MIRA INFORM REPORT

Report Date :

30.09.2008

IDENTIFICATION DETAILS

Name :	PUNJAB NATIONAL BANK
Registered Office :	7 Bhikhaji Cama Place, New Delhi – 110 066
Country :	India
Financials (as on) :	31.03.2008
Year of Establishment :	1895
Legal Form :	Subject is a Government of India Undertaking Bank.
Line of Business :	Banking activities

RATING & COMMENTS

MIRA’s Rating :

Aa

RATING		STATUS	PROPOSED CREDIT LINE
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large

Maximum Credit Limit :	Large
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established and reputed Nationalised Bank. Fundamentals are strong and healthy. Payments are reported as correct and as per commitments. The bank can be considered good for any normal business dealings. It can be regarded as a promising business partner in medium to long-run.

LOCATIONS

Registered Office :	7 Bhikhaji Cama Place, New Delhi – 110 066, INDIA
Tel. No.:	91-11-26102303 / 6869 / 8379 / 2619 6353 / 26108205 / 26196487
Fax No.:	91-11-26876456 / 26108741 / 26160149 / 26196462
E-Mail :	board@pnb.co.in
Website :	http://www.pnbindia.com
Head Office :	5, Parliament Street, New Delhi – 11 001, India
Over 4100 offices spread across the country.

DIRECTORS

Name :	Mr. K C Chakrabarty
Designation :	Chairman and Managing Director
Name :	Mr. K Raghuraman
Designation :	Executive Director
Name :	Mr. Rakesh Singh
Designation :	Nominee (Govt)
Name :	Mr. L M Fonseca
Designation :	Nominee (RBI)
Name :	Mr. S R Khurana
Designation :	Director
Name :	Mr. P K Nayar
Designation :	Director (Officer Employee)
Name :	Mr. Mohan Lal Bagga
Designation :	Director (Workman Employee)
Name :	Mr. Harsh Mahajan
Designation :	Director (Shareholders)
Name :	Mr. Mohanjit Singh
Designation :	Director
Name :	Mr. Prakash Agarwal
Designation :	Director
Name :	Mr. Jag Mohan Garg
Designation :	Executive Director and Wholetime Director
Name :	Mrs. Ranveet Kaur
Designation :	Director
Name :	Mr. Mushtaq A Antulay
Designation :	Director
Name :	Mr. Gautam P Khandelwal
Designation :	Director

KEY EXECUTIVES

Name :	Mr. Ramesh Kumar Kochar
Designation :	Company Secretary
Name :	Mr. C.P. Swarnkar
Designation :	Chief General Manager
Name :	Mr. V. Nagaraja
Designation :	Chief General Manager
Name :	Mr. V. K. Nagar
Designation :	Chief General Manager
Name :	Mr. P.L. Madan
Designation :	General Managers
Name :	Mr. K.G. Sathyasingan
Designation :	General Managers
Name :	Mr. B. M. Mittal
Designation :	General Managers
Name :	Mr. D.L. Rawal
Designation :	General Managers
Name :	Mr. A.D. Paliwal
Designation :	General Managers
Name :	Mr. U.S. Bhargava
Designation :	General Managers
Name :	Mr. A. Balasubramanian
Designation :	General Managers
Name :	Mr. Harwant Singh
Designation :	General Managers
Name :	Mr. Arun Kaul
Designation :	General Managers
Name :	Mr. R.I.S. Sidhu
Designation :	General Managers
Name :	Mr. V.R. Choudary
Designation :	General Managers
Name :	Mr. L.P. Agarwal
Designation :	General Managers
Name :	Mr. Ranjan Dhawan
Designation :	General Managers
Name :	Mr. I.D. Singh
Designation :	General Managers
Name :	Mr. P.K. Mitra
Designation :	General Managers
Name :	Mr. B.P. Chopra
Designation :	General Managers
Name :	Mr. K.S. Bajwa
Designation :	General Managers
Name :	Mr. V.K. Sood
Designation :	General Managers
Name :	S. Ranganathan
Designation :	General Managers
Name :	Mr. Y.N. Mathur
Designation :	General Managers
Name :	Mr. R K Gupta
Designation :	General Managers
Name :	Mr. V K Gupta
Designation :	General Managers
Name :	Mr. S K Roy
Designation :	General Managers
Name :	Mr. G K Sawhney
Designation :	General Managers
Name :	Mr. N C Jain
Designation :	General Managers
Name :	Mr. S P Singh
Designation :	General Managers
Name :	Mr. Jagat Ram
Designation :	General Managers
Name :	Mr. B C Nigam
Designation :	General Managers
Name :	Mr. S S Bhandari
Designation :	General Managers
Name :	Mrs. Sudesha Sharma
Designation :	General Managers
Name :	Mr. N K Mehta
Designation :	General Managers
Name :	Mr. K G Sharma
Designation :	General Managers
Name :	Mr. V K Khanna
Designation :	General Managers
Name :	Mr. A K Gupta
Designation :	General Managers
Name :	Mr. R K Dubey
Designation :	General Managers
Name :	Ms. Archana S Bhargava
Designation :	General Managers
Name :	Mr. G Banerjee
Designation :	General Managers
Name :	Mr. V M Sharma
Designation :	General Managers
Name :	Mr. K Bhaskar
Designation :	General Managers

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

(As on 31.03.2008)

Shareholders Category	Percentage of Holding
President of India	57.80
FIIs/NRIs/OCBs	20.07
Banks/Financial Institutions/Insurance Companies	10.29
Mutual Funds	6.36
Domestic Companies/Trusts	0.76
Indian Public/Resident Individuals	4.72
Total	100.00

