The year 2024 is a momentous year for Punjab National Bank as it enters
its 130th year of operations from its commencement on 12th April, 1895, from
Lahore. The bank has travelled a long way, gaining strength and braving strong winds of
change, indicating its tenacity over the past so many years. Built on the principles of
prudence, caution, and a forward-looking approach, PNB has come out stronger, weathering
many crises, and has grown to be the repository of trust among its stakeholders and
customers.
Punjab National Bank, in its journey over the last 13 decades, has
played a highly instrumental role in shaping the banking landscape of pre and
post-independence India, and continues to play a significant role in the country's
economic growth.
It gives me great pleasure to share with you the progress your Bank has
made and the general operating environment in FY2023-24.
Macro-Economic Scenario
The global economy in FY2023-24 fared better than expected, marked by
fading fears of recession and a resurgence in growth in major economies. Despite economic
growth in manufacturing and services, global headwinds due to wars persisted. The
Russia-Ukraine conflict extended and a new Israel-Palestine war partially disrupted trade
routes.
Amidst these global trends, the Indian economy remained resilient and
was the fastest-growing major economy in the world. As per the BCG report1, the
Indian Economy is at an inflection point today and will become a developed nation by 2047.
"Today, India is becoming the engine of global growth with 15 percent share in global
GDP growth"2. The economic growth of India exceeded expectations and
surprised the upside with growth greater than 8.0 per cent in three- quarters of
FY2023-24. It is at a strong 8.2 per cent for the whole year. The year ended on a positive
note, with high-frequency indicators like GST collections, car sales, and UPI transactions
hitting high spots. India's Manufacturing PMI climbed to a 16-year high of 59.1 in
March'2024.
As per the BCG report, the key drivers that are propelling India's
growth story are large domestic consumption demand on the back of rising disposable
income, global realignment of supply chains; government launched Production Linked
Incentive (PLI) Scheme to boost manufacturing, high export potential turning India into a
factory of the world, supportive financial ecosystem with rising public capex and
demographic dividend.
India's digital landscape presents exciting prospects. The burgeoning
e-commerce, fintech, and Artificial Intelligence sectors offer a multitude of avenues for
qualified professionals. Government programs like Digital India are fostering digital
inclusion, expanding internet access and propelling the digital economy forward. However,
there is a need for robust cybersecurity measures which ensure the integrity of digital
processes and provide a shield against evolving threats, making it a cornerstone of
successful digital transformation.
Climate change poses significant risks to both the global and Indian
economies. Globally, rising temperatures could reduce GDP by up to 18% by 2050, according
to a report by Swiss Re Institute3. Economies around the world will need to
take collective action to mitigate climate risk. India is at the forefront of mitigating
climate change. India has shown active participation in global climate change initiatives
and commitment to renewable energy. India has initiated forums for climate action, such as
the International Solar Alliance, LeadIT, Climate and Disaster Resilience Initiative,
Infrastructure for Resilient Island States, Green Credit Initiative and International Big
Cat Alliance. The Reserve bank of India on its part has also framed the Green Deposit
framework for banks and issued guidelines for disclosure of climate related risks by its
regulated entities. SEBI has similarly issued disclosure guidelines called the Business
Responsibility and Sustainability Reporting (BRSR) which mandate listed companies to make
disclosures related to sustainability parameters. India has also achieved in 2020-21 the
renewable energy target it had set for 2030. India aims to achieve net zero emissions by
2070 and fulfil 50 per cent of its energy requirements through renewable energy by 2030.
Banking Scenario
The last financial year marked a significant milestone for Indian
banks, representing the best performance in a decade. Across all fundamental
pillars—business growth, asset quality, profitability and capital adequacy
—positive growth was evident. Bank credit surged to decadal-high levels, reaching 16
per cent (and 20 per cent considering the merger impact of HDFC Bank with HDFC Ltd.),
primarily driven by robust demand for retail loans, as per RBI's fortnightly data4.
Notably, gross NPAs decreased from 11.25 per cent in 2018 to below 3 per cent by September
2023.
Public Sector Banks played a pivotal role, with cumulative profits
exceeding Rs. 1.4 Lakh Crore—a remarkable 35 per cent growth over the previous year.
This transformation owes much to government initiatives and reforms. However, decline in
market share of business remained a challenge for all the Public Sector Banks.
Simultaneously, the Indian banking landscape underwent a structural
shift. Banks embraced innovation and digitalization, introducing various digital products
and services. UPI transactions crossed the 100 billion mark in FY' 2023-24, registering a
remarkable 56 per cent yearly growth. India now leads globally, accounting for 46 per cent
of all digital payments. Lending to value chains, too, has made significant progress in
digitization. This transition towards digital banking reflects India's journey towards a
less cash economy.
