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Indian Overseas Bank நிறுவனத்தின் கணக்கியல் கொள்கைகள்

Mar 31, 2023

SIGNIFICANT ACCOUNTING POLICIES OF THE BANK1. Basis of Preparation

1.1 The Bank''s financial statements have been prepared under the historical cost convention on the accrual basis of accounting and ongoing concern basis, unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises applicable statutory provisions, regulatory / Reserve Bank of India (RBI) guidelines, Accounting Standards / Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI) and practices prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with.

Use of Estimates

1.2 The preparation of financial statements requires the Management to make estimates and assumptions which are considered in the reported amounts of assets and liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported income and expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. Revenue Recognition and Expense Accounting

2.1 Income is recognized on accrual basis on performing assets and on realization basis in respect of nonperforming assets as per the prudential norms prescribed by Reserve Bank of India. Recovery in Non-Performing Assets is first appropriated towards interest and the balance, if any, towards principal, except in the case of Suit Filed Accounts and accounts under One Time Settlement, where it would be appropriated towards principal. In case of assets sold to Asset Reconstruction Companies (ARCs), the income is recognized to the extent of cash component of the Sale Consideration received, where the sale consideration is over and above Net Book Value (i.e., Book outstanding less Provisioning).

2.2 Interest on bills purchased/Mortgage Backed Securities, Commission (except on Letter of Credit/Letter of Guarantee/Government Business/ Insurance), Exchange, Locker Rent and Dividend are accounted for on realization basis.

2.3 Income from consignment sale of precious metals is accounted for as Other Income after the sale is complete.

2.4 Expenditure is accounted for on accrual basis, unless otherwise stated.

2.5 In respect of Inoperative Savings Bank Accounts, unclaimed Savings Bank accounts and unclaimed Term Deposits, interest is accrued as per RBI guidelines.

2.6 Legal expenses in respect of Suit Filed Accounts are charged to Profit and Loss Account. Such amount when recovered is treated as income.

2.7 In respect of foreign branches, Income and Expenditure are recognized/ accounted for as per local laws of the respective countries.

3. Foreign Currency Transactions

3.1 Accounting for transactions involving foreign exchange is done in accordance with Accounting Standard (AS) 11, “The Effects of Changes in Foreign Exchange Rates”, issued by The Institute of Chartered Accountants of India.

3.2 Transactions in respect of Treasury (Foreign):

a) Foreign Currency transactions, except foreign currency deposits and lending, 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 date of transaction. Foreign Currency deposits and lendings are initially accounted at the then prevailing FEDAI weekly average rate.

b) Closing Balances in NOSTRO and ACU Dollar accounts are stated at closing rates. All foreign currency deposits and lendings including contingent liabilities are stated at the FEDAI weekly average rate applicable for the last week of each quarter. Other assets, liabilities and outstanding forward contracts denominated in foreign currencies are stated at the rates on the date of transaction.

c) The resultant profit or loss on revaluation of all assets, liabilities and outstanding forward exchange contracts including contingent liabilities at year-end exchange rates advised by FEDAI is taken to revenue with corresponding net adjustments to “Other Liabilities and Provisions” / Other Asset Account” except in case of NOSTRO and ACU Dollar accounts where the accounts stand adjusted at the closing rates.

d) Income and expenditure items are translated at the exchange rates ruling on the date of incorporating the transaction in the books of accounts.

3.3 Translation in respect of overseas branches:

a) As stipulated in Accounting Standard 11, all overseas branches are treated as Non Integral Operations.

b) Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter.

c) Income and Expenses are translated at quarterly average rate notified by FEDAI at the end of each quarter.

d) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account “Foreign Currency Translation Reserve” till the disposal of the net investment.

4. Investments

4.1 Investments in India are classified into “Held for Trading”, “Available for Sale” and “Held to Maturity” categories in line with the RBI Guidelines. Disclosures of Investments are made under six classifications viz.,

a) Government Securities

b) Other Approved securities including those issued by

local bodies,

c) Shares,

d) Bonds & Debentures,

e) Subsidiaries / Joint Ventures and

f) Units of Mutual Funds and Others.

4.2 Interest on Investments, where interest/principal is in arrears for more than 90 days and income from Units of Mutual Funds, is recognized on realization basis as per prudential norms.

4.3 Valuation of Investments is done in accordance with the guidelines issued by RBI as under:

4.3.1. Individual securities under “Held for Trading” and “Available for Sale” categories are marked to market at quarterly intervals. Central Government securities and State Government securities are valued at market rates declared by FBIL (Financial Benchmarks India Pvt Ltd). Securities of State Government, other Approved Securities and Bonds & Debentures are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA (Fixed Income Money Market and Derivatives Association of India). Quoted equity shares are valued at market rates, Unquoted equity shares and units of Venture Capital Funds are valued at book value /NAV ascertained from the latest available balance sheets, otherwise the same are valued at Re. 1/- per company /Fund.

Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate mark-up over the YTM rates for Central Government Securities put out by the PDAI (Primary Dealers Association of India)/FBIL periodically.

Based on the above valuations under each of the six classifications, net depreciation, if any, is provided for and net appreciation, if any, is ignored except for the depreciation on Non Performing Investments, which is not netted off against appreciation available in the basket. Though the book value of individual securities would not undergo any change due to valuation, in the books of account, the investments are stated net of depreciation in the balance sheet.

4.3.2. “Held to Maturity”: Such investments are carried at acquisition cost/amortized cost. The excess, if any, of acquisition cost over the face value of each security is amortised on an effective interest rate method, over the remaining period of maturity. Investments in subsidiaries, associates and sponsored institutions and units of Venture capital funds are valued at carrying cost.

4.4 Investments are subject to appropriate provisioning / de -recognition of income, in line with the prudential norms prescribed by RBI for NPA classification. Bonds and Debentures in the nature of advances are also subject to usual prudential norms and accordingly provisions are made, wherever applicable.

4.5 Profit/Loss on Sale of Investments in any category (viz. Held for Trading, Available for Sale and Held to Maturity) is taken to Profit & Loss account. In case of Profit on Sale of Investments in “Held to Maturity” category, Profit net of taxes and the amount required to be transferred to Statutory Reserves is appropriated to “Capital Reserve Account”.

4.6 Broken period interest, Incentive / Front-end fees, brokerage, commission etc. received on acquisition of securities are taken to Profit and Loss account. Broken Period interest does not arise in case of Treasury Bills. Income is accounted based on the difference between the holding cost and the face value i.e. discount income.

4.7 Repo / Reverse Repo transactions are accounted as per RBI guidelines.

4.8 Investments held by overseas branches are classified and valued as per guidelines issued by respective overseas Regulatory Authorities.

4.9 All the investments are held by adopting the Weighted Average Pricing Method

Depreciation on revalued portion of the fixed assets is charged to the profit and loss account and equivalent

4.10 All the investments are held in the book on settlement date basis only

4.11 Dividend income on investments is accounted on cash basis

4.12 Investments are shown in the Balance Sheet at net off provision held in respect of Non Performing Investments

4.13 Investments matured for payment are shown under “Other Assets” and underlying provisions held for Non Performing Investments is also netted off from the said investments.

4.14 An Investment is classified as HTM, HFT or AFS at the time of its purchase and subsequent shifting amongst categories, other than shifting / transfer from HFT to AFS Category, is done once in a year with the approval of Board of Directors, at the least of acquisition cost / book value / market value on the date of shifting. The depreciation, if any, on such shifting is provided for and the book value of the security is adjusted accordingly. Such transfer of securities from one category to another is done as per permission from or guidelines of Reserve Bank of India (RBI)

4.15 As per RBI Circular no. RBI/2017-18/147 DBR No. BP BC. 102/ 21.04.0489/ 2017-18 dated April 2, 2018, from the year 2018-19 an Investment Fluctuation Reserve (IFR) is to be created to build up adequate reserves to protect the bank against increase in yields in future.

The Transfer to Investment Fluctuation Reserve (IFR) is to be the lower of the following: -

a) Net Profit on sale of investments during the year or

b) Net profit for the year less mandatory appropriations,

until the amount of IFR is at least 2% of the HFT and AFS Portfolio, on a continuing basis.

5. Advances

5.1 Advances in India have been classified as ‘Standard'', ‘Sub-standard'', ‘Doubtful'' and ‘Loss assets'' and provisions for losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In case of overseas branches, the classification and provision is made based on the respective country''s regulations or as per norms of Reserve Bank of India whichever is higher.

5.2 Advances are stated net of provisions, except general provisions for standard advances.

5.3 For Restructured / Rescheduled Assets, provisions

are made in accordance with the guidelines issued by the RBI, which require that the difference between the fair value of the loans / advance before and after restructuring is provided for, in addition to provision for the respective loans/ advances. The Provision for Diminution in Fair Value and interest sacrifice, if any, arising out of the above is reduced from advances.

In the case of loan accounts classified as NPAs, an account may be reclassified as performing asset if it conforms to the guidelines prescribed by the Regulators

6. Derivatives

6.1 The Bank enters into Derivative Contracts in order to hedge interest bearing assets/ liabilities, and for trading purposes.

6.2 In respect of derivative contracts which are entered for hedging purposes, the net amount receivable/ payable is recognized on accrual basis. Gains or losses on termination of such contracts are deferred and recognized over the remaining contractual life of the derivatives or the remaining life of the assets/ liabilities, whichever is earlier. Such derivative contracts are marked to market and the resultant gain or loss is not recognized, except where the derivative contract is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset/ liability.

6.3 Derivative contracts entered for trading purposes are marked to market as per the generally accepted practices prevalent in the industry and the changes in the market value are recognized in the profit and loss account. Income and expenses relating to these contracts are recognized on the settlement date. Gain or loss on termination of the trading derivative contracts are recorded as income or expense.

7. Fixed Assets (Property, Plant and Equipment)

7.1 Fixed Assets, except revalued premises, are stated at historical cost.

7.2 Depreciation is provided on straight-line method at the rates considered appropriate by the Management as under:

Premises

2.50%

Furniture

10%

Electrical Installations, Vehicles & Office Equipments

20%

Computers

33 1/3 %

Fire Extinguishers

100%

Computer Software

33 1/3%

amount is transferred from Revaluation reserve to Revenue Reserves.

7.3 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

7.4 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

7.5 In respect of leasehold properties, premium is amortized over the period of lease.

7.6 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws/practices of the respective countries.

8. Staff Benefits

8.1 Contribution to Provident Fund is charged to Profit and Loss Account.

8.2 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is made based on actuarial valuation at the year-end.

8.3 In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

9. 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 - “Accounting for Taxes on Income” respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions. Deferred Tax adjustments comprises of 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 tax losses only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future profits.

10. Earnings per Share

The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard - 20, “Earnings Per Share”, issued by The Institute of Chartered Accountants of India. Basic earnings per equity share has been computed by dividing net profit for the year by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the year-end except where the results are anti-dilutive.

11. Impairment of Assets

The bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceed their estimated recoverable amount.

12. Segment Reporting

The Bank recognizes 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. Accounting for Provisions, Contingent Liabilities

and Contingent Assets

In accordance with Accounting Standard 29, “Provisions, Contingent Liabilities and Contingent Assets”, issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions when it has a present obligation as a result of a past event, 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.

Provisions are determined based on management estimate required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financial statements.

Contingent Assets, if any, are not recognized or disclosed in the financial statements.

1. Investments:

1.1 In accordance with Reserve Bank of India guidelines, the investments portfolio of the bank has been classified into three categories, as given below:

Category

Gross Book Value (Rs. in crore)

Percentage to Total Investments (%)

31.03.2023

31.03.2022

31.03.2023

31.03.2022

Held to Maturity

81 802.30

79 958.83

84.98

79.47

Available for Sale

14 469.07

20 656.71

15.03

20.53

Held for Trading

0.00

0.00

0.00

0.00

1.2 SLR Securities (domestic) under “Held to Maturity” accounted for 21.30% (previous Year 20.91 %) of bank''s Demand and Time liabilities as at March 31st 2023 as against ceiling of 23 % (previous year 22%) stipulated by Reserve Bank of India.

1.3 In respect of Held to Maturity category of Investments, premium of Rs.48.32 Crore was amortized during the year (previous year Rs.32.84 Crore).

Further, a sum of Rs.4100 Crore being Non-Interest bearing GOI Recapitalization Bonds investments are held under Held to Maturity category at carrying cost are maturing from March 2031 to March 2036.

1.4 Securities of Face Value for Rs.1717.00 Crore (previous year Rs.1639.00 Crore) towards CCIL Settlement Guarantee Fund/Default Fund and securities for Rs.15518.00 Crore (previous year Rs.7518.00 Crore) towards collateral for borrowing under TREPS/Default Fund have been kept with Clearing Corporation of India Limited. Besides, securities to the extent of Rs.127.10 Crore (previous year Rs.123.10 Crore) has been lodged with CCIL towards default fund for Forex operations and Rs.15 Crore (previous year Rs.15.00 Crore) held for Currency derivative segment. The Bank has placed securities of face value Rs.1500 Crore (previous year Rs.1500 Crore) with Reserve Bank of India for intraday borrowing. The Bank has also placed Securities to the extent Rs.6100 Crore (previous year Rs.2800 Crore) with Reserve Bank of India for our borrowing under the LAF window.

1.5 Shares under Investments in India in Regional Rural Bank- Odisha Gramya Bank is Rs.606.90 Crore (previous year Rs.575.37 Crore) which includes amount''s towards Share Capital Deposits.

1.6 The Bank sold Government Securities from HTM category during the year, both outright and under Reserve Bank of India''s Open Market Operations (OMO). The extent of sale by the Bank under OMO was NIL (BV) [previous year:

Rs.3682.97 Crore] and earned a profit of NIL [previous year: Rs.15.40 Crore]. The Bank has also sold Government Securities (other than OMO), to the extent of Rs.2408.02 Crore (BV) [previous year Rs.2314.59 Crore] (within 5%, prescribed limit of Reserve Bank of India) and booked a profit of Rs.27.95 Crore [previous year Rs.124.77 Crore].

Investment Fluctuation Reserve

As per Reserve Bank of India circular number RBI/2017-18/147 DBR. No. BP BC .102/ 21.04.048/2017-18 dated April 2, 2018, from the year 2018-2019, an Investment Fluctuation Reserve (IFR) is to be created to build up adequate reserves to protect the bank against increase in yields in future.

The Transfer to IFR is to be the lower of the following -

a. Net profit on sale of Investments during the year or

b. Net profit for the year less mandatory appropriations, until the amount of IFR is at least 2 percent of the HFT and AFS portfolio, on a continuing basis.

During the year ended on March 31st 2023 an amount of NIL has been transferred to IFR.

2. Advances

2.1 The Classification for advances and provisions for possible loss has been made as per prudential norms issued by Reserve Bank of India.

