Head Office, Finance Division

5 Sansad Marg, New Delhi-110001

Phone Nos.: 23711460, 23359310, 23712917

23715360,
e-mail : finsa1@pnb.co.in, finbs@pnb.co.in.

Guidelines for
Statutory auditors
(To be read with PNBs Manual for Yearly Accounts 2016-17)

PART-A : FEES, TRAVELLING,

LODGING/BOARDING

PART-B: REPORTING REQUIREMENTS

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 1

 PART A

Fees, Travelling & Lodging/Boarding

1 Fees

1.1 The following audit fee is payable on the basis of advances outstanding as on
31.03.2017 (POST MOC). Service Tax, wherever applicable (subject to
mentioning of Service Tax Registration Number in the Bill), will be over and
above the fees.

Category of Bank Branch Rate of Audit Fee(in Rs)

Upto Rs. 10 crore 40250
Above Rs. 10 crore up to Rs. 20 crore 57500
Above Rs. 20 crore up to Rs. 30 crore 79350
Above Rs. 30 crore up to Rs. 50 crore 120750
Above Rs. 50 crore up to Rs. 75 crore 138000
Above Rs. 75 crore up to Rs.125 crore 182850
Above Rs.125 crore up to Rs.175 crore 228850
Above Rs.175 crore up to Rs. 300 crore 287500
Above Rs.300 crore up to Rs. 500 crore 324300
Above Rs. 500 crore up to Rs.1000 crore 359950
Above Rs.1000 crore up to Rs.5000 Crore 395600
Above Rs. 5000 crore 431250

1.2 In addition to the above, fee for Tax Audit and Long Form Audit is payable as
follows:
a) Tax Audit - 15% of Audit Fee as per above schedule
b) Long Form Audit - 10% of Audit Fee as per above schedule.

The fee as above is inclusive of the fee for Extension Counters, if functioning
under the same branch.

1.3 Separate Fee has been prescribed for service branches/offices (having no
advances portfolio like Circle Office, RCC, Currency Chest, MICR, etc.) which is
at present Rs.20000/-.

2.0 Travelling

2.1 The travelling expenses will be reimbursed on actual basis subject to the
following entitlements as per RBI guidelines:

2.2.1 Proprietors/Partners: Air-conditioned First Class by rail or by air in economy

class or actual cost of conveyance by other modes of transportation where the
routes are not served by rail/air.

2.2.2 Audit Assistants: Audit assistants are to be allowed to travel by First class / AC
II tier by rail or to be reimbursed the actual cost of conveyance by other modes
of transportation where the routes are not served by rail.

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 2

2.3 In case of travel by train, as far as possible, tickets should be attached with the
bill or alternatively declaration containing date of journey, ticket numbers, from/to
etc. should be given, in the absence of which second-class fare will be
reimbursed on notional basis. Original Tickets in case of travel by bus be
attached. In case of air travel, original/e-tickets should be supported by boarding
passes. All such original tickets should be authenticated by putting the signature
with date.

2.4 If the branches allotted are not linked with public mode of transportation,
permission to travel by own car/taxi can be considered by Circle Office on merits
of individual case, for which you are required to obtain prior permission by
applying on the format as per Annexure T-1.

2.5.1 It may be noted that if permission to travel by own car or taxi is given by the
bank, the entire audit team is required to travel together and such
permission is granted for one trip only i.e. once to and fro and not for daily
travel.

2.5.2 In case of travel by taxi, a stamped receipt showing taxi owners name, taxi no.,
toll tax receipt, if applicable, distance covered, rate charged per kilometer duly
signed by the owner/driver of the taxi and verified by the auditor should be
submitted, in the absence of which second class train fare on notional basis will
be reimbursed.

2.5.3 Taxi charges will be reimbursed @ Rs.8.00 per Km. inclusive of driver
charges/Night Halt age etc. for the actual distance travelled. Claims at higher
rates will not be entertained.

2.5.4 In case of travel by own car, petrol bills along with toll tax receipt, if any should
be submitted in the absence of which notional second-class train fare will be
reimbursed. Reimbursement will be made @ Rs.7.00 per Km. in case of travel
by own car. No local conveyance is payable in such cases.

2.6 Where the statutory auditors have an office at the place where the
branches/offices of the bank to be audited are situated , they will not be
reimbursed TA/HA.

2.7 Auditors are expected to return to their head quarter only after completion of
audit of all the branches allotted to them.

3.0 Lodging/Boarding

1 The auditors should endeavor to keep the expenditure on lodging etc at the
minimum level.

2 At places where ITDC Hotels are established, auditors shall be entitled to

reimbursement of Lodging expenses subject to the maximum tariff notified by
the ITDC Hotel(s) in which they are entitled to stay.