No. of shareholders as on 31.03.2008 227792

Nominal Value of each share Rs.10/-

BUSINESS DETAILS

Line of Business :

Banking activities

GENERAL INFORMATION

No. of Employees :	56025
Bankers :	Reserve Bank of India

Banking Relations :	Good
Auditors :	· Kalani and Company · Surrender K. Jain and Company · Mookherjee Biswas and Pathak · M. C. Bhandari and Company · P. K. Chopra and Company · G. P. Chartered Accountants · Ramanlal G Shah And Company · B.K. Ramadhyani And Company · V Sankar Aiyer and Company · N C Rajagopal and Company · Gupta and Gupta · P Jain and Company
Associates :	· Everest Bank Limited · Principal PNB Asset Management Company Private Limited · Principal trustee Company Private Limited · PNB Principal Financial Planners Private Limited · PNB Principal Insurance Broking Private Limited · UTI Asset Management Company Private Limited · UTI Trustee Company Private Limited · Asset Care Enterprises Limited · Principal PNB life Insurance Company Limited (Operation not started) · Madhya Bihar Gramin Bank, Patna · Haryana Gramin Bank, Rohtak · Himachal Gramin Bank, Mandi · Punjab Gramin Bank, Kapurthala · Rajasthan Gramin Bank, Alwar · Sarva UP Gramin Bank, Meerut
Subsidiaries :	· PNB Gilts Limited · PNB Housing Finance Limited · Punjab National Bank (International) Limited, UK · PNB Capital Services Limited · PNB Asset Management Company Limited

CAPITAL STRUCTURE

(As on 31.03.2008)

Authorised Capital :

No. of Shares	Type	Value	Amount
1500000000	Equity Shares	Rs.10 Each	Rs.15000.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
315302500	Equity Shares (includes 182241300 Equity Shares of Rs. 10 Each held by Central Government)	Rs.10 Each	Rs.3153.025 millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS	31.03.2008	31.03.2007	31.03.2006
Capital	3153.025	3153.025	3153.000
Reserves and Surplus	120030.439	101201.574	90610.600
Deposits	1664572.260	1398596.711	1196849.200
Borrowings	54465.596	19488.566	66648.700
Other Liabilities & Provisions	147982.286	101785.089	96236.400
TOTAL	1990203.606	1624224.965	1453497.900
Cash & Balances with RBI	152581.517	123720.292	233945.500
Balances with Banks & money at Call & Short Notice	35725.721	32734.896	13971.400
Investments	539917.050	451898.360	410553.100
Advances	1195015.662	965965.186	746273.700
Fixed Assets	23155.219	10098.255	10302.300
Other Assets	43808.437	39807.976	38451.900
TOTAL	1990203.606	1624224.965	1453497.900

PROFIT & LOSS ACCOUNT

PARTICULARS	31.03.2008	31.03.2007	31.03.2006
Interest Earned	142650.176	112361.434	95841.500
Other Income	19975.606	17303.995	19010.000
TOTAL	162625.782	129665.429	114851.500
Interest expended	87308.619	60229.067	49173.900
Operating Expenses	35254.771	33262.310	33007.000
Provisions & Contingencies	19574.761	20773.210	18277.500
TOTAL	142138.151	114264.587	100458.400
Net Profit for the year	20487.631	15400.800	14393.100
Prior Year Adjustments	0.000	(132.700)	00.000
Profit brought forward	155.173	1834.900	00.000

KEY RATIOS

PARTICULARS	31.03.2008	31.03.2007	31.03.2006
Credit Deposit Ratio	70.55	65.97	60.6
Investment Deposit Ratio	32.38	33.23	41.16
Cash Deposit Ratio	9.02	13.78	14.74
Interest Expended/Interest Earned	61.2	53.6	51.31
Other Income/Total Income	12.44	14.68	16.55
Operating Expense/Total Income	21.82	26.79	28.74
Interest Income/Total Funds	7.93	7.31	7.07
Interest Expended /Total Funds	4.85	3.92	3.63
Net Interest Income/Total Funds	3.08	3.39	3.44
Non Interest Income/Total Funds	1.13	1.26	1.4
Operating Expense/Total Income	1.98	2.3	2.44
Profit Before Provisions/Total Funds	2.23	2.52	2.41
Net Profit/Total Funds	1.14	1.00	1.06
Return On Net Worth(%)	19.58	18.68	17.01

LOCAL AGENCY FURTHER INFORMATION

HISTORY

Subject established in the year 1895 at Lahore, undivided India, has the distinction of being the first Indian bank to have been started solely with Indian capital. The bank was nationalised in July 1969 along with 13 other banks. From its modest beginning, the bank has grown in size and stature to become a front-line banking institution in India at present. With its presence virtually in all the important centres of the country, Subject offers a wide variety of banking services which include corporate and personal banking, industrial finance, agricultural finance, financing of trade and international banking. Among the clients of the Bank are Indian conglomerates, medium and small industrial units, exporters, non-resident Indians and multinational companies. 