2.2 Claims pending settlement and claims yet to be lodged with Guarantee Institutions identified by the branches have been considered for provisioning requirements on the basis that such claims are valid and recoverable.

2.3 In assessing the realisability of certain advances, the estimated value of security, Central Government Guarantees etc. have been considered for the purpose of asset classification and income recognition.

2.4 The classification of advances, as certified by the Branch Managers have been incorporated, in respect of unaudited branches.

3. Fixed Assets (Property, Plant and Equipment)

The Profit on sale of land & building for the year 2022-23 is 1.58 Crore (previous year Rs.1.20 Crore).

4. Rupee Interest Rate Swap

Deferred income on account of gains on termination of Rupee Interest Rate Swaps taken for hedging as on March 31st 2023 is NIL (previous year NIL). This amount, if any, is to be recognized over the remaining contractual life of Swap or life of the Assets/Liabilities, whichever is earlier.

5. Reconciliation

Reconciliation of Inter Branch transactions has been completed up to March 31st 2023 and steps for elimination of outstanding entries are in progress. The Management does not anticipate any material consequential effect on reconciliation / elimination of outstanding entries.

6. Capital and Reserves

During the Financial Year 2022-23 Bank has issued Basel III Tier II Bonds aggregating to Rs.1,000 Crore (Previous year Rs.665 Crore) through private placement subscribed by Qualified Institutional Buyers (QIBs).

During the current financial year 2022-23, Bank has not raised any equity capital. The paid up capital of the Bank stands at Rs.18902.41 crores as on March 31st 2023. The Government of India shareholding stands at 96.38% as on March 31st 2023. During the financial year 2022-23, there is no revaluation of immovable properties. The Revaluation Reserve as on March 31st 2023 stands at Rs.2753.15 Crore.

7. Taxes

7.1 In the opinion of management provisions under section 115 JB (Minimum Alternate Tax ) of the Income Tax Act ,1961 are not applicable to the Bank. Therefore bank has not provided any amount towards provision for Income tax.

''W

7 2 Tax paid in advance (Net of provisions) is under reconciliation. This is on account of amounts pending assessment/under appeal/ tax paid under dispute. [Refer Schedule 11(iii)].

7.3 Taking into consideration the decisions of Appellate Authorities, certain judicial pronouncements and the opinion of tax experts, no provision is considered necessary in respect of disputed and other demands of income tax aggregating Rs. 9081.37 Crore (previous year Rs. 7409.24 Crore), Service Tax aggregating to Rs.220.52 Crore (previous year Rs.122.33 crore) and Goods and Service Tax aggregating to Rs.1648.68 Crore (Previous year Nil).

7.4 Tax expense for the year amounting to Rs.249.45 crore includes Current Tax expense of RS.20.60 crore and Deferred Tax expense of Rs 228.85 crore - refer note no.18.8.

7.5 The Bank based on internal evaluation presently has decided to continue with the existing tax regime. Further, the Bank has recognized net Deferred Tax liability as on March 31st 2023 aggregating to Rs.228.85 crore (PY Rs.37.81 crore) on timing differences in accordance with Accounting Standard - 22 on “Accounting for Taxes on Income” issued by the Institute of Chartered Accountants of India and adjustments if any to be carried out on reassessment at appropriate stage.

8. Bank has received notification from IBA regarding wage revision arising out of 12th bipartite settlement effective from November 1st 2022. During the year ended March 31st 2023, the Bank has made ad-hoc provision of Rs.60.00 Crores towards the same (cumulative provision Rs.60.00 Crores)

9. There has been no reported cases of delayed payments of the principal amount or interest due thereon to Micro, Small & Medium Enterprises

10. Reserve Bank of India during the ISE 2022 (Inspection for Supervising Evaluation 2022) made observations relating to interest pegging discrepancies in respect of MCLR, RLLR and Base Rate linked loan accounts, under Risk Mitigation Plan 5(ii). The Bank has refunded amount as assessed by it, to its customers. The compliance process of validation with regard to the said observations in under progress and the final impact in any, would be provided.

DISCLOSURES AS PER RESERVE BANK OF INDIA REQUIREMENTS:

1. REGULATORY CAPITAL

a) Composition of Regulatory Capital (Amount in '' crore)

S.No.

Particulars

2022-23

2021-22

i)

Common Equity Tier 1 capital (CET 1)* / Paid up share capital and reserves@ (net of deductions, if any)

16736.13

12 428.11

ii)

Additional Tier 1 capital*/ Other Tier 1 capital@

0.00

0.00

iii)

Tier 1 capital (i ii)

16736.13

12 428.11

iv)

Tier 2 capital

4188.83

3 622.20

v)

Total capital (Tier 1 Tier 2)

20924.96

16 050.31

vi)

Total Risk Weighted Assets (RWAs)

129980.80

116 069.83

vii)

CET 1 Ratio (CET 1 as a percentage of RWAs)/ Paid-up share capital and reserves as percentage of RWAs

12.88%

10.71%

viii)

Tier 1 Ratio (Tier 1 capital as a percentage of RWAs)

12.88%

10.71%

ix)

Tier 2 Ratio (Tier 2 capital as a percentage of RWAs)

3.22%

3.12%

x)

Capital to Risk Weighted Assets Ratio (CRAR) (Total Capital as a percentage of RWAs)

16.10%

13.83%

xi)

Leverage Ratio

5.14%

4.07%

Percentage of the shareholding of

xii)

a) Government of India

96.38%

96.38%

b) State Government (specify name)$

N.A

NA

c) Sponsor Bank$

N.A

NA

xiii)

Amount of paid-up equity capital raised during the year

Nil

2 465.42#

xiv)

Amount of non-equity Tier 1 capital raised during the year

Nil

0.00

xv)

Amount of Tier 2 capital raised during the year, Basel III compliant Tier II Bonds

1000.00

665.00

$ Percentage of shareholding of State Government and Sponsor Bank is applicable only for RRBs.

#The Bank received a capital infusion of Rs.4100 crore (Rupees Four Thousand One Hundred Crore Only) from Government of India on 31.03.2021 and the equity shares were issued and allotted on 02.06.2021 i.e. 246,54,23,932 equity shares of face value of Rs.10 each for cash at issue price of Rs.16.63 per equity shares (including premium of Rs.6.63 per equity share)

b) Draw down from Reserves

Drawdown from the reserves during the financial year 2022-23 is NIL.

However, to comply with the RBI-RAR 2021 observations regarding appropriation of 25% of Net Profit of FY 2020-21 to Statutory Reserve, Bank with the approval of Reserve Bank of India vide their letter dated 18.02.2022 has effected the draw-down of reserve as given below:

From

To

Amount (Rs. in crores)

Capital Reserve (Excluding Revaluation Reserve)

Statutory Reserve

142.05

Profit & Loss Account

Statutory Reserve

65.82

2. Asset Liability Management

a) Maturity pattern of certain items of assets and liabilities as at March 31,2023 (Amount in '' crore)

Particulars

Deposits

Advances

(Gross)

Investments

(Net)

Borrowings

Foreign

Currency

Assets

Foreign

Currency

Liabilities

Day 1

3 070.49

1 837.10

23 532.65

0.27

2 360.90

2 467.40

2 to 7 days

6 659.81

4 429.34

2 545.41

2 54.38

1 581.66

868.81

8 to 14 days

7 958.73

2 393.20

1 962.03

0.00

1 814.52

945.80

15 Days - 30 Days

5 606.22

4 431.81

1 507.15

287.09

3 322.09

1 820.99

31 Days - 2 Months

8 717.88

6 163.05

2 604.59

828.52

5 412.50

2 205.18

2 Months - 3 Months

9 675.62

8 546.17

2 521.78

828.67

4 016.56

3 702.26

3 Months - 6 Months

22 588.12

13 299.37

5 667.89

2 091.53

6 122.42

9 281.98

Over 6 Months & Upto 1 year

40 030.48

26 407.51

9 580.31

9 64.01

2 679.34

7 325.23

Over 1 year & up to 3 years

44 559.84

47 511.61

13 165.16

3 075.73

1 346.52

776.50

Over 3 years & up to 5 years

5 664.79

27 652.69

2 980.80

5.89

2 122.64

698.54

Over 5 years

106 351.30

46 336.68

28 102.65

2 479.72

2 059.46

2 745.90

Total

260 883.28

189 008.53

94 170.42

10 815.81

32 838.61

32 838.59

Maturity pattern of assets and liabilities as at March 31, 2023 (Amount in '' crore)

Particulars

Deposits

Advances

(Gross)

Investments

(Net)

Borrowings

Foreign

Currency

Assets

Foreign

Currency

Liabilities

Day 1

2 903.00

2 568.14

25 573.95

318.73

4 446.79

2 399.94

2 to 7 days

6 218.09

2 732.04

2 424.07

0.00

1 724.50

842.78

8 to 14 days

6 862.09

3 460.08

1 457.71

0.00

2 073.75

2 437.69

15 Days - 30 Days

5 486.80

2 328.62

1 330.71

0.00

3 829.54

4 615.05

31 Days - 2 Months

9 487.30

9 981.92

2 734.04

0.00

6 266.46

6 095.62

2 Months - 3 Months

10 549.00

11 168.10

3 506.14

0.00

6 835.68

5 697.70

3 Months - 6 Months

26 778.48

13 102.44

6 688.80

479.61

7 335.48

10 609.79

Over 6 Months & Upto 1 year

49 691.20

29 477.94

12 071.21

7.30

4 556.64

5 189.03

Over 1 year & up to 3 years

32 652.62

46 776.20

9 741.03

0.00

1 036.33

745.18

Over 3 years & up to 5 years

5 569.67

12 048.08

2 892.99

800.00

1 180.14

628.62

Over 5 years

105 960.69

22 157.16

29 758.67

1 465.00

2 213.95

2 236.86

Total

262 158.92

155 800.71

98 179.31

3 070.64

41 499.26

41 499.26

b) Liquidity Coverage Ratio (LCR)

Reserve Bank of India had introduced the Liquidity Coverage Ratio (LCR) vide circular No RBI/2014-15/529 DBR. No. BPBC.80/21.06.201/2014-15 dated March 31,2015 which has been modified from time to time, in order to ensure short term resilience of banks to potential liquidity disruptions by ensuring that bank have sufficient high quality liquid assets (HQLA) to survive an acute stress scenario lasting for 30 days. The minimum LCR requirement set out in the Reserve Bank of India guidelines for the bank effective January 1,2019 is 100%

Definition of LCR: Stock of high quality liquid assets (HQLAs)

Total net cash outflows over the next 30 calendar days

In the stock of high quality liquid assets (HQLA), there are two categories of assets, viz. Level 1 and Level 2 assets. Level 2 assets are sub-divided into Level 2A and Level 2B assets on the basis of their price-volatility. Assets included in each category are those that the bank is holding on the first day of the stress period. Level 1 assets are with 0% haircut while in Level 2, 2A assets are with a minimum 15% haircut and Level 2B Assets, with a minimum 50% haircut.

The total net cash outflows is defined as the total expected cash outflows minus total expected cash inflows for the subsequent 30 calendar days. Total expected cash outflows are calculated by multiplying the outstanding balances of various categories or types of liabilities and off-balance sheet commitments by the rates at which they are expected to run off or be drawn down. Total expected cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in up to an aggregate cap of 75% of total expected cash outflows.

Details of LCR for FY 2022-23 (Four Quarters) & Quarter Ended March 2022:

(Rs. in crore)

Details

Quarter Ended March 31 2023

Quarter Ended December 31 2022

Quarter Ended september 30 2022

Quarter Ended June 30 2022

Quarter Ended March 31 2022

HQLA

69 269.29

69 630.48

71 853.08

74 671.80

72,048.89

Total Net cash Outflows

40 469.60

40 377.79

42 468.53

44 262.78

40,499.29

LCR in %

171.16

172.45

169.19

168.70

177.90

Bank has calculated LCR for all working days over the March 2023 quarter. Bank''s LCR for the quarter ended March 31st 2023 stands at 171.16% based on daily average of three months (Q4 FY 2022-23) and is well above the present minimum requirement prescribed by Reserve Bank of India of 100% for the Quarter ended March, 2023. The Minimum requirement as on March 31st 2022 was 100%. Bank is having enough liquidity to meet sudden cash outflows.

The detailed Quantitative disclosure is placed below:

Liquidity Management in the Bank is driven by the ALM Policy of the Bank and regulatory prescriptions. The Domestic and Overseas Centers are reporting to the Asset Liability Management Committee (ALCO). The ALCO has been empowered by the Bank''s Board to formulate the Bank''s funding strategies to ensure that the funding sources are well diversified and is consistent with the operational requirements of the Bank. All the major decisions of ALCO are being reported to the Bank''s Board periodically. In addition to daily/monthly LCR reporting, Bank prepares daily Structural Liquidity statements to assess the liquidity needs of the Bank on an ongoing basis.

The Bank has been maintaining HQLA mainly in the form of SLR investments over and above the mandatory requirements. Retail deposits constitute major portion of total funding sources, and such funding sources are well diversified. Management is of the view that the Bank has sufficient liquidity cover to meet its likely future short-term requirements.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. Available stable funding (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of required stable funding (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures.

Details of NSFR for the quarter ended Dec''2022 & Mar''2023:

(Rs. In Crore)

Details

Dec’2022 Quarter

Mar’2023 Quarter

Available stable funding (ASF) (Weighted Value)

2 26 423.49

2 45 665.82

Required Stable Fund (RSF) (Weighted Value)

1 48 366.14

1 71 536.41

NSFR in %

152.61%

143.21%

Bank has calculated NSFR for March 31st 2023 which stands at 143.21% which is well above the Reserve Bank of India prescribed minimum requirement of 100%. Bank''s majority funding is from Retail and Small Business customers, which provide high stability with regard to stability of Funding. Bank is having enough stable sources of funding to fund their activities on an ongoing basis over a longer-term time horizon.


Mar 31, 2022

SIGNIFICANT ACCOUNTING POLICIES OF THE BANK1. Basis of Preparation

1.1 The Bank''s financial statements have been prepared under the historical cost convention on the accrual basis of accounting and ongoing concern basis, unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises applicable statutory provisions, regulatory / Reserve Bank of India (RBI) guidelines, Accounting Standards / Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI) and practices prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with.

Use of Estimates

1.2 The preparation of financial statements requires the Management to make estimates and assumptions which are considered in the reported amounts of assets and liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported income and expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. Revenue Recognition and Expense Accounting

2.1 Income is recognized on accrual basis on performing assets and on realization basis in respect of nonperforming assets as per the prudential norms prescribed by Reserve Bank of India. Recovery in Non-Performing Assets is first appropriated towards interest and the balance, if any, towards principal, except in the case of Suit Filed Accounts and accounts under One Time Settlement, where it would be appropriated towards principal. In case of assets sold to Asset Reconstruction Companies (ARCs), the income is recognized to the extent of cash component of the Sale Consideration received, where the sale consideration is over and above Net Book Value (i.e. Book outstanding less Provisioning).

