Mar 31, 2023
SIGNIFICANT ACCOUNTING POLICIES:1. BASIS OF PREPARATION:
The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated and conform, in all material aspects, to the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), Accounting Standards (AS), pronouncements issued by The Institute of Chartered Accountants of India (ICAI), Banking Regulation Act, 1949 and accounting practices prevalent in the banking industry in India. In respect of foreign offices/branches, statutory provisions and accounting practices prevailing in the respective foreign countries are complied with, except as specified elsewhere.
The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount 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. However, actual results can differ from estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
3. REVENUE RECOGNITION: (AS 9 - Revenue Recognition)
a. Income/Expenditure is recognised on accrual basis, unless otherwise stated. In respect of foreign offices, income/expenditure is recognised as per local laws/ standards of host country.
b. Interest income is recognised on time proportion basis except interest on non-performing assets.
c. Commission on issue of Bank Guarantee and Letter of Credit is recognised over the tenure of BG/LC.
d. All other Commission and Exchange, Brokerage, Fees and other charges are recognised as income on realisation.
e. Income (other than interest) on investments in âHeld to Maturityâ category acquired at a discount to the face value, is recognised as follows:
i. On Interest bearing securities, it is recognised only at the time of sale/ redemption.
ii. On zero-coupon securities, it is accounted for over the balance tenor of the security on a constant yield basis.
f. Profit or loss on sale of investments is recognised in the Profit and Loss account. As per RBI Guidelines, in case of profit on sale of investments under âHeld to Maturity'' category, an equivalent amount (net of taxes and amount required to be transferred to Statutory Reserves) is appropriated to âCapital Reserve Account''.
g. Dividend Income is recognised when the right to receive the dividend is established.
h. Interest Income on Income-tax refund is recognised in the year of passing of assessment order.
i. Appropriation of recoveries in NPAs:
In respect of NPAs, recoveries effected except through a.) Compromise settlement /special OTS,
b.) Judgement of a CouiI/DRT/NCLT and c.) Assignment to ARC''s/SC''s. are to be made in the following order:-
⢠Charges debited to borrower''s account,
⢠Expenses/out of pocket expenses incurred but not debited,
⢠Unrealised interest,
⢠Uncharged interest,
⢠Principal
In other cases, the recoveries made are appropriated as per the order of relevant authority.
a. Advances are classified into âPerformingâ and âNonPerforming Advancesâ (NPAs) in accordance with the applicable regulatory guidelines.
b. NPAs are further classified into Sub-Standard, Doubtful and Loss Assets in terms of applicable regulatory guidelines.
c. In respect of domestic branches, NPA Provisions(On the Outstanding Advances) are made at the rates given as under:
Category of NPAs |
Uur -iR cm MldMId % of net outstanding advance |
Sub Standard:* |
|
Exposures, which are unsecured ab initio |
25% |
Unsecured exposure in respect of infrastructure loan accounts where certain safeguards such as escrow accounts are available (unsecured - infra) |
20% |
Others |
15% |
Doubtful: |
|
- Upto one year |
25% |
- One year to three years |
40% |
- More than three years |
100% |
Unsecured portion |
100% |
Loss |
100% |
d. In respect of foreign branches, classification of advances as NPAs and provision in respect of NPAs is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.
e. Provisions in respect of NPAs, unrealised interest, ECGC claims, etc. are deducted from total advances to arrive at net advances as per RBI norms.
f. In respect of Rescheduled/Restructured advances, provision is made for the diminution in the fair value of restructured advances measured in present value terms as per RBI guidelines. The said provision is reduced to arrive at Net advances.
g. In case of financial assets sold to Asset Reconstruction Company (ARC) / Securitisation Company (SC), if the sale is at a price below the net book value (NBV), (i.e. outstanding less provision held) the shortfall is debited to the Profit and Loss account as per the extant RBI guidelines issued from time to time. If the sale is at a price higher than the NBV, the excess provision on sale of NPAs may be reversed to profit and loss account in the year the amounts is received. However, any excess provision is reversed only when the cash received (by way of initial consideration only/or redemption of SR''s/PTC) is higher than the net book value (NBV) of the asset. Reversal of excess provision is limited to the extent to which cash received exceeds the NBV of the asset.
h. Provision for Standard assets, including restructured advances classified as standard, is made in accordance with RBI guidelines. In respect of foreign branches provision for Standard Assets is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.
i. Provision for net funded country exposures (Direct/ Indirect) is made on a graded scale in accordance with the RBI guidelines.
The bank has framed a policy for creation and utilisation of floating provisions. The quantum of floating provisions to be created is assessed at the end of each financial year. The floating provisions are utilised only for contingencies under extraordinary circumstances specified in the policy with prior permission of Reserve Bank of India or on being specifically permitted by Reserve Bank of India for specific purposes. These provisions are netted off from gross NPAs to arrive at Net NPAs.
6. DEBIT/CREDIT CARDS REWARD POINTS:
Provision for reward points in relation to the debit cards is provided for on actuarial estimates and Provision for Reward Points on Credit cards is made based on the accumulated outstanding points.
a. Transactions in Government Securities are
recognised on Settlement Date and all other Investments are recognised on trade date.
b. Investments are classified under "Held to
Maturity'', âHeld for Trading'' and âAvailable for Sale'' categories as per RBI guidelines. For the purpose
of disclosure in the Balance Sheet in Schedule 8, (I) âInvestments in India'' are classified under six categories viz. i.) Government Securities, ii.) Other Approved Securities, iii.) Shares, iv.) Debentures and Bonds, v.) Subsidiaries and Joint Ventures and vi.) Others and (II) âInvestments outside India'' are classified under three categories viz. i.) Government Securities, ii.) Subsidiaries and Joint Ventures abroad and iii.) Other Investments.
Classification of an investment is done at the time of its acquisition.
These comprise investments that the Bank intends to hold till maturity. Investments in equity of subsidiaries, joint ventures and associates are also categorised under Held to Maturity.
These comprise investments acquired with the intention to trade by taking advantage of short term price/interest rate movements. Securities are to be sold within 90 days from the purchase date.
These comprise investments which do not fall either under âHeld to Maturityâ or âHeld for Tradingâ category.
B. Acquisition Cost of Investment:
(i) Brokerage, commission, securities transaction tax, etc. paid on acquisition of equity investments are included in cost.
(ii) Brokerage, commission, broken period interest paid/ received on debt investments is treated as expense/income and is excluded from cost/ sale consideration.
(iii) Brokerage and Commission, if any, received on subscription of investments is credited to Profit and Loss Account.
Investments in India are valued in accordance with the RBI guidelines and investments held at foreign branches are valued at lower of the value as per the statutory provisions prevailing at the respective foreign countries or as per RBI guidelines issued from time to time.
Treasury Bills and all other discounted instruments are valued at carrying cost (ie acquisition cost plus discount accrued at the rate prevailing at the time of acquisition)
1. Investments included in this category are carried at their acquisition cost, net of amortisation, if any. The excess of acquisition cost, if any, over the face value is amortised over the remaining period of maturity using constant yield method. Such amortisation of premium is adjusted against income under the head âinterest on investmentsâ.
2. Investments in subsidiaries, joint
ventures and associates (both in India and abroad) are valued at historical cost except for investments in Regional Rural Banks, which are valued at carrying cost (i.e. book value). Suitable provision is made for diminution, other than of temporary nature, for each investment individually.
(ii) Held for Trading / Available for Sale:
1. Investments under these categories are individually valued at the market price or fair value determined as per Regulatory guidelines and only the net depreciation in each classification for each category is provided for and net appreciation is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.
2. For the purpose of valuation of quoted investments in ââHeld for Tradingâ and âAvailable for Saleâ categories, the market rates / quotes on the Stock Exchanges, the rates declared by Fixed Income Money Market and Derivatives Association (FIMMDA)/ Financial Benchmark India Pvt. Ltd. (FBIL) are used. Investments for which such rates/ quotes are not available are valued as per norms laid down by RBI, which are as under:
Classification |
Basis of Valuation |
Government Securities |
on Yield to Maturity basis |
Other Approved Securities |
on Yield to Maturity basis |
Equity Shares, PSU and Trustee shares |
at break-up value as per the latest Balance Sheet (not more than 18 months old), otherwise Re.1 per company. |
Preference Shares |
on Yield to Maturity basis |
PSU/Corporate Bonds |
on Yield to Maturity basis |
Units of Mutual Funds |
at the latest repurchase price/NAV declared by the fund in respect of each scheme |
Units of Venture Capital Funds (VCF) |
declared NAV or break-up NAV as per audited financials which are not more than 18 months old. If NAV/audited financials are not available for more than 18 months then at Re. 1/- per VCF. |
Security Receipts |
at NAV as declared by Securitisation Companies which is not more than 6 months old. |
D. Transfer of Securities between Categories:A) HTM to AFS/HFT -
i) If the security was originally placed under the HTM category at a discount it is transferred at the acquisition price / book value. After transfer, these securities are immediately re-valued and resultant depreciation, if any, is provided.
ii) If the security was originally placed in the HTM category at a premium, it is transferred to the AFS / HFT category at the amortised cost. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.
B) AFS/HFT To HTM - Transfer of scrips from AFS / HFT category to HTM category is made at the lower of book value or market value. In cases where the market value is higher than the book value at the time of transfer, the appreciation is ignored. In cases where the market value is less than the book value, the provision against depreciation held against this security is adjusted to reduce the book value to the market value and the security is transferred at the market value.
C) AFS To HFT AND VICE-VERSA - In the
case of transfer of securities from AFS to HFT category or vice-versa, the securities are not re-valued on the date of transfer and the provisions for the accumulated depreciation, if any, held are transferred to the provisions for depreciation against the HFT securities and vice-versa.
E. Non-performing Investments (NPIs) and valuation thereof:
(i) Investments are classified as performing and non-performing, based on the guidelines issued by the RBI in case of domestic offices and respective regulators in case of foreign offices.
(ii) In respect of non-performing investments, income is not recognised and provision is made for depreciation in value of such securities as per RBI guidelines.
(iii) Matured NPIs are shown under âOther Assets'' Schedule11 (Net of Provision).
F. Repo / Reverse Repo:
The securities sold and purchased under Repo/ Reverse repo are accounted as Collateralised lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/ purchase transactions and such movement of securities is reflected using the Repo/ Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity.
Costs and revenues are accounted as interest expenditure/income, as the case may be. Balance in Repo Account is classified as Borrowings and balance in Reverse Repo account is classified as Balance with Banks and Money at Call & Short Notice in the Balance sheet.
G. Investment in Security Receipts (SRs) backed by assets:-
In terms of RBI guidelines issued vide circular no RBI/DOR/2021-22/86 DOR.STR. REC.51/21.04.048/2021-22 dated September 24, 2021, the bank has revised valuation methodology in respect of SRs under securitization,
a) Investments by banks in SRs / PTCs / other securities issued by ARCs shall be valued periodically by reckoning the Net Asset Value (NAV) declared by the ARC based on the recovery ratings received for such instruments.
Provided that when bank invest in the SRs/ PTCs issued by ARCs in respect of the stressed loans transferred by them to the ARC, the bank shall carry the investment in their books on an ongoing basis, until its transfer or realization, at lower of the redemption value of SRs arrived based on the NAV as above, and the NBV of the transferred stressed loan at the time of transfer.
Provided further that when the investment by bank in SRs backed by stressed loans transferred by it, is more than 10 percent of all SRs backed by its transferred loans and issued under that securitisation, the valuation of such SRs by the bank will be additionally subject to a floor of face value of the SRs reduced by the provisioning rate as applicable to the underlying loans, had the loans continued in the books of the bank.
b) SRs/PTCs which are not redeemed as at the end of the resolution period (i.e., five years or eight years as the case may be) shall be treated as loss asset in books of the bank and fully provided for.
c) The valuation, classification and other norms applicable to investment in non-SLR instruments prescribed by RBI from time to time shall be applicable to bank investment in debentures/ bonds/ SRs /PTCs issued by ARC. However, if any of the above instruments issued by ARC is limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the bank shall reckon the NAV obtained from ARC from time to time, for valuation of such investments.
The Bank presently deals in Forex Forward Contracts, interest rate, and currency derivatives. The interest rate
derivatives dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures. Currency Derivatives dealt with by the Bank are Options, Currency Swaps and Currency Futures. Based on RBI guidelines, Derivatives are valued as under:
a. The hedge/non hedge (market making) transactions are recorded separately.
b. Income/expenditure on hedging derivatives are accounted on accrual basis.
c. Forex forward contracts are marked to market and the resultant gains and losses are recognized in the profit and loss account
d. MTM appreciation/ depreciation of hedging
derivative is first set off with the depreciation / appreciation of the corresponding underlying and the resultant depreciation is recognized. Resultant appreciation, if any, is ignored.
e. Interest Rate Derivatives and currency derivatives other than exchange traded derivatives for trading purpose are marked to market and the resulting losses, if any, are recognised in the Profit & Loss account. Net Profit if any, is ignored.
f. Exchange Traded Derivatives entered into for trading purposes are valued at prevailing market rates based on rates given by the Exchange and the resultant gains and losses are recognized in the Profit and Loss Account.
g. Gains/ losses on termination of the trading swaps are recorded on the termination date as income/ expenditure. Any gain/loss on termination of hedging swaps are deferred and recognised over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/liabilities.
h. Option fees/premium is amortised over the tenor of the option contract.
9. PROPERTY, PLANT & EQUIPMENT:
(AS 10 Property, Plant & Equipment)
a. Fixed assets are stated at historic cost, except in the case of assets which have been revalued, which are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve.
b. Cost includes cost of purchase and all expenditure such as site preparation, installation costs, professional fees, etc. incurred on the asset before it is ready to use or capable of ready to use. Subsequent expenditure incurred on assets ready to use is capitalised only when it increases the future benefits from such assets or their functioning capability.
c. 5% residual value has been kept for all the assets except for the assets with estimated useful life less than 5 Years (eg. Mobile Phones, Computers and Computer Software forming integral part of hardware), where the entire cost of the assets is amortised over the useful life.
e. In respect of additions/sale during the year, depreciation is provided on proportionate basis for the number of days the assets have been ready to use during the year.
f. The revalued portion is depreciated over the balance useful life of the assets as assessed at the time of revaluation. Such depreciation is charged to Profit & loss and equivalent amount is transferred from Revaluation Reserve to Revenue Reserve.
g. Depreciation on fixed assets outside India is provided on Straight Line Method, except at the centres where different rates/method have been prescribed by the local statutory authorities.
h. Computer Software, not forming integral part of computer hardware is classified as intangible asset and amortised over a period of 5 years.
i. In respect of leasehold land, the lease premium, if any, is amortised over the period of lease.
10. TRANSACTION INVOLVING FOREIGN EXCHANGE:
Transactions involving foreign exchange are accounted for in accordance with AS 11, âThe Effect of Changes in Foreign Exchange Ratesâ read with extant RBI guidelines:
A. Translation in respect of Integral Foreign operations: Foreign currency transactions of Indian branches have been classified as integral foreign operations and foreign currency transactions of such operations are translated as under:
i. Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount, the daily closing rate as available from Cogencis/ Reuter''s page on date of the transaction.
ii. Foreign currency monetary items are reported using the Foreign Exchange Dealers Association of India (FEDAI) closing spot rates.
iii. Foreign currency non-monetary items, which are carried in terms of historical cost, are reported using the exchange rate at the date of the transaction.
iv. Contingent liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.
v. Outstanding foreign exchange spot and forward contracts held for trading are revalued at the exchange rates notified by FEDAI for specified maturities, and the resulting notional profit or loss is recognised in the Profit and Loss account.
vi. Outstanding Foreign exchange forward
contracts which are not intended for trading are valued at the closing spot rate as advised by FEDAI. The premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.
vii. Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.
viii. Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/ losses are recognised in the Profit and Loss account.
B. Translation in respect of Non-Integral Foreign operations: Transactions and balances of foreign branches are classified as non-integral foreign operations and their financial statements are translated as follows:
i. Assets and Liabilities (monetary and nonmonetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI.
ii. Income and expenses are translated at the quarterly average closing rates notified by FEDAI.
iii. All resulting exchange differences are accumulated in a separate account âForeign Currency Translation Reserve'' till the disposal of the net investments by the bank in the respective foreign branches.
Iv. The Assets and Liabilities of foreign offices in foreign currency (other than local currency of the foreign offices) are translated into local currency using spot rates applicable to that country.
11. EMPLOYEE BENEFITS: (AS 15 Employee Benefits)A. Short Term Employee Benefits:
The undiscounted amount of short-term employee benefits, such as medical benefits etc. which are expected to be paid in exchange for the services rendered by employees are recognised during the period when the employee renders the service.
B. Long Term Employee Benefits:a. Defined Benefit Plan:-
i) Gratuity:
The Bank provides gratuity to all eligible employees. The benefit Is in the form of lump sum payments to vested employees on retirement, or on death while in employment, or on termination of employment, for an amount equivalent to 15 days basic salary payable for each completed year of service, subject to a maximum prescribed as per The Payment of Gratuity Act, 1972 or Bank of India Gratuity Fund Rules,1975, whichever is higher. Vesting occurs upon completion of five years of service. The Bank makes periodic contributions to a fund administered by trustees based on an independent actuarial valuation carried out quarterly.
ii) Pension:
The Bank provides pension to all eligible employees. The benefit Is in the form of monthly payments as per rules and payments to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs at different stages as per rules. The Bank makes monthly contribution to the pension fund at 10% of pay in terms of Bank of India Pension Regulations, 1995. The pension liability is reckoned based on an independent actuarial valuation carried out quarterly and Bank makes such additional contributions periodically to the Fund as may be required to secure payment of the benefits under the pension regulations.
i) Provident Fund:
The Bank operates a Provident Fund scheme. All eligible employees are entitled to receive benefits under the Bank''s Provident Fund scheme. The Bank contributes monthly at a determined rate (currently 10% of employee''s basic pay plus eligible allowance). These contributions are remitted to a trust established for this purpose and are charged to Profit and Loss Account. The bank recognises such annual contributions as an expense in the year to which it relates.
ii) Pension:
All Employees of the bank, who have joined from 1st April, 2010 are eligible for contributory pension. Such employees contribute monthly at a predetermined rate to the pension scheme. The bank also contributes monthly at a predetermined rate to the said pension scheme. Bank recognises its contribution to such scheme as expenses in the year to which it relates. The contributions are remitted to National Pension System Trust. The obligation of bank is limited to such predetermined contribution.
C. Other Long term Employee Benefit:
All eligible employees are entitled to the following-
i. ) Leave encashment benefit, which is a defined
benefit obligation, is provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.
ii. ) Other employee benefits such as Leave Fare
Concession, Milestone award, resettlement benefits, Sick leave etc. which are defined benefit obligations are provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.
iii. ) In respect of overseas branches and offices,
the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective territories.
12. SEGMENT REPORTING: (AS 17 Segment reporting)
The Bank recognises the business segment as the primary reporting segment and geographical segment as the secondary reporting segment in accordance with the RBI guidelines and in compliance with the Accounting Standard 17 issued by Institute of Chartered Accountants of India.
13. Lease Transactions: (AS 19 Leases)
Lease where risks & rewards of ownership are retained by lessor are classified as Operating Lease as per AS 19 (Leases). Lease expenses on such lease are recognised in Profit & Loss Account.
14. EARNINGS PER SHARE: (AS 20 Earnings per Share)
Basic and Diluted earnings per equity share are reported in accordance with AS 20 âEarnings per shareâ. Basic earnings per equity share are computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the period.
Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the end of the period.
(AS 22 Accounting for taxes on Income)
Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - âAccounting for Taxes on Incomeâ respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.
Deferred Tax adjustments comprise changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognised by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognised in the profit and loss account.
Deferred tax assets are recognised and re-assessed at each reporting date, based upon management''s judgment as to whether their realisation is considered as reasonably certain. Deferred Tax Assets are recognised on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realised against future taxable income.
(AS 28 Impairment of Assets)
âImpairment losses, if any on Fixed Assets (including revalued assets) are recognised and charged to Profit and Loss account in accordance with AS 28 âImpairment of Assetsâ. However, an impairment loss on a revalued asset is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount held in the revaluation surplus for that same asset.â
17. PROVISIONS, CONTINGENT LIABLITIES AND
CONTINGENT ASSETS: (AS 29 Provisions,
Contingent Liabilities and Contingent Assets)
As per AS 29 âProvisions, Contingent Liabilities and Contingent Assetsâ, the Bank recognises provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.
Contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefit is remote.
Contingent Assets are not recognised in the financial statements.
Share issue expenses are charged to Share Premium Account in the year of issue of shares.
Mar 31, 2022
SIGNIFICANT ACCOUNTING POLICIES1. BASIS OF PREPARATION:
The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated and conform, in all material aspects, to the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), Accounting Standards (AS), pronouncements issued by The Institute of Chartered Accountants of India (ICAI), Banking Regulation Act, 1949 and accounting practices prevalent in the banking industry in India. In respect of foreign offices/ branches, statutory provisions and accounting practices prevailing in the respective foreign countries are complied with, except as specified elsewhere.
