Punjab & Sind Bank Directors Report

The Board of Directors has the pleasure of presenting the Annual Report of the Bank together with the Balance Sheet as on 31^st March 2023 and the Profit and Loss Account for the year ended 31^st March 2023.

MANAGEMENT DISCUSSION AND ANALYSIS

a. Global Economic Outlook:

The IMFs World Economic Outlook April 2023, has projected a decline in global economic growth from 3.4% in 2022 to 2.8% in 2023, with the recent financial sector turmoil, persistently high inflation, the ongoing conflict in Ukraine and the pandemics side effects contributing to the downward projection.

As per IMF, Global trade has also been impacted by moderating growth and supply chain disruptions, with an anticipated decrease in trade volume from 5.1% in 2022 to 2.4% in 2023 before a slight improvement to 3.5% in 2024.

The emergence of stress in financial markets has complicated the task of central banks, particularly as inflation remains above target. The normalization process of Central Banks to reduce their balance sheets may pose challenges for sovereign debt markets, which will have to be absorbed by private investors.

b. Domestic Economic Outlook:

Indias GDP Growth rebounded to 9.1% in 2021-22 from a contraction of 5.8% in 2020-21. Steps initiated by the Government, Central bank, and regulator helped in the speedy recovery of the economy.

Domestic economic activity remains resilient, on the back of consecutive years of strong agricultural production, a post-pandemic rebound in contact-intensive services, buoyant growth in bank credit, a healthy banking and financial system, and the Governments capex push. The domestic economy registered a growth of 7.2 % in FY 2022-23.

Going ahead, the economic activity would be supported by improving rural demand, the Governments thrust on infrastructure spending, revival in corporate investment, healthy bank credit, and moderating commodity prices. Headwinds from prolonged geopolitical tensions, tighter global financial conditions, global financial market volatility, and slowing external demand are the key risks to the growth outlook. RBI in its April2023 monetary policy projected GDP growth of 6.5% for FY 2023-24.

c. Banking Sector:

Recent Global Banking Events and Impact on Indian Banking: The year 2023 has witnessed major banking crises in advanced economies of the world. The crisis varies from reporting of Material Weakness in internal control of Credit Suisse to the run on the bank happening in Signature Bank on account of concentrated and unsecured bulk deposits. However, on April 28, Federal Reserve released a detailed critical report where FED accepted weaknesses in its own regulation and supervision and took primary responsibility for the closure of Silicon Valley Bank.

The Silicon Valley Bank classified most of its investments into HTM category where the legal accounfing treatment essenfially smoothers the losses as the assets are actually "Held fill Maturity". However, when Federal Reserve embarked on its program of rate hikes to curtail inflafion, the bond prices of longer durafion SVBs portfolio fell rapidly.

d. Indian Banking Scenario:

In India, the RBI has already advised banks to report Mark to Market Losses on their HTM portfolio on a quarterly basis under the Interest Rate Risk on Banking Book (IRRBB). Also, Accounfing Standards in India requires immediate recognifion of loss on account of shifting of securities into P&L.

With lower magnitude of rate increase in India and with lower inherent Price value of a basis point (PVBP) of debt instruments as compared to developed economies, Indian fixed income portfolios have comparafively fared well in the rising interest rate environment. Nevertheless, it should be learned as a lesson to vigilantly monitor interest rate risk in so called MTM protected banking book exposure.

In addifion to the above, Indias banking sector is well capitalized and well-regulated. The Indian banking system has remained resilient over the years and has not been adversely affected by the recent sparks of financial instability seen in some advanced economies.

Indian Banks with their robust fundamentals and risk management system, diversified deposits & asset base and robust regulatory framework can withstand any global financial turmoil.

Bank credit rose by 15 % year-on-year (YoY) in FY22-23, against 9.6 % YoY in FY21-22 as per RBI WSS report. SCBs credit growth is highest since 2011-12, when it was 19.3 %. Bank deposits expanded 9.58 % YoY in FY23, against 8.9 % YoY growth seen in the previous financial year (FY2021-22).

SCBs raised Rs 15.78 trillion through deposits in FY2022-23, compared to Rs 13.51 trillion raised in FY2021-22. The credit in absolute terms rose to Rs 17.83 trillion in FY2022-23, up from Rs 10.43 trillion in FY2021-22.

