Punjab National Bank Auditor Reports

To the Members of Punjab National Bank

Report on Audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying Standalone Financial Statements of Punjab National Bank (the Bank), which comprise the Balance Sheet as at 31 March 2024, the Profit and Loss Account and the Statement of Cash Flows for the year then ended, and notes to financial statements including accounting summary policies and other of significant explanatory information in which are included the returns for the year ended on that date of the Central Office, 22 Zonal Offices and i. 20 branches, Treasury division, Credit Card division and

37 other offices audited by us. ii. 1629 Indian branches and other offices audited by statutory branch auditors.

iii. 1 foreign branch audited by local auditors.

iv. 1 International Banking Unit situated at Gujarat International Finance Tec-City (Gift City) audited by Statutory Branch Auditors.

The branches audited by us and those audited by other auditors have been selected by the Bank in accordance with the guidelines issued to the Bank by the Reserve Bank of India. Also incorporated in the Balance Sheet, the Profit andLoss Account and the Statement of Cash Flows are the returns from 9638 branches which have not been subjected to audit. These unaudited branches account for 26.68% of advances, 66.60 % of deposits, 20.53% of interest income and 60.27% of interest expenses.

2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by theBanking Regulation Act, 1949 in the manner so required for bank and are in conformity with accounting principles generally accepted in India and:

a. the Balance Sheet, read with the notes thereon is a full and fair Balance Sheet containing all the necessary particulars, is properly drawn up so as to exhibit a true and fair view of the state of affairs of the Bank as at 31March, 2024; b. the Profitand Loss Account, read with the notes thereon shows a true balance of profit and c. the Cash Flow Statement gives a true and fair view of the cash flows for the year ended on that date.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing (SAs) issued by the ICAI. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the standalone Financial Statements section of our report. We are independent of the Bank in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with ethical requirements that are relevant to our audit of the Standalone financial statements and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have sufficientappropriate to provide a basis for our obtainedis opinion.

Key Audit Matters

4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements for the year ended 31 March

2024. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters prescribed below to be the key audit matters to be communicated in our report.

