Punjab National Bank: implementing core banking solution

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502
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nt. J. Services Technology and Managemen
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, Vol. 26, No. 6, 2020
Copyright © 2020 Inderscience Enterprises Ltd.
Punjab National Bank: implementing core banking
solution
Bala Krishnamoorthy*
School of Business Management,
NMIMS University,
V.L. Mehta Road, JVPD Scheme,
Vile Parle West, Mumbai, India
Email: balak@nmims.edu
*Corresponding author
Archana Shivkumar
Navdurga Apartments,
Govandi Station Road,
Deonar, Mumbai 400-088, India
Email: archana86@gmail.com
Abstract: This case study narrates Punjab National Bank’s (PNB) journey
from a computerised bank to a core banking solution (CBS) operated bank. It
provides a brief background on the bank’s vision for achieving long-term
growth followed by a short introduction to the concept of CBS. This case study
explores PNB’s CBS implementation process in detail and provides a road map
for other banks to replicate the CBS system. The case further analyses the
competitive advantages especially the first mover advantage gained by PNB
due to CBS, and impact of CBS on its market value. The comparative
advantages gained by PNB due to CBS and its impeccable contribution towards
human resource management (HRM), business diversification, and financial
inclusions have been analysed. The case identifies potential challenges likely to
be encountered by PNB in the future with respect to maintenance of CBS
systems.
Keywords: core banking solution; CBS; first-mover advantage; comparative
performance; market value; business diversification; financial inclusion; CBS
implementation phases.
Reference to this paper should be made as follows: Krishnamoorthy, B. and
Shivkumar, A. (2020) ‘Punjab National Bank: implementing core banking
solution’, Int. J. Services Technology and Management, Vol. 26, No. 6,
pp.502–519.
Biographical notes: Bala Krishnamoorthy has about 28 years of work
experience, (teaching and consulting) and is presently an Associate Dean and
Professor of Business Strategy at the School of Business Management NMIMS
University, Mumbai. She holds a PhD from the JBIMS Mumbai. She has
contributed to institutional development and has been part of the board of
management at the NMIMS University. She has been area chair for strategy for
the past ten years. She has held positions of institutional responsibilities for

Punjab National Bank: implementing core banking solution 503
industry partnership, chairperson for admissions and faculty in charge for
career advancement, industry institute partnership cell IIPC, etc. She has also
developed Industry electives for adding value to the teaching-learning process
in the MBA program.
Archana Shivkumar holds a post-graduation in Financial Engineering, with an
MA in Economics. She has three years work experience with Maersk ship
liners.
1 Introduction
Core banking solution (CBS) encompassed interconnecting the bank’s branches so as to
enable the customers to carry out common transactions and various other services
virtually from any part of the world. It involved the integration of the core functions of
various departments and verticals of the bank. After the first phase of successful
implementation of computerisation, PNB’s management recognised the opportunities and
benefits inherent in leveraging technology to achieve faster business growth. Moreover,
they recognised that every department is an integral part of the business and a one-stop
solution is needed to combine the expertise of all. Consequently, the bank will be in a
position to provide quality services in a faster and more cost-efficient manner. This in
turn would foster greater business growth and expansion. In other words, the
management wanted to leverage the bank’s strengths in every domain. Therefore, PNB’s
management wanted to move towards CBS.
1.1 Case lead
After the initial phase of successful implementation of the recommendations of
Narasimhan Committee and Organisational Development Interventions (ODI) in the
areas of restructuring organisational structure, human resource systems and procedures,
the chairman and managing director (CMD) decided to plan a strategy for a growth
phase. Accordingly, in 2001, PNB conducted a series of brainstorming sessions involving
its officers, senior executives, and Board members. The Head of human resources (HR)
department was skeptical about the business strategy to be adopted and the availability of
skilled manpower required for fulfilling the business projections as expected by the
CMD. After analysing the results of the first phase of computerisation, it was decided that
during the next decade the bank can leverage technology to realise the tremendous
potential available for growth.
Considering the huge projected business growth, technology appeared to be the sole
solution provider. Others argued that the real resource for any organisation are the human
resources and the machine is only a ‘garbage in-garbage out’ (GIGO) system. The
marketing people argued that banks cannot survive in the future without going out and
marketing its products. All the general managers (GMs) and directors contributed their
views; however, the question of whether CBS could contribute significantly in providing
competitive advantage remained unanswered.