A package was developed for corporate customers for fast remittance of funds from different up-country branches to the controlling office during the year 1996. The Bank has introduced a scheme for providing finance against mortgage of immovable property in the year 2000. It commenced its Gold Business in the form of Gold Import Scheme in September of the same year 2000. An International Co-branded Credit Card of Subject and Hongkong and Shanghai Banking Corporation (HSBC) was launched in New Delhi in November of the year 2000. The scheme offers international quality gold for sale to the Bank's clientele consisting of exporters and others at competitive prices. Subject came out with its first Initial public offer (IPO) in March 2002 for 5,30,60,700 equity shares of Rs 10 each. During the year 2002, the bank started its branch in M.G. Road, Bangalore named as Mid-Corporate Branch (MCD) to provide its corporate clients with a credit limit of Rs 35 millions and above. Subject made joint venture with Infosys for the implementation of a Centralised Banking Solution for it. The Bank received the Best Bank Award' for excellence in banking technology. Subject tied up with Cisco Systems for networking 3,870 branches as part of its Rs 1500 Subject plan.  

Subject has taken over Kozhikode-based Nedungadi Bank Limited (NBL) in February of the year 2003. The Bank has entered into an alliance with New India Assurance for selling its general insurance products in the same year 2003. In June of the year 2003, Subject made Memorandum of Understanding (MoU) with Principal Financial Services Inc. (USA) and Vijaya Bank for joint venture partnership in Life Insurance, Pensions and Asset Managements (MF) business. The Bank has formed a strategic alliance with Infrastructure Leasing and Financial Services Ltd (IL and FS) to set up a private equity fund for investing in domestic companies. Entered an agreement with Oriental Bank of Commerce, Indian Bank, UTI Bank and Global Trust Bank for sharing ATMs spread across the country. In the year 2004, Subject acquired the assets of Hindustan Transmission Product Limited (HTPL) under Sarfaesi. The Bank had signed a corporate agency agreement with Export Credit Guarantee Corporation of India Limited (ECGC) for marketing ECGC's export credit insurance products through the network of the bank's branches. A MoU was signed for the deployment of various IT-related solutions between the bank and Intel. Subject and ICICI Bank had signed a MoU for ATM network sharing. Subject implements Loans and Advances Data Desk for Evaluations and Reports, (LADDER) system for rationalisation of returns, asset classification and provisioning, credit monitoring and NPA management.

The Bank has mandated the project worth of Rs 50-100 millions to Tata Consultancy Services (TCS) for implement human capital management and payroll solution in the year 2004. The Bank branch at Kabul, Afghanistan has commenced soft opening on July 26th of 2004. Subject has launched its corporate Internet banking facility during November of the year 2004. Subject has coveted as Best IT User in Banking and Financial Services Industry - 2004 - by NASSCOM in partnership with Economic Times. The Bank had unveiled ATM at Edappal in the year of 2005. Subject had adjudged with Golden Peacock Award - for Excellence in Corporate Governance - 2005 by Institute of Directors. During 2005-06, the bank revamped its organisational structure. Seven new Zonal Offices were created. The Bank received 'Best IT Team of the Year Award' - at the IDRBT Banking Technology awards for the year 2005-06.

During the year 2006, Subject had tied up with MasterCard International to launch a signature-based debit card and opened one new branch in Uttaranchal. Also during the same year of 2006, the bank has made tie up with Indian Airlines for online booking of air tickets and ties up with IDBI Capital. Subject had entered into MoU with India Infrastructure Finance Company (IIFC) in October of the year 2007 with an aim to extend its cooperation and support to IIFC in areas of creating a deal flow of infrastructure projects. RBI rejected Punjab National Bank's proposal to float a credit card joint venture with insurer American International Group Inc. (AIG) and Venture Infotek Global Private Limited, a third-party processor for credit card companies.

The Bank had commenced commercial banking operations in Hong Kong on 17th December 2007 and made a formal inauguration on 30th of January 2008. As on June 2008, Subject has entered into MoU with ILFS Cluster Development Initiative Limited in order to provide an impetus to financing of various industrial infrastructure projects in the country.

Subject aims to expand its base in the entire northern India region for providing banking facilities at the doorsteps of the peoples. The Bank is serving over 35 millions customers through 4540 Offices including 421 extension counters - largest amongst Nationalized Banks. Subject is moving with the vision, to be India's most profitable Universal Bank. Also wants to profitably serve the banking and the financial services needs of the nation everyday and everywhere.

KEY FINANCIAL HIGHLIGHTS 

Key highlights of the Bank's performance in the year 2007-08 include the following

Positive Earnings Momentum 

· Net Profit of Rs 20487.600 millions; a rise of 33.0 per cent.

· Operating Profit crossed the landmark level of Rs 40000 millions to reach Rs 40062.400 millions as compared to Rs 36174.000 millions in the previous year.

· Cost to income ratio of 46.8 per cent; an improvement of 109 basis points (bps).

· Net Interest margin stood at 3.58 percent.

· Return on Assets rose by 12 bps to 1 .15 percent.  

· CRAR improved to 12.96 percent as at the end of March 2008, compared to 12.29 percent last year. This CRAB was achieved even after providing for additional capital towards (i) compliance with revised AS-15 ( relating to accounting for retirement benefits) ; (ll) compliance with Basel fl-the capital has also been provided for operational risk, besides credit and market risks and (iii) starting the Bank's subsidiary at London, called PNBIL. 

The Bank has successfully migrated to Basel II accord as at March 31, 2008. The CRAB, as per Basel II works out to 13.46 percent. 

To shore up the capital base, the Bank raised Hybrid Perpetual Tier-1 bonds (Rs 11000 millions) and Upper Tier 11 bonds (Rs 1,6100 millions) during the year 2007-08. 

· Ratio of Gross NPAs to Gross advances was 2.74 per cent; showing an improvement of 71 bps over the previous year. 

· Ratio of net NPAs to net advances stood at 0.64 per cent; an improvement of 12 bps over the previous year. 

