From the Managing Director and CEO's Desk
In the Financial Year 2021-22 the economy started gaining momentum despite the impactof COVID-19 on the contact intensive sector in the first half. During the last couple ofyears the disruption due to COVID-19 has impacted every aspect of life and has alteredthe way we live. The pandemic turned much attention towards technology as a key enablerfor sustaining businesses across the globe. Since banking services can also be givenremotely the linkage of the sector with the real sector as provider of payment savingsand to some extent on credit limited the negative effect of the COVID-19 crisis. Thebanking sector played the role of supporting fi'rms and households during period of lowerrevenues through important policy actions by Financial Regulators and Governments.
Amidst this backdrop the Bank provided continuous services to our customers whileensuring the safety of our employees. Despite challenging circumstances the Bank postedgrowth in this Financial Year. The Annual Report FY 2021-22 is a reflection of the yearbygone sharing major highlights detailed performance and initiatives as the Bank treadedon its growth trajectory. We continued to pursue transformational development and recordedgrowth in both business and profit.
The Global Economy
The global economy rebounded in Calendar Year (CY) 2021 posting a growth of 6.1 percent. The global recovery continued but momentum was weakened hobbled by the pandemic.The world economy now is simultaneously facing re-emergence of COVID-19 inflationscaling back of government spending and normalization of monetary policies. The new crisisof Russia- Ukraine war and frequent and wider-ranging lockdowns in China is exacerbatingsupply and demand tensions damaging consumer sentiment and is threatening global economicgrowth.
Risks to economic prospects have become challenging as the spill over of the warspreads to other countries mainly through commodity markets trade and financiallinkages. IMF in its World Economic Outlook April 2022 issue has projected Global growthto slow from an estimated 6.1 per cent in CY 2021 to 3.6 per cent in CY 2022 as well as CY2023.
Inflation has emerged as another cause of concern for most economies due to globalsupply shocks driven by war-induced commodity price increase.
Oil prices of more than $100 per barrel are weighing heavily on the economies ofimport-dependent countries at large and particularly on South Asian nations and thesenations have been pushed on the brink of crisis with rising prices declining GDP growthand depleting foreign exchange reserves.
The two difficult policy trade-offs faced by the economies are between tacklinginflation and safeguarding the recovery; and between supporting the vulnerable sections ofthe society and rebuilding fiscal buffers.
In such circumstances efforts are needed to respond to the geo-political crisis toprevent further economic fragmentation due to imposition of sanctions. Apart from thesame it is essential to maintain global liquidity manage debt distress and tackleclimate change. Targeted support to households and firms would provide the space forgrowth enhancing investment. Reform of trade-related policies in goods would enablecountries to take advantage of shifts in the global trade landscape. Improving skills andenhancing competition would strengthen the capacity and incentive to adopt new digitaltechnologies.
The Indian Economy
The Provisional Estimates for FY 2021-22 released by the National Statistical Office(NSO) placed India's real Gross Domestic Product (GDP) growth at 8.7 per cent. Economicactivity which was recovering with the ebbing of the third wave rapid stride towardsuniversal vaccination and supportive fiscal and monetary policies now faces significantheadwinds from the worsening geopolitical developments and the accompanying sharp rise inglobal commodity prices and weakening global growth outlook.
The GDP growth rate projections has been lowered down by various agencies citingworsening supply bottlenecks and rising inflation risks caused by the geo-politicalconflict. The Wholesale and Consumer Price Index for March 2022 was at 14.55 per cent and6.95 per cent respectively. The CPI has remained above the upper limit of RBI's targetedrange for last four months. With limitation on both monetary and fiscal front the path torecovery will be marred by fresh challenges.
However despite the challenges the economy will get the much needed push from variousgovernment reforms notably the 500-gigawatt (GW) green energy plan Production-LinkedIncentive (PLI) manufacturing push digital economy drive Rs 145 lakh crore-plusinfrastructure pipeline and targeted incentives for Micro Small and Medium Enterprises(MSMEs).
India launched the $1.9-triNion National Infrastructure Pipeline (NIP) in 2020 whichwill give boost to the infrastructure sector. PM Gati Shakti launched in the Union Budgetis a transformative approach for economic growth and sustainable development. It willsteer the economy over the AmritKaal of the next 25 years - from India at 75 to India at100.
