PNB Housing Finance Ltd. நிறுவனத்தின் கணக்கியல் கொள்கைகள்
Mar 31, 2023
PNB Housing Finance Limited (''PNBHFL'', ''the Company'') was incorporated on November 11, 1988. The Company is primarily engaged in the business of providing loans to individuals and corporate bodies for purchase, construction, repair and up-gradation of houses. It also provides loans for commercial space, loan against property and loan for purchase of residential plots. The Company is deposit taking Housing Finance Company registered with National Housing Bank (NHB) under Section 29A of the National Housing Bank Act, 1987. The Company is listed on BSE Limited and National Stock Exchange of India Limited. The Company''s registered office is at 9th floor, Antriksh Bhawan, 22, K.G. Marg, New Delhi -110001.
These standalone financial statements are approved and adopted by the Board of Directors of the Company in their meeting held on May 18, 2023. However, the shareholders have the power to amend the financial statements after issue.
1.2. Statement of Compliance and basis of preparation and presentation
The standalone financial statements are prepared in accordance with provision contained in section 129 of the Companies Act, 2013, read with Division III of Schedule III as amended from time to time. The Statement of Cash Flows has been prepared and presented as per Ind AS 7 "Statement of Cash Flows".
The standalone financial statements have been prepared under the historical cost convention on accrual basis except where quantum of accruals cannot be ascertained with reasonable certainty. Following are measured on each reporting date:
- Certain financial assets and liabilities (including derivative instruments) that is measured at fair value.
- Defined benefit liability/(assets): present value of defined benefit obligation less fair value of plan assets.
- Financial instrument - measured at fair value.
The standalone financial statements comply in all material aspects with the Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time, notified under section 133 of the Companies Act, 2013 and the relevant provisions of the National Housing Bank Act, 1987 as amended from time to time and the Non-Banking Financial Company-Housing Finance Company (Reserve Bank) Directions, 2021 (''RBI Directions'') as amended from time to time and the RBI circular DOR.CRE.REC. No.60/03.10.001/2021-22 dated October 22, 2021, on "Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs
The standalone financial statements are presented in Indian Rupees (H) which is the functional and presentation currency of the Company and all values are rounded to the nearest crore with two decimals, except when otherwise indicated.
Balance sheet analysis regarding recovery or settlement within 12 months after the reporting date and more than 12 months after the reporting date is presented in note 45.
Accounting policies have been consistently applied except where a newly issued Ind AS is initially adopted or a revision to an existing Ind AS requires a change in the accounting policy hitherto in use.
2. SIGNIFICANT ACCOUNTING POLICIES2.1. Use of estimates, judgements and assumptions
The preparation of financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting year. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to the accounting estimates are recognised in the period in which the estimates are known or materialised.
Some of the judgements, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are:
a) Business model assessment
Classification and measurement of financial assets depends on the results of the solely payments of principal and interest (SPPI) and the business model test. The Company determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and measured, the risks that affect the performance of the assets and how these are being managed. The Company monitors financial assets on a continuous basis to assess whether the business model for which the financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of the assets.
b) Fair value of financial instruments
The fair value of financial instruments is the price that would be received upon selling of an asset or paid upon transfer of a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. Judgements and estimates include considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty), funding value adjustments, correlation and volatility.
c) Effective Interest Rate (EIR) method
EIR methodology recognises interest income / expense using a rate of return that represents the best estimate of a constant rate of return over the expected behavioral life of loans given / taken and recognises the effect of potentially different interest rates at various stages and other characteristics of the product life cycle (including prepayments, penalty interest and charges).
This estimation, by nature, requires an element of judgement regarding the expected behavior and lifecycle of the instruments, as well as expected changes to interest rates and other fee income/expense that are integral parts of the instrument.
d) Impairment of financial asset
The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances (Refer note 2.21).
e) Provisions and other contingent liabilities
The Company operates in a regulatory and legal environment that, by nature, has a heightened element of litigation risk inherent to its operations. Cases where Company can reliably measure the outflow of economic benefits in relation to a specific case and considers such outflows probable, it recognises a provision against the same. Where the probability of outflow is considered
remote, or probable, but a reliable estimate cannot be made, a contingent liability is disclosed for the same.
f) Defined benefit plans
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
g) Deferred tax assets
The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the future taxable income against which the deferred tax assets can be utilised.
h) Useful life of Property, Plant and Equipment (PPE) and Intangible assets
The Company reviews its estimate of the useful life of PPE and intangible assets at each reporting date, based on the expected utility of the PPE and intangible assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of PPE and intangible assets. In case of a revision of useful life, the unamortised depreciable amount is charged over the remaining useful life of the PPE and intangible assets.
i) Share-Based Payments
The Company measures the cost of equity-settled transactions with employees using Black-Scholes Model to determine the fair value of the liability incurred on the grant date. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant.
This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them.
Cash and cash equivalent comprises cash/ stamp on hand, demand deposits and time deposits with original maturity of less than three months from the date of acquisition, highly liquid investments that are readily convertible in the known amounts of cash and which
are subject to insignificant risk of change in value, debit balance in cash credit account.
Time deposits held with bank, with original maturity of more than three months but less than twelve months is a part of bank balance other than cash and cash equivalents.
For the purpose of the statement of cash flow, cash and cash equivalents consists of cash at banks and on hand and short term deposits, as defined above.
2.3 Revenue Recognition
a) Interest and related income
Interest income for all financial instruments measured either at amortised cost or at fair value through other comprehensive income, is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset. The calculation takes into account all contractual terms of the financial instrument (for example - prepayment options) and includes any discount or premium on acquisition, fees or incremental costs that are directly attributable and are an integral part of the EIR, but not future credit losses.
The Company calculates interest income by applying the EIR to the gross carrying amount of financial assets other than credit-impaired assets. When a financial asset becomes credit-impaired and is, therefore, regarded as ''Stage 3'', the Company calculates interest income by applying the EIR on net amount (i.e. gross carrying amount less allowance for expected credit loss) . If the financial assets cures and is no longer credit-impaired, the Company reverts to calculating interest income on a gross basis.
Interest income on all trading assets measured at fair value through profit and loss (FVTPL) is recognised using the contractual interest rate under interest income and the fair value impact is recognised in net gain / loss on fair value changes.
b) Dividend income
Dividend income is recognised when the Company''s right to receive the payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of the dividend can be measured reliably. This is generally when shareholders approve the dividend.
c) Profit on derecognition of financial assets
When the Company transfers the financial asset in a transfer that qualifies for derecognition in its entirety
then whole of the interest spread and net servicing fees (over the expected life of the asset) is recognised at present value on the date of derecognition itself as interest-only strip / net servicing fees receivable and correspondingly recognised as profit on derecognition of financial asset.
d) Fees and commission income
Fees and commissions income i.e. login fee, penal interest on defaults, pre-payment / other charges, fees for advertising in offices / website etc. (other than for those items to which Ind AS 109 Financial Instruments are applicable) is recognised in accordance with the terms of the relevant contracts / agreements and when it is probable that the Company will collect the consideration.
e) Other income
Income from operating leases are recognised in the statement of profit and loss as per the contractual rentals.
Interest on tax refunds and other claims where quantum of accruals cannot be ascertained with reasonable certainty, are recognised as income only when revenue is virtually certain which generally coincides with receipts.
Other Income represents income earned from the activities incidental to the business and is recognised when the right to receive the income is established as per the terms of the contract.
2.4 Property, plant and equipment (PPE) and Intangible assets
a) PPE
PPE are stated at cost (including directly attributable expenses) less accumulated depreciation and impairment losses, if any. Cost includes deemed cost which represents the carrying value of PPE recognised as at April 1, 2017 measured as per the previous Generally Accepted Accounting Principles (GAAP).The cost of PPE comprises the purchase price (excluding tax credits availed, if any) and any attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure related to PPE are capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of item can be measured reliably. Other repairs and maintenance costs are expensed off as and when incurred.
An item of PPE and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
Capital work in progress includes assets which are not ready for the intended use at the end of the reporting year and is carried at cost including directly attributable expenses.
b) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost (excluding tax credits availed, if any) and are capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of item can be measured reliably. Cost comprises the purchase price (excluding tax credits availed, if any) and any attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure related to Intangible assets are capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of item can be measured reliably. Subsequent to initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses (if any).
An intangible asset is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
Intangible assets which are not ready for the intended use at the end of the reporting year are disclosed as Intangible assets under development.
2.5 Depreciation and amortisation
a) Depreciation
Depreciation on PPE is provided on straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013, except for networking equipment and mobile phone instruments that are depreciated over a period of five years and three years respectively based on technical evaluation. Leasehold improvements are amortised over the period of five years however, where the lease term is less than five years amortisation is restricted to the underlying lease term.
All PPE individually costing H5,000 or less are fully depreciated in the year of purchase.
Depreciation on additions to PPE is provided on a prorata basis from the date the asset is available for use.
Depreciation on sale / derecognition of PPE is provided for up to the date of sale / derecognition, as the case may be.
The residual values, useful lives and methods of depreciation of PPE are reviewed at each financial year-end and changes (if any) are then treated as changes in accounting estimates.
b) Amortisation
Intangible assets are amortised over a period of five years or less on straight-line method except website development costs, which are amortised over a period of three years on a straight-line basis from the date when the assets are available for use or the life whichever is less.
The amortisation period and the amortisation method for these Intangibles with a finite useful life are reviewed at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or methodology, as appropriate, which are then treated as changes in accounting estimates.
Investment property comprises freehold properties that are held to earn rentals or for capital appreciation or both.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any.
Subsequent expenditure is capitalised to the assets carrying amount only when it is probable that future economic benefit associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are recognised in statement of profit or loss as incurred.
Investment properties are depreciated using the straightline method over their estimated useful lives prescribed in Schedule II of the Companies Act, 2013.
Though the Company measures investment property using cost based measurement, the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by a registered independent valuer.
Investment properties are derecognised either when they have been disposed off or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of derecognition.
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Foreign currency denominated monetary assets and liabilities are translated at the functional currency spot rates of exchange at the reporting date and exchange gains and losses arising on settlement and restatement are recognized in the statement of profit and loss except for differences arising on cash flow hedges.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the spot exchange rates as at the date of initial recognition.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
The Company determines the lease term as the noncancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
Right-of-use assets - The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses (if any), and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straightline basis over the lease term.
Lease liability - At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments or a change in the assessment of an option to purchase the underlying asset.
Short-term leases and leases of low-value assets - The
Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense.
Company as a lessor
The Company as an intermediate lessor, accounts for the head lease and the sublease as two separate contracts.
The sub-lease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
Borrowing costs consists of interest and other cost that the Company incurred in connection with the borrowing of funds. Borrowing costs charged to the Statement of Profit and Loss on the basis of effective interest rate method.
2.10 Impairment of non-financial assets
The carrying amount of assets is reviewed at each reporting date. If there is any indication of impairment based on internal/external factors, an impairment loss is recognised in the statement of profit and loss wherever the carrying amount of an asset exceeds its recoverable amount.
After impairment, depreciation/amortisation is provided on the revised carrying amount of the asset over its remaining useful life.
If at the reporting date there is an indication that previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to maximum of depreciable historical cost.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
2.12 Contingent liabilities, Contingent assets and Commitments
The Company does not recognise a contingent liability but discloses its existence in the financial statements.
a) Contingent liability is disclosed in case of -
- A present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation.
- A present obligation arising from past events, when no reliable estimate is possible.
- A possible obligation arising from past events, unless the probability of outflow of resources is remote.
Contingent liabilities are reviewed at each balance sheet date.
b) Contingent assets are not recognised in the financial statements.
c) Commitments are future liabilities for contractual expenditure and is disclosed in case of -
- Estimated amount of contracts remaining to be executed on capital account and not provided for;
- Other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of management.
2.13 Employee Benefitsa) Retirement and other employee benefits
Defined contribution plan
Retirement benefit in the form of provident fund and Employee State Insurance Scheme is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund and Employee State Insurance scheme. The Company recognises contribution payable to the provident fund and Employee State Insurance scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid.
Defined Benefit Plan
The Company has defined benefit plans as Compensated absences and Gratuity for all eligible employees, the liability for which is determined based on actuarial
valuation at each year-end using projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, excluding amounts included in net interest on the net defined benefit liability, the effect of the asset ceiling, and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in the statement of profit and loss on the earlier of:
- The date of the plan amendment or curtailment, and
- The date that the Company recognises related restructuring costs.
The Company recognises the following changes in the net defined benefit obligation as an employee benefits expense in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
- Net interest expense or income
b) Short term and other long term employee benefits
A liability is recognised for benefits to employees in respect of wages and salaries, annual leave, sick leave and short-term employee benefits in the year the related service is rendered. The undiscounted amount of shortterm employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service. These benefits include performance incentive and compensated absences, which are expected to occur within twelve months after the end of the period in which the employee renders the related service.
In case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences and liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date.
c) Share based payments
The Company operates a number of Employee Stock Option Scheme/ Restricted stock units (''the Scheme'') which provides for the grant of options to acquire equity shares of the Company to its employees. The options
granted to employees vest in a graded manner and these may be exercised by the employees within a specified period. These equity-settled share based payments to employees are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity (Share option outstanding account). The fair value of options is estimated using valuation techniques, which incorporate exercise price, term, risk-free interest rates, the current share price, its expected volatility etc.
At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in statement of profit and loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to the share option outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Taxes on income
Tax expense comprises current and deferred tax.
a) Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities in accordance with Income Tax Act, 1961, Income Computation and Disclosure Standards and other applicable tax laws. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current tax relating to items recognised outside profit and loss is recognised outside profit and loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Current tax assets and liabilities are offset if a legally enforceable right exists to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
b) Deferred tax
Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit and loss is recognised outside profit and loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity.
Goods and services input tax credit
Goods and Services tax input credit is recognised in the period in which the supply of goods or service received is recognised and the conditions to avail the credit are fulfilled as per the underlying law.
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares except where the result would be antidilutive.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
a) Financial Assets
Initial recognition and measurement
Financial assets, with the exception of loans and advances to customers, are initially recognised on the trade date, i.e. the date that the Company becomes a party to the contractual provisions of the instrument. Loans and advances to customers are recognised when funds are disbursed to the customers. The classification of financial assets at initial recognition depends on their purpose, characteristics and the intention of the management''s while acquiring the same. All financial assets measured at fair value through profit or loss (FVTPL) are recognised initially at fair value. Financial assets measured at amortised cost or at fair value through other comprehensive income (FVTOCI) is recorded at fair value plus transaction costs that are attributable to the acquisition of that financial asset. Trade receivable that does not contain a significant financing component are measured at transaction price.
Classification and subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
- Financial asset at amortised cost
- Financial asset (debt instruments) at FVTOCI
- Financial asset at FVTPL
Financial asset at amortised costs
Financial asset is measured at the amortised cost if both the following conditions are met:
i) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method less impairment (if any). Amortised cost is calculated by taking into account any discount or premium on acquisition and fees received and the costs incurred on acquisition of financial asset. The EIR amortisation is included in interest income in the statement of profit and loss. The
losses arising from impairment are recognised in the statement of profit and loss.
Financial assets (debt instruments) at FVTOCI
Financial asset (debt instruments) is classified as at the FVTOCI if both of the following criteria are met:
i) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
ii) The asset''s contractual cash flows represent SPPI.