2.2 Interest on bills purchased/Mortgage Backed Securities, Commission (except on Letter of Credit/Letter of Guarantee/Government Business/ Insurance), Exchange, Locker Rent and Dividend are accounted for on realization basis.

2.3 Income from consignment sale of precious metals is accounted for as Other Income after the sale is complete.

2.4 Expenditure is accounted for on accrual basis, unless otherwise stated.

2.5 Interest payable on Overdue Term Deposits is provided @ Savings Bank rate, till such time it is transferred to Unclaimed Term Deposits. In respect of Inoperative Savings Bank Accounts, unclaimed Savings Bank accounts and unclaimed Term Deposits, interest is accrued as per RBI guidelines.

2.6 Legal expenses in respect of Suit Filed Accounts are charged to Profit and Loss Account. Such amount when recovered is treated as income.

2.7 In respect of foreign branches, Income and Expenditure are recognized/ accounted for as per local laws of the respective countries.

3. Foreign Currency Transactions

3.1 Accounting for transactions involving foreign exchange is done in accordance with Accounting Standard (AS) 11, “The Effects of Changes in Foreign Exchange Rates”, issued by The Institute of Chartered Accountants of India.

3.2 Transactions in respect of Treasury(Foreign):

a) Foreign Currency transactions, except foreign currency deposits and lending, 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 date of transaction. Foreign Currency deposits and lendings are initially accounted at the then prevailing FEDAI weekly average rate.

b) Closing Balances in NOSTRO and ACU Dollar accounts are stated at closing rates. All foreign currency deposits and lendings including contingent liabilities are stated at the FEDAI weekly average rate applicable for the last week of each quarter. Other assets, liabilities and outstanding forward contracts denominated in foreign currencies are stated at the rates on the date of transaction.

c) The resultant profit or loss on revaluation of all assets, liabilities and outstanding forward exchange contracts including contingent liabilities at year-end exchange rates advised by FEDAI is taken to revenue with corresponding net adjustments to “Other Liabilities and Provisions”/”Other Asset Account” except in case of NOSTRO and ACU Dollar accounts where the accounts stand adjusted at the closing rates.

d) Income and expenditure items are translated at the exchange rates ruling on the date of incorporating the transaction in the books of accounts.

3.3 Translation in respect of overseas branches:

a) As stipulated in Accounting Standard 11, all overseas branches are treated as Non Integral Operations.

b) Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter.

c) Income and Expenses are translated at quarterly average rate notified by FEDAI at the end of each quarter.

d) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account “Foreign Currency Translation Reserve” till the disposal of the net investment.

4. Investments

4.1 Investments in India are classified into “Held for Trading”, “Available for Sale” and “Held to Maturity” categories in line with the RBI Guidelines. Disclosures of Investments are made under six classifications viz.,

a) Government Securities

b) Other Approved securities including those issued by local bodies,

c) Shares,

d) Bonds & Debentures,

e) Subsidiaries / Joint Ventures and

f) Units of Mutual Funds and Others.

4.2 Interest on Investments, where interest/principal is in arrears for more than 90 days and income from Units of Mutual Funds, is recognized on realization basis as per prudential norms.

4.3 Valuation of Investments is done in accordance with the guidelines issued by RBI as under:

4.3.1. Individual securities under “Held for Trading” and “Available for Sale” categories are marked to market at quarterly intervals. Central Government securities and State Government securities are valued at market rates declared by FBIL (Financial Benchmarks India Pvt Ltd). Securities of State Government, other Approved Securities and Bonds & Debentures are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA (Fixed Income Money Market and Derivatives Association of India). Quoted equity shares are valued at market rates, Unquoted equity shares and units of Venture Capital Funds are valued at book value / NAV ascertained from the latest available balance sheets, otherwise the same are valued at Re. 1/-per company /Fund.

Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate mark-up over the YTM rates for Central Government Securities put out by the PDAI (Primary Dealers Association of India)/FBIL periodically.

Based on the above valuations under each of the six classifications, net depreciation, if any, is provided for and net appreciation, if any, is ignored. Though the book value of individual securities would not undergo any change due to valuation, in the books of account, the investments are stated net of depreciation in the balance sheet.

4.3.2. “Held to Maturity”: Such investments are carried at acquisition cost/amortized cost. The excess, if any, of acquisition cost over the face value of each security is amortised on an effective interest rate method, over the remaining period of maturity. Investments in subsidiaries, associates and sponsored institutions and units of Venture capital funds are valued at carrying cost.

4.4 Investments are subject to appropriate provisioning / de -recognition of income, in line with the prudential norms prescribed by RBI for NPA classification. Bonds and Debentures in the nature of advances are also subject to usual prudential norms and accordingly provisions are made, wherever applicable.

4.5 Profit/Loss on Sale of Investments in any category (viz. Held for Trading, Available for Sale and Held to Maturity) is taken to Profit & Loss account. In case of Profit on Sale of Investments in “Held to Maturity” category, Profit net of taxes and the amount required to be transferred to Statutory Reserves is appropriated to “Capital Reserve Account”.

4.6 Broken period interest, Incentive / Front-end fees, brokerage, commission etc. received on acquisition of securities are taken to Profit and Loss account. Broken Period interest does not arise in case of Treasury Bills. Income is accounted based on the difference between the holding cost and the face value i.e. discount income.

4.7 Repo / Reverse Repo transactions are accounted as per RBI guidelines.

4.8 Investments held by overseas branches are classified and valued as per guidelines issued by respective overseas Regulatory Authorities.

4.9 All the investments are held by adopting the Weighted Average Pricing Method.

4.10 All the investments are held in the book on settlement date basis only.

4.11 Dividend income on investments is accounted on cash basis.

4.12 Investments are shown in the Balance Sheet at net off provision held in respect of Non Performing Investments.

4.13 Investments matured for payment are shown under “Other Assets” and underlying provisions held for Non Performing Investments is also netted off from the said investments.

4.14 An Investment is classified as HTM, HFT or AFS at the time of its purchase and subsequent shifting amongst categories, other than shifting / transfer from HFT to AFS Category, is done once in a year with the approval of Board of Directors, at the least of acquisition cost / book value / market value on the date of shifting. The depreciation, if any, on such shifting is provided for and the book value of the security is adjusted accordingly. Such transfer of securities from one category to another is done as per permission from or guidelines of Reserve Bank of India (RBI).

4.15 As per RBI Circular no. RBI/2017-18/147 DBR No. BP BC. 102/ 21.04.048/ 2017-18 dated April 2, 2018, from the year 2018-19 an Investment Fluctuation Reserve (IFR) is to be created to build up adequate reserves to protect the bank against increase in yields in future.

The Transfer to Investment Fluctuation Reserve (IFR) is to be the lower of the following: -

a) Net Profit on sale of investments during the year or

b) Net profit for the year less mandatory appropriations,

until the amount of IFR is atleast 2% of the HFT and AFS Portfolio, on a continuing basis.

5. Advances

5.1 Advances in India have been classified as ‘Standard'', ‘Sub-standard'', ‘Doubtful'' and ‘Loss assets'' and provisions for losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In case of overseas branches, the classification and provision is made based on the respective country''s regulations or as per norms of Reserve Bank of India whichever is higher.

5.2 Advances are stated net of provisions, except general provisions for standard advances.

5.3 For Restructured / Rescheduled Assets, provisions are made in accordance with the guidelines issued by the RBI, which require that the difference

between the fair value of the loans / advance before and after restructuring is provided for, in addition to provision for the respective loans/ advances. The Provision for Diminution in Fair Value and interest sacrifice, if any, arising out of the above is reduced from advances.

In the case of loan accounts classified as NPAs, an account may be reclassified as performing asset if it conforms to the guidelines prescribed by the Regulators.

6. Derivatives

6.1 The Bank enters into Derivative Contracts in order to hedge interest bearing assets/ liabilities, and for trading purposes.

6.2 In respect of derivative contracts which are entered for hedging purposes, the net amount receivable/ payable is recognized on accrual basis. Gains or losses on termination of such contracts are deferred and recognized over the remaining contractual life of the derivatives or the remaining life of the assets/ liabilities, whichever is earlier. Such derivative contracts are marked to market and the resultant gain or loss is not recognized, except where the derivative contract is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset/ liability.

6.3 Derivative contracts entered for trading purposes are marked to market as per the generally accepted practices prevalent in the industry and the changes in the market value are recognized in the profit and loss account. Income and expenses relating to these contracts are recognized on the settlement date. Gain or loss on termination of the trading derivative contracts are recorded as income or expense.

7. Fixed Assets (Property, Plant and Equipment)

7.1 Fixed Assets, except revalued premises, are stated at historical cost.

7.2 Depreciation is provided on straight-line method at the rates considered appropriate by the Management as under:

Premises

2.50%

Furniture

10%

Electrical Installations, Vehicles & Office Equipments

20%

Computers

33 1/3%

Fire Extinguishers

100%

Computer Software

33 1/3%

Depreciation on revalued portion of the fixed assets is charged to the profit and loss account and equivalent amount is transferred from Revaluation reserve to Revenue Reserves.

7.3 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

7.4 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

7.5 In respect of leasehold properties, premium is amortized over the period of lease.

7.6 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws/practices of the respective countries.

8. Staff Benefits

8.1 Contribution to Provident Fund is charged to Profit and Loss Account.

8.2 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is made based on actuarial valuation at the year-end.

8.3 In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

9. 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 - “Accounting for Taxes on Income” respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions. Deferred Tax adjustments comprises of 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 tax losses only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future profits.

10. Earnings per Share

The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard - 20, “Earnings Per Share”, issued by The Institute of

Chartered Accountants of India. Basic earnings per equity share has been computed by dividing net profit for the year by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the year-end except where the results are anti-dilutive.

11. Impairment of Assets

The bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceed their estimated recoverable amount.

12. Segment Reporting

The Bank recognizes 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. Accounting for Provisions, Contingent Liabilities and Contingent Assets

In accordance with Accounting Standard 29, “Provisions, Contingent Liabilities and Contingent Assets”, issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions when it has a present obligation as a result of a past event, 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.

Provisions are determined based on management estimate required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financial statements.

Contingent Assets, if any, are not recognized or

disclosed in the financial statements.

1. Investments:

1.1 In accordance with RBI guidelines, the investments portfolio of the bank has been classified into three categories, as given below:

Category

Gross Book Value (Rs. in crore)

Percentage to Total Investments (%)

31.03.2022

31.03.2021

31.03.2022

31.03.2021

Held to Maturity

79 958.83

74 703.05

79.47

75.91

Available for Sale

20 656.71

23 708.69

20.53

24.09

Held for Trading

0.00

0.00

0.00

0.00

1.2 SLR Securities (domestic) under “Held to Maturity” accounted for 20.91% (previous Year 20.16%) of bank''s Demand and Time liabilities as at 31st March 2022 as against ceiling of 22.00% (previous year 22%) stipulated by RBI

1.3 In respect of Held to Maturity category of Investments, premium of Rs.32.84 Crore was amortized during the year (previous year Rs.40.67 Crore).

Further, a sum of Rs.4100 Crore being Non-Interest bearing GOI Recapitalization Bonds investments are held under HTM category at carrying cost are maturing from March 2031 to March 2036.

1.4 Securities of Face Value for Rs.1639.00 Crore (previous year Rs.1305.50 Crore) towards CCIL Settlement Guarantee Fund/Default Fund and securities for Rs.7518.00 Crore (previous year Rs.4914.50 Crore) towards collateral for borrowing under TREPS/Default Fund have been kept with Clearing Corporation of India Limited. The Bank has placed securities of face value Rs 1500 Crore (previous year Rs.1500 Crore) with RBI for intraday borrowing. The Bank has also placed Securities to the extent Rs. 2800 Crore (previous year Rs.3065 Crore) with Reserve Bank of India for borrowing under the LAF window. Besides, securities to the extent of Rs.123.10 Crore (previous year Rs.95.73 Crore) has been lodged with CCIL towards default fund for Forex operations and Rs. 15.00 Crore (previous year Rs.12.50 Crore) held for Currency derivative segment.

1.5 Shares under Investments in India in Regional Rural Banks is Rs.575.37 Crore (previous year Rs.301.58 Crore) including amount towards share application money pending allotment.

1.6 The Bank sold Government Securities from HTM category during the year, both outright and under RBI''s Open Market Operations (OMO). The extent of sale by the Bank under OMO was Rs.3682.97 Crore (BV) [previous year: Rs.14002.39 Crore] and earned a profit of Rs.15.40 Crore [previous year: Rs.654.04 Crore]. The Bank has also sold Government Securities (other than OMO), to the extent of Rs.2314.59 Crore (BV) [previous year Rs.1963.02 Crore] (within 5%, prescribed limit of RBI) and booked a profit of Rs.124.77 Crore [previous

year Rs.217.66 Crore].

Investment Fluctuation Reserve

As per RBI circular number RBI/2017-18/147 DBR. No. BP BC .102/ 21.04.048/2017-18 dated April 2, 2018, from the year 2018-2019, an Investment Fluctuation Reserve (IFR) is to be created to build up adequate reserves to protect the bank against increase in yields in future.

The Transfer to IFR is to be the lower of the following -

a. Net profit on sale of Investments during the year or

b. Net profit for the year less mandatory appropriations, until the amount of IFR is at least 2 percent of the HFT and AFS portfolio, on a continuing basis.

Accordingly, in compliance with extant RBI Guidelines, Bank had provided Rs.390 crore being 2% of Trading book as on 31.03.2022.

2. Advances

2.1 The Classification for advances and provisions for possible loss has been made as per prudential norms issued by Reserve Bank of India.

2.2 Claims pending settlement and claims yet to be lodged with Guarantee Institutions identified by the branches have been considered for provisioning requirements on the basis that such claims are valid and recoverable.

2.3 In assessing the realis-ability of certain advances, the estimated value of security, Central Government Guarantees etc. have been considered for the purpose of asset classification and income recognition.

2.4 The classification of advances, as certified by the Branch Managers have been incorporated, in respect of unaudited branches.

DISCLOSURES AS PER RBI REQUIREMENTS: 1. REGULATORY CAPITAL

a) Composition of Regulatory Capital

(Amount in '' crore)

S.No.