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After patiently listening to all the views, the CMD felt that the future of the business
cannot be seen in isolation in terms of HR, information technology (IT) or marketing, and
there should be a one-stop solution which combines the expertise of all the departments.
For this, they had to formulate a strategy which would leverage their strength in HR, IT,
and marketing. When senior executives started deliberations on the ideas provided by the
CMD, a new road map for decadal growth emerged.
2 Legacy of Punjab National Bank
Punjab, since its annexure by the British in the year 1849, experienced rapid economic
development and rise of the elite class. The idea of ‘Swadeshi’ bank, proposed by
Rai Mool Raj of Arya Samaj, emphasised on setting-up a national bank as large amounts
of Indian capital were being exploited by the British to earn substantial profits from
English banks and enterprises. However, only a paltry sum was being paid as interest to
the owners of Indian capital. At his insistence Lala Lajpat Rai (Lalaji) distributed
circulars to a close set of friends requesting them to collaborate for the development of an
Indian Joint Stock Bank. Lala Harkrishan Lal, who had returned from England with
innovative ideas on commerce and industry, was eager to give the ideas a shape. Due to
these pioneering efforts of Lalaji, PNB came into existence on May 19, 1894. The bank
opened its doors to the general public on April 12, 1895. The first board comprised
eminent individuals like Sardar Dayal Singh Majithia, Lala Lalchand, Kali Prosanna Roy,
Lala Harkishan Lal, E.C. Jessawala, Lala Prabhu Dayal, Lala Dholan Dass and Bakshi
Jaishi Ram. The sole objective of the bank was to contribute to economic development of
the country.
The first branch was established in Lahore, British India (now in modern-day
Pakistan) with Lalaji as the first account holder and his younger brother as the first bank
manager. The total staff strength was nine and the total monthly salary amounted to
Rs.320. The bank’s authorised capital was Rs.200,000 and working capital was
Rs.20,000. The bank declared a 4% dividend within seven months of operation. The
second branch was opened in Rawalpindi, British India (now in modern-day Pakistan) in
1900 and Lalaji joined the board of directors. In 1913, the Indian banking industry
suffered a major setback due to the fall of Peoples Bank of India but PNB managed to
stay afloat.
The period from 1926 to 1936 was hostile, and worsened due to the great depression
that commenced in 1929. Post this period, many well-known freedom fighters and leaders
of India started maintaining accounts in PNB and the bank achieved record growth in the
period 1941–1946. The number of branches increased from 71 to 278. Total amount of
deposits increased from Rs.100 million to Rs.620 million.
However, PNB suffered turbulence due to the partition of India in 1947. The bank’s
head-quarter was shifted from Lahore to New Delhi. Many staff members became
victims of the widespread riots. The bank had to close 92 branches in West Pakistan that
resulted in the loss of 40% of the total deposits. However, PNB conducted its duties with
honesty and integrity and repaid the deposits to the displaced victims on both sides of the
border. Thus, PNB became an epitome of trust. In 1951, PNB took over Bharat Bank. In
1962, the Indo Commercial Bank amalgamated with PNB. By 1969, deposits rose to
Rs.3,550 million, advances to Rs.2,430 million, and number of branches to 569 (Punjab
National Bank, 2016a).

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3 Current status of Punjab National Bank
As on January 18, 2017, PNB features in the top five banks of India. It has 13 zonal
offices and 76 circle offices. It has three domestic subsidiaries, viz., PNB Investment
Services Ltd. (100% stake), PNB Insurance Broking Pvt. Ltd. (81% stake) and PNB Gilts
Ltd. (74.07% stake). Its international subsidiaries are Punjab National Bank, UK (100%
stake) and Druk PNB Ltd., Bhutan (51% stake). It has a joint venture with five regional
rural banks (RRBs) with 35% stake in each. It has entered into a joint venture with the
following entities, PNB Housing Finance Ltd. (39.08%), Everest Bank Ltd., Nepal
(20%), Principal Trustee Co Pvt. Ltd. (30%), Principal PNB Asset Management Co. Pvt.
Ltd. (21.38%), PNB MetLife India Insurance Co. Ltd. (30%), and JSC PNB Kazakhstan
(49%); the percentage in brackets represents PNB’s proportion of ownership in each of
its associates (Punjab National Bank, 2016b).
4 Core banking solutions
Technology-driven banking system was never a foreign concept to India. Mechanised
banking had forayed into the Indian Territory way back in the 1960s. The 1970s
witnessed the advent of computer-based banking. The 1980s witnessed the gradual
implementation of technology driven banking infrastructure. The starting point was the
implementation of advanced ledger posting machines (ALPMs) across various locations
in the country. At the same time, the Reserve Bank of India (RBI) announced that it was
mandatory for all banks to automate their offices at the branch level.
In the opening phase of computerisation, most of the banks automated only their front
offices. The State Bank of India (SBI) was exceptional in this regard, as it simultaneously
automated both its front and back offices.
The second phase, popularly known as the total branch automation (TBA) phase, was
marked by complete automation wherein all banks automated both their front and back
offices at the branch level. A separate database was created for each branch.
In the third phase, some large players in the banking industry opted for the
centralised database system which comprised maintenance of a single large database and
deployment of a robust networking system. In due course, all banks migrated to the single
database model as it was cheaper to maintain and less cumbersome to operate than the
multiple database model.
The fourth phase witnessed the rise of customer-centric quality services. This
customer-focused approach led to the advent of automated teller machines (ATMs).
ATMs continue to be one of the most preferred delivery channels even today. Eventually
internet banking evolved followed by mobile banking. The RBI’s real-time gross
settlement (RTGS) system was a direct consequence of these technological
advancements. Electronic transfers and online interbank settlements made banking
processes more efficient in terms of both time and money thereby leading to greater
customer satisfaction. The fifth or the last phase which commenced in the early 2000s
saw the rise of CBS (Bindiya, 2014).
Basically, CBS is an integration of IT, communications technology, and all segments
of banking, the largest being retail and merchant banking. It is the foundation stone for
current day modern banking systems. It has extended to non-banking financial