Financial assets included within the above category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the other comprehensive income (OCI). However, the Company recognises interest income, impairment losses or reversals and foreign exchange gain or loss in the profit and loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to profit and loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Financial asset at FVTPL
Financial asset which does not meet the criteria for categorisation as at amortised cost or as FVTOCI, is classified as at FVTPL. Financial assets classified under FVTPL category are measured at fair value with all changes recognised in the statement of profit and loss.
b) Financial liabilities
Financial liabilities are classified and measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for trading or it is designated as on initial recognition to be measured at FVTPL. All financial liabilities, other than classified at FVTPL, are classified at amortised cost in which case they are initially measured at fair value, net of transaction costs and subsequently at amortised cost using effective interest rate.
Amortised cost is calculated by taking into account any fees, commission / brokerage and ancillary costs incurred in relation to the financial liability.
c) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments are recognised at the face value and proceeds received in excess of the face value are recognised as share premium.
Offsetting a financial asset and a financial liability
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
2.17 Derivative financial instruments
A derivative is a financial instrument or other contract with all three of the following characteristics:
- Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided that, in the case of a non-financial variable, it is not specific to a party to the contract (i.e. the ''underlying'').
- It requires no initial net investment or an initial net investment that is smaller than what would be required for other types of contracts expected to have a similar response to changes in market factors.
- It is settled at a future date.
The Company holds derivative to mitigate the risk of changes in exchange rates on foreign currency exposures as well as interest fluctuations. The counterparty for such contracts are generally banks.
Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are included in net gain on fair value changes unless hedge accounting is applied.
The Company makes use of derivative instruments to manage exposures to interest rate and foreign currency. In order to manage particular risks, the Company applies hedge accounting for transactions that meet specified criteria.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company''s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the entity will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction and could affect profit or loss.
For designated and qualifying cash flow hedges, the effective portion of the cumulative gain or loss on the hedging instrument is initially recognised directly in OCI within equity (cash flow hedge reserve). The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in net gain/loss on fair value changes in the profit and loss statement.
When the hedged cash flow affects the statement of profit and loss, the effective portion of the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the statement of profit and loss. When the forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in OCI are reversed and included in the initial cost of the asset or liability.
When a hedging instrument expires, is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss that has been recognised in OCI at that time remains in OCI and is recognised when the hedged forecast transaction is ultimately recognised in the statement of profit and loss.
When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in OCI is immediately transferred to the statement of profit and loss.
2.19 Reclassification of financial assets and liabilities
The Company doesn''t reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Company acquires, disposes of, or terminates a business line. Further, whenever there is a change in the business model the underlying affected financial asset are reclassified. Financial liabilities has not been reclassified.
2.20 Derecognition of financial assets and liabilities
a) Financial Assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the financial asset have expired. The Company also derecognised the financial asset if it has transferred the financial asset and the transfer qualifies for derecognition.
The Company has transferred the financial asset if and only if, either:
- It has transferred its contractual rights to receive cash flows from the financial asset
- It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full or in part without material delay to a third party under a ''pass-through'' arrangement
Pass-through arrangements are transactions whereby the Company retains the contractual rights to receive the cash flows of a financial asset (the ''original asset''), but assumes a contractual obligation to pay those cash flows to one or more entities (the ''eventual recipients''), when all of the following three conditions are met:
- The Company has no obligation to pay amounts to the eventual recipients unless it has collected equivalent amounts from the original asset
- The Company cannot sell or pledge the original asset other than as security to the eventual recipients.
- The Company has to remit any cash flows it collects on behalf of the eventual recipients without material delay.
In addition, the Company is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents including interest earned, during the period between the collection date and the date of required remittance to the eventual recipients.
A transfer only qualifies for derecognition if either:
- The Company has transferred substantially all the risks and rewards of the asset
Or
- The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
The Company considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
When the Company has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset, the asset continues to be recognised only to the extent of the Company''s continuing involvement, in which case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in the statement of profit and loss.
2.21 Measurement of Expected Credit Loss (ECL)
The Company records allowance for expected credit losses for all loans, other debt financial assets not held at FVTPL together with the financial guarantee contracts. Equity instruments are not subject to impairment under Ind AS 109.
The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless there has been no significant increase in credit risk (SICR) since origination, in which case, the allowance is based on the 12 months'' expected credit loss (12mECL).
Default
Classification of default is based on the regulatory definition of Non-Performing Assets (NPA). Our regulator i.e. Reserve Bank of India defines NPA in Paragraph 8.3.5 in its Master Directions - Non Banking Financial Company - Housing Finance (Reserve Bank) Directions, 2021 as exposures where interest or principal is in arrears for a period of more than ninety days.
The Company will maintain the definition of default in line with any amendments made by the regulator from time to time through its circulars and through its Master Circular published from time to time.
Staging
The Company while assessing whether there has been a SICR of an exposure since origination, it compares the risk of a default occurring over the expected life of the financial instrument as at the reporting date with the risk of default as at the date of initial recognition. The Company classifies the accounts into three stages.
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The mechanics and key inputs for classifying the stages and computing the ECL are defined below: |
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Stage Definition |
Details |
Classification |
|
Stage 1 |
Low credit risk Days Past Due (DPD) 0-30 |
Financial instruments are treated as stage 1 which are not credit impaired and for which the credit risk has not increased significantly since initial recognition. The company calculates the 12 month ECL allowance. |
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Stage 2 |
DPD 31-90 Qualitative indicators of SICR |
Financial instruments having SICR since initial recognition (origination of facilities) are classified under (if not impaired) Stage 2. The Company calculates the lifetime ECL allowance. |
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Stage 3 |
90 / NPA |
Remaining financial instruments which are credit impaired are treated as Stage 3. The Company uses regulatory definition as a consistent measure for default across all product classes. The Company records an allowance for the LTECLs. |
Key components for computation of expected credit loss are - Probability of Default (PD)
Probability of Default (PD) is one of the three risk components needed to estimate ECL under Ind AS 109. PD is defined as the probability that a borrower will be unable to meet their debt obligations over a stipulated time. The PD estimate incorporates information relevant for assessing the borrower''s ability and willingness to repay its debts, as well as information about the economic environment in which the borrower operates.
The Company uses 12-month PD for stage 1 assets and lifetime PD for stage 2 and Stage 3 assets.
- Loss Given Default (LGD)
The Loss given default (LGD) is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the expected cash flows, including from the realisation of any collateral.
- Exposure at default (EAD)
Exposure at default (EAD) is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and future interests.
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The Company has adopted the following methodology for ECL computation: |
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Particulars |
PD |
LGD |
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Retail Loans |
Multinomial logistic regression |
Workout Method |
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Corporate Loans |
Pluto-Tasche |
Asset coverage based / Expected Collateral Realisation (ECR) |
Broadly, the Company has grouped the portfolio into retail and corporate category. ECL computation is based on collective approach except for a few large exposure of corporate finance portfolio where loss estimation is based on ECR. Further, given the characteristics and inherent risks of the various sub categories of the portfolio the Company has used appropriate PD / LGD computation techniques which are detailed below:
Retail loans Probability of default
The retail portfolio is segregated into homogenous pools at the product level and occupational level.
For ECL computation, basis risk emergence curve movement, the Company has adopted statistical techniques of multinomial logistic regression, Observed Default Rate based on customer classification etc using behaviour and credit variables. For life time PDs computation, the Company has used survival analysis using Kaplan-Meier technique.
Previous year(s) portfolio behaviour of homogenous pools is considered for PD estimation. The Company has further stressed the PDs for such selective group of customers
who are falling in early warning signal pool like customers who have had experienced delinquency with other financial institutions but remained good with us, customers showing very early signs of stress in emerging delinquencies.
Loss given default
The LGD for the retail portfolio is modelled through a workout approach. Historical NPA data of last few years has been used to arrive at LGD. Loss estimation have been done either basis distressed value or actual/expected recoveries, depending on resolution strategies already materialised or in the process of materialisation. Multiple factors are considered for determining the LGD including time taken for resolutions, geographies, collection feedback, underlying security etc.
Exposure at default
EAD is the sum of the outstanding principle, interest outstanding and future interest receivables for the expected life of the asset, computed basis the behavioral analysis of the Company''s historical experience.
Corporate loans Probability of default
PDs for the corporate portfolio are determined by using external ratings as cohorts along with ever default behavior of an account in last 12 months (basis external ratings based statistical technique of Pluto-Tasche). PD s are further stressed basis operational variables like construction variance, sales velocity, resolution team feedback etc. For life time PDs computation, the Company has used survival analysis using Kaplan-Meier technique.
Loss given default
For LGD estimates, the Company has used ECR approach and have applied business logic based on security coverage ratio of existing portfolio. Sensitivity analysis, resolution feedbacks are applied on probability weighted scenarios to compute loss given default.
Exposure at Default
EAD is the sum of the outstanding principl
Mar 31, 2022
NOTE 1: OVERVIEW Note 1.1: Overview
PNB Housing Finance Limited (''PNBHFL'', ''the Company'') was incorporated on November 11, 1988. The Company is primarily engaged in the business of providing loans to individuals and corporate bodies for purchase, construction, repair and up-gradation of houses. It also provides loans for commercial space, loan against property and loan for purchase of residential plots. The Company is deposit taking Housing Finance Company registered with National Housing Bank (NHB) under Section 29A of the National Housing Bank Act, 1987. The Company is listed on BSE Limited and National Stock Exchange of India Limited. The Company''s registered office is at 9th floor, Antriksh Bhawan, 22, K.G. Marg, New Delhi -110001.
These standalone financial statements are approved and adopted by the Board of Directors of the Company in their meeting held on April 28, 2022.
Note 1.2. Statement of Compliance and basis of preparation and presentation
The standalone financial statements are prepared in accordance with provision contained in section 129 of the Companies Act, 2013, read with Division III of Schedule III as amended from time to time. The Statement of Cash Flows has been prepared and presented as per Ind AS 7 Statement of Cash Flows.
The standalone financial statements have been prepared under the historical cost convention on accrual basis except where quantum of accruals cannot be ascertained with reasonable certainty. Following are measured on each reporting date:
- Certain financial assets and liabilities (including derivative instruments) that is measured at fair value.
- Defined benefit liability/(assets): present value of defined benefit obligation less fair value of plan assets.
- Financial instrument - measured at fair value.
The standalone financial statements comply in all material aspects with the Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time, notified under section 133 of the Companies Act, 2013 and the relevant provisions of the National Housing Bank Act, 1987 as amended from time to time and the Non-Banking Financial Company-Housing Finance Company (Reserve Bank) Directions, 2021 (''RBI Directions'') as amended from time to time.
The Finance (No.2) Act, 2019 has amended the National Housing Bank Act, 1987 conferring certain powers for regulation of Housing Finance Companies (HFCs) with Reserve Bank of India (RBI). The Central Government has since issued notification appointing August 09, 2019 as the date on which the relevant part of that Act shall come into effect. RBI vide its press release dated August 13, 2019
notified that HFCs will henceforth be treated as one of the categories of Non-Banking Financial Companies (NBFCs) for regulatory purposes. Subsequently, RBI vide its notification dated February 17, 2021 issued master directions for HFCs called the Non-Banking Financial Company-Housing Finance Company (Reserve Bank) Directions, 2021 repealing erstwhile Housing Finance Companies Directions 2010.
The standalone financial statements are presented in Indian Rupees (?) which is the functional and presentation currency of the Company and all values are rounded to the nearest crore with two decimals, except when otherwise indicated.
Balance sheet analysis regarding recovery or settlement within 12 months after the reporting date and more than 12 months after the reporting date is presented in Note 45.
Accounting policies have been consistently applied except where a newly issued Ind AS is initially adopted or a revision to an existing Ind AS requires a change in the accounting policy hitherto in use.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES Note 2.1. Use of estimates, judgements and assumptions
The preparation of financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting year. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to the accounting estimates are recognised in the period in which the estimates are known or materialised.
Some of the judgements, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are:
a) Business model assessment
Classification and measurement of financial assets depends on the results of the solely payments of principal and interest (SPPI) and the business model test. The Company determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and measured, the risks that affect the performance of the assets and how these are being managed. The Company monitors financial assets on a continuous basis to assess whether the business model for which the financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change
in business model and so a prospective change to the classification of the assets.
b) Fair value of financial instruments
The fair value of financial instruments is the price that would be received upon selling of an asset or paid upon transfer of a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values. Judgements and estimates include considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty), funding value adjustments, correlation and volatility.
c) Effective Interest Rate (EIR) method
EIR methodology recognises interest income / expense using a rate of return that represents the best estimate of a constant rate of return over the expected behavioral life of loans given / taken and recognises the effect of potentially different interest rates at various stages and other characteristics of the product life cycle (including prepayments, penalty interest and charges).
This estimation, by nature, requires an element of judgement regarding the expected behavior and lifecycle of the instruments, as well as expected changes to interest rates and other fee income/expense that are integral parts of the instrument.
d) Impairment of financial asset
The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances. (Refer note 2.20).
e) Provisions and other contingent liabilities
The Company operates in a regulatory and legal environment that, by nature, has a heightened element of litigation risk inherent to its operations. Cases where Company can reliably measure the outflow of economic benefits in relation to a specific case and considers such outflows probable, it recognises a provision against the same. Where the probability of outflow is
considered remote, or probable, but a reliable estimate cannot be made, a contingent liability is disclosed for the same.
f) Defined Benefit Plans
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
g) Deferred tax assets
The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the future taxable income against which the deferred tax assets can be utilised.
h) Useful Life of Property, Plant and Equipment (PPE) and Intangible assets
The Company reviews its estimate of the useful life of PPE and intangible assets at each reporting date, based on the expected utility of the PPE and intangible assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of PPE and intangible assets. In case of a revision of useful life, the unamortised depreciable amount is charged over the remaining useful life of the PPE and intangible assets.
i) Share-Based Payments
The Company measures the cost of equity-settled transactions with employees using Black-Scholes Model to determine the fair value of the liability incurred on the grant date. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant.
This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them.
Note 2.2 Cash and cash equivalents
Cash and cash equivalent comprises cash/ stamp on hand, demand deposits and time deposits with original maturity of less than three months from the date of acquisition, highly liquid investments that are readily convertible in the known amounts of cash and which are subject to insignificant risk of change in value, debit balance in cash credit account.
Time deposits held with bank, with original maturity of more than three months but less than twelve months is a part of bank balance other than cash and cash equivalents.
For the purpose of the statement of cash flow, cash and cash equivalents consists of cash at banks and on hand and short term deposits, as defined above.
a) Interest and related income
Interest income for all financial instruments measured either at amortised cost or at fair value through other comprehensive income, is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any discount or premium on acquisition, fees or incremental costs that are directly attributable and are an integral part of the EIR, but not future credit losses.
The Company calculates interest income by applying the EIR to the gross carrying amount of financial assets other than credit-impaired assets. When a financial asset becomes credit-impaired and is, therefore, regarded as ''Stage 3'', the Company calculates interest income by applying the EIR on net amount (i.e. gross carrying amount less allowance for expected credit loss). If the financial assets cures and is no longer credit-impaired, the Company reverts to calculating interest income on a gross basis.
