Punjab National Bank - Quarterly/Annual Result Disclosures and Notes dated 30 Sep 2020

1. The financial results for the quarter/half-year ended 30th September, 2020 have been prepared in accordance with AS-25 Interim Financial Reporting issued by ICAI, following the same Accounting Policies and practices as those followed in the annual financial statements for the year ended 31st March, 2020, except appropriation of recoveries in NPA accounts.

During the quarter and half year ended September 30, 2020, the Bank has changed its Accounting Policy for appropriation of recovery in NPA accounts from the earlier policy of appropriating recovery first against charges recorded then principal advance amount and balance towards recorded/derecognised interest income, to the new policy of appropriation of recovery first against the charges recorded, followed by Recorded Interest/Derecognised Interest and balance against the principal. This change in Accounting Policy has resulted in increase in Profit before Tax by Rs.271.46 crore and corresponding increase in Net Advances by the even amount.

2. The Government of India (Gol), Ministry of Finance, Department of Financial Services has issued Gazette Notification no. CG-DL-E- 04032020-216535 dated 4th March, 2020, approving the scheme of Amalgamation of Oriental Bank of Commerce and United Bank of India into Punjab National Bank in exercise of the powers conferred by Section 9 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 and Section 9 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1980. The amalgamation has come into effect from April 1, 2020. The results for quarter/half year ended September 30, 2020 include operations of erstwhile Oriental Bank of Commerce and United Bank of India. Hence, the quarterly/half yearly results of current financial year are not comparable with corresponding quarter/half-year of previous financial year.

The amalgamation is accounted under the “pooling of interest” method as prescribed in AS-14 on “Accounting for Amalgamations”, to record amalgamation of erstwhile Oriental Bank of Commerce and United Bank of India with the Bank w.e.f. April 01, 2020.

Accordingly, the difference of Rs.9268.29 crores (net-off adjustments) between the net assets of amalgamating banks and the amount of shares issued to shareholders of the amalgamating banks has been recognized as Amalgamation Adjustment Reserve. The Bank has considered this amount under CET-1 for the purpose of calculation of CRAR.

3. The Consolidated financial results are prepared in accordance with Accounting Standard 21 on “Consolidated Financial Statements”, Accounting Standard 23 on “Accounting for Investment in Associates” and Accounting Standard 27 on “Financial Reporting of Interest in Joint Ventures”.

4. The consolidated financial statements of the Group comprise financial statements of 5 subsidiaries, 14 Associates & 1 Joint Venture. The consolidated results are prepared in accordance with section 133 of Companies Act, 2013 and regulation 33 of Securities & Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015.

5. The above financial results have been reviewed by the Audit Committee of Board and approved by the Board of Directors in the meeting held on November 02, 2020. The same have been subjected to limited review by the Statutory Central Auditors of the Bank, in line with the guidelines issued by the Reserve Bank of India and as per the requirement of Listing Agreement with Stock Exchanges.

6. The financial results of the Bank have been arrived at after considering provisions for non-performing assets, standard assets, restructured advances, standard derivative exposures, direct taxes including deferred tax, unhedged foreign currency exposure and investment depreciation on the basis of extant guidelines issued by Reserve Bank of India. Provisions for Employee Benefits have been made on actuarial basis. Other usual and necessary provisions have been made on estimated basis for the quarter and are subject to adjustments, if any, at the year end.

7. In terms of RBI circular dated July 01, 2015 read together with RBI circular dated March 31, 2015, banks are required to make Pillar 3 disclosures under BASEL-III capital regulations. Accordingly, Pillar 3 disclosures under BASEL III capital regulations are being made available on Bank's website i.e. www.pnbindia.in. These disclosures have not been subjected to limited review by the Statutory Central Auditors.

8. In terms of RBI Circular dated June 23, 2017(RBI List-I) and Circular dated August 28, 2017 (RBI List-ll) for the accounts admitted under the provisions of Insolvency & Bankruptcy Code (IBC), the Bank is holding 100% provision for the outstanding of Rs. 16503.49 crore as on September 30, 2020, in respect of such accounts.

9. In the interim order dated September 03, 2020, Hon’ble Supreme Court of India in writ petition Gajendra Sharma Vs. Union of India & Others, has directed that accounts which were not declared as NPA till 31st August, 2020 shall not be declared as NPA till further orders. Based on the same, the Bank has not classified any account as NPA which was not NPA as on August 31, 2020. As a matter of prudence, the Bank has made a contingent provision of Rs. 180.00 Crore in respect of such accounts that were not classified as NPA which includes provision for interest income aggregating to Rs.85.00 Crore reckoned in operating profit.

10. In accordance with the RBI guidelines relating to COVID-19 Regulatory Package dated 27th March, 2020 and 17th April, 2020, and clarification issued by RBI through Indian Bankers Association dated 6th May, 2020, the Bank granted moratorium on the payment of instalments and/or interest, as applicable, falling due between March 01, 2020 and May 31, 2020 to eligible borrowers classified as Standard, even if overdue, as on February 29, 2020. In accordance with the additional Regulatory Package guidelines dated May 23, 2020, the Bank granted a second moratorium on instalments or interest, as applicable, due between June 01, 2020 and August 31, 2020. The moratorium period, wherever granted, is excluded from the number of days past-due for the purpose of asset classification under RBI's Income Recognition and Asset Classification norms
For Table, kindly refer Corporate Announcements on www.bseindia.com.

11. COVID-19 pandemic continues to spread across several countries including India resulting in a significant volatility in global and Indian financial markets and a significant decline in global and local economic activities. The Govt, of India had announced a series of lock down measures from March 24, 2020 onwards which are yet to be completely withdrawn. Govt, of India has directed a calibrated and gradual withdrawal of lock down and partial resumption of economic activities.

The situation continues to be uncertain and the Bank is evaluating the situation on ongoing basis. The major identified challenges for the bank would arise from eroding cash flows and extended working capital cycles. The Bank is gearing itself on all the fronts to meet these challenges.

12. In terms of RBI Cir dated April 17, 2020, on COVID-19 regulatory package — Review of resolution timelines under the prudential framework on resolution of stressed assets, the number of accounts and the amount involved in those accounts where the resolution period was extended is given below for the half year ended 30.09.2020.
No. of Accounts in which Resolution Plan extended - 08
Amount Involved (Rs in Crores) - 1790.06

13. During the quarter bank has availed dispensation for deferment of provision in respect of frauds amounting to Rs.1558.58 crore in terms of option available as per RBI Circular dated April 18, 2016. Accordingly, an amount of Rs.389.64 crore has been charged to profit and loss account and Rs.1168.94 crore has been deferred to subsequent
quarters. Further, out of un-amortized amount of Rs. 1329.97 crore up to quarter ended June 30, 2020, an amount of Rs.483.13 crore has been charged to P&L and remaining Rs. 846.84 crore has been carried forward to subsequent quarters.

14. Pursuant to the proposed bipartite agreement on wage revision (due with effect from November, 2017), a sum of Rs.797.79 crore has been provided during the quarter towards wage revision on estimated basis. (Cumulative provision till September 30, 2020 is Rs.2370.66 crores).

15. In accordance with RBI circular dated January 01, 2019, DOR. No. BP. dated February 11, 2020 and DOR.No.BP.BC/4/21.04.048/2020-21 dated August 06, 2020 on "Relief for MSME borrowers either exempted or registered under Goods and Service Tax (GST)" the details of MSME restructured accounts from 01.01.2019 to 30.09.2020 as under: For Table, kindly refer Corporate Announcements on www.bseindia.com.

16. In terms of notification no.CG-DL-E-23032020-218862 dated 23.03.2020 issued by the Ministry of Finance (Department of Financial Services) containing amendment in Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1970, after complying with the requirements of Nationalised Banks (Management and Miscellaneous Provisions) Scheme, 1970 and sub - section (2BBA) of section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the Bank has appropriated accumulated losses of Rs.28,707.92 crore from its share premium account on August 06, 2020. The said appropriation has no impact on Bank’s Paid-up capital, Capital Adequacy, Leverage Ratio and Net Worth.

17. During the quarter ended on September 30, 2020, the Bank has exercised call option and redeemed bonds amounting to Rs.500.00 Crores. The Bank has issued Tier-ll Bonds aggregating to Rs.994.00 Crores.

18. The Bank had made investment of Rs. 341.59 Crores in JSC Tengri Bank (formerly known as Bank of Kazakhstan), which is an associate of the Bank. The licence of JSC Tengri Bank has been revoked by Agency of Republic of Kazakhstan for Regaulation and Development of Financial Market with effect from 18th September 2020. In the absence of any further development and as a matter of prudence the Bank has made a provision of Rs.341.59 Crores during the quarter and half-year ended September 30, 2020.

19. The Provisioning Coverage Ratio as at September 30, 2020 works out to 83.00%.

20. Pursuant to the Accounting Standard -10 (Revised 2016) on Property, Plant & Equipment, applicable from April 01, 2017, depreciation of Rs.84.15 Crores for the period on revalued portion of Fixed Assets has been transferred from the Revaluation Reserve to Revenue Reserve instead of crediting to Profit & Loss Account.

21. The Government of India has pronounced Section 115BAA of the Income Tax Act, 1961 through Taxation Laws (Amendment) Ordinance, 2019. Bank has evaluated the options available under section 115 BAA of Income Tax Act and opted to continue to recognise the taxes on income for the half-year ended 30.09.2020 as per the earlier provision of Income Tax Act.

22. Details of Investors complaints for the quarter ended September 30, 2020: Pending at Beginning: Nil; Received: 04; Disposed off: 03; Pending for Closure: 1.

23. In accordance to SEBI regulations, for the purpose of quarterly consolidated financial results, minimum eighty percent of consolidated revenue, assets and profits have been included subject to audit or limited review.
24. The figures for the quarter ended September 30, 2020 are the balancing figures between reviewed figures in respect of the half-year ended September 30, 2020 and the published year to date figures up to June 30, 2020.

25. Figures of the previous periods have been regrouped / rearranged / re-classified wherever necessary

26. Cash Flow given in Rs. In Thousand mention in pdf.

D K Jain
General Manager & CFO