· NPA Coverage ratio stood at 77.3 percent as at the end of March 2008. 

· Return on Equity of 19 percent; an improvement of 381 bps over the previous year. 

SIGNIFICANT BALANCE SHEET STRENGTH 

· Capital and Reserves increased to Rs 123180 millions; an increase of 18.0 per cent. 

· Total business stood at Rs 2859590 millions; registering an increase of 20.9 per cent. 

· Deposits amounted to Rs 1664570 millions; showing a growth of 19.0 per cent. 

· Low cost deposits comprising savings and current deposits formed 42.99 per cent of total deposits. 

·  Advances grew by 23.7 per cent to Rs 1195020 millions. 

· Retail Advances (excluding traders) rose by 18.5 percent to Rs 188340 millions. 

· Priority Sector Credit at Rs 434120 millions was 44.11 percentage of Adjusted Net Bank Credit (ANBC) and continues to be above the national goal of 40 per cent. 

· Agricultural credit at Rs 199470 millions was 18.94 percent of ANBC and continues to be higher than the national goal of 18 percent. 

INCOME AND EXPENDITURE ANALYSIS 

· Total income of the Bank increased by 25.4 percent to reach a level of Rs162620 millions. 

· Interest Income rose by 27.0 percent to Rs 142650 millions.

· Net Interest Income increased by 6.2 percent to Rs 55340 millions. 

· Non-Interest income grew by 15.4 percent to Rs 19970 millions, accounting for 12.3 percent of total income of the Bank. Commission, Exchange and Brokerage (CEB) increased to Rs 11060 millions, registering a growth of 14 percent. 

· Operating expenses stood at Rs 35250 millions during 200708, showing an increase of 6 percent. 

· Interest Spread stood at 3.11 percent during 2007-08. 

PROFIT ANALYSIS 

· Operating profit of the Bank crossed the landmark level of Rs 40000 millions to reach Rs 40060 millions. 

· Provisions were made at Rs 19570 millions, as compared to Rs 20770 millions made during the last year. 

· Net profit grew by 33 percent to Rs 20490 millions. 

CHANGES IN BOARD OF DIRECTORS 

During the year 2007-08, the following changes took place in the composition of Board of Directors. 

· Dr. K.C. Chakrabarty took over as Chairman and Managing Director on 4.6.2007. 

· Shri J.M. Garg was appointed Executive Director of the Bank on 6.6.2007, thereby increasing the strength of Executive Directors to two. 

· Shri Mushtaq A. Antulay and Shri Gautam P. Khandelwal were nominated as Directors on the Board of the Bank on 27.2.2008 under Section 9(3)(h) of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970. 

· Shri S.C. Gupta ceased to be Chairman and Managing Director w.e.f. 1.6.2007 on attaining the age of superannuation. 

· Shri Mohanjit Singh, Director representing shareholders expired on 21.2.2008. 

The Board welcomes all the new Directors and wishes to place on record the valuable services rendered by Shri S.C. Gupta and Shri Mohanjit Singh. 

ORGANISATIONAL RESTRUCTURING 

While the Bank gained in terms of improved business processes, asset liability management and risk management, the rapid changes in the competitive environment and higher use of technology warranted the need for a more horizontal organizational structure for speedier decision making. Keeping this in view, the Bank removed one tier and adopted 3 tier structure in place of existing 4 tier one. The new 3 tier structure will allow for a leaner, efficient and cost effective system. 

MANAGEMENT DISCUSSION AND ANALYSIS: 

Business Environment: 

Indian economy continued to expand at a robust pace during 2007-08 for the fifth consecutive year, although there was some moderation in the growth momentum during the course of the year. According to the advance estimates released by Central Statistical Organisation in February 2008, the real GDP growth rate moderated to 8.7 percent in 2007-08 from 9.6 percent in 2006-07. The moderation in growth occurred in all the three sectors, viz., agriculture & allied activities, industry and services. 

The 'agricultural and allied sector' which contibutes 17.5 percent of GDP is estimated to decelerate to 2.6 percent in 2007-08 as against 3.8 percent growth in 2006-07. 

Industry, contributing 19.5 percent of GDP and a major driver of growth last year, registered a slower growth of 8.1 percent during 2007-08 as against 11.6 percent last year. The slowdown has mainly been on account of slowdown in the manufacturing sector to 8.6 percent from 12.5 percent last year. Similarly, there was weaker growth in consumer spending, pinched by inflationary pressures and higher borrowing costs. There was a decline in consumer durables production (-1.0 percent) in 2007-08 from 9.2 percent during last year. 

The services sector generating 63 percent of GDP has been the key contributor to growth and continued its rapid growth at 10.6 percent in 2007-08, though marginally lower than last year's 11.2 percent. It was led by trade, hotel, transport and communications sub-sector. The finance, insurance, real estate, and business services sub-sector remained healthy despite a lower growth this year. 

Higher inflationary trend has been a cause of concern. On an annual basis, inflation based on Wholesale Price Index (WPI) stood at 7.4 percent at end-March 2008 as compared to 5.9 percent a year ago. The key drivers of domestic inflation have been primary food articles, mineral product and manufactured product prices apart from the global factors like global hardening of commodity prices and upsurge in capital inflows. 

Gross Domestic Capital Formation (GDCF) at 35.9 percent of GDP and Gross Domestic Savings (GDS) rate at 34.8 percent of GDP in 2006-07, give rise to optimism for sustaining high GDP growth. 