Interest income on all trading assets measured at fair value through profit and loss (FVTPL) is recognised using the contractual interest rate under interest income and the fair value impact is recognised in net gain / loss on fair value changes.
b) Dividend income
Dividend income is recognised when the Company''s right to receive the payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of the dividend can be measured reliably. This is generally when shareholders approve the dividend.
c) Profit on derecognition of financial assets
When the Company transfers the financial asset in a transfer that qualifies for derecognition in its entirety then whole of the interest spread and net servicing fees (over the expected life of the asset) is recognised at present value on the date of derecognition itself as interest-only strip / net servicing fees receivable and correspondingly recognised as profit on derecognition of financial asset.
d) Fees and commission income
Fees and commissions income i.e. login fee, penal interest on defaults, pre-payment / other charges, fees for advertising in offices / website etc. (other than for those items to which Ind AS 109 Financial Instruments are applicable) is recognised in accordance with the terms of the relevant contracts / agreements and when it is probable that the Company will collect the consideration.
e) Other income
Income from operating leases are recognised in the statement of profit and loss as per the contractual rentals.
Interest on tax refunds or other claims where quantum of accruals cannot be ascertained with reasonable certainty, are recognised as income only when revenue is virtually certain which generally coincides with receipts.
Other Income represents income earned from the activities incidental to the business and is recognised when the right to receive the income is established as per the terms of the contract.
Note 2.4 Property, plant and equipment (PPE) and Intangible assets
a) PPE
PPE are stated at cost (including directly attributable expenses) less accumulated depreciation and impairment losses, if any. Cost includes deemed cost which represents the carrying value of PPE recognised as at April 1, 2017 measured as per the previous Generally Accepted Accounting Principles (GAAP).The cost of PPE comprises the purchase price (excluding tax credits availed, if any) and any attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure related to PPE are capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of item can be measured reliably. Other repairs and maintenance costs are expensed off as and when incurred.
An item of PPE and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
Capital work in progress includes assets which are not ready for the intended use at the end of the reporting year and is carried at cost including directly attributable expenses.
b) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost (excluding tax credits availed, if any) and are capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of item can be measured reliably. Cost comprises the purchase price (excluding tax credits availed, if any) and any attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure related to Intangible assets are capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of item can be measured reliably. Subsequent to initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses (if any).
An intangible asset is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
Intangible assets which are not ready for the intended use at the end of the reporting year are disclosed as Intangible assets under development
Note 2.5 Depreciation and amortisation
a) Depreciation
Depreciation on PPE is provided on straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013, except for networking equipment and mobile phone instruments that are depreciated over a period of five years and three years respectively based on technical evaluation. Leasehold improvements are amortised over the period of five years however, where the lease term is less than five years amortisation is restricted to the underlying lease term.
All PPE individually costing '' 5,000/- or less are fully depreciated in the year of purchase.
Depreciation on additions to PPE is provided on a prorata basis from the date the asset is available for use. Depreciation on sale / derecognition of PPE is provided for up to the date of sale / derecognition, as the case may be.
The residual values, useful lives and methods of depreciation of PPE are reviewed at each financial year-end and changes (if any) are then treated as changes in accounting estimates.
b) Amortisation
Intangible assets are amortised over a period of five years or less on straight-line method except website
development costs, which are amortised over a period of three years on a straight-line basis from the date when the assets are available for use or the life whichever is less.
The amortisation period and the amortisation method for these Intangibles with a finite useful life are reviewed at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or methodology, as appropriate, which are then treated as changes in accounting estimates.
Note 2.6 Investment Property
Investment property comprises freehold properties that are held to earn rentals or for capital appreciation or both.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any.
Subsequent expenditure is capitalised to the assets carrying amount only when it is probable that future economic benefit associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are recognised in statement of profit or loss as incurred.
Investment properties are depreciated using the straightline method over their estimated useful lives prescribed in Schedule II of the Companies Act, 2013.
Though the Company measures investment property using cost based measurement, the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by a registered independent valuer.
Investment properties are derecognised either when they have been disposed off or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of derecognition.
Note 2.7 Foreign Currency
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Foreign currency denominated monetary assets and liabilities are translated at the functional currency spot rates of exchange at the reporting date and exchange gains and losses arising on settlement and restatement are recognized
in the statement of profit and loss except for differences arising on cash flow hedges.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the spot exchange rates as at the date of initial recognition.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a Lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
The Company determines the lease term as the noncancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
Right-of-use assets - The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses (if any), and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straightline basis over the lease term.
Lease Liability - At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments or a change in the assessment of an option to purchase the underlying asset.
Short-term leases and leases of low-value assets - The
Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense.
Company as a Lessor
The Company as an intermediate lessor, accounts for the head lease and the sublease as two separate contracts.
The sub-lease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
Note 2.9 Impairment of non-financial assets
The carrying amount of assets is reviewed at each reporting date. If there is any indication of impairment based on internal/external factors, an impairment loss is recognised in the statement of profit and loss wherever the carrying amount of an asset exceeds its recoverable amount.
After impairment, depreciation/amortisation is provided on the revised carrying amount of the asset over its remaining useful life.
If at the reporting date there is an indication that previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to maximum of depreciable historical cost.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Note 2.11 Contingent liabilities, Contingent assets and Commitments
The Company does not recognise a contingent liability but discloses its existence in the financial statements
a) Contingent liability is disclosed in case of -
⢠A present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation.
⢠A present obligation arising from past events, when no reliable estimate is possible.
⢠A possible obligation arising from past events, unless the probability of outflow of resources is remote.
Contingent liabilities are reviewed at each balance sheet date.
b) Contingent assets are not recognised in the financial statements.
c) Commitments are future liabilities for contractual expenditure and is disclosed in case of -
⢠Estimated amount of contracts remaining to be executed on capital account and not provided for;
⢠Other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of management.
Note 2.12 Employee Benefits ⢠Retirement and other employee benefits Defined Contribution Plan
Retirement benefit in the form of provident fund and Employee State Insurance Scheme is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund and Employee State Insurance scheme. The Company recognises contribution payable to the provident fund and Employee State Insurance scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid.
Defined Benefit Plan
The Company has defined benefit plans as Compensated absences and Gratuity for all eligible employees, the liability for which is determined based on actuarial valuation at each year-end using projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, excluding amounts included in net interest on the net defined benefit liability, the effect of the asset ceiling, and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Past service, costs are recognised in the statement of profit and loss on the earlier of:
⢠The date of the plan amendment or curtailment, and
⢠The date that the Company recognises related restructuring costs.
The Company recognises the following changes in the net defined benefit obligation as an employee benefits expense in the statement of profit and loss:
⢠Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
⢠Net interest expense or income
⢠Short term employee benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service.
These benefits include performance incentive and compensated absences, which are expected to occur within twelve months after the end of the period in which the employee renders the related service.
The cost of short-term compensated absences is accounted as under:
⢠In case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and
⢠In case of non-accumulating compensated absences, when the absences occur
⢠Share based payments
The Company operates a number of Employee Stock Option Scheme/ Restricted stock units (''the Scheme'') which provides for the grant of options to acquire equity shares of the Company to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees within a specified period. These equity-settled share based payments to employees are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity (Share option outstanding account). The fair value of options is estimated using valuation techniques, which incorporate exercise price, term, risk-free interest rates, the current share price, its expected volatility etc.
At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in statement of profit and loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to the share option outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Taxes on income
Tax expense comprises current and deferred tax.
a) Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities in accordance with Income Tax Act, 1961, Income Computation and Disclosure Standards and other applicable tax laws. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current tax relating to items recognised outside profit and loss is recognised outside profit and loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Current tax assets and liabilities are offset if a legally enforceable right exists to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
b) Deferred tax
Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit and loss is recognised outside profit and loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity.
Goods and Services Input Tax Credit
Goods and Services tax input credit is recognised in the period in which the supply of goods or service received is recognised and the conditions to avail the credit are fulfilled as per the underlying law.
Note 2.14 Earnings per Share
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares except where the result would be antidilutive.
Note 2.15 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
a) Financial Assets
⢠Initial recognition and measurement
Financial assets, with the exception of loans and advances to customers, are initially recognised on the trade date, i.e., the date that the Company becomes a party to the contractual provisions of the instrument. Loans and advances to customers are recognised when funds are disbursed to the customers. The classification of financial assets at initial recognition depends on their purpose, characteristics and the intention of the management''s while acquiring the same. All financial assets measured at fair value through profit or loss (FVTPL) are recognised initially at fair value. Financial assets measured at amortised cost or at fair value through other comprehensive income (FVTOCI) is recorded at fair value plus transaction costs that are attributable to the acquisition of that financial asset.
⢠Classification and Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
⢠Financial asset at amortised cost
⢠Financial asset (debt instruments) at FVTOCI
⢠Financial asset at FVTPL Financial asset at amortised costs
Financial asset is measured at the amortised cost if both the following conditions are met:
i) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method less impairment (if any). Amortised cost is calculated by taking into account any discount or premium on acquisition and fees received and the costs incurred on acquisition of financial asset. The EIR amortisation is included in interest income in the statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss.
Financial assets (debt instruments) at FVTOCI
Financial asset (debt instruments) is classified as at the FVTOCI if both of the following criteria are met:
i) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
ii) The asset''s contractual cash flows represent SPPI.
Financial assets included within the above category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the other comprehensive income (OCI). However, the Company recognises interest income, impairment losses or reversals and foreign exchange gain or loss in the profit and loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to profit and loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Financial Asset at FVTPL
Financial asset which does not meet the criteria for categorisation as at amortised cost or as FVTOCI, is classified as at FVTPL. Financial assets classified under FVTPL category are measured at fair value with all changes recognised in the statement of profit and loss.
b) Financial Liabilities
Financial liabilities are classified and measured at amortised cost or FVTPL. A financial liability is
classified as at FVTPL if it is classified as held-for trading or it is designated as on initial recognition to be measured at FVTPL. All financial liabilities, other than classified at FVTPL, are classified at amortised cost in which case they are initially measured at fair value, net of transaction costs and subsequently at amortised cost using effective interest rate.
Amortised cost is calculated by taking into account any fees, commission / brokerage and ancillary costs incurred in relation to the financial liability. The EIR amortisation is included in interest expense in the statement of profit and loss.
c) Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments are recognised at the face value and proceeds received in excess of the face value are recognised as share premium.
Offsetting a Financial Asset and a Financial Liability
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
Note 2.16 Derivative financial instruments
A derivative is a financial instrument or other contract with all three of the following characteristics:
⢠Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided that, in the case of a non-financial variable, it is not specific to a party to the contract (i.e., the ''underlying'').
⢠It requires no initial net investment or an initial net investment that is smaller than what would be required for other types of contracts expected to have a similar response to changes in market factors.
⢠It is settled at a future date.
The Company holds derivative to mitigate the risk of changes in exchange rates on foreign currency exposures as well as interest fluctuations. The counterparty for such contracts are generally banks.
Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are included in net gain on fair value changes unless hedge accounting is applied.
Note 2.17 Hedge accounting
The Company makes use of derivative instruments to manage exposures to interest rate and foreign currency. In
order to manage particular risks, the Company applies hedge accounting for transactions that meet specified criteria.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company''s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the entity will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction and could affect profit or loss.
For designated and qualifying cash flow hedges, the effective portion of the cumulative gain or loss on the hedging instrument is initially recognised directly in OCI within equity (cash flow hedge reserve). The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in net gain/loss on fair value changes in the profit and loss statement.
When the hedged cash flow affects the statement of profit and loss, the effective portion of the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the statement of profit and loss. When the forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in OCI are reversed and included in the initial cost of the asset or liability.
When a hedging instrument expires, is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss that has been recognised in OCI at that time remains in OCI and is recognised when the hedged forecast transaction is ultimately recognised in the statement of profit and loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in OCI is immediately transferred to the statement of profit and loss.
Note 2.18 Reclassification of financial assets and liabilities
The Company doesn''t reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Company acquires, disposes of, or terminates a business line. Further, whenever there is a change in the business model the underlying affected financial asset are reclassified. Financial liabilities has not been reclassified.
Note 2.19 Derecognition of financial assets and liabilities
a) Financial Assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the financial asset have expired. The Company also derecognised the financial asset if it has transferred the financial asset and the transfer qualifies for derecognition.
The Company has transferred the financial asset if and only if, either:
⢠It has transferred its contractual rights to receive cash flows from the financial asset
Or
⢠It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full or in part without material delay to a third party under a ''pass-through'' arrangement
Pass-through arrangements are transactions whereby the Company retains the contractual rights to receive the cash flows of a financial asset (the ''original asset''), but assumes a contractual obligation to pay those cash flows to one or more entities (the ''eventual recipients''), when all of the following three conditions are met:
⢠The Company has no obligation to pay amounts to the eventual recipients unless it has collected equivalent amounts from the original asset
⢠The Company cannot sell or pledge the original asset other than as security to the eventual recipients.
⢠The Company has to remit any cash flows it collects on behalf of the eventual recipients without material delay.
In addition, the Company is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents including interest earned, during the period
between the collection date and the date of required remittance to the eventual recipients.
A transfer only qualifies for derecognition if either:
⢠The Company has transferred substantially all the risks and rewards of the asset
Or
⢠The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
The Company considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
When the Company has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset, the asset continues to be recognised only to the extent of the Company''s continuing involvement, in which case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
b) Financial Liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the
original financial liability and the consideration paid is recognised in the statement of profit and loss.
Note 2.20 Measurement of Expected Credit Loss (ECL)
The Company records allowance for expected credit losses for all loans, other debt financial assets not held at FVTPL together with the financial guarantee contracts. Equity instruments are not subject to impairment under Ind AS 109.
The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless there has been no significant increase in credit risk (SICR) since origination, in which case, the allowance is based on the 12 months'' expected credit loss (12mECL).
Default
Classification of default is based on the regulatory definition of Non-Performing Assets (NPA). Our regulator i.e. Reserve Bank of India defines NPA in Paragraph 8.3.5 in its Master Directions - Non Banking Financial Company - Housing Finance (Reserve Bank) Directions, 2021 as exposures where interest or principal is in arrears for a period of more than ninety days.
The Company will maintain the definition of default in line with any amendments made by the regulator from time to time through its circulars and through its Master Circular published from time to time.
Staging
The Company while assessing whether there has been a SICR of an exposure since origination, it compares the risk of a default occurring over the expected life of the financial instrument as at the reporting date with the risk of default as at the date of initial recognition. The Company classifies the accounts into three stages.
|
The mechanics and key inputs for classifying the stages and computing the ECL are defined below: |
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|
Stage Definition |
Details |
Classification |
|
Stage 1 |
Low credit risk Days Past Due (DPD) 0-30 |
Financial instruments are treated as Stage 1 which are not credit impaired and for which the credit risk has not increased significantly since initial recognition. The Company calculates the 12 month ECL allowance. |
|
Stage 2 |
DPD 31-90 Qualitative indicators of SICR |
Financial instruments having SICR since initial recognition (origination of facilities) are classified under (if not impaired) Stage 2. The Company calculates the lifetime ECL allowance. |
|
Stage 3 |
90 / NPA |
Remaining financial instruments which are credit impaired are treated as Stage 3. The Company uses regulatory definition as a consistent measure for default across all product classes. The Company records an allowance for the LTECLs. |
Key components for computation of Expected Credit Loss are:
⢠Probability of Default (PD)
Probability of Default (PD) is one of the three risk components needed to estimate ECL under Ind AS 109. PD is defined as the probability that a borrower will be unable to meet their debt obligations over a stipulated time. The PD estimate incorporates information relevant for assessing the borrower''s ability and willingness to repay its debts, as well as information about the economic environment in which the borrower operates.
The Company uses 12-month PD for stage 1 assets and lifetime PD for stage 2 and Stage 3 assets.
⢠Loss Given Default (LGD)
The Loss given default (LGD) is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the expected cash flows, including from the realisation of any collateral.