3.1.3 Where, however, an auditor stays in a non-ITDC Hotel either because of there is
no ITDC Hotel at the center or accommodation or ITDC Hotel of the eligible
starred category is not available at the centre, the limits up to which Hotel
reimbursement may be considered have been laid down by the Bank from time
PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 3
 to time. The reimbursement of actual lodging charges (i.e. only for outstation
branches) where the firm is not having its head quarter or branch) will be
made subject to the following schedule on production of original bills.
(Amount in Rs.)
Maximum Room Tariff permissible
Designation Eligibility to stay in Major A-Class Area-I Other
ITDC hotels Cities Places
Proprietor/Partner 4* Hotels 6800 3400 3000
Qualified Assistants 2* Hotel (Non-AC) 2400 1600 1200
Unqualified 1* Hotel (Non-AC) 1600 1200 800
Assistants

Major A Class cities are Delhi, Mumbai, Chennai, Kolkata, Ahmedabad,

Hyderabad and Bangalore.

Area I cities are Pune, Nagpur, Kanpur, Surat, Jaipur , Lucknow,

Visakhapatnam, Patna, Vadodara, Kochi, Indore, Bhopal, Ludhiana,
Coimbatore, Madurai, Agra and Varanasi.

If partner/proprietor are not able to stay in eligible hotels in Delhi, Kolkata,

Mumbai, Chennai and Banglore within permissible room tariff, they would be
reimbursed actual lodging expenses for staying in other hotels not exceeding
125% of their entitled class at Delhi, Kolkata, Mumbai, Chennai and Banglore.

3.2 In case no staying facilities are available at the place of audit, auditors may stay
at the nearest place where such facilities are available. Auditors may obtain a
certificate from the Branch Manager to that effect and furnish the same along
with their TA/HA claims. However, it may be noted that in such cases the daily
travelling expenses from the place of stay to the place of audit will be
considered as "Local Conveyance" and will be reimbursed subject to rules
relating to Local Conveyance.

3.3 The Boarding charges (Halting Allowance) will be reimbursed subject to the
following rates (per day) including the journey period.
(Amount in Rs.)
Designation Major A- Area-I Other
Class Cities Places
Proprietor/Partner 500 400 325
Qualified Assistants 450 350 313
Unqualified Assistants 350 313 275

1 The above boarding charges are subject to the production of bills. Where no
bills are produced, boarding charges @ 60% of the above mentioned rates will
be reimbursed, to cover the boarding and other incidental charges.

2 No TA/HA/Lodging charges etc would be admissible to statutory auditors on

travel from one centre to another centre forming parts of the same Urban
Agglomeration/Composite area/Continous Area such as Gurgaon, Mewla
Maharajpur, Noida, Faridabad, Ghaziabad, Ballabhgarh and Mohannagar. For
any clarification, the matter should be referred to concerned Circle office.

3 RBI has observed that some of the audit firms were found to have managed
obtaining bills of the lodging charges far in excess of the tariff charges
levied by the concerned hotels and submitted bills for higher claims to the
PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 4
 banks. Audit firms should desist from such practice and if such cases come
to our/their notice, a serious view will be taken by Bank/RBI in the matter.

4 As per RBI guidelines, it will be necessary for the auditors to submit claims for
actual expenses incurred for travelling, halting, etc for conducting the audit work,
duly supported by bills /vouchers/cash memos, etc. wherever required. It is
observed that many times the expenses under TAQ/HA bills claimed by audit
firms are far in excess of the total audit fees paid to them. In view of the
foregoing and with a view to curtailing the expenditure, all audit firms are
advised that they should endeavor to keep the expenditure on lodging etc. at a
minimum level. A reference is also invited to RBI circular letter DBS. ARS .No.
426/08.92.001/2004-2005 dated 01.01.2005.

5 Further, it has been reported that audit teams of large size (comprising of
audit assistants/articled clerks/partner(s) of the firm) are being deployed
for the purpose of statutory audit of comparatively small sized branches.
This not only increases the cost of audit but, at times, also delays the
completion of audit work. Therefore, the audit firms are advised to
constitute the audit team keeping in view the volume of work at the branch
under audit.

4.0 Local Conveyance

4.1 The actual local conveyance incurred by the auditors while working away from
their headquarters for conducting the banks audit, not exceeding Rs. 188/- per
day for proprietor/partners, Rs. 94/- and Rs. 75/- per day for qualified and
unqualified assistants respectively, may be reimbursed on the basis of self-
declaration.

