To the Members of Punjab National Bank
Report on Audit of the Standalone Financial Statements
1. We have audited the financial statements of the Punjab National Bank which comprisethe Balance Sheet as at 31st March 2019 and the Profit and Loss Account andthe Cash Flow Statement for the year then ended and notes to financial statementsincluding a summary of significant accounting policies and other explanatory informationin which are included returns for year ended on that date of 20 branches audited by us and3861 branches audited by statutory branch auditors. The branches audited by us and thoseaudited by other auditors have been selected by the Bank in accordance with the guidelinesissued to the Bank by the Reserve Bank of India. Also included in the Balance Sheet theProfit and Loss Account and the Cash Flow Statement are the returns from 3109 branches and116 other offices of the bank which have not been subjected to audit. These unauditedbranches account for 5.38 percent of advances 23.65 per cent of deposits 6.98 per centof 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 explanationsgiven to us the aforesaid financial statements give the information required by theBanking Regulation Act 1949 (the Act') in the manner so required for bank and arein 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 Bankas at 31 st March 2019;
b) true balance of loss in case of Profit 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 bythe Institute of Chartered Accountants of India (ICAI). Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements' section of our report. We are independent of the Bank in accordancewith the code of ethics issued by the Institute of Chartered Accountants of India togetherwith ethical requirements that are relevant to our audit of the financial statements inIndia and we have fulfilled our other ethical responsibilities in accordance with theserequirements and the code of ethics. We believe that the audit evidence we sufficientandappropriate to provide a haveobtainedis basis for our opinion.
Key Audit Matters
4. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the financial statements of the current period. These matterswere addressed in the context of our audit of the financial statements as a whole and informing our opinion thereon and we do not provide a separate opinion on these matters. Wehave determined the matters described below to be the key audit matters to be communicatedin our report.
|Key Audit Matters ||How our matter was addressed in the audit |
|Advances classification and provisioning ||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 statements read internal instructions and procedures in respect of the assets classification and its provisioning and adopted the following audit procedures: |
|(Refer Schedule 9 to the financial with the Accounting Policy No.5) || |
|The advances are classified as performing and non- performing advances (NPA) and provisioning thereon is made in accordance with the prudential norms as prescribed by the || |
| ||- 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. |
|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). ||- 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 |
|The extent of provisioning of NPA under the prudential norms are mainly based on its ageing and recoverability of the underlined security. ||- 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. |
|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. || |
| ||Our Results: |
| ||The results of our audit process were observed to be adequate and satisfactory considering the materiality of the transactions. |
|Investments valuation and identification and provisioning for Non-Performing Investments (Refer Schedule 8 to the financial statements read with of the Accounting Policy No.4) ||Our audit approach towards Investments with reference to the RBI circulars / directives included the review and testing |
| ||the design implementation operating effectiveness of internal controls and audit procedures in relation to valuation classification identification of Non-Performing |
|Investment portfolio of the bank comprises of Investments in Government Securities Bonds Debentures Shares Security Receipts and other Approved Securities which are classified / under three categories Held to Maturity Available for Sale and Held for Trade. ||Investments provisioning depreciation related to Investments as per RBI guidelines |
|Valuation of Investments identification of Non-performing Investments (NPI) and the corresponding non-recognition of income and provision thereon is carried out in accordance with the relevant circulars / guidelines / directions of RBI. The valuation of each category (type) of aforesaid security is to be carried out as per the methodology prescribed in circulars and directives issued by the RBI which involves collection of data/ information from various sources such as FBIL rates rates quoted on BSE/ NSE financial statements of unlisted companies NAV in case of mutual funds & security receipts etc. Certain investments ||- We reviewed and evaluated the process adopted for collection of information from various sources for determining fair value of these investments. |
| ||- For selected sample of |
| ||investments (covering all categories of investments based on nature of security) we tested accuracy and compliance with the RBI Master circulars and directions. |
| ||- We assessed and evaluated the process of identification of NPIs and corresponding reversal of income and creation of provision. |
|are based on the valuation methodologies that include statistical models with inherent assumptions assessment of price for valuation based on financial statements etc. 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. ||Our Results: |
| ||The results of our audit process were observed to be adequate and satisfactory considering the materiality. |
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 otherinformation comprises the Corporate Governance Report (but does not include the financialstatements and our auditor's report thereon) which we obtained prior to the date of thisauditor's report and Directors' Report including annexures if any thereon which isexpected to be made available to us after that date.