⢠Exposure at default (EAD)
Exposure at default (EAD) is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and future interests.
The Company has adopted the following methodology for ECL computation:
|
Particulars |
PD |
LGD |
|
Retail |
Multinomial |
Workout Method |
|
Loans |
logistic |
|
|
regression |
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|
Corporate |
Pluto- |
Asset coverage based / Expected |
|
Loans |
Tasche |
Collateral Realisation (ECR) |
Broadly, the Company has grouped the portfolio into retail and corporate category. ECL computation is based on collective approach except for a few large exposure of corporate finance portfolio where loss estimation is based on ECR. Further, given the characteristics and inherent risks of the various sub categories of the portfolio the Company has used appropriate PD / LGD computation techniques which are detailed below:
Retail Loans Probability of Default
The retail portfolio is segregated into homogenous pools at the product level and occupational level.
For ECL computation, basis risk emergence curve movement, the Company has adopted statistical technique of multinomial logistic regression using behaviour and credit variables. For life time PDs computation, the Company has used survival analysis using Kaplan-Meier technique.
Previous year(s) portfolio behaviour of homogenous pools is considered for PD estimation. The Company has further stressed the PDs for such selective group of customers who are falling in early warning signal pool like customers who have had experienced delinquency with other financial institutions but remained good with us, customers showing very early signs of stress in emerging delinquencies.
Loss Given Default
The LGD for the retail portfolio is modelled through a workout approach. Historical NPA data of last few years has been used to arrive at LGD. Loss estimation have been done either basis distressed value or actual/expected recoveries, depending on resolution strategies already materialised or in the process of materialisation. Multiple factors are considered for determining the LGD including time taken for resolutions, geographies etc.
Exposure at Default
EAD is the sum of the outstanding principle, interest outstanding and future interest receivables for the expected life of the asset, computed basis the behavioural analysis of the Company''s historical experience.
Corporate Loans Probability of Default:
PDs for the corporate portfolio are determined by using external ratings as cohorts along with ever default behavior of an account in last 12 months (basis external ratings based statistical technique of Pluto-Tasche). PD s are further stressed basis operational variables like construction variance, sales velocity, resolution team feedback etc. For life time PDs computation, the Company has used survival analysis using Kaplan-Meier technique.
Loss Given Default
For LGD estimates, the Company has used ECR approach and have applied business logic based on security coverage ratio of existing portfolio. Sensitivity analysis, resolution feedbacks are applied on probability weighted scenarios to compute loss given default.
Exposure at Default
EAD is the sum of the outstanding principle, interest outstanding and fut
Mar 31, 2019
Notes to Standalone Financial Statements for the year ended March 31, 2019
1. OVERVIEW
1.1. Overview
PNB Housing Finance Limited (PNBHFL''), ''the Company'' was incorporated on November 11,1988. The Company is primarily engaged in the business of providing loans to individuals and corporate bodies for purchase, construction, repair and up-gradation of houses. It also provides loans for commercial space, loan against property and loan for purchase of residential plots. The Company is deposit taking Housing Finance Company registered with National Housing Bank (NHB) under Section 29A of the National Housing Bank Act, 1987. The Company is listed on BSE Limited and the National Stock Exchange of India Limited. The Company''s registered office is at 9th floor, Antriksh Bhawan, 22, K.G.Marg, New Delhi -110001.
These standalone financial statement are approved and adopted by the Board of Directors of the Company in their meeting held on May 9, 2019.
1.2. Basis of preperation/Statement of compliance
The standalone financial statements have been prepared on a historical cost basis, except for fair value through other comprehensive income (FVOCI) instruments, derivative financial instruments and other financial assets held for trading, all of which have been measured at fair value.
The standalone financial statements comply in all material aspects with the Indian Accounting Standards (lnd AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 and the relevant provisions of the National Housing Bank Act, 1987 and the Housing Finance Companies Directions, 2010 as amended from time to time.
The standalone financial statements are prepared in accordance with provision contained in section 129 of the Companies Act 2013, read with Division III of Schedule III.
For all periods up to and including the year ended March 31, 2018, the Company has prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP or previous GAAP). These financial statements for the year ended March 31, 2019 are the first the Company has prepared in accordance with Ind AS.
The standalone financial statements are presented in Indian Rupees (Rs.) and all values are rounded to the nearest crores, except when otherwise indicated.
Balance sheet analysis regarding recovery or settlement within 12 months after the reporting date and more than 12 months after the reporting date is presented in note no. 42.
Principles and methods considered for the first time adoption of Ind AS are explained in the note no. 46.
2. SIGNIFICANT ACCOUNTING POLICIES
2.1. Use of estimates, judgements and assumptions
The preparation of financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to the accounting estimates are recognised in the period in which the estimates are known or materialised.
Some of the judgements, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are:
a) Business model assessment
Classification and measurement of financial assets depends on the results of the solely payments of principal and interest (SPPI) and the business model test. The Company determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and measured, the risks that affect the performance of the assets and how these are being managed. The Company monitors financial assets on a continuous basis to assess whether the business model for which the financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of the assets.
b) Fair value of financial instruments
The fair value of financial instruments is the price that would be received upon selling of an asset or paid upon transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required
in establishing fair values. Judgements and estimates include considerations of liquidity and model inputs related to items such as credit risk (both own and counterparty), funding value adjustments, correlation and volatility.
c) Effective Interest Rate (EIR) method
EIR methodology recognises interest income / expense using a rate of return that represents the best estimate of a constant rate of return over the expected behavioural life of loans given / taken and recognises the effect of potentially different interest rates at various stages and other characteristics of the product life cycle (including prepayments, penalty interest and charges).
This estimation, by nature, requires an element of judgement regarding the expected behaviour and life-cycle of the instruments, as well expected changes to interest rates and other fee income / expense that are integral parts of the instrument.
d) Impairment of financial asset
The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances.
e) Provisions and other contingent liabilities
The Company operates in a regulatory and legal environment that, by nature, has a heightened element of litigation risk inherent to its operations. Cases where Company can reliably measure the outflow of economic benefits in relation to a specific case and considers such outflows probable, it recognises a provision against the same. Where the probability of outflow is considered remote, or probable, but a reliable estimate cannot be made, a contingent liability is disclosed for the same.
2.2 Cash and cash equivalents
Cash and cash equivalent comprises cash on hand, demand deposits and time deposits with original maturity of less than three months from the date of acquisition, highly liquid investments that are readily convertible in the known amounts of cash and which are subject to insignificant risk of change in value, debit balance in cash credit account.
Time deposits held with bank, with original maturity of more than three months but less than twelve months is a part of bank balance other than cash and cash equivalents.
For the purpose of the statement of cash flow, cash and cash equivalents consist of cash at banks and on hand and short term deposits, as defined above.
2.3 Revenue recognition
a) Interest and related income
Interest income, for all financial instruments measured either at amortised cost or at fair value through other comprehensive income, is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any discount or premium on acquisition, fees or incremental costs that are directly attributable and are an integral part of the EIR, but not future credit losses.
The Company calculates interest income by applying the EIR to the gross carrying amount of financial assets other than credit-impaired assets. When a financial asset becomes credit-impaired and is, therefore, regarded as ''Stage 3'', the Company calculates interest income by applying the effective interest rate on net amount and restricting to the extent of the fair valuation of underlying asset. If the financial assets cures and is no longer credit-impaired, the Company reverts to calculating interest income on a gross basis.
Interest income on all trading assets measured at fair value through profit and loss (FVTPL) is recognised using the contractual interest rate under interest income and the fair value impact is recognised in net gain / loss on fair value changes.
b) Dividend income
Dividend income is recognised when the Company''s right to receive the payment is established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of the dividend can be measured reliably. This is generally when shareholders approve the dividend.
c) Profit on derecognition of financial assets
When the Company transfers the financial asset in a transfer that qualifies for derecognition in its entirety then whole of the interest spread and net servicing fees Cover the expected life of the asset) is recognised at present value on the date of derecognition itself as interest-only strip/net servicing fees receivable and correspondingly recognised as profit on derecognition of financial asset.
d) Other income
Fees and commissions income i.e. login fee, penal interest on defaults, pre-payment / other charges, fees for advertising in offices / website etc. (other than for those items to which Ind AS 109 - Financial Instruments are applicable) is measured at fair value of the consideration received or receivable when the Company satisfies the performance obligation.
Interest on tax refunds or other claims where quantum of accruals cannot be ascertained with reasonable certainty, are recognised as income only when revenue is virtually certain which generally coincides with receipts.
2.4 Property, plant and equipment (PPE) and Intangible assets
a) PPE
PPE are stated at cost (including incidental expenses directly attributable to bringing the asset to its working condition for its intended use) less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure related to PPE is capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of item can be measured reliably. Other repairs and maintenance costs are expensed off as and when incurred.
An item of PPE and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
b) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost and are capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of item can be measured reliably. Subsequent to initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
2.5 Depreciation and Amortisation
a) Depreciation
Depreciation on tangible fixed assets is provided on straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013, except for networking equipment and mobile phone instruments that are depreciated over a period of five years and three years respectively. Leasehold improvements are amortised over the period of five years.
All fixed assets individually costing Rs.5,000/- or less are fully depreciated in the year of purchase.
Depreciation on additions to fixed assets is provided on a pro-rata basis from the date the asset is put to use. Depreciation on sale / derecognition of fixed assets is provided for up to the date of sale / derecognition, as the case may be.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year-end and adjusted prospectively, if appropriate.
b) Amortisation
Intangible assets are amortised over a period of five years on straight line method except website development costs which are amortised over a period of three years on a straight-line basis from the date when the assets are available for use.
The amortisation period and the amortisation method for these Intangibles with a finite useful life are reviewed at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or methodology, as appropriate, which are then treated as changes in accounting estimates.
2.6 Investment property
Investment property comprises freehold properties that are held to earn rentals or for capital appreciation or both.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any.
Subsequent expenditure is capitalised to the assets carrying amount only when it is probable that future economic benefit associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are recognised in statement of profit and loss as incurred.
Investment properties are depreciated using the straight-line method over their estimated useful lives prescribed in Part C of Schedule II of the Companies Act 2013.
Though the Company measures investment property using cost based measurement, the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by an accredited external independent valuer.
Investment properties are derecognised either when they have been disposed off or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in statement of profit and loss in the period of derecognition.
2.7 Foreign currency
Items included in the financial statements are measured using the currency of the primary economic environment
in which the entity operates (''the functional currency''). The Company''s financial statements are presented in Indian Rupees (Rs.), which is also the Company''s functional currency.
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Foreign currency denominated monetary assets and liabilities are translated at the functional currency spot rates of exchange at the reporting date and exchange gains and losses arising on settlement and restatement are recognised in the statement of profit and loss except for differences arising on cash flow hedges.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the spot exchange rates as at the date of initial recognition.
2.8 Operating Leases
Company as a Lessee - Leases that do not transfer to the Company substantially all of the risks and benefits incidental to ownership of the leased items are operating leases. The Company has ascertained that the payments to the lessor are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases and therefore, the lease payments are recognised as per terms of the lease agreement in the Statement of Profit and Loss.
Company as a Lessor - Leases where the Company does not transfer substantially all of the risk and benefits of ownership of the asset are classified as operating leases. The Company has ascertained that the payments by the lessee are structured to increase in line with expected general inflation to compensate for the Company''s (lessor''s) expected inflationary cost increases and therefore, the lease income is recognised as per terms of the lease agreement in the Statement of Profit and Loss.
2.9 Impairment of non-financial assets
The carrying amount of assets is reviewed at each reporting date. If there is any indication of impairment based on internal / external factors, an impairment loss is recognised in the statement of profit and loss wherever the carrying amount of an asset exceeds its recoverable amount.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
If at the reporting date there is an indication that previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to maximum of depreciable historical cost.
2.10 Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
2.11 Contingent liabilities and assets
The Company does not recognise a contingent liability but discloses its existence in the financial statements.
a) Contingent liability is disclosed in case of -
⢠A present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation.
⢠A present obligation arising from past events, when no reliable estimate is possible.
⢠A possible obligation arising from past events, unless the probability of outflow of resources is remote.
Contingent liabilities are reviewed at each balance sheet date.
b) Contingent assets are not recognised in the financial statements.
2.12 Employee benefits
a) Retirement and other employee benefits Defined Contribution Plan
Retirement benefit in the form of provident fund and Employee State Insurance Scheme is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund and Employee State Insurance scheme. The Company recognises contribution payable to the provident fund and Employee State Insurance scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognised as an asset to the extent that the pre-payment will lead to reduction in future payment or a cash refund.
Defined Benefit Plan
The Company has defined benefit plans as Compensated absences and Gratuity for all eligible employees, the liability for which is determined based on actuarial valuation at each year-end using projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Past service, costs are recognised in the Statement of Profit and Loss on the earlier of:
⢠The date of the plan amendment or curtailment, and
⢠The date that the Company recognises related restructuring costs.
The Company recognises the following changes in the net defined benefit obligation as an employee benefits expense in the statement of profit and loss:
⢠Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
⢠Net interest expense or income
b) Short term employee benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service. These benefits include performance incentive and compensated absences, which are expected to occur within twelve months after the end of the period in which the employee renders the related service.
The cost of short-term compensated absences is accounted as under:
⢠In case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and
⢠In case of non-accumulating compensated absences, when the absences occur
c) Share based payments
The Company operates a number of Employee Stock Option Scheme (''the Scheme'') which provides for the grant of options to acquire equity shares of the Company to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees within a specified period. These Equity-settled share based payments to employees are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight line basis over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest, with a corresponding increase in equity (Share option outstanding account). The fair value of options is estimated using valuation techniques, which incorporate exercise price, term, risk-free interest rates, the current share price, its expected volatility etc.
At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in statement of profit and loss such that the cumulative expenses reflects the revised estimate, with a corresponding adjustment to the share option outstanding account.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
2.13 Taxes
Tax expense comprises current and deferred tax.
a) Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities in accordance with Income tax Act, 1961, Income Computation and Disclosure Standards and other applicable tax laws. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Current tax relating to items recognised outside profit and loss is recognised outside profit and loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Current tax assets and liabilities are offset if a legally enforceable right exists to set off the recognised amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
b) Deferred tax
Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit and loss is recognised outside profit and loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity.
2.14 Earnings per Share
Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
2.15 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
a) Financial Assets
o Initial recognition and measurement
Financial assets, with the exception of loans and advances to customers, are initially recognised on the trade date, i.e., the date that the Company becomes a party to the contractual provisions of the instrument. Loans and advances to customers are recognised when funds are disbursed to the customers. The classification of financial assets at initial recognition depends on their purpose, characteristics and the intention of the management''s while acquiring the same. All financial assets measured at fair value through profit or loss (FVTPL) are recognised initially at fair value. Financial assets measured at amortised cost or at fair value through other comprehensive income (FVTOCI) is recorded at fair value plus transaction costs that are attributable to the acquisition of that financial asset.
o Classification and Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
⢠Financial asset at amortised cost
⢠Financial asset (debt instruments) at FVTOCI Financial asset at FVTPL
Financial asset at amortised costs
Financial asset is measured at the amortised cost if both the following conditions are met:
i) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees / costs incurred on acquisition of financial asset. The EIR amortisation is included in interest income in the statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss.
Financial assets (debt instruments) at FVOCI
Financial asset (debt instruments) is classified as at the FVTOCI if both of the following criteria are met:
i) The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and
ii) The asset''s contractual cash flows represent SPPI.