4.2 In case of local auditors, if the distance between the auditors office/branch and
banks office/branch is beyond 8 kms, actual expenditure not exceeding as
mentioned above may be reimbursed on self-declaration basis. However, the
reimbursement of expenses on local conveyance shall not exceed 10% of
audit fee calculated per branch.

5.0. Reimbursement of Claims

5.1 No advance is permissible from any branch of the bank against TA bill.

5.2 Attendance Certificate as per Annexure-T2 is to be obtained from the Branch

Manager of each branch and should be attached with the TA Bill.

5.3 Claims for reimbursement of TA/HA should be prepared and submitted in

accordance with the TA Bill Form as per Annexure-T3.

5.4 The claim for reimbursement of TA/HA should not be submitted with Audit
Reports but should be sent separately. All supporting vouchers/bills/cash
memos/tickets etc. should be enclosed in original duly verified by the
proprietor /partner of the firm under their signature & seal.

5.5 All TA/HA claims and attendance certificate should be submitted to Chief
Manager, Punjab National Bank, concerned Circle Office latest by 15th May,
2017, failing which it shall be presumed that you have no claims to lodge.

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 5

6.0 Long Form Audit & Tax Audit has to conducted and reports in the prescribedformats
submitted simultaneously with the usual audit. No separate Travelling
Allowance/Halting Allowance etc. is payable for the same.

7.0 SBAs are requested to specifically report, simultaneously to the Chief Executive
Officer of the bank and the concerned Regional Office of the Department of
Banking Supervision, RBI, any matter, susceptible to be fraud or fraudulent
activity or any foul play in any transaction.

***********************

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 6

 Annexure - T1

The Executive In charge

Balance Sheet Cell
Punjab National Bank
Circle Office
___________

Dear Sir,

Statutory Audit: 2016-2017- Permission to travel by Own Car/Taxi

Please refer to Appointment Letter no. / 2016-17/ ___ dated ______. As the
branches allotted to us are not directly connected with Train/Bus route, we seek your
permission to travel by Own Car/Taxi for conducting audit as detailed below:

1. Mode of Travel : Own Car/Taxi

2. Permission required as per details given below:

Sr.No. Branch to be audited Appx. Distance

(Kms)
From To
(i)
(ii)
(iii)

3. We undertake,

to travel together and no other travelling expenses will be claimed by us.

that printed taxi receipt/petrol bills(for own car only) along with toll tax receipt, if
any will be furnished in original with the TA Bill.

that the taxi charges will be charged for the actual KM travelled and bank may
reimburse @ upto Rs.8.00 per Km (Rs.7.00 per Km for own car) or actual fare
charged by the taxi whichever is lower.

4. We have noted the rules for reimbursement of own car/Taxi expenses.

DATE SEAL SIGNATURE OF AUDITOR

Name & Address____________

of the Firm ________________

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 7

 Annexure T-2
Certificate of Attendance
PUNJAB NATIONAL BANK
BRANCH________________ DISTN. NO .______________
CIRCLE OFFICE__________
DATE___________________

We certify that:

1 Following representatives of M/s.____________________, Chartered Accountants,

have conducted the statutory audit of this branch for the Financial year ended 31st
March, 2017.

S.No Name Designation* Arrival Departure Total days

Time Date Time Date taken including
Sundays &
Holidays

2. No advance against Fees, TA or HA was paid to them.

3+. The audit team stayed at______________(Place), which is___KM away from the
branch, as no staying facilities are available at this place.

4+. The audit team has traveled by own car/taxi from_________(Place).

5+. Auditors being local, the distance from auditors office to our branch are
approximately __ KM.

6. Branch's advances as on 31.3.2017 (Post MOC) were Rs._______thousands

i.e.Total of Code No.62599 & 62699 of Balance Sheet.

OFFICER INCUMBENT INCHARGE

GBPA. NO. GBPA.NO

Instructions for Incumbent Incharge:

- IT SHOULD BE ENSURED THAT THE CERTIFICATE IS COMPLETE IN ALL RESPECTS BEFORE IT
IS SIGNED.THERE SHOULD BE NO CUTTING/ALTERATION WITHOUT PROPER
AUTHENTICATION BY THE INCUMBENT INCHARGE. IMMEDIATELY ON COMPLETION OF
AUDIT COPY OF CERTIFICATE OF ATTENDENCE IS TO BE SENT BY INCUMBENT INCHARGE TO
THEIR CIRCLE OFFICE.

- * There are separate rates of TA & HA payable to

i) Partner/Proprietor of the firm, (ii) Qualified Assistants(iii) Unqualified Assistants .
The Designation column therefore, must specify one of the above categories and
this can be ascertained from representative of audit firm. Partner/Proprietor of the
firm & Qualified Assistants must mention their membership no. allotted by
ICAI.

- +Delete, if not applicable.

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 8
 Annexure T3

Claim for Travelling, Lodging/Boarding & Local Conveyance

The Chief Manager

Punjab National Bank
Circle Office__________
_____________________

Ref : Appointment letter no. :2016-2017, dt.

We have audited following branches for 2016-17 in terms of above letter. We submit our
claim as given below:-

S. No Dist.No. Branch Circle Name of the Firm:

UCN No. :
1 Address :

2 Branches at :

3 E-Mail Address :
Service Tax No.
PAN. No.

A. Travelling Expenses

Name of Desig- Mode Class Tic Dist- Amt.

the nation Departure Arrival of of ket ance (Rs.)
person * Station Date Time Station Date Time Travel Travel No. (Kms)

Total A

B . Lodging Charges

Voucher no. Name of the Designation* Place of Date of No. of Days Amount
Person stay Stay (Rs.)

Total B

.. cont 2
PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 9
 2

Annexure-T3 (Continued)

C. Boarding Charges

Voucher Name of the Designation* Date of No. of Amount (`)

no. Person Stay Days

Total C

D. Local Conveyance Charges

Name of Designation* From To No. of Total Amount

the Days Distance (`)
Person Travelled Travelled
(Kms)

Total D

GRAND TOTAL A+B+C+D= ` ________ ( ` _____________only )

* State whether partner / proprietor or Qualified Assistant or Unqualified Assistant.

Certified that we have actually incurred above expenses and no advance was obtained
from any branch. The above information is correct to the best of our knowledge and
belief.

Please credit the amount of bill passed in our account as per details already
provided.

We confirm that we have submitted all Returns/Reports/Certificates as required.

Encls._______ vouchers.(Duly verified tickets, bills etc. to be enclosed)

DATE SEAL SIGNATURE OF AUDITOR

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 10

 PART B -REPORTING REQUIREMENT

1. It is requested to go through the Manual for yearly accounts-2016-17 before

commencement of audit.

2. The audit team should be constituted keeping in view the volume of work at the
branch under audit so as to keep the cost of audit to minimum.

3. To facilitate the Auditors to locate the branch allotted, send acceptance letter
(additional copy), Audit Report etc., addresses and telephone numbers of the
Circle Offices are given in Annexure T-4.

4. Closing Returns & Audit Reports along with other documents/certificates as

detailed in Annexure given in the Manual for Yearly Accounts-Chapter I, are
to be received by speed post/courier to the respective authorities latest by
15.05.2017.

5. Long Form Audit Report and Tax Audit Reports are to be submitted in digitalized
soft copy in new Web Application i.e., Centralised Financial Audit (CFA).
Please also refer Manual for details

6. Significant Accounting Policies followed by the bank are enclosed as Annexure-

R-1

7. All the branches of the Bank are under Centralised Banking System (CBS).
They have been instructed by IT Division to provide one computer terminal
exclusively for the use of Statutory Auditors to view details of all the accounts of
the branch during the conduct of audit. In case of any difficulty, matter be
brought to the notice of respective Circle Office/Circle Balance Sheet Cell/HO
Finance Division.

8. All the certificates/returns to be generated by CBPMS should be digital signed

by Incumbents of branches and statutory branch auditors.

9. It is requested that audit work be commenced by 5th April 2017 and audit of all
the branches allotted, be completed by 15th April 2017. The above time
schedule may please be strictly adhered to. Branch Managers have been
advised to extend full co-operation so that the audit is expeditiously completed.
In case of any difficulty, concerned Circle Office may please be contacted, as
per the list provided in Manual for Yearly Accounts 2016-17.

10. Annual closing returns are divided into three parts viz. First, Second and Third
Despatch. A detailed content of each of these is given in the relevant Chapters
of Manual for yearly Accounts 2016-17.

11. Provision for Bonus, Leave Encashment, Pension, Gratuity, Standard Assets,
NPA Accounts, Restructured Accounts is made at Finance Division, Head Office.
Accordingly no vouchers are required to be passed at branches.

12. Auditors are requested to verify and comment upon the status of the
compliance in regard to the implementation of the recommendations of the committee
set up to inquire into various aspects relating to frauds and malpractices in Banks
(Chairman: Sh. Amitabh Ghosh) and the working group to review the internal control
and inspection/audit system in Banks (Convener: Sh. Rashid Jilani).
PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 11
 13. Auditors are requested to look into the manner in which the Bank is functioning and
suggest improvements, if any, in its functioning in order to reduce transaction cost,
greater use of information technology and better customer service. The comments are
also desired on instances of adverse credit deposit ratio in the rural areas with a view to
ensuring that the deposits mobilised from rural areas are largely utilised for the
development of those areas.

14. Auditors are requested to ensure that all reports/returns/certificates submitted, are duly
signed and dated under their seal along-with the initials on all the pages of the
statement, under their stamp.

15. In the course of inspection of banks by RBI, it has been observed that there
have been divergences between the asset classification/valuation made by
bank/statutory auditors and the assessment made by RBI inspectors. Such
divergences arise mainly due to non-adherence of the guidelines and ignoring
certain qualitative factors like realizable value of security becoming suspect or
unrecoverable, having bearing on the value or risk assets. In order to narrow
down the divergences and ensure adequate provisioning. It is suggested that, if
Auditors so desire, they can have a dialogue with RBI Regional Office, New
Delhi /Inspectors who carried out the banks inspection during the previous year
with regard to the accounts contributing to the difference.

16. Auditors are required to specifically report, simultaneously, to the Chief

Executive Officer of the bank and to the Reserve Bank of India, Department of
Banking Supervision, 6 Sansad Marg, New Delhi 110001, any matter
susceptible to be fraud or fraudulent activity or any foul play in any transaction. In
case where the amount of fraud involved is Rs. 100 lakh or above, it is requested
to report such instances directly to the Reserve Bank of India, Central Office,
Department of Banking Supervision, Cuffe Parade, Colaba, Mumbai. RBI has
advised that any deliberate failure on the part of the auditor should render them
liable for action.

17. Submission of LFAR & Tax Audit Reports should be completed along-with branch
audit.

18. Soft copy of the Certificates to be signed is attached herewith and the
same are also made available in the Home page of CBPMS. Five sets of
these certificates are required to be submitted after taking the print-out,
filling up relevant information and after signing the same. In case of any
difficulty, branches be advised to contact Circle Offices.

19. Certificates required to be given by auditor are given in the Annexure,

given in the Manual-Yearly Accounts-2016-17.

20. Audit is to be carried out by the Auditors Firm with the help of their own staff and
guidelines contained in RBI Circular DBOD: No.App.BC.101/.C.452 (k)-83 dated
15th December, 1983 and RBI Circular DBOD.No.App.BC.71/C.452 (k)-84 dated
25 July, 1984 is to be complied with.

21. The audit must be conducted under the direct supervision of a

proprietor/partner/qualified Chartered Accountant.

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 12

22. Auditors are requested that as per guidelines, the qualifications, if any, made in
the Audit Report/Financial Statements should be quantified wherever possible, if
the same are material, in clear and unambiguous manner.

23. With your appointment as Statutory Auditor of the bank, all the internal/special or
any other assignments in the bank/subsidiaries, if any, shall stand withdrawn i.e.
you should relinquish the internal assignment(s), in the event of acceptance of
the appointment as Statutory Auditor of the Bank.

24. As per banks Accounting Policy, Commission on Govt. Business is booked on

accrual basis and accrual entry is passed only at corporate level. However,
branches will continue to pass the commission vouchers as and when received.

25. In addition to above, the other guidelines issued by the Reserve Bank of India as
amended from time to time relating to audit may please be adhered to.

+++++++++++++

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 13


Addresses where copies of Reports/Certificates meant for SCAs to be sent:
Sr. Name & Address of the
No. Statutory Central
Auditors.
1. M/s. Chhajed & Doshi
101, Hubtown Solaris, Near
East West Flyover,
N.S. Phadke Marg.
Andheri (E)
Mumbai 400069
2. M/s. R.Devendra Kumar &
Associates
205, Blue Rose Industrial
Estate, Near Petrol Pump,
Western Express Highway,
Borivali (East),
Mumbai 400066
3. M/s. Hem Sandeep & Co.
G-59 A, Sanjay Gandhi
Puram, Faizabad Road, PO:
Indira Nagar,
Lucknow 226016
4. M/s Suri & Co.
New No: 4 /Old No 55A
Chevaliar Sivaji Ganesan
Salai
(South Boag Road)
Thyagarayanagar
Chennai 600 017
UCN- 192155
5. M/s SPMG & Company
3322A, II Floor, Karol Bagh,
New Delhi-110005
UCN- 103940
PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17
Annexure- T 5
Name of concerned circle Copy for SCAs to be sent at
the following address:
Karnal, Kurukshetra, Dharamshala, M/s Chhajed & Doshi
Mandi, Hamirpur, Simla, Raipur, Chartered Accountants
Bilaspur, North Delhi, Central C/O Punjab National Bank
Delhi, South Delhi, Finance Division,
Ahmedabad, Ranchi,Bokaro, Head Office,
Noida 5, Sansad Marg
New Delhi 110001
Jabalpur, Gwalior, Bhubaneshwar, M/s R.Devendra Kumar &
Jammu, Sambalpur, Alwar, Associates
Udaipur, Bharatpur, Chartered Accountants
SriGanganagar, , Haridwar, C/O Punjab National Bank
Kashipur, Chandigarh, Finance Division,
Muzaffarnagar, Meerut, Head Office,
5, Sansad Marg
New Delhi 110001
Kozhikode, Coimbatore, M/s Hem Sandeep & Co..
Ernakulum, Chennai, Burdwan, Chartered Accountants
Midnapur, Guwahati, Rohtak, C/O Punjab National Bank
Allahabad, Hissar, Finance Division,
Andhra,Telangana, Ludhiana, Head Office,
Jaipur, Jodhpur, Muzaffarpur 5, Sansad Marg
New Delhi 110001
Mumbai City, Mumbai Suburb, M/s Suri & Co
Nagpur, Pune, Surat, Faizabad, Chartered Accountants
Gorakhpur, Kanpur, varanasi, C/O Punjab National Bank
Dehradun, Bhopal, Indore, Finance Division,
Bangalore, Bihar-Sharif, Gaya, Head Office,
Patna . 5, Sansad Marg
New Delhi 110001
Agra, Bareilly, Jhansi, M/s SPMG & Company
Bulandshahar, Moradabad, Chartered Accountants
Amritsar, Jalandhar, C/O Punjab National Bank
Bhatinda,Patiala, Hoshiarpur, Finance Division,
Kapurthala , Lucknow, Kolkata, , Head Office,
Darbangha, Arrah, 5, Sansad Marg
New Delhi 110001
14
Annexure- R-1
SCHEDULE 17

SIGNIFICANT ACCOUNTING POLICIES

1. BASIS OF PREPARATION:
The financial statements have been prepared on the historical cost basis
and conform, in all material aspects, to Generally Accepted Accounting
Principles (GAAP) in India which encompasses applicable statutory
provisions, regulatory norms prescribed by Reserve Bank of India (RBI),
Accounting Standards (AS) and pronouncements issued by The Institute
of Chartered Accountants of India (ICAI) and prevailing practices in
Banking industry in India.

Use of Estimates
The preparation of financial statements requires the management to
make estimates and assumptions considered in the reported amounts of
assets and liabilities (including contingent liabilities) as of date of the
financial statements and the reported income and expenses for the
reporting period. Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable.

2. METHOD OF ACCOUNTING:
The Financial Statements have been prepared on the going concern
basis with accrual concept and in accordance with the accounting
policies and practices consistently followed unless otherwise
stated.

3. FIXED ASSETS
3.1 Fixed assets are stated at historical cost except those premises, which
have been revalued. The appreciation on revaluation is credited to
revaluation reserve and incremental depreciation attributable to the
revalued amount is deducted there from.
3.2 a. Depreciation on assets (including land where value is not
separable) are provided on straight-line method based on
estimated life of the asset.
b. Depreciation on assets has been provided at the rates furnished
below:-
Particulars Rate of
Depreciation
Land acquired on perpetual lease where no lease period Nil
is mentioned

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 15

 Land acquired on lease where lease period is mentioned Over lease
period
Building
- Constructed on free hold land and on leased land, 2.50%
where lease period is above 40 years
- Constructed on leased land where lease period is Over lease
below 40 years period
Built- up Assets taken over from erstwhile New Bank of 4.00%
India & Nedungadi Bank Ltd
Furniture and fixtures- Steel articles 5.00%
Furniture and fixtures-wooden articles 10.00%
Mattresses 20.00%
Mobile Phone Instruments 33.33%
Machinery, electrical and miscellaneous articles 15.00%
Motor cars and cycles 15.00%
Computers, ATMs and related items 33.33%
Computer Application Software Intangible Assets
- Up to Rs. 5,000 Charged to
Revenue
- Others 20.00%

c. Depreciation on fresh additions to assets other than bank's own premises is

provided from the month in which the assets are put to use and in the case
of assets sold/disposed off during the year, up to the month pre ceding the
month in which it is sold/ disposed off.
The depreciation on bank's own premises existing at the close of the year is
charged for full year. The construction cost is depreciated only when the building
is complete in all respects.
4. ADVANCES
4.1 Advances are classified as performing and non-performing
assets; provisions are made in accordance with prudential norms
prescribed by RBI.
3 Advances are stated net of provisions in respect of non-performing
assets.
4 Offices outside India / Offshore Banking Units:
a Advances are classified under categories in line with those of
Indian Offices.
b Provisions in respect of advances are made as per the local law
requirements or as per the norms of RBI, whichever is higher.
4.4. Financial Assets sold are recognized as under:

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 16

 a In case the sale is at a price lower than the Net Book Value (NBV)
the shortfall is charged to the Profit and Loss Account.

b In case the sale is at a price higher than the NBV, the surplus
provision is retained to meet shortfall/loss on account of sale of
other non-performing financial assets.

5 For restructured/rescheduled advances, provisions are made in accordance

with guidelines issued by RBI.

5. INVESTMENTS
5.1 Investments are classified into six categories as stipulated in form A of
the third schedule to the Banking Regulation Act, 1949.
5.2 Investments have been categorized into Held to Maturity, Available for
Sale and Held for Trading in terms of RBI guidelines. Securities
acquired by the Bank with an intention to hold till maturity is classified
under Held to Maturity.
5.3 The securities acquired by the Bank with an intention to trade by taking
advantage of short-term price/ interest rate movements are classified
under Held for Trading.
5.4 The securities, which do not fall within the above two categories, are
classified under Available for Sale.
5.5 Transfer of securities from one category to another is carried out at the
lower of acquisition cost/ book value/ market value on the date of transfer.
The depreciation, if any, on such transfer is fully provided for.
5.6 In determining acquisition cost of an investment
a Brokerage / commission received on subscription is deducted from
the cost of securities.
b Brokerage, commission etc. paid in connection with acquisition of
securities are treated as revenue expenses.
c Interest accrued up to the date of acquisition of securities i.e. broken
period interest is excluded from the acquisition cost and the same is
accounted in interest accrued but not due account.
5.7 Investments are valued as per RBI/ FIMMDA guidelines, on the following
basis:
Held to Maturity
i) Investments under Held to Maturity category are carried at
acquisition cost. Wherever the book value is higher than the face
value/redemption value, the premium is amortized over the
remaining period to maturity.
ii) Investments in subsidiaries/joint ventures/associates are valued at
carrying cost less diminution, other than temporary, in nature.
iii) Investments in sponsored regional rural banks are valued at
carrying cost.
iv) Investment in venture capital is valued at carrying cost.
PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 17
 Available for Sale and Held for Trading

a) Govt. Securities At market prices/YTM as published by Fixed

I. Central Govt. Income Money Market And Derivatives
Securities Association of India (FIMMDA)

II. State Govt. On appropriate yield to maturity basis as per

Securities FIMMDA/RBI guidelines.
b) Securities guaranteed On appropriate yield to maturity basis as per
by Central / State FIMMDA/RBI guidelines
Government, PSU
Bonds (not in the
nature of advances)
c) Treasury Bills At carrying cost
d) Equity shares At market price, if quoted, otherwise at break up
value of the Shares as per latest Balance Sheet (not
more than one year old), otherwise at Re.1 per
company
e) Preference shares At market price, if quoted or on appropriate
yield to maturity basis not exceeding
redemption value as per RBI/FIMMDA
guidelines.
f) Bonds and debentures (not At market price, if quoted, or on appropriate
in the nature of advances) yield to maturity basis as per RBI/FIMMDA
guidelines.
g) Units of mutual funds As per stock exchange quotation, if quoted; at
repurchase price/NAV, if unquoted
h) Commercial paper At carrying cost
i) Certificate of Deposits At carrying cost.
j) Security receipts of At net asset value of the asset as declared by
ARCIL ARCIL
k) Venture Capital Funds At net asset value (NAV) declared by the VCF
l) Other Investments At carrying cost less diminution in value

The above valuation in category of Available for Sale and Held for Trading
are done scrip wise and depreciation / appreciation is aggregated for
each classification. Net depreciation for each classification, if any, is
provided for while net appreciation is ignored.

5.8 Investments are subject to appropriate provisioning/ de-recognition of

income, in line with the prudential norms of Reserve Bank of India for NPI
classification. The depreciation/provision in respect of non-performing
securities is not set off against the appreciation in respect of the other
performing securities.

5.9 Profit or loss on sale of investments in any category is taken to Profit and
Loss account but, in case of profit on sale of investments in "Held to

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 18

 Maturity" category, an equivalent amount is appropriated to "Capital
Reserve Account".

5.10 Securities repurchased/resold under buy back arrangement are

accounted for at original cost.

5.11 The derivatives transactions are undertaken for trading or hedging

purposes. Trading transactions are marked to market. As per RBI
guidelines, different categories of swaps are valued as under: -

Hedge Swaps
Interest rate swaps which hedges interest bearing asset or liability is
accounted for on accrual basis except the swap designated with an asset
or liability that is carried at market value or lower of cost in the financial
statement.

Gain or losses on the termination of swaps are recognized over the

shorter of the remaining contractual life of the swap or the remaining life
of the asset/ liabilities.

Trading Swaps
Trading swap transactions are marked to market with changes recorded
in the financial statements.
5.12 Foreign currency options
Foreign currency options written by the bank with a back-to-back contract
with another bank is not marked to market since there is no market risk.
Premium received is held as a liability and transferred to the Profit and
Loss Account on maturity/cancellation.

6. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS &

BALANCES:
a Except advances of erstwhile London branches which are accounted for at the
exchange rate prevailing on the date of parking in India, all other monetary assets
and liabilities, guarantees, acceptances, endorsements and other obligations are
translated in Indian Rupee equivalent at the exchange rates prevailing as on the
Balance Sheet date as per Foreign Exchange Dealers' Association of India (FEDAI)
guidelines.
b Non-monetary items other than fixed assets are translated at exchange rate
prevailing on the date of transaction.
c Forward exchange contracts are translated as on the Balance Sheet date at the
rates notified by FEDAI and the resultant Gain/loss on translation is taken to profit &
Loss Account.
d Income and expenditure items are accounted for at the exchange rate prevailing on
the date of transaction.
e Offices outside India / Offshore Banking Units:
i Operations of foreign branches and off shore banking unit are classified as
Non-integral foreign operations and operations of representative offices
abroad are classified as integral foreign operations.

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 ii Foreign currency transactions of integral foreign operations and non-integral
foreign operations are accounted for as prescribed by AS-11.
iii Exchange Fluctuation on Profit / loss of non-integral operations is
credited /debited to exchange fluctuation reserve.

7. TAXES ON INCOME
Current tax is determined on the amount of tax payable in respect of
taxable income for the year and accordingly provision for tax is
made.

The deferred tax charge or credit is recognized using the tax rates
that have been enacted or substantially enacted by the Balance
Sheet date. In terms of Accounting Standard 22 issued by ICAI,
provision for deferred tax liability is made on the basis of review at
each Balance Sheet date and deferred tax assets are recognized
only if there is virtual certainty of realization of such assets in
future. Deferred tax assets/ liabilities are reviewed at each Balance
Sheet date based on developments during the year.

8. EMPLOYMENT BENEFITS
PROVIDENT FUND:
Provident fund is a defined contribution scheme as the Bank pays
fixed contribution at pre-determined rates. The obligation of the
Bank is limited to such fixed contribution. The contributions are
charged to Profit & Loss A/c.

GRATUITY:
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation. The scheme is funded by the
bank and is managed by a separate trust.

PENSION:
Pension liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation. The scheme is funded by the
bank and is managed by a separate trust.

COMPENSATED ABSENCES:
Accumulating compensated absences such as Privilege Leave
(PL) and Sick Leave (including un-availed casual leave) are
provided for based on actuarial valuation.

OTHER EMPLOYEE BENEFITS:

Other Employee benefits such as Leave Fare Concession (LFC),
Silver jubilee award, Medical Benefits etc. are provided for based
on actuarial valuation.

PUNJAB NATIONAL BANK - GUIDELINES FOR STATUTORY AUDITORS -2016-17 20

 In respect of overseas branches and offices, the benefits in
respect of employees other than those on deputation are
accounted for as per laws prevailing in the respective countries.

9. IMPAIRMENT OF ASSETS
Impairment loss, if any, is recognized in accordance with the accounting
standard issued in this regard by ICAI and impairment loss on any
revalued asset is treated as a revaluation decrease.

10. REVENUE RECOGNITION

10.1 Income / expenditure (other than items referred to in paragraph 10.4) is
generally accounted for on accrual basis.
10.2 Income on non-performing assets is recognized on realisation as per RBI
guidelines.
10.3 Recoveries in NPA accounts (irrespective of the mode / status / stage of
recovery actions) are appropriated in the following order of priority:-
a Expenditure/out of pocket Expenses incurred for recovery (earlier
recorded in memorandum dues);
b Principal irregularities i.e. NPA outstanding in the account.
c) Towards the interest irregularities/accrued interest.

10.4 Commission (excluding on Government Business), interest on overdue

bills, exchange, locker rent, income from merchant banking transactions
and dividend income are accounted for on realization and insurance
claims are accounted for on settlement.
10.5 Income from interest on refund of income tax is accounted for in the year
the order is passed by the concerned authority.

11. OTHERS
11.1 Interest on unpaid and unclaimed matured term deposits are accounted
for at savings bank rate.

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