All these developments indicate that the Indian economy is well placed to take on thechallenges during FY 2022-23 and will continue to remain the fastest growing economy inthe world.
Developments in the Banking Sector
The Banking sector was well supported by the measures from Regulator and Governmentwhich helped manage the pandemic linked stress. As on March 25 2022 Non Food credit byScheduled Commercial Banks rose by 9.7 per cent on YoY basis from 4.5 per cent during thecorresponding period of previous year. Support from the Government through various schemesaided credit growth in almost all sectors.
The asset quality of SCBs improved further during FY 2021-22 with the overallnon-performing assets (NPA) ratio declining to 6.5 per cent in December 2021 from 6.8 percent a year ago driven by lower NPAs in credit to industry. Banks continued to strengthentheir financials by raising capital and adding to provision buffers.
To rein in elevated inflation Reserve Bank hiked Repo Rate in May 2022 and this willlikely to have an impact on Bank's lending and deposits rate. The immediate impact onconsumption and investment will be limited. The growth will be supported by a broadrebound in economic activity the forecast of a normal monsoon and a revival in theinvestment cycle and exports.
The pandemic forced banks to re-examine their technology strategies and strengthendigital/branchless banking. Becoming a customer centric and customer fi'rst organizationis essential to ensure survival and retain existing customers.
I would now share with you some of key performance highlights of your Bank during theFY 2021-22.
In spite of a challenging year the Bank reached the mark of Rs. 1931322 Crore inGross Global Business as on 31st March 2022 with Gross Global Advances at Rs.785104 Crore and Gross Global Deposit at Rs. 1146218 Crore.
Bank's low cost franchise remained robust with the Domestic CASA share at 47.43 percent an improvement of 195 bps over last year. Current and Saving Deposits (CASA) were atRs. 533654 Crore. The Current and Savings during FY 2021-22 grew by more than 8 percent. The global cost of deposit was contained at 3.99 per cent.
For the FY 2021-22 Bank's profitability parameters and ratios remained stable. Bank'sOperating Profit was at Rs. 20761 Crore. Net Profit grew by 71 per cent in FY 2021-22 toRs. 3457 Crore from Rs. 2022 Crore in FY 2020-21.
Return on Assets and Return on Equity improved to 0.26 per cent and 5.96 per centrespectively during FY 2021-22. The key productivity parameter Business per employeeincreased to Rs. 1941 lakh in 31st March 2022. The domestic and global Net InterestMargin (NIM) stood at 2.79 per cent and 2.71 per cent respectively in FY 2021-22.
Asset Quality and Capital Adequacy
Level of NPAs have seen sequential reduction with Gross NPA reducing to Rs. 92448crore as on 31st March 2022 and Net NPA reducing to Rs. 34909 crore from Rs.104423crore and Rs. 38576 crore respectively. Gross NPA ratio improved by 234 bps to 11.78 percent Net NPA ratio improved by 93 bps and was at 4.80 per cent on 31st March 2022.Provision Coverage Ratio (PCR) (incl. TWO) improved by 146 bps to 81.60 per cent as on31st March 2022 from 80.14 per cent as on 31st March 2021.
Improving asset quality continues to be our prime focus. The SASTRA portal rolled outby bank for NPA management has 5 different modules for One Time Settlement (OTS)Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest(SARFAESI) Debts Recovery Tribunals (DRT) National Company Law Tribunal (NCLT) &Wilful Default. Through this recovery management portal status of major recovery actionsof a Borrower can be ascertained at a single place. For effective monitoring standaloneDRT and SARFAESI Portals have been re-configured as separate modules in the SASTRA Portal.
Further a new comprehensive application software for digitalization & automationof Bank's recovery & litigation functions is being developed which will provideend-to-end processing of all major recovery actions in NPA Accounts.
During FY 2021-22 Bank raised equity of Rs.1800 Crore through QIP Rs.1919 Crorethrough Tier -II Bonds and Rs. 3971 Crore through AT-1 Bonds.