The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount 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. However, actual results can differ from estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
a. Income/Expenditure is recognised on accrual basis, unless otherwise stated. In respect of foreign offices, income/expenditure is recognised as per local laws/ standards of host country.
b. Interest income is recognised on time proportion basis except interest on non-performing assets.
c. Commission on issue of Bank Guarantee and Letter of Credit is recognised over the tenure of BG/LC.
d. All other Commission and Exchange, Brokerage, Fees and other charges are recognised as income on realisation.
e. Income (other than interest) on investments in âHeld to Maturityâ category acquired at a discount to the face value, is recognised as follows:
i. On Interest bearing securities, it is recognised only at the time of sale/ redemption.
ii. On zero-coupon securities, it is accounted for over the balance tenor of the security on a constant yield basis.
f. Profit or loss on sale of investments is recognised in the Profit and Loss account. As per RBI Guidelines, in case of profit on sale of investments under âHeld to Maturity'' category, an equivalent amount (net of taxes and amount required to be transferred to Statutory Reserves) is appropriated to âCapital Reserve Account''.
g. Dividend Income is recognised when the right to receive the dividend is established.
h. Interest Income on Income-tax refund is recognised in the year of passing of assessment order.
i. Appropriation of recoveries in NPAs:
In respect of NPAs, recoveries effected except through a.) compromise settlement /special OTS, b.) Judgement of a Court/DRT/NCLT and c.) Assignment to ARC''s/SC''s. are to be made in the following order:-
⢠Charges debited to borrower''s account,
⢠Expenses/out of pocket expenses incurred but not debited,
⢠Unrealised interest,
⢠Uncharged interest,
⢠Principal
In other cases, the recoveries made are appropriated as per the order of relevant authority.
a. Advances are classified into âPerformingâ and âNonPerforming Advancesâ (NPAs) in accordance with the applicable regulatory guidelines.
b. NPAs are further classified into Sub-Standard, Doubtful and Loss Assets in terms of applicable regulatory guidelines.
c. In respect of domestic branches, NPA Provisions are made at the rates given as under:
d. In respect of foreign branches, classification of advances as NPAs and provision in respect of NPAs is made as per the regulatory requirements prevailing at the respective foreign countries or
as per guidelines applicable to domestic branches, whichever is stringent.
e. Provisions in respect of NPAs, unrealised interest, ECGC claims, etc. are deducted from total advances to arrive at net advances as per RBI norms.
f. In respect of Rescheduled/Restructured advances, provision is made for the diminution in the fair value of restructured advances measured in present value terms as per RBI guidelines. The said provision is reduced to arrive at Net advances.
g. In case of financial assets sold to Asset Reconstruction Company (ARC) / Securitisation Company (SC), if the sale is at a price below the net book value (NBV), (i.e. outstanding less provision held) the shortfall is debited to the Profit and Loss account as per the extant RBI guidelines issued from time to time. If the sale is at a price higher than the NBV, the excess provision on sale of NPAs may be reversed to profit and loss account in the year the amounts is received. However, any excess provision is reversed only when the cash received (by way of initial consideration only/or redemption of SR''s/PTC) is higher than the net book value (NBV) of the asset. Reversal of excess provision is limited to the extent to which cash received exceeds the NBV of the asset.
h. Provision for Standard assets, including restructured advances classified as standard, is made in accordance with RBI guidelines. In respect of foreign branches provision for Standard Assets is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.
i. Provision for net funded country exposures (Direct/ Indirect) is made on a graded scale in accordance with the RBI guidelines.
The bank has framed a policy for creation and utilisation of floating provisions. The quantum of floating provisions to be created is assessed at the end of each financial year. The floating provisions are utilised only for contingencies under extraordinary circumstances specified in the policy with prior permission of Reserve Bank of India or on being specifically permitted by Reserve Bank of India for specific purposes. These provisions are netted off from gross NPAs to arrive at Net NPAs.
6. DEBIT/CREDIT CARDS REWARD POINTS:
Provision for reward points in relation to the debit cards is provided for on actuarial estimates and Provision for Reward Points on Credit cards is made based on the accumulated outstanding points.
a. Transactions in Government Securities are recognised on Settlement Date and all other Investments are recognised on trade date.
b. Investments are classified under ''Held to Maturity'', âHeld for Trading'' and âAvailable for Sale'' categories as per RBI guidelines. For the purpose of disclosure in the Balance Sheet in Schedule 8, (I) âInvestments in India'' are classified under six categories viz. i.) Government Securities, ii.) Other Approved Securities, iii.) Shares, iv.) Debentures and Bonds, v.) Subsidiaries and Joint Ventures and vi.) Others and (II) âInvestments outside India'' are classified under three categories viz. i.) Government Securities, ii.) Subsidiaries and Joint Ventures abroad and iii.) Other Investments.
Classification of an investment is done at the time of its acquisition.
These comprise investments that the Bank intends to hold till maturity. Investments in equity of subsidiaries, joint ventures and associates are also categorised under Held to Maturity.
These comprise investments acquired with the intention to trade by taking advantage of short term price/interest rate movements. Securities are to be sold within 90 days from the purchase date.
These comprise investments which do not fall either under âHeld to Maturityâ or âHeld for Tradingâ category.
B. Acquisition Cost of Investment:
(i) Brokerage, commission, securities transaction tax, etc. paid on acquisition of equity investments are included in cost.
(ii) Brokerage, commission, broken period interest paid/ received on debt investments is treated as expense/ income and is excluded from cost/sale consideration.
(iii) Brokerage and Commission, if any, received on subscription of investments is credited to Profit and Loss Account.
Investments in India are valued in accordance with the RBI guidelines and investments held at foreign branches are valued at lower of the value as per the statutory provisions prevailing at the respective foreign countries or as per RBI guidelines issued from time to time.
Treasury Bills and all other discounted instruments are valued at carrying cost (ie acquisition cost plus discount accrued at the rate prevailing at the time of acquisition)
1. Investments included in this category are carried at their acquisition cost, net of amortisation, if any. The excess of acquisition cost, if any, over the face value is amortised over the remaining period of maturity
using constant yield method. Such amortisation of premium is adjusted against income under the head âinterest on investmentsâ.
2. Investments in subsidiaries, joint ventures and associates (both in India and abroad) are valued at historical cost except for investments in Regional Rural Banks, which are valued at carrying cost (i.e. book value). Suitable provision is made for diminution, other than of temporary nature, for each investment individually.
(ii) Held for Trading / Available for Sale:
1. Investments under these categories are individually valued at the market price or fair value determined as per Regulatory guidelines and only the net depreciation in each classification for each category is provided for and net appreciation is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.
For the purpose of valuation of quoted investments in ââHeld for Tradingâ and âAvailable for Saleâ categories, the market rates / quotes on the Stock Exchanges, the rates declared by Fixed Income Money Market and Derivatives Association (FIMMDA)/ Financial Benchmark India Pvt. Ltd. (F BIL) are used. Investments for which such rates/quotes are not available are valued as per norms laid down by RBI, which are as under:
Classification |
Basis of Valuation |
Government Securities |
on Yield to Maturity basis |
Other Approved Securities |
on Yield to Maturity basis |
Equity Shares, PSU and Trustee shares |
at break-up value as per the latest Balance Sheet (not more than 18 months old), otherwise Re.1 per company. |
Preference Shares |
on Yield to Maturity basis |
PSU/Corporate Bonds |
on Yield to Maturity basis |
Units of Mutual Funds |
at the latest repurchase price/ NAV declared by the fund in respect of each scheme |
Units of Venture Capital Funds (VCF) |
declared NAV or break-up NAV as per audited financials which are not more than 18 months old. If NAV/audited financials are not available for more than 18 months then at Re. 1/- per VCF. |
Security Receipts |
at NAV as declared by Securitisation Companies which is not more than 6 months old. |
D. Transfer of Securities between Categories:A) HTM to AFS/HFT -
i) If the security was originally placed under the HTM category at a discount it is transferred at the acquisition price / book value. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.
ii) If the security was originally placed in the HTM category at a premium, it is transferred to the AFS / HFT category at the amortised cost. After transfer, these securities are immediately re-valued and resultant depreciation, if any, is provided.
B) AFS/HFT TO HTM- Transfer of scrips from AFS / HFT category to HTM category is made at the lower of book value or market value. In cases where the market value is higher than the book value at the time of transfer, the appreciation is ignored. In cases where the market value is less than the book value, the provision against depreciation held against this security is adjusted to reduce the book value to the market value and the security is transferred at the market value.
C) AFS TO HFT AND VICE-VERSA - In the case of transfer of securities from AFS to HFT category or vice-versa, the securities are not re-valued on the date of transfer and the provisions for the accumulated depreciation, if any, held are transferred to the provisions for depreciation against the HFT securities and vice-versa.
E. Non-performing Investments (NPIs) and valuation thereof:
(i) Investments are classified as performing and nonperforming, based on the guidelines issued by the RBI in case of domestic offices and respective regulators in case of foreign offices.
(ii) In respect of non-performing investments, income is not recognised and provision is made for depreciation in value of such securities as per RBI guidelines.
(iii) Matured NPIs are shown under âOther Assets'' Schedule11 (Net of Provision).
The securities sold and purchased under Repo/ Reverse repo are accounted as Collateralised lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/ purchase transactions and such movement of securities is reflected using the Repo/ Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity. Costs and revenues are accounted as interest expenditure/income, as the case may be. Balance in Repo Account is classified as Borrowings and balance in Reverse Repo account is classified as Balance with Banks and Money at Call & Short Notice in the Balance sheet.
G. Investment in Security Receipts (SRs) backed by assets:-
In terms of RBI guidelines issued vide circular no RBI/ DOR/2021 -22/86DOR.STR.REC.51/21.04.048/2021-22 dated September 24, 2021, the bank has revised valuation methodology in respect of SRs under securitization,
a) Investments by banks in SRs / PTCs / other securities issued by ARCs shall be valued periodically by reckoning the Net Asset Value (NAV) declared by the ARC based on the recovery ratings received for such instruments.
Provided that when bank invest in the SRs/PTCs issued by ARCs in respect of the stressed loans transferred by them to the ARC, the bank shall carry the investment in their books on an ongoing basis, until its transfer or realization, at lower of the redemption value of SRs arrived based on the NAV as above, and the NBV of the transferred stressed loan at the time of bank.
Provided further that when the investment by bank in SRs backed by stressed loans transferred by it, is more than 10 percent of all SRs backed by its transferred loans and issued under that securitisation, the valuation of such SRs by the bank will be additionally subject to a floor of face value of the SRs reduced by the provisioning rate as applicable to the underlying loans, had the loans continued in the books of the bank.
b) SRs/PTCs which are not redeemed as at the end of the resolution period (i.e., five years or eight years as the case may be) shall be treated as loss asset in books of the bank and fully provided for.
c) . The valuation, classification and other norms
applicable to investment in non-SLR instruments prescribed by RBI from time to time shall be applicable to bank investment in debentures/ bonds/ SRs /PTCs issued by ARC. However, if any of the above instruments issued by ARC is limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the bank shall reckon the NAV obtained from ARC from time to time, for valuation of such investments.
The Bank presently deals in Forex Forward Contracts, interest rate, and currency derivatives. The interest rate derivatives dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures. Currency Derivatives dealt with by the Bank are Options, Currency Swaps and Currency Futures. Based on RBI guidelines, Derivatives are valued as under:
a. The hedge/non hedge (market making) transactions are recorded separately.
b. Income/expenditure on hedging derivatives are accounted on accrual basis.
c. Forex forward contracts are marked to market and the resultant gains and losses are recognized in the profit and loss account
d. MTM appreciation/ depreciation of hedging derivative is first set off with the depreciation / appreciation of the corresponding underlying and the resultant depreciation is recognized. Resultant appreciation, if any, is ignored.
e. Interest Rate Derivatives and currency derivatives other than exchange traded derivatives for trading purpose are marked to market and the resulting losses, if any, are recognised in the Profit & Loss account. Net Profit if any, is ignored.
f. Exchange Traded Derivatives entered into for trading purposes are valued at prevailing market rates based on rates given by the Exchange and the resultant gains and losses are recognized in the Profit and Loss Account.
g. Gains/ losses on termination of the trading swaps are recorded on the termination date as income/ expenditure. Any gain/loss on termination of hedging swaps are deferred and recognised over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/liabilities.
h. Option fees/premium is amortised over the tenor of the option contract.
9. PROPERTY, PLANT & EQUIPMENT:
a. Fixed assets are stated at historic cost, except in the case of assets which have been revalued, which are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve.
b. Cost includes cost of purchase and all expenditure such as site preparation, installation costs, professional fees, etc. incurred on the asset before it is ready to use or capable of ready to use. Subsequent expenditure incurred on assets ready to use is capitalised only when it increases the future benefits from such assets or their functioning capability.
c. 5% residual value has been kept for all the assets except for the assets with estimated useful life less than 5 Years (eg. Mobile Phones, Computers and Computer Software forming integral part of hardware), where the entire cost of the assets is amortised over the useful life.
d. The rates of depreciation and method of charging depreciation is given below:
e. In respect of additions/sale during the year, depreciation is provided on proportionate basis for the number of days the assets have been ready to use during the year.
f. The revalued portion is depreciated over the balance useful life of the assets as assessed at the time of revaluation. Such depreciation is charged to Profit & loss and equivalent amount is transferred from Revaluation Reserve to Revenue Reserve.
g. Depreciation on fixed assets outside India is provided on Straight Line Method, except at the centres where different rates/method have been prescribed by the local statutory authorities.
10. TRANSACTION INVOLVING FOREIGN EXCHANGE:
Transactions involving foreign exchange are accounted for in accordance with AS 11, âThe Effect of Changes in Foreign Exchange Ratesâ read with extant RBI guidelines:
A. Translation in respect of Integral Foreign operations: Foreign currency transactions of Indian branches have been classified as integral foreign operations and foreign currency transactions of such operations are translated as under:
i. Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount, the daily closing rate as available from Cogencis/ Reuter''s page on date of the transaction.
ii. Foreign currency monetary items are
reported using the Foreign Exchange Dealers Association of India (FEDAI) closing spot rates.
iii. Foreign currency non-monetary items, which are carried in terms of historical cost, are reported using the exchange rate at the date of the transaction.
iv. Contingent liabilities denominated in foreign
currency are reported using the FEDAI closing spot rates.
v. Outstanding foreign exchange spot and
forward contracts held for trading are revalued at the exchange rates notified by FEDAI for specified maturities, and the resulting notional profit or loss is recognised in the Profit and Loss account.
vi. Outstanding Foreign exchange forward contracts which are not intended for trading are valued at the closing spot rate as advised by FEDAI. The premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.
vii. Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.
viii. Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/ losses are recognised in the Profit and Loss account.
B. Translation in respect of Non-Integral Foreign operations: Transactions and balances of foreign branches are classified as non-integral foreign operations and their financial statements are translated as follows:
i. Assets and Liabilities (monetary and nonmonetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI.
ii. Income and expenses are translated at the quarterly average closing rates notified by FEDAI.
iii. All resulting exchange differences are
accumulated in a separate account âForeign Currency Translation Reserve'' till the disposal of the net investments by the bank in the respective foreign branches.
iv. The Assets and Liabilities of foreign offices in foreign currency (other than local currency of the foreign offices) are translated into local currency using spot rates applicable to that country.
11. EMPLOYEE BENEFITS:A. Short Term Employee Benefits:
The undiscounted amount of short-term employee benefits, such as medical benefits etc. which are expected to be paid in exchange for the services rendered by employees are recognised during the period when the employee renders the service.
B. Long Term Employee Benefits:
i. ) Gratuity:
The Bank provides gratuity to all eligible employees. The benefit is in the form of lump sum payments to vested employees on retirement, or on death while in employment, or on termination of employment, for an amount equivalent to 15 days basic salary payable for each completed year of service, subject to a maximum prescribed as per The Payment of Gratuity Act, 1972 or Bank of India Gratuity Fund Rules,1975, whichever is higher. Vesting occurs upon completion of five years of service. The Bank makes periodic contributions to a fund administered by trustees based on an independent actuarial valuation carried out quarterly.
ii. ) Pension:
The Bank provides pension to all eligible employees. The benefit is in the form of monthly payments as per rules and payments to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs at different stages as per rules. The Bank makes monthly contribution to the pension fund at 10% of pay in terms of Bank of India Pension Regulations, 1995. The pension liability is reckoned based on an independent actuarial valuation carried out quarterly and Bank makes such additional contributions periodically to the Fund as may be required to secure payment of the benefits under the pension regulations.
b. Defined Contribution Plan: i.) Provident Fund:
The Bank operates a Provident Fund scheme. All eligible employees are entitled to receive benefits under the Bank''s Provident Fund scheme. The Bank contributes monthly at a determined rate (currently 10% of employee''s basic pay plus eligible allowance). These contributions are remitted to a trust established for this purpose and are charged to Profit and Loss Account. The bank recognises such annual contributions as an expense in the year to which it relates.
All Employees of the bank, who have joined from 1st April, 2010 are eligible for contributory pension. Such employees contribute monthly at a predetermined rate to the pension scheme. The bank also contributes monthly at a predetermined rate to the said pension scheme. Bank recognises its contribution to such scheme as expenses in the year to which it relates. The contributions are remitted to National Pension System Trust. The obligation of bank is limited to such predetermined contribution.
C. Other Long term Employee Benefit:
All eligible employees are entitled to the
following-
i. ) Leave encashment benefit, which is a
defined benefit obligation, is provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.
ii. ) Other employee benefits such as Leave
Fare Concession, Milestone award, resettlement benefits, Sick leave etc. which are defined benefit obligations are provided for on the basis of an actuarial valuation in accordance with AS 15 -Employee Benefits.
iii. ) In respect of overseas branches and
offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective territories.
The Bank recognises the business segment as the primary reporting segment and geographical segment as the secondary reporting segment in accordance with the RBI guidelines and in compliance with the Accounting Standard 17 issued by Institute of Chartered Accountants of India.
Basic and Diluted earnings per equity share are reported in accordance with AS 20 âEarnings per shareâ. Basic earnings per equity share are computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the period.
Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the end of the period.
Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - âAccounting for Taxes on Incomeâ respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.
Deferred Tax adjustments comprise changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognised by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognised in the profit and loss account.
Deferred tax assets are recognised and re-assessed at each reporting date, based upon management''s judgment as to whether their realisation is considered as reasonably certain. Deferred Tax Assets are recognised on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realised against future taxable income.
âImpairment losses, if any on Fixed Assets (including revalued assets) are recognised and charged to Profit and Loss account in accordance with AS 28 âImpairment of Assetsâ. However, an impairment loss on a revalued asset is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount held in the revaluation surplus for that same asset.â
16. PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:
As per AS 29 âProvisions, Contingent Liabilities and Contingent Assetsâ, the Bank recognises provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.
Contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefit is remote.
Contingent Assets are not recognised in the financial statements.
Share issue expenses are charged to Share Premium Account in the year of issue of shares.
Mar 31, 2019
1) BASIS OF PREPARATION:
The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated and conform, in all material aspects, to the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), Accounting Standards (AS), pronouncements issued by The Institute of Chartered Accountants of India (ICAI), Banking Regulation Act, 1949 and accounting practices prevalent in the banking industry in India. In respect of foreign offices/branches, statutory provisions and accounting practices prevailing in the respective foreign countries are complied with, except as specified elsewhere.
2) USE OF ESTIMATES:
The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount 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. However, actual results can differ from estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
3) REVENUE RECOGNITION:
a. Income/Expenditure is recognised on accrual basis, unless otherwise stated. In respect of foreign offices, income/expenditure is recognised as per local laws/ standards of host country.
b. Interest income is recognised on time proportion basis except interest on non-performing assets.
c. Commission on issue of Bank Guarantee and Letter of Credit is recognised over the tenure of BG/LC.
d. All other Commission and Exchange, Brokerage, Fees and other charges are recognised as income on realisation.
e. Income (other than interest) on investments in âHeld to Maturityâ category acquired at a discount to the face value, is recognised as follows:
i. On Interest bearing securities, it is recognised only at the time of sale/ redemption.
ii. On zero-coupon securities, it is accounted for over the balance tenor of the security on a constant yield basis.
f. Profit or loss on sale of investments is recognised in the Profit and Loss account. As per RBI Guidelines, in case of profit on sale of investments under âHeld to Maturityâ category, an equivalent amount (net of taxes and amount required to be transferred to Statutory Reserves) is appropriated to âCapital Reserve Accountâ.
g. Dividend Income is recognised when the right to receive the dividend is established.
h. Interest Income on Income-tax refund is recognised in the year of passing of assessment order.
i. Appropriation of recoveries in NPAs:
In respect of NPAs, recoveries effected except through a.) compromise settlement /special OTS, b.) Judgement of a Court/DRT/NCLT and c.) Assignment to ARCâs/SCâs. is to be made in the following order:-
- Charges debited to borrowerâs account,
- Expenses/out of pocket expenses incurred but not debited,
- Unrealised interest,
- Uncharged interest,
- Principal
4) ADVANCES:
a. Advances are classified into âPerformingâ and âNonPerforming Advancesâ (NPAs) in accordance with the applicable regulatory guidelines.
b. NPAs are further classified into Sub-Standard, Doubtful and Loss Assets in terms of applicable regulatory guidelines.
c. In respect of domestic branches, NPA Provisions are made at the rates given as under:
* On the outstanding advance
d. In respect of foreign branches, classification of advances as NPAs and provision in respect of NPAs is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.
e. Provisions in respect of NPAs, unrealised interest, ECGC claims, etc. are deducted from total advances to arrive at net advances as per RBI norms.
f. In respect of Rescheduled/Restructured advances, provision is made for the diminution in the fair value of restructured advances measured in present value terms as per RBI guidelines. The said provision is reduced to arrive at Net advances.
g. In case of financial assets sold to Asset Reconstruction Company (ARC) / Securitisation Company (SC), if the sale is at a price below the net book value (NBV), (i.e. outstanding less provision held) the shortfall is debited to the Profit and Loss account as per the extant RBI guidelines issued from time to time. If the sale is at a price higher than the NBV, the excess provision on sale of NPAs may be reversed to profit and loss account in the year the amount is received. However, any excess provision is reversed only when the cash received (by way of initial consideration only/or redemption of SRâs/PTC) is higher than the net book value (NBV) of the asset. Reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.
h. Provision for Standard assets, including restructured advances classified as standard, is made in accordance with RBI guidelines. In respect of foreign branches provision for Standard Assets is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.
i. Provision for net funded country exposures (Direct/ Indirect) is made on a graded scale in accordance with the RBI guidelines.