During 2007-08, while merchandise exports recorded a growth of 23.0 percent in US $ terms, imports grew by 27.0 percent on account of non-oil imports (18.7 percent) and oil imports (76.7 percent). The trade deficit at US $ 80.4 bn recorded an increase of 35.5 percent. Foreign exchange reserves rose to US $ 314 billion as on May 16, 2008. The Indian rupee as on April 11, 2008 stood at Rs 39.94 perUS dollar showing an annual appreciation of 7.34 percent. 

During 2007-08, the Sensex after peaking to 21,206 on Jan 10, 2008 ended at 15644 at end-March 2008, thereby registering a growth of 19.7 percent from 13072 at end-March 2007. 

BANKING DEVELOPMENTS 

The overall moderation in real sector activity was reflected in banking developments too. 

· Non-food credit of Scheduled Commercial Banks (SCBs) increased by 22.3 percent, as compared with 28.5 percent last year. 

· The incremental non food credit deposit ratio for the banking system declined to 72.3 percent from 83.2 percent in 2006-07. 

· On a y-o-y basis, credit to services sector recorded the highest growth (28.4 percent), followed by industry (25.9 percent) and agriculture (16.4 percent). On the other hand, personal loans, housing loans and real estate witnessed decelerated growth. 

· Credit to industry constituted 45.2 percent of the total expansion in non food bank credit up to February 2008, followed by services (29.8 percent), personal loans (15.8 percent) and agriculture (9.2 percent). The share of infrastructure in total credit to industry increased from 20.5 percent to 23.1 percent. 

· Aggregate deposits of Scheduled Commercial Banks (SCBs) increased by 22.2 percent (23.8 percent last year). In addition to the mobilisation of deposits, the banking sector's lendable resources were augmented substantially by capital raised through public issues and innovative capital instruments. 

· Movement in interest rates in the domestic financial markets reflected the factors driving changes in liquidity with the banking system during 2007-08. The daily weighted average call rate during March 2008 was much lower at 7.37 percent as compared with 14.10 percent in March 2007. 

· In order to contain inflationary expectations, CRR was hiked by 150 basis points to 7.5 percent during 2007-08. The ceiling on the outstanding amount under the Market Stabilisation Scheme (MSS) was raised on 4 occasions to Rs.2500000 millions. 

INDUSTRY STRUCTURE 

As at end March 2007, Indian banking system consisted of 178 Scheduled Commercial Banks (SCBs) including 28 Public Sector Banks (PSBs), 25 Private Sector Banks, 29 Foreign Banks and 96 Regional Rural Banks (RRBs). Public Sector Banks accounted for 71 percent of business of SCBs. 

As a front-line PSB with the largest network of branches among the nationalized banks, Subject has a strong franchise value and provides a host of financial products and services, both to the retail customer and corporate business. Besides, the Bank has diversified into other areas, which includes insurance business and Gold coins and asset management business. Despite intensified competition, PNB has been able to maintain its market share at around 5 percent. 

DETAILED BUSINESS OVERVIEW 

Business

Domestic Business of the Bank increased to Rs 2858230 millions as on March 31, 2008 registering an absolute accretion of Rs 494210 millions and a growth of 20.9 per cent. Including the business of foreign branches at Kabul and Hong Kong, the Bank's global business amounted to Rs 2859590 millions. 

Resource Mobilisation 

Total deposits of the Bank amounted to Rs 1664570 millions as on March 31, 2008, showing an absolute accretion of Rs 265970 millions and a growth of 19.0 percent over previous year. The share of low cost deposits (current and savings) in total deposits stood at 43 percent. 

Credit Deployment 

The Bank's Advances at the end of March 2008 stood at Rs 1195020 millions, as compared to Rs 965970 millions at the end of March 2007, showing an accretion of Rs 229050 millions and a growth of 23.7 percent. 

To further improve the quality of loan portfolio, the Bank continued its emphasis on effective monitoring, intensive on the job training and making the credit proposal format more objective. To expedite the decision making process for faster credit delivery, the Bank introduced a single point Credit Appraisal System for credit proposals. 

For better monitoring, supervision, tracking and reporting of credit proposals in the Bank, a web-based Online Monitoring and Tracking of Credit Proposal System has also been developed. The system has the feature where next level in the hierarchy can monitor and track the status of the credit proposals.

The Bank has set up a Project Appraisal and Debt Syndication Cell to develop syndication business and to tap fee based income. Besides, the Bank has formulated a scheme for improving liquidity position for sugar mills, as per Govt of India guidelines. The Bank has also entered into an MoU with India Infrastructure Finance Company Ltd (IIFCL) in order to provide an impetus to the financing of infrastructure projects. The two institutions propose to co-operate and complement each other's capabilities in the area of creating a deal flow of infrastructure projects that could be structured along commercially viable lines. 

NPA Management 

The year 2007-08 started with concerns emerging on asset quality, as reflected in the slippages during the previous year. The Bank not only stepped up its follow up & recovery efforts but also contained slippages by gearing up its machinery. By the end of March 2008, the Bank was able to bring the position under control. 

During the year, the Bank opened one Asset Recovery Management Branch (ARMB) and 9 Special Asset Recovery Cells (SARCs) raising the total number of ARMBs and SARCs to 11 and 49, respectively. These specialized branches contributed in a big way towards substantial reduction of NPAs. 

The Bank implemented account-specific resolution strategies coupled with regular monitoring. Special thrust was given to upgradation of NPAs to performing category during the year. Accounts with exposure of Rs 369 crore were upgraded to standard category by implementing the appropriate strategies. Further, compromise route was adopted to resolve 29,993 NPA accounts amounting to Rs 5670 millions. Total cash recoveries in NPA accounts amounted to Rs 10410 millions. 