Particulars

2021-22

2020-21

i)

Common Equity Tier 1 capital (CET 1)* / Paid up share capital and reserves@ (net of deductions, if any)

12 428.11

14 462.20

ii)

Additional Tier 1 capital*/ Other Tier 1 capital@

0.00

0.00

iii)

Tier 1 capital (i ii)

12 428.11

14 462.20

iv)

Tier 2 capital

3 622.20

2 695.47

2.5 In terms of RBI Letter RBI/2021-22/28 DOR.STR. REC. 10/21.04.048/2021-22 dated 05.05.2021, Bank has utilized the balance outstanding under Counter Cyclical Provision Buffer (CCP Buffer) of Rs.338.22 crores towards specific provisions for non-performing assets, with the approval of the Board. As on 31.03.2022, there is no outstanding under CCP Buffer.

3. Fixed Assets (Property, Plant and Equipment)

The Profit on sale of land & building for the year 2021-22 is Rs.1.20 crores.

4. Rupee Interest Rate Swap

Deferred income on account of gains on termination of Rupee Interest Rate Swaps taken for hedging as on 31st March 2022 is NIL (previous year NIL). This amount, if any, is to be recognized over the remaining contractual life of Swap or life of the Assets/Liabilities, whichever is earlier.

5. Reconciliation

Reconciliation of Inter Branch transactions has been completed up to 31.03.2022 and steps for elimination of outstanding entries are in progress. The Management does not anticipate any material consequential effect on reconciliation / elimination of outstanding entries.

6. Capital and Reserves

During the Financial Year 2021-22 Bank has issued Basel III Tier II Bonds aggregating to Rs.665 crore through private placement subscribed by QIBs.

During the Financial year 2021-22, the Bank on 02.06.2021 had issued and allotted upto 246,54,23,932 equity shares of Rs.10/- each for cash at Issue Price of Rs.16.63 per Equity Share (including a premium of Rs.6.63 per equity share amounting to Rs. 1634.58 crores) aggregating to Rs.4100 crore on preferential basis to Government of India (President of India) for capital infusion and share application money was received by the Bank on 31.03.2021. The Government of India shareholding has increased from 95.84% to 96.38%. The paid up capital of the Bank increased from Rs.16436.99 crore to

Rs.18902.41 crore.

On account of revaluation of immovable properties during the year FY 2021-22, the Revaluation Reserve of the Bank increased by Rs.529.10 crores and stands at Rs.2,749.56 crore as at 31.03.2022.

7. Taxes

7.1 Taking into consideration the decisions of appellate Authorities, certain judicial pronouncements and the opinion of tax experts, no provision is considered necessary in respect of disputed and other demands of income tax aggregating Rs.7409.24 crore (previous year Rs.5,734.33 crore) and Service Tax aggregating to Rs. 122.33 crore(previous year Rs.122.33 crore).

7.2 Tax expense for the year is Rs.69.52 crore consisting of Current Tax expense of Rs.31.71 crore and Deferred Tax expense of Rs.37.81 crore - refer note No.11 under Disclosures under Accounting Standards.

7.3 The Bank, based on internal evaluation, presently has decided to continue with the existing tax regime. Further, the Bank has recognized net Deferred Tax Asset as on 31st March, 2022 aggregating to Rs.6262.41 crore (Previous year Rs.6300.40 crore) on timing differences in accordance with Accounting Standard - 22 on “Accounting for Taxes on Income” issued by the Institute of Chartered Accountants of India and adjustments if any to be carried out on reassessment at appropriated stage.

8. The 11th Bipartite Settlement and Eight Joint Note dated 11.11.2020 is operational for five years from 01.11.2017. The Bank has already implemented the 11th Bipartite Settlement, hence NO provision towards wage revision is held as on 31.03.2022.

9. Information relating to vendors registered under Micro, Small and Medium Enterprises Development Act, 2006 and from whom goods and services have been procured by the Bank has been disclosed to the extent information was made available to the Bank by the vendors. There are no overdue pending of principal amount and/ or interest and accordingly no additional disclosures have been made for the FY 2021-22.


Mar 31, 2021

-

2.4 Expenditure is accounted for on accrual basis, unless otherwise stated.

2.5 Interest payable on Overdue Term Deposits is provided @ Savings Bank rate, till such time it is transferred to Unclaimed Term Deposits. In respect of Inoperative Savings Bank Accounts, unclaimed Savings Bank accounts and unclaimed Term Deposits, interest is accrued as per RBI guidelines.

2.6 Legal expenses in respect of Suit Filed Accounts are charged to Profit and Loss Account. Such amount when recovered is treated as income.

2.7 In respect of foreign branches, Income and Expenditure are recognized / accounted for as per local laws of the respective countries.

3. Foreign Currency Transactions

3.1 Accounting for transactions involving foreign exchange is done in accordance with Accounting Standard (AS) 11, “The Effects of Changes in Foreign Exchange Rates” , issued by The Institute of Chartered Accountants of India.

3.2 Transactions in respect of Treasury (Foreign):

a) Foreign Currency transactions, except foreign currency deposits and lending, 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 date of transaction. Foreign Currency deposits and lendings are initially accounted at the then prevailing FEDAI weekly average rate.

b) Closing Balances in NOSTRO and ACU Dollar accounts are stated at closing rates. All foreign currency deposits and lendings including contingent liabilities are stated at the FEDAI weekly average rate applicable for the last week of each quarter. Other assets, liabilities and outstanding forward contracts denominated in foreign currencies are stated at the rates on the date of transaction.

c) The resultant profit or loss on revaluation of all assets, liabilities and outstanding forward exchange contracts including contingent liabilities at year-end exchange rates advised by FEDAI is taken to revenue with corresponding net adjustments to “Other Liabilities and Provisions” / “Other Asset Account” except in case of NOSTRO and ACU Dollar accounts where the accounts stand adjusted at the closing rates.


SIGNIFICANT ACCOUNTING POLICIES1. Basis of Preparation

1.1 The Bank’s financial statements have been prepared under the historical cost convention on the accrual basis of accounting and ongoing concern basis, unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises applicable statutory provisions , regulatory / Reserve Bank of India (RBI) guidelines, Accounting Standards / Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI) and practices prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with .

Use of Estimates

1.2 The preparation of financial statements requires the Management to make estimates and assumptions which are considered in the reported amounts of assets and liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported income and expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. Revenue Recognition and Expense Accounting

2.1 Income is recognized on accrual basis on performing assets and on realization basis in respect of nonperforming assets as per the prudential norms prescribed by Reserve Bank of India. Recovery in Non-Performing Assets is first appropriated towards interest and the balance, if any, towards principal, except in the case of Suit Filed Accounts and accounts under One Time Settlement. where it would be appropriated towards principal. In case of assets sold to Asset Reconstruction Companies (ARCs), the income is recognized to the extent of cash component of the Sale Consideration received, where the sale consideration is over and above Net Book Value (i.e. Book outstanding less Provisioning).

2.2 Interest on bills purchased/Mortgage Backed Securities, Commission (except on Letter of Credit/ Letter of Guarantee/Government Business/Insurance), Exchange, Locker Rent and Dividend are accounted for on realization basis.

2.3 Income from consignment sale of precious metals is accounted for as Other Income after the sale is complete.

d) Income and expenditure items are translated at the exchange rates ruling on the date of incorporating the transaction in the books of accounts.

3.3 Translation in respect of overseas branches:

a) As stipulated in Accounting Standard 11, all overseas branches are treated as Non Integral Operations.

b) Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter.

c) Income and Expenses are translated at quarterly average rate notified by FEDAI at the end of each quarter.

d) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account “Foreign Currency Translation Reserve” till the disposal of the net investment.

4. Investments

4.1 Investments in India are classified into “Held for Trading”, “Available for Sale” and “Held to Maturity” categories in line with the RBI Guidelines. Disclosures of Investments are made under six classifications viz.,

a) Government Securities,

b) Other Approved securities including those issued by local bodies,

c) Shares,

d) Bonds & Debentures,

e) Subsidiaries / Joint Ventures and

f) Units of Mutual Funds and Others.

4.2 Interest on Investments, where interest/principal is in arrears for more than 90 days and income from Units of Mutual Funds, is recognized on realization basis as per prudential norms.

4.3 Valuation of Investments is done in accordance with the guidelines issued by RBI as under:

4.3.1.Individual securities under “Held for Trading” and “Available for Sale” categories are marked to market at quarterly intervals. Central Government securities and State Government securities are valued at market rates declared by FBIL. Securities of State

Government, other Approved Securities and Bonds & Debentures are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA. Quoted equity shares are valued at market rates, Unquoted equity shares and units of Venture Capital Funds are valued at book value /NAV ascertained from the latest available balance sheets, otherwise the same are valued at Re. 1/- per company /Fund.

Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate mark-up over the YTM rates for Central Government Securities put out by the PDAI/ FBIL periodically.

Based on the above valuations under each of the six classifications, net depreciation, if any, is provided for and net appreciation, if any, is ignored. Though the book value of individual securities would not undergo any change due to valuation, in the books of account, the investments are stated net of depreciation in the balance sheet.

4.3.2.“Held to Maturity”: Such investments are carried at acquisition cost/amortized cost. The excess, if any, of acquisition cost over the face value of each security is amortised on an effective interest rate method, over the remaining period of maturity. Investments in subsidiaries, associates and sponsored institutions and units of Venture capital funds are valued at carrying cost.

4.4 Investments are subject to appropriate provisioning / de -recognition of income, in line with the prudential norms prescribed by RBI for NPA classification. Bonds and Debentures in the nature of advances are also subject to usual prudential norms and accordingly provisions are made, wherever applicable.

4.5 Profit/Loss on sale of Investments in any category is taken to Profit and Loss account. In case of profit on sale of investments in “Held to Maturity” category, profit net of taxes is appropriated to “Capital Reserve Account”.

4.6 Broken period interest, Incentive / Front-end fees, brokerage, commission etc. received on acquisition of securities are taken to Profit and Loss account. Broken Period interest does not arise in case of Treasury Bills. Income is accounted based on the difference between the holding cost and the face value i.e. discount income.

4.7 Repo / Reverse Repo transactions are accounted as per RBI guidelines.

4.8 Investments held by overseas branches are classified and valued as per guidelines issued by respective overseas Regulatory Authorities.

4.9 All the investments are held by adopting the Weighted Average Pricing Method.

4.10 All the investments are held in the book on settlement date basis only.

4.11 Dividend income on investments is accounted on cash basis.

4.12 Investments are shown in the Balance Sheet at net off provision held in respect of Non Performing Investments.

4.13 Investments matured for payment are shown under “Other Assets” and underlying provisions held for Non Performing Investments is also netted off from the said investments.

5. Advances

5.1 Advances in India have been classified as ‘Standard’, ‘Sub-standard’, ‘Doubtful’ and ‘Loss assets’ and provisions for losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In case of overseas branches, the classification and provision is made based on the respective country’s regulations or as per norms of Reserve Bank of India whichever is higher.

5.2 Advances are stated net of provisions, except general provisions for standard advances.

6. Derivatives

6.1 The Bank enters into Derivative Contracts in order to hedge interest bearing assets/ liabilities, and for trading purposes.

6.2 In respect of derivative contracts which are entered for hedging purposes, the net amount receivable/ payable is recognized on accrual basis. Gains or

losses on termination on such contracts are deferred and recognized over the remaining contractual life of the derivatives or the remaining life of the assets/ liabilities, whichever is earlier. Such derivative contracts are marked to market and the resultant gain or loss is not recognized, except where the derivative contract is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset/ liability.

6.3 Derivative contracts entered for trading purposes are marked to market as per the generally accepted practices prevalent in the industry and the changes in the market value are recognized in the profit and loss account. Income and expenses relating to these contracts are recognized on the settlement date. Gain or loss on termination of the trading derivative contracts are recorded as income or expense.

7. Fixed Assets (Property, Plant and Equipment)

7.1 Fixed Assets, except revalued premises, are stated at historical cost.

7.2 Depreciation is provided on straight-line method at the rates considered appropriate by the Management as under :

Premises

2.50%

Furniture

10%

Electrical Installations, Vehicles &

20%

Office Equipments

Computers

33 1/3%

Fire Extinguishers

100%

Computer Software

33 1/3 %

Depreciation on revalued portion of the fixed assets is charged to the profit and loss account and equivalent amount is transferred from Revaluation reserve to Revenue Reserves.

7.3 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

7.4 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

7.5 In respect of leasehold properties, premium is amortized over the period of lease.

7.6 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws/practices of the respective countries.

8. Staff Benefits

8.1 Contribution to Provident Fund is charged to Profit and Loss Account.

8.2 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is made based on actuarial valuation at the year-end.

8.3 In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

9. 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 -“Accounting for Taxes on Income” respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions. Deferred Tax adjustments comprises of 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 tax losses only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future profits.

10. Earning per Share

The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard - 20, “Earnings Per Share”, issued by The Institute of Chartered Accountants of India. Basic earnings per equity share has been computed by dividing net profit for the year by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during

the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the year-end except where the results are anti-dilutive.

11. Impairment of Assets

The bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceed their estimated recoverable amount.

12. Segment Reporting

The Bank recognizes 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. Accounting for Provisions, Contingent Liabilities and Contingent Assets

In accordance with Accounting Standard 29, “Provisions, Contingent Liabilities and Contingent Assets”, issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions when it has a present obligation as a result of a past event, 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.

Provisions are determined based on management estimate required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to refect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financial statements.

Contingent Assets, if any, are not recognized or disclosed in the financial statements.



Mar 31, 2019

1.1 Sale and Transfers to/from HTM Category

Sale and transfer to/from HTM category (above the prescribed limit of 5%) during the current year: NIL (previous year NIL)

2. DERIVATIVES

2.1 Forward Rate Agreement / Interest Rate Swap

2.2 DISCLOSURES ON RISK EXPOSURE IN DERIVATIVES

2.2.1 Qualitative Disclosure Treasury (Foreign)

The Bank uses Interest Rate Swaps (IRS), Currency Swaps and Options for hedging purpose to mitigate interest rate risk and currency risk in banking book. Such transactions are entered only with Clients and Banks having agreements in place.

a) The Risk Management Policy of the Bank allows using of derivative products to hedge the risk in Interest/Exchange rates that arise on account of overseas borrowing/FCNR(B) portfolio/the asset liability mis-match, for funding overseas branches etc.

b) The Bank has a system of evaluating the derivatives exposure separately and placing appropriate credit lines for execution of derivative transactions duly reckoning the Net Worth and security backing of individual clients.

c) The Bank has set in place appropriate control systems to assess the risks associated in using derivatives as hedge instruments and proper risk reporting systems are in place to monitor all aspects relating to derivative transactions. The Derivative transactions were undertaken only with the Banks and counterparties well within their respective exposure limit approved by appropriate credit sanctioning authorities for each counter party.

d) The Bank has set necessary limits in place for using derivatives and its position is continuously monitored.

e) The Bank has a system of continuous monitoring appraisal of resultant exposures across the administrative hierarchy for initiation of necessary follow up actions.

f) Derivatives are used by the Bank to hedge the Bank’s Balance sheet.

g) The income from such derivatives are amortized and taken to profit and loss account on accrual basis over the life of the contract. In case of early termination of swaps undertaken for Balance Sheet Management, income on account of such gains would be recognized over the remaining contractual life of the swap or life of the assets/liabilities whichever is lower.

h) All the hedge transactions are accounted on accrual basis. Valuations of the outstanding contracts are done on Mark to Market basis. The Bank has duly approved Risk Management and Accounting procedures for dealing in Derivatives.

i) The derivative transactions are conducted in accordance with the extant guidelines of Reserve Bank of India.