5) FLOATING PROVISION:
The bank has framed a policy for creation and utilisation of floating provisions. The quantum of floating provisions to be created is assessed at the end of each financial year. The floating provisions are utilised only for contingencies under extraordinary circumstances specified in the policy with prior permission of Reserve Bank of India or on being specifically permitted by Reserve Bank of India for specific purposes.
6) DEBIT/CREDIT CARDS REWARD POINTS:
Provision for reward points in relation to the debit cards is provided for on actuarial estimates and Provision for Reward Points on Credit cards is made based on the accumulated outstanding points.
7) INVESTMENTS:
a. Transactions in Government Securities are recognised on Settlement Date and all other Investments are recognised on trade date.
b. Investments are categorised under âHeld to Maturityâ, âHeld for Tradingâ and âAvailable for Saleâ categories as per RBI guidelines. For the purpose of disclosure of Investments, these are classified in accordance with RBI guidelines & Banking Regulation Act 1949, under six categories viz.
a.) Government Securities, b.) Other Approved Securities, c.) Shares, d.) Debentures and Bonds,
e.) Subsidiaries and Joint Ventures and f.) Others.
A. Basis of categorisation
Categorisation of an investment is done at the time of its acquisition.
i) Held to Maturity
These comprise investments that the Bank intends to hold till maturity. Investments in equity of subsidiaries, joint ventures and associates are also categorised under Held to Maturity
ii) Held for Trading
These comprise investments acquired with the intention to trade by taking advantage of short term price/interest rate movements. Securities are to be sold within 90 days from the purchase date.
iii) Available for Sale
These comprise investments which do not fall either under âHeld to Maturityâ or âHeld for Tradingâ category.
B. Acquisition Cost of Investment:
i) Brokerage, commission, securities transaction tax, etc. paid on acquisition of equity investments are included in cost.
(ii) Brokerage, commission, broken period interest paid/ received on debt investments is treated as expense/income and is excluded from cost/ sale consideration.
(iii) Brokerage and Commission, if any, received on subscription of investments is credited to Profit and Loss Account
C. Method of valuation:
Investments in India are valued in accordance with the RBI guidelines and investments held at foreign branches are valued at lower of the value as per the statutory provisions prevailing at the respective foreign countries or as per RBI guidelines issued from time to time.
Treasury Bills and all others discounted instruments are valued at carrying cost (ie acquisition cost plus discount accrued at the rate prevailing at the time of acquisition).
i) Held to Maturity:
1. Investments included in this category are carried at their acquisition cost, net of amortisation, if any. The excess of acquisition cost, if any, over the face value is amortised over the remaining period of maturity using constant yield method. Such amortisation of premium is adjusted against income under the head âinterest on investmentsâ.
2. Investments in subsidiaries, joint ventures and associates (both in India and abroad) are valued at historical cost except for investments in Regional Rural Banks, which are valued at carrying cost (i.e. book value). Suitable provision is made for diminution, other than of temporary nature, for each investment individually.
ii) Held for Trading / Available for Sale:
1. Investments under these categories are individually valued at the market price or fair value determined as per Regulatory guidelines and only the net depreciation in each classification for each category is provided for and net appreciation is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.
2. For the purpose of valuation of quoted investments in âHeld for Tradingâ and âAvailable for Saleâ categories, the market rates / quotes on the Stock Exchanges, the rates declared by Primary Dealers Association of India (PDAI) / Fixed Income Money Market and Derivatives Association (FIMMDA)/ Financial Benchmark India Pvt. Ltd. (FBIL) are used. Investments for which such rates/quotes are not available are valued as per norms laid down by RBI, which are as under:
D. Transfer of Securities between Categories:
A) HTM to AFS/HFT -
i) If the security was originally placed under the HTM category at a discount
it is transferred at the acquisition price / book value. After transfer, these securities are immediately re-valued and resultant depreciation, if any, is provided.
ii) If the security was originally placed in the HTM category at a premium, it is transferred to the AFS / HFT category at the amortised cost. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.
B) AFS/HFT TO HTM- Transfer of scrips from AFS / HFT category to HTM category is made at the lower of book value or market value. In cases where the market value is higher than the book value at the time of transfer, the appreciation is ignored. In cases where the market value is less than the book value, the provision against depreciation held against this security is adjusted to reduce the book value to the market value and the security is transferred at the market value..
C) AFS TO HFT AND VICE-VERSA - In the
case of transfer of securities from AFS to HFT category or vice-versa, the securities are not re-valued on the date of transfer and the provisions for the accumulated depreciation, if any, held are transferred to the provisions for depreciation against the HFT securities and vice-versa.
E. Non performing Investments (NPIs) and valuation thereof:
(i) Investments are classified as performing and non-performing, based on the guidelines issued by the RBI in case of domestic offices and respective regulators in case of foreign offices.
(ii) In respect of non performing investments, income is not recognised and provision is made for depreciation in value of such securities as per RBI guidelines.
(iii) Matured NPIs are shown under âOther Assetsâ Schedule11 (Net of Provision).
F. Repo / Reverse Repo:
The securities sold and purchased under Repo/ Reverse repo are accounted as Collateralised lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/ purchase transactions and such movement of securities is reflected using the Repo/ Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity. Costs and revenues are accounted as interest expenditure/income, as the case may be. Balance in Repo Account is classified as Borrowings and balance in Reverse Repo account is classified as Balance with Banks and Money at Call & Short Notice in the balance sheet.
G. Investment in Security Receipts (SRs) backed by assets:
In terms of RBI guidelines issued vide circular no DBR.No.BP.BC.9/21.04.048/2016-17 dated September 01, 2016, the bank has revised valuation methodology in respect of SRs under securitization, with effect from April 01, 2018. As per the revised guidelines, if the quantum of SRs backed by stressed assets sold by the bank exceeds 10% of entire portfolio of SRs backed by sold assets issued under that securitization, provision for depreciation will be higher of the following;
a. provisioning at a rate required in terms of net asset value declared by the SCs/RCs; and
b. provisioning at a rate as applicable to the underlying loans, assuming that the loans notionally continued in the books of the bank.
When Bank invests in the security receipts/ passthrough certificates issued by ARC in respect of the financial assets sold by the Bank to the ARC, the sale will be recognized in books of the bank at the lower of:
- the redemption value of the security receipts/ pass-through certificates, and
- the Net Book Value of the financial asset.
The above investment will be carried in the books of the bank at a price as determined above until its sale or realization.
8) DERIVATIVE:
The Bank presently deals in Forex Forward Contracts, interest rate, and currency derivatives. The interest rate derivatives dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures. Currency Derivatives dealt with by the Bank are Options, Currency Swaps and Currency Futures. Based on RBI guidelines, Derivatives are valued as under:
a. The hedge/non hedge (market making) transactions are recorded separately.
b. Income/expenditure on hedging derivatives are accounted on accrual basis.
c. Forex forward contracts are marked to market and the resultant gains and losses are recognized in the profit and loss account
d. MTM appreciation/ depreciation of hedging derivative is first set off with the depreciation / appreciation of the corresponding underlying and the resultant depreciation is recognized. Resultant appreciation, if any, is ignored.
e. Interest Rate Derivatives and currency derivatives other than exchange traded derivatives for trading purpose are marked to market and the resulting losses, if any, are recognised in the Profit & Loss account. Net Profit if any, is ignored.
f. Exchange Traded Derivatives entered into for trading purposes are valued at prevailing market
rates based on rates given by the Exchange and the resultant gains and losses are recognized in the Profit and Loss Account.
g. Gains/ losses on termination of the trading swaps are recorded on the termination date as income/ expenditure. Any gain/loss on termination of hedging swaps are deferred and recognised over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/liabilities.
h. Option fees/premium is amortised over the tenor of the option contract.
9) PROPERTY, PLANT & EQUIPMENT
a. Fixed assets are stated at historic cost, except in the case of assets which have been revalued, which are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve.
b. Cost includes cost of purchase and all expenditure such as site preparation, installation costs, professional fees, etc. incurred on the asset before it is put to use or capable of put to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefits from such assets or their functioning capability.
c. 5% residual value has been kept for all the assets except for the assets with estimated useful life less than 5 Years (eg. Computers, Computer Software and Cycles), where the entire cost of the assets is amortised over the useful life.
d. The rates of depreciation and method of charging depreciation is given below:
e. In respect of additions/sale during the year, depreciation is provided on proportionate basis for the number of days the assets have been put to use during the year.
f. The revalued portion is depreciated over the balance useful life of the assets as assessed at the time of revaluation. Such depreciation is charged to Profit & loss and equivalent amount is transferred from Revaluation Reserve to Revenue Reserve.
g. Depreciation on fixed assets outside India is provided on Straight Line Method, except at the centres where different rates/method have been prescribed by the local statutory authorities.
10) TRANSACTION INVOLVING FOREIGN EXCHANGE:
Transactions involving foreign exchange are accounted for in accordance with AS 11, âThe Effect of Changes in Foreign Exchange Ratesâ read with extant RBI guidelines:
A. Translation in respect of Integral Foreign operations:
Foreign currency transactions of Indian branches have been classified as integral foreign operations and foreign currency transactions of such operations are translated as under:
i. Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the daily closing rate as available from Cogencis/ Reuterâs page.
ii. Foreign currency monetary items are reported using the Foreign Exchange Dealers Association of India (FEDAI) closing spot rates.
iii. Foreign currency non-monetary items, which are carried in terms of historical cost, are reported using the exchange rate at the date of the transaction.
iv. Contingent liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.
v. Outstanding foreign exchange spot and forward contracts held for trading are revalued at the exchange rates notified by FEDAI for specified maturities, and the resulting notional profit or loss is recognised in the Profit and Loss account.
vi. Outstanding Foreign exchange forward contracts which are not intended for trading are valued at the closing spot rate as advised by FEDAI. The premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.
vii. Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.
viii. Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/ losses are recognised in the Profit and Loss account.
B. Translation in respect of Non-Integral Foreign operations:
Transactions and balances of foreign branches are classified as non-integral foreign operations and their financial statements are translated as follows:
i. Assets and Liabilities (monetary and nonmonetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI.
ii. Income and expenses are translated at the quarterly average closing rates notified by FEDAI.
iii. All resulting exchange differences are accumulated in a separate account âForeign Currency Translation Reserveâ till the disposal of the net investments by the bank in the respective foreign branches.
iv. The Assets and Liabilities of foreign offices in foreign currency (other than local currency of the foreign offices) are translated into local currency using spot rates applicable to that country.
11) EMPLOYEE BENEFITS:
A. Short Term Employee Benefits:
The undiscounted amount of short-term employee benefits, such as medical benefits etc. which are expected to be paid in exchange for the services rendered by employees are recognised during the period when the employee renders the service.
B. Long Term Employee Benefits:
a. Defined Benefit Plan:
i.) Gratuity:
The Bank provides gratuity to all eligible employees. The benefit is in the form of lump sum payments to vested employees on retirement, on death while in employment, or on termination of employment, for an amount equivalent to 15 days basic salary payable for each completed year of service, subject to a maximum prescribed as per The Payment of Gratuity Act, 1972 or Bank of India Gratuity Fund Rules, 1975, whichever is higher. Vesting occurs upon completion of five years of service. The Bank makes periodic contributions to a fund administered by trustees based on an independent actuarial valuation carried out quarterly.
ii.) Pension:
The Bank provides pension to all eligible employees. The benefit is in the form of monthly payments as per rules and payments to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs at different stages as per rules. The Bank makes monthly contribution to the pension fund at 10% of pay in terms of Bank of India Pension Regulations, 1995. The pension liability is reckoned based on an independent actuarial valuation carried out quarterly and Bank makes such additional contributions periodically to the Fund as may be required to secure payment of the benefits under the pension regulations.
b. Defined Contribution Plan:
i.) Provident Fund:
The Bank operates a Provident Fund scheme. All eligible employees are entitled to receive benefits under the Bankâs Provident Fund scheme. The Bank contributes monthly at a determined rate (currently 10% of employeeâs basic pay plus eligible allowance). These contributions are remitted to a trust established for this purpose and are charged to Profit and Loss Account. The bank recognises such annual contributions as an expense in the year to which it relates.
ii.) Pension:
All Employees of the bank, who have joined from 1st April, 2010 are eligible for contributory pension. Such employees contribute monthly at a predetermined rate to the pension scheme. The bank also contributes monthly at a predetermined rate to the said pension scheme. Bank recognises its contribution to such scheme as expenses in the year to which it relates. The contributions are remitted to National Pension System Trust. The obligation of bank is limited to such predetermined contribution.
C. Other Long term Employee Benefit:
All eligible employees are entitled to the following-
i.) Leave encashment benefit, which is a defined benefit obligation, is provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.
ii.) Other employee benefits such as Leave Fare Concession, Milestone award, resettlement benefits, Sick leave etc. which are defined benefit obligations are provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.
iii.) In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective territories.
12) EARNINGS PER SHARE:
Basic and Diluted earnings per equity share are reported in accordance with AS 20 âEarnings per shareâ. Basic earnings per equity share are computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the period.
Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the end of the period.
13) TAXES ON INCOME:
Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - âAccounting for Taxes on Incomeâ respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.
Deferred Tax adjustments comprise changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognised by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognised in the profit and loss account.
Deferred tax assets are recognised and re-assessed at each reporting date, based upon managementâs judgment as to whether their realisation is considered as reasonably certain. Deferred Tax Assets are recognised on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realised against future taxable income.
14) IMPAIRMENT OF ASSETS:
Impairment losses, if any on Fixed Assets (including revalued assets) are recognised and charged to Profit and Loss account in accordance with AS 28 âImpairment of Assetsâ. However, an impairment loss on a revalued asset is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount held in the revaluation surplus for that same asset.
15) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:
As per AS 29 âProvisions, Contingent Liabilities and Contingent Assetsâ, the Bank recognises provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.
Contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefit is remote.
Contingent Assets are not recognised in the financial statements.
16) SHARE ISSUE EXPENSES:
Share issue expenses are charged to the Profit and Loss Account in the year of issue of shares.
Mar 31, 2018
SCHEDULE 17: SIGNIFICANT ACCOUNTING POLICIES: 1) BASIS OF PREPARATION:
The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated and conform, in all material aspects, to the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), Accounting Standards (AS), pronouncements issued by The Institute of Chartered Accountants of India (ICAI), Banking Regulation Act, 1949 and accounting practices prevalent in the banking industry in India. In respect of foreign offices/branches, statutory provisions and accounting practices prevailing in the respective foreign countries are complied with, except as specified elsewhere.
2) USE OF ESTIMATES:
The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount 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. However, actual results can differ from estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
3) REVENUE RECOGNITION:
a. Income/Expenditure is recognized on accrual basis, unless otherwise stated. In respect of foreign offices, income/expenditure is recognized as per local laws/ standards of host country.
b. Interest income is recognized on time proportion basis except interest on non-performing assets.
c. Commission on issue of Bank Guarantee and Letter of Credit is recognized over the tenure of BG/LC.
d. All other Commission and Exchange, Brokerage, Fees and other charges are recognized as income on realization.
e. Income (other than interest) on investments in âHeld to Maturityâ category acquired at a discount to the face value, is recognized as follows:
i. On Interest bearing securities, it is recognized only at the time of sale/ redemption.
ii. On zero-coupon securities, it is accounted for over the balance tenor of the security on a constant yield basis.
f. Profit or loss on sale of investments is recognized in the Profit and Loss account. As per RBI Guidelines, in case of profit on sale of investments under âHeld to Maturity'' category, an equivalent amount, net of taxes and amount required to be transferred to Statutory Reserves, is appropriated to âCapital Reserve Account''.
g. Dividend is recognized when the right to receive the dividend is established.
h. Interest on Income-tax refund is recognized in the year of passing of assessment order.
i. The recoveries made from NPA accounts are appropriated first towards unrealized interest/income debited to borrowers accounts, expenditure/out of pocket expenses incurred, then principal dues and lastly towards uncharged interest.
4) ADVANCES:
a. Advances are classified into âPerformingâ and âNonperforming Advancesâ (NPAs) in accordance with the applicable regulatory guidelines.
b. NPAs are further classified into Sub-Standard, Doubtful and Loss Assets in terms of applicable regulatory guidelines.
c. In respect of domestic branches, NPA Provisions are made at the rates given as under
* On the outstanding advance
d. In respect of foreign branches, classification of advances as NPAs and provision in respect of NPAs is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.
e. Provisions in respect of NPAs, unrealized interest, ECGC claims settled, etc. are deducted from total advances to arrive at net advances as per RBI norms.
f. In respect of Rescheduled/Restructured advances, provision is made for the diminution in the fair value of restructured advances measured in present value terms as per RBI guidelines. The said provision is reduced to arrive at Net advances.
g. In case of financial assets sold to Asset Reconstruction Company (ARC) / Securitization Company (SC), if the sale is at a price below the net book value (NBV), (i.e. outstanding less provision held) the shortfall is debited to the Profit and Loss account as per the extant RBI guidelines issued from time to time. If the sale is at a price higher than the NBV, the excess provision on sale of NPAs may be reversed to profit and loss account in the year the amounts is received. However, any excess provision is reversed only when the cash received (by way of initial consideration only/or redemption of SR''s/PTC) is higher than the net book value (NBV) of the asset. Reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.
h. Provision for Standard assets, including restructured advances classified as standard, is made in accordance with RBI guidelines. In respect of foreign branches provision for Standard Assets is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent..
i. Provision for net funded country exposures (Direct/ Indirect) is made on a graded scale in accordance with the RBI guidelines.
5) FLOATING PROVISION
The bank has framed a policy for creation and utilization of floating provisions. The quantum of floating provisions to be created is assessed at the end of each financial year. The floating provisions are utilized only for contingencies under extraordinary circumstances specified in the policy with prior permission of Reserve Bank of India or on being specifically permitted by Reserve Bank of India for specific purposes.
6) DEBIT/CREDIT CARDS REWARD POINTS:
Provision for reward points in relation to the debit cards is provided for on actuarial estimates and Provision for Reward Points on Credit cards is made based on the accumulated outstanding points.
7) INVESTMENTS:
a. Transactions in Government Securities are recognized on Settlement Date and all other Investments are recognized on trade date.
b. Investments are categorized under "Held to Maturity'', âHeld for Trading'' and âAvailable for Sale'' categories as per RBI guidelines. For the purpose of disclosure of investments in India, these are classified, in accordance with RBI guidelines & Banking Regulation Act 1949, under six classification viz. a.) Government Securities,
b.) Other Approved Securities, c.) Shares,
d.) Debentures and Bonds, e.) Investment in Subsidiaries and Associates and f.) Others. In respect of investments outside India, these are classified, in accordance with RBI guidelines, under three categories viz. Government Securities (including local authorities), Subsidiaries/Joint Ventures abroad and Other Investments..
A. Basis of categorization
Categorization of an investment is done at the time of its acquisition.
i) Held to Maturity
These comprise investments that the Bank intends to hold till maturity. Investments in subsidiaries, joint ventures and associates are also categorized under Held to Maturity.
ii) Held for Trading
These comprise investments acquired with the intention to trade by taking advantage of short term price/interest rate movements. These are intended to be traded within 90 days from the date of purchase.
iii) Available for Sale
These comprise investments which do not fall under âHeld to Maturityâ or âHeld for Tradingâ classification.
B. Acquisition Cost of Investment:
i) Brokerage, commission, securities transaction tax, etc. paid on acquisition of equity investments are included in cost.
ii) Brokerage, commission, broken period interest paid/ received on debt investments is treated as expense/income and is excluded from cost/ sale consideration.
iii) Brokerage and Commission received on subscription of investments is credited to Profit and Loss Account.
iv) Cost of investments is determined at weighted average cost method.
C. Method of valuation
Investments in India are valued in accordance with the RBI guidelines and investments held at foreign branches are valued at lower of the value as per the statutory provisions prevailing at the respective foreign countries or as per RBI guidelines issued from time to time.
Treasury Bills and all others discounted instruments are valued at carrying cost (ie book value).
i) Held to Maturity
1 Investments included in this category are carried at their acquisition cost, net of amortization, if any. The excess of acquisition cost, if any, over the face value is amortized over the remaining period of maturity using constant yield method. Such amortization of premium is adjusted against income under the head âinterest on investmentsâ.
2 Investments in subsidiaries, joint ventures and associates (both in India and abroad) are valued at historical cost except for investments in Regional
Rural Banks, which are valued at carrying cost (i.e. book value). A provision is made for diminution, other than temporary, for each investment individually.
ii) Held for Trading / Available for Sale
1 Investments under these categories are individually valued at the market price or fair value determined as per Regulatory guidelines and only the net depreciation in each classification for each category is provided for and net appreciation is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.