The Bank has initiated action under SARFAESI Act in majority of eligible accounts, which resulted in recovery of around Rs 500 crore in 6106 accounts. Besides, NPAs amounting to around Rs.244 crore have been sold to ARCS and other Banks/ NBFCs, as per RBI guidelines. 

As a result of the concerted efforts made, the ratio of Gross NPAs to Gross Advances declined to 2.74 percent from 3.45 percent last year. The ratio of net NPAs to net Advances also declined to 0.64 percent from 0.76 percent last year. 

SEGMENT-WISE PERFORMANCE 

Credit to Agriculture 

Credit to agricultural sector increased to Rs 199470 millions and accounted for 18.94 percent of AN BC as on LRF of March 2008, higher than the National Goal of 18%. The Bank has issued 2,58,074 Kisan Credit Cards (KCCs) during 2007-08 taking the cumulative number of KCCs issued to 23.77 lakh since inception. Under Special Agricultural Credit Plan, the Bank disbursed Rs. 121350 millions during 2007-08. During the year, the Bank launched innovative credit scheme for financing farmers growing sugarcane crop in tie-up arrangements with sugar mills as Business Facilitators. The Bank has also signed an MoU with D1 Williamson Magor Bio Fuels Limited and International Tractors Limited for financing Jatropha farmers under contract farming agreement and Channel financing, respectively. 

Besides meeting the credit related requirements of farm sector, the Bank implemented the RBI's guidelines for providing relief and rehabilitation assistance to farmers engaged in poultry business in areas affected by Avian Influenza. Short-term production credit was provided to farmers at 7 percent rate of interest with a 2 percent subvention support from RBI. Further, special emphasis has been given by the Bank to bring oral lessees, tenant farmers and sharecroppers into Bank's fold by encouraging formation of Joint Liability Groups. 

The Bank has also done preliminary work in implementation of the Debt Waiver and Debt Relief Scheme announced by the Hon'ble Finance Minister in the Budget Speech of 2008-09. 

Apart from meeting credit requirements of the farming community through various lending schemes, the Bank laid stress on marketing/dissemination of useful information to the rural community by organizing Kisan Goshthies and formation of Farmers' Clubs. During the year 2007-08, the Bank conducted 5519 Kisan Goshthies wherein 2.48 lakh farmers participated and 167 Farmers' Clubs were formed. Through Kisan Goshthies and also through the Bank's exclusive website, 'www.pnbkrishi.com', the Bank has been creating awareness about its schemes as well as cultivation practices; technical aspects of food grains, cash crops, medicinal/aromatic plants, vegetables, fruits, etc.; daily mandi rates; marketing facilities etc. 

 (i) PNB Farmers' Welfare Trust 

The Bank established PNB Farmers' Welfare Trust in the year 2000 for welfare of the farmers, women and youth in rural areas. Under the aegis of the Trust, eight Farmers' Training Centres (FTCs) are operational at Village Sacha Khera (Haryana), Vidisha (MP), Neemrana (Rajasthan), Shamsher Nagar (Punjab), Saifai (UP), Labhandi (Chhattisgarh), Mehraj (Punjab) and Pillayarpatti (Tamil Nadu). Land has been obtained at Jhalara Patan (Rajasthan) where Trust intends to start 911 Farmers' Training Centre. 

Mobile Van at FTC Sacha Khera is providing off-site training on improved package and practices of agricultural crops and allied activities, soil testing and Jatropha cultivation. In addition, the van is acting as an information kiosk. 

As a major objective of the Farmers' Welfare Trust Scheme, these FTCs have become training ground for the farmers, small traders, agri-businessmen, entrepreneurs, etc. These Centres provide training FREE OF COST. They imparted training to 1,34,646 farmers and youths including 18,900 women till March 2008. Further, during 2007-08, 30 Human Health Check-up Camps and 88 Animal Health Check-up Camps were conducted, in addition to arranging 50 visits to Agricultural Universities/ Colleges/Fairs/Govt. Farms etc. Each FTC has also adopted one village for developing it as a Model Village at a cost of Rs 0.500 million. 

 (ii) PNB Centenary Rural Development Trust 

The Bank has established subject Centenary Rural Development Trust with an objective of assisting rural youth for taking up gainful employment and rural development. Three units under the Trust are working, viz. Soil Testing and Artificial Insemination Centre at Village Matki jharoli (UP), Training Centre for Rural Youth for Self Employment at village Dhudike (Punjab) and PNB Swarojgar Vikas Sansthan for training of unemployed youth at Patna (Bihar). 

At Matki Jharoli Centre, 31,297 soil samples have been analyzed, 7653 animals artificially inseminated and 63,222 diseased animals have been treated till March 2008. Besides, 81 ,211 persons have attended demonstrations on vermi composting and solar energy. At Dhudike Centre, the birth place of Shri Lala Lajpat Rai, training on self employment ventures like repair and maintenance of farm machinery; cutting, tailoring and embroidery; computer courses etc. have been imparted to 555 boys and 526 girls. subject Swarojgar Vikas Sansthan, Patna (Bihar) is a Rural Development and Self Employment Training Institute established on 15.1 .2007 for channelising youth power in wealth creation through entrepreneurship development and imparting knowledge and skill required for taking up self employment ventures. Till March 2008, training has been provided to 378 persons including 330 women by the Institute. 