Credit growth is expected to be moderate in FY2023-24 due to global slowdown.

Source: www.rbi.org.in,https://www.imf.org

Working Results:

Highlights of Banks financial performance is given below:

Total business of the Bank increased by 10.50% reached at Rs.190647.22 crore as on 31.03.2023, from Rs.172524.10 crore as on 31.03.2022.

CASA deposits increased by 6.67% on Y-o-Y and stood at Rs.36833.11 crore as on 31.03.2023, as compared to Rs. 34528.42 crore as on 31.03.2022.

Total deposits of the Bank stood at Rs.109665.49 crore as on 31.03.2023 as compared to Rs.102137.01

crore as on 31.03.2022. The average cost of deposits of the bank stood at 4.53% (FY 2022-23) as compared to 4.28% (FY 2021-22) in the previous year.

Banks Advances registered a growth of 15.05% from Rs.70387.09 crore as on 31.03.2022 to Rs. 80981.73 crore as on 31.03.2023. The average yield on Advances stood at 7.67% (FY 2022-23) as compared to 7.20% (FY 2021-22) during the last year.

Total Priority Sector Advances increased from Rs.31178 Crore (50.20% of ANBC) as on 31.03.2022 to Rs.32795 crore (54.99 % of ANBC) as on 31.03.2023, registering a growth of 5.18%.

Retail lending portfolio of the Bank grew to Rs.16437 crore as on 31.03.2023 and registered a growth of 40.04 % over the previous year (Rs.11737 crore).

The percentage of Retail credit (Rs.16437 crore) to Gross Advances (Rs.81545.64 crore) was 20.15% as on 31.03.2023 compared to 16.68% as on 31.03.2022.

MSME Credit grew by 14.10% from Rs.13021 crore as on 31.03.2022 to Rs. 14857 crore as on 31.03.2023. The share of MSME Credit to total Advances was 18.35% as on 31.03.2023.

Financial Parameters:

Operating profit stood at Rs.1449.94 crore as on 31.03.2023 against Rs.1330.09 crore as on 31.03.2022.

Net profit stood at Rs.1313.03 crore as on 31.03.2023 as compared to a Net Profit of Rs.1039.05 crore as on 31.03.2022.

Return on Assets (ROA) stood at 0.98% (FY 2022-23) as compared to that at 0.85 % (FY 2021-22).

The Net Worth of the Bank stood at Rs.6785.94 crore on 31.03.2023 as compared to Rs.5051.90 crore as on 31.03.2022.

Capital Adequacy Ratio (Basel III) of the Bank is 17.10% as on 31.03.2023 against the minimum stipulated requirement of 11.50%.

Gross NPAs of the Bank is Rs.5648.21 crore (6.97%) as on 31.03.2023 as compared to Rs.8564.82 crore (12.17%) as on 31.03.2022.

Net NPAs of the Bank is Rs.1411.50 crore as on 31.03.2023 as compared to Rs. 1742.27 crore as on 31.03.2022.

Net NPA percentage improved to 1.84% as on 31.03.2023 from 2.74% as on 31.03.2022.

The Financial performance of the Bank for the year 2022-23 is summarized below:

(Rs. Crore)

Particulars	FY 2022-23
Net Interest Income	2973.38
Non-Interest Income	939.96
Operating Expenses	2463.40
Operating Profit	1449.94
Provisions / Contingencies	136.91
Net Profit	1313.03
Earnings per share (Rs.)	1.94
Book Value per share (Rs.)	10.01

Key Financial Ratios for the year 2022-23 are as under:

(Percentage - %)

Particulars	FY 2022-23
Yield on Advances	7.67
Yield on Investments	6.63
Cost of Deposits	4.53
Net Interest Margin	2.91
Cost to Income Ratio	62.95

Capital and Reserves:

The net worth of the Bank stood at Rs.6785.94 crore as on 31.03.2023 as compared to Rs.5051.90 crore as on 31.03.2022

Capital Adequacy:

As per the Basel III framework, the Banks Capital Adequacy Ratio is 17.10% which is higher than the regulatory requirement of 11.50%