Our opinion on the financial statements does not cover the other information and Pillar3 disclosure under Basel III and we do not and will not express any form of assuranceconclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above and in doing so consider whether the otherinformation is materially inconsistent with the financial statements or our knowledgeobtained 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 priorto the date of this auditor's report we conclude that there is a material misstatement ofthis other information we are required to report that fact. We have nothing to report inthis regard.
When we read the Directors' Report including annexure if any thereon if we concludethat there is a material misstatement therein we are required to communicate the matterto those charged with governance.
Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements
6. The Bank's Board of Directors is responsible with respect to the preparation ofthese standalone financial statements that give a true and fair view of the financialposition financial performance and cash flows of the Bank in accordance with theaccounting principles generally accepted in India including the Accounting Standardsissued by ICAI and provisions of Section 29 of the Banking Regulation Act 1949 andcirculars and guidelines issued by the Reserve Bank of India (RBI') from time totime.
This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Bank andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the financial statements management is responsible for assessing theBank's ability to continue as a going concern disclosing as applicable matters relatedto going concern and using the going concern basis of accounting unless management eitherintends to liquidate the Bank or to cease operations or has no realistic alternative butto do so.
Auditor's Responsibilities for the Audit of the Financial Statements
7. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditor's report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.
As part of an audit in accordance with SAS we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financialstatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.
Evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis ofaccounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast the bank's ability to continue as asignificant going concern. If we conclude that a material uncertainty exists we arerequired to draw attention in our auditor's report to the related disclosures in thefinancial statements or if such disclosures are inadequate to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor'sreport. However future events or conditions may cause the bank to cease to continue as agoing concern.
Evaluate the overall presentation structure and content of the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the significant audit findings including and anysignificant in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significance in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
8. We did not audit the financial statements / information of 3861 branches included inthe standalone financial statements of the Bank whose financial statements / financialinformation reflect total assets of Rs. 379370.38 crores as at 31st March 2019and total revenue of Rs. 21751.57 for the year ended on that date as considered in thestandalone financial statements. The financial statements / information of these brancheshave been audited by the branch auditors whose reports have been furnished to us and inour opinion in so far as it relates to the amounts and disclosures included in respect ofbranches 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 accordancewith Section 29 of the Banking Regulation Act 1949:
10. Subject to the limitations of the audit indicated in paragraphs 5 to 7 above and asrequired by the Banking Companies (Acquisition and Transfer of Undertakings) Act1970/1980 and subject also to the limitations of disclosure required therein we reportthat: a. We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes of our audit and have found them tobe satisfactory; b. The transactions of the Bank which have come to our notice have beenwithin the powers of the Bank; and c. The returns received from the offices and branchesof 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 theBank so far as it appears from our examination of those books and proper returns adequatefor the purposes of our audit have been received from branches not visited by us; b. theBalance Sheet the Profit and Loss Account and
Statement of Cash Flows dealt with by this report are in agreement with the books ofaccount and with the returns received from the branches not visited by us; c. the reportson the accounts of the branch offices audited by branch auditors of the Bank under section29 of the Banking Regulation Act 1949 have been sent to us and have been properly dealtwith by us in preparing this report; and d. In our opinion the Balance Sheet the Profitand Loss
Account and the Statement of Cash Flows comply with the applicable accountingstandards to the extent they are not inconsistent with the accounting policies prescribedby RBI.
|For G S Mathur & Co. Chartered ||For MKPS & Associates. ||For HDSG & Associates |
|Accountants ||Chartered ||Chartered |
|Frn 008744N ||Accountants ||Accountants |
| ||Frn 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 & Co. ||For A John Moris & Co. || |
|Chartered ||Chartered || |
|Accountants ||Accountants || |
|Frn 001411N ||Frn 007220S || |
|(M K Aggarwal) ||(G Kumar) || |
|Partner ||Partner || |
|M.no. 14956 ||M.no. 023082 || |
|Place: New Delhi || || |
|Date: May 28 2019 || || |