Punjab National Bank

The President of India

1. We have audited the attached Balance Sheet of Punjab National Bank as at 31st March,2011, the Profit and Loss Account and Cash Flow Statement annexed thereto for the yearended on that date, in which are incorporated the returns of (i) 20 branches andcontrolling offices audited by us (ii) 4296 branches (including 4 foreign branches and 1Offshore Banking Unit) and 112 other offices audited by other auditors and (iii) 850branches not subjected to audit. These unaudited branches account for 0.65% of advances,3.95% of deposits, 0.43% of interest income and 3.38 % of interest expenses. The branchesselected by the Bank for audit are in accordance with the guidelines issued by the ReserveBank of India.

2. These financial statements are the responsibility of the Bank's management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

3. We conducted our audit in accordance with the auditing standards generally acceptedin India. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatements. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by the management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

4. The Balance Sheet and Profit and Loss Account have been drawn up in Forms A and Brespectively of the Third Schedule to the Banking Regulation Act, 1949.

5. Emphasis of Matter:

Without qualifying our opinion, we draw attention to Note No.16 in Schedule 18 to thefinancial statements, which describes deferment of pension and gratuity liability of thebank to the extent of Rs.2658.92 crores pursuant to the exemption granted by the ReserveBank of India to the public sector banks from application of the provisions of AccountingStandard (AS) 15, Employee Benefits vide its circular no. DBOD. BP.BC/80/21.04.018/2010-11on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement inGratuity Limits - Prudential Regulatory Treatment.

6. Subject to the limitations of the audit as indicated in paragraph 1 above and asrequired by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 andalso subject to the limitations of disclosure required therein, we report that: a) In ouropinion and to the best of our information and according to the explanations given to usand as shown by the books of the Bank and in conformity with the accounting principlesgenerally accepted in India:

i. The Balance Sheet read with significant accounting policies and notes thereon, is afull and fair Balance Sheet containing the necessary particulars, and is properly drawn upso as to exhibit a true and fair view of the state of affairs of the Bank as at 31st March2011;

ii. The Profit and Loss Account read with the significant accounting policies and notesthereon shows a true balance of the profit for the year covered by the account; and

iii. The Cash Flow Statement gives a true and fair view of cash flows for the yearcovered by the statement.

b) In our opinion the Balance Sheet, Profit & Loss Account

& Cash Flow Statement comply with the applicable Accounting Standards.

c) We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purpose of our audit and have found them to besatisfactory.

d) The transactions of the Bank, which have come to our notice, have been within itspowers.

e) The returns received from the offices and branches of the Bank have been foundadequate for the purpose of our audit.