Risk Management policies pertaining to derivatives with particular reference to the extent to which derivatives are used, the associated risks and business purposes served. Also to include

a) The structure and organization for management of risk in derivatives trading;

b) The scope and nature of risk measurement, risk reporting and risk monitoring systems;

c) Policies for hedging and/or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/mitigants; and

d) Accounting policy for recording hedge and non-hedge transactions; recognition of income, premiums and discounts; valuation of outstanding contracts; provisioning, collateral and credit risk mitigation.

Treasury (Domestic)

The Bank uses Rupee Interest Rate Swaps (IRS) for hedging purpose to mitigate interest rate risk in Govt. Securities and to reduce the cost of Subordinated Debt. In addition, the bank also enters into rupee interest rate swaps for trading purposes as per the policy duly approved by the Board. Swap transactions are entered only with Banks having ISDA agreements in place.

a) The bank has put in place an appropriate structure and organization for management of risk, which includes Treasury Department, Asset Liability Management Committee and Risk Management Committee of the Board.

b) Derivative transactions carry Market Risk (arising from adverse movement in interest rates), Credit risk (arising from probable counter party failure), Liquidity risk (arising from failure to meet funding requirements or execute the transaction at a reasonable price), Operational risk, Regulatory risk and Reputation risk. The Bank has laid down policies, set in place appropriate control systems to assess the risks associated in using derivatives and proper risk reporting and mitigation systems are in place to monitor all risks relating to derivative transactions. The IRS transactions were undertaken with only Banks as counter party and well within the exposure limit approved by the Board of Bank for each counter party.

c) Derivatives are used by the bank for trading and hedging. The bank has an approved policy in force for derivatives and has set necessary limits for the use of derivatives and the position is continuously monitored. The value and maturity of the hedges which are used only as back to back or to hedge bank’s Balance Sheet has not exceeded that of the underlying exposure.

d) The accounting policy for derivatives has been drawn up in accordance with RBI guidelines, as disclosed in Schedule 17 - Significant Accounting Policies (Policy No.6)

3.1.1 Provision Coverage Ratio

The Provision Coverage Ratio (PCR) computed as per the RBI guidelines stood at 71.39% as on 31.03.2019 (59.45% as on 31.03.2018).

4.1 Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the Bank:

The bank had taken single/group borrower exposure in excess of prudential limit prescribed by RBI in the cases given below:

DISCLOSURES IN TERMS OF ACCOUNTING STANDARDS 18.1 Accounting Standard 5 - Net Profit or Loss for the period, prior period items and changes in accounting policies

The financial statements have been prepared following the same accounting policies and practices as those followed for the year ended March 31, 2018, except for the treatment of depreciation on revalued portion of Fixed Assets in accordance with Accounting Standard 10 (revised 2016) on Property, Plant and Equipment as below:

- Depreciation on revalued portion of Fixed Assets has been transferred from the revaluation reserve to the revenue reserve instead of crediting to the Profit and Loss account.

4.2 Accounting Standard 9 - Revenue Recognition

Revenue has been recognized as described in item No. 2 of Significant Accounting Policies - Schedule 17.

4.3 Accounting Standard 15 - Employee Benefits

i. The Bank had adopted Accounting Standard 15 (Revised) “Employees Benefits” issued by the Institute of Chartered Accountants of India, with effect from 1st April, 2007.

ii. The summarized position of Post-employment benefits and long term employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard - 15 (Revised) are as under: -

(a) Defined Benefit Schemes:

Changes in the present value of the obligations

The estimates of future salary increases, considered in actuarial valuation, take into account actual return on plan assets, inflation, seniority, promotion and other relevant factors, such as supply and demand in employee market.

In respect of overseas branches, disclosures if any required for Employee Benefit Schemes are not made in the absence of information.

(h) The financial assumptions considered for the calculations are as under:-

Discount Rate: The discount rate has been chosen by reference to market yield on government bonds as on the date of valuation (Balance sheet dated 31.03.2019).

Expected Rate of Return: The Overall expected rate of return on assets is determined based on the market prices prevailing on that date applicable to the period over which the obligation is to be settled. There has been significant change in expected rate of return on assets due to the improved stock market scenario.

Bank’s best estimate expected to be paid in next Financial Year for Gratuity is Rs. 225 Crore.

4.4 Accounting Standard 21 - Consolidated Financial Statements and Accounting Standard 23 - Accounting for Investments in Associates in Consolidated Financial Statements

As there is no subsidiary, no consolidated financial statement is considered necessary.

4.5 Accounting Standard 26 - Intangible Assets

The software acquired for core banking system is treated as intangible asset and amortized over a period of 3 years.

4.6 Accounting Standard 27 - Financial Reporting of Interests in Joint Ventures

Our Bank (with 35% share) has floated a Joint Venture at Malaysia along with Bank of Baroda (40%) and Andhra Bank (25%) by name INDIA INTERNATIONAL BANK (MALAYSIA) BHD (IIBM). IIBM has an Authorized Capital of MYR 500 Mio. The Joint Venture’s Paid up Capital is MYR 330 Mio. (previous year MYR 330 Mio.) Our Bank’s share in the Assigned up Capital is 35% - MYR 115.500 Mio.

As on 31.03.2019, Bank’s investment value in the Joint Venture as per the books stands at Rs.193.44 Crore (Original Investment value Rs.199.58 Crores as reduced by Diminution in Value of Investments amounting to Rs.6.14 crore).

4.7 Accounting Standard 28 - Impairment of Assets

Fixed Assets owned by the Bank are treated as ‘Corporate Assets’ and are not ‘Cash Generating Units’ as defined by AS-28 issued by ICAI. In the opinion of the Management, there is no impairment of any of the Fixed Assets of the Bank.

4.8 Accounting Standard 29 - Provision for Contingent Liabilities and Contingent Assets:

The guidelines issued by the Institute of Chartered Accountant of India in this respect have been incorporated at the appropriate places.

5 Additional Disclosures

5.1 Concentration of Deposits, Advances, Exposures and NPAs

*Of the two awards received from Banking Ombudsman, Bangalore during 2017-18, both the awards were appealed during 2017-18 and during 2018-19, one appeal was set aside by the Appellate Authority, RBI, Mumbai in our favour and for another one , Bank has paid.

**For the award given by Banking Ombudsman, Chandigarh in 2018-19, Bank preferred appeal with Appellate Authority and the same is pending.

During the year 2009-10, the Bank has issued a Letter of Comfort (LOC) undertaking to maintain a minimum CRAR of 12% in respect of Bangkok branch and to arrange to convert retained earnings to capital funds and / or infuse further capital in order to restore the CRAR to a minimum of 12% subject to approval from RBI. The capital of Bangkok Branch stands at THB1798.891 mio as on 31.03.2019.

In the worst case scenario of the entire textile exposure of the branch becoming NPA, we may have to make additional provision to the extent of THB 315.051 mio being unsecured portion of standard textile advances. If this contingency arises, there would be no additional capital to be remitted as existing reserves are adequate to cover the unsecured amount.

During the year 2010-11, the Bank has issued a letter of comfort favoring Bank Negara Malaysia. The Bank in association with other Joint Venture partners will provide support to India International Bank (Malaysia) Bhd in funding, business and other matters as and when required and ensure that it complies with the requirements of the Malaysian Laws, Regulations and Policies in the conduct of its business operations and management.

The financial impact for the letter of comfort issued to Bank Negara Malaysia is to the tune of our share of 35% of the paid up capital of MYR 330 mio ie. MYR 115.500 mio. Our Bank has invested INR 199.58 crore towards the capital of MYR 115.500 mio on various dates.

*Fees/Remuneration received in respect of the Bancassurance Business undertaken by the Bank.

5.2 Disclosures relating to Securitisation NIL (previous year - NIL)

5.3 Credit Default Swaps (CDS) NIL (previous year - NIL)

5.4 Draw Down from Reserves

Pursuant to RBI and GOI guidance, the Board of Directors has accorded approval for the exercise of Regulatory Call option in view of the regulatory event of PCA framework under which the Bank is placed in respect of 10% Basel III Compliant Additional Tier I Perpetual Bonds - Series I aggregating Rs.1000 crore issued by the Bank in February 2015.

Coupon payment on redemption of Rs.1000 crore was made on 13.06.2018 on account of exercising regulatory call option on AT-I Bonds. The Bank had made coupon payment amounting to Rs.35.34 crore out of Statutory Reserves as per RBI Circular dated 02.02.2017.

6 Unhedged Foreign Currency Exposure (UFCE)

As per RBI circular ref to RBI/2013-14/620 & RBI/2013-14/448, data relating to UFCE of borrowers from individual branches is obtained through online and consolidated working of the required additional provision and capital for Exposures to entities with Unhedged Foreign Currency Exposure is done at Risk Management Department.

The Bank has estimated the provision towards Unhedged Foreign Currency Exposure to their constituents in terms of RBI Circular DBOD.NO.BPBC.85/21.06.200/2013-14 dated January 15, 2014 at Rs.6.09 crore. However, the Bank holds provision of Rs.11.08 crores as on 31.03.2019 against the same.

LCR for the bank as on 31.03.2019 stood at 387.13% which is well above the RBI stipulated level of 100% for the current calendar year. Bank is having a strong built up of High Quality Liquid Assets at Rs.42252.54 Crore as on 31.03.2019. Bank has government securities to the tune of Rs.5951.53 Crore in excess to the minimum SLR requirements, and has liquidity to meet sudden cash outflows.

The Bank has been maintaining HQLA mainly in the form of SLR investments over and above the mandatory requirements. Retail deposits constitute major portion of total funding sources, and such funding sources are well diversified. Management is of the view that the Bank has sufficient liquidity cover to meet its likely future short term requirements.

7 As per RBI directions vide letter No.DBR.NO.BP:15199/21.04.048/2016-17 dated June 23, 2017 in respect of certain Borrowal accounts covered under the provisions of Insolvency and Bankruptcy Code (IBC) and vide letter no. DBR.NO.BPBC.1949/21.04.048/2017-18 dated August 28, 2017 in respect of certain Borrowal accounts covered under the provisions of Insolvency and Bankruptcy Code (IBC), the Bank was required to make additional provision as stated therein. Accordingly, the Bank has made adequate provision in respect of those accounts without availing any concession as per the latest RBI letter No.DBR.No.BP/8756/21.04.048/2017-18 dated 02.04.2018.

8 Comparative Figures

Previous year’s figures have been regrouped / rearranged / reclassified wherever necessary.


Mar 31, 2018

1. Investments

1.1 In accordance with RBI guidelines, the investments portfolio of the bank has been classifi ed into three categories, as given below:

2. Advances

2.1 The Classification for advances and provisions for possible loss has been made as per prudential norms issued by Reserve Bank of India.

2.2 Claims pending settlement and claims yet to be lodged with Guarantee Institutions identified by the branches have been considered for provisioning requirements on the basis that such claims are valid and recoverable.

2.3 In assessing the realisability of certain advances, the estimated value of security, Central Government Guarantees etc. have been considered for the purpose of asset classification and income recognition.

2.4 The classification of advances, as certified by the Branch Managers have been incorporated, in respect of unaudited branches.

2.5 The Reserve Bank of India, vide Circular No. DBR.No.BP BC.79/21.04.048/ 2014-15 dated 30.03.2015, allowed banks to utilize upto 50% of Counter-cyclical Provisioning Buffer / Floating Provisions held by them as at the end of 31.12.2014. During the year 2017-18, Bank has not utilized any portion of Counter-cyclical Provisioning Buffer [previous year NIL] out of balance in Counter-cyclical Provisioning Buffer of Rs.338.22 Crore held (as on March 31, 2017) for meeting specifi c provisions for Nonperforming Assets.

3. Fixed Assets (Property, Plant and Equipment)

3.1 Revaluation has not been carried out during the current year 2017-18 and in the previous year 2016-17 pertaining to land and building.

3.2 Profit on Sale of Assets for the year ending March 2018 is Rs.1.79 crore (previous year Rs.1.24 crore), has been appropriated to Capital Reserve, net of Taxes.

4. Rupee Interest Rate Swap

Deferred income on account of gains on termination of Rupee Interest Rate Swaps taken for hedging as on 31st March 2018 is NIL (previous year NIL).

5.1 Tax expense for the year is Rs.(-)2332.21 Crore net of deferred tax(previous year Rs.35.81 crore) - refer note no.18.6.

5.2 During the current year the Bank has transferred the Special Reserves of Rs.741.60 crorecreated under section 36(i)(viii) of the Income Tax Act, 1961, in earlier years, to its General Reserves. Consequently, the Deferred Tax Liability on above till 31.03.2017 remain adjusted in the Deferred Tax Assets.

5.3 The Bank has carried out during the year a detailed review of its adjustments relating to Income Tax, on the basis of relevant records / assessments and determined the availability of future taxable income against which timing differences arising on account of unabsorbed depreciation, bad and doubtful debts, employee benefits, etc. can be realized. After ascertaining the availability of virtual / reasonable certainty duly supported by convincing evidence, viz., the detailed projections approved by the Management, the Bank has recognized the Deferred Tax Assets of Rs.2392.02 crore during the year, in accordance with Accounting Standards (AS) 22 - “Accounting for Taxes and Income”.

6. Reconciliation

The Management in relation to Migration has implemented action plan including systems audit to address significant areas.Reconciliation of certain inter branch transactions are being addressed to and the Management does not anticipate any material impact emanating out of such exercise on the Financial Statements of the bank.

7. Information relating to vendors registered under Micro, Small and Medium Enterprises Development Act, 2006 and from whom goods and services have been procured by the Bank has been disclosed to the extent information was made available to the Bank by the vendors.

8.1 Value of Investments

*net of provision held for NPI

8.2 Movement of Provisions held towards depreciation on Investments

8.3 Inter Bank Repo transactions (in face value terms)

8.4 Non-SLR Investment Portfolio

8.4.1 Issuer Composition of Non-SLR Investments

*of which Rs.1034.66 crore held towards MTM of Equity Shares classified as NPI as on 31st March 2018 against Rs. 20.68 crore as on 31st March 2017

**there is one non performing non SLR investments in our books, but that has been technically written off and book outstanding in that investment account is USD 1.00 only

8.5 Sale and Transfers to/from HTM Category: NIL

(Total transfer of securities to/from HTM category was within permissible limit of 5 %.)

