The Punjab National Bank (PNB) has reported an increase of 12.1 per cent in net profits to Rs 1,205 crore for the second quarter of the year compared to Rs 1,074.5 crore in the same period previous year.

The country's largest nationalised lender saw an increase in interest income resulting in better than expected profits in the quarter. Net interest income for the bank rose 16 per cent to Rs 3,453 crore in the second quarter from Rs 2,977 crore in the same period last year.

Total income rose by 37.2 per cent to Rs 9,841 crore, against Rs 7,173.6 crore in the second quarter of 2010. However, the bank saw a rise in its provisioning to Rs 1,322.7 crore, which mostly due to a change in standard assets' provisioning mandated by the Reserve Bank of India (RBI).

"This year there has been a change in provisioning norms by the RBI. This has led to aggressive provisioning during the September quarter," PNB Chairman and Managing Director K R Kamath.

The central bank has raised requirement for provisioning on certain NPAs of banks. New guidelines state that the secured exposures under doubtful assets of up to one-year would attract a provision of 25 per cent, up from 20 per cent. Provisioning for standard assets of PNB went up 147 per cent rose to Rs 95 crore in the quarter. The duplication for investments accounted for Rs 161 crore.

Deposits for the bank increased 25 per cent to Rs 3.41 lakh crore, while advances were up 19.3 per cent to Rs 2.49 lakh crore. Gross non-performing assets (NPAs) increased to 2.05 per cent in the quarter.