Details of Capital Adequacy (BASEL III) are:

(Rs. Crore)

Particulars	BASEL - III
	31.03.2022		31.03.2023
CET1CRAR	6307	12.77%	7990	14.32%
AT1 CRAR	1000	2.03%	--	--
TIER I Capital	7307	14.80%	7990	14.32%
TIER II Capital	1849	3.74%	1553	2.78%
Total Capital	9156	18.54%	9543	17.10%
Risk Weighted Assets	49381	--	55815	--

Business Initiatives:

During the current financial year, the Bank has implemented various initiatives to enhance customer convenience and boost its competitive edge. Some of the important among them are:

• The Bank has launched PSB SBI Co-Branded credit card to start the credit card business.

• Bajaj Life Insurance Co Ltd. has been selected as new business partner for life insurance business

• Aditya Birla Health Insurance Co. Ltd. has been selected as a standalone health insurance partner to procure health insurance business.

• Rationalization of the Savings Bank interest rate and Service Charges of the Bank.

• The Bank on-boarded to the Account Aggregator ecosystem.

• Introduced specialized mid-corporate branches.

• Created a new Field General Manager Office in Mumbai to tap the Mid-corporate and Corporate business.

• Expanded the Banks branch network by opening 28 new branches across India.

• Implemented a new CTS solution for all three grids.

• Integrated Contact Centre with LOS.

• Implemented the Con-Current Audit Portal.

• Implemented the Compliance Risk Matrix Portal.

• API Integration of KCC Accounts with the Finance Ministry for KCC Subvention Scheme.

To offer a full range of services to customers, the Bank has added the following products and services during the year to its existing bouquet:-

• Introduced a special deposit product (PSB MCC i-shield salary product) for employees of the Municipal Corporation, Chandigarh.

• Introduced the opening of savings and term deposit accounts through online mode.

• Added facility to generate TDS Certificate, Interest Certificate for deposits, Interest Certificate for loans, and accounts Mini-statement through Digi-Locker.

• Started ATM Card Green Pin generation through CBS.

• Introduced SMS Alert for change/deletion of mobile number in CBS.

• The following facilities are now made available in the PSB UnIC app:

Open an Instant online Savings Account through PSB UnIC App.

Apply for a Pre-Approved Personal Loan.

Apply for Digi Loan - Housing, Vehicle, Personal, KCC, Mudra etc. on PSB UnIC.

Registration for Financial Inclusion & Jan-Dhan Accounts on PSB UnIC.

Open Digi fixed deposits & Digi recurring deposits through PSB UnIC to avail additional rate of interest on FD/RD.

The Public Fund Management System (PFMS) is live on PSB UnIC.

PSB UnIC is now available in 12 Languages.

PSB UnIC app has been enabled with an additional security feature to scan the vulnerabilities in the customers device.

Awards & Achievements:

The Bank has been awarded with:

Top Improver Bank in EASE Reforms Index 5.0 for Q2 FY 2022-23.

0 3rd Top Performing Bank in Theme 4 i.e. collaboratively and Development focused banking under EASE 5.0 as on 30.09.2022.

Rajbhasha Shield competition from Delhi Bank TOLIC for best implementation of Official Language Policy.

Third prize in the category of Hindi e-magazine by Delhi Bank Town Official Language Implementation Committee for quarterly e-magazine Rajdeep.

Directors Responsibility Statement:

The Directors confirm that in the preparafion of the annual accounts for the year ended March 31, 2023:

a) The applicable accounfing standards have been followed in the preparafion of the annual accounts along with proper explanafion relafing to material departures if any.

b) The accounfing policies framed in accordance with the guidelines of the Reserve Bank of India were consistently applied. Reasonable and prudent judgments and esfimates were made to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit and loss of the Bank for the year ended March 31, 2023.

c) Proper and sufficient care for the maintenance of adequate accounfing records in accordance with the provisions of applicable laws governing banks in India for safeguarding the assets of the Bank and for prevenfing and detecfing fraud and other irregularifies.

d) Annual accounts have been prepared on a going concern basis.

e) Internal financial controls system to be followed by the Bank were laid down and that such internal financial controls are adequate and were operating effecfively,

f) Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operafing effecfively.