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institutions (NBFIs) as well and enables customers to receive quality banking and
financial services with the click of a button (HCL, 2016).
CBS enables 24 × 7 banking from any location across the globe. It requires all
branches across the globe to be integrated with the help of a robust network system.
With the advent of CBS, a customer ceases to be only a branch’s customer but
becomes a bank’s customer (Bank of Baroda, 2016).
Banks in general view CBS as a boon to the banking system. The IT age has
improved the way business is conducted in various sectors and the banking sector is no
exception to this. Product and service differentiation is the key to survival in the intensely
competitive banking industry. IT not only induces time and cost efficiency in various
operations but also improves quality of products and services by facilitating
differentiation. The CBS software has in-built codes for maintenance of centralised
systems and generation of necessary reports for top management and regulatory
authorities. Cloud computing has further enhanced the benefits of CBS. Thus, CBS has
become an indispensable part of the banking business (The Karnataka State Co-operative
Urban Banks Federation, 2013).
5 Competitive advantage of CBS
The term ‘competitive advantage’ is widely used to explain how firms perform, create a
niche, and compete in the marketplace. Competitive advantage entails supernormal value
addition and profit generation. A firm has a cost advantage when it is able to deliver
products and services at a cheaper rate than its competitors without compromising on
quality. A firm has a differentiation advantage when the benefits or value derived from
the usage of its products and services exceed the benefits derived from products or
services of competing firms (Porter, 1985).
Competitive advantage is also explained in terms of resources and capabilities.
Resources that can generate competitive advantages include customer base, brand image,
production technology, goodwill of a firm, and intellectual property. Capabilities
comprise of efficient utilisation of resources available at the firm’s disposal (Quick
MBA, 2010).
In the early 90s, the competitiveness of CBS and internet banking was recognised by
many countries all over the world. In July 1994, James Mahan, the CEO of Cardinal
Bancshares, had a conversation with his brother-in-law Michael McChesney, the CEO of
Secure Ware Inc., at a family party. They were discussing an online article for green card
services which had garnered a lot of responses over the internet. This advertisement
prompted McChesney to think about setting up a virtual bank. McChesney’s firm had
experience in providing network security solutions. Thus, the amalgamation of banking
expertise of Cardinal Bancshares and network security expertise of Secure Ware led to
the birth of Security First Network Bank (SFNB) in 1995. SFNB created history by
becoming the first internet bank in the world. It was also the first bank authorised by the
USA Government to provide all services online and to receive 100% federal insurance.
Within two months of its inception, SFNB had opened 1,000 online customer accounts
and by the end of the first year it had assets worth USD41 billion. Its customer base
covered all the states in the USA. It had successfully merged with secure ware and also
raised additional capital through an initial public offering (IPO). The success of SFNB
had laid the foundations for a global online banking wave (Lee and Clark, 1998).