9. DERIVATIVES

9.1 Forward Rate Agreement / Interest Rate Swap

9.2 DISCLOSURES ON RISK EXPOSURE IN DERIVATIVES

9.2.1 Qualitative Disclosure Treasury (Foreign)

The Bank uses Interest Rate Swaps (IRS), Currency Swaps and Options for hedging purpose to mitigate interest rate risk and currency risk in banking book. The Bank also offers these products to corporate clients to enable them to manage their own currency and interest rate risk. Such transactions are entered only with Clients and Banks having agreements in place.

a) The Risk Management Policy of the Bank allows using of derivative products to hedge the risk in Interest/Exchange rates that arise on account of overseas borrowing/ FCNR(B) portfolio/the asset liability mis-match, for funding overseas branches etc., and also to offer derivative products on back-to-back basis to customers.

b) The Bank has a system of evaluating the derivatives exposure separately and placing appropriate credit lines for execution of derivative transactions duly reckoning the Net Worth and security backing of individual clients.

c) The Bank has set in place appropriate control systems to assess the risks associated in using derivatives as hedge instruments and proper risk reporting systems are in place to monitor all aspects relating to derivative transactions. The Derivative transactions were undertaken only with the Banks and counterparties well within their respective exposure limit approved by appropriate credit sanctioning authorities for each counter party.

d) The Bank has set necessary limits in place for using derivatives and its position is continuously monitored.

e) The Bank has a system of continuous monitoring appraisal of resultant exposures across the administrative hierarchy for initiation of necessary follow up actions.

f) Derivatives are used by the Bank to hedge the Bank’s Balance sheet and offered to select corporate clients on back-to-back basis. In respect of hedge transactions, the value and maturity of hedges have not exceeded that of the underlying exposures. In respect of back-to-back transactions, the transactions with clients are fully matched with counter party Bank transactions and there is no uncovered exposure.

g) The income from such derivatives are amortized and taken to profit and loss account on accrual basis over the life of the contract. In case of early termination of swaps undertaken for Balance Sheet Management, income on account of such gains would be recognized over the remaining contractual life of the swap or life of the assets/ liabilities whichever is lower. In case of early termination of derivatives undertaken for customers on a back-to-back basis, income on account of such transactions will be recognized on termination.

h) All the hedge transactions are accounted on accrual basis. Valuations of the outstanding contracts are done on Mark to Market basis. The Bank has duly approved Risk Management and Accounting procedures for dealing in Derivatives.

i) The derivative transactions are conducted in accordance with the extant guidelines of Reserve Bank of India.

Risk Management policies pertaining to derivatives with particular reference to the extent to which derivatives are used, the associated risks and business purposes served. Also to include

a) The structure and organization for management of risk in derivatives trading;

b) The scope and nature of risk measurement, risk reporting and risk monitoring systems;

c) Policies for hedging and/or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/mitigants; and

d) Accounting policy for recording hedge and non-hedge transactions; recognition of income, premiums and discounts; valuation of outstanding contracts; provisioning, collateral and credit risk mitigation.

Treasury (Domestic)

The Bank uses Rupee Interest Rate Swaps (IRS) for hedging purpose to mitigate interest rate risk in Government Securities and to reduce the cost of Subordinated Debt. In addition, the bank also enters into Rupee Interest Rate Swaps for trading purposes as per the policy duly approved by the Board. Swap transactions are entered only with Banks having ISDA agreements in place.

a) The bank has put in place an appropriate structure and organization for management of risk, which includes Treasury Department, Asset Liability Management Committee and Risk Management Committee of the Board.

b) Derivative transactions carry Market Risk (arising from adverse movement in interest rates), Credit risk (arising from probable counter party failure), Liquidity risk (arising from failure to meet funding requirements or execute the transaction at a reasonable price), Operational risk, Regulatory risk and Reputation risk. The Bank has laid down policies, set in place appropriate control systems to assess the risks associated in using derivatives and proper risk reporting and mitigation systems are in place to monitor all risks relating to derivative transactions. The IRS transactions were undertaken with only Banks as counter party and well within the exposure limit approved by the Board of Bank for each counter party.

c) Derivatives are used by the bank for trading and hedging. The bank has an approved policy in force for derivatives and has set necessary limits for the use of derivatives and the position is continuously monitored. The value and maturity of the hedges which are used only as back to back or to hedge bank’s Balance Sheet has not exceeded that of the underlying exposure.

d) The accounting policy for derivatives has been drawn up in accordance with RBI guidelines, asdisclosed in Schedule 17 - Significant Accounting Policies (Policy No.6)

10. ASSET QUALITY

10.1.1 Non-Performing Assets (NPAs)

10.1.2 : Divergence in the Asset Classification and Provisioning for NPAs (vide RBI Circular no.DBR.DP. BC.No.63/21.04.018/2016-17 dated 18.04.2017)

Interest reversal pertaining to the Divergence in Gross NPA as at S.No.3 is Rs.14.00 Crs

10.1.3 Provision Coverage Ratio

The Provision Coverage Ratio (PCR) computed as per the RBI guidelines stood at 59.45% as on 31.03.2018 (53.63% as on 31.03.2017).

11.1 Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the Bank:

The bank had taken single/group borrower exposure in excess of prudential limit prescribed by RBI in the cases given below:

# Unavailed portion of USD 40 mio cancelled by MCB in its meeting dated 17.3.2016 out of total sanctioned limit of USD 100 mio ## Even though the accounts stands closed as on 31.3.2016, the balance exceeded SBL of USD 40 mio during the reporting period upto 20.8.2015. Outstanding was USD 46.80 mio [INR 310.07 cr] as on 20.8.2015.

** Represents bills under LC after acceptance - exposure on Bank

@ Limit reduced to USD 55 mio from 1.4.15 to 31.12.15 and USD 50 mio wef 1.1.16 to 31.3.16 BY MCB

There has been no increase in limits in respect of the above accounts after the date of original sanction by MCB/Ratification by Board.


Mar 31, 2017

1. Basis of Preparation

1.1 The financial statements have been prepared under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises statutory provisions, regulatory / Reserve Bank of India (RBI) guidelines, Accounting Standards / Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI) and practices prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with.

Use of Estimates

1.2 The preparation of financial statements requires the Management to make estimates and assumptions which are considered in the reported amounts of assets and liabilities (including Contingent Liabilities) as of the date of the financial statements and reported income and expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. Revenue Recognition and Expense Accounting

2.1 Income is recognized on accrual basis on performing assets and on realization basis in respect of non-performing assets as per the prudential norms prescribed by Reserve Bank of India. Recovery in Non Performing Assets is first appropriated towards interest and the balance, if any, towards principal, except in the case of Suit Filed Accounts and accounts under One Time Settlement, where it would be appropriated towards principal. In case of assets sold to Asset Reconstruction Companies (ARCs), the income is recognized to the extent of cash component of the Sale Consideration received, where the sale consideration is over and above Net Book Value (i.e. Book outstanding less Provisioning).

2.2 Interest on bills purchased/Mortgage Backed Securities, Commission (except on Letter of Credit/Letter of Guarantee/ Government Business/Insurance), Exchange, Locker Rent and Dividend are accounted for on realization basis.

2.3 Income from consignment sale of precious metals is accounted for as Other Income after the sale is complete.

2.4 Expenditure is accounted for on accrual basis, unless otherwise stated.

2.5 In case of matured overdue Term Deposits, interest is accounted for as and when deposits are renewed. In respect of Inoperative Savings Bank Accounts, unclaimed Savings Bank accounts and unclaimed Term Deposits, interest is accrued as per RBI guidelines.

2.6 Legal expenses in respect of Suit Filed Accounts are charged to Profit and Loss Account. Such amount when recovered is treated as income.

2.7 In respect of foreign branches, Income and Expenditure are recognized / accounted for as per local laws of the respective countries.

3. Foreign Currency Transactions

3.1 Accounting for transactions involving foreign exchange is done in accordance with Accounting Standard (AS)

11, “The Effects of Changes in Foreign Exchange Rates”, issued by The Institute of Chartered Accountants of India.

3.2 Transactions in respect of Treasury(Foreign):

a) Foreign Currency transactions except foreign currency deposits and lending 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 date of transaction. Foreign Currency deposits and lendings are initially accounted at the then prevailing FEDAI weekly average rate.

b) Closing Balances in NOSTRO and ACU Dollar accounts are stated at closing rates. All foreign currency deposits and lendings including contingent liabilities are stated at the FEDAI weekly average rate applicable for the last week of each quarter. Other assets, liabilities and outstanding forward contracts denominated in foreign currencies are stated at the rates on the date of transaction.

c) The resultant profit or loss on revaluation of all assets, liabilities and outstanding forward exchange contracts including contingent liabilities at year-end exchange rates advised by FEDAI is taken to revenue with corresponding net adjustments to “Other Liabilities and Provisions”/“Other Asset Account” except in case of NOSTRO and ACU Dollar accounts where the accounts stand adjusted at the closing rates.

d) Income and expenditure items are translated at the exchange rates ruling on the date of incorporating the transaction in the books of accounts.

3.3 Translation in respect of overseas branches:

a) As stipulated in Accounting Standard 11, all overseas branches are treated as Non Integral Operations.

b) Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter.

c) Income and Expenses are translated at quarterly average rate notified by FEDAI at the end of each quarter.

d) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account “Foreign Currency Translation Reserve” till the disposal of the net investment.

4. Investments

4.1 Investments in India are classified into “Held for Trading”, “Available for Sale” and “Held to Maturity” categories in line with the guidelines from Reserve Bank of India. Disclosures of Investments are made under six classifications viz.,

a) Government Securities

b) Other Approved securities including those issued by local bodies,

c) Shares,

d) Bonds & Debentures,

e) Subsidiaries /Joint Ventures,

f) Units of Mutual Funds and Others.

4.2 Interest on Investments, where interest/principal is in arrears for more than 90 days and income from Units of Mutual Funds, is recognized on realization basis as per prudential norms.

4.3 Valuation of Investments is done in accordance with the guidelines issued by Reserve Bank of India as under:

4.3.1.Individual securities under “Held for Trading” and “Available for Sale” categories are marked to market at quarterly intervals. Central Government securities and State Government securities are valued at market rates declared by FIMMDA. Securities of State Government, other Approved Securities and Bonds & Debentures are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA. Quoted equity shares are valued at market rates, Unquoted equity shares and units of Venture Capital Funds are valued at book value /NAV ascertained from the latest available balance sheets, otherwise the same are valued at Re. 1/- per company / Fund.

Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate markup over the YTM rates for Central Government Securities put out by the PDAI/FIMMDA periodically.

Based on the above valuations under each of the six classifications, net depreciation, if any, is provided for and net appreciation, if any, is ignored. Though the book value of individual securities would not undergo any change due to valuation, in the books of account, the investments are stated net of depreciation in the balance sheet.

4.3.2.“Held to Maturity”: Such investments are carried at acquisition cost/amortised cost. The excess, if any, of acquisition cost over the face value of each security is amortised on an effective interest rate method, over the remaining period of maturity. Investments in subsidiaries, associates and sponsored institutions and units of Venture capital funds are valued at carrying cost.

4.4 Investments are subject to appropriate provisioning / de -recognition of income, in line with the prudential norms prescribed by Reserve Bank of India for NPA classification. Bonds and Debentures in the nature of advances are also subject to usual prudential norms and accordingly provisions are made, wherever applicable.

4.5 Profit/Loss on sale of Investments in any category is taken to Profit and Loss account. In case of profit on sale of investments in “Held to Maturity” category, profit net of taxes is appropriated to “Capital Reserve Account”.

4.6 Broken period interest, Incentive / Front-end fees, brokerage, commission etc. received on acquisition of securities are taken to Profit and Loss account.

4.7 Repo / Reverse Repo transactions are accounted as per RBI guidelines.

4.8 Investments held by overseas branches are classified and valued as per guidelines issued by respective overseas Regulatory Authorities.

5. Advances

5.1 Advances in India have been classified as ‘Standard’, ‘Substandard’, ‘Doubtful’ and ‘Loss assets’ and provisions for losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In case of overseas branches, the classification and provision is made based on the respective country’s regulations or as per norms of Reserve Bank of India whichever is higher.

5.2 Advances are stated net of provisions except general provisions for standard advances.

6. Derivatives

6.1 The Bank enters into Derivative Contracts in order to hedge interest bearing assets/ liabilities, and for trading purposes.

6.2 In respect of derivative contracts which are entered for hedging purposes, the net amount receivable/payable is recognized on accrual basis. Gains or losses on termination on such contracts are deferred and recognized over the remaining contractual life of the derivatives or the remaining life of the assets/ liabilities, whichever is earlier. Such derivative contracts are marked to market and the resultant gain or loss is not recognized, except where the derivative contract is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset/ liability.

6.3 Derivative contracts entered for trading purposes are marked to market as per the generally accepted practices prevalent in the industry and the changes in the market value are recognized in the profit and loss account. Income and expenses relating to these contracts are recognized on the settlement date. Gain or loss on termination of the trading derivative contracts are recorded as income or expense.

7. Fixed Assets

7.1 Fixed Assets except revalued premises are stated at historical cost.

7.2 Depreciation is provided on straight-line method at the rates considered appropriate by the Management as under:

Depreciation on revalued portion of the Axed assets is withdrawn from revaluation reserve and credited to profit and loss account.

7.3 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

7.4 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

7.5 In respect of leasehold properties, premium is amortised over the period of lease.

7.6 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws/practices of the respective countries.

8. Staff Benefits

8.1 Contribution to Provident Fund is charged to Profit and Loss Account.

8.2 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is based on actuarial valuation at the year-end. However, additional liability accrued during the year on account of Re-opening of pension option and enhancement of Gratuity limit is being amortized over a period of five years.

8.3 In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

9. Tax on Income

This comprises provision for current tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income & taxable income for the period) as determined in accordance with Accounting Standard 22 of ICAI, “Accounting for taxes on income”. Deferred tax is recognized 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 periods. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the timing differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income statement in the period of enactment of the change.

10. Earning per Share

The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard - 20, “Earnings Per Share”, issued by The Institute of Chartered Accountants of India. Basic earnings per equity share has been computed by dividing net profit for the year by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.

11. Impairment of Assets

The bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceed their estimated recoverable amount.

12. Accounting for Provisions, Contingent Liabilities and Contingent Assets

I n accordance with Accounting Standard 29, “Provisions, Contingent Liabilities and Contingent Assets”, issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions when it has a present obligation as a result of a past event, 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.