The Capital Adequacy ratio of the Bank improved to 14.50 per cent as on 31st March2022 with Tier-I capital at 11.73 per cent and CET1 of 10.56 per cent. The focus of thebank was on sustainable business growth by targeting better rated borrowers with low riskprofile.
Technology Initiatives and Digitalisati'on
Embracing futuristic technologies has gained significant momentum across the bankingand financial sector as well.
Both within and beyond the financial services industry unique digital offerings andinnovative user experiences continue to raise the bar of customer expectations. Digitalcontent and marketing has assumed importance considering the customers now rely on them tolearn about the services available.
In the last decade technology has turned our world on its head. With the advent ofultra-high-speed connectivity the way we engage with customers has also evolved. Todayeven the smallest of transactions involve multiple touch points and complex multi-layeredinteractions. Business has become more intricate than ever before. To remain competitiveand risk-free technology-enablement in decision-making is indispensable.
We have developed PNB 360 a comprehensive dashboard to monitor business performance.It has been developed to capture the day to day requirements of branches leveraging theenterprise data warehouse capabilities of Bank's state of art analysis tool. In the nextphase further enhancement of this tool will be done.
Apart from above the Bank undertook several initiatives such as Bharat Bill PaymentSystem (BBPS) option is being provided in mobile app-PNB ONE for "anywhereanytime" bill payment Positive Pay System (PPS) an electronic authentication systemallowing customers to share the cheque details with Bank in digital mode before the Bankprocesses it enabling online reset of password(s) for Internet Banking users havingactive debit card etc. ASBA have been included in PNB ONE facilitating investors tosubscribe IPO 24*7.
Two new initiatives were incorporated in digital banking to make it user friendly forour physically challenged customers. The visually impaired customers by using screenreading software like JAWS (Job Access With Speech) which facilitates Text to Speech canavail internet banking services and they can also avail mobile banking services as voiceenabled assistance have been introduced in PNB ONE.
To promote digitisation to facilitate banking at doorstep the customers are receivingthe Debit Card at their registered address. Customers have also been facilitated toactivate the Debit Card delivered at their registered address by setting Debit Card PINthrough digital channel. Cardless cash withdrawal facility has been launched which allowscash withdrawal facility from PNB ATMs without debit card.
Bank has launched Virtual Debit Card which can be used for e-Commerce transactions atall merchant sites through second factor authentication. An umbrella application namelyPNB Personal Advisor- PNB PA has been developed for customers as well as non- customers ofthe Bank to provide information on Bank's services products locators financialcalculators and all apps at one place.
In the wake of changing environment Bank shall design develop and implement acomprehensive solution along with change in policy to bring complete Digitaltransformation thereby enabling and optimizing the organization for the future in termsof achieving business goals complying with benchmark needs of EASE end to enddigitalisation of internal processes other upcoming digital opportunities as permitted byregulatory framework and other regulatory requirements.
MSME sector suffered the most in ensuring business continuity in the face of severesupply disruption and dipping demand after COVID-19. The Government initiated numerousmeasures to provide much needed thrust to the sector.
The Bank gave highest importance to financing MSME in their strategic growth planthrough various schemes like Guaranteed Emergency Credit Line (GECL) Credit GuaranteeScheme for Subordinate Debt (CGSSD) for Stressed MSMEs PM Street Vendor's AtmaNirbharNidhi (PM SVANidhi) Interest Subvention Scheme of 2% on Prompt Repayment of Shishu Loanextended under Pradhan Mantri Mudra Yojana (PMMY) PNB COVID-19 Emergency Credit Facility(PNB-CECF) etc.
Digital lending to MSME has been given requisite thrust through customized IT basedsolution i.e. PNB LenS. Launch of e-RENEWAL scheme (a system for automatic renewal ofcredit facilities) has been introduced to increase efficiency of the appraisal processreduce TAT and provide ease to small borrowers. PNB e-Mudra (Shishu) scheme was launchedto meet the credit needs of the Micro and Small entrepreneur through Digital platform aswell as through psbloansin59minutes.com platform.
The learning and development of employees is vital for their performance improvement aswell as retention. The training system of the Bank evolved through adoption of newdelivery systems and technology to upskill and prepare the maximum number of employees toface the challenges.
During the year the Bank took a slew of innovative measures to promote learning anddevelopment amongst workforce ensuring consistent delivery of an enhanced learningexperience at flexible timings.