The adoption of digital banking capabilities, along with Government
initiatives like the Pradhan Mantri Jan Dhan Yojana (PMJDY), Unified Payment Interface
(UPI) and Goods and Service Tax (GST), has brought over 50 crore individuals and numerous
small businesses into the formal banking system. Further initiatives by the Government and
the regulator like harnessing Goods and Services Tax (GST) invoices on IndiaStack, the
59-minute Micro, Small and Medium Enterprise (MSME) loan portal, introduction of more
players in the financial ecosystem such as Account Aggregator and Payment Aggregators,
digitalization of KCC loans, expanding the scope and coverage of UPI and greater
interoperability of UPI with other IT applications. Central Bank Digital Currency (CBDC),
Open Network for Digital Commerce (ONDC) etc. will further mature the financial ecosystem.
Banks will continue to deploy emerging technologies like artificial
intelligence, machine learning, and the Internet of Things (IoT) to improve operational
efficiency, mitigate risks, enhance customer experience, and develop innovative services.
Banks are also experimenting with supply chain financing that will enable smoother
transactions, reduce risks and enhance overall efficiency.
Apart from extending credit to traditional sectors of the economy like
MSME and Agriculture, banks are also expected to venture into new emerging sectors like
Space, Electric Vehicles and Renewable Energy, etc.
Banks in India are gearing up for the next wave of technology- fuelled
innovations in services with the imminent growth of 5G internet usage, deeper smartphone
penetration, expansion of digital payments, frictionless data-led digital lending,
risk-mitigated secure data protection and collaboration between banks and FinTechs. The
banking sector will aid the consumption and investment growth in the economy by providing
credit for the needy sectors of the economy. The above steps will pave the way for India
to become the third-largest economy with a GDP of $5 trillion by 2027.
Developments at your Bank
Beginning its journey from a pure Swadeshi capital of Rs.20,000 on 12th
April 1895, the Bank achieved the landmark of Rs.23 lakh crore in Gross Business as of 31st
March 2024. In FY'2023-24, your Bank registered the highest net profit year-on-year growth
at 228 per cent to Rs.8,245 crores among all the Public Sector Banks. The Bank has made
significant progress in asset quality in the last two years, and now its Net NPA and
Provisioning Coverage Ratio are in line with the industry. The Bank is also well
capitalized with a capital adequacy ratio of 15.97 per cent as of March'2024 as against
the regulatory requirement of 11.5 per cent.
On the back of strong financial performance and gaining investors'
trust, the PNB's market capitalization crossed Rs.1 lakh crore mark on 15th December 2023.
Our Bank is the third PSB to achieve this feat, and it has also joined the top 50 most
valuable listed stocks in terms of market capitalization.
Your Bank has always been striving to offer the best. Customer delight
at all levels and in all transactions is our goal. To achieve this, PNB embarked on a
Digital Transformation Journey and in the last 2 years has launched more than 100 digital
products, processes and portals. The three pillars on which this digital transformation
journey was based are -revamping of channels to make them more efficient, reduce human
intervention and building the best capabilities.
Keeping customer centricity in mind, Bank offers a range of Current
Account and Savings Account products to cater to varied financial needs of different
customer segments. Your Bank has introduced various new features and services in its
mobile and internet banking application to facilitate ease of banking services and also
strengthened its customer grievance redress mechanism. We are constantly collaborating
with the Fintech ecosystem to pave the way for a more inclusive financial service
landscape, with the primary goal of enhancing customer service.
Your Bank is also incorporating Artificial Intelligence, Machine
Learning in various processes like risk mitigation, model development, optimizing cash
retention in ATM & BNA5 machines, transaction based nudges for boosting
retail products, lead generation, customer retention, etc.
Your Bank undertook various measures last year to reinforce sharper
risk management at the bank like setting up of a climate risk management cell, dedicated
Market Intelligence Unit, introducing new Early Warning System SAJAG 2.0 for effective
credit monitoring, risk dashboard, strengthening of product approval process etc.
Your Bank also undertook various steps to strengthen its compliance
culture like Compliance Monitoring Tool to track and monitor individual level compliance,
Penalty Reporting and Monitoring System to track regulatory penalties and monitoring
Compliance Risk at Bank level using in-house developed Compliance Risk Assessment Model.
India strives to achieve net zero emissions by 2070, and your Bank will
play a pivotal role in this transition. PNB has launched various schemes for green
financing like financing of Electric Vehicles, rooftop solar panels and extending credit
to various renewable energy projects.
The Bank last year also launched PNB Palaash, an eight-month period
campaign to embrace sustainability in bank's operations through measures such as energy
and resource conservation, paper reduction, waste management and streamlined digital
processes.
Going Forward
For accelerating business growth, Your Bank will continue to focus on
all the segments like Retail, Agriculture, MSME and Corporates. For Retail Credit, Bank
has multiple products for meeting the credit needs of the customers at competitive rates
and it is leveraging its specialized loan processing points and marketing verticals. Bank
will undertake tie-ups with Builders, Home Loan Counsellors, Car Dealers and NBFCs for
driving retail credit growth on continued basis.
Your Bank will continue its focus on agriculture portfolio to help
farmers meet their credit requirements. Apart from leveraging its dense network of rural
branches, Your Bank will continue to market its digital products for agriculture i.e. Agri
Gold Loan, Krishi Tatkal Rin etc. Bank also plans to tie up with State Rural Livelihood
Mission for financing of Self Help Groups and for financing food and agriculture based
ancillary activities.