Financial assets included within the above category are measured initially as well as at each reporting date at fair value. Fair value movements are recognised in the other comprehensive income (OCI). However, the Company recognises interest income, impairment losses & reversals and foreign exchange gain or loss in the profit and loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to profit and loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method.
Financial Asset at FVTPL
Financial asset which does not meet the criteria for categorisation as at amortised cost or as FVTOCI, is classified as at FVTPL. Financial assets classified under FVTPL category are measured at fair value with all changes recognised in the statement of profit and loss.
b) Financial Liabilities
Financial liabilities are classified and measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for trading or it is designated as on initial recognition to be measured at FVTPL. All financial liabilities, other than classified at FVTPL, are classified at amortised cost in which case they are initially measured at fair value, net of transaction costs and subsequently at amortised cost using effective interest rate.
Amortised cost is calculated by taking into account any fees , commission / brokerage and ancillary costs incurred in relation to the financial liability .The EIR amortisation is included in interest expense in the statement of profit and loss.
2.16 Derivative financial instruments
A derivative is a financial instrument or other contract with all three of the following characteristics
⢠Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided that, in the case of a non-financial variable, it is not specific to a party to the contract (i.e., the ''underlying'').
⢠It requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts expected to have a similar response to changes in market factors.
⢠It is settled at a future date.
The Company holds derivative to mitigate the risk of changes in exchange rates on foreign currency exposures as well as interest fluctuations. The counterparty for such contracts are generally banks.
Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. Changes in the fair value of derivatives are included in net gain on fair value changes unless hedge accounting is applied.
2.17 Hedge accounting
The Company makes use of derivative instruments to manage exposures to interest rate and foreign currency. In order to manage particular risks, the Company applies hedge accounting for transactions that meet specified criteria.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Company''s risk management objective and strategy for undertaking hedge, the hedging/ economic relationship, the hedged item or transaction, the nature of the risk being hedged, hedge ratio and how the entity will assess the effectiveness of changes in the hedging instrument''s fair value in offsetting the exposure to changes in the hedged item''s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the criteria for hedge accounting are accounted for as Cash flow hedges.
A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction and could affect profit or loss.
For designated and qualifying cash flow hedges, the effective portion of the cumulative gain or loss on the hedging instrument is initially recognised directly in OCI within equity (cash flow hedge reserve). The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in net gain / loss on fair value changes in the Statement of Profit and Loss.
When the hedged cash flow affects the statement of profit and loss, the effective portion of the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the statement of profit and loss. When the forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in OCI are reversed and included in the initial cost of the asset or liability.
When a hedging instrument expires, is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss that has been recognised in OCI at that time remains in OCI and is recognised when the hedged forecast transaction is ultimately recognised in the statement of profit and loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in OCI is immediately transferred to the statement of profit and loss.
2.18 Reclassification of financial assets and liabilities
The Company doesn''t reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Company acquires, disposes of, or terminates a business line. Financial liabilities are never reclassified.
2.19 Derecognition of financial assets and liabilities a) Financial Assets
A financial asset Cor, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the rights to receive cash flows from the financial asset have expired. The Company also derecognised the financial asset if it has transferred the financial asset and the transfer qualifies for derecognition.
The Company has transferred the financial asset if and only if, either:
⢠It has transferred its contractual rights to receive cash flows from the financial asset
Or
⢠It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full or in part without material delay to a third party under a ''pass-through'' arrangement
Pass-through arrangements are transactions whereby the Company retains the contractual rights to receive the cash flows of a financial asset (the ''original asset''), but assumes a contractual obligation to pay those cash flows to one or more entities (the ''eventual recipients''), when all of the following three conditions are met:
⢠The Company has no obligation to pay amounts to the eventual recipients unless it has collected equivalent amounts from the original asset
⢠The Company cannot sell or pledge the original asset other than as security to the eventual recipients.
⢠The Company has to remit any cash flows it collects on behalf of the eventual recipients without material delay.
In addition, the Company is not entitled to reinvest such cash flows, except for investments in cash and cash equivalents including interest earned, during the period between the collection date and the date of required remittance to the eventual recipients.
A transfer only qualifies for derecognition if either:
⢠The Company has transferred substantially all the risks and rewards of the asset
Or
⢠The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
The Company considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and
is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer.
When the Company has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset, the asset continues to be recognised only to the extent of the Company''s continuing involvement, in which case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
b) Financial Liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in the statement of profit and loss.
2.20 Measurement of Expected Credit Loss (ECL)
The Company records allowance for expected credit losses for all loans, other debt financial assets not held at FVTPL together with the financial guarantee contracts. Equity instruments are not subject to impairment under lnd AS 109.
The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless there has been no significant increase in credit risk (SICR) since origination, in which case, the allowance is based on the 12 months'' expected credit loss C12mECL).
Definition of default: Classification of default is based on the regulatory definition of Non-Performing Assets (NPA). Our regulator i.e. National Housing Bank defines NPA in its Paragraph 2 sub-paragraph CD, clause (v) in its Housing Finance Companies (NHB) Directions, 2010 as exposures where interest or principal is in arrears for a period of more than ninety days.
The Company will maintain the definition of default in line with any amendments made by the regulator from time to time through its circulars and through its Master Circular published from time to time.
The mechanics and key inputs for computing the ECL are defined below:
|
Stage Definition |
Details |
Classification |
|
Stage 1 |
Low credit risk Days Past Due (DPD) 0-30 |
Financial instruments are treated as Stage 1 which are not credit impaired & for which the credit risk has not increased significantly since initial recognition. The Company calculates the 12 month ECL allowance based on the expectation of default. |
|
Stage Definition |
Details |
Classification |
|
Stage 2 |
DPD 31-90 Qualitative indicators of SICR |
Financial instruments having Significant Increase in Credit Risk ("SICR") since initial recognition (origination of facilities) are classified under (if not impaired) stage 2. The Company calculates the lifetime ECL allowance. |
|
Stage 3 |
DPD 90 |
Remaining financial instruments which are credit impaired are treated as Stage 3. The Company uses 90 DPD as a consistent measure for default across all product classes. The Company records an allowance for the LTECLs. |
Key components of Expected Credit Loss are: Probability of Default (PD)
Probability of Default (PD) is one of the three risk components needed to estimate ECL under Ind AS 109. PD is defined as the probability that a borrower will be unable to meet his/her debt obligations over a stipulated time. The PD estimate incorporates information relevant for assessing the borrower''s ability and willingness to repay its debts, as well as information about the economic environment in which the borrower operates.
The Company uses 12 month PD for stage 1 borrowers and lifetime PD for stage 2 and Stage 3 assets.
⢠Loss Given Default (LGD)
The Loss given default (LGD) is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the expected cash flows, including from the realisation of any collateral. It is expressed as a percentage of EAD.
⢠Exposure at Default (EAD)
Exposure at default (EAD) is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and future interests.
The Company has adopted the following methodology for ECL computation:
|
Particulars |
PD |
LGD |
|
Retail Loans |
Multinomial logistic regression |
Workout Method |
|
Corporate Loans |
Pluto-Tasche |
FIRB Asset coverage based |
Broadly, the Company has grouped the portfolio into retail and corporate category. ECL computation is based on collective approach. Further, given the characteristics and inherent risks of the various sub categories of the portfolio the Company has used appropriate PD / LGD computation techniques which are detailed below:
Retail Loans
Probability of Default
The retail loans is segregated into homogenous pools at the product level and occupational level.
For ECL computation, basis risk emergence curve movement, the Company has adopted statistical technique of multinomial logistic regression using behaviour and credit variables. For life time PDs computation, the Company has used survival analysis using Kaplan-Meier technique.
Previous year(s) portfolio behaviour of homogeneous pools is considered for PD estimation.
The company has identified various parameters to trigger SICR, which are described in the SICR section.
Loss Given Default
The LGD for the retail portfolio is modelled through a workout approach. Historical NPA data of last 4 years has been used to arrive at LGD. Loss estimation have been done either basis distressed value or actual/ expected recoveries, depending on resolution strategies already materialised or in the process. Further, LGD pools have been aligned with the PD pools.
Exposure at Default
EAD is the sum of the outstanding principle, interest outstanding and future interest receivables for the expected life of the asset, computed basis the behavioural analysis of the Company''s historical experience.
Corporate Loans
Probability of Default
Historically, the Company has observed low instance of default for the corporate portfolio. For nil default portfolio, the Company has floored the PD at the minimum required level and for low default portfolio, statistical technique of Pluto-Tasche methodology, using latest external rating as available as cohort, has used to arrive at PDs. For life time PDs computation, the Company has used survival analysis using Kaplan-Meier technique.
The Company has identified various parameters to trigger SICR which are described in the SICR section.
Loss Given Default
Given a very low instance of loss experience, the Company has referred Foundation internal rating based (FIRB) estimates. Further, the Company has applied business logic based on security coverage ratio to normalise the LGD estimates. A cut-off based on the skewness of the density plot of security coverage ratio was calculated.
Exposure at Default
EAD is the sum of the outstanding principle, interest outstanding and future interest receivables for the expected life of the asset, computed basis the behavioural analysis of the Company''s historical experience.
Significant increase in credit risk (SICR)
The Company monitors all financial assets that are subject to impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk in the assets falling in stage 1 then the Company measures the loss allowance over the lifetime of the loan instead of 12 month ECL.
Retail Loans
Given the prevalent environment, the qualitative criteria for triggering SICR in retail exposure is those stage 1 loan assets where underlying property is under construction and construction progress in last one year is slow.
Corporate Loans
The Company has its own qualitative assessment criteria comprising various operational and repayment variables like construction variance, historical delinquency rates, sales velocity, asset coverage ratio etc. Basis the review and management overlay, the Company has identified assets where likelihood of deterioration in credit quality is high and for such assets SICR has been triggered.
Incorporation of forward looking information
Ind AS 109 requires entities to model their ECL and apply forward-looking macroeconomic scenarios taking into consideration possibility of stressed and favourable economic conditions. Multiple scenarios are required to be applied to the ECL and a probability weighted ECL is then computed. In order to compute probability weighted ECL we have considered several macroeconomic variables such as growth rates of GDP, Housing Price Index (HPI) inflation, money supply, Private Final Consumption Expenditure (PFCE), interest rates among others.
The forward-looking scenario-based PDs were computed based on the selected macroeconomic variables for different portfolios. The list of macroeconomic variables was narrowed down using expert judgement based on business logic. The statistical significance of these variables was checked to finalize variables for each portfolio. List of macroeconomic variables as finalized are given below:
Macro parameter
GDP (Lag 1)__________________________________________
Money Supply (Lag 2)
HPI (Lag1 and Lag 2)__________________________________
WPI_________________________________________________
CPI (LagD___________________________________________
The macroeconomic variables with up to two-time lags
were regressed against 20 quarter historic default rates of the portfolios. A Quasi-Binomial with logit regression was used to establish the relationships between default rates and macroeconomic variables.
Worst, Base, Mild and Best scenarios were created for all the portfolios and default rates were estimated for all the four scenarios. The differential default rates between the Base scenario and the Best, Worst and Mild scenarios were created/built to compute the shock factors. These shock factors were then added to the base Residual maturity probability of default (RMPD) term structure which was arrived using the Kaplan Meier technique, thereby creating four different RMPD term structures for the four scenarios. By this method, RMPD is a combination of the exogenous and the endogenous variables and hence PD value will constitute both idiosyncratic risk of the portfolio as well as the influence of macroeconomic risk factors. For the purpose of finding likelihood (probability weights) of different scenarios, the frequency of each of the scenarios was ascertained. ECL for all portfolios is computed for these different scenarios and a probability weighted ECL is computed using the likelihood (weights) as calculated.
2.21 ECL on financial guarantee contracts
ECL on financial guarantee contracts has been computed basis the methodologies defined under note no 2.20.
2.22 Write-offs
The company undertakes write-off on a loan, in full or in part, when the amount is construed as irrecoverable after enforcement of available means of resolution. The authority of write-off is vested with committee of senior officials of the Company. For LGD computation, the Company considers contractual amount written-off i.e. principal as well as interest overdue.
2.23 Collateral
Company is in business of secured lending and all loans are adequately covered by either residential collateral or commercial collateral. The collaterals are assessed at the time of origination and are being re-assessed as and when required.
The illustrative factors considered while evaluation of collateral are liquidity, enforceability, marketability, ease and efficiency in custody & settlement and free from all encumbrances in the relevant jurisdictions and complied with local by laws. The assessment of collateral is undertaken by empanelled team of independent and qualified technical / legal agencies.
The company has specified the maximum loan-to-value ratio for various types of asset to be accepted as collateral. Such ratios commensurate with the relative risk of the assets as prescribed by NHB and provides an adequate buffer against potential losses.
On case-to-case basis, the Company may ask for additional security, which may in the form of guarantee or financial assets or any other real estate assets.
The Company may take actions as provided in the SARFAESI Act which enables it to enforce the underlying collateral of stage 3 assets without court intervention.
2.24 Dividend
The Company recognises a liability to make cash distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Company. Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.
2.25 Unclaimed Deposits
Deposits, which has become overdue but have not been presented for payment or renewal, are transferred to unclaimed deposits. Interest for the period from last maturity date to the date of renewal of unclaimed deposits is accounted for during the year of its renewal.
2.26 Share issue expenses
Share issue expenses, net of tax, are adjusted against the securities premium account, as permissible under section 52(2) of the Companies Act. 2013, to the extent of balance available and thereafter, the balance portion is charged to the statement of profit and loss, as incurred.
2.27 Assets held for sale
Assets acquired by the company under SARFASI Act, 2002 has been classified as assets held for sale, as their carrying amounts will be recovered principally through a sale of asset. In accordance with Ind AS 105, the company is committed to sell these asset and they are measured at the lower of their carrying amount and the fair value less costs to sell.
2.28 Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (CODM). CODM is responsible for allocating the resources, assess the financial performance and position of the Company and make strategic decision.
Mar 31, 2018
1.2.1 GENERAL METHOD AND SYSTEM OF ACCOUNTING
1.2.1.1 The standalone financial statements are prepared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India. The financial statements comply in all material aspects with the Accounting Standards specified under section 133 of Companies Act, 2013 read with Rule 7 of the Company (Accounts Rules 2014) and the relevant provisions of the Companies Act, 2013, the National Housing Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010 as amended from time to time, unless stated otherwise hereinafter. Accounting Standards (AS) and Guidance Notes issued by The Institute of Chartered Accountants of India (âICAIâ) are followed insofar as they are not inconsistent with the NHB Directions, 2010.
1.2.1.2 Accounting policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the Company.
1.2.1.3 The preparation of financial statements requires the Management to make estimates and assumptions 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 expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.
1.2.1.4 The Company has adopted the accrual concept in the preparation of the financial statements. The Balance Sheet and the Statement of Profit and Loss of the Company are prepared in accordance with the provisions contained in Section 129 of the Companies Act, 2013, read with Schedule III.
1.2.1.5 Amounts in the financial statements are presented in âcroresâ, except for per share data and as otherwise stated. All exact amounts are stated with suffix â/-â.
1.3 INFLATION
Assets and liabilities are recorded at historical cost to the Company. These costs are not adjusted to reflect the changing value in the purchasing power of money.
1.4 OPERATING CYCLE
Based on the nature of its activities, the Company has determined its operating cycle as 12 months for classification of its assets and liabilities as current and non-current.
1.5 CASH FLOW STATEMENT
Cash flows are reported using the indirect method, whereby profit/(loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
1.6 CASH AND CASH EQUIVALENTS (FOR PURPOSES OF CASH FLOW STATEMENT)
Cash comprises cash-on-hand and demand deposits with banks. Cash equivalents are short-term deposits with banks (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of change in value.