D. Transfer of Securities between Categories
A) HTM to AFS/HFT -
i) If the security was originally placed under the HTM category at a discount it is transferred at the acquisition price / book value. After transfer, these securities are immediately re-valued and resultant depreciation, if any, is provided.
ii) If the security was originally placed in the HTM category at a premium, it is transferred to the AFS / HFT category at the amortized cost. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.
B) AFS/HFT TO HTM- Transfer of scrips from AFS / HFT category to HTM category is made at the lower of book value or market value. In cases where the market value is higher than the book value at the time of transfer, the appreciation is ignored. In cases where the market value is less than the book value, the provision against depreciation held against this security is adjusted to reduce the book value to the market value and the security is transferred at the market value.
C) AFS TO HFT AND VICE-VERSA - In the case of transfer of securities from AFS to HFT category or vice-versa, the securities are not re-valued on the date of transfer and the provisions for the accumulated depreciation, if any, held are transferred to the provisions for depreciation against the HFT securities and vice-versa
E. Non performing Investments (NPIs) and valuation thereof
i) Investments are classified as performing and non-performing, based on the guidelines issued by the RBI in case of domestic offices and respective regulators in case of foreign offices.
ii.) In respect of non performing investments, income is not recognized and provision is made for depreciation in value of such securities as per RBI guidelines.
iii.) Matured NPIs are shown under âOther Assets'' Schedulell.
F. Repo / Reverse Repo
The securities sold and purchased under Repo/ Reverse repo are accounted as Collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/ purchase transactions and such movement of securities is reflected using the Repo/ Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity. Costs and revenues are accounted as interest expenditure/income, as the case may be. Balance in Repo Account is classified as Borrowings and balance in Reverse Repo account is classified as Balance with Banks and Money at Call & Short Notice.
G. Investment in Security Receipts (SRs) backed by assets:-
In terms of RBI guidelines issued vide circular no DBR.No.BP.BC.9/21.04.048/2016-17 dated September 01, 2016, the bank has revised valuation methodology in respect of SRs under securitization, with effect from April 01, 2017. As per the revised guidelines, if the quantum of SRs backed by stressed assets sold by the bank exceeds 50% of
entire portfolio of SRs backed by sold assets issued under that securitization, provision for depreciation will be higher of the following;
a. provisioning at a rate required in terms of net asset value declared by the SCs/RCs; and
b. provisioning at a rate as applicable to the underlying loans, assuming that the loans notionally continued in the books of the bank.
When Bank invests in the security receipts/ pass-through certificates issued by ARC in respect of the financial assets sold by the Bank to the ARC, the sale will be recognized in books of the bank at the lower of:
- the redemption value of the security receipts/ pass-through certificates, and
- the NBV of the financial asset.
The above investment will be carried in the books of the bank at the price as determined above until its sale or realization.
8) DERIVATIVE:
The Bank presently deals in Forex Forward Contracts, interest rate, and currency derivatives. The interest rate derivatives dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures. Currency Derivatives dealt with by the Bank are Options, Currency Swaps and Currency Futures. Based on RBI guidelines, Derivatives are valued as under:
a. The hedge/non hedge (market making) transactions are recorded separately.
b. Income/expenditure on hedging derivatives are accounted on accrual basis.
c. Forex forward contracts are marked to market and the resultant gains and losses are recognized in the profit and loss account
d. Interest Rate Derivatives and currency derivatives other than exchange traded derivatives for trading purpose are marked to market and the resulting losses, if any, are recognized in the Profit & Loss account. Net Profit if any, is ignored.
e. Exchange Traded Derivatives entered into for trading purposes are valued at prevailing market rates based on rates given by the Exchange and the resultant gains and losses are recognized in the Profit and Loss Account.
f. Gains/ losses on termination of the trading swaps are recorded on the termination date as income/ expenditure. Any gain/loss on termination of hedging swaps are deferred and recognized over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/liabilities.
g. Option fees/premium is amortized over the tenor of the option contract.
9) FIXED ASSETS:
a. Fixed assets are stated at historic cost, except in the case of assets which have been revalued, which are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve.
b. Cost includes cost of purchase and all expenditure such as site preparation, installation costs, professional fees, etc. incurred on the asset before it is put to use or capable of put to use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefits from such assets or their functioning capability.
c. Cost of premises includes cost of land, both freehold and leasehold
10) DEPRECIATION ON FIXED ASSETS
a. Depreciation on assets is charged on Straight Line Method at the rates determined by the Bank on the basis of estimated useful life of respective assets except in respect of computers & computer software not forming integral part of hardware, where it is calculated on the Straight Line Method, at the rates prescribed by RBI.
b. In respect of additions/sale, depreciation is provided on proportionate basis for the number of days the assets have been put to use during the year. However, for computer software not forming integral part of hardware is fully depreciated in the year of acquisition.
c. Depreciation on the revalued portion of assets is charged to Profit & loss and equivalent amount is transferred from Revaluation Reserve to Revenue Reserve.
d. Premium on leasehold properties is amortized over the period of lease.
e. Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.
f. Depreciation on fixed assets outside India is provided on Straight Line Method, except at the centres where different rates/method have been prescribed by the local statutory authorities.
g. Depreciation on assets is provided at the following rates.
h. 5% residual value has been kept for all the assets except for the assets with estimated useful life less than 5 Years (eg. Computers, Computer Software and Cycles), where the entire cost of the assets is amortised over the useful life.
11) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
Transactions involving foreign exchange are accounted for in accordance with AS 11, âThe Effect of Changes in Foreign Exchange Ratesâ read with extant RBI guidelines:
A. Translation in respect of Integral Foreign operations: Foreign currency transactions of Indian branches have been classified as integral foreign operations and foreign currency transactions of such operations are translated as under
i. Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the daily closing rate as available from Cogencyâs/ Reuter''s page.
ii. Foreign currency monetary items are reported using the Foreign Exchange Dealers Association of India (FEDAI) closing spot rates.
iii. Foreign currency non-monetary items, which are carried in terms of historical cost, are reported using the exchange rate at the date of the transaction.
iv. Contingent liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.
v. Outstanding foreign exchange spot and forward contracts held for trading are revalued at the exchange rates notified by FEDAI for specified maturities, and the resulting notional profit or loss is recognized in the Profit and Loss account.
vi. Outstanding Foreign exchange forward contracts which are not intended for trading are valued at the closing spot rate as advised by FEDAI. The premium or discount arising at the inception of such a forward exchange contract is amortized as expense or income over the life of the contract.
vii. Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognized as income or as expense in the period in which they arise.
viii. Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/ losses are recognized in the Profit and Loss account.
B. Translation in respect of Non-Integral Foreign operations:
Transactions and balances of foreign branches are classified as non-integral foreign operations and their financial statements are translated as follows:
i. Assets and Liabilities (monetary and nonmonetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI.
ii. Income and expenses are translated at the quarterly average closing rates notified by FEDAI.
iii. All resulting exchange differences are accumulated in a separate account âForeign Currency Translation Reserve'' till the disposal of the net investments by the bank in the respective foreign branches.
iv. The Assets and Liabilities of foreign offices in foreign currency (other than local currency of the foreign offices) are translated into local currency using spot rates applicable to that country.
12) EMPLOYEE BENEFITS:
A. Short Term Employee Benefit:
The undiscounted amount of short-term employee benefits, such as medical benefits etc. which are expected to be paid in exchange for the services rendered by employees are recognized during the period when the employee renders the service.
B. Post Employment Benefit:
a. Defined Benefit Plan:-
i.) Gratuity:
The Bank provides gratuity to all eligible employees. The benefit is in the form of lump sum payments to vested employees on retirement, on death while in employment, or on termination of employment, for an amount equivalent to 15 days basic salary payable for each completed year of service, subject to a maximum prescribed as per The Payment of Gratuity Act, 1972 or Bank of India Gratuity Fund Rules,1975, whichever is higher. Vesting occurs upon completion of five years of service. The Bank makes periodic contributions to a fund administered by trustees based on an independent actuarial valuation carried out quarterly.
ii.) Pension
The Bank provides pension to all eligible employees. The benefit is in the form of monthly payments as per rules and payments to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs at different stages as per rules. The Bank makes monthly contribution to the pension fund at 10% of pay in terms of Bank of India Pension Regulations, 1995.
The pension liability is reckoned based on an independent actuarial valuation carried out quarterly and Bank makes such additional contributions periodically to the Fund as may be required to secure payment of the benefits under the pension regulations.
b. Defined Contribution Plan:
i.) Provident Fund:
The Bank operates a Provident Fund scheme. All eligible employees are entitled to receive benefits under the Bank''s Provident Fund scheme. The Bank contributes monthly at a determined rate (currently 10% of employee''s basic pay plus eligible allowance). These contributions are remitted to a trust established for this purpose and are charged to Profit and Loss Account. The bank recognizes such annual contributions as an expense in the year to which it relates.
ii.) Pension:
All Employees of the bank, who have joined from 1st April, 2010 are eligible for contributory pension. Such employees contribute monthly at a predetermined rate to the pension scheme. The bank also contributes monthly at a predetermined rate to the said pension scheme. Bank recognises its contribution to such scheme as expenses in the year to which it relates. The contributions are remitted to National Pension System Trust. The obligation of bank is limited to such predetermined contribution.
C. Other Long term Employee Benefit
i.) Leave encashment benefit, which is a defined benefit obligation, is provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.
ii.) Other employee benefits such as Leave Fare Concession, Milestone award, resettlement benefits, Sick leave etc. which are defined benefit obligations are provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.
iii.) In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective territories.
13) EARNINGS PER SHARE
Basic and Diluted earnings per equity share are reported in accordance with AS 20 âEarnings per shareâ. Basic earnings per equity share are computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the period.
Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the end of the period.
14) TAXES ON INCOME:
Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard
22 - âAccounting for Taxes on Incomeâ respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.
Deferred Tax adjustments comprise changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognized by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognized in the profit and loss account.
Deferred tax assets are recognized and re-assessed at each reporting date, based upon management''s judgment as to whether their realization is considered as reasonably certain. Deferred Tax Assets are recognized on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable income
15) IMPAIRMENT OF ASSETS
âImpairment losses, if any on Fixed Assets (including revalued assets) are recognized and charged to Profit and Loss account in accordance with AS 28 âImpairment of Assetsâ. However, an impairment loss on a revalued asset is recognized directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount held in the revaluation surplus for that same asset.â
16) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:
As per AS 29 âProvisions, Contingent Liabilities and Contingent Assetsâ, the Bank recognizes provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.
Contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefit is remote.
Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.
17) SHARE ISSUE EXPENSES
Share issue expenses are charged to the Profit and Loss Account in the year of issue of shares.
Mar 31, 2017
1) BASIS OF PREPARATION:
The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated and conform, in all material aspects, to the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), Accounting Standards (AS), pronouncements issued by The Institute of Chartered Accountants of India (ICAI), Banking Regulation Act, 1949 and accounting practices prevalent in the banking industry in India. In respect of foreign offices/branches, statutory provisions and accounting practices prevailing in the respective foreign countries are complied with, except as specified elsewhere.
2) USE OF ESTIMATES:
The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount 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. However, actual results can differ from estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.
3) REVENUE RECOGNITION:
(a) Income/Expenditure is recognised on accrual basis, unless otherwise stated. In respect of foreign offices, income/expenditure is recognised as per local laws/ standards of host country.
(b) Interest income is recognised on time proportion basis except interest on Non-performing Assets and accounts coverd under SDR/S4A, which is recognised on realisation, in terms of the RBI guidelines.
(c) Commission on issue of Bank Guarantee and Letter of Credit is recognised over the tenure of BG/LC.
(d) All other Commission and Exchange, Brokerage, Fees and other charges are recognised as income on realisation.
(e) Income (other than interest) on investments in âHeld to Maturityâ category acquired at a discount to the face value, is recognised as follows:
1. On Interest bearing securities, it is recognised only at the time of sale/redemption.
2. On zero-coupon securities, it is accounted for over the balance tenor of the security on a constant yield basis.
(f) Profit or loss on sale of investments is recognised in the Profit and Loss account. As per RBI guidelines, in case of profit on sale of investments under âHeld to Maturityâ category, an equivalent amount, net of taxes and amount required to be transferred to Statutory Reserves, is appropriated to âCapital Reserve Accountâ.
(g) Dividend is recognised when the right to receive the dividend is established.
(h) Interest on Income-tax refund is recognised in the year of passing of assessment order.
(i) The recoveries made from NPA accounts are appropriated first towards unrealised interest/income debited to borrowers accounts, expenditure/out of pocket expenses incurred, then principal dues and lastly towards uncharged interest.
4) ADVANCES:
(a) Advances are classified into âPerformingâ and âNon Performing Advancesâ (NPAs) in accordance with the applicable regulatory guidelines.
(b) NPAs are further classified into Sub-Standard, Doubtful and Loss Assets in terms of applicable regulatory guidelines.
(c) In respect of domestic branches, Provisions in respect of NPAs are made at the rates given as under:
(d) In respect of foreign branches, classification of advances as NPAs and provision in respect of NPAs is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.
(e) Provisions in respect of NPAs, unrealised interest, ECGC claims settled, etc., are deducted from total advances to arrive at net advances as per RBI norms.
(f) In respect of Rescheduled/Restructured advances, provision is made for the diminution in the fair value of restructured advances measured in present value terms as per RBI guidelines. The said provision is reduced to arrive at Net advances.
(g) In case of financial assets sold to Asset Reconstruction Company (ARC) / Securitisation Company (SC), if the sale is at a price higher than the Net Book Value (NBV), the surplus is retained and utilised to meet the shortfall/loss on account of sale of other financial assets to SC/ARC. If the sale is at a price below the net book value (NBV), (i.e.outstanding less provision held) the shortfall is to be debited to the Profit and Loss account. However, if surplus is available, such shortfall will be absorbed in the surplus. Any such shortfall arising due to sale of NPA on or after 26/02/2014 will be amortised over a period of two years if not absorbed in the surplus.
Excess provision arising out of sale of NPAs are reversed only when the cash received (by way of initial consideration only/or redemption of SRs/PTC) is higher than the net book value (NBV) of the asset. Reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.
(h) Provision for Standard assets, including restructured advances classified as standard, is made in accordance with RBI guidelines. In respect of foreign branches provision for Standard Assets is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.
(i) Provision for net funded country exposures (direct/ indirect) is made on a graded scale in accordance with the RBI guidelines.
5) FLOATING PROVISION:
The bank has a policy for creation and utilisation of floating provisions. The quantum of floating provisions to be created is assessed at the end of each financial year. The floating provisions are utilised only for contingencies under extraordinary circumstances specified in the policy with prior permission of Reserve Bank of India or on being specifically permitted by Reserve Bank of India for specific purposes.
6) DEBIT/CREDIT CARD REWARD POINTS:
Provision for reward points in relation to the debit cards is provided for on actuarial estimates and Provision for Reward Points on Credit cards is made based on the accumulated outstanding points.
7) INVESTMENTS:
A. Transactions in Government Securities are recognised on Settlement Date and all other Investments are recognised on trade date.
B. Investments are categorised under âHeld to Maturityâ, âHeld for Tradingâ and âAvailable for Saleâ categories as per RBI guidelines. For the purpose of disclosure of investments in India, these are classified, in accordance with RBI guidelines & Banking Regulation Act, 1949, under six classification viz. a) Government Securities, b) Other Approved Securities, c) Shares, d) Debentures and Bonds, e) Investment in Subsidiaries and Associates and f) Others. In respect of investments outside India, these are classified, in accordance with RBI guidelines, under three categories viz. Government Securities (including local authorities), Subsidiaries/ Joint Ventures abroad and Other Investments.
(a) Basis of categorisation
Categorisation of an investment is done at the time of its acquisition.
i) Held to Maturity
These comprise investments that the Bank intends to hold till maturity. Investments in subsidiaries, joint ventures and associates are also categorised under Held to Maturity.
ii) Held for Trading
This comprise investments acquired with the intention to trade by taking advantage of short term price/interest rate movements. These are intended to be traded within 90 days from the date of purchase.
iii) Available for Sale
This comprise investments which do not fall under âHeld to Maturityâ or âHeld for Tradingâ classification.
(b) Acquisition Cost of Investment
i) Brokerage, commission, securities transaction tax etc. paid on acquisition of equity investments are included in cost.
ii) Brokerage, commission, broken period interest paid/ received on debt investments is treated as income/expense and is excluded from cost/ sale consideration.
iii) Brokerage and Commission received on subscription of investments is credited to Profit and Loss Account.
iv) Cost of investments is determined at weighted average cost method.
(c) Method of valuation
Investments in India are valued in accordance with the RBI guidelines and investments held at foreign branches are valued at lower of the value as per the statutory provisions prevailing at the respective foreign countries or as per RBI guidelines issued from time to time.
Treasury Bills and Commercial Papers are valued at carrying cost.
i) Held to Maturity
1 Investments included in this category are carried at their acquisition cost, net of amortisation, if any. The excess of acquisition cost, if any, over the face value is amortised over the remaining period to maturity using constant yield method. Such amortisation of premium is adjusted against income under the head âinterest on investmentsâ.
2 Investments in subsidiaries, joint ventures and associates (both in India and abroad) are valued at historical cost except for investments in Regional Rural Banks, which are valued at carrying cost (i.e. book value). A provision is made for diminution, other than temporary, for each investment individually.
ii) Held for Trading / Available for Sale
1 Investments under these categories are individually valued at the market price or fair value determined as per Regulatory guidelines and only the net depreciation in each classification for each category is provided for and net appreciation is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.
2 For the purpose of valuation of quoted investments in âHeld for Tradingâ and âAvailable for Saleâ categories, the market rates / quotes on the Stock Exchanges, the rates declared by Primary Dealers Association of India (PDAI) / Fixed Income Money Market and Derivatives Association (FIMMDA) are used. Investments for which such rates/quotes are not available are valued as per norms laid down by RBI, which are as under:
(d) Transfer of Securities between Categories
The transfer of securities between categories is carried out at the least of acquisition cost / book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.
(e) Non performing Investments (NPIs) and valuation thereof
1 Investments are classified as performing and nonperforming, based on the guidelines issued by the RBI in case of domestic offices and respective regulators in case of foreign offices.
2 In respect of non performing investments, income is not recognised and provision is made for depreciation in value of such securities as per RBI guidelines.
(f) Repo / Reverse Repo
The securities sold and purchased under Repo/ Reverse repo are accounted as Collateralised lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/ purchase transactions and such movement of securities is reflected using the Repo/ Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity. Costs and revenues are accounted as interest expenditure/income, as the case may be. Balance in Repo Account is classified as Borrowings and balance in Reverse Repo account is classified as Balance with Banks and Money at Call & Short Notice.
8) Derivative
The Bank presently deals in Forex Forward Contracts, interest rate and currency derivatives. The interest rate derivatives dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures. Currency Derivatives dealt with by the Bank are Options, Currency Swaps and Currency Futures. Based on RBI guidelines, Derivatives are valued as under:
(a) The hedge/non hedge (market making) transactions are recorded separately.
(b) Income/expenditure on hedging derivatives are accounted on accrual basis.
(c) Forex forward contracts are Marked to market and the resultant gains and losses are recognized in the profit and loss account.
(d) Interest Rate Derivatives and currency derivatives other than exchange traded derivatives for trading purpose are marked to market and the resulting losses, if any, are recognised in the Profit & Loss account. Net Profit if any, is ignored.
(e) Exchange Traded Derivatives entered into for trading purposes are valued at prevailing market rates based on rates given by the Exchange and the resultant gains and losses are recognized in the Profit and Loss Account.
(f) Gains/ losses on termination of the trading swaps are recorded on the termination date as income/ expenditure. Any gain/loss on termination of hedging swaps are deferred and recognised over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/liabilities.
(g) Option fees/premium is amortised over the tenor of the option contract.
9) FIXED ASSETS:
(a) Fixed assets are stated at historic cost, except in the case of assets which have been revalued, which is stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve.
(b) Cost includes cost of purchase and all expenditure such as site preparation, installation costs, professional fees etc. incurred on the asset before it is put to use or capable of put to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefits from such assets or their functioning capability.
(c) Cost of premises includes cost of land, both freehold and leasehold.
10) DEPRECIATION ON FIXED ASSETS:
a) Depreciation on assets is charged on the Straight Line Method at the rates determined by the Bank, on the basis estimated useful use of respective assets except in respect of computers and computer software not forming integral part of hardware, where it is calculated on Straight Line Method, at the rates prescribed by RBI.
b) In respect of additions/sale, depreciation is provided on proportionate basis (except for computer software not forming integral part of hardware, where it is fully depreciated in the year of acquisition) for the number of days the assets have been put to use during the year.
c) Depreciation on the revalued portion of assets is adjusted against the Revaluation Reserve.
d) Premium on leasehold properties is amortised over the period of lease.
e) Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.
f) Depreciation on fixed assets outside India is provided based on Straight Line Method, except at the centres where the rates/method have been prescribed by the local statutory authorities.
g) Depreciation on assets is provided at the following rates:
h) 5% residual value has been kept for all the assets except for the assets with estimated useful life less than 5 years (e.g. Computers, computer software and Cycles), where the entire cost of the assets is amortised over the useful life.
11) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
Transactions involving foreign exchange are accounted for in accordance with AS 11, âThe Effect of Changes in Foreign Exchange Ratesâ read circular extant RBI guidelines:
a) Translation in respect of Integral Foreign operations:
Foreign currency transactions of Indian branches have been classified as integral foreign operations and foreign currency transactions of such operations are translated as under:
i) Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the daily closing rate as available from Cogencis/ Reuters page.
ii) Foreign currency monetary items are reported using the Foreign Exchange Dealers Association of India (FEDAI) closing spot rates.
iii) Foreign currency non-monetary items, which are carried in terms of historical cost, are reported using the exchange rate at the date of the transaction.
iv) Contingent liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.
v) Outstanding foreign exchange spot and forward contracts held for trading are revalued at the exchange rates notified by FEDAI for specified maturities, and the resulting notional profit or loss is recognised in the Profit and Loss account.
vi) Outstanding Foreign exchange forward contracts which are not intended for trading are valued at the closing spot rate as advised by FEDAI. The premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.
vii) Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.
viii) Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/losses are recognised in the Profit and Loss account.
b) Translation in respect of Non-Integral Foreign operations:
Transactions and balances of foreign branches are classified as non-integral foreign operations and their financial statements are translated as follows:
i) Assets and Liabilities (monetary and nonmonetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI.
ii) Income and expenses are translated at the quarterly average closing rates notified by FEDAI.
iii) All resulting exchange differences are accumulated in a separate account âForeign Currency Translation Reserveâ till the disposal of the net investments by the bank in the respective foreign branches.
iv) The Assets and Liabilities of foreign offices in foreign currency (other than local currency of the foreign offices) are translated into local currency using spot rates applicable to that country.
12) EMPLOYEE BENEFITS:
i. Short Term Employee Benefit:
The undiscounted amount of short-term employee benefits, such as medical benefits etc. which are expected to be paid in exchange for the services rendered by employees are recognised during the period when the employee renders the service.
ii. Post Employment Benefit:
A. Defined Benefit Plan:-
a) Gratuity:
The Bank provides gratuity to all eligible employees. The benefit is in the form of lumpsum payments to vested employees on retirement, on death while in employment, or on termination of employment, for an amount equivalent to 15 days basic salary payable for each completed year of service, subject to a maximum prescribed as per The Payment of Gratuity Act 1972 or BOI (Employee) Gratuity Regulation whichever is higher. Vesting occurs upon completion of five years of service. The Bank makes periodic contributions to a fund administered by trustees based on an independent actuarial valuation carried out annually.
b) Pension:
The Bank provides pension to all eligible employees. The benefit is in the form of monthly payments as per rules and payments to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs at different stages as per rules. The Bank makes monthly contribution to the pension fund at 10% of pay in terms of BOI (Employees) Pension regulations. The pension liability is reckoned based on an independent actuarial valuation carried out annually and Bank makes such additional contributions periodically to the Fund as may be required to secure payment of the benefits under the pension regulations.
B. Defined Contribution Plan:
a) Provident Fund:
The Bank operates a Provident Fund scheme. All eligible employees are entitled to receive benefits under the Bankâs Provident Fund scheme. The Bank contributes monthly at a determined rate (currently 10% of employeeâs basic pay plus eligible allowance). These contributions are remitted to a trust established for this purpose and are charged to Profit and Loss Account. The bank recognises such annual contributions as an expense in the year to which it relates.
b) Pension:
All Employees of the bank, who have joined from 1st April, 2010 are eligible for contributory pension. Such employees contribute monthly at a predetermined rate to the pension scheme. The bank also contributes monthly at a predetermined rate to the said pension scheme. Bank recognises its contribution to such scheme as expenses in the year to which it relates. The contributions are remitted to National Pension System Trust. The obligation of bank is limited to such predetermined contribution.
iii. Other Long term Employee Benefit:
a) Leave encashment benefit, which is a defined benefit obligation, is provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.
b) Other employee benefits such as Leave Fare Concession, Milestone award, resettlement benefits, Sick leave etc. which are defined benefit obligations are provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.
c) In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective territories.
13) EARNINGS PER SHARE:
Basic and Diluted earnings per equity share are reported in accordance with AS-20 âEarnings per shareâ. Basic earnings per equity share are computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the period.
Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the end of the period.
14) TAXES ON INCOME:
Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - âAccounting for Taxes on Incomeâ respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.
Deferred Tax adjustments comprise changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognised by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognised in the profit and loss account.
Deferred tax assets are recognised and re-assessed at each reporting date, based upon managementâs judgment as to whether their realisation is considered as reasonably certain. Deferred Tax Assets are recognised on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realised against future taxable income.
15) IMPAIRMENT OF ASSETS:
Impairment losses, if any on Fixed Assets (including revalued assets) are recognised and charged to Profit and Loss account in accordance with AS-28 âImpairment of Assetsâ.However, an impairment loss on a revalued asset is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount held in the revaluation surplus for that same asset.
16) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:
As per AS-29 âProvisions, Contingent Liabilities and Contingent Assetsâ, the Bank recognises provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefit is remote.
Contingent Assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised.
17) SHARE ISSUE EXPENSES:
Share issue expenses are charged to the Profit and Loss Account in the year of issue of shares
Mar 31, 2015
1) BASIS OF PREPARATION:
The abridged Standalone and Consolidated Financial Statements have been
prepared from the audited Standalone and Consolidated financial
statements of the Bank of India (''the Bank'') for the year ended 31st
March,2015, which are prepared based on the accounting policies
hereinafter appearing.
The financial statements are prepared following the going concern
concept, on historical cost basis unless otherwise stated and conform,
in all material aspects, to the Generally Accepted Accounting
Principles (GAAP) in India, which encompasses applicable statutory
provisions, regulatory norms prescribed by the Reserve Bank of India
(RBI), Accounting Standards (AS) and pronouncements issued by The
Institute of Chartered Accountants of India (ICAI) and accounting
practices prevalent in the banking industry in India. In respect of
foreign offices/branches, statutory provisions and accounting practices
prevailing in the respective foreign countries are complied with,
except as specified elsewhere
In addition to above, for preparation of the consolidated financial
statements applicable statutory provisions and regulatory norms
prescribed by the Insurance Regulatory and Development Authority of
India (IRDA and Companies Act 1956 have been followed to the extent
these are applicable to the Joint ventures/subsidiaries/ associates
being consolidated.
2) USE OF ESTIMATES:
The preparation of financial statements requires the management to make
estimates and assumptions considered in the reported amount 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.
However actual results can differ from estimates. Any revision to
accounting estimates is recognized prospectively in current and future
periods.
3) REVENUE RECOGNITION:
3.1 Banking entities
(a) Income/Expenditure is recognised on accrual basis, unless otherwise
stated. In respect of foreign offices, income is recognised as per
local laws of host country.
(b) Interest income is recognised on time proportion basis except (i)
interest on Non-performing Assets, which is recognised on realisation,
in terms of the RBI guidelines.
(c) Commission on issue of Bank Guarantee and Letter of Credit is
accrued over the tenure of BG/LC.
(d) All other Commission and Exchange, Brokerage, Fees and other
charges are recognised as income on realisation.
(e) Income (other than interest) on investments in "Held to Maturity"
category acquired at a discount to the face value, is recognised as
follows:
1. On Interest bearing securities, it is recognised only at the time
of sale/ redemption.
2. On zero-coupon securities, it is accounted for over the balance
tenor of the security on a constant yield basis.
(f) Profit or loss on sale of investments is recognised in the Profit
and Loss account. However, in case of profit on sale of investments
under ''Held to Maturity'' category, an equivalent amount, net of taxes
and amount required to be transferred to Statutory Reserves, is
appropriated to ''Capital Reserve Account''.
(g) Dividend is recognised when the right to receive the dividend is
established.
(h) Interest on Income-tax refund is recognised in the year of passing
of assessment order.
(i) The recoveries made from NPA accounts are appropriated first
towards unrealised interest/income debited to borrowers accounts,
expenditure/out of pocket expenses incurred, then principal dues and
lastly towards uncharged interest.
3.2 Non Banking entities:
Insurance:
a) Premium Income:
Premium (net of service tax) is recognised as income when due. For
linked business, premium is recognised when the associated units are
created. Top up premiums are considered as single premium. Premium on
lapsed policies is recognised as income when such policies are
reinstated.
b) Income from linked funds:
Income from linked funds which includes policy administrative charges,
mortality charges, fund management charges etc. are recovered from the
linked funds in accordance with the terms and conditions of policy and
recognised when recovered.
c) Reinsurance Premium:
Reinsurance Premium ceded is accounted for at the time of recognition
of premium income in accordance with the terms and conditions of the
relevant treaties with the reinsurers.
d) Benefits paid (including claims):
Benefits paid comprise of policy benefits & claim settlement costs, if
any.
Death, rider & surrender claims are accounted for on receipt of
intimation from the policy holder. Withdrawals & surrenders under
linked policies are accounted for in the respective schemes when the
associated units are cancelled.
Survival benefit claims and maturity claims are accounted for when due.
Reinsurance recoveries on claims are accounted for in the period in
which claims are settled.
e) Acquisition Costs
Acquisition costs are costs that vary with and are primarily related to
acquisition of insurance contracts and are expensed in the period in
which they are incurred.
Claw back in future, if any, for the first year commission paid, is
accounted for in the year in which it is recovered.
f) Liability for life policies:
Actuarial liability for life policies in force and for policies in
respect of which premium has been discontinued but a liability exists,
is determined by the Appointed Actuary using the gross premium method
and in case of group business unearned premium reserve method, in
accordance with accepted actuarial practice, requirements of Insurance
Act, 1938, IRDA regulations and the stipulations of Institute of
Actuaries of India.
Linked liabilities comprise unit liability representing the fund value
of policies and non-unit liability for meeting insurance claims etc.
This is based on an actuarial valuation carried out by the Appointed
Actuary.
Non-Banking Activities - Mutual Fund
Revenue from Operations Management fees from the scheme of mutual fund
are accounted on an accrual basis in accordance with the investment
management agreement and are dependent on the net asset value as
recorded by the schemes of BOI AXA Mutual fund.
Other Income: Interest income is recorded on accrual basis. Profit or
loss on sale of investment is recognised in the P & L Account on the
trade date and determined on weighted average basis for individual
security.
4) ADVANCES:
(a) Advances are classified into "Performing" and "Non-Performing
Advances" (NPAs) in accordance with the applicable regulatory
guidelines.
(b) NPAs are further classified into Sub-Standard, Doubtful and Loss
Assets in terms of applicable regulatory guidelines.
(c) In respect of domestic branches, Provisions in respect of NPAs is
made as per policy of the bank particularly in accelerated provisioning
for NPAs which is at the rate given as under:
Category of NPAs % of net outstanding
advance
Sub Standard:*
a) Exposures, which are unsecured ab initio 25%
b) Others 15%
Doubtful:
a) Secured portion (Period for which advance has
remained in doubtful category)
- Up to one year 25%
- One year to three years 60%
- More than three years 100%
b) Unsecured portion 100%
Loss 100%
* on the outstanding advance
(d) In respect of foreign branches, classification of advances as NPAs
and provision in respect of NPAs is made as per the regulatory
requirements prevailing at the respective foreign countries or as per
guidelines applicable to domestic branches, whichever is stringent.
(e) Provisions in respect of NPAs, unrealised interest, ECGC claims
settled, etc., are deducted from total advances to arrive at net
advances as per RBI norms.
(f) In respect of Rescheduled/Restructured advances, provision is made
for the diminution in the fair value of restructured advances measured
in present value terms as per RBI guidelines. The said provision is
reduced to arrive at Net advances.
(g) In case of financial assets sold to Asset Reconstruction Company
(ARC) / Securitisation Company (SC), if the sale is at a price higher
than the NBV, the surplus is retained and utilised to meet the
shortfall/loss on account of sale of other financial assets to SC/ARC.
If the sale is at a price below the net book value (NBV), (i.e.
outstanding less provision held) the shortfall is to be debited to the
Profit and Loss account. However if surplus is available, such shortfall
will be absorbed in the surplus. Any such shortfall arising due to sale
of NPA on or after 26/02/2014 will be amortised over a period of two
years if not absorbed in the surplus.
Excess provision arising out of sale of NPA''s are reversed only when
the cash received (by way of initial consideration only/ or redemption
of SRS/PTC) is higher then the net book value (NBV) of the asset.
Reversal of excess provision will be limited to the extent to which
cash received exceeds the NBV of the asset.
(h) Provision for Standard assets, including restructured advances
classified as standard, is made in accordance with RBI guidelines.
(i) Provision for net funded country exposures is made on a graded
scale in accordance with the RBI guidelines.
5) FLOATING PROVISION:
The bank has a policy for creation and utilisation of floating
provisions. The quantum of floating provisions to be created is
assessed at the end of each financial year. The floating provisions are
utilised only for contingencies under extraordinary circumstances
specified in the policy with prior permission of Reserve Bank of India
or on being specifically permitted by Reserve Bank of India for
specific purposes.
6) Debit/Credit Card Reward Points:
Provision for Reward Points on Debit/Credit cards is made based on the
accumulated outstanding points in each category.
7) INVESTMENTS:
Investments are categorised under ''Held to Maturity'', ''Held for
Trading'' and ''Available for Sale'' categories as per RBI guidelines.
For the purpose of disclosure of investments in India, these are
classified, in accordance with RBI guidelines, under six classification
viz. Government Securities, Other Approved Securities, Shares,
Debentures and Bonds, Investment in Subsidiaries and Associates and
Others. In respect of investments outside India, these are classified,
in accordance with RBI guidelines, under four categories viz.
Government Securities (including local authorities), Subsidiaries/
Joint Ventures abroad and Other Investments.
(a) Basis of categorisation
Categorisation of an investment is done at the time of its acquisition.
Transactions in Government Securities are recognised on Settlement Date
and all other investments are recognised on trade date.
i) Held to Maturity
These comprise investments that the Bank intends to hold till maturity.
Investments in subsidiaries, joint ventures and associates are also
categorised under Held to Maturity.
ii) Held for Trading
This comprise investments acquired with the intention to trade by
taking advantage of short term price/interest rate movements. These are
intended to be traded within 90 days from the date of purchase.
iii) Available for Sale
This comprise investments which do not fall under in "Held to Maturity"
or "Held for Trading" classification.
(b) Acquisition Cost of Investment
i) Brokerage, commission, securities transaction tax etc. paid on
acquisition of equity investments are included in cost.
ii) Brokerage, commission, broken period interest paid/ received on
debt investments is treated as income/ expense and is excluded from
cost/sale consideration.
iii) Brokerage and Commission received on subscription of investments
is credited to Profit and Loss Account.
iv) Cost of investments is determined at weighted average cost method.
(c) Method of valuation
Investments in India are valued in accordance with the RBI guidelines
and investments held at foreign branches are valued at lower of the
value as per the statutory provisions prevailing at the respective
foreign countries or as per RBI guidelines issued from time to time.
Treasury Bills and Commercial Papers are valued at carrying cost.
i) Held to Maturity
1 Investments included in this category are carried at their
acquisition cost, net of amortisation, if any. The excess of
acquisition cost, if any, over the face value is amortised over the
remaining period to maturity using constant yield method. Such
amortisation of premium is adjusted against income under the head
"interest on investments".
2 Investments in subsidiaries, joint ventures and associates (both in
India and abroad) are valued at historical cost except for investments
in Regional Rural Banks, which are valued at carrying cost (i.e. book
value). A provision is made for diminution, other than temporary, for
each investment individually.
ii) Held for Trading / Available for Sale
1 Investments under these categories are individually valued at the
market price or fair value determined as per Regulatory guidelines and
only the net depreciation in each classification for each category is
provided for and net appreciation is ignored. On provision for
depreciation, the book value of the individual securities remains
unchanged after marking to market.
2 For the purpose of valuation of quoted investments in "Held for
Trading" and "Available for Sale" categories, the market rates / quotes
on the Stock Exchanges, the rates declared by Primary Dealers
Association of India (PDAI) / Fixed Income Money Market and Derivatives
Association (FIMMDA) are used. Investments for which such rates/quotes
are not available are valued as per norms laid down by RBI, which are
as under:
Government Securities on Yield to Maturity basis
Other Approved Securities on Yield to Maturity basis
Equity Shares, PSU and At break up value as per the
Trustee shares latest Balance Sheet (not more than
18 months old),
otherwise Rs. 1 per company.
Preference Shares on Yield to Maturity basis
PSU Bonds on Yield to Maturity basis
Units of Mutual Funds at the latest repurchase price/NAV
declared by the Fund in respect of each
scheme
Venture Capital Funds Declared NAV or break up NAV as per
(VCF) audited financials which are not more
than 18 months old. If NAV/audited
financials are not available for more
than 18 months
then at Rs. 1/- per VCF.
Security Receipts At NAV as declared by Securitisation
Companies
(d) Transfer of Securities between Categories
The transfer of securities between categories are carried out at the
least of acquisition cost / book value /market value on the date of
transfer. The depreciation, if any, on such transfer is fully provided
for.
(e) Non performing Investments (NPIs) and valuation thereof
1 Investments are classified as performing and non- performing, based
on the guidelines issued by the RBI in case of domestic offices and
respective regulators in case of foreign offices.
2 In respect of non performing investments, income is not recognised
and provision is made for depreciation in value of such securities as
per RBI guidelines.
(f) Repo / Reverse Repo
The securities sold and purchased under Repo/ Reverse repo are
accounted as Collateralised lending and borrowing transactions.
However, securities are transferred as in case of normal outright sale/
purchase transactions and such movement of securities is reflected
using the Repo/ Reverse Repo Accounts and Contra entries. The above
entries are reversed on the date of maturity. Costs and revenues are
accounted as interest expenditure/income, as the case may be. Balance
in Repo Account is classified as Borrowings and balance in Reverse Repo
account is classified as Balance with Banks and Money at Call & Short
Notice.
8) Derivative
The Bank presently deals in interest rate and currency derivatives.
The interest rate derivatives dealt with by the Bank are Rupee Interest
Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate
Agreements and Interest Rate Futures. Currency Derivatives dealt with
by the Bank are Options, Currency Swaps and Currency Futures. Based on
RBI guidelines, Derivatives are valued as under:
(a) The hedge/non hedge (market making) transactions are recorded
separately.
(b) Income/expenditure on hedging derivatives are accounted on accrual
basis
(c) Trading derivative positions are marked to market (MTM) and the
resulting losses, if any, are recognised in the Profit & Loss Account.
Profit, if any, is ignored.
(d) Gains/ losses on termination of the trading swaps are recorded on
the termination date as income/expenditure. Any gain/ loss on
termination of swap is deferred and recognised over the shorter of the
remaining contractual life of the swap or the remaining life of the
designated assets/liabilities.
(e) Option fees/premium is amortised over the tenor of the option
contract.
9) FIXED ASSETS:
(a) Fixed assets are stated at historic cost, except in the case of
assets which have been revalued, which is stated at revalued amount.
The appreciation on revaluation is credited to Revaluation Reserve.
(b) Cost includes cost of purchase and all expenditure such as site
preparation, installation costs, professional fees etc. incurred on
the asset before it is put to use. Subsequent expenditure incurred on
assets put to use is capitalised only when it increases the future
benefits from such assets or their functioning capability.
(c) Cost of premises includes cost of land, both freehold and
leasehold.
10) DEPRECIATION ON FIXED ASSETS:
a) Depreciation on assets is charged on the Written Down Value at the
rates determined by the Bank, except in respect of computers where it
is calculated on the Straight Line Method, at the rates prescribed by
RBI.
b) In respect of additions, depreciation is provided for the full year,
irrespective of the date on which the assets were put to use whereas,
depreciation is not provided in the year of sale/ disposal of an asset.
c) Depreciation on the revalued portion of assets is adjusted against
the Revaluation Reserve.
d) Where the cost of land and building cannot be separately
ascertained, depreciation is provided on the composite cost, at the
rate applicable to buildings.
e) Premium paid on leasehold land is amortised over the period of
lease.
f) Depreciation on assets in respect of domestic are provided as under:
Sr. Particulars Rate of
No Depreciation
1. Premises 5.00%
2. Other Fixed Assets
Furniture, Fixtures, Electrical fittings 10.00%
and Equipments
Air-conditioning plants, etc. and business 15.00%
Machines
Motor cars, Vans & Motor cycles 20.00%
Computers and Computer Software forming 33.33%
integral part of hardware.
Computer Software, not forming integral 100.00%
part of hardware
g) Depreciation on fixed assets outside India is provided based on the
estimated useful life determined by each centre.
11) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
Transactions involving foreign exchange are accounted for in accordance
with AS 11, "The Effect of Changes in Foreign Exchange Rates".
a) Translation in respect of Integral Foreign operations:
Foreign currency transactions of Indian branches have been classified
as integral foreign operations and foreign currency transactions of
such operations are translated as under:
i) Foreign currency transactions are recorded on initial recognition in
the reporting currency by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
on the weekly average closing rate as advised by Foreign Exchange
Dealers Association of India (FEDAI)
ii) Foreign currency monetary items are reported using the FEDAI
closing spot rates.
iii) Foreign currency non-monetary items, which are carried in terms of
historical cost, are reported using the exchange rate at the date of
the transaction.
iv) Contingent liabilities denominated in foreign currency are reported
using the FEDAI closing spot rates.
v) Outstanding foreign exchange spot and forward contracts held for
trading are revalued at the exchange rates notified by FEDAI for
specified maturities, and the resulting profit or loss is recognised in
the Profit and Loss account.
vi) Outstanding Foreign exchange forward contracts which are not
intended for trading are valued at the closing spot rate. The premium
or discount arising at the inception of such a forward exchange
contract is amortised as expense or income over the life of the
contract.
vii) Exchange differences arising on the settlement of monetary items
at rates different from those at which they were initially recorded are
recognised as income or as expense in the period in which they arise.
viii) Gains/Losses on account of changes in exchange rates of open
position in currency futures trades are settled with the exchange
clearing house on daily basis and such gains/losses are recognised in
the Profit and Loss account.
b) Translation in respect of Non-Integral Foreign operations:
Transactions and balances of foreign branches are classified as
non-integral foreign operations and their financial statements are
translated as follows:
i) Assets and Liabilities (monetary and non-monetary as well as
contingent liabilities) are translated at the closing rates notified by
FEDAI.
ii) Income and expenses are translated at the quarterly average closing
rates notified by FEDAI.
iii) All resulting exchange differences are accumulated in a separate
account ''Foreign Currency Translation Reserve'' till the disposal of the
net investments by the bank in the respective foreign branches.
iv) The Assets and Liabilities of foreign offices in foreign currency
(other than local currency of the foreign offices) are translated into
local currency using spot rates applicable to that country.
12) EMPLOYEE BENEFITS:
i. Short Term Employee Benefit:
The undiscounted amount of short-term employee benefits, such as
medical benefits etc. which are expected to be paid in exchange for the
services rendered by employees are recognised during the period when
the employee renders the service.
ii. Post Employment Benefit:
A. Defined Benefit Plan
a) Gratuity
The Bank provides gratuity to all eligible employees. The benefit is
in the form of lump sum payments to vested employees on retirement, on
death while in employment, or on termination of employment, for an
amount equivalent to 15 days basic salary payable for each completed
year of service, subject to a maximum prescribed as per The Payment of
Gratuity Act 1972 or BOI (Employee) Gratuity Regulation whichever is
higher. Vesting occurs upon completion of five years of service. The
Bank makes periodic contributions to a fund administered by trustees
based on an independent external actuarial valuation carried out
annually.
b) Pension
The Bank provides pension to all eligible employees. The benefit is in
the form of monthly payments as per rules and payments to vested
employees on retirement, on death while in employment, or on
termination of employment. Vesting occurs at different stages as per
rules. The Bank makes monthly contribution to the pension fund at 10%
of pay in terms of BOI (Employees) Pension regulations. The pension
liability is reckoned based on an independent actuarial valuation
carried out annually and Bank makes such additional contributions
periodically to the Fund as may be required to secure payment of the
benefits under the pension regulations.
B. Defined Contribution Plan:
a) Provident Fund
The Bank operates a Provident Fund scheme. All eligible employees are
entitled to receive benefits under the Bank''s Provident Fund scheme.
The Bank contributes monthly at a determined rate (currently 10% of
employee''s basic pay plus eligible allowance). These contributions are
remitted to a trust established for this purpose and are charged to
Profit and Loss Account. The bank recognises such annual contributions
as an expense in the year to which it relates.
b) Pension
All Employees of the bank, who have joined from 1st April, 2010 are
eligible for contributory pension. Such employees contribute monthly at
a predetermined rate to the pension scheme. The bank also contributes
monthly at a predetermined rate to the said pension scheme. Bank
recognises its contribution to such scheme as expenses in the year to
which it relates. The contributions are remitted to National Pension
System Trust. The obligation of bank is limited to such predetermined
contribution.
iii. Other Long term Employee Benefit:
c) Leave encashment benefit, which is a defined benefit obligation, is
provided for on the basis of an actuarial valuation in accordance with
AS 15 - Employee Benefits.
d) Other employee benefits such as Leave Fare Concession, Milestone
award, resettlement benefits, etc. which are defined benefit
obligations are provided for on the basis of an actuarial valuation in
accordance with AS 15 - Employee Benefits.
13) EARNINGS PER SHARE:
a) Basic and Diluted earnings per equity share are reported in
accordance with AS 20 "Earnings per share". Basic earnings per equity
share are computed by dividing net profit after tax by the weighted
average number of equity shares outstanding during the period.
b) Diluted earnings per equity share are computed using the weighted
average number of equity shares and dilutive potential equity shares
outstanding at the end of the period.
14) TAXES ON INCOME:
a) Income Tax comprises the current tax provision and net change in
deferred tax assets or liabilities during the year, in accordance with
AS 22 "Accounting for Taxes on Income". Current taxes are determined in
accordance with the provisions of Accounting Standard 22 and tax laws
prevailing in India after taking into account taxes of foreign offices,
which are based on the tax laws of respective jurisdiction. Deferred tax
adjustments comprise of changes in the deferred tax assets or
liabilities during the period.
b) Deferred Tax is recognised subject to consideration of prudence in
respect of items of income and expenses those arise at one point of
time and are capable of reversal in one or more subsequent years.
c) Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
balance sheet date.
d) Deferred tax assets are recognised and reassessed at each reporting
date, based upon management''s judgement as to whether realisation is
considered reasonably certain. Deferred tax assets are recognised on
carry forward of unabsorbed depreciation and tax losses, only if there
is virtual certainty that such deferred tax assets can be realised
against future profits.
15) IMPAIRMENT OF ASSETS:
"Impairment losses, if any on Fixed Assets (including revalued assets)
are recognised and charged to Profit and Loss account in accordance
with AS 28 "Impairment of Assets".However, an impairment loss on a
revalued asset is recognised directly against any revaluation surplus
for the asset to the extent that the impairment loss does not exceed
the amount held in the revaluation surplus for that same asset."
16) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:
As per AS 29 "Provisions, Contingent Liabilities and Contingent
Assets", the Bank recognises provisions only when it has a present
obligation as a result of a past event and it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation and when a reliable estimate of the amount of the
obligation can be made.
Contingent liability is disclosed unless the possibility of an outflow
of resources embodying economic benefit is remote.
Contingent Assets are not recognised in the financial statements since
this may result in the recognition of income that may never be
realised.
17) SHARE ISSUE EXPENSES:
Share issue expenses are charged to the Profit and Loss Account in the
year of issue of shares.
Mar 31, 2014
1) BASIS OF PREPARATION:
The abridged Standalone and Consolidated Financial Statements have been
prepared from the audited Standalone and Consolidated Financial
Statements of Bank of India (''the Bank'') for the year ended 31st March
2014, which were prepared based on the accounting policies hereinafter
appearing.
The Financial Statements are prepared following the going concern
concept, on historical cost basis unless otherwise stated and conform,
in all material aspects, to the Generally Accepted Accounting
Principles (GAAP) in India, which encompasses applicable statutory
provisions, regulatory norms prescribed by the Reserve Bank of India
(RBI), Accounting Standards (AS) and pronouncements issued by The
Institute of Chartered Accountants of India (ICAI) and accounting
practices prevalent in the banking industry in India. In respect of
foreign offices/branches, statutory provisions and accounting practices
prevailing in the respective foreign countries are complied with,
except as specified elsewhere.
In addition to above, for preparation of the Consolidated Financial
Statements applicable statutory provisions and regulatory norms
prescribed by the Insurance Regulatory and Development Authority (IRDA)
and Companies Act 1956 have been followed to the extent these are
applicable to the joint ventures/subsidiaries/associates being
consolidated.
2) USE OF ESTIMATES:
The preparation of Financial Statements requires the management to make
estimates and assumptions considered in the reported amount 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.
However actual results can differ from estimates. Any revision to
accounting estimates is recognized prospectively in current and future
periods.
3) REVENUE RECOGNITION: 3.1 Banking entities
(a) Income/Expenditure is recognised on accrual basis, unless otherwise
stated. In respect of foreign offices, income is recognised as per local
laws of host country.
(b) Interest income is recognised on time proportion basis except (i)
interest on Non-performing Assets, which is recognised on realisation,
in terms of the RBI guidelines.
(c) Commission on issue of Bank Guarantee and Letter of Credit is
accrued over the tenure of BG/LC.
(d) All other Commission and Exchange, Brokerage, Fees and other
charges are recognised as income on realisation.
(e) Income (other than interest) on investments in "Held to Maturity"
category acquired at a discount to the face value, is recognised as
follows:
1. On Interest bearing securities, it is recognised only at the time
of sale/ redemption.
2. On zero-coupon securities, it is accounted for over the balance
tenor of the security on a constant yield basis.
(f) Proft or loss on sale of investments is recognised in the Profit and
Loss account. However, in case of profit on sale of investments under
''Held to Maturity'' category, an equivalent amount, net of taxes and
amount required to be transferred to Statutory Reserves, is
appropriated to ''Capital Reserve Account''.
(g) Dividend is recognised when the right to receive the dividend is
established.
(h) Interest on Income-tax refund is recognised in the year of passing
of assessment order.
(i) The recoveries made from NPA accounts are appropriated first towards
unrealised interest/income debited to borrowers accounts,
expenditure/out of pocket expenses incurred, then principal dues and
lastly towards uncharged interest.
3.2 Non Banking Entities
Insurance:
a) Premium Income:
Premium (net of service tax) is recognised as income when due. For
linked business, premium is recognised when the associated units are
created. Top up premiums are considered as single premium.
Premium on lapsed policies is recognised as income when such policies
are reinstated.
b) Income from linked funds:
Income from linked funds which includes policy administrative charges,
mortality charges, fund management charges etc. are recovered from the
linked funds in accordance with the terms and conditions of policy and
recognised when recovered.
c) Reinsurance Premium:
Reinsurance Premium ceded is accounted for at the time of recognition
of premium income in accordance with the terms and conditions of the
relevant treaties with the reinsurers.
d) Benefits paid (including claims):
Benefits paid comprise of policy benefits & claim settlement costs, if
any.
Death, rider & surrender claims are accounted for on receipt of
intimation from the policy holder. Withdrawals & surrenders under
linked policies are accounted for in the respective schemes when the
associated units are cancelled.
Survival benefit claims and maturity claims are accounted for when due.
Reinsurance recoveries on claims are accounted for in the period in
which claims are settled.
e) Acquisition Costs
Acquisition costs are costs that vary with and are primarily related to
acquisition of insurance contracts and are expensed in the period in
which they are incurred.
Claw back in future, if any, for the first year commission paid, is
accounted for in the year in which it is recovered.
f) Liability for life policies:
Actuarial liability for life policies in force and for policies in
respect of which premium has been discontinued but a liability exists,
is determined by the Appointed Actuary using the gross premium method
and in case of group business unearned premium reserve method, in
accordance with accepted actuarial practice, requirements of Insurance
Act, 1938, IRDA regulations and the stipulations of Institute of
Actuaries of India.
Linked liabilities comprise unit liability representing the fund value
of policies and non-unit liability for meeting insurance claims etc.
This is based on an actuarial valuation carried out by the Appointed
Actuary.
4) ADVANCES:
(a) Advances are classified into "Performing" and "Non-Performing
Advances" (NPAs) in accordance with the applicable regulatory
guidelines.
(b) NPAs are further classified into Sub-Standard, Doubtful and Loss
Assets in terms of applicable regulatory guidelines.
(d) In respect of foreign branches, classification of advances as NPAs
and provision in respect of NPAs is made as per the regulatory
requirements prevailing at the respective foreign countries or as per
guidelines applicable to domestic branches, whichever is stringent.
(e) Provisions in respect of NPAs, unrealised interest, ECGC claims
settled, etc., are deducted from total advances to arrive at net
advances as per RBI norms.
(f) In respect of Rescheduled/Restructured advances, provision is made
for the diminution in the fair value of restructured advances measured
in present value terms as per RBI guidelines. The said provision is
reduced to arrive at Net advances.
(g) In case of financial assets sold to Asset Reconstruction Company
(ARC) / Securitisation Company (SC), if the sale is at a price higher
than the NBV, the surplus is retained and utilised to meet the
shortfall/loss on account of sale of other financial assets to SC/ARC.
If the sale is at a price below the net book value (NBV), (i.e.
outstanding less provision held) the shortfall is to be debited to the
Profit and Loss account. However if surplus is available, such
shortfall will be absorbed in the surplus. Any such shortfall arising
due to sale of NPA on or after 26/02/2014 will be amortised over a
period of two years if not absorbed in the surplus.
Excess provision arising out of sale of NPA''s are reversed only when
the cash received (by way of initial consideration only/ or redemption
of SRS/PTC) is higher than the net book value (NBV) of the asset.
Reversal of excess provision will be limited to the extent to which
cash received exceeds the NBV of the asset.
(h) Provision for Standard assets, including restructured advances
classified as standard, is made in accordance with RBI guidelines.
(i) Provision for net funded country exposures is made on a graded
scale in accordance with the RBI guidelines.
5) FLOATING PROVISION:
The bank has a policy for creation and utilisation of footing
provisions. The quantum of footing provisions to be created is
assessed at the end of each financial year. The footing provisions are
utilised only for contingencies under extraordinary circumstances
specified in the policy with prior permission of Reserve Bank of India
or on being specifically permitted by Reserve Bank of India for specific
purposes.
6) Debit/Credit Card Reward Points:
Provision for Reward Points on Debit/Credit cards is made based on the
accumulated outstanding points in each category.
7) INVESTMENTS:
Investments are categorised under Held to Maturity'', ''Held for Trading''
and ''Available for Sale'' categories as per RBI guidelines. For the
purpose of disclosure of investments in India, these are classified, in
accordance with RBI guidelines, under six classification viz. Government
Securities, Other Approved Securities, Shares, Debentures and Bonds,
Investment in Subsidiaries and Associates and Others. In respect of
investments outside India, these are classified, in accordance with RBI
guidelines, under four categories viz. Government Securities (including
local authorities), Subsidiaries/ Joint Ventures abroad and Other
Investments.
(a) Basis of categorisation
Categorisation of an investment is done at the time of its acquisition.
Transactions in Government Securities are recognised on Settlement Date
and all other investments are recognised on trade date.
i) Held to Maturity
These comprise investments that the Bank intends to hold till maturity.
Investments in subsidiaries, joint ventures and associates are also
categorised under Held to Maturity.
ii) Held for Trading
This comprise investments acquired with the intention to trade by
taking advantage of short term price/interest rate movements. These are
intended to be traded within 90 days from the date of purchase.
iii) Available for Sale
This comprise investments which do not fall under in "Held to Maturity"
or "Held for Trading" classification.
(b) Acquisition Cost of Investment
i) Brokerage, commission, securities transaction tax etc. paid on
acquisition of equity investments are included in cost.
ii) Brokerage, commission, broken period interest paid/ received on
debt investments is treated as income/ expense and is excluded from
cost/sale consideration.
iii) Brokerage and Commission received on subscription of investments
is credited to Profit and Loss Account.
iv) Cost of investments is determined at weighted average cost method.
(c) Method of valuation
Investments in India are valued in accordance with the RBI guidelines
and investments held at foreign branches are valued at lower of the
value as per the statutory provisions prevailing at the respective
foreign countries or as per RBI guidelines issued from time to time.
Treasury Bills and Commercial Papers are valued at carrying cost.
i) Held to Maturity
1 Investments included in this category are carried at their
acquisition cost, net of amortisation, if any. The excess of
acquisition cost, if any, over the face value is amortised over the
remaining period to maturity using constant yield method. Such
amortisation of premium is adjusted against income under the head
"interest on investments".
2 Investments in subsidiaries, joint ventures and associates (both in
India and abroad) are valued at historical cost except for investments
in Regional Rural Banks, which are valued at carrying cost (i.e. book
value). A provision is made for diminution, other than temporary, for
each investment individually.
ii) Held for Trading / Available for Sale
1 Investments under these categories are individually valued at the
market price or fair value determined as per Regulatory guidelines and
only the net depreciation in each classification for each category is
provided for and net appreciation is ignored. On provision for
depreciation, the book value of the individual securities remains
unchanged after marking to market.
2 For the purpose of valuation of quoted investments in "Held for
Trading" and "Available for Sale" categories, the market rates / quotes
on the Stock Exchanges, the rates declared by Primary Dealers
Association of India (PDAI) / Fixed Income Money Market and Derivatives
Association (FIMMDA) are used. Investments for which such rates/quotes
are not available are valued as per norms laid down by RBI, which are
as under:
(d) Transfer of Securities between Categories
The transfer of securities between categories are carried out at the
least of acquisition cost / book value /market value on the date of
transfer. The depreciation, if any, on such transfer is fully provided
for.
(e) Non performing Investments (NPIs) and valuation thereof
1 Investments are classified as performing and non- performing, based on
the guidelines issued by the RBI in case of domestic offices and
respective regulators in case of foreign offices.
2 In respect of non performing investments, income is not recognised
and provision is made for depreciation in value of such securities as
per RBI guidelines.
(f) Repo / Reverse Repo
The securities sold and purchased under Repo/ Reverse repo are
accounted as Collateralised lending and borrowing transactions.
However, securities are transferred as in case of normal outright sale/
purchase transactions and such movement of securities is reflected using
the Repo/ Reverse Repo Accounts and Contra entries. The above entries
are reversed on the date of maturity. Costs and revenues are accounted
as interest expenditure/income, as the case may be. Balance in Repo
Account is classified as Borrowings and balance in Reverse Repo account
is classified as Balance with Banks and Money at Call & Short Notice.
8) Derivative
The Bank presently deals in interest rate and currency derivatives.
The interest rate derivatives dealt with by the Bank are Rupee Interest
Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate
Agreements and Interest Rate Futures. Currency Derivatives dealt with
by the Bank are Options, Currency Swaps and Currency Futures. Based on
RBI guidelines, Derivatives are valued as under:
(a) The hedge/non hedge (market making) transactions are recorded
separately.
(b) Income/expenditure on hedging derivatives are accounted on accrual
basis
(c) Trading derivative positions are marked to market (MTM) and the
resulting losses, if any, are recognised in the Profit & Loss Account.
Profit, if any, is ignored.
(d) Gains/ losses on termination of the trading swaps are recorded on
the termination date as income/expenditure. Any gain/ loss on
termination of swap is deferred and recognised over the shorter of the
remaining contractual life of the swap or the remaining life of the
designated assets/liabilities.
(e) Option fees/premium is amortised over the tenor of the option
contract.
9) FIXED ASSETS:
(a) Fixed assets are stated at historic cost, except in the case of
assets which have been revalued, which is stated at revalued amount.
The appreciation on revaluation is credited to Revaluation Reserve.
(b) Cost includes cost of purchase and all expenditure such as site
preparation, installation costs, professional fees etc. incurred on
the asset before it is put to use. Subsequent expenditure incurred on
assets put to use is capitalised only when it increases the future
benefits from such assets or their functioning capability.
(c) Cost of premises includes cost of land, both freehold and
leasehold.
10) DEPRECIATION ON FIXED ASSETS:
a) Depreciation on assets is charged on the Written Down Value at the
rates determined by the Bank, except in respect of computers where it
is calculated on the Straight Line Method, at the rates prescribed by
RBI
b) In respect of additions, depreciation is provided for the full year,
irrespective of the date on which the assets were put to use whereas,
depreciation is not provided in the year of sale/ disposal of an asset.
c) Depreciation on the revalued portion of assets is adjusted against
the Revaluation Reserve.
d) Where the cost of land and building cannot be separately
ascertained, depreciation is provided on the composite cost, at the
rate applicable to buildings.
e) Premium paid on leasehold land is amortised over the period of
lease.
g) Depreciation on fxed assets outside India is provided as per the
regulatory requirements/or prevailing practices of the respective
country.
11) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
Transactions involving foreign exchange are accounted for in accordance
with AS 11, "The Effect of Changes in Foreign Exchange Rates".
a) Translation in respect of Integral Foreign operations:
Foreign currency transactions of Indian branches have been classified as
integral foreign operations and foreign currency transactions of such
operations are translated as under:
i) Foreign currency transactions are recorded on initial recognition in
the reporting currency by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
on the weekly average closing rate as advised by Foreign Exchange
Dealers Association of India (FEDAI)
ii) Foreign currency monetary items are reported using the FEDAI
closing spot rates.
iii) Foreign currency non-monetary items, which are carried in terms of
historical cost, are reported using the exchange rate at the date of
the transaction.
iv) Contingent liabilities denominated in foreign currency are reported
using the FEDAI closing spot rates.
v) Outstanding foreign exchange spot and forward contracts held for
trading are revalued at the exchange rates notified by FEDAI for
specified maturities, and the resulting proof or loss is recognised in
the Proft and Loss account.
vi) Outstanding Foreign exchange forward contracts which are not
intended for trading are valued at the closing spot rate. The premium
or discount arising at the inception of such a forward exchange
contract is amortised as expense or income over the life of the
contract.
vii) Exchange differences arising on the settlement of monetary items
at rates different from those at which they were initially recorded are
recognised as income or as expense in the period in which they arise.
viii) Gains/Losses on account of changes in exchange rates of open
position in currency futures trades are settled with the exchange
clearing house on daily basis and such gains/losses are recognised in
the Profit and Loss account.
b) Translation in respect of Non-Integral Foreign operations:
Transactions and balances of foreign branches are classified as
non-integral foreign operations and their Financial Statements are
translated as follows:
i) Assets and Liabilities (monetary and non-monetary as well as
contingent liabilities) are translated at the closing rates notified by
FEDAI.
ii) Income and expenses are translated at the quarterly average closing
rates notified by FEDAI.
iii) All resulting exchange differences are accumulated in a separate
account ''Foreign Currency Translation Reserve'' till the disposal of the
net investments by the bank in the respective foreign branches.
iv) The Assets and Liabilities of foreign offices in foreign currency
(other than local currency of the foreign offices) are translated into
local currency using spot rates applicable to that country.