Improved credit culture due to focused processing centres made the Bank
well positioned to capitalize an increase in MSME loans with the upswing in GDP. 13.5 Lakh
vendors are registered on Government e-Marketplace (GeM) providing a large opportunity to
increase MSME portfolio. In India, the number of MSMEs are expected to grow from 6.3 Crore
to 7.2 Crore in the coming years. Only 15% of MSMEs are under the purview of formal
credit, providing vast untapped potential, that could be exploited by your bank through
vast network of branches, specialized centres for MSME loans, array of schemes and
products for MSME segment and digital channels. Apart from the existing 58 MSME clusters,
the Bank aims to identify additional clusters. For each cluster, we plan to introduce
customized financial products and an awareness program, all facilitated through
cluster-based financing at competitive interest rates.
For Corporate Credit, Bank has dedicated Extra Large Corporate
Branches/ Large Corporate Branches and Centralized Industry Oriented Credit Desk at Head
Office for quick disposal of credit proposals. Your Bank will continue to extend credit in
Core Industries like Infrastructure sectors, Real Estate, Engineering Procurement and
Construction, Food Processing along with 14 sectors for which government has launched the
Production Linked Incentive (PLI) scheme.
All these measures are expected to help the Bank regain its market
share in overall business.
Bank is ensuring to align its business growth strategy with its risk
appetite. Your Bank has devised various policies and frameworks for management of risk
emanating from various sources like economic uncertainties, climate risks, regulatory
risks, cyber risks etc.
Your Bank strongly believes in giving back to the society which are
evident from its various initiatives, CSR activities and training programs. Bank has 12
Farmer Training Centres (FTCs) across the country that are aiding farmers by providing
them training on agriculture & allied activities, maintenance of tractor and other
farm machineries, processing and preservation of fruits and vegetables, computer courses,
running of beauty parlour, tailoring & embroidery, etc. Since inception, FTCs has
provided training to more than 18 lakh farmers, youth including young girls and women from
rural areas. Your Bank also provided free financial literacy and credit counselling in
FY'2023-24 to around 3 lakh people, including different groups like Farmers, Self Help
Groups, Micro and Small Entrepreneurs, Senior Citizens etc. through its 175 Financial
Literacy Centres (FLCs). These programs aided these groups to have better financial
planning that helps them inculcate the habit of financial prudence. Bank is also providing
training to the rural population for skill up-gradation to undertake self-employment
ventures and jobs and has helped around 6 lakh persons to settle through its 76 Rural Self
Employment Training Institutes (RSETIs) and 2 Rural Development Centres (RDCs) since
inception. Our RSETIs focus on settlement of participants by also ensuring adequate credit
for inclusive growth.
Your Bank continues to discharge its social obligations with
enthusiasm, which includes free medical camps, blood donation camps, besides frequent
donations and infrastructure support to Hospitals, Schools, Defence Stations etc. The Bank
also supports various societies, charitable institutions and NGOs working for the benefit
of weaker sections of society.
Going forward, PNB will play an active role in the vision of Viksit
Bharat by extending credit support to all sectors of the economy with special focus on
MSME, Agriculture, Women and Youth.
Your Bank will continue to deploy generative Artificial Intelligence
and predictive analytics in its operations for cross-selling and upselling opportunities.
Your Bank will continue to facilitate ease of banking through Mobile First experience,
Anywhere Banking, Whatsapp Banking, Chatbots, and intuitive mobile apps that will help in
broadening the financial reach and enhancing the customer experience and trust. It is also
committed to make the digital experience as safe as possible for its various stakeholders
by investing in appropriate technology to make its systems robust and reliable.
PNB will continue to reassess its processes, user interface and banking
experience to optimize efficiencies, minimize expenses, strengthen customer relationships
and enhance regulatory compliance and governance to eventually become one of the most
competitive Banks in the industry.
The Bank believes that human resources are its strongest asset and thus
continues to focus on upskilling and grooming of its employees through its ambitious
project UDAAN. Bank in the last financial year introduced various tools and initiatives to
enhance productivity of its employees and effectively utilize its human resources.
The Bank will continue to serve the nation with the same zeal and
vigour as it has done for the past 13 decades. It will continue to make the social fabric
of India strong and play a pivotal part in the vision of Viksit Bharat making India the
third-largest economy by providing credit to essential sectors of the economy. The Bank
will also continue to extend financial services across the length and breadth of the
country and take steps to ensure financial reach to each and every citizen of India.
I would like to congratulate and extend my gratitude to each and every
member of the PNB Parivar who has worked relentlessly and untiringly for the sustained and
steady growth of the Bank. I sincerely thank all the stakeholders including esteemed
shareholders, customers for their continued support and trust in our Bank. I also express
my sincere thanks to the Government of India, the Reserve Bank of India and other
regulators for their support and guidance. Last but not the least, I thank and appreciate
all the Board members for their valuable inputs and guidance.
(K.G. Anantha Krishnan)
Non-executive Chairman