Provisions are determined based on management estimate required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financial statements.

Contingent Assets, if any, are not recognized or disclosed in the financial statements.


Mar 31, 2015

1.1 Valuation of Investments is done in accordance with the guidelines issued by Reserve Bank of India as under:

1.1.1. Individual securities under "Held for Trading" and "Available for Sale" categories are marked to market at quarterly intervals. Central Government securities are valued at market rates declared by FIMMDA. Securities of State Government, other Approved Securities and Bonds & Debentures are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA. Quoted equity shares are valued at market rates, Unquoted equity shares and units of Venture Capital Funds are valued at book value /NAV ascertained from the latest available balance sheets, otherwise the same are valued at Re. 1/- per company /Fund.

Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate markup over the YTM rates for Central Government Securities put out by the PDAI/FIMMDA periodically.

Based on the above valuations under each of the six classifications, net depreciation, if any, is provided for and net appreciation, if any, is ignored. Though the book value of individual securities would not undergo any change due to valuation, in the books of account, the investments are stated net of depreciation in the balance sheet.

1.1.2. "Held to Maturity": Such investments are carried at acquisition cost/amortised cost. The excess, if any, of acquisition cost over the face value of each security is amortised on an effective interest rate method, over the remaining period of maturity. Investments in subsidiaries, associates and sponsored institutions and units of Venture capital funds are valued at carrying cost.

2.1 Investments are subject to appropriate provisioning / de -recognition of income, in line with the prudential norms prescribed by Reserve Bank of India for NPA classification. Bonds and Debentures in the nature of advances are also subject to usual prudential norms and accordingly provisions are made, wherever applicable.

2.2 Profit/Loss on sale of Investments in any category is taken to Profit and Loss account. In case of profit on sale of investments in "Held to Maturity" category, profit net of taxes is appropriated to "Capital Reserve Account".

2.3 Broken period interest, Incentive / Front-end fees, brokerage, commission etc. received on acquisition of securities are taken to Profit and Loss account.

2.4 Repo / Reverse Repo transactions are accounted as per RBI guidelines.

2.5 Investments held by overseas branches are classified and valued as per guidelines issued by respective overseas Regulatory Authorities.

3. Advances

3.1 Advances in India have been classified as ''Standard'', ''Sub- standard'', ''Doubtful'' and ''Loss assets'' and provisions for losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In case of overseas branches, the classification and provision is made based on the respective country''s regulations or as per norms of Reserve Bank of India whichever is higher.

3.2 Advances are stated net of provisions except general provisions for standard advances.

4. Derivatives

4.1 The Bank enters into Derivative Contracts in order to hedge interest bearing assets/ liabilities, and for trading purposes.

4.2 In respect of derivative contracts which are entered for hedging purposes, the net amount receivable/payable is recognized on accrual basis. Gains or losses on termination on such contracts are deferred and recognized over the remaining contractual life of the derivatives or the remaining life of the assets/ liabilities, whichever is earlier. Such derivative contracts are marked to market and the resultant gain or loss is not recognized, except where the derivative contract is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset/ liability.

4.3 Derivative contracts entered for trading purposes are marked to market as per the generally accepted practices prevalent in the industry and the changes in the market value are recognized in the profit and loss account. Income and expenses relating to these contracts are recognized on the settlement date. Gain or loss on termination of the trading derivative contracts are recorded as income or expense.

5. Fixed Assets

5.1 Fixed Assets except revalued premises are stated at historical cost.

5.2 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

5.3 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

5.4 In respect of leasehold properties, premium is amortised over the period of lease.

5.5 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws/practices of the respective countries.

6. Staff Benefits

6.1 Contribution to Provident Fund is charged to Profit and Loss Account.

6.2 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is based on actuarial valuation at the year-end. However, additional liability accrued during the year on account of Re-opening of pension option and enhancement of Gratuity limit is being amortised over a period of five years.

6.3 In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

7. Tax on Income

This comprises provision for current tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income & taxable income for the period) as determined in accordance with Accounting Standard 22 of ICAI, "Accounting for taxes on income". Deferred tax is recognized 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 periods. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the timing differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income statement in the period of enactment of the change.

8. Earning per Share

The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard - 20, "Earnings Per Share", issued by The Institute of Chartered Accountants of India. Basic earnings per equity share has been computed by dividing net profit for the year by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.

9. Impairment of Assets

The Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceed their estimated recoverable amount.

10. Accounting for Provisions, Contingent Liabilities and Contingent Assets

In accordance with Accounting Standard 29, "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions when it has a present obligation as a result of a past event, 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.

Provisions are determined based on management estimate required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financial statements.

Contingent Assets, if any, are not recognized or disclosed in the financial statements.


Mar 31, 2012

1. Basis of Preparation

1.1 The financial statements have been prepared under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises statutory provisions, regulatory / Reserve Bank of India (RBI) guidelines, Accounting Standards / Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI) and practices prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with.

Use of Estimates

1.2 The preparation of financial statements requires the Management to make estimates and assumptions which are considered in the reported amounts of assets and liabilities (including Contingent Liabilities) as of the date of the financial statements and reported income and expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. Revenue Recognition and Expense Accounting

2.1 Income is recognized on accrual basis on performing assets and on realization basis in respect of non-performing assets as per the prudential norms prescribed by Reserve Bank of India. Recovery in non performing assets is first appropriated towards interest and the balance, if any, towards principal, except in the case of Suit Filed Accounts and accounts under One Time Settlement, where it would be appropriated towards principal.

2.2 Interest on Bills purchased/Mortgage Backed Securities, Commission (except on Letter of Credit / Letter of Guarantee/Government Business), Exchange, Locker Rent and Dividend are accounted for on realization basis.

2.3 Income from consignment sale of precious metals is accounted for as Other Income after the sale is complete.

2.4 Expenditure is accounted for on accrual basis, unless otherwise stated.

2.5 In case of matured overdue Term Deposits, interest is accounted for as and when deposits are renewed. In respect of Inoperative Savings Bank Accounts, unclaimed Savings Bank accounts and unclaimed Term Deposits, interest is accrued as per RBI guidelines.

2.6 Legal expenses in respect of Suit Filed Accounts are charged to Profit and Loss Account. Such amount when recovered is treated as income.

2.7 In respect of foreign branches, Income and Expenditure are recognized / accounted for as per local laws of the respective countries.

3. Foreign Currency Transactions

3.1 Accounting for transactions involving foreign exchange is done in accordance with Accounting Standard (AS) 11, "The Effects of Changes in Foreign Exchange Rates", issued by The Institute of Chartered Accountants of India.

3.2 Transaction in respect of Treasury (Foreign):

a) Foreign Currency transactions except foreign currency deposits and lending 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 date of transaction. Foreign Currency deposits and lendings are initially accounted at the then prevailing FEDAI weekly average rate.

b) Closing Balances in NOSTRO and ACU Dollar accounts are stated at closing rates. All foreign currency deposits and lendings including contingent liabilities are stated at the FEDAI weekly average rate applicable for the last week of each quarter. Other assets, liabilities and outstanding forward contracts denominated in foreign currencies are stated at the rates on the date of transaction.

c) The resultant profit or loss on revaluation of all assets, liabilities and outstanding forward exchange contracts including contingent liabilities at year-end exchange rates advised by FEDAI is taken to revenue with corresponding net adjustments to "Other Liabilities and Provisions"/"Other Asset Account" except in case of NOSTRO and ACU Dollar accounts where the accounts stand adjusted at the closing rates.

d) Income and expenditure items are translated at the exchange rates ruling on the date of incorporating the transaction in the books of accounts.

3.3 Translation in respect of overseas branches:

a) As stipulated in Accounting Standard 11, all overseas branches are treated as Non Integral Operations.

b) Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter.

c) Income and Expenses are translated at quarterly average rate notified by FEDAI at the end of each quarter.

d) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account "Foreign Currency Translation Reserve" till the disposal of the net investment.

4. Investments

4.1 Investments in India are classified into "Held for Trading", "Available for Sale" and "Held to Maturity" categories in line with the guidelines from Reserve Bank of India. Disclosures of Investments are made under six classifications viz.,

a) Government Securities

b) Other Approved securities including those issued by local bodies,

c) Shares,

d) Bonds & Debentures,

e) Subsidiaries /Joint Ventures,

f) Units of Mutual Funds and Others.

4.2 Interest on Investments, where interest/principal is in arrears for more than 90 days and income from Units of Mutual Funds, is recognized on realisation basis as per prudential norms.

4.3 Valuation of Investments is done in accordance with the guidelines issued by Reserve Bank of India as under:

4.3.1.Individual securities under "Held for Trading" and " Available for Sale" categories are marked to market at quarterly intervals. Central Government securities are valued at market rates declared by FIMMDA. Securities of State Government, other Approved Securities and Bonds & Debentures are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA. Quoted equity shares are valued at market rates, Unquoted equity shares and units of Venture Capital Funds are valued at book value / NAV ascertained from the latest available balance sheets, otherwise the same are valued at Re.1/- per company / Fund.

Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate markup over the YTM rates for Central Government Securities put out by the PDAI / FIMMDA periodically.

Based on the above valuations under each of the six classifications, net depreciation, if any, is provided for and net appreciation, if any, is ignored. Though the book value of individual securities would not undergo any change due to valuation, in the books of account, the investments are stated net of depreciation in the balance sheet.

4.3.2."Held to Maturity": Such investments are carried at acquisition cost/amortised cost. The excess, if any, of acquisition cost over the face value of each security is amortised on an effective interest rate method, over the remaining period of maturity. Investments in subsidiaries, associates and sponsored institutions and units of Venture capital funds are valued at carrying cost.

4.4 Investments are subject to appropriate provisioning / de -recognition of income, in line with the prudential norms prescribed by Reserve Bank of India for NPA classification. Bonds and Debentures in the nature of advances are also subject to usual prudential norms and accordingly provisions are made, wherever applicable.

4.5 Profit/Loss on sale of Investments in any category is taken to Profit and Loss account. In case of profit on sale of investments in "Held to Maturity" category, profit net of taxes is appropriated to "Capital Reserve Account".

4.6 Broken period interest, Incentive / Front-end fees, brokerage, commission etc. received on acquisition of securities are taken to Profit and Loss account.

4.7 Repo / Reverse Repo transactions are accounted as per RBI guidelines.

4.8 Investments held by overseas branches are classified and valued as per guidelines issued by respective overseas Regulatory Authorities.

5. Advances

5.1 Advances in India have been classified as 'Standard', 'Sub-standard', 'Doubtful' and 'Loss assets' and provisions for losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In case of overseas branches, the classification and provision is made based on the respective country's regulations or as per norms of Reserve Bank of India whichever is higher.

5.2 Advances are stated net of provisions except general provisions for standard advances.

6. Derivatives

6.1 The Bank enters into Derivative Contracts in order to hedge interest bearing assets/ liabilities, and for trading purposes.

6.2 In respect of derivative contracts which are entered for hedging purposes, the net amount receivable / payable is recognized on accrual basis. Gains or losses on termination on such contracts are deferred and recognized over the remaining contractual life of the derivatives or the remaining life of the assets / liabilities, whichever is earlier. Such derivative contracts are marked to market and the resultant gain or loss is not recognized, except where the derivative contract is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset/ liability.

6.3 Derivative contracts entered for trading purposes are marked to market as per the generally accepted practices prevalent in the industry and the changes in the market value are recognized in the profit and loss account. Income and expenses relating to these contracts are recognized on the settlement date. Gain or losses on termination of the trading derivative contracts are recorded as income or expenses.

7. Fixed Assets

7.1 Fixed Assets except revalued premises are stated at historical cost.

7.2 Depreciation is provided on straight-line method at the rates considered appropriate by the Management as under:

Premises 2.50%

Furniture 10%

Electrical Installations, Vehicles & Office Equipments 20% Computers 33 1/3 %

Fire Extinguishers 100%

Depreciation on revalued portion of the fixed assets is withdrawn from revaluation reserve and credited to profit and loss account.

7.3 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

7.4 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

7.5 In respect of leasehold properties, premium is amortised over the period of lease.

7.6 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws/practices of the respective countries.

8. Staff Benefits

8.1 Contribution to Provident Fund is charged to Profit and Loss Account.

8.2 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is based on actuarial valuation at the year-end. However, additional liability accrued during the year on account of Re-opening of pension option and enhancement of Gratuity limit is being amortised over a period of five years.

8.3 In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

9. Tax on Income

This comprises provision for current tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income & taxable income for the period) as determined in accordance with Accounting Standard 22 of ICAI, Accounting for taxes on income. Deferred tax is recognized 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 periods. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the timing differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income statement in the period of enactment of the change.

10. Earning per Share

The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard - 20, Earnings Per Share, issued by The Institute of Char- tered Accountants of India. Basic earnings per equity share has been computed by dividing net profit for the year by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.

11. Impairment of Assets

The bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceed their estimated recoverable amount.

12. Accounting for Provisions, Contingent Liabilities and Contingent Assets

In accordance with Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions when it has a present obligation as a result of a past event, 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.

Provisions ore determined based on management estimate required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financial statements.


Mar 31, 2011

1. Basis of Preparation

1.1 The financial statements have been prepared under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises statutory provisions, regulatory / Reserve Bank of India (RBI) guidelines, Accounting Standards / Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI) and practices prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with.

Use of Estimates

1.2 The preparation of financial statements requires the Management to make estimates and assumptions which are considered in the reported amounts of assets and liabilities (including Contingent Liabilities) as of the date of the financial statements and reported income and expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. Revenue Recognition and Expense Accounting

2.1 Income is recognized on accrual basis on performing assets and on realization basis in respect of non-performing assets as per the prudential norms prescribed by Reserve Bank of India. Recovery in Non Performing Assets is first appropriated towards interest and the balance, if any, towards principal, except in the case of Suit Filed Accounts and accounts under One Time Settlement, where it would be appropriated towards principal.

2.2 Interest on bills purchased/Mortgage Backed Securities, Commission (except on Letter of Credit/Letter of Guarantee/Government Business), Exchange, Locker Rent and Dividend are accounted for on realization basis.

2.3 Income from consignment sale of precious metals is accounted for as Other Income after the sale is complete.

2.4 Expenditure is accounted for on accrual basis, unless otherwise stated.

2.5 In case of matured overdue Term Deposits, interest is accounted for as and when deposits are renewed. In respect of Inoperative Savings Bank Accounts, unclaimed Savings Bank accounts and unclaimed Term Deposits, interest is accrued as per RBI guidelines.

2.6 Legal expenses in respect of Suit Filed Accounts are charged to Profit and Loss Account. Such amount when recovered is treated as income.

2.7 In respect of foreign branches, Income and Expenditure are recognized / accounted for as per local laws of the respective countries.

3. Foreign Currency Transactions

3.1 Accounting for transactions involving foreign exchange is done in accordance with Accounting Standard (AS) 11, "The Effects of Changes in Foreign Exchange Rates", issued by The Institute of Chartered Accountants of India.

3.2 Transaction in respect of Treasury(Foreign):

a) Foreign Currency transactions except foreign currency deposits and lending 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 date of transaction. Foreign Currency deposits and tendings are initially accounted at the then prevailing FEDAI weekly average rate.

b) Closing Balances in NOSTRO and ACU Dollar accounts are stated at closing rates. All foreign currency deposits and lendings including contingent liabilities are stated at the FEDAI weekly average rate applicable for the last week of each quarter. Other assets, liabilities and outstanding forward contracts denominated in foreign currencies are stated at the rates on the date of transaction.

c) The resultant profit or loss on revaluation of all assets, liabilities and outstanding fdrward exchange contracts including contingent liabilities at year-end exchange rates advised

by FEDAI is taken to revenue with corresponding net adjustments to "Other Liabilities and ProvisionsVOther Asset Account" except in case of NOSTRO and ACU Dollar accounts where the accounts stand adjusted at the closing rates.

d) Income and expenditure items are translated at the exchange rates ruling on the date of incorporating the transaction in the books of accounts.

3.3 Translation in respect of overseas branches:

a) As stipulated in Accounting Standard 11, all overseas branches are treated as Non Integral Operations.

b) Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter.

c) Income and Expenses are translated at quarterly average rate notified by FEDAI at the end of each quarter.

d) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account "Foreign Currency Translation Reserve" till the disposal of the net investment.

4. Investments

4.1 Investments in India are classified into "Held for Trading", "Available for Sale" and "Held to Maturity" categories in line with the guidelines from Reserve Bank of India. Disclosures of Investments are made under six classifications viz.,

a) Government Securities

b)Other Approved securities including those issued by local bodies,

c) Shares,

d) Bonds &Debentures,

e) Subsidiaries/Joint Ventures,

f) Units of Mutual Funds and Others.

4.2 Interest on Investments, where interest/principal is in arrears for more than 90 days and income from Units of Mutual Funds , is recognized on realisation basis as per prudential norms.

4.3 Valuation of Investments is done in accordance with the guidelines issued by Reserve Bank of India as under:

4.3.1. Individual securities under "Held for Trading"and "Available for Sale" categories are marked to market at quarterly intervals. Central Government securities are valued at market rates declared by FIMMDA. Securities of State Government, other Approved Securities and Bonds & Debentures are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA. Quoted equity shares are valued at market rates, Unquoted equity shares and units of Venture Capital Funds are valued at book value /NAV ascertained from the latest available balance sheets, otherwise the same are valued at Re. 1/- per company /Fund.

Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate markup over the YTM rates for Central Government Securities put out by the PDAI/FIMMDA periodically.

Based on the above valuations under each of the six classifications, net depreciation, if any, is provided for and net appreciation, if any, is ignored. Though the book value of individual securities would not undergo any change due to valuation, in the books of account, the investments are stated net of depreciation in the balance sheet.

4.3.2."Held to Maturity": Such investments are carried at acquisition cost/amortised cost. The excess, if any, of acquisition cost over the face value of each security is amortised on an effective interest rate method, over the remaining period of maturity. Investments in subsidiaries, associates and sponsored institutions and units of Venture capital funds are valued at carrying cost.

4.4 Investments are subject to appropriate provisioning / de -recognition of income, in line with the prudential norms prescribed by Reserve Bank of India for NPA classification. Bonds and Debentures in the nature of advances are also subject to usual prudential norms and accordingly provisions are made, wherever applicable.

4.5 Profit/Loss on sale of Investments in any category is taken to Profit and Loss account. In case of profit on sale of investments in "Held to Maturity" category, profit net of taxes is appropriated to "Capital Reserve Account".

4.6 Broken period interest, Incentive / Front-end fees, brokerage, commission etc. received on acquisition of securities are taken to Profit and Loss account.

4.7 Repo / Reverse Repo transactions are accounted as per RBI guidelines.

4.8 Investments held by overseas branches are classified and valued as per guidelines issued by respective overseas Regulatory Authorities.

5. Advances

5.1 Advances in India have been classified as Standard, Sub-standard, Doubtful and Loss assets and provisions for losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In case of overseas branches, the classification and provision is made based on the respective countrys regulations or as per norms of Reserve Bank of India whichever is higher.

5.2 Advances are stated net of provisions except general provisions for standard advances.

6. Derivatives

6.1 The Bank enters into Derivative Contracts in order to hedge interest bearing assets/ liabilities, and for trading purposes.

6.2 In respect of derivative contracts which are entered for hedging purposes, the net amount receivable/payable is recognized on accrual basis. Gains or losses on termination on such contracts are deferred and recognized over the

remaining contractual life of the derivatives or the remaining life of the assets/ liabilities, whichever is earlier. Such derivative contracts are marked to market and the resultant gain or loss is not recognized, except where the derivative contract is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset/ liability.

6.3 Derivative contracts entered for trading purposes are marked to market as per the generally accepted practices prevalent in the industry and the changes in the market value are recognized in the profit and loss account. Income and expenses relating to these contracts are recognized on the settlement date. Gain or losses on termination of the trading derivative contracts are recorded as income or expenses.

7. Fixed Assets

7.1 Fixed Assets except revalued premises are stated at historical cost.

Depreciation on revalued portion of the fixed assets is withdrawn from revaluation reserve and credited to profit and loss account.

7.3 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

7.4 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

7.5 In respect of leasehold properties, premium is amortised over the period of lease.

7.6 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws/practices of the respective countries.

8. Staff Benefits

8.1 Contribution to Provident Fund is charged to Profit and Loss Account.

8.2 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is based on actuarial valuation at the year-end. However, additional liability accrued during the year on account of Re-opening of pension option and enhancement of Gratuity limit is being amortised over a period of five years.

8.3 In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

9. Tax on Income

This comprises provision for current tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income & taxable income for the period) as determined in accordance with Accounting Standard 22 of ICAI, Accounting for taxes on income. Deferred tax is recognized 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 periods. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the timing differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income statement in the period of enactment of the change.

10. Earning per Share

The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard - 20, Earnings Per Share, issued by The Institute of Chartered Accountants of India. Basic earnings per

equity share has been computed by dividing net profit for the year by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.

11. Impairment of Assets

The bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceed their estimated recoverable amount.

12. Accounting for Provisions, Contingent Liabilities and Contingent Assets

In accordance with Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions when it has a present obligation as a result of a past event, 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.

Provisions ore determined based on management estimate required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financial statements.

Contingent Assets, if any, are not recognized or disclosed in the financial statements.


Mar 31, 2010

1. General

The financial statements have been prepared on historical cost basis unless otherwise stated and further on the assumption of going concern concept.

2. Revenue Recognition

2.1 Income is recognized on accrual basis on performing assets and on realization basis in respect of non-performing assets as per the prudential norms prescribed by Reserve Bank of India. Recovery in Non Performing Assets is first appropriated towards interest and the balance, if any towards principal, except in the case of Suit Filed Accounts and accounts under One Time Settlement.

2.2 Interest on bills purchased/Mortgage Backed Securities, commission (except on Letter of Credit/Letter of Guarantee/Government Business), Exchange, Locker Rent and Dividend are accounted for on realization basis.

2.3 Income from consignment sale of precious metals is accounted for as Other Income after the sale is complete.

2.4 Expenditure is accounted for on accrual basis, except otherwise stated.

2.5 In case of matured Term Deposits, interest is accounted for as and when deposits are renewed. In respect of Inoperative Savings Bank Accounts, unclaimed Savings Bank accounts and unclaimed Term Deposits, interest is accrued as per RBI guidelines.

2.6 Legal expenses in respect of Suit Filed Accounts are charged to Profit and Loss Account. Such amount when recovered is treated as income.

2.7 In respect of foreign branches, Income & Expenditure are recognized / accounted for as per local laws of the respective countries.

3. Foreign exchange Transactions of Indian Operations

3.1 Balances in NOSTRO and ACU Dollar accounts are stated at closing rates. FCNR/ EEFC/RFC/FCA (all foreign currency deposits including interest accrued thereon) and PCFC/WCFC/TLFC/FCL (all foreign currency lendings) are stated at the FEDAI weekly average rate applicable for the last week of the quarter. Other Assets, Liabilities and Outstanding Forward Contracts denominated in foreign currencies are stated at the rates on the date of transaction.

Profit/Loss on valuation of all assets, liabilities and outstanding forward exchange contracts at year-end exchange rates advised by FEDAI is taken to revenue with corresponding net adjustments retained in "Other Liabilities and Provisions"/ "Other Assets Account" except in case of NOSTRO and ACU Dollar accounts where the accounts stand adjusted at the closing rates.

3.2 Acceptances, Endorsements and other obligations including guarantees of Indian operations denominated in foreign currencies are stated at the FEDAI weekly average rate applicable for the last week of the quarter.

3.3 Income and Expenditure items are translated at the exchange rate ruling on the date of incorporating the transaction in the books of account.

4. Translation of the Financial Statements of Foreign Branches

Assets and Liabilities of Foreign branches are translated at the year-end closing rate in compliance with Accounting Standard 11 and the net gain/ loss arising out of this is kept under Foreign Currency Translation Reserve until the disposal of the net investment.

5. Investments

5.1 Investments in India are classified into "Held for Trading", "Available for Sale" and "Held to Maturity" categories in line with the guidelines from Reserve Bank of India. Valuation and disclosures of Investments are made under six classifications viz.,

a) Government securities (including State Government securities), b) Other Approved securities, c) Shares, d) Bonds & Debentures, e) Subsidiaries / Joint ventures, f) Units of Mutual Funds and Others.

5.2 Interest on Investments, where interest / principal is in arrears for more than 90 days and income from units of Mutual Funds is recognised on cash basis as per prudential norms.

5.3 Valuation of Investments is done in accordance with the guidelines issued by Reserve Bank of India as under:-

5.3.1. "Held for Trading":- Individual scrips under this category (both long and short-not to be netted off) are held at original cost. The same is valued at daily basis at market rate, wherever available, or as per the prices declared by FIMMDA and in respect of each classification under this category, net depreciation, if any, is charged to revenue and net appreciation, if any, is ignored.

5.3.2. "Available for Sale":- Individual securities under this category are marked to market at quarterly intervals. Central Government securities are valued at market rates declared by FIMMDA. State Government, other Approved securities and Debentures / bonds are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA. Quoted equity shares are valued at market rates, Unquoted equity shares and Units of Venture Capital Funds are valued at book value/NAV ascertained from the latest available balance sheet, otherwise the same is valued at Re.1/ - per Company/Fund.

Treasury Bills and Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate mark up over the YTM rates for Central Govt. Securities put out by the PDAI / FIMMDA periodically.

Based on the above valuations under each classification, net depreciation, if any, is provided for and net appreciation, if any is ignored. The book value of the individual securities would not undergo any change due to valuation.

5.3.3. "Held to Maturity":- Such investments are carried at acquisition cost/ amortized cost.

The excess, if any, of acquisition cost over the face value of each security is amortized over the remaining period of maturity. Investments in subsidiaries, associates and sponsored Institutions and Units of Venture Capital Funds are valued at carrying cost.

5.4 Investments are subject to appropriate provisioning / de-recognition of income, in line with the prudential norms prescribed by Reserve Bank of India for NPA classification. Debentures / bonds in the nature of advances are also subject to usual prudential norms and accordingly provided for, wherever appropriate.

5.5 Profit / Loss on sale of Investments in any category is taken to Profit and Loss account. In case of profit on sale of investments in "Held to Maturity" category, an equivalent amount is appropriated to "Capital Reserve Account".

5.6 Incentive / Front-end fees, etc. received on subscription to securities are taken to Profit and Loss account.

5.7 Investments held by Overseas Branches are classified and valued as per guidelines issued by the respective regulatory authorities.

6. Advances

6.1 Advances have been classified as Standard, Sub-standard, Doubtful and Loss assets and provisions for possible losses on such advances are made as per prudential norms issued by Reserve Bank of India and also as per the directives of Reserve Bank of India from time to time. In case of overseas branches, the provision is made on the respective countrys regulations or as per norms of Reserve Bank of India whichever is higher.

6.2 The Bank holds floating provision for non- performing advances over and above the prudential norms. Such floating provisions built over different periods would not be used for any profit or dividend equalisation across accounting periods.

6.4 Advances are stated net of provisions except general provisions for standard advances.

7. Gold Business

Transactions in Gold other than purchase and sale are accounted for at prevalent notional rates.

8. Derivatives

8.1 The Bank enters into Interest Rate Swaps in order to hedge interest bearing assets / liabilities, and for trading purposes.

8.2 In respect of Interest Rate Swaps which are contracted for hedging purposes, the net amount receivable / payable is recognized on accrual basis. Gains or losses on termination on swaps are deferred and recognized over the remaining contractual life of the swaps or the remaining life of the assets/ liabilities, whichever is earlier. Such Interest rate swaps are marked to market, but the resultant gain or loss is not recognized, except where the swap is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset / liability.

8.3 Trading Swaps outstanding at the year end are marked to market as per the generally accepted practices prevailing in the industry and the changes in the market value are recognized in the Profit & Loss Account. Income and expenses relating to these swaps are recognized on the settlement date.

Gains or losses on termination of the trading swaps are recorded as income or expenses.

9. Fixed Assets

9.1 Fixed Assets except revalued premises are stated at historical cost and are broadly classified/ grouped under the following heads:

i) Premises.

ii) Capital Work-in-progress.

iii) Other Fixed Assets including

a) Metal Furniture. b) Wooden Furniture. c) Electrical Installation. d) Vehicles. e) Computers.*

* ATMs along with cost of development of the leasehold and freehold sites, computer peripherals like UPS, Batteries, etc and their replacement costs are capitalized under the head computers.

9.3 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

9.4 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

9.5 In respect of leasehold properties, premium is amortised over the period of lease.

9.6 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws of the respective countries.

10. Staff Benefits

10.1 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is made on actuarial valuation at the year-end, in compliance with Accounting Standard 15.

10.2In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

11. Net Profit / Loss

Net Profit / Loss disclosed in the Profit and Loss Account is after:

i) Provision for taxes on income and wealth

ii) Provision for non-performing advance and general provision for Standard Advances

iii) Depreciation/Amortisation/ provision on investments

iv) Other usual and necessary provisions

12. Provision for Taxation

I) Provision for Taxes has been made on the basis of estimated tax liability which includes adjustments for Deferred Tax in compliance with Accounting Standard 22.

ii) Securities Transactions Tax is charged to Profit & Loss Account.

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