Key Audit Matters	How our matter was addressed in the audit
Advances classification and provisioning
(Refer Schedule 9 to the Standalone
	Our audit approach included an understanding of the Banks software, circulars, guidelines and directives of the Reserve Bank of India and the Banks internal instructions and procedures in respect of the assets classification and its provisioning and adopted the following audit procedures:
Financial Statements, read with the Accounting Policy No 5) The advances are classified as performing and non-performing advances (NPA) and provisioning thereon is made in accordance with the prudential norms as prescribed by the Reserve Bank of India (RBI). The Bank has implemented complete system driven recognition of advances and their classification in SASCL Application under Core Banking Solution (CBS). The extent of provisioning of NPA under the prudential norms are mainly based on its ageing and recoverability of the underlined security. The same are also reviewed manually based on necessity.
	• Evaluated and understood the Banks internal control system in adhering to the Relevant RBI guidelines regarding income recognition, asset classification and provisioning pertaining to advances.
	• Test checked the design and implementation as well as operational effectiveness of relevant internal controls and substantive testing, including involvement of manual process in relation to income recognition, asset classification and provisioning pertaining to advances.
In the event of any improper application of the prudential norms or consideration of the incorrect value of the security, as the valuation of the security involves high degree of estimation and judgement, the carrying value of the advances could be materially misstated either individually or collectively, and in view of the significance of the amount of advances in the Standalone Financial Statements the classification of the advances and provisioning thereon has been considered as Key Audit Matter in our audit.	• Reviewed the Banks monitoring mechanisms to identify errors and omission in applying/ implementation of logic / data integrity and its corrective action.
	• Reviewed the documentations, operations / performance and monitoring of the advance accounts, on as per RBI guidelines basis of the large and stressed advances, to ascertain any overdue, unsatisfactory conduct or weakness in any advance account, examination of classification as per prudential norms of the RBI, in respect of the branches / relevant divisions audited by us. In respect of the branches audited by the branch statutory auditors, we have placed reliance on their reports.
	• Reviewed the report of independent IT Expert on review of SASCL Application (Income Recognition and Asset Classification solution) used by CBS including the review of "Baseline Requirements for the NPA classification Solution".
	• Reviewed on test check basis the reports of the credit audit, inspection audit, risk based internal audit, concurrent audit, regulatory audit to ascertain the advances having any adverse features / comments, and reviewed the reports generated from the Banks system.
	Our Results:
	The results of our audit process were observed to be adequate and satisfactory considering the materiality of the transactions.
Investments – valuation, and identification and provisioning for Non-Performing Investments
(Refer Schedule 8 to the Standalone
Financial Statements, read with the Accounting Policy No 4) Investment portfolio of the bank comprises of Investments in Government Securities, Bonds, Debentures, Shares, Security Receipts and other Approved Securities which are classified under three categories, Held to Maturity, Available for Sale and Held for Trade.	Our audit approach towards Investments with reference to the RBI circulars / directives included the review and testing of the design, implementation, operating effectiveness of internal controls and audit procedures in relation to valuation, classification, identification of Non-Performing Investments, provisioning / depreciation related to Investments as per RBI guidelines.
	• We reviewed and evaluated the process adopted for collection of information from various sources for determining fair value of these investments.
Valuation of Investments, identification of Non performing Investments (NPI) and the corresponding non-recognition of income and provision thereon, is carried out in accordance with the relevant circulars / guidelines / directions of RBI. The valuation of each category (type) of aforesaid security is to be carried out as per the methodology prescribed in circulars and directives issued by the RBI which involves collection of data/ information from various sources such as FBIL rates, rates quoted on BSE/NSE, financial statements of unlisted companies, NAV in case of mutual funds & security receipts etc. Certain investments are based on the valuation methodologies that include statistical models with inherent assumptions, assessment of price for valuation based on financial statements etc. Hence, the price discovered for the valuation of these Investments may not be the true representative but only a fair assessment of the Investments as on date. Hence the valuation of Investments requires special attention and further in view of the significance of the amount of Investments in the financial statements the same has been considered as Key Audit Matter in our audit.	• For selected sample of investments (covering all categories of investments based on nature of security) we tested accuracy and compliance with the RBI Master Circulars and directions.
	• We assessed and evaluated the process of identification of NPIs, and corresponding reversal of income and creation of provision.
	Our Results:
	The results of our audit process were observed to be adequate and satisfactory considering the materiality.
Assessment of Information Technology (IT):	Our audit approach included: -
IT controls with respect to recording of transactions, generating various reports in compliance with RBI guidelines.	• Understanding the coding system adopted by the Bank for various categories of customers.
Other compliances to regulators etc., is an important part of the process. Such reporting is highly dependent on the effective working of Core Banking Software and other allied systems.	• Reviewed the design, implementation and operating effectiveness of the Banks IT controls including application, access controls that are critical to financial reporting on test check basis.
We have considered this as key audit matter as any control lapses, validation failures, incorrect input data and wrong extraction of data may result in wrong reporting of data to the management and regulators.	• Understanding the feeding of the data in the system and going through the extraction of the financial information and statements from the IT system existing in the Bank.
	• Checking of the user requirements for any changes in the regulations/ policy of the Bank.
	• Reviewed the reports generated
	by the system on sample basis.
	• Reviewed the report of independent IT Expert on review of SASCL Application (Income Recognition and Asset Classification solution) used by CBS including the review of "Baseline Requirements for the NPA classification Solution".
	Our Results:
	There is continuous progress, still the system needs to be strengthened for its efficacy to control data from the system.
Litigation & Contingent Liabilities	Our audit approach included: -
Assessment of Contingent liabilities in respect of certain litigations including Direct and Indirect Taxes and various other claims filed by other parties upon the Bank not acknowledged as debts.	• Going through the current status of the tax litigations and contingent liabilities;
	• Examining the orders and/or communication received from various Tax Authorities/ Judicial forums and follow up action thereon;
The Banks assessment is supported by the facts of matter, their own judgment, past experience, and advice from legal and independent tax consultants wherever considered necessary.	• Evaluating the merits of the subject matter under consideration with reference to the grounds presented therein and available independent legal / tax advice; and
Accordingly, unexpected adverse outcomes may significantly impact the Banks reported profit and the Balance Sheet.	• Wherever required, reliance is placed on the opinion of legal and tax consultants.
We determined the above area as a Key Audit Matter in view of associated uncertainty relating to the outcome of litigations which requires application of judgment in interpretation of law.
Accordingly, our audit was focused on analysing the facts of subject matter under consideration and judgments/ interpretation of law involved.

Information Other than the Standalone Financial Statements and Auditors Report thereon

5. The Banks Board of Directors is responsible for the other information. The other information comprises the Directors Report, including annexures, Corporate Governance

Report and other reports (but does not include the financial statements and our auditors report thereon). Our opinion on the Standalone Financial Statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

6. The Banks Board of Directors is responsible with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the applicable Accounting Standards, and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the Reserve Bank of India (‘RBI) from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating the effectively accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Financial Statements, management is responsible for assessing the Banks ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

Auditors Responsibilities for the Audit of the Standalone Financial Statements

7. Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions thatmaycastsignificantdoubt on the banks ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the bank to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of the misstatements in the standalone financial statements that, individually or aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be quantitative materiality and qualitative influenced. factors in (i) planning of the scope of our audit work and evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatement in the financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the significantaudit findings, including and in internal control that we identify anysignificant during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matters

of 1629 8. We did not audit the financial

(number) branches and other offices, 1 foreign branch and

1 International Banking Unit situated at GIFT City included in the standalone financial statements of the Bank whose financial statements / financial information reflect total assets of Rs. 2,74,666.07 crores as at 31^st March 2024 and total revenue of Rs. 19,064.58 crores for the year ended on that date, as considered in the standalone financial statements. These branches and other offices and foreign branches cover 22.61% of advances, 26.43% of deposits and 31.10% of non-performing assets as at 31^st March 2024 and 15.85% of revenue for the year ended 31^st March 2024. The financial statements / information of these branches has been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of branches, is based solely on the report of such branch auditors.