1.7 REVENUE RECOGNITION
1.7.1 Interest income on loans is recognised on accrual basis except in case of non-performing assets where interest is accounted on realisation. Interest on loans is computed either on an annual rest, on a monthly rest or on a daily rest basis depending upon loan product. EMIs commence once the entire loan is disbursed. Certain customers request for commencement of regular principal repayments even before the entire loan is disbursed, especially when the projects are of long gestation. Pending commencement of EMIs, Pre-EMI interest is charged every month. Interest on loans purchased through direct assignment is recognised on accrual basis.
1.7.2 Interest income on Investment is recognized on accrual basis. Dividend income is recognised when the right to receive is established. The gain / loss on account of long-term Investment at discount / premium in Debentures / Bonds and Government Securities, is amortised over the life of the security on a pro-rata basis.
1.7.3 The gain/losses on sale of investments are recognised in the Statement of Profit and Loss on the trade date. Gain or loss on Sale of investment is determined after consideration of cost on a weighted average basis.
1.7.4 Income from login fee, other charges and penal interest on defaults, pre-payment charges etc. is recognised on receipt basis. Processing Fee on loans is recognised over the average tenure of the loan. The average tenure of loan has been arrived at based on the experience of repayment behaviour of the borrowers.
1.7.5 Income from servicing of securitised/assigned portfolio and renting of space in our offices and website is recognised on accrual basis.
1.7.6 Other income and interest on tax refunds are accounted for on receipt basis.
1.8 TANGIBLE ASSETS
Tangible Assets are capitalised at cost including all expenses incidental to the acquisition/installation.
1.9 INTANGIBLE ASSETS
Intangibles Assets are recognised where it is possible that the future economic benefit attributable to the asset will flow to the Company and its cost can be reliably measured. Intangibles are capitalised at cost including all expenses attributable for bringing the same in its working condition.
1.10 DEPRECIATION / AMORTISATION Tangible Assets
Depreciation on Tangible Assets is provided on the Straight Line Method as per the useful life prescribed in Part C of Schedule II of the Companies Act, 2013 on pro-rata basis, except the following category of asset, in whose case the life of the assets has been assessed as under, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc. on which different useful lives for depreciation have been charged:
a) Networking equipment and mobile phone instruments are depreciated over a period of five and three years respectively.
b) Leasehold Improvements are depreciated over a period of five years.
c) Assets costing up to RS.5,000/- is fully depreciated in the year of purchase.
Intangible Assets
Intangible Assets are amortised over a period of five years except website development costs which are amortised over a period of three years.
1.11 INVESTMENTS
Investments are capitalised at cost inclusive of brokerage and stamp charges. Investments are classified as Non-Current Investment (long-term investments) and current investments are valued in accordance with guidelines of National Housing Bank and Accounting Standard on âAccounting for Investmentsâ (AS-13).
1.12 EMPLOYEE BENEFITS
1.12.1 Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service. These benefits include performance incentive and compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service.
The cost of short-term compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and
(b) in case of non-accumulating compensated absences, when the absences occur.
1.12.2 Long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related service are recognised as a liability at the present value of the defined benefit obligation as at the balance sheet date.
1.12.3 Defined Contribution Plan
The Companyâs contribution to Provident Fund and Employee State Insurance Scheme are considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees.
1.12.4 Defined Benefit Plan
The Company has defined benefit plans as Leave Encashment/Compensated Absences and gratuity for all eligible employees, the liability for which is determined based on an actuarial valuation at the end of the year using the âProjected Unit Credit Methodâ. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions which are recognised in the Statement of Profit and Loss as income or expenses, as applicable.
1.12.5 Employees Stock Options Scheme
The Company has introduced the Employee Stock Option Scheme (âthe Schemeâ) which provides for the grant of options to acquire equity shares of the Company to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees within a specified period. The Company follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost, if any, is amortised over the vesting period.
1.13 BORROWING COSTS
1.13.1 Interest on borrowings are recognised as an expense in the period in which they are incurred.
1.13.2 Ancillary cost in connection with long-term borrowing are amortised to the Statement of Profit and Loss over the tenure of the borrowing.
1.13.3 Brokerage and incentive on deposits is amortised over the average period of the deposit.
1.13.4 All other borrowing costs are charged to the Statement of Profit and Loss.
1.13.5 Issue expenses of certain securities are charged to the Securities Premium account.
1.14 TRANSACTION INVOLVING FOREIGN EXCHANGE
Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction. Monetary assets and liabilities in foreign currency are converted at the rate of exchange prevailing on the date of financial statements.
In case of a forward exchange contracts, the exchange difference between the forward rate and the exchange rate at the date of transaction is recognised as income or expense over the life of the contract in line with Accounting Standard on âAccounting for the Effects of Changes in Foreign Exchange Ratesâ (AS-11) issued by the Institute of Chartered Accountants of India.
1.15 DERIVATIVE TRANSACTIONS
The derivative contracts are initially recognised at fair value on the date of the transaction and all outstanding derivative transactions, on the date of balance sheet, are revalued at their fair market value, on that date. Profit/Losses, on revaluation, are recognised in the Statement of Profit and Loss. Where hedge accounting is used, fair value changes of the derivative contracts are recognised through the Statement of Profit and Loss in the same period as the offsetting losses and gains on the hedged item. Any profit/loss arising on cancellation/unwinding of derivative contracts are recognised as income or expenses for the period. Premium/discount on derivative contracts, which are not intended for trading or speculation purposes, are amortised over the period of the contracts, if such contracts relate to monetary items as at the Balance Sheet date.
1.16 SHARE ISSUE EXPENSES
Share issue expenses, net of tax, are adjusted against the Securities Premium Account, as permissible under Section 52(2) of the Companies Act, 2013, to the extent of balance available and thereafter, the balance portion is charged to the Statement of Profit and Loss, as incurred.
1.17 OPERATING LEASES
Leases where the lessor effectively retains substantially all the risk and the benefits of ownership over the leased term are classified as operating leases. Lease payments for assets taken on operating lease are recognised as an expense in the Statement of Profit and Loss as per terms of lease agreement.
1.18 EARNINGS PER SHARE
The basic earnings per share is computed by dividing the net profit or loss attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting year. The number of shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving earnings per share, and the weighted average number of equity shares, which could have been issued on the conversion of all dilutive potential shares. In computing, dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit per share are included.
1.19 TAXES ON INCOME
Taxes on Income are accounted for in accordance with Accounting Standard âAccounting for taxes on incomeâ (AS 22), issued by The Institute of Chartered Accountants of India. Income tax comprises both current and deferred tax.
Current tax is measured based on estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961 and rules made thereunder.
The tax effect of timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. Such deferred tax is quantified using the tax rates and laws enacted of substantively enacted as on Balance Sheet date. The carrying amount of deferred tax asset/liability is reviewed at each Balance Sheet date and consequential adjustments are carried out.
Deferred tax assets arising on account of other timing differences are recognised only to the extent there is a reasonable certainty of its realisation.
1.20 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
i) Provisions are recognised when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
ii) Contingent liabilities are disclosed when the Company has a possible or present obligation where it is not probable that an outflow of resources will be required to settle it.
iii) Contingent Assets are neither recognised nor disclosed in the financial statements.
1.21 PROIVISION FOR STANDARD ASSETS, NON-PERFORMING ASSETS (NPAs) AND CONTINGENCIES
The Companyâs policy is to carry adequate amounts towards Provision for Standard Assets, NonPerforming Assets (NPAs) and other contingencies. All loans and other credit exposures where the instalments are overdue for more than ninety days are classified as NPAs in accordance with the prudential norms prescribed by the National Housing Bank (NHB). The provisioning policy of the Company covers the minimum provisioning required as per the NHB guidelines.
The Company also has a policy to create and carry a provision over and above the provisioning requirements as prescribed in NHB Directions for Standard Assets and NPAs, under the Provision for Contingencies Account. The provision under this head is made with regards to loan accounts and other credit exposure which are classified as standard assets on the balance sheet date, however these were classified as NPA in last 12 months / payments in these loan accounts have not been regular / loan accounts where customers have reported slow progress of construction of the underlying dwelling unit.
1.22 STOCK OF ACQUIRED PROPERTIES
The assets acquired by the Company under SARFAESI Act, 2002 are classified as âStock of Acquired Propertiesâ and are valued at outstanding dues or net realisable value, whichever is lower.
1.23 LOAN ORIGINATION / ACQUISITION COST
All direct costs incurred for the loan origination are amortised over the average tenure of the loan. The average tenure of loan has been arrived at based on the experience of repayment behaviour of the borrowers.
1.24 UNCLAIMED DEPOSITS
Deposits, which have become due but have not been presented for payment or renewal, are transferred to unclaimed deposits. Interest for the period from last maturity date till the date of renewal of unclaimed deposits is accounted for during the year of its renewal.
1.25 IMPAIRMENT OF ASSETS
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
1.26 SECURITISATION OF LOANS
Securitised and assigned assets are de-recognised in the books of the Company based on the principle of transfer of ownership over the assets.
Transfer of pool of loan assets under the current RBI guidelines involve transfer of proportionate shares in the pool of loan assets. Such transfers result in de-recognition only of that proportion of the loan assets which meets the de-recognition criteria. The portion retained by the Company continue to be accounted for as loan assets as described above.
On de-recognition, the difference between the book value of the securitised loan assets and consideration received is recognised as gain arising on securitisation in the Statement of Profit and Loss over the balance maturity period of the pool transferred. Losses, if any, arising from such transactions, are recognised immediately in the Statement of Profit and Loss.
Mar 31, 2017
1.1 GENERAL METHOD AND SYSTEM OF ACCOUNTING
1.1.1 The financial statements are prepared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India. The financial statements comply in all material aspects with the Accounting Standards specified under section 133 of Companies Act, 2013 read with Rule 7 of the Company (Accounts Rules 2014) and the relevant provisions of the Companies Act, 2013, the National Housing Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010 as amended from time to time, unless stated otherwise hereinafter. Accounting Standards (AS) and Guidance Notes issued by The Institute of Chartered Accountants of India (âICAIâ) are followed insofar as they are not inconsistent with the NHB Directions, 2010.
1.1.2 Accounting policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the Company.
1.1.3 The preparation of financial statements requires the Management to make estimates and assumptions 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 expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.
1.1.4 The Company has adopted the accrual concept in the preparation of the financial statements. The Balance Sheet and the Statement of Profit and Loss of the Company are prepared in accordance with the provisions contained in Section 129 of the Companies Act, 2013, read with Schedule III.
1.1.5 Amounts in the financial statements are presented in âcroresâ, except for per share data and as otherwise stated. All exact amounts are stated with suffix â/-â.
1.2 INFLATION
Assets and liabilities are recorded at historical cost to the Company. These costs are not adjusted to reflect the changing value in the purchasing power of money.
1.3 OPERATING CYCLE
Based on the nature of its activities, the Company has determined its operating cycle as 12 months for classification of its assets and liabilities as current and non-current.
1.4 CASH FLOW STATEMENT
Cash flows are reported using the indirect method, whereby profit/(loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
1.5 CASH AND CASH EQUIVALENTS (FOR PURPOSES OF CASH FLOW STATEMENT)
Cash comprises cash-on-hand and demand deposits with banks. Cash equivalents are short-term deposits with banks (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of change in value.
1.6 REVENUE RECOGNITION
1.6.1 Interest income on Loans is recognised on accrual basis except in case of non-performing assets where interest is accounted on realisation. Interest on loans is computed either on an annual rest, on a monthly rest or on a daily rest basis depending upon loan product. EMIs commence once the entire loan is disbursed. Certain customers request for commencement of regular principal repayments even before the entire loan is disbursed, especially when the projects are of long gestation. Pending commencement of EMIs, Pre-EMI interest is charged every month. Interest on loans purchased through direct assignment is recognised on accrual basis.
1.6.2 Interest income on Investment is recognized on accrual basis. Dividend income is recognised when the right to receive is established. The gain / loss on account of long-term Investment at discount / premium in Debentures / Bonds and Government Securities, is amortised over the life of the security on a pro-rata basis.
1.6.3 The gain/losses on sale of investments are recognised in the Statement of Profit and Loss on the trade date. Gain or loss on Sale of investment is determined after consideration of cost on a weighted average basis.
1.6.4 Income from login fee, other charges and penal interest on defaults, pre-payment charges etc. is recognised on receipt basis. Processing Fee on loans is recognised over the average tenure of the loan. The average tenure of loan has been arrived at based on the experience of repayment behaviour of the borrowers.
1.6.5 Income from servicing of securitised/assigned portfolio and renting of space in our offices and website is recognised on accrual basis.
1.6.6 Other income and interest on tax refunds are accounted for on receipt basis.
1.7 TANGIBLE ASSETS
Tangible Assets are capitalised at cost including all expenses incidental to the acquisition/ installation.
1.8 INTANGIBLE ASSETS
Intangibles Assets are recognised where it is possible that the future economic benefit attributable to the asset will flow to the Company and its cost can be reliably measured. Intangibles are capitalised at cost including all expenses attributable for bringing the same in its working condition.
1.9 DEPRECIATION / AMORTISATION Tangible Assets
Depreciation on Tangible Assets is provided on the Straight Line Method as per the useful life prescribed in Part C of Schedule II of the Companies Act, 2013 on pro-rata basis, except the following category of asset, in whose case the life of the assets has been assessed as under, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc. on which different useful lives for depreciation have been charged:
a) Networking Equipment and Mobile phone instruments are depreciated over a period of five and three years respectively.
b) Leasehold Improvements are depreciated over a period of five years.
c) Assets costing up to Rs.5,000/- is fully depreciated in the year of purchase.
Intangible Assets
Intangible Assets are amortised over a period of five years except website development costs which are amortised over a period of three years.
1.10 INVESTMENTS
Investments are capitalised at cost inclusive of brokerage and stamp charges. Investments are classified as Non-Current Investment (long-term investments) and current investments and are valued in accordance with guidelines of National Housing Bank and Accounting Standard on âAccounting for Investmentsâ (AS-13).
1.11 EMPLOYEE BENEFITS
1.11.1 Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service. These benefits include performance incentive and compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service.
The cost of short-term compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and
(b) in case of non-accumulating compensated absences, when the absences occur.
1.11.2 Long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related service are recognised as a liability at the present value of the defined benefit obligation as at the balance sheet date.
1.11.3 Defined Contribution Plan
The Companyâs contribution to Provident Fund and Employee State Insurance Scheme are considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees.
1.11.4 Defined Benefit Plan
The Company has defined benefit plans as Leave Encashment/Compensated Absences and gratuity for all eligible employees, the liability for which is determined based on an actuarial valuation at the end of the year using the âProjected Unit Credit Methodâ. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised in the Statement of Profit and Loss as income or expenses, as applicable.
1.11.5 Employees Stock Options Scheme
The Company has introduced the Employee Stock Option Scheme (âthe Schemeâ) which provides for the grant of options to acquire equity shares of the Company to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees within a specified period. The Company follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation cost, if any, is amortised over the vesting period.
1.12 BORROWING COSTS
1.12.1 Interest on borrowings are recognised as an expense in the period in which they are incurred.
1.12.2 Ancillary cost in connection with long-term borrowing are amortised to the Statement of Profit and Loss over the tenure of the borrowing.