Micro Credit 

The Bank continued to promote Micro Finance through formation & credit linkage of Self Help Groups which is an effective instrument for increasing the income level and reducing poverty and unemployment. Adequate thrust is being given to financing Tenant Farmers' Groups (TFGs). In addition, the Bank has laid emphasis on capacity building and training of intermediaries, such as NGOs/Volunteer Vahinis and the ultimate beneficiaries. During 2007-08, the Bank contributed Rs 2.275 millions to the corpus formed for providing financial assistance towards infrastructure for the RUDSETI being run by J and K Government. Further, the Board approved a budget of Rs 1.309 millions for recurring expenses of RUDSETI at Distt. Solan, Himachal Pradesh, established in association with Ambuja Cement Foundation. As at end March 2008, the Bank has credit-linked 1,18,952 SHGs, registering a growth of 18.2 percent. 

The Bank was awarded National Award for Excellence in lending to Micro Enterprises. 

Performance Highlights

Net Profit Rs.5120 Millions (Increase by 20.55%)

Total Assets : Rs.2064580 Millions (Increase by 24.88%)

Total Business : Rs.2875040 millions (Increase by 20.67%)

Total Deposits : Rs.1730740 Millions (Increase by 21.36%)

Net Worth : Rs.128250 millions (Increase by 18.11%)

Capital to Risk Asset Ration : 12.96% (Basel II)

Investment Portfolio

· As at Jun’08, the gross investment portfolio was Rs.604210 Millions of this about 80% of portfolio in Government and other approved securities.

· During Q1 FY’09 Bank transferred Rs.21050 millions securities to HTM category, booking a loss of Rs.3280 millions.

· The Bank proactively managed interest rate risk and has de-risked the portfolio to a large extent.

· In respect of SLR securities the AFS portfolio has been reduced from 44% as at Mar’06 to 13% as at Jun’08

· Reduction in duration / modified duration of the AFS portfolio from 4.37 / 4.19 in FY 06 to 1.85 / 1.73 in June’08

Deposits

· Subject accounts for around 5.0% of System;s Deposits.

· Deposits at end Jun’08 grew at 21.36% to Rs.1730740 millions from Rs.1426090 millions at end Jun’07.

· Share of low cost Current and Savings deposits (CASA) in total deposits stood at 41.31% as at Jun’08

· Average Cost of Deposits as on Jun’08 was 5.88%

· Renewed focus being given to increase CASA.

CONTINGENT LIABILITIES

	As on 31.03.2008 (Rs. In Millions)
Claims against the Bank not acknowledged as debts	1683.046
Disputed income tax and interest tax demands under appeals, references etc.	8461.448
Liability for partly paid investments	1.915
Liability on account of outstanding forward exchange contracts	650855.716
Guarantees given on behalf of constituents :
In India	111711.195
Outside India	31004.592
Acceptances, endorsements and other obligations	163444.291
Other items for which the Bank is contingently liable	2352.845
Total	969515.048

WEB DETAILS

Profile

With its presence virtually in all the important centres of the country, Subject offers a wide variety of banking services which include corporate and personal banking, industrial finance, agricultural finance, financing of trade and international banking. Among the clients of the Bank are Indian conglomerates, medium and small industrial units, exporters, non-resident Indians and multinational companies. The large presence and vast resource base have helped the Bank to build strong links with trade and industry.

Subject is serving over 35 millions customers through 4540 Offices including 421 extension counters - largest amongst Nationalized Banks.

Subject with 112 year tradition of sound and prudent banking is one among 300 global companies and seven Indian companies which are expected to emerge as challengers to World’s leading blue chip companies. While among top 1000 world banks, “The Banker”, the leading magazine in London, has placed subject at the 248th position, the bank features at 1308th position among Forbe’s Global 2000 list of global giants and fast growing companies.

At the same time, the bank has been conscious of its social responsibilities by financing agriculture and allied activities and small scale industries (SSI). Considering the importance of small scale industries bank has established 31 specialised branches to finance exclusively such industries.

Strong correspondent banking relationship which subject maintains with over 200 leading international banks all over the world enhances its capabilities to handle transactions world-wide. Besides, bank has Rupee Drawing Arrangements with 15 exchange companies in the Gulf and one in Singapore. Bank is a member of the SWIFT and over 150 branches of the bank are connected through its computer-based terminal at Mumbai. With its state-of-art dealing rooms and well-trained dealers, the bank offers efficient forex dealing operations in India.

The bank has been focussing on expanding its operations outside India and has identified some of the emerging economies which offer large business potential. Bank has set up representative offices at Almaty: Kazakhistan, Shanghai: China and in London. Besides, Bank has opened a full fledged Branch in Kabul, Afghanistan.

Keeping in tune with changing times and to provide its customers more efficient and speedy service, the Bank has taken major initiative in the field of computerization. All the Branches of the Bank have been computerized. The Bank has also launched aggressively the concept of "Any Time, Any Where Banking" through the introduction of Centralized Banking Solution (CBS) and over 2409 offices have already been brought under its ambit.

Subject also offers Internet Banking services in the country for Corporates as well as individuals. Internet Banking services are available through all Branches of the Bank networked under CBS. Providing 24 hours, 365 days banking right from the PC of the user, Internet Banking offers world class banking facilities like anytime, anywhere access to account, complete details of transactions, and statement of account, online information of deposits, loans overdraft account etc. Subject has recently introduced Online Payment Facility for railway reservation through IRCTC Payment Gateway Project and Online Utility Bill Payment Services which allows Internet Banking account holders to pay their telephone, mobile, electricity, insurance and other bills anytime from anywhere from their desktop.