12) EMPLOYEE BENEFITS:
i. Short Term Employee Benefit:
The undiscounted amount of short-term employee benefits, such as medical
benefits etc. which are expected to be paid in exchange for the services
rendered by employees are recognised during the period when the
employee renders the service.
ii. Post Employment Benefit:
A. Defend Benefit Plan
a) Gratuity
The Bank provides gratuity to all eligible employees. The benefit is in
the form of lump sum payments to vested employees on retirement, on
death while in employment, or on termination of employment, for an
amount equivalent to 15 days basic salary payable for each completed
year of service, subject to a maximum prescribed as per The Payment of
Gratuity Act 1972 or BOI (Employee) Gratuity Regulation whichever is
higher. Vesting occurs upon completion of five years of service. The
Bank makes periodic contributions to a fund administered by trustees
based on an independent external actuarial valuation carried out
annually.
b) Pension
The Bank provides pension to all eligible employees. The benefit is in
the form of monthly payments as per rules and payments to vested
employees on retirement, on death while in employment, or on
termination of employment. Vesting occurs at different stages as per
rules. The Bank makes monthly contribution to the pension fund at 10%
of pay in terms of BOI (Employees) Pension regulations. The pension
liability is reckoned based on an independent actuarial valuation
carried out annually and Bank makes such additional contributions
periodically to the Fund as may be required to secure payment of the
benefits under the pension regulations.
B. Defined Contribution Plan:
a) Provident Fund
The Bank operates a Provident Fund scheme. All eligible employees are
entitled to receive benefits under the Bank''s Provident Fund scheme. The
Bank contributes monthly at a determined rate (currently 10% of
employee''s basic pay plus eligible allowance). These contributions are
remitted to a trust established for this purpose and are charged to
Profit and Loss Account. The bank recognises such annual contributions
as an expense in the year to which it relates.
b) Pension
All Employees of the bank, who have joined from 1st April, 2010 are
eligible for contributory pension. Such employees contribute monthly at
a predetermined rate to the pension scheme. The bank also contributes
monthly at a predetermined rate to the said pension scheme. Bank
recognises its contribution to such scheme as expenses in the year to
which it relates. The contributions are remitted to National Pension
System Trust. The obligation of bank is limited to such predetermined
contribution.
iii. Other Long term Employee Benefit:
a) Leave encashment benefit, which is a defend benefit obligation, is
provided for on the basis of an actuarial valuation in accordance with
AS 15 - Employee Benefits.
b) Other employee benefits such as Leave Fare Concession, Milestone
award, resettlement benefits, Casual Leave etc. which are defined
benefit obligations are provided for on the basis of an actuarial
valuation in accordance with AS 15 - Employee Benefits.
13) EARNINGS PER SHARE:
a) Basic and Diluted earnings per equity share are reported in
accordance with AS 20 "Earnings per share". Basic earnings per equity
share are computed by dividing net profit after tax by the weighted
average number of equity shares outstanding during the period.
b) Diluted earnings per equity share are computed using the weighted
average number of equity shares and dilutive potential equity shares
outstanding at the end of the period.
14) TAXES ON INCOME:
a) Income Tax comprises the current tax provision and net change in
deferred tax assets or liabilities during the year, in accordance with
AS 22 "Accounting for Taxes on Income". Current taxes are determined
in accordance with the provisions of Accounting Standard 22 and tax
laws prevailing in India after taking into account taxes of foreign
offices, which are based on the tax laws of respective jurisdiction.
Deferred tax adjustments comprise of changes in the deferred tax assets
or liabilities during the period.
b) Deferred Tax is recognised subject to consideration of prudence in
respect of items of income and expenses those arise at one point of
time and are capable of reversal in one or more subsequent years.
c) Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
balance sheet date.
d) Deferred tax assets are recognised and reassessed at each reporting
date, based upon management''s judgment as to whether realisation is
considered reasonably certain. Deferred tax assets are recognised on
carry forward of unabsorbed depreciation and tax losses, only if there
is virtual certainty that such deferred tax assets can be realised
against future profits.
15) IMPAIRMENT OF ASSETS:
"Impairment losses, if any on Fixed Assets (including revalued assets)
are recognised and charged to Proft and Loss account in accordance with
AS 28 "Impairment of Assets". However, an impairment loss on a revalued
asset is recognised directly against any revaluation surplus for the
asset to the extent that the impairment loss does not exceed the amount
held in the revaluation surplus for that same asset."
16) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:
As per AS 29 "Provisions, Contingent Liabilities and Contingent
Assets", the Bank recognises provisions only when it has a present
obligation as a result of a past event and it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligation and when a reliable estimate of the amount of the
obligation can be made.
Contingent liability is disclosed unless the possibility of an outflow
of resources embodying economic benefit is remote.
Contingent Assets are not recognised in the Financial Statements since
this may result in the recognition of income that may never be
realised.
17) SHARE ISSUE EXPENSES:
Share issue expenses are charged to the Profit and Loss Account in the
year of issue of shares.
Accounting policy relevant to consolidated financial statement
18) BASIS OF CONSOLIDATION:
Consolidated Financial Statements of the group have been prepared on
the basis of:
1. The Financial Statements of Bank of India (the Parent bank) and its
subsidiaries in accordance with Accounting Standard (AS) 21
"Consolidated Financial Statements" issued by the Institute of
Chartered Accountants of India (ICAI), on a line by line basis by
adding together like items of assets, liabilities, income and expenses
after eliminating intra-group transactions, balances, unrealised
proft/loss and making necessary adjustments wherever required to
conform to uniform accounting policies except in case of overseas
subsidiaries/ associates, where, the Financial Statements are prepared
based on local regulatory requirements/ International Financial
Reporting Standards (IFRS). Impact of such adjustments not being
material is not given in Consolidated Financial Statements. The
Financial Statements of the subsidiaries are drawn up to the same
reporting date as that of Parent bank i.e. 31st March 2014.
2. The difference between cost to the parent bank of its investment in
the subsidiaries and Parent bank''s share in the equity of the
subsidiaries is recognised as goodwill/capital reserve. Goodwill, if
any, is written off immediately on its recognition.
3. Minority interest in the Consolidated Financial Statement consists
of the share of the minority shareholders in the net equity of the
subsidiaries.
4. Accounting for Investment in Associate companies is done under
Equity method in accordance with Accounting Standard (AS) 23,
"Accounting for Investments in Associates in Consolidated Financial
Statements", issued by ICAI.
5. Accounting for Investments in Joint Venture are consolidated on
"Proportionate basis" as prescribed in Accounting Standard (AS) 27,
"Financial Reporting of Interests in Joint Ventures" issued by ICAI.
Mar 31, 2012
1) ACCOUNTING CONVENTION:
The accompanying financial statements have been prepared following the
going concern concept, on historical cost basis unless otherwise stated
and conform to the Generally Accepted Accounting Principles (GAAP) in
India, which encompasses applicable statutory provisions, regulatory
norms prescribed by the Reserve Bank of India, Accounting Standards
(AS) and pronouncements issued by The Institute of Chartered
Accountants of India and accounting practices prevalent in the banking
industry in India. In respect of foreign offices/branches, statutory
provisions and accounting practices prevailing in the respective
foreign countries are complied with, except as specified elsewhere.
The preparation of financial statements requires the management to make
estimates and assumptions considered in the reported amount 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) REVENUE RECOGNITION:
(a) Income/Expenditure is generally accounted for on accrual basis,
unless otherwise stated.
(b) Income on Non-performing Assets (NPAs) is recognised on
realisation, in terms of the RBI guidelines The recoveries made from
NPA accounts are appropriated first towards unrealised interest/income,
principal dues and thereafter towards uncharged interest.
(c) Exchange Commission, Brokerage, Dividend Income, Commission on
Government Business and Commission on Third Party Products are
accounted for on realisation basis.
(d) Interest on Income-tax refunds is accounted for in the year of
receipt of the assessment order.
3) ADVANCES:
(a) In terms of guidelines issued by the RBI, advances to borrowers are
classified into "Performing" or "Non-Performing" assets based
on recovery of principal/ interest. NPAs are further classified as
Sub-Standard, Doubtful and Loss Assets.
(b) Provision for Standard assets is made as per RBI guidelines.
(c) In respect of advances at foreign offices/ branches, provision is
made as per the statutory requirements prevailing at the respective
foreign countries, or as per RBI guidelines, whichever is higher.
(d) Provisions in respect of NPAs, unrealised interest, ECGC claims
settled, etc., are deducted from total advances to arrive at net
advances as per RBI norms.
(e) In respect of Rescheduled/Restructured accounts, provision is made
for the sacrifice of interest/diminution in the value of restructured
advances measured in present value terms as per RBI guidelines. The
said provision is reduced to arrive at Net advances.
(f) In case of financial assets sold to Asset Reconstruction Company
(ARC) / Securitisation Company (SC), if the sale is at a price below
the net book value (NBV), the shortfall is debited to the Profit and
Loss account. If the sale value is higher than the NBV, the surplus
provision is retained to meet the shortfall/loss on account of sale of
other financial assets to SC/ARC.
4) INVESTMENTS:
Investments are classified under 'Held to Maturity', 'Held for Trading'
and 'Available for Sale' categories as per RBI guidelines. In
conformity with the requirements in Form A of the Third Schedule to the
Banking Regulation Act, 1949, these are classified under six groups -
Government Securities, Other Approved Securities, Shares, Debentures
and Bonds, Investments in Subsidiaries/Joint Ventures and Other
Investments.
A) Basis of classification
Classification of an investment is normally done at the time of its
acquisition:
i) Held to Maturity
These comprise investments the Bank intends to hold till maturity.
ii) Held for Trading
Investments acquired with the intention to trade within 90 days from
the date of purchase are classified under this head.
iii) Available for Sale
Investments which are not classified either as "Held to Maturity"
or as "Held for Trading" are classified under this head.
B) Method of valuation
Investments are valued in accordance with the RBI guidelines.
Accordingly, the Bank follows "Settlement Date" for accounting of
investment (in Government securities) transactions.
i) Held to Maturity
Investments included in this category are carried at their acquisition
cost. Premium, if any, paid on acquisition is amortised using constant
yield method over the remaining period of maturity.
ii) Held for Trading / Available for Sale
a. Investments under these categories are valued scrip-wise.
Appreciation/ depreciation is aggregated for each class of securities
and net depreciation as per applicable norms is recognised in the
Profit and Loss account, whereas net appreciation is ignored.
b. For the purpose of valuation of quoted investments in "Held for
Trading" and "Available for Sale" categories, the market rates /
quotes on the Stock Exchanges, the rates declared by Primary Dealers
Association of India (PDAI) / Fixed Income Money Market and Derivatives
Association (FIMMDA) are used. Investments for which such rates/quotes
are not available are valued as per norms laid down by RBI, which are
as under:
iii) Held at Foreign Branches
Investments held at foreign branches are carried at lower of the value
as per the statutory provisions prevailing at the respective foreign
countries or as per RBI guidelines issued from time to time.
C) Transfer of Securities between Categories
The transfer of securities between categories specified at para 4 A (i)
to (iii) above are 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.
D) Acquisition Cost of Investment
i) Brokerage, commission, securities transaction tax etc. paid on
acquisition of Equity investments are included in cost.
ii) Brokerage, commission, broken period interest paid/ received on
debt instruments is treated as income/expense and is excluded from
cost/sale consideration.
iii) Brokerage and Commission received on subscription of investments
is credited to Profit and Loss Account
iv) Cost of Investments is determined at weighted average cost method.
v) Treasury bills and Commercial Papers are valued at carrying cost.
E) Profit or loss on sale of investment
Profit or loss on sale of investments in any category is taken to
Profit and Loss account. However, in case of profit on sale of
investments under 'Held to Maturity' category, an equivalent amount net
of taxes and amount required to be transferred to Statutory Reserves is
appropriated to 'Capital Reserve Account'.
F) Provisioning and income recognition - Non performing Investments
(NPIs)
In respect of non performing investments, income is not recognised and
provision is made for depreciation in value of such securities as per
RBI guidelines.
G) Repo / Reverse Repo
The Bank has adopted the Accounting Procedure prescribed by the RBI for
accounting of Repo and Reverse Repo transactions [other than
transactions under the Liquidity Adjustment Facility (LAF) with the
RBI]. The economic essence of repo transactions, viz., borrowing
(lending) of funds by selling (purchasing) securities is reflected in
the books of repo participants, by accounting the same as
collateralized lending and borrowing transaction, with an agreement to
repurchase, on the agreed terms. Costs and revenues are accounted for
as interest expenditure / income, as the case may be. Balance in Repo/
Reverse Repo Account is adjusted against the balance in the Investment
Account.
Securities purchased/sold under LAF with RBI are debited/credited to
Investment Account and reversed on maturity of the transaction.
Interest expended / earned thereon is accounted for as expenditure /
revenue.
H) Derivative
The Bank presently deals in interest rate and currency derivatives. The
interest rate derivatives dealt with by the Bank are Rupee Interest
Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate
Agreements and Interest Rate Futures. Currency Derivatives dealt with
by the Bank are Options, Currency Swaps and Currency Futures.
Based on RBI guidelines, Derivatives are valued as under:
The hedge/non hedge (market making) transactions are recorded
separately.
Hedging derivatives are accounted on accrual basis.
Trading derivative positions are marked to market (MTM) and the
resulting losses, if any, are recognised in the Profit & Loss Account.
Profit, if any, is ignored. Income and Expenditure relating to
interest rate swaps are recognised on the settlement date. Gains/
losses on termination of the trading swaps are recorded on the
termination date as income/expenditure. Any gain/ loss on termination
of swap is deferred and recognized over the shorter of the remaining
contractual life of the swap or the remaining life of the designated
assets/ liabilities.
5) FIXED ASSETS:
(a) Fixed assets are stated at historic cost, except in the case of
assets which have been revalued. The appreciation on revaluation is
credited to Revaluation Reserve.
(b) Cost of premises includes cost of land, both freehold and
leasehold.
6) DEPRECIATION ON FIXED ASSETS:
i) Depreciation on assets is charged on the Written Down Value at the
rates determined by the Bank, except in respect of computers where it
is calculated on the Straight Line Method, at the rates prescribed by
RBI
ii) In respect of on additions, depreciation is provided for the full
year, irrespective of the date on which the assets were put to use
whereas, depreciation is not provided in the year of sale/ disposal of
an asset
iii) Depreciation on the revalued portion of assets is adjusted against
the Revaluation Reserve.
a) Where the cost of land and building cannot be separately
ascertained, depreciation is provided on the composite cost, at the
rate applicable to buildings.
b) Premium paid on leasehold land is amortised over the period of
lease.
d) Depreciation on fixed assets outside India is provided as per the
regulatory requirements/or prevailing practices of the respective
country.
7) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
Accounting for transactions involving foreign exchange is accounted for
in accordance with Accounting Standard (AS) 11, "The Effect of
Changes in Foreign Exchange Rates" issued by ICAI.
a) Translation in respect of Integral Foreign operations
Foreign currency transactions of Indian branches have been classified
as integral foreign operations.
i) The transactions are initially recorded on weekly average closing
rate as advised by FEDAI (Foreign exchange dealers association of
India).
ii) Monetary Foreign currency assets and liabilities are translated at
the closing rates notified by FEDAI at the year end.
iii) Acceptances, endorsements, other obligations and guarantees in
foreign currencies are carried at the closing rates notified by FEDAI
at the year end
iv) Foreign Currency Assets and Liabilities are translated at the
closing spot rates notified by FEDAI at the end of each week.
v) The resulting exchange differences are recognized as income or
expenses and are accounted through profit and loss account.
b) Translation in respect of Non-Integral Foreign operations
Transactions and balances of foreign branches are classified as
non-integral foreign operations and their financial statements are
translated as follows:
i) Assets and Liabilities (both monetary and non- monetary as well as
contingent liabilities) are translated at the closing rates notified by
FEDAI at the year end.
ii) Income and expenses are translated at the quarterly average closing
rates notified by FEDAI at the end of respective quarter.
iii) All resulting exchange differences are accumulated in a separate
account 'Foreign Currency Translation Reserve' till the disposal of the
net investments in the respective foreign branches.
c) Forward Exchange Contracts
In accordance with the guidelines of FEDAI and the provisions of AS-11,
outstanding forward exchange contracts in each currency are revalued at
the Balance Sheet date at the corresponding forward rates for the
residual maturity of the contract. The difference between revalued
amount and the contracted amount is recognized as profit or loss, as
the case may be.
Gains/Losses on account of changes in exchange rates of open position
in currency futures trades are settled with the exchange clearing house
on daily basis and such gains/losses are recognised in the Profit and
Loss account.
8) EMPLOYEE BENEFITS:
a) Provident Fund
Provident fund is a defined contribution scheme as the bank pays fixed
contribution at predetermined rates. The obligation of the bank is
limited to such fixed contribution. The contributions are charged to
Profit and Loss Account.
b) Gratuity
Gratuity liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation made at the end of the financial
year. The scheme is funded by the bank and is managed by a separate
trust.
c) Pension
Pension liability is a defined benefit obligation and is provided for
on the basis of an actuarial valuation made at the end of the financial
year. The scheme is funded by the bank and is managed by a separate
trust.
d) Leave encashment
The bank provides for leave encashment benefits which is a defined
benefit obligation and is provided for on the basis of an actuarial
valuation made at the end of the financial year.
e) Other employee benefits
The bank provides for other employee benefits such as Leave Fare
Concession, Milestone and resettlement benefits which are defined
benefit obligations and are provided for on the basis of an actuarial
valuation made at the end of the financial year.
9) LEASED ASSETS:
Lease Income is recognised based on the Internal Rate of Return method
over the primary period of the lease and is accounted for in accordance
with the Accounting Standard (AS) 19 on "Accounting for Leases",
issued by ICAI.
10) EARNING PER SHARE:
Basic and Diluted earnings per equity share are reported in accordance
with the Accounting Standard (AS) 20 "Earnings per share" issued by
ICAI. Basic earnings per equity share are computed by dividing net
profit after tax by the weighted average number of equity shares
outstanding for the period. Diluted earnings per equity share are
computed using the weighted average number of equity shares and
dilutive potential equity shares outstanding during the period.
11) TAXES ON INCOME:
Income Tax comprises the current tax provision and net change in
deferred tax assets or liabilities during the year, in accordance with
the Accounting Standard (AS) 22, "Accounting for Taxes on Income"
issued by ICAI. Deferred Tax is recognised subject to consideration of
prudence in respect of items of income and expenses those arise at one
point of time and are capable of reversal in one or more subsequent
years. Deferred tax assets and liabilities are measured using the tax
rates and tax laws that have been enacted or substantively enacted by
the balance sheet date.
12) IMPAIRMENT OF ASSETS:
Impairment losses, if any on Fixed Assets (including revalued assets)
are recognised and charged to Profit and Loss account in accordance
with the Accounting Standard (AS) 28 "Impairment of Assets" issued
by ICAI.
13) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:
As per the Accounting Standard (AS) 29 "Provisions, Contingent
Liabilities and Contingent Assets", issued by ICAI, the Bank
recognises provisions only when it has a present obligation as a result
of a past event and it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and when a reliable estimate of the amount of the obligation can be
made.
Contingent Assets are not recognized in the financial statements since
this may result in the recognition of income that may never be
realised.
Mar 31, 2011
1) ACCOUNTING CONVENTION
The accompanying financial statements have been prepared following the
going concern concept, on historical cost basis unless otherwise stated
and conform to the Generally Accepted Accounting Principles (GAAP) in
India, which encompasses applicable statutory provisions, regulatory
norms prescribed by the Reserve Bank of India, Accounting Standards
(AS) and pronouncements issued by The Institute of Chartered
Accountants of India and accounting practices prevalent in the banking
industry in India. In respect of foreign offices/branches, statutory
provisions & accounting practices prevailing in the respective foreign
countries are complied with.
The preparation of financial statements requires the management to make
estimates and assumptions considered in the reported amount 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) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
Accounting for transactions involving foreign exchange is done in
accordance with Accounting Standard (AS) 11, ÃThe Effect of Changes in
Foreign Exchange Ratesà issued by The Institute of Chartered
Accountants of India.
2.1 Translation in respect of Integral Foreign operations:
i) Indian branches having foreign currency transactions have been
classified as integral foreign operations.
ii) Monetary Foreign currency assets and liabilities are translated at
the closing rates notified by Foreign Exchange Dealers Association of
India (FEDAI) at the year end and non-monetary items are translated at
the rates prevailing on the transaction date.
iii) Acceptances, endorsements, other obligations and guarantees in
foreign currencies are carried at the closing rates notified by FEDAI
at the year end. Exchange differences arising on settlement and
translation of monetary items at the end of the financial year are
recognised as income or expenses in the period in which they arise.
2.2 Translation in respect of Non-Integral Foreign operations:
Foreign branches are classified as non-integral foreign operations and
their financial statements are translated as follows:
i) Assets and Liabilities (both monetary and non- monetary as well as
contingent liabilities) are translated at the closing rates notified by
FEDAI at the year end.
ii) Income and expenses are translated at the quarterly average closing
rates notified by FEDAI at the end of respective quarter.
iii) All resulting exchange differences are accumulated in a separate
account ÃForeign Currency Translation Reserve till the disposal of the
net investments in the respective foreign branches.
2.3 Forward Exchange Contracts:
In accordance with the guidelines of FEDAI and the provisions of AS-11,
outstanding forward exchange contracts in each currency are revalued at
the Balance Sheet date at the corresponding forward rates for the
residual maturity of the contract. The difference between revalued
amount and the contracted amount is recognized as profit or loss, as
the case may be.