1.12.3 Brokerage and incentive on deposits is amortised over the period of the deposit.
1.12.4 All other borrowing costs are charged to the Statement of Profit and Loss.
1.13 TRANSACTION INVOLVING FOREIGN EXCHANGE
Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction. Monetary assets and liabilities in foreign currency are converted at the rate of exchange prevailing on the date of financial statements.
In case of a forward exchange contracts, the exchange difference between the forward rate and the exchange rate at the date of transaction is recognised as income or expense over the life of the contract in line with Accounting Standard on âAccounting for the Effects of Changes in Foreign Exchange Ratesâ (AS-11) issued by the Institute of Chartered Accountants of India.
1.14 DERIVATIVE TRANSACTIONS
The derivative contracts are initially recognised at fair value on the date of the transaction and all outstanding derivative transactions, on the date of balance sheet, are revalued at their fair market value, on that date. Profit/Losses, on revaluation, are recognised in the Statement of Profit and Loss. Where hedge accounting is used, fair value changes of the derivative contracts are recognised through the Statement of Profit and Loss in the same period as the offsetting losses and gains on the hedged item. Any profit/loss arising on cancellation/unwinding of derivative contracts are recognised as income or expenses for the period. Premium / discount on derivative contracts, which are not intended for trading or speculation purposes, are amortised over the period of the contracts, if such contracts relate to monetary items as at the Balance Sheet date.
1.15 SHARE ISSUE EXPENSES
Share issue expenses, net of tax, are adjusted against the Securities Premium Account, as permissible under Section 52(2) of the Companies Act, 2013, to the extent of balance available and thereafter, the balance portion is charged to the Statement of Profit and Loss, as incurred.
1.16 OPERATING LEASES
Leases where the lessor effectively retains substantially all the risk and the benefits of ownership over the leased term are classified as operating leases. Lease payments for assets taken on operating lease are recognised as an expense in the Statement of Profit and Loss as per terms of lease agreement.
1.17 EARNINGS PER SHARE
The basic earnings per share is computed by dividing the net profit or loss attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting year. The number of shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving earnings per share, and the weighted average number of equity shares, which could have been issued on the conversion of all dilutive potential shares. In computing, dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit per share are included.
1.18 TAXES ON INCOME
Taxes on Income are accounted for in accordance with Accounting Standard âAccounting for taxes on incomeâ (AS 22), issued by The Institute of Chartered Accountants of India. Income tax comprises both current and deferred tax.
Current tax is measured based on estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961 and rules made thereunder.
The tax effect of timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. Such deferred tax is quantified using the tax rates and laws enacted of substantively enacted as on Balance Sheet date. The carrying amount of deferred tax asset/liability is reviewed at each Balance Sheet date and consequential adjustments are carried out.
Deferred tax assets arising on account of other timing differences are recognised only to the extent there is a reasonable certainty of its realisation.
1.19 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
i) Provisions are recognised when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
ii) Contingent liabilities are disclosed when the Company has a possible or present obligation where it is not probable that an outflow of resources will be required to settle it.
iii) Contingent Assets are neither recognised nor disclosed in the financial statements.
1.20 PROVISION FOR STANDARD ASSETS, NON-PERFORMING ASSETS (NPAs) AND CONTINGENCIES
The Companyâs policy is to carry adequate amounts towards Provision for Standard Assets, NonPerforming Assets (NPAs) and other contingencies. All loans and other credit exposures where the instalments are overdue for more than ninety days are classified as NPAs in accordance with the prudential norms prescribed by the National Housing Bank (NHB). The provisioning policy of the Company covers the minimum provisioning required as per the NHB guidelines.
The Company also has a policy to create and carry a provision over and above the provisioning requirements as prescribed in NHB Directions for Standard Assets and NPAs, under the Provision for Contingencies Account. The provision under this head is made with regards to loan accounts and other credit exposure which are classified as standard assets on the balance sheet date, however these were classified as NPA in the last 12 months / payments in these loan accounts have not been regular / loan accounts where customers have reported slow progress of construction of the underlying dwelling unit.
1.21 STOCK OF ACQUIRED PROPERTIES
The assets acquired by the Company under SARFAESI Act, 2002 are classified as âStock of Acquired Propertiesâ and are valued at outstanding dues or net realisable value, whichever is lower.
1.22 LOAN ORIGINATION / ACQUISITION COST
All direct costs incurred for the loan origination are amortised over the average tenure of the loan. The average tenure of loan has been arrived, based on the experience of repayment behaviour of the borrowers.
1.23 UNCLAIMED DEPOSITS
Deposits, which have become due but have not been presented for payment or renewal, are transferred to unclaimed deposits. Interest for the period from last maturity date till the date of renewal of unclaimed deposits is accounted for during the year of its renewal.
1.24 IMPAIRMENT OF ASSETS
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
1.25 SECURITISATION OF LOANS
Securitised and assigned assets are de-recognised in the books of the Company based on the principle of transfer of ownership over the assets.
Transfer of pool of loan assets under the current RBI guidelines involve transfer of proportionate shares in the pool of loan assets. Such transfers result in de-recognition only of that proportion of the loan assets which meets the de-recognition criteria. The portion retained by the Company continue to be accounted for as loan assets as described above.
On de-recognition, the difference between the book value of the securitised loan assets and consideration received is recognised as gain arising on securitisation in the Statement of Profit and Loss over the balance maturity period of the pool transferred. Losses, if any, arising from such transactions, are recognised immediately in the Statement of Profit and Loss.
Mar 31, 2016
Notes forming part of the Financial Statements
for the year ended March 31st, 2016
NOTE: 1
SIGNIFICANT ACCOUNTING POLICIES
1.1 GENERAL METHOD AND SYSTEM OF ACCOUNTING
The financial statements are prepared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India. The Financial Statements comply in all material aspects with the Accounting Standards specified under section 133 of Companies Act, 2013 read with rule 7 of the Company (Accounts Rules 2014 and the relevant provisions of the Companies Act, 2013, the National Housing Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010 as amended from time to time, unless stated otherwise hereinafter.
Accounting policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the Company.
1.2 USE OF ESTIMATES
The preparation of financial statements require the Management to make estimates and assumptions 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 expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.
1.3 SYSTEM OF ACCOUNTING
The Company adopts the accrual concept in the preparation of the financial statements.
The Balance Sheet and the Statement of Profit and Loss of the Company are prepared in accordance with the provisions contained in Section 129 of the Companies Act, 2013, read with Schedule III.
1.4 OPERATING CYCLE
Based on the nature of its activities, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.
1.5 CASH FLOW STATEMENT
Cash flows are reported using the indirect method, whereby profit/(loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
1.6 CASH AND CASH EQUIVALENTS (FOR PURPOSES OF CASH FLOW STATEMENT)
Cash comprises cash-on-hand and demand deposits with banks. Cash equivalents are short-term deposits with banks (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of change in value.
1.7 REVENUE RECOGNITION
i) INTEREST ON LOANS
Interest income is recognized on accrual basis except in case of non-performing assets where interest is accounted on realization. Interest on loans is computed either on an annual rest, on a monthly rest or on a daily rest basis depending upon loan product. EMIs commence once the entire loan is disbursed. Certain customers request for commencement of regular principal repayments even before the entire loan is disbursed, especially when the projects are of long gestation.
Pending commencement of EMIs, Pre-EMI interest is charged every month. Interest on loans purchased through direct assignment is recognized on accrual basis.
Interest income is allocated over the contractual term of the loan by applying the committed interest rate to the outstanding amount of the loan. Interest income is accrued as earned with the passage of time.
Interest on loan assets classified as ânon-performingâ is recognized only on actual receipt.
ii) INCOME FROM INVESTMENT
Interest income on Investment is recognized on accrual basis. Dividend income is accounted for in the year in which the same is received. The gain/loss on account of long-term Investment at discount/premium in Debentures/Bonds and Government Securities, is amortized over the life of the security on a pro-rata basis.
iii) FEE AND OTHER CHARGES
Income from login fee, other charges and penal interest on defaults, pre-payment charges etc. is recognized on receipt basis. Processing Fee on loans is recognized over the average tenure of the loan. The average tenure of loan has been arrived at based on the past experience of repayment behaviour of the borrowers.
iv) OTHER INCOME
Other income and interest on tax refunds except service fee on securitized portfolio are accounted for on receipt basis.
1.8 TANGIBLE ASSETS
Tangible Assets are capitalized at cost including all expenses incidental to the acquisition/installation.
1.9 INTANGIBLE ASSETS
Intangibles Assets are recognized where it is possible that the future economic benefit attributable to the asset will flow to the company and its cost can be reliably measured. Intangibles are capitalized at cost including all expenses attributable for bringing the same in its working condition.
1.10 DEPRECIATION/AMORTISATION
Depreciation on Tangible Assets is provided on the Straight Line Method at the lives prescribed in Part C of Schedule II of the Companies Act, 2013 on pro-rata basis, except the following items on which different useful lives for depreciation have been charged:
i) Networking Equipment and Mobile phone instruments are depreciated over a period of five and three years respectively.
ii) Leasehold Improvements are depreciated over a period of five years.
iii) Assets costing up to Rs. 5,000/- is fully depreciated in the year of purchase.
Intangible Assets are amortized over a period of five years except website development costs which are amortized over a period of three years.
1.11 INVESTMENTS
Investments are capitalized at cost inclusive of brokerage and stamp charges. Investments are classified as long-term investments (Non-Current Investment) and current investments and are valued in accordance with guidelines of National Housing Bank and Accounting Standard on Accounting for Investmentsâ (AS-13) issued by The Institute of Chartered Accountants of India.
1.12 EMPLOYEE BENEFITS
i) The Company has taken Policy from Life Insurance Corporation of India to cover the accumulated gratuity liability of its employees as Defined Benefit Plan. The premium on this policy has been accounted for on accrual basis in line with the Accounting Standard on Accounting for Employee Benefitsâ (AS-15)-Revised, issued by the Institute of Chartered Accountants of India.
ii) Leave benefits for both short-term and long-term compensated absences are accounted for on actuarial valuation determined as at the year end. Actuarial gains and losses comprising of experience adjustments and effects of changes in actuarial assumptions, are recognized immediately in Statement of Profit and Loss as income or expense.
iii) Provident Fund Contribution paid to Employees Provident Fund Organization is debited to the Statement of Profit and Loss on accrual basis.
iv) Incentive paid to employees in terms of performance linked incentive scheme is charged to Statement of Profit and Loss on accrual basis.
1.13 TRANSACTION INVOLVING FOREIGN EXCHANGE
i) Foreign currency monetary liabilities are translated at the rate which reflects the liability of the Company in Indian Rupee which is likely to be repaid at the balance sheet date.
ii) Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.
iii) Generally Exchange differences arising on Foreign Currency transactions are recognized as income or expense as the case may be in the period in which they arise. However, in case of forward exchange contracts, the Exchange difference between the forward rate and the exchange rate at the date of transaction is recognized as an income or expense over the life of the forward contract in line with Accounting Standard on Accounting for the Effects of Changes in Foreign Exchange Ratesâ (AS-11) issued by The Institute of Chartered Accountants of India.
1.14 BORROWING COSTS
i) Interest of borrowings are recognized as an expense in the period in which they are incurred.
ii) Ancillary cost in connection with long-term borrowing are amortized to the Statement of Profit and Loss over the tenure of the borrowing. Issue expenses of certain securities are charged to Securities Premium account.
1.15 OPERATING LEASES
Lease payments for assets taken on operating lease are recognized as an expense in the Statement of Profit and Loss as per terms of lease agreement.
1.16 EARNINGS PER SHARE
The basic earnings per share is computed by dividing the net profit or loss attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting year. The number of shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving earnings per share, and also the weighted average number of equity shares, which could have been issued on the conversion of all dilutive potential shares. In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit per share are included.
1.17 TAXES ON INCOME
Taxes on Income are accounted for in accordance with Accounting Standard (AS)-22-âAccounting for taxes on incomeâ, issued by The Institute of Chartered Accountants of India. Income tax comprises both current and deferred tax.
Current tax is measured on the basis of estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961 and rules made there under.
The tax effect of timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. Such deferred tax is quantified using the tax rates and laws enacted of substantively enacted as at Balance Sheet date. The carrying amount of deferred tax asset/liability is reviewed at each Balance Sheet date and consequential adjustments are carried out.
Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization.
1.18 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
i) Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
ii) Contingent liabilities are disclosed when the Company has a possible or present obligation where it is not probable that an outflow of resources will be required to settle it.
iii) Contingent Assets are neither recognized nor disclosed.
1.19 PROIVISION FOR STANDARD ASSETS, NON-PERFORMING ASSETS (NPAs) AND CONTINGENCIES
The Companyâs policy is to carry adequate amounts towards Provision for Standard Assets, Non -Performing Assets (NPAs) and other contingencies. All loans and other credit exposures where the installments are overdue for more than ninety days are classified as NPAs in accordance with the prudential norms prescribed by the National Housing Bank (NHB). The provisioning policy of the Company covers the minimum provisioning required as per the NHB guidelines. Excess provisions over and above provisioning requirement for Standard Assets and NPAs are carried under Provision for Contingencies Account.
1.20 STOCK OF ACQUIRED PROPERTIES
The assets acquired by the Company under SARFAESI Act, 2002 are classified as âStock of Acquired Propertiesâ and are valued at outstanding dues or net realizable value, whichever is lower.
1.21 LOAN ORIGINATION / ACQUISITION COST
All direct costs incurred for the loan origination are amortized over the average tenure of the loan. The average tenure of loan has been arrived at based on the past experience of repayment behaviour of the borrowers.
1.22 UNCLAIMED DEPOSITS
Deposits, which have become due but have not been presented for payment or renewal, are transferred to unclaimed deposits. Interest for the period from last maturity date till the date of renewal of unclaimed deposits is accounted for during the year of its renewal.
1.23 IMPAIRMENT OF ASSETS
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
1.24 SECURITISATION OF LOANS
Securitized and assigned assets are de-recognized in the books of the Company based on the principle of transfer of ownership over the assets.
Transfer of pool of loan assets under the current RBI guidelines involve transfer of proportionate shares in the pool of loan assets. Such transfers result in de-recognition only of that proportion of the loan assets which meets the de-recognition criteria. The portion retained by the Company continue to be accounted for as loan assets as described above.
On de-recognition, the difference between the book value of the securitized loan assets and consideration received is recognized as gain arising on securitization in the Statement of Profit and Loss over the balance maturity period of the pool transferred. Losses, if any, arising from such transactions, are recognized immediately in the Statement of Profit and Loss
Mar 31, 2015
SIGNIFICANT ACCOUNTING POLICIES
1.1 GENERAL METHOD AND SYSTEM OF ACCOUNTING
The financial statements are prepared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India. The Financial Statements comply in all material aspects with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006, the relevant provisions of the Companies Act, 2013, the National Housing Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010 as amended from time to time.
Accounting policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the Company.
1.2 USE OF ESTIMATES
The preparation of financial statements require the Management to make estimates and assumptions 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 expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.