9. The Standalone Financial results of the Bank for the previous year ended 31^st March, 2023 were audited by the joint auditors, expressedthree of them are predecessor audit firms unmodified opinion on such financial results vide report dated

May 19, 2023.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

10. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with Section 29 of the Banking Regulation Act, 1949;

11. Subject to the limitations of the audit indicated in paragraphs 8 and 9 above and as required by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, and subject also to the limitations of disclosure required therein, we report that:

a. We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit and have found them to be satisfactory; b. The transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and c. The returns received from the offices and branches of the

Bank have been found adequate for the purposes of our audit.

12. As required by letter No. DOS. ARG. No. 6270/08.91.001/

- 2019-20 dated 17th March 2020 on "Appointment of Statutory Central Auditors (SCAs) in Public Sector Banks – Reporting obligations for SCAs from FY 2019-20", read with subsequent communication dated 19 May 2020 issued by the RBI, we further report on the matters specified in paragraph 2 of the aforesaid letter as under: a. In our opinion, the aforesaid Standalone Financial Statements comply with the applicable Accounting Standards issued by ICAI, to the extent they are not inconsistent with the accounting policies prescribed by the RBI. b. There are no observations or comments on financial transactions or matters which have any adverse effect on the functioning of the Bank.

c. As the Bank is not registered under the Companies Act,

2013 the disqualification from being a director of the bank under sub-section (2) of section 164 of the Companies Act, 2013 do not apply to the Bank. d. There are no qualifications, reservations or adverse remarks relating to the maintenance of accounts and other matters connected therewith.

e. Our audit report on the adequacy and operating effectivenessof the Banks internal financial controls over financial reporting is given in Annexure A to this report. Our report expresses an unmodified opinion on the Banks internal financial controls over financial reporting as at 31 March 2024.

13. We further report that:

a. In our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us; b. the Balance Sheet, the Profit and Loss Account and the

Statement of Cash Flows dealt with by this report are in agreement with the books of account and with the returns received from the branches not visited by us; c. the reports on the accounts of the branch offices audited by branch auditors of the Bank under section 29 of the Banking Regulation Act, 1949 have been sent to us and have been properly dealt with by us in preparing this report; and

d. In our opinion, the Balance Sheet, the Profit and Loss Account and the Statement of Cash Flows comply with the applicable accounting standards, to the extent they are not inconsistent with the accounting policies prescribed by RBI.

ANNEXURE "A" TO THE INDEPENDENT AUDITORS REPORT

(Referred to in paragraph 12 (e) under ‘Report on Other Legal and Regulatory Requirements section of our report of even date)

Report on the Internal Financial Controls over Financial Reporting as required by the Reserve Bank of India (the "RBI") Letter DOS.ARG. No.6270/08.91.001/2019-20 dated March 17, 2020 (as amended) (the "RBI communication")

We have audited the internal financial controls over financial reporting of Punjab National Bank ("the Bank") as of 31 March, 2024 in conjunction with our audit of the Standalone Financial Statements of the Bank for the year ended on that date which includes internal financial controls over financial reporting of the

Banks branches.

Managements Responsibility for Internal Financial Controls

The Banks management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the Banks policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Banking Regulation Act, 1949 and the circulars and guidelines issued by the Reserve Bank of India.

Auditors Responsibility

Our responsibility is to express an opinion on the Banks internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting ("the Guidance Note") issued by the Institute of Chartered Accountants of India ("the ICAI") and the Standards on Auditing (SAs) issued by the ICAI, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting were established and maintained and if such controlsoperatedeffectivelyin all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained and the audit evidence obtained by the branch auditors, in terms of their reports referred to in the Other Mattersparagraphbelow,issufficient and appropriate to provide a basis for our audit opinion on the Banks internal financial controls over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Banks internal financial controls over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Banks internal financial controls over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Bank; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Bank are being made only in accordance with authorizations of management and directors of the Bank; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Banks assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial controls over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, and to the best of our information and according to the explanations given to us and based on the consideration of the reports of the branch auditors referred to in the Other Matters paragraph below, the Bank has, in all material respects, adequate internal financial controls over financial reporting that were 31 March, 2024, based on the criteria operatingeffectively for internal financial control over financial reporting established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

Other Matters

Our aforesaid report in so far as it relates to the operating effectiveness of internal financial controls over financial reporting of 1631 branches/offices is based on the corresponding reports of the respective branch auditors of those branches.

Our opinion is not modified in respect of this matter.