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In the year 1998, the success of the internet banking model in the West prompted the
Committee for Banking Industry Reforms, popularly known as the Narasimhan
Committee, to make it obligatory for all Indian banks to achieve 100% computerisation.
The committee mandated that by the end of the year 2000, all banks should have
computerised at least 70% of their total business. The move was also made with a view to
achieve financial inclusion and social equality. At that time, retail sections were more
technologically advanced than their corporate counterparts. Corporate sections, on the
other hand, were good at offering customised products whereas retail sections were
dealing with only traditional products and services.
Technology and customisation were thus disjoint. Moreover, banking services
penetration in rural and urban areas was unequal. Accessibility and quality of banking
services offered in urban areas was way higher. Thus, the masses in rural areas were left
unbanked or under-banked as compared to their urban counterparts. The pace of
technological development was also slower in India compared to the developed countries
of the world and scope for business process re-engineering (BPR) was also lower. The
Narasimhan Committee’s mandate accelerated the pace of technological advancement in
the banking sector and CBS finally entered the Indian soil in the early 2000s (Narasimhan
Committee, 1999).
6 Evolution of core banking solutions in Punjab National Bank
Keeping in mind the Narasimhan Committee’s mandate, PNB adopted a structured
process to automate 70% of its business. As a first step towards the same, the bank
entered into a pact with Nelito, an organisation that provides IT solutions to the
banking financial service insurance (BFSI) sector across emerging markets
(http://www.nelito.com/about.html, 2016). As 100% automation required deployment of
a robust local area network (LAN) infrastructure, it was an uphill task for the bank to
achieve the same within the stipulated deadline. Thus, PNB opted for partial automation
of all branches. It chose Nelito’s DOS-based application for the same as it was the most
suitable for primitive stand-alone desktops. The application was successfully tested in
one branch and gradually replicated in all the branches. However, PNB missed the
prescribed deadline and received extension till March 2001. The bank met the requisite
automation target in the extended timeframe. The bank’s personnel were put through
rigorous training sessions to work on the new applications and they gained sufficient
expertise by the extended deadline. It was a remarkable milestone for both PNB and the
training institutes that partnered with the bank to provide the requisite staff training
(Cisco Systems, 2003).
In the year 2000, PNB also initiated the preliminary steps towards 100% CBS
implementation. As PNB was the first bank in India to embark on the CBS journey, there
was no standard or set CBS model in India which could serve as a blueprint for PNB for
relative or comparative study. Thus, the bank’s top management carried out a detailed
study of the experiences of some CBS-enabled foreign banks. A special team was formed
for the same and sent to various countries to carry out the study. On the basis of the
guidelines laid down by the Vigilance Commission of India, the bank issued global
tenders inviting vendors from all over the world for CBS implementation. The top
management approved the tender document and a special internal team laid technical and

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financial specifications. In those days, there were hardly any IT vendors providing CBS
implementation services. So out of the few options available, the PNB management
zeroed down on Infosys Technologies Limited and accepted their tender offer. Through
CBS implementation PNB aimed to achieve expansion of customer base, retention of
existing customer base, growth in market share, and launch innovative products and
value-added services. Value-added services included the launch of tele-banking, mobile
banking, online banking solutions, instant customer query handling, and a plethora of
virtual banking services. With an aim to attract non-resident Indian (NRI), persons of
Indian origin (PIO) and non-resident external saving accounts (NRE) entities, the bank
adopted global banking practices to provide services at par with those of renowned
international banks. The BASEL and RBI norms pertaining to CBS, risk management,
and database management were also complied with. As a strategic move towards 100%
CBS migration, PNB first achieved 100% computerisation of all its branches in
May 2004. S.S. Kohli, the CMD of PNB stated that the bank had successfully
computerised all its 4,026 branches (1,933 rural; 788 semi-urban, 769 urban, and 536
metro branches). At that time, only 504 branches in approximately 100 cities were
CBS-driven. PNB launched an attractive service in the CBS driven branches known as
‘multi-city check book’, which can be used in any CBS-led PNB branch all over India.
Instant banking services were offered at the CBS branches with bilingual software
installed in more than 1,000 branches (Sify, 2004).
7 Partnering with information technology vendor: Infosys’s centralised
solutions
The banking sector was becoming increasingly competitive due to entry of foreign and
private banks after deregulation. On 30 March 2001, PNB announced its partnership with
Infosys Technologies Limited for deploying banking e-platform – Finacle, as a part of an
ambitious plan to deploy a new generation IT backbone. PNB was the first public sector
bank in the country to finalise and announce its long-term IT plans. PNB decided to
house various servers, security infrastructure, and storage equipment in its internal
database wing in New Delhi and hired Sun Microsystems to deploy the servers.
Infosys offered a CBS named ‘Finacle’, which is an integrated real-time system that
supports both front and back-end operations pertaining to retail banking, institutional
banking, and import-export finances. The system offers a customer relationship
management (CRM) module that comprises sales, service, and marketing functions and
fosters 24 × 7 banking. It is comprehensive enough to support large volumes of foreign
exchange transactions, process data in multiple languages, and effectively manage
multiple accounts of the same entity. Core services provided by Finacle include security,
control and audit, ledger maintenance, transaction handling, inventory management,
interest and charges, clearing, etc.
8 Implementation of core banking solutions and related issues
1 Gap study: development of systems for various banking products like deposits, loans,
SME lending, credit and debit cards, Forex, etc. and internal departments like
treasury, asset liability management (ALM), risk management were crucial apart

Punjab National Bank: implementing core banking solution 509
from strengthening of the internal management information systems (MIS). BPR was
conducted to assess the requirements of various departments and create suitable
systems and processes. Then the employees were trained to work on the new systems
adopted.
They regained employees’ trust by imparting proper training, job rotation, and
redeployment to prevent layoffs. The gap study had to be done not only for the
system requirements but also in the area of HR, which was challenging for the
management. As the first mover, PNB management faced many hurdles and finally
reaped the benefits.
2 Network design: PNB implemented a nationwide network backbone to connect all its
offices. Cisco assisted the bank in understanding and implementing the various
technologies associated with the project. The converged network infrastructure
allowed PNB to standardise the applications and software needed to provide the
banking services. The bank focused on connectivity and development of
infrastructure in rural areas.
3 Storage systems: the bank had to follow RBI’s storage requirement guidelines.
Provisions were made to store transaction data for around ten years. In some cases,
data was stored permanently.
4 Security: the security architecture had to be robust, reliable, and scalable to meet
current and future needs. Considering the huge business volume and strong customer
base, PNB ensured a high standard of system security. Modules of fraud prevention,
risk management, and system audit as well as vigilance were set-up to comply with
the regulatory requirements.
9 Punjab National Bank lead the transformation process
By 2003, PNB had 101 branches on a wide area network (WAN) and had successfully
deployed a core banking infrastructure running 175 networked ATMs. It has also
deployed a reliable security infrastructure that helps it conduct transactions within its
branches without worry. The banking major introduced numerous value-added services
like networked ATMs, tele-banking, mobile banking, internet banking, etc. Using
Straight to Processing (STP) facility, the bank made a depository set-up at its corporate
office in New Delhi and Mumbai. Shares and bonds could be dematerialised and
deposited there.
10 Road map for modernising core systems (2000–2008)
The Punjab National Bank board in consultation with Infosys Technologies Limited
approved the following phases for implementation of CBS:
Phase 1 (2000) Team selection for technology upgrade.
Phase 2 (2001) Selection of Infosys’s ‘Finacle’ system for CBS implementation.
Phase 3 (2002) Implementation of ‘Finacle’ system.

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Phase 4 (2003) Implementation of ‘Finacle’ internet banking system; implementation
of CBS in 500 branches.
Phase 5 (2005) Implementation of CBS in 1,000 branches.
Phase 6 (2007) Implementation of CBS in 2,246 branches.
Phase 7 (2008) Implementation of CBS in all branches.
In addition to the technical team of vendor, PNB had set-up an internal IT team
consisting of 50 officers with varied experience and technical qualifications. The IT team
dedicated to the conversion effort and implementation of internet banking, besides BPR
at all levels. Data migration of old customers was a huge task and the work of in-house IT
team was really impressive, which paved the path for successful implementation of CBS.
Since PNB as well as the vendor were implementing CBS for the first time in India, it
was not a smooth affair and there were delays, cost over-runs, technical hiccups, etc. But
the dedicated team of PNB did not lose hope and maintained its innovative zeal and
interest and on 6 February 2009 PNB announced the successful deployment of country’s
first ever 100% CBS. The biggest achievement was that this was achieved four months
ahead of the schedule (Telecom Tiger, 2009). As of 30 June 2016, the bank had 6,809
branches all of which were CBS-enabled (Punjab National Bank, 2016c). The
implementation of CBS provided lot of advantages to the bank. They are as follows:
1 Innovations and expansion in product and service mix: the CBS architecture
facilitates faster introduction of customised solutions for different classes of
customers. The CBS system allows easier modification of the product catalogue and
creation of customised solutions using features from the existing product and service
mix. Regulatory changes can also be easily incorporated into the system. Thus, CBS
is a one-stop solution for all the financial needs of the customers.
2 Customer-centric approach: CBS is a cost-effective solution as it lowers staff
training costs and enhances employee productivity and enhancing the quality of
solutions offered to the customers. The complete integration of front and back-office
functionalities enables staff to access complete customer and transaction information
with a click of a button. Customer relationship management (CRM) becomes easier
with CBS as each customer is viewed as a distinct market and tailor-made solutions
are offered to the customer according to their requirements.
3 Data security: information and data security is critical for all sectors especially
financial and banking sectors as they deal with vast amounts of confidential financial
data on a daily basis. CBS has inherent enhanced security features that make it
cheaper and less cumbersome for banks to deal with data security issues.
Information-auditing and detection of anomalies in encrypted data are some key
features of CBS.
4 Database management: CBS is a technological advancement that comprises multiple
servers and applications. As business expands, ever increasing volumes of data can
be easily accommodated into the system by simply adding more servers. Thus, costs
of installing new software can be done away with. Updating of legacy systems is also
a simple process in the CBS model. In other words, CBS reduces operating costs and
makes it easier to track crucial business metrics. Thus, the banks can achieve
increasing economies of scale (Temenos Banking Software Company, 2013).

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5 Business intelligence (BI): BI comprises variety of tools, software, and applications
that facilitate data analytics. Banks have enormous amounts of data at their disposal
and BI is an important mechanism through which one can make sense of raw data. It
is an umbrella term and encompasses business analytics, querying, data mining,
virtual analytical processing, and generation of reports. BI is an effective tool for
SWOT analysis and is cost-efficient too. It is used for successful implementation of
waste management and lean six sigma methodology and facilitates BPR. The prime
advantage of BI is that it enables a layman to analyse data rather than waiting for a
core technical team to run complex queries and reports. It is thus an effective
decision-making tool that bestows an organisation with sufficient levels of scalability
(Mulcahy, 2007).
11 Financial inclusion
Punjab National Bank has been playing an active role in financial inclusion initiatives for
a long time. In the beginning of the year 2009, PNB sponsored Haryana Gramin Bank to
implement CBS. According to the then CMD of PNB, K.C. Chakrabarty, and CBS at
RRBs would entail financial inclusion of under-banked and unbanked citizens (Indian
Express Agencies, 2009).
The Ministry of Finance, Government of India has stated that PNB is at the forefront
in mobilisation of deposits through Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts.
On June 30, 2016, 13.5 million PMJDY accounts were opened and deposits worth
Rs.18,140 million were mobilised. In addition, PNB has issued 9.9 million RuPay debit
cards. PNB has been a pioneer in installing micro-ATMs at business correspondent
locations to facilitate RuPay and Aadhar cards based transactions in addition to normal
financial transactions.
The bank has endorsed the Vitiya Jan Chetna Abhiyan program to increase financial
awareness among the masses. PNB also plays an active role in creating awareness on the
following schemes (Punjab National Bank, 2016d):
1 Atal Pension Yojana
2 Pradhan Mantri Jeevan Jyoti Yojana
3 Mudra loans
4 Pradhan Mantri Jan Dhan Yojana
5 Pradhan Mantri Jan Suraksha Yojana.
12 Human resource management
Employees are considered an integral part of the PNB’s culture. The bank maintains a
human resource management systems (HRMS) package, which became operational in
2006, for efficiently executing all HR functions. Centralised processing forms the core of
this HRMS package. It was named as the PNB Parivar. It comprised of an extensive
database of PNB employees, both past and present, and facilitates centralised payroll
management and processing. Apart from the core activities, it also facilitates employee

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promotions, appraisals, recruitment, training, and attendance. The payroll module
generates salary reports with details of basic pay, bonuses, share in profits (if the
company follows a profit-sharing model) and all deductions applicable. The system
facilitates online submission of appraisal forms, leave applications, reimbursements,
disclosure of assets and liabilities, and provides a wide range of employee self-services.
Thus, the HRMS combines data from various modules and makes information accessible
from a single point (Punjab National Bank, 2006).
13 Business diversification
Core banking solution has enabled PNB to diversify its business into four major areas.
The bank’s product mix has been briefly listed as follows:
13.1 Capital services
• Mutual fund: since 2004 the bank promotes and distributes a wide range of mutual
fund schemes of UTI Asset Management Company Ltd. and Principal PNB Asset
Management Company Pvt. Ltd. Both asset management companies have a wide
range of products catering to every type of investor with different risk appetites.
• Merchant banking: it encompasses financial advisory services to high net worth
individuals and organisations. The bank acts as a debenture trustee for debenture
issues having a maturity period of more than 18 months. It underwrites and manages
all types of issues. PNB also acts as a collecting banker for various types of issues. It
monitors the performances of the customer portfolios on a regular basis. The bank
has set up a new system akin to Finacle’s demand draft paying account, in its
CBS-enabled branches. The new system has the following advantages:
1 It facilitates payment of instruments online and provides status of paid
instruments with the click of a button.
2 It enables online updating of MISs pertaining to paid, unpaid, and cancelled
instruments.
3 It validates all instrument data fed into the system.
4 It ensures 100% reconciliation, a fully automated process, of dividend and
refund accounts.
5 It facilitates cancellation of lost instruments, upfront uploads of new
instruments, and re-upload of duplicate instruments.
• Depository services: the bank acts as a NSDL registered depository participant (DP)
and provides the following services:
1 Dematerialisation and Re-materialisation.
2 Initiation of dematerialised account with electronic crediting of securities
allotted under an IPO.
3 Receipt of non-cash corporate profits and benefits.

