PUNJAB NATIONAL BANK HUMAN RESOURCES DEVELOPMENT DIVISION Corporate Office, Plot no.4, Sector 10, Dwarka, New Delhi August 16, 2018

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1 PUNJAB NATIONAL BANK HUMAN RESOURCES DEVELOPMENT DIVISION Corporate Office, Plot no.4, Sector, Dwarka, New Delhi August 16, 18 TO ALL OFFICES HRDD Circular No. 779 Reg.: Performance Based - Employee Incentive Policy (EIP) In order to inculcate performance driven culture in Bank and reward Employees/ Business Units which are contributing significantly towards Bank s goals and corporate expectations, an Employee Incentive Policy (EIP) has been approved by the Board in its meeting dated This Policy aims to implement Enhanced Access and Service Excellence (EASE) agenda of Ministry of Finance, Government of India for Developing Personnel through identification and rewarding the top performers. At present, Bank is already having reward schemes for performers in select areas such as MD & CEO Club for Branch Heads (SMEAD Cir. no. 09 dt ), for top performers in area of recovery (Recovery Division Cir. no. 23 dt ), recognition of Digital Champions (DBD Cir no. 45 dt & 47 dt ). The Employee Incentive Policy (EIP), extends the benefit of the incentive to all the performers across different roles in various Branches/ Offices. Details of the approved policy are appended. Major Highlights of the EIP are as under: 1. The incentive policy is based on the principles of objectivity & transparency through use of system driven data. 2. The Policy covers employees working in all Branches/ Offices of the Bank. 3. Incentives under the Policy will be in form of non cash rewards as under: a. Option to purchase a memento/ article. b. Learning Opportunities: i. Specialized trainings at premier Institutes in India & Abroad. ii. Reimbursement of fees for acquiring new qualification c. Recognition: i. Certificate of Appreciation ii. Recording the achievements in employee records (HRMS).

2 4. Incentive Scheme for General Banking Branches, MCBs, LCBs, SIBs, Circles and Zones shall be administered by SMEAD, HO as per policy. Similarly, Incentive Scheme for RAPC, Currency Chest, CPPC, ZAO, and Training Centres shall be administered by respective owner Divisions. 5. Selection of General Banking Branches (upto VLBs) for incentive will be based on achievement of all specified parameters. For all other categories of Branches/ Offices, selection for incentive will be based on the performance vis a vis defined parameters/ Key Responsibility Areas. 6. Performance Parameters for ascertaining incentive eligibility of HO Divisions will be informed separately. 7. Detailed guidelines pertaining to the Employee Incentive scheme for the F.Y will be issued separately. All concerned Offices/ Divisions are requested to take note of the above and all Staff members are requested to work towards achievement of parameters as part of Employee Incentive Policy. Index: Performance Based- Employee Incentive Policy (Punit Jain) General Manager

3 EIP: Annexure I Performance Based - Employee Incentive Policy (EIP) An Incentive Policy is being introduced in the Bank to reward select top- performers identified through a Performance Management System/Process. This is also a step to move towards Enhanced Access and Service Excellence (EASE), one of the priorities of Ministry of Finance, Government of India. The policy aims to establish guidelines related to performance based incentive to reward employees who significantly contribute to the Bank goal and perform according to corporate expectations. Further, policy intents to inculcate performance driven culture with ethics in the Bank by recognizing hard work done by employees as individual and member of the team. The policy is based on the principles of objectivity, transparency and fair evaluation therefore the entire reward and recognition process is based on system based data matrix drawn and programmed for arriving at evaluation which is reflective of achievement of corporate priorities. Scope & Coverage: This policy shall be called Employee Incentive Policy (EIP). The policy covers all confirmed employees working in bank posted in offices located in India (excluding employees on deputation). The policy shall be applicable for FY & onwards subject to an annual review and shall be changed when required to align the budget, strategy and risk appetite of the Bank for each performance period. Incentive Recommending Factors: The Incentive shall be based on following determining parameters: Identification of performers through Performance Management System. Objective grading framework that distinguishes top performers. Achievement of various Budgeted Business Parameters. Recommendation of controlling Authority w.r.t. Qualitative aspects, Effort made by employee to achieve budgets, Compliance/ Inspection Reports, prudence risk taking approach, Integrity etc. Incentive Plans: Incentives to encompass following: Non Cash Rewards: - Option to purchase a memento/ article.

4 EIP: Annexure I Learning Opportunities: - Specialized trainings at premier Institutes in India & Abroad. - Reimbursement of fees for acquiring new qualification. Recognition: - Certificate of Appreciation - Recording the achievements in employee records (HRMS). Categories eligible for Incentive: Employees of the bank shall be eligible for incentive under following Categories: Category Inclusion Applicability/ Eligibility I. General Banking Branches (upto VLBs) II. III. Branches (LCBs/ MCBs/ ELBs & SIBs) Service Branches (RAPCs, Currency Chest, CPPCs) & Other offices (Training Centres, ZAOs and LDMOs) All Branches* achieving all specified parameters will be eligible for the incentive. * Note: In case, less than 3 branches qualify the above criteria, 3 top branches of the circle shall be eligible for the incentive. Based on the performance in Budgeted Parameters of the branch, total number of branches eligible for incentive shall be as under: Branch Type Number of Branches eligible for incentive LCB 1 MCB 1 ELB 3 SIB 3 Service Branch/ other offices in each category to be identified by the owner Division on their parameters : Offices Owner Division Number of Office eligible for Incentive RAPCs Retail Banking Division 3 Currency Chest Govt. Business Division 2 CPPCs Govt. Business Division 1 Training Centers LKMC, HO 1 ZAOs Inspection & Audit Division 1 LDMOs PS & FI Division 2

5 EIP: Annexure I IV. Zonal & Circle Offices Top 1 Zone & Top 3 Circles V. HO Divisions 3 HO Divisions** (** Division each from Business, Support & Control Divisions) Administration of Incentive: Administration Authority at various levels shall administer the type of incentive taking into account the achievement of business parameters and rationalization of performance in case of non fulfilment of budgets due to various issues beyond the control of the business unit. The competent authorities for the purpose of approving eligible offices for incentives in various categories shall be as under:-- Category Inclusion Administration Authority/ Incentive Committees I. General Banking Branches (upto VLBs) II. Branches (LCBs/ MCBs/ ELBs & SIBs) III. Service Branches (RAPCs, Currency Chest, CPPCs) & Other offices (Training Centres, ZAOs and LDMOs) SMEAD, HO shall be the nodal Division to place the performance of these branches to Managing Director & CEO for decision. SMEAD, HO shall be the nodal Division to place the performance of these branches to Managing Director & CEO for decision. Eligible Branch/ office to be identified by the respective owner Divisions on the specified parameters. HRDD, HO shall be the nodal Division to place the performance of these offices to Managing Director & CEO for decision. IV. Zonal & Circle Offices SMEAD, HO shall be the nodal Division to place the performance of these branches to Managing Director & CEO for decision. V. HO Divisions Performance of the Divisions (categorised under category: business/ Control/ Support) shall be based on the parameters to be advised to respective Division Separately. Further, Division may also place any other Achievements/ work done

6 EIP: Annexure I by the division in this context. The parameters for selection of eligible office shall be finalized in consultation with respective owner Division. HRDD, HO who shall be the nodal Division to place the performance of these offices to Managing Director & CEO for decision. Quantum of Incentive Applicability & Quantum of Incentive: Type of Incentive Option to purchase a memento/ article Specialized trainings at premier Institutes in India & Abroad. Reimbursement of fees for acquiring new qualification. Certificate Appreciation of Applicability & Quantum All employees under winning categories are eligible for the incentive as under: Scale Admissible amount for purchase of Memento/ article (Amount in Rs.) ZM/ GM 0000 DGM 0000 AGM Chief Manager Sr. Manager Manager Officer Clerical 8000 Sub staff 5000 Select officers form Top Branch/ Office under each category will be considered for trainings at premier Institutes in India & Abroad. - Guidelines regarding acquiring special qualification have been conveyed by the LKMC circular no.03/14 & 02/16 -Apart from the above the officers selected for incentive shall also be eligible for acquiring certification from Digital Platforms. -The Competent Authority shall be General Manager- LKMC. - Maximum Reimbursement of fees for above shall be Rs.000/- Employees covered under all categories

7 EIP: Annexure I Recording achievements employee (HRMS). the in records Employees covered under all categories Selection Criteria/ Process: In case PMS score is not available, Performance shall be calculated by relevant data drawn out of online systems & portals in the bank and put in matrix for the parameters as mentioned below. Category I: General Banking Branches (upto VLBs)*** Branches achieving all the following parameters will be eligible for the incentive: - Growth in CASA - Budget for Average Core Deposits - Budgets for Advances(Core Retail/ Agriculture/ MSME) - Budgets for Fee based income - NPA Management Category II: (LCB/MCB/ELB/SIB)*** Selection criteria of the LCB/ MCB/ SIB to be based on following Parameters: - NPA Management - Budgets for Fee based income - Reduction in RWAs Selection of ELB to be based on achievement of following Parameters: - Growth in CASA - Budget for Average Core Deposits - Budgets for Advances(Core Retail/ Agriculture/ MSME) - Budgets for Fee based income - NPA Management Category III: (Specialized Offices) - Respective owner Division shall carry out the exercise of identifying top performing offices/branches based on specified parameters as per Annexure A, with specific detailed calculations. Divisions may add or delete any parameter keeping in the view of the Business Priorities with the permission of respective General Manager.

8 EIP: Annexure I - Division shall send the recommendations to the HRDD, HO who shall be the nodal Division to place the performance of these branches to Managing Director & CEO for decision. Category IV: (Zones/ Circles)*** Selection criteria of the Zone/ Circle to be based on achievement of following Parameters: - YoY Growth in Average CASA - YoY Growth in Average Core Deposits - YoY Growth in Advances(Core Retail/ Agriculture/ MSME) - Budgets for Fee based income - NPA Management - Number of Circles/ Branches registering positive Growth (Profit) - Reduction in RWAs Category V: (HO Division) - Performance of the Divisions (categorised under category: business/ Control/ Support) shall be based on the performance parameters to be informed separately. Further, Division may also place any other Achievements/ work done by the division in this context. - HRDD, HO shall be the nodal Division to place the performance of these offices to Managing Director & CEO for decision. *** Note: Detailed marking scheme for Branches, Circles & Zones is annexed at Annexure B. Restrictions: Claw Back Clause: It is important to understand that a good decision today might have negative future consequences. In event of identification of any imprudent risks which are not consistent with the long term health of the Bank or non adherence to internal procedures and/or proper risk management in the decision-making process, all incentive will be subjected to claw back arrangements. A staff member coming under any of the category mentioned below shall not be eligible for the incentive: - Employee involved in fraud etc. during the review period. - Employee placed under suspension during the review period. - Major penalty has been inflicted upon the employee during the review period.

9 EIP: Annexure I - Any contemplated case is arising against an employee, out of cause of action happening during the review period. - Prosecution for criminal charge is pending. - Employee categorized under LODI/ Agreed List during review period. Miscellaneous: To be eligible for incentive, rating of an officer in APAR for the preceding 5 years should Very Good or above. An employee who is already eligible for incentive under any other incentive scheme of the Bank during the review period, shall not be eligible for incentive under the scheme issued under this policy. For purposes of paying amount for purchase of memento/ article, the staff working or who were working at such offices for the period for which the office has got the award, would be eligible for the incentive even though they may have been transferred/ retired, on a pro-rata basis, for the period of stay at such offices. Incentive amount shall be calculated as under: Amount of Incentive X No. of days worked in the incentive winning office 365 Sanctioned leave will be included for number of days for basis of calculation of incentive. An employee who has availed more than 1 month leave during the review period shall be eligible for the prorata incentive. Part Time Sweepers are also covered as part of sub-staff for payment of amount of incentive for purchase of memento/ article on prorata basis. Data generated from the system [wherever applicable] shall be taken for calculation of score. An employee on deputation working in incentive winning branches/ offices shall be eligible for incentive; vice-versa is not applicable. Only employees having more than 6 months of residual service as on shall be eligible for the incentive. The incentive would not be available to staff posted in subsidiaries/ outside agencies on deputation and those on sabbatical leave/ loss of pay. An employee who has resigned from the services of the bank will not be eligible for getting incentive. The SMEAD, HO shall provide the list of offices eligible for the incentive under category I, II & IV to HRDD, HO after finalization.

10 EIP: Annexure I After completion of disbursement process, ZO/COs would send a consolidated statement containing the names of employees category wise and amount of incentive paid for purchase of memento/ article under various categories to HRDD, HO. The total amount paid should tally with the amount entered in HRMS and appearing in revenue statement of the Circle/Zone. After approval by HO, Zone/Circle Office would calculate and enter the amount of incentive for purchase of memento in HRMS of each employee and pay the eligible amount to the debit of Expenditure Head Performance Linked Incentive paid to staff in the CBS system, at Circle Office/ Zone. A record of approval by Circle Head and HO approvals shall be kept for audit. Operational Guidelines & Other Modalities: The policy depicts the broad guidelines for providing incentives to employees based on the existing processes and PMS Score (wherever applicable). The Managing Director & CEO is empowered to approve the detailed operational guidelines, modification (if any) and modalities of this policy. **********

11 Annexure -A Selection criteria/ parameters for Specialized Offices/ Branches I. Parameters for Selection of LDMO: S.No. Parameters 1 Annual Credit Plan (% Achievement) & Total Priority Sector advances and Agriculture Advances vis-à-vis budgets allotted to LDMO by circle office (Growth Rate). 2 Total Deposits vis-à-vis budgets allotted to LDMO by circle office (Growth Rate). 3 Total Agriculture Investment Credit- Fresh Sanction/ Disbursement vis-à-vis budgets allotted to LDMO by circle office. 4 No. of SHGs credit linked during the year. 5 Financial Inclusion No. of BSBDA A/cs/ PMSBY/ PMJJBY/ APY opened during the year. Activation of SSAs/ BC Agents during the year. 6 Recovery / Reduction in NPA and Fresh Slippage. II. Parameters for Selection of RAPC: Marks PARAMETERS/ SCORE Total Sanctioned Amount Below 40<50 50<75 75<0 0< (Housing+Eucation+Mortgage) (Amt. in Crs.) 40 5 and above Lead Conversion Rate Below 50<60 60<70 70<80 80<90 90 and (In %age) 50 above Turn Around Time (TAT) More More More More More Upto 7 {In Days} than than 13 than 11 than 9 than 7 15 upto 15 upto 13 upto 11 upto 9 Sanction Per Day Per Officer [(Sanction/No. of Officer)/ No. of Working Days] {Amt in cr} Below < < < <1 1 and above LAPS Usage (Housing & Below 50<65 65<80 80<90 90<95 95< Education) {In %age} TAT for vetting of loan proposal entered through E- Veda {In Hrs.} 50 More than 1 0 1<96 96<72 72<48 48<24 Less than 24

12 Annexure -A III. Parameters for Selection of Training Centre/college: 1. Programme & Participation: PARAMETERS Targets Achievements KRAs Maxi. Marks* No. of programme to be conducted No. of Participant attended No. of programme where participants are more than 30 No. of employees (in a command area of college/ centre) who have not been imparted training during the last 2 years based on figure at the end of the F.Y Faculty Utilization: No. of programme conducted No. of Faculty No. of Session taken Average Session per faculty No. of Publication No. of Research Assignment submitted No. of outside training attended Maxi. Marks* 3. Programme & Coordination : (Based on feedback received from participants) Category Outstanding Excellent Very Good Good Needs Improvement Marks* Programme Coordination 4. Logistics: Category Excellent Very Good Catering Accommodation Cleanliness Library 5. Classroom Utilization: Classrooms Capacity Training Days Maximum Capacity Available Good Satisfactory Unsatisfactory Marks* 15 Actual Capacity utilization % utilization Marks* Compliance : MARD Rating Timely Closure of MARD Compliance of TMC Minutes Compliance of LKMC reporting system New Initiative if any Marks*

13 Annexure -A IV. Parameters for Selection of Currency Chest: S. No Parameter 1. Levy of penalty/penal interest by RBI on account of i) detection of shortage/ forged notes in the remittances made to RBI during FY ii) Detection of shortage/ forged notes in chest balances during conduct of inspection of the chest. iii) Non compliance of operational guidelines of RBI/violation of any terms & conditions of agreement with RBI/deficiency in service 2. Levy of Penal Interest by RBI on account of delayed/ wrong/non reporting of Currency Chest transactions during FY Maintenance of average cash ratio of the branches attached to the chest as per average budget allocated 4. Cash Handling charges recovered from linked other bank branches and non linked other bank branches. Data/Document to be submitted Date-wise detail of Penalty/penal interest levied by RBI during FY, with reasons Date-wise detail of penal interest levied by RBI during FY, with reasons Provide list of branches attached and cash retention fixed for each branch and achievement of each branch for March 19. Furnish date wise amount of cash handling charges as under: Charges recovered for non-linked other bank branches prior to delinking : Charges recovered from linked other bank branches : Marks Closure of Internal Annual Inspection Report/ RBI Inspection Report 6. Sorting of all Cash Receipts on daily basis and kept in chest and maintenance of cash sorting Register (Copy of sorting register be enclosed) Date of submission of IR.. Date of closure.. Please ensure that Note Sorting Register is maintained by the Currency Chest. Copy of Note Sorting Register maintained in the chest for any two months from April 18 to March 19 be submitted.

14 Annexure -A 7. All remittances of soiled notes to RBI are recounted, resorted on Note Sorting Machine and suspect notes are checked manually by the person accompanying remittance to ensure remittance is free from shortage, counterfeit notes and issuable notes. 8. Daily and correct ICCOM reporting to Link Office and RBI within stipulated period. As per S. no. 1 As per S. No. 2 V. Parameters for Selection of CPPC: Sl. Name of parameter No. 1 IR Rating Rating as per last IR Whether it is LOW RISK or MEDIUM RISK 2 Outstanding entries of Pension reimbursement / Imprest suspense / sundry /Non customer account as on Productivity Calculation of Productivity of all activities shall be done as under: Approved Norms for activity is say a Actual volume is say B Productivity of CPPC in activity B/A X 0 Productivity Norms Production activity New PPOs entered / authorised Modifications in existing accounts 4 Income activity (Earlier the better) Receipt of Agency Commission No.of Accounts No.of Accounts Per Per Month by Month by SWO SA/Officer No. of days after completion of Quarter Days / Days / 30 Days/>30 Days Marks Distribution of Agency Commission to Branches after receipt Days / Days / 30 Days/>30 Days

15 Annexure -A VI. Parameters for Selection of ZAO: S. Parameters & Max. Score (Total 0) for F.Y No. 1 Overdue Regular Inspection Reports out of Total Reports >% 0 >7% to % 8 >5% to 7% 12 >3% to 5% 15 Up to 3% Overdue 2 %age of QCAR closed by rectification of irregularities within stipulate period Upto 65% 0 >65% to 80% 8 >80% to 90% 12 >90% to 95% 15 >95% to0% 3 Average monthly %age of rectification of regular Inspection irregularities Average % of rectification of irregularities O/s at the beginning and identified during the month. Upto 50% 0 > 50% to 60% 8 > 60% to 70% 12 > 70% 4 Up-gradation in risk rating of Branches. ZAOs having > 90% Low Risk Rated Branches ZAOs having > 80% to 90% Low Risk Rated Branches 6 ZAOs having > 70% to 80% Low Risk Rated Branches 4 ZAOs having 70% and below Low Risk Rated Branches 0 5 No. of Limitation Expired cases % of total no. of loan a/cs >5 lac 2 to 5 lac & < 2 lac Above 3% 0 Above 5% 0 Above 5% 0 <3% 2 <3% 2 < 5% 2 <1% 4 <1% 4 6 Compliance Audit Audit conducted on pro rata basis i) Target = ii) Conducted = iii) Achievement 0% iv ) Achievement 95 to <0% 12 v) Achievement 90 to <95 % 8 vi) Achievement <90% 0 Score Allocated Total Score (i.e. 1 to 6) 0 0 **********

16 HRDD Circular No.779 Dated: Annexure B Marking Scheme for Branches, Circles & Zones I. Business Parameters for General Banking Branches (incl. ELBs) S.No. Parameter Max. Marks 1 Deposits 30 a Average Core Deposit - YOY Growth 15 b Growth in CASA Deposit over last year Advances 25 a Core Retail Advances Absolute YOY Growth b MSME Advances Absolute YOY Growth 8 c Agri Advances Absolute YOY Growth 7 3 Fee Based Income 15 a Budget Achievement for Fee Based Income 15 4 NPA Management 30 a Achievement of NPA terminal budget b Total Reduction in GNPA as per Budget [Cash Recovery + 5 Upgradation] c NPA Slippage as % age to standard advances on the close of last FY 5 Total 0 II. S.No. Parameter Business parameters for LCBs/ MCBs/ SIBs 1. NPA Management 45 a Achievement of NPA terminal budget 25 b Total Reduction in GNPA as per Budget [Cash Recovery + Upgradation] c NPA Slippage as % age to standard advances on the close of last FY 2. Fee Based Income 25 a Fee Based Income [Budget Achievement] Reductions in RWAs 30 Max. Marks a Credit RWA to Credit ratio (Decrease over previous year) 30 Total 0

17 HRDD Circular No.779 Dated: Annexure B III. Business parameters for Zones & Circles S.No. Parameter Max. Marks 1. Deposits 30 a Average Core Deposit [Budget vis a vis achievement] 15 b Growth in CASA Deposit over last year Advances 15 a Core Retail Advances Absolute Budget vis a vis achievement 5 b MSME Advances Absolute Budget vis a vis achievement 5 c Agri Advances Absolute Budget vis a vis achievement 5 3. NPA Management 25 a Achievement of NPA terminal budget 15 b Total Reduction in GNPA as per Budget [Cash Recovery + 5 Upgradation] c NPA Slippage as % age to standard advances on the close of last FY 5 4 Fee Based Income a Fee Based Income [Budget Achievement] 5 Circles/ Branches registering Positive Growth a Reduction in number of branches making loss for more than 2 years. 6 Reductions in RWAs a Credit RWA to Credit ratio (Decrease over previous year) Total 0