Gains/Losses on account of changes in exchange rates of open position
in currency futures trades are settled with the exchange clearing house
on daily basis and such gains/losses are recognised in the Profit and
Loss account.
3) INVESTMENTS:
Investments are classified under `Held to Maturity, ÃHeld for Trading
and ÃAvailable for Sale categories as per Reserve Bank of India (RBI)
guidelines. In conformity with the requirements in Form A of the Third
Schedule to the Banking Regulation Act, 1949, these are classified
under six groups à Government Securities, Other Approved Securities,
Shares, Debentures and Bonds, Investments in Subsidiaries/ Joint
Ventures and Other Investments.
3.1 Basis of classification
Classification of an investment is normally done at the time of its
acquisition:
(a) Held to Maturity
These comprise investments the Bank intends to hold on to maturity.
(b) Held for Trading
Investments acquired with the intention to trade within 90 days from
the date of purchase are classified under this head.
(c) Available for Sale
Investments which are not classified either as ÃHeld to Maturityà or as
ÃHeld for Tradingà are classified under this head.
3.2 Method of valuation
Investments are valued in accordance with the RBI guidelines.
(a) Held to Maturity
Investments included in this category are carried at their acquisition
cost. Premium, if any, paid on acquisition is amortised using constant
yield method over the remaining period of maturity.
(b) Held for Trading / Available for Sale
1. Investments under these categories are valued scrip-wise.
Appreciation / depreciation is aggregated for each class of securities
and net depreciation as per applicable norms is recognised in the
Profit and Loss account, whereas net appreciation is ignored.
2. For the purpose of valuation of quoted investments in ÃHeld for
Tradingà and ÃAvailable for Saleà categories, the market rates / quotes
on the Stock Exchanges, the rates declared by Primary Dealers
Association of India (PDAI) / Fixed Income Money Market and Derivatives
Association (FIMMDA) are used. Investments for which such rates /
quotes are not available are valued as per norms laid down by Reserve
Bank of India, which are as under:
Government / on Yield to Maturity basis
Approved securities
Equity Shares, PSU at book value as per the latest
and Trustee shares Balance Sheet (not more than
12 months old), otherwise Rs. 1
per company.
Preference Shares on Yield to Maturity basis
PSU Bonds on Yield to Maturity basis with
appropriate credit spread mark-up
Units of Mutual Funds at the latest repurchase price /
NAV declared by the Fund in
respect of each scheme
Venture Capital Declared NAV or break up NAV
as per audited balance sheet
which is not more than 18 months
old. If NAV/ audited financials are
not available for more than 18
months continuously then at
Rs. 1/- per VCF
(c) Held at Foreign Branches
Investments held at foreign branches are carried at lower of the value
as per the statutory provisions prevailing at the respective foreign
countries or as per RBI guidelines issued from time to time.
(d) Transfer of Securities between Categories
The transfer of a security between categories specified in (a) to (c)
above are accounted for at the acquisition cost / book value /market
value on the date of transfer, whichever is the least, and the
depreciation, if any, on such transfer is fully provided for.
(e) Profit or loss on sale of investment
Profit or loss on sale of investments in any category is taken to
Profit and Loss account. However, in case of profit on sale of
investments under ÃHeld to Maturity category, an equivalent amount net
of taxes and amount required to be transferred to Statutory Reserves is
appropriated to ÃCapital Reserve Account.
(f) Provisioning and income recognition - Non performing Investments
(NPIs):
In respect of non performing investments, income is not recognised and
provision is made for depreciation in value of such securities as per
Reserve Bank of India Guidelines.
(g) Repo / Reverse Repo
The Bank has adopted the Accounting Procedure prescribed by the RBI for
accounting of Repo and Reverse Repo transactions [other than
transactions under the Liquidity Adjustment Facility (LAF) with the
RBI]. The economic essence of repo transactions, viz., borrowing
(lending) of funds by selling (purchasing) securities is refected in
the books of repo participants, by accounting the same as
collateralized lending and borrowing transaction, with an agreement to
repurchase, on the agreed terms. Costs and revenues are accounted for
as interest expenditure / income, as the case may be. Balance in Repo/
Reverse Repo Account is adjusted against the balance in the Investment
Account.
Securities purchased/ sold under LAF with RBI are debited/ credited to
Investment Account and reversed on maturity of the transaction.
Interest expended / earned thereon is accounted for as expenditure /
revenue.
h) Derivative
The Bank presently deals in interest rate and currency derivatives. The
interest rate derivatives
dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency
Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures.
Currency Derivatives dealt with by the Bank are Options, Currency Swaps
and Currency Futures.
Based on RBI guidelines, Derivatives are valued as under:
The hedge/non hedge (market making) transactions are recorded
separately. Hedging derivative are accounting on an accrual basis.
Trading derivative positions are marked to market (MTM) and the
resulting losses, if any, are recognised in the Profit & Loss Account.
Proft, if any, is ignored. Income and Expenditure relating to interest
rate swaps are recognised on the settlement date. Gains/ losses on
termination of the trading swaps are recorded on the termination date
as income/expenditure. Any gain/loss on termination of swap is deferred
and recognized over the shorter of the remaining contractual life of
the swap or the remaining life of the designated assets/liabilities.
4) ADVANCES:
(a) In terms of guidelines issued by the RBI, advances to borrowers are
classified into ÃPerformingà or ÃNon-Performingà assets based on
recovery of principal/ interest. Non-Performing Assets (NPAs) are
further classified as Sub- Standard, Doubtful and Loss Assets.
(b) Provision for standard assets is made as per RBI norms.
(d) In respect of advances at foreign offices/branches, provision is
made as per the statutory requirements prevailing at the respective
foreign countries, or as per RBI guidelines, whichever is higher.
(e) Provisions in respect of NPAs, unrealised interest, ECGC claims
settled, etc., are deducted from total advances to arrive at net
advances as per RBI norms.
(f) In respect of Rescheduled/Restructured accounts, provision is made
for the sacrifice of interest/ diminution in the value of restructured
advances measured in present value terms as per RBI guidelines. The
said provision is reduced to arrive at Net advances.
(g) In case of financial assets sold to Asset Reconstruction Company
(ARC) / Securitisation Company (SC), if the sale is at a price below
the net book value (NBV), the shortfall is debited to the Profit and
Loss account. If the sale value is higher than the NBV, the surplus
provision is not reversed but will be utilised to meet the shortfall/
loss on account of sale of other financial assets to SC/ ARC.
5) FIXED ASSETS:
(a) Fixed assets are stated at historic cost, except in the case of
assets which have been revalued. The appreciation on revaluation is
credited to Revaluation Reserve.
(b) Cost of premises includes cost of land, both freehold and
leasehold.
6) DEPRECIATION ON FIXED ASSETS:
(i) Depreciation
(a) on assets (including revalued assets), is charged on the Written
Down Value at the rates determined by the Bank, except in respect of
computers where it is calculated on the Straight Line Method, at the
rates prescribed by the RBI;
(b) on additions is provided for the full year, irrespective of the
date on which the assets were put to use;
(c) is not provided in the year of sale/disposal of an asset;
(d) on the revalued portion of assets, is adjusted against the
Revaluation Reserve.
(ii) Where the cost of land and building cannot be separately
ascertained, depreciation is provided on the composite cost, at the
rate applicable to buildings.
(iii) Premium paid on leasehold land is amortised over the period of
lease.
v) Computer Software, not forming integral part of hardware, is
depreciated fully during the year of purchase.
vi) Depreciation on fixed assets outside India is provided as per the
regulatory requirements / or prevailing practices of respective country
/ industry.
7) REVENUE RECOGNITION:
(a) Income/Expenditure is generally accounted for on accrual basis,
except in the case of income on NPAs which is recognised on
realisation, in terms of the RBI guidelines issued from time to time.
(b) The recoveries made from NPA accounts are appropriated first
towards unrealised interest/ income, principal dues and thereafter
towards uncharged interest.
(c) Dividend Income, Commission on Government Business, Commission on
Third Party Products are accounted on actual realisation basis.
(d) Interest on Income-tax refunds is accounted for in the year of
receipt of the assessment order.
8) EMPLOYEE BENEFITS:
a) Contribution to the Provident Fund is charged to Profit and Loss
Account.
b) Contribution to recognised Gratuity Fund, Pension Fund and the
provision for encashment of accumulated leave and additional retirement
benefits are made on actuarial basis and charged to Profit and Loss
account.
c) The effect of transitional liability till 31.03.2007 as required by
Revised AS 15 has been recognised as an expense on straight line basis
over a period of five years.
d) The additional liability on account of reopening of pension option
for existing employees who had not opted for pension earlier and the
enhancement of gratuity limits as per Payment of Gratuity Act, 1972 has
been amortised over a
period of five years beginning with the financial year ending
31.03.2011.
9) LEASED ASSETS:
Lease Income is recognised based on the Internal Rate of Return method
over the primary period of the lease and is accounted for in accordance
with the Accounting Standard (AS) 19 on ÃAccounting for LeasesÃ, issued
by the Institute of Chartered Accountants of India (ICAI).
10) EARNING PER SHARE:
Basic and Diluted earnings per equity share are reported in accordance
with the Accounting Standard (AS) 20 ÃEarnings per shareà issued by the
Institute of Chartered Accountants of India. Basic earnings per equity
share are computed by dividing net profit by the weighted average
number of equity shares outstanding for the period. Diluted earnings
per equity share are computed using the weighted average number of
equity shares and dilutive potential equity shares outstanding during
the period.
11) TAXES ON INCOME
Income Tax comprises the current tax provision and net change in
deferred tax assets or liabilities during the year, in accordance with
the Accounting Standard (AS) 22, ÃAccounting for Taxes on IncomeÃ
issued by The Institute of Chartered Accountants of India (ICAI).
Deferred Tax is recognised subject to consideration of prudence in
respect of items of income and expenses those arise at one point of
time and are capable of reversal in one or more subsequent years.
Deferred tax assets and liabilities are measured using the tax rates
and tax laws that have been enacted or substantively enacted by the
balance sheet date.
12) IMPAIRMENT OF ASSETS
Impairment losses, if any on Fixed Assets (including revalued assets)
are recognised and charged to Profit and Loss account in accordance
with the Accounting Standard (AS) 28 ÃImpairment of Assetsà issued by
The Institute of Chartered Accountants of India.
13) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS
As per the Accounting Standard (AS) 29 ÃProvisions, Contingent
Liabilities and Contingent Assetsà issued by The Institute of Chartered
Accountants of India, the Bank recognises provisions only when it has a
present obligation as a result of a past event and it is probable that
an outflow of resources embodying economic benefits will be required to
settle the obligation and when a reliable estimate of the amount of the
obligation can be made.
Contingent Assets are not recognized in the financial statements since
this may result in the recognition of income that may never be
realised.
Mar 31, 2010
1) ACCOUNTING CONVENTION:
The accompanying fi nancial statements have been prepared following the
going concern concept, on historical cost basis unless otherwise stated
and conform to the Generally Accepted Accounting Principles (GAAP) in
India, which encompasses applicable statutory provisions, regulatory
norms prescribed by the Reserve Bank of India, Accounting Standards
(AS) and pronouncements issued by The Institute of Chartered
Accountants of India and accounting practices prevalent in the banking
industry in India. In respect of foreign offi ces / branches, statutory
provisions & accounting practices prevailing in the respective foreign
countries are complied with.
2) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
Accounting for transactions involving foreign exchange is done in
accordance with Accounting Standard (AS) 11, ÃThe Effect of Changes in
Foreign Exchange Ratesà issued by The Institute of Chartered
Accountants of India.
2.1 Translation in respect of Integral Foreign operations:
i) Indian branches having foreign currency transactions have been
classifi ed as integral foreign operations and foreign exchange
transactions at these branches have been recorded at the rates
prevailing on the date of the transaction.
ii) Monetary Foreign currency assets and liabilities are translated at
the closing rates notifi ed by Foreign Exchange Dealers Association of
India (FEDAI) at the year end and non-monetary items are translated at
the rates prevailing on the transaction date.
iii) Acceptances, endorsements, other obligations and guarantees in
foreign currencies are carried at the closing rates notifi ed by FEDAI
at the year end. Exchange differences arising on settlement and
translation of monetary items at the end of the fi nancial year are
recognised as income or expenses in the period in which they arise.
2.2 Translation in respect of Non-Integral Foreign operations:
Foreign branches are classifi ed as non-integral foreign operations and
their fi nancial statements are translated as follows:
i) Assets and Liabilities (both monetary and non- monetary as well as
contingent liabilities) are translated at the closing rates notifi ed
by FEDAI at the year end.
ii) Income and expenses are translated at the quarterly average closing
rates notifi ed by FEDAI at the end of respective quarter.
iii) All resulting exchange differences are accumulated in a separate
account ÃForeign Currency Translation Reserveà till the disposal of the
net investments in the respective foreign branches.
2.3 Forward Exchange Contracts:
In accordance with the guidelines of FEDAI and the provisions of AS-11,
outstanding forward exchange contracts in each currency are revalued at
the Balance Sheet date at the corresponding forward rates for the
residual maturity of the contract. The difference between revalued
amount and the contracted amount is recognized as profi t or loss, as
the case may be.
Gains/Losses on account of changes in exchange rates of open position
in currency futures trades are settled with the exchange clearing house
on daily basis and such gains/losses are recognised in the Profi t and
Loss account.
3) INVESTMENTS:
Investments are classifi ed under `Held to MaturityÃ, ÃHeld for
Tradingà and ÃAvailable for Saleà categories as per Reserve Bank of
India (RBI) guidelines. In conformity with the requirements in Form A
of the Third Schedule to the Banking Regulation Act, 1949, these are
classifi ed under six groups à Government Securities, Other Approved
Securities, Shares, Debentures and Bonds, Investments in
Subsidiaries/Joint Ventures and Other Investments.
3.1 Basis of classifi cation
Classifi cation of an investment is normally done at the time of its
acquisition:
a) Held to Maturity
These comprise investments the Bank intends to hold on to maturity.
b) Held for Trading
Investments acquired with the intention to trade within 90 days from
the date of purchase are classifi ed under this head.
c) Available for Sale
Investments which are not classifi ed either as ÃHeld to Maturityà or
as ÃHeld for Tradingà are classifi ed under this head.
3.2 Method of valuation
Investments are valued in accordance with the RBI guidelines.
a) Held to Maturity
Investments included in this category are carried at their acquisition
cost. Premium, if any, paid on
acquisition is amortised using constant yield method over the remaining
period of maturity.
b) Held for Trading / Available for Sale Investments under these
categories are valued scrip- wise. Appreciation / depreciation is
aggregated for each class of securities and net depreciation as per
applicable norms is recognised in the Profi t and Loss account, whereas
net appreciation is ignored.
c) Held at Foreign Branches
Investments held at foreign branches are carried at lower of the value
as per the statutory provisions prevailing at the respective foreign
countries or as per RBI guidelines issued from time to time.
d) Transfer of Securities between Categories
The transfer of a security between categories specifi ed in (a) to (c)
above are accounted for at the acquisition cost / book value /market
value on the date of transfer, whichever is the least, and the
depreciation, if any, on such transfer is fully provided for.
e) Profi t or loss on sale of investment
Profi t or loss on sale of investments in any category is taken to
Profi t and Loss account. However, in case of profi t on sale of
investments under ÃHeld to Maturityà category, an equivalent amount is
appropriated to ÃCapital Reserve AccountÃ.
f) Provisioning and income recognition à Non performing Investments
(NPIs):
In respect of non performing investments, income is not recognised and
provision is made for depreciation in value of such securities as per
Reserve Bank of India Guidelines.
g) Derivative: The Bank presently deals in interest rate and currency
derivatives. The interest rate derivatives dealt with by the Bank are
Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps,
Forward Rate Agreements and Interest Rate Futures. Currency
Derivatives dealt with by the Bank are Options, Currency Swaps and
Currency Futures.
Based on RBI guidelines, Derivatives are valued as under:
The hedge /non hedge (market making) transactions are recorded
separately. Hedging derivative are accounting on an accrual basis.
Trading derivative positions are marked to market (MTM) and the
resulting losses, if any, are recognised in the Profi t & Loss Account.
Profi t, if any, is ignored Income and Expenditure relating to interest
rate swaps are recognised on the settlement date. Gains/ losses on
termination of the trading swaps are recorded on the termination date
as income/expenditure. Any gain/ loss on termination of swap is
deferred and recognized over the shorter of the remaining contractual
life of the swap or the remaining life of the designated
assets/liabilities.
4) ADVANCES:
(a) In terms of guidelines issued by the RBI, advances to borrowers are
classifi ed into ÃPerformingà or ÃNon- Performingà assets based on
recovery of principal / interest. Non-Performing Assets (NPAs) are
further classifi ed as Sub-Standard, Doubtful and Loss Assets.
(b) Provision for standard assets is made as per RBI norms.
(d) In respect of advances at foreign offi ces/branches, provision is
made as per the statutory requirements prevailing at the respective
foreign countries, or as per RBI guidelines, whichever is higher.
(e) Provisions in respect of NPAs, unrealised interest, ECGC claims
settled, etc., are deducted from total advances to arrive at net
advances as per RBI norms.
(f) In respect of Rescheduled / Restructured accounts, provision is
made for the sacrifi ce of interest/ diminution in the value of
restructured advances measured in present value terms as per RBI
guidelines. The said provision is reduced to arrive at Net advances.
(g) In case of fi nancial assets sold to Asset Reconstruction Company
(ARC) / Securitisation Company (SC), if the sale is at a price below
the net book value (NBV), the shortfall is debited to the Profi t and
Loss account. If the sale value is higher than the NBV, the surplus
provision is not reversed but will be utilised to meet the
shortfall/loss on account of sale of other fi nancial assets to SC/ARC.
5) FIXED ASSETS:
(a) Fixed assets are stated at historic cost, except in the case of
assets which have been revalued. The appreciation on revaluation is
credited to Revaluation Reserve.
(b) Cost of premises includes cost of land, both freehold and
leasehold.
6) DEPRECIATION ON FIXED ASSETS:
(i) Depreciation
(a) on assets (including revalued assets), is charged on the Written
Down Value at the rates determined by the Bank, except in respect of
computers where it is calculated on the Straight Line Method, at the
rates prescribed by the RBI;
(b) on additions is provided for the full year, irrespective of the
date on which the assets were put to use;
(c) is not provided in the year of sale/disposal of an asset;
(d) on the revalued portion of assets, is adjusted against the
Revaluation Reserve.
(ii) Where the cost of land and building cannot be separately
ascertained, depreciation is provided on the composite cost, at the
rate applicable to buildings.
(iii) Premium paid on leasehold land is amortised over the period of
lease.
7) REVENUE RECOGNITION:
(a) Income/Expenditure is generally accounted for on accrual basis,
except in the case of income on NPAs which is recognised on
realisation, in terms of the RBI guidelines issued from time to time.
(b) The recoveries made from NPA accounts are appropriated fi rst
towards interest and thereafter towards other dues.
(c) Dividend Income, Commission on Government Business, Commission on
Third Party Products are accounted on actual realisation basis.
(d) Interest on Income-tax refunds is accounted for in the year of
receipt of the assessment order.
8) EMPLOYEE BENEFITS:
a) Contribution to the Provident Fund is charged to Profi t and Loss
Account.
b) Contribution to recognised Gratuity Fund, Pension Fund and the
provision for encashment of accumulated leave and additional retirement
benefi ts are made on actuarial basis and charged to Profi t and Loss
account.
c) The effect of transitional liability till 31.03.2007 as required by
Revised AS 15 has been recognised as an expense on straight line basis
over a period of fi ve years.
9) LEASED ASSETS:
Lease Income is recognised based on the Internal Rate of Return method
over the primary period of the lease and is accounted for in accordance
with the Accounting Standard 19 on ÃAccounting for LeasesÃ, issued by
the Institute of Chartered Accountants of India (ICAI).
10) EARNING PER SHARE:
Basic and Diluted earnings per equity share are reported in accordance
with the Accounting Standard 20 ÃEarnings per shareà issued by the
Institute of Chartered Accountants of India. Basic earnings per equity
share are computed by dividing net profi t by the weighted average
number of equity shares outstanding for the period. Diluted earnings
per equity share are computed using the weighted average number of
equity shares and dilutive potential equity shares outstanding during
the period.
11) TAXES ON INCOME
Income Tax comprises the current tax provision and net change in
deferred tax assets or liabilities in the year, in accordance with the
Accounting Standard 22 , ÃAccounting for Taxes on Incomeà issued by The
Institute of Chartered Accountants of India (ICAI)
12) IMPAIRMENT OF ASSETS:
Impairment losses, if any on Fixed Assets (including revalued assets)
are recognised and charged to Profi t and Loss account in accordance
with the Accounting Standard 28 ÃImpairment of Assetsà issued by The
Institute of Chartered Accountants of India.
13) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:
As per the Accounting Standard 29 ÃProvisions, Contingent Liabilities
and Contingent Assetsà issued by The Institute of Chartered Accountants
of India, the Bank recognises provisions only when it has a present
obligation as a result of a past event and it is probable that an outfl
ow of resources embodying economic benefi ts will be required to settle
the obligation and when a reliable estimate of the amount of the
obligation can be made.
Contingent Assets are not recognized in the fi nancial statements since
this may result in the recognition of income that may never be
realised.
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