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4 Settlement of off-market trades.
5 Security mortgaging.
6 Settlement of transactions according to the intended timelines.
7 Maintenance of insurance portfolio in dematerialised/electronic form through
e-insurance account.
• Application supported by blocked amount: the application supported by blocked
amount (ASBA) facility enables an investor to pay allotment charges from their
savings/current account without an overdraft facility.
13.2 Personal services
• Insurance business: the bank provides life insurance services through its associate,
PNB MetLife Insurance Co. Ltd., whose 30% shares are held by PNB and 26%
shares by MetLife International Holdings Inc. The brand image of PNB as a
trustworthy bank coupled with the financial prowess of world’s one of the largest
global insurance providers, have made PNB MetLife a sought after insurance
provider. In the general insurance segment, PNB acts as a corporate agent of Oriental
Insurance Co. Ltd. PNB’s extensive distribution network has provided further
impetus to its insurance wing.
• Deposit schemes: the bank offers a wide range of schemes for saving deposits
(general) account, current account, fixed deposit, and capital gains account. As on
January 8, 2017, the upper limit for one-shot cash payments into deposit schemes is
Rs.500,000 at non-base branches of the bank. PNB only permits cash payments to
third parties at the base branch.
• Government business: PNB’s robust technology infrastructure coupled with its
extensive distribution network has enabled it to provide a CBS-enabled platform to
its customers to conduct government business transactions with the click of a button
and from the comfort of their homes. These include filing of income tax returns,
payment of taxes, investing in government schemes, etc.
• Agricultural banking: PNB’s agri-business cell offers cash credits or demand
loans for amounts up to Rs.5 million under agriculture credit scheme and up to
Rs.500 million under PS (Pledging Schemes) credit scheme. These loans can be
obtained by pledging any non-perishable commodity or warehouse receipts of these
commodities issued by any of the following entities:
1 The National Collateral Management Services Limited (NCMSL).
2 The Central Warehousing Corporation (CWC).
3 The National Bulk Handling Corporation (NBHC).
4 Shree Shubham Logistics Limited (SSLL).
5 Star Agri-warehousing and Collateral Management Limited (SACML).
Borrowers have to deposit 20–40% of the loan amount as margin money against the
pledged receipts or commodities. The maximum tenure for repayment is one year.

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Apart from this, a plethora of agricultural credit schemes and debt waivers are offered
to farmers. It encourages entrepreneurship among the peasantry and leads to rapid
expansion of poultry, fishery, dairy farming, horticulture, animal husbandry, sericulture,
apiculture, bio-gas plantation, and wasteland development. It also provides adequate
financing for acquisition of tractors, agricultural equipment, and appropriate storage
facilities. There are special schemes for encouraging participation of women in
agricultural activities and nurturing their entrepreneurial spirit. The PNB Farmers
Welfare Trust is a non-profit organisation whose sole objective is the up liftment of
farmers.
• Priority sector: women entrepreneurship is encouraged for development of small- or
medium-scale industries and redevelopment of sick units. There is also a special
scheme that provides women with requisite loans for establishing day-care centres.
Adequate financing is provided to Women Self-Help Groups (SHGs) to encourage
self-employment. Maximum membership allowed in SHGs is 20.
• Housing loans: property owners in rural/urban/semi-urban areas can obtain loans
against their rent receivables. Under the Pradhan Mantri Awas Yojana – housing for
all loans up to Rs.3 million are granted at lower interest rates to backward and
economically poorer classes. The PNB Gen-Next Housing Finance Scheme grants
loans to young generation salaried class at interest rates between 20% and 25%.
13.3 International services
The Punjab National Bank has a plethora of schemes for NRIs and international traders,
i.e., both importers and exporters who are constantly dealing with foreign currencies.
foreign currency non-resident (FCNR) accounts allow maintenance of money balances in
five currencies, namely, Australian Dollar (AUD), US Dollar (USD), Canadian Dollar
(CAD), Euro (EUR) and British Pounds (GBP). Wealth and income taxes are not charged
on these accounts. Interest as per applicable rates is paid on these deposits as well. The
other types of accounts or deposits that NRIs can maintain are the non-resident external
(NRE) and non-resident ordinary (NRO). An Indian resident receiving payments or
remittances in foreign currency can maintain a resident foreign currency (RFC) account.
The PNB world travel card denominated in USD/GBP/Euro is a perfect substitute for
travellers’ cheques in foreign currency. Insurance cover on losses due to
misuse/misplacement of the card is provided with an upper limit of USD5,000. NRIs can
also avail all services provided at offshore banking units (OBUs).
13.4 Corporate services
• Exim finance: issuance of letters of credit, collection of import bills, and remission of
advances against imports, credit analysis of international suppliers and utilisation of
foreign currency denominated pre-shipment credit are some of the services offered
by PNB for importers. Offering pre and post shipment finances denominated in both
domestic and foreign currency, collecting export bills, handling both inward and
outward remittances, handling of exchange earners foreign currency (EEFC)

Punjab National Bank: implementing core banking solution 515
accounts, credit scoring of international clients and offering competitive export rates
are some of the services offered by the bank to exporters. The PNB Expo Gold Card
scheme is designed in conformity with the guidelines of RBI exclusively for
exporters. The scheme enables exporters to procure export credit more easily.
• Cash management services (CMS): this service is particularly useful for corporates
having multiple branches or a robust dealer network. The Payfee service is designed
mainly for educational institutions wherein students can pay the requisite fees for the
concerned institute by simple filling a fee challan. In addition, the bank maintains a
payee database for every institute. The PNB fee portal is used by institutes having no
website of their own to facilitate online transactions. MIS reports are sent to the
institutes on a regular basis. The E-CMS is useful for all NEFT/RTGS transactions.
13.5 Door-step banking services
The door-step banking services are offered to all customers, both retail and institutional.
know your customer (KYC) norms are duly complied with. The striking features of this
service are as follows (Punjab National Bank, 2016e):
• On call pick up: on customer’s request, bank’s representative visits clients’ premises
or residence.
• Beat pick up: bank’s representative visits clients’ residence or premises on daily
basis for cash collection.
• Free of cost collection: the collection charges are waived for all clients’ who have
sufficient balances in their savings or current accounts.
• Fully insured and safe and lower service charges.
13.6 E-services
• Bharat interface for money (BHIM): this feature facilitates secure cashless
transactions from the mobile phone. It is designed by the National Payment
Corporation of India (NCPI) and is well-connected to other bank accounts and
unified payment interfaces (UPIs).
• PNB Kitty and PNB Yuva: these schemes are akin to an e-wallet. They are open to
youngsters in the age group 14–25 years.
14 The road ahead
CBS has benefitted PNB in myriad ways and the benefits are well reflected in PNB’s
financial statements in the last seven years. However, as observed in the net profit figures
for the financial years 2015–2016 (Figure 2), net profit has dipped drastically due to
increased provision (Table 1) for large number of non-performing assets.

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Table 1 Results of CBS: growth (2009–2016)
Description 31 March 2009 31 March 2016 Growth rate over period
2009–2016 (%)
Share capital 3,153 3,930 25
Reserves and surpluses 152,449 379,170 149
Deposits 2,106,592 5,530,510 163
Advances 1,584,534 4,123,260 160
Total business 3,644,630 9,653,770 165
Total assets 2,535,912 6,673,900 163
Investment 653,917 1,578,460 141
Number of branches 4,427 6,760 53
Number of ATMs 2,150 9,463 340
Operating profit 57,440 122,160 113
Total provisions 26,530 161,920 510
Net profit 20,490 −39,740 −294
Staff strength 58,205 70,801 22
Business/employee 63 136 116
Note: Rs. in millions.
Source: Punjab National Bank (2009), Punjab National Bank (2016f)
Figure 1 Total business for the period 2009 to 2016 (see online version for colours)

Punjab National Bank: implementing core banking solution 517
Table 2 Comparative Performance of PNB, SBI and all SCBs
Items PNB 2015–2016 SBI 2015–2016 ICICI 2015–2016
No. of branches 6,760 13,000 4,501
No. of ATMs 9,463 59,000 14,146
Share capital 3,930 7,763 11,632
Reserves and surplus 379,170 1,434,982 885,657
Deposits 5,530,510 17,307,224 4,214,257
Advances 4,123,260 14,637,004 4,352,639
Net investments 1,578,460 4,770,973 1,604,118
Total assets 6,673,900 22,590,630 7,206,951
Operating profit 122,160 432,580 238,630
Total provisions 161,920 1,598,756 347,264
Net profit −39740 99,510 97,263
Cost of deposit 5.85% 6.22% 5.88%
Return on advances 9.10% 10.00% 8.67%
Return on assets −0.61% 0.46% 1.49%
Capital adequacy ratio 11.28% 13.12% 16.64%
(Basel III)
Net NPA Ratio 8.61% 3.81%
Note: Amount in millions.
Source: Punjab National Bank (2016f), State Bank of India (2016a, 2016b)
ICICI Bank (2016)
Figure 2 Net profit for the period 2009–2016 (see online version for colours)
Source: Punjab National Bank (2009), Punjab National Bank (2016a),
Punjab National Bank (2010)

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Figure 3 Market value of PNB share post 100% CBS migration (see online version for colours)
In the fiscal years 2016–2017, the bank mainly aimed to recover maximum number of
non-performing assets thereby leading to drastic improvements in asset quality. In
addition, the bank will adhere to its fundamental goals of profit maximisation and
shareholder wealth maximisation and orient its business model accordingly. It will
continue with its digital banking processes to maximise growth. The growth strategy they
expect to follow in the fiscal years 2017–2018 is mobilisation of low cost deposits and
disbursement of smaller amount loans. Technology will continue to be the backbone of
its operations and adequate amounts of capital will also be maintained to avoid any
bottlenecks in business. In short, CBS as a major driver for growth cannot be denied;
CBS alone cannot guarantee or sustain growth.
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