Another step taken by subject in meeting the changing aspirations of its clientele is the launch of its Debit card, which is also an ATM card. It enables the card holder to buy goods and services at over 99270 merchant establishments across the country. Besides, the card can be used to withdraw cash at more than 25000 ATMs, where the 'Maestro' logo is displayed, apart from the subject 's over 1094 ATMs and tie up arrangements with other Banks.

The Life and Times of Lala Lajpat Rai

There are few leaders of the pre-independence era who, after having plunged themselves into the political struggle, continued to take an active interest in social, cultural and educational work. Lala Lajpat Rai was one of such leader. Born on 28th January, 1865 at a small village, Dhudike in the Ferozpur district of Punjab, he belonged to the Agarwal Baniya caste and it was perhaps because of this, in addition to taking part in social and political life of the country, he took keen interest in industrial and financial matter also. His father was a teacher of Persian and Urdu in a government school.

Having passed the final examination in Law from Punjab University, he started his practice in1883, when he was barely 18 years old. Endowed with a rich legacy of moral and intellectual background, Lala Lajpat Rai had benefit of education in his the practical rationalism of western science combined with the religious purity and moral elevation of Eastern literature put on him the hallmark of true culture. While sympathizing with and aiding every movement made for progress, Lala Lajpat Rai identified himself very closely with Arya Samaj, in which he found ample scope for the exercise of his patriotism, philanthropy and religious zeal.

Having qualified as a pleader, Lala Lajpat Rai started practice at Hissar and soon became a leading lawyer of the district. He organized the Arya Samaj there and put it on proper lines. In 1892, he transferred his practice to the wider field at Lahore.

Education, both secular and religious, was in Lala Lajpat Rai’s view an important factor in national development. HE took part in the foundation of the D.A.V. College at Lahore.

Lalaji and Politics

Lala Lajpat Rai always felt drawn towards politics. It was in 1888 that he joined the Indian National Congress when it met at Allahabad under the presidency of Mr. G. Yule.

In 1905, the Indian National Congress Committee having recognized in him an austere, sincere and selfless devoted worker selected him as one of its delegates to place before the British public the political grievances of the Indian people. He met the expenses of his trip from his own pocket. He along with Gokhale carried on the political campaign in various parts of England and brought home to the mind of the British, the evils of an unsympathetic and bureaucratic government under which India was labouring and pleaded in eloquent language, adding facts and figures in supporting their contention, cause of the half starving and half dying people of India. Lala Lajpat Rai created an impression on the public of England.

After his return from England, he was busy devising and organizing ways and means for political advancement and industrial emancipation of the country.

The movement of “Swadeshi” was in the offing and he put his heart and soul into it. He preached the message of swadeshi to the people of Punjab and made it very popular. This naturally enraged the bureaucracy and he came to be regarded as a revolutionary by the Bitishers and the Anglo-Indian press. He was openly dubbed as a Revolutionary and an instigator of the armed forces.

The Jalianwala Bagh tragedy and the Government's denial to censure the conduct of its officers made him a complete non cooperator. He lost his faith in the British and threw himself whole heartedly into the non-cooperation movement.

In 1925, he joined the Swaraj Party and became its deputy leader. He took active part in the deliberations of the debates of the Assembly. It was he, who moved the resolution for the Boycott of the Simon Commission in the Assembly. It was while leading the boycott procession at Lahore on the 30th October, 1928 that he received lathi blows on his chest which ultimately brought about his death on the 17th November, 1928.

Lala Lajpat Rai and PNB

Lalaji was keenly concerned with the fact that though Indian capital was being used to run English Banks and companies, the profits went entirely to the British, while Indians had to contend themselves with a small interest on their capital. He echoed this sentiment in one of his writing while concurring with Rai Mul Raj of Arya Samaj who had long cherished the idea that Indians should have a National Bank of their own. At the instance of Rai Mul Raj, Lala Lajpat Rai sent a circular to selected friends insisting on an Indian joint stock Bank as the first step in constructive Swadeshi and the response was satisfactory.

After filing and registering the memorandum and Articles of Association on 19 May, 1894, the bank was incorporated under Act VI of the 1882 Indian Companies Act. The prospectus of the bank was published in the Tribune, and the Urdu Akhbar-e-Am and Paisa Akhbar. On 23rd May, 1894, the founders met at the Lahore residence of Sardar Dyal Singh Majithia, the first Chairman of PNB, and resolved to go ahead with the scheme. They decided to hire a house in the famous Anarkali Bazar of Lahore opposite the post office and near well known stores of Rama Brothers.

On 12th April 1895, the bank opened for business, a day before the great Punjabi festival of Baishakhi. The essence of the Bank’s culture was clear at this first meeting itself. The fourteen original shareholders and seven directors took only a modest number of shares; the control of the bank was to lie with the large, dispersed shareholding, a purely professional approach that was as uncommon then as it is today.

CMT REPORT (Corruption, Money Laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.46.94
UK Pound	1	Rs.85.57
Euro	1	Rs.67.79

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	8
PAID-UP CAPITAL	1~10	8
OPERATING SCALE	1~10	8
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	9
--PROFITABILIRY	1~10	7
--LIQUIDITY	1~10	8
--LEVERAGE	1~10	8
--RESERVES	1~10	8
--CREDIT LINES	1~10	8
--MARGINS	-5~5	-
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		72

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
NR		In view of the lack of information, we have no basis upon which to recommend credit dealings	No Rating

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions