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PUNJAB NATIONAL BANK

27 November 2020 | 12:00

Industry >> Finance - Banks - Public Sector

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ISIN No INE160A01022 52Week High 68 Book Value (Rs.) 63.39 Face Value 2.00
Bookclosure 04/08/2020 52Week Low 26 EPS 0.47 P/E 71.81
Market Cap. 31478.56 Cr. P/BV 0.53 Div Yield (%) 0.00 Market Lot 1.00

AUDITOR'S REPORT

You can view full text of the latest Director's Report for the company.
Year End :2019-03 

Report on Audit of the Standalone Financial Statements

Opinion

1. We have audited the financial statements of the Punjab National Bank which comprise the Balance Sheet as at 31st March, 2019, and the Profit and Loss Account and the Cash Flow Statement for the year then ended and notes to financial statements including a summary of significant accounting policies and other explanatory information, in which are included returns for year ended on that date of 20 branches audited by us and 3861 branches 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 included in the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement are the returns from 3109 branches and 116 other offices of the bank which have not been subjected to audit. These unaudited branches account for 5.38 percent of advances, 23.65 per cent of deposits, 6.98 per cent of interest income and 22.48 percent of interest expenses. Based on above:

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

a) true and fair view in case of the Balance sheet, of the state of affairs of the Bank as at 31st March, 2019;

b) true balance of loss in case of Profit and Loss Account for the year ended on that date; and

c) true and fair view in case of Cash Flow Statement 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 Institute of Chartered Accountants of India (ICAI). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the 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 financial statements in India, 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 obtained is sufficient and appropriate to provide a basis for our 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 financial statements of the current period. These matters were addressed in the context of our audit of the 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 described 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

Our audit approach included an understanding of the Bank’s software, circulars, guidelines and directives of the Reserve Bank of India and the Bank’s internal instructions and procedures in respect of the assets classification and its provisioning and adopted the following audit procedures:

- Evaluated and understood the Bank's 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 controls, including involvement of manual process in relation to income recognition, asset classification and provisioning pertaining to advances

- Reviewed the documentations, operations / performance and monitoring of the advance accounts, on test check 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.

Further we have 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 CBS/ Ladder.

Our Results:

The results of our audit process were observed to be adequate and satisfactory considering the materiality of the transactions.

and Drovisionina

(Refer Schedule 9 to the financial statements, read with the Accounting Policy No.5)

The advances are classified as performing and nonperforming advances (NPA) and provisioning thereon is made in accordance with the prudential norms as prescribed by the Reserve Bank of India (RBI). The classification and provisioning is done by the Bank’s IT software Ladder which imports all the required data from 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.

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 financial statements i.e.59.13 % of total assets, the classification of the advances and provisioning thereon has been considered as Key Audit Matter in our audit.

Investments - valuation, and

Our audit approach towards

identification and Provision in a for

Investments with reference to

Non-Performina Investments

the RBI circulars / directives

(Refer Schedule 8 to the

included the review and testing

financial statements, read with

of the design, implementation,

the Accounting Policy No.4)

operating effectiveness of

internal controls and audit

Investment portfolio of the bank

procedures in relation to

comprises of Investments in

valuation, classification,

Government Securities, Bonds,

identification of Non-Performing

Debentures, Shares, Security Receipts and other Approved Securities which are classified

Investments, provisioning / depreciation related to

under three categories, Held to

Investments as per RBI

Maturity, Available for Sale and

guidelines

Held for Trade.

- We reviewed and evaluated

Valuation of Investments,

the process adopted for

identification of Non-performing

collection of information

Investments (NPI) and the

from various sources for

corresponding non-recognition

determining fair value of

of income and provision thereon,

these investments.

is carried out in accordance

with the relevant circulars /

- For selected sample of

guidelines / directions of RBI.

investments (covering all

The valuation of each category

categories of investments

(type) of aforesaid security is

based on nature of security)

to be carried out as per the

we tested accuracy and

methodology prescribed in

compliance with the RBI

circulars and directives issued

Master circulars and

by the RBI which involves

directions.

collection of data/ information

from various sources such as

- We assessed and evaluated

FBIL rates, rates quoted on

the process of identification

BSE/ NSE, financial statements

of NPIs, and corresponding

of unlisted companies, NAV in

reversal of income and

case of mutual funds & security

creation of provision.

receipts etc. Certain investments

Our Results:

are based on the valuation

methodologies that include

The results of our audit process

statistical models with inherent

were observed to be adequate

assumptions, assessment of price for valuation based on financial statements etc.

and satisfactory considering the materiality.

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 i.e. 26.08% of total

assets), the same has been

considered as Key Audit Matter

in our audit

Information Other than the Financial Statements and Auditor’s Report thereon

5. The Bank's Board of Directors is responsible for the other information. The other information comprises the Corporate Governance Report (but does not include the financial statements and our auditor's report thereon), which we obtained prior to the date of this auditor's report, and Directors’ Report, including annexures, if any, thereon, which is expected to be made available to us after that date.

Our opinion on the financial statements does not cover the other information and Pillar 3 disclosure under Basel III and we do not and will not express any form of assurance conclusion thereon.

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

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, 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.

When we read the Directors’ Report, including annexure, if any, thereon, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

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

6. The Bank's 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 Accounting Standards issued by ICAI, 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 effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Bank's 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.

Auditor’s Responsibilities for the Audit of the Financial Statements

7. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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 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.

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

- Conclude on the appropriateness of management’s 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 that may cast significant doubt on the bank's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s 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 auditor's 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.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify 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 auditor's 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 Matter

8. We did not audit the financial statements / information of 3861 branches included in the standalone financial statements of the Bank whose financial statements / financial information reflect total assets of Rs. 379370.38 crores as at 31st March 2019 and total revenue of Rs. 21751.57 for the year ended on that date, as considered in the standalone financial statements. The financial statements / information of these branches have been audited by the branch auditors whose reports have been furnished to us, and in 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.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

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

10. Subject to the limitations of the audit indicated in paragraphs 5 to 7 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.

11. 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.

For G S Mathur & Co. For MKPS & For HDSG &

Chartered Associates. Associates

Accountants Chartered Chartered

Fm 008744N Accountants Accountants

Fm 302014E Frn 002871N

(Rajiv Kumar (Sanjaya Kumar (Dalbir Singh Gulati)

Wadhawan) Parida) Partner

Partner Partner M.no. 081024

M.no. 091007 M.no. 504222

For M K Aggarwal For A John Moris

& Co. & Co.

Chartered Chartered

Accountants Accountants

Fm 001411N Frn 007220S

(M K Aggarwal) (G Kumar)

Partner Partner

M.no. 14956 M.no. 023082

Place: New Delhi

Date: May 28, 2019