention.

India is experiencing the rise of new business models due to the success of UPI, the implementation of the Account Aggregator (AA) framework and the widespread adoption of digital banking services. This has led to an increasing number of banks collaborating with innovative service providers to empower customers in leveraging their data and accessing a broader range of services.

With the evolution happening in customer behaviour, fintechs are acting as a catalyst for banks. These are providing banks with cutting-edge technologies to augment their services and cater to their customers changing needs. Banks must engage more with fintechs to leverage the advanced technologies developed by fintechs. Also, fintechs need the expertise of banks to understand customer behaviour and increase customer engagement. The two parties together can bring a revolution to the entire financial landscape of India.

Going ahead, there will be a renewed focus on Green and Sustainable Banking, directing resources towards initiatives that align with Environment, Social and Governance (ESG) goals following global benchmarks. Financial institutions are expanding their offerings to include eco-friendly products such as virtual debit and credit cards, which are not only convenient and user-friendly but also accessible to customers.

In the ever-evolving landscape of banking, Punjab National Bank stands resolute, poised to navigate the challenges of today and tomorrow with unwavering commitment. As the bank reflects on its 130-year long journey, "Doing well by doing good" remains more than a mantra; it is the cornerstone of the Banks ethos. The institution firmly believes that its success is intertwined with the prosperity of its diverse customer segments.

Building upon its rich legacy and strong presence in the Indian banking sector, the Bank is primed to continue its evolution and innovation. Looking ahead, its vision of becoming the pre-eminent bank in the industry and the employer of choice remains steadfast. Embracing technological advancements, the Bank is committed to enhancing customer experience through seamless digital journeys. Recognizing that digitization transcends mere technology, the Bank is reshaping the way it interacts with customers and communities, ensuring they benefit from cutting-edge digital solutions while upholding the highest ethical standards.

The Bank reaffirms its commitment to ethical banking practices, prioritizing societal and environmental well-being alongside financial growth. The institution recognizes that sustainable success hinges on robust credit underwriting and proactive recovery measures, which will drive improvements in asset quality and bolster profitability.

The Banks dedicated employees, through their targeted efforts, will continue to elevate its brand value, reinforcing Punjab National Bank as the trusted partner upon which customers can rely. Together, they embody the institutions mission of delivering quality financial services by leveraging technology to create value for all stakeholders, contributing to the economic growth of the nation, whilst staying true to its motto - "the name you can bank upon".

Guided by its core values—teamwork, innovation, objectivity, adaptability and integrity—the Bank is ready to embrace the challenges of tomorrow, leveraging its strengths and legacy to forge a brighter future for Punjab National Bank and the communities it serves.