The training system has been strategically aligned with the long term corporate goalsmanifested in the backdrop of global financial and economic scenario.
To understand new products and to keep the staff abreast of those changes a dailypodcast service has been started wherein brief details of products/ processes/guidelinesare circulated for the benefit of the staff on daily basis. Interactive videos on 'PNBONE' has been launched to promote better understanding of its features amongst staff aswell as customers.
To facilitate field functionaries with consolidated guidelines/ SOPs/FAQs/common errorson different banking process
Training vertical has taken initiative of curating booklets for Current and Savingsaccount opening processes NPA Management and customer service/complaint escalationmatrices.
Awards and Recognitions
In FY 2021-22 the Bank won many prestigious awards. Bank won the Best MSME Bank (PSU)in 8*h MSME Excellence Awards by ASSOCHAM and Secured First position amongstpeer banks under Agriculture Infrastructure Fund (AIF) campaign launched by Ministry ofAgriculture and Farmers Welfare. Bank won the best Data Quality Improvement Award onCommercial Bureau for FY 2021-22 amongst Public Sector Banks by TransUnion CIBIL. Award ofexcellence in campaign APY Leadership Capital launched by PFRDA was also received by theBank.
Jointly with M/s Infosys the Bank won the "Global Banking & Finance Awards2021" in the category "Initiative Core Amalgamation" for FY 2020-21 byGlobal Finance Review Company.
Further the Bank bagged 3rd position for its performance in implementingthe Government scheme PMEGP for the FY 2020 21.
Bank was awarded 2nd Best Bank in SHG Credit Linkage under NRLM scheme byMinistry of Rural Development (MoRD).
Bank also won Dr. Ambedkar Business Excellence Award under the category "MostSignificant lender supporting SC Entrepreneurs".
Other awards that were received by the Bank-Special Commemorative Award 2021 by NABARDfor Best PSU in the fields of Agriculture Credit Micro Finance Financial Inclusion andTechnology Adoption; The Asian Banker Financial Technology Innovation Award 2021 for"Best Core-banking Technology Implementation".
The pandemic is seen as a watershed event in the evolution of banking. COVID-19 hascaused banks to become more proactive to question their long-held assumptions and tobecome more adaptive and innovative. The future of banking is digital.
Bank will emphasize to improve quality of business by focusing on advances from MSMERetail Agriculture and Corporate. Bank is planning to transform the Digital resourceswith the changing environment and expectations by using digitization of customer journeysthrough pre-approved Personal Pension loans and e-Mudra for efficiency in businessoperations improving customer experience and reducing cost.
Bank is strengthening PNB ONE app by offering digital lending journeys market placefeatures life style offerings wealth management services etc. by revamping the existingfeatures. In the next Financial Year Bank will also make efforts towards profitmaximisation through increase in Non-Fund based business and income from third partyproducts reaping synergies arising out of amalgamation rationalization of branches/ATMs administrative offices to reduce cost/expenditure.
To transform the human resources in terms of expectations of customers and fast growingfinancial ecosystem the Bank is planning to design develop and implement a comprehensivesolution along with change in policy to bring complete HR transformation. Thus enablingand optimizing the organisation for the future in terms of achieving business goalscomplying with benchmark needs of EASE and other regulatory requirements.
The main thrust areas of HR Transformation will be on Business intelligence (internaland external) driven target setting HR Resource optimization Online PerformanceManagement System Talent Management and Individual level compliance Monitoring tool. Thisshall also lead to more transparency better efficiency optimization of resources andenhanced productivity.
I would like to express my gratitude to all members of the Board for their trust faithand active association. I also thank the Ministry of Finance and Reserve Bank of India fortheir support and guidance. I also take this opportunity to wholeheartedly thank all ourstakeholders for their unequivocal trust in the Bank.
I would also like to acknowledge the continuous patronage we have received in thisjourney from our customers. I thank all our employees for their unstinted support duringthis testing times. In the forthcoming financial year we will continue our focus onproviding new and tailored solutions improving efficiency and productivity enhancingcustomer centricity and brand presence and expanding into new segments.
(Atul Kumar Goel)
Managing Director & CEO.