1.3 REVENUE RECOGNITION
i) FEE AND OTHER CHARGES
Income from log in fee, other charges and penal interest on overdue / additional interest on defaults, pre-payment charges etc. is recognized on receipt basis. Income on loan processing/management fees is recognized over the average tenure of the loan being the consideration received for continuing obligation over the life of loan.
ii) INCOME FROM INVESTMENT
Interest income on Bonds and Government Securities is recognized on accrual basis. Dividend income is accounted for in the year in which the same is received. The gain / loss on account of long-term Investment at discount / premium in Debentures/Bonds and Government Securities, is amortized over the life of the security on a pro-rata basis.
iii) OTHER INCOME
Interest on tax refunds and other incomes are accounted for on receipt basis.
iv) INTEREST ON LOANS
Interest Income is recognized on accrual basis except in case of non-performing assets where interest is accounted on realization. In loans, the repayment is received by way of Equated Monthly Installments (EMIs) comprising principal and interest. Interest is calculated on the outstanding balance at the beginning of the month. EMIs generally commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is charged every month. Income on loans purchased through direct assignment is recognized on accrual basis.
Recovery in case of Non-Performing Loans is appropriated first towards interest portion of overdue EMIs and thereafter towards principal portion of overdue EMIs.
1.4 FIXED ASSETS
Fixed Assets are stated at cost of acquisition less accumulated depreciation. Costs include all expenses incidental to the acquisition of the fixed assets.
1.5 INTANGIBLE ASSETS
Intangibles are recognized where it is possible that the future economic benefit attributable to the asset will flow to the company and its cost can be reliably measured. Intangibles are stated at cost of acquisition less accumulated amortization.
1.6 DEPRECIATION/AMORTISATION
i) Depreciation on Fixed Assets is provided on the Straight Line Method at the lives prescribed in Part C of Schedule II of the Companies Act, 2013 on pro-rata basis, except the following items on which different useful lives for depreciation have been charged:
- Intangible Assets are amortized over a period of five years except website development costs which are amortized over a period of three years.
- Networking Equipment''s and Mobile phone instruments are depreciated over a period of five and three years respectively.
- Leasehold Improvements are depreciated over a period of five years.
ii) Assets costing up to Rs.5,000/- are charged to revenue.
1.7 INVESTMENTS
Investments are capitalized at cost inclusive of brokerage and stamp charges excluding interest/dividend accruing till the date of purchase. The difference between the carrying amount and disposal proceeds of investments, net of expenses, is recognized in the Profit & Loss Account. Investments are classified as long-term investments (Non-Current Investment) and current investments and are valued in accordance with guidelines of National Housing Bank and Accounting Standard on Accounting for Investments (AS-13), issued by The Institute of Chartered Accountants of India. Long-term investments are valued at cost net of amortization of premium / discount. However, when there is a decline, other than temporary, in the value of long-term investment, the carrying amount is reduced to recognize the decline. Current investments are valued at lower of cost or market value determined on individual investment basis.
1.8 EMPLOYEE BENEFITS
i) The company has taken LIC Policy to cover the accumulated gratuity liability of its employees as Defined Contribution Plan. The premium on this policy has been accounted for on accrual basis in line with the Accounting Standard on Accounting for Employee Benefits (AS-15)- Revised, issued by the Institute of Chartered Accountants of India.
ii) Provision for leave encashment is made on the basis of actuarial valuation.
iii) Retirement benefits of employees on deputation from Punjab National Bank are borne by the Bank and hence no provision is considered necessary by the company.
iv) Provident Fund Contribution paid to recognized Provident Fund Trust and Government Provident Fund is debited to the Profit and Loss Account on accrual basis.
v) Incentive paid to employees in terms of performance linked incentive scheme is charged to Profit & Loss Account on accrual basis.
1.9 TRANSACTION INVOLVING FOREIGN EXCHANGE
i) Foreign currency monetary liabilities are translated at the rate which reflects the liability of the company in Indian Rupee which is likely to be repaid at the balance sheet date.
ii) Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.
iii) Generally Exchange differences arising on Foreign Currency transactions are recognized as income or expense as the case may be in the period in which they arise. However, in case of forward exchange contracts, the Exchange difference between the forward rate and the exchange rate at the date of transaction is recognized as an income or expense over the life of the forward contract in line with Accounting Standard on Accounting for the Effects of Changes in Foreign Exchange Rates (AS-11) issued by The Institute of Chartered Accountants of India.
1.10 BORROWING COSTS
Borrowing costs are recognized as an expense in the year in which they are incurred. Expenditure incurred on issue of shares/bonds is charged to Statement of Profit and Loss in the year on accrual basis except brokerage costs directly attributable to a borrowing which are amortized over the period of borrowing. Ancillary cost in connection with long term external borrowing are amortized to the Statement of Profit and Loss Account over the tenure of the loan. Issue expenses of certain securities are charged to Securities Premium account.
1.11 OPERATING LEASES
Lease payments for assets taken on operating lease are recognized as an expense in the Statement of Profit and Loss as per terms of lease agreement.
1.12 EARNINGS PER SHARE
The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. The number of shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving earnings per share, and also the weighted average number of equity shares, which could have been issued on the conversion of all dilutive potential shares. In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit per share are included.
1.13 TAXES ON INCOME
Taxes on Income are accounted for in accordance with Accounting Standard (AS)-22- âAccounting for taxes on incomeâ, issued by The Institute of Chartered Accountants of India. Income tax comprises both current and deferred tax.
Current tax is measured on the basis of estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961.
The tax effect of timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using substantially enacted tax rates and tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws, are recognized, only if there is virtual certainty of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization.
1.14 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed when the Company has a possible or present obligation where it is not probable that an outflow of resources will be required to settle it. Contingent Assets are neither recognized nor disclosed.
1.15 PROVISION FOR STANDARD ASSETS
Provisions are established on a collective basis against loan assets classified as âStandardâ to absorb credit losses on the aggregate exposures in each of the Company''s loan portfolios based on the NHB Directions. A higher standard asset provision may be made based upon statistical analysis of past performance, level of allowance already in place and Management''s judgement. This estimate includes consideration of economic and business conditions. The amount of the collective allowance for credit losses is the amount that is required to establish a balance in the Provision for Standard Assets Account that the Company''s management considers adequate, after consideration of the prescribed minimum under the NHB Directions, to absorb credit related losses in its portfolio of loan items after individual allowances or write offs.
1.16 STOCK OF ACQUIRED PROPERTIES
i) As per the National Housing Bank Directions 2010, the land and buildings, including Assets/ Properties acquired from NPA Advances in settlement of Loans, are held as ''Other Current Assets'' till their disposal. These assets are required to be disposed off within 3 years from the date of acquisition (if it exceeds 10% of net owned funds of the company) unless and until extended by the NHB. All the expenses incurred on the upkeep of the property including safeguarding, insurance, rates & taxes etc. are charged to Profit & Loss Account in the year of incurrence.
ii) Where the possession of the secured assets has been taken by the Company under SARFAESI Act, 2002 such assets are classified in ''Current Assets'' at cost or market price (as per valuation report), whichever is less till its final disposal. The diminution in value is provided as ''Provision for Doubtful Debts & Contingencies''. The loss, if any, is ascertained and accounted for in the year of its disposal.
1.17 LOAN ORIGINATION / ACQUISITION COST
All direct costs incurred for the loan origination are amortized over the average tenure of the loan.
1.18 SERVICE TAX INPUT CREDIT
Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is no uncertainty in availing / utilizing the credits.
1.19 UNCLAIMED DEPOSITS
Deposits, which have become due but have not been presented for payment or renewal, are transferred to unclaimed deposits. Interest for the period from last maturity date till the date of renewal of unclaimed deposits is accounted for during the year of its renewal.
1.20 IMPAIRMENT OF ASSETS
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
1.21 SECURITISATION OF LOANS
The Company transfers pool of loan assets. Such Assets are derecognized, if and only if, Company loses control over the contractual rights that comprises pool of loan assets transferred.
Transfer of pool of loan assets under the current RBI guidelines involve transfer of proportionate shares in the pool of loan assets. Such transfers result in de - recognition only of that proportion of the loan assets which meets the de-recognition criteria. The portion retained by the Company continue to be accounted for as loan assets as described above.
On de-recognition, the difference between the book value of the securitized loan assets and consideration received is recognized as gain arising on securitization in the Statement of Profit and Loss over the balance maturity period of the pool transferred. Losses, if any, arising from such transactions, are recognized immediately in the Statement of Profit and Loss.
Mar 31, 2014
Notes to Financial Statements for the year ended March 31st, 2014
NOTE: 1 SIGNIFICANT ACCOUNTING POLICIES
1. General Method and System of Accounting
The financial statements are prepared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India. The Financial Statements comply in all material aspects with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006, the relevant provisions of the Companies Act, 1956, the National Housing Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010 as amended from time to time.
Accounting policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the Company.
2. Use of Estimates
The preparation of financial statements require the Management to make estimates and assumptions 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 expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.
3. Revenue Recognition
(a) Fee and other Charges
Income from log in fee, other charges and Penal Interest on Over dues / Additional Interest on Defaults, Pre-payment charges etc. is recognized on receipt basis. Income on loan processing/management fees is recognized over the average tenure of the loan being the consideration received for continuing obligation over the life of loan.
(b) Income from Investment
Interest income on Bonds and Government Securities is recognized on accrual basis. Dividend income is accounted for in the year in which the same is received. The gain / loss on account of long term Investment at discount / premium in Debentures/Bonds and Government Securities, is amortized over the life of the security on a pro-rata basis.
(c) Other Income
Interest on tax refunds and other incomes are accounted for on receipt basis.
(d) Interest on Loans
Interest Income is recognized on accrual basis except in case of non-performing assets where interest is accounted on realization. In loans, the repayment is received by way of Equated Monthly Installments (EMIs) comprising principal and interest. Interest is calculated on the outstanding balance at the beginning of the month. EMIs generally commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is charged every month. Income on loans purchased through direct assignment is recognized on accrual basis.
Recovery in case of Non-Performing Loans is appropriated first towards interest portion of overdue EMIs and their-after towards principal portion of overdue EMIs.
4. Fixed Assets
Fixed Assets are stated at cost of acquisition less accumulated depreciation. Costs include all expenses incidental to the acquisition of the fixed assets.
5. Intangible Assets
Intangibles are recognized where it is possible that the future economic benefit attributable to the asset will flow to the Company and its cost can be reliably measured. Intangibles are stated at cost of acquisition less accumulated amortization.
6. Depreciation/Amortization
(i) Depreciation on Fixed Assets is provided on the Written Down Value Method at the rates prescribed in Schedule XIV of the Companies Act, 1956 on prorata basis, except the following items on which higher rates of depreciation have been charged:
- Intangible Assets are amortized over a period of five years except website development costs which are amortized over a period of three years.
- Networking Equipments and Mobile phone instruments are depreciated over a period of five years.
- Leasehold Improvements are depreciated over a period of five years.
(ii) Assets costing up to Rs. 5,000/- are charged to revenue.
7. Investments
Investments are capitalized at cost inclusive of brokerage and stamp charges excluding interest/dividend accruing till the date of purchase. The difference between the carrying amount and disposal proceeds of investments, net of expenses, is recognized in the Profit & Loss Account. Investments are classified as long-term investments (Non Current Investment) and current investments and are valued in accordance with guidelines of National Housing Bank and Accounting Standard on Accounting for Investments (AS-13), issued by The Institute of Chartered Accountants of India. Long-term investments are valued at cost net of amortization of premium / discount. However, when there is a decline, other than temporary, in the value of long-term investment, the carrying amount is reduced to recognize the decline. Current investments are valued at lower of cost or market value determined on individual investment basis.
8. Employee Benefits
(i) The Company has taken LIC Policy to cover the accumulated gratuity liability till 31.03.2014 of its employees as Defined Contribution Plan. LIC has made actuarial valuation on renewal date i.e. 01-01-2014. The premium on this policy has been accounted for on accrual basis in line with the Accounting Standard on Accounting for Employee Benefits (AS-15)-Revised, issued by the Institute of Chartered Accountants of India.
(ii) Provision for leave encashment is made on the basis of actuarial valuation as on 31.03.2014.
(iii) Retirement benefits of employees on deputation from Punjab National Bank are borne by the Bank and hence no provision is considered necessary by the Company.
(iv) Provident Fund Contribution paid to recognized Provident Fund Trust and Govt. Provident Fund is debited to the Profit and Loss Account on accrual basis.
(v) Incentive paid to employees in terms of performance linked incentive scheme is charged to Profit & Loss Account on accrual basis.
9. Transaction Involving Foreign Exchange
(i) Foreign currency monetary liabilities are translated at the rate which reflects the liability of the Company in Indian Rupee which is likely to be repaid at the balance sheet date.
(ii) Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.
(iii) Generally Exchange differences arising on Foreign Currency transactions are recognized as income or expense as the case may be in the period in which they arise. However, in case of forward exchange contracts, the Exchange difference between the forward rate and the exchange rate at the date of transaction is recognized as an income or expense over the life of the forward contract in line with Accounting Standard on Accounting for the Effects of Changes in Foreign Exchange Rates (AS-11) issued by The Institute of Chartered Accountants of India.
10. Borrowing Costs
Borrowing costs are recognized as an expense in the year in which they are incurred. Expenditure incurred on issue of shares/bonds is charged to Statement of Profit and Loss in the year on accrual basis except brokerage costs directly attributable to a borrowing which are amortized over the period of borrowing.
11. Operating Leases
Lease payments for assets taken on operating lease are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.
12. Earnings Per Share
The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. The number of shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving earnings per share, and also the weighted average number of equity shares, which could have been issued on the conversion of all dilutive potential shares. In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit per share are included.
13. Taxes on Income
Taxes on Income are accounted for in accordance with Accounting Standard (AS) -22-"Accounting for taxes on income", issued by the Institute of Chartered Accountants of India. Income tax comprises both current and deferred tax.
Current tax is measured on the basis of estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961.
The tax effect of timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using substantially enacted tax rates and tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws, are recognized, only if there is virtual certainty of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization.
14. Provisions, Contingent Liabilities and Contingent Assets (AS-29)
Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed when the Company has a possible or present obligation where it is not probable that an outflow of resources will be required to settle it. Contingent Assets are neither recognized nor disclosed.
15. Possession of Secured Assets
(i) As per the National Housing Bank Directions 2010, the land and buildings, including Assets/ Properties acquired from NPA Advances in settlement of Loans, are held as ''Other Current Assets'' till their disposal. These assets are required to be disposed of within 3 years from the date of acquisition (if it exceeds 10% of net owned funds of the Company) unless and until extended by the NHB. All the expenses incurred on the upkeep of the property including safeguarding, insurance, rates & taxes etc are charged to Profit & Loss Account in the year of incurrence.
(ii) Where the possession of the secured assets has been taken by the Company under SARFAESI Act, 2002 such assets are classified in ''Current Assets'' at cost or market price (as per valuation report), whichever is less till its final disposal. The diminution in value is provided as ''Provision for Doubtful Debts & Contingencies''. The loss, if any, is ascertained and accounted for in the year of its disposal.
16. Loan Origination / Acquisition Cost
All direct costs incurred for the loan origination are amortized over the average tenure of the loan.
17. Unclaimed Deposits
Deposits, which have become due but have not been presented for payment or renewal, are transferred to unclaimed deposits. Interest for the period from last maturity date till the date of renewal of unclaimed deposits is accounted for during the year of its renewal.
18. Impairment of Assets
The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
Mar 31, 2013
NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2013
NOTE: 1 SIGNIFICANT ACCOUNTING POLICIES
1. GENERAL METHOD AND SYSTEM OF ACCOUNTING
The financial statements are prepared under the historical cost convention on accrual basis of accounting and in accordance with accounting principles generally accepted in India. The Financial Statements comply in all material aspects with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006, the relevant provisions of the Companies Act, 1956, the National Housing Bank Act, 1987 and the Housing Finance Companies (NHB) Directions, 2010 as amended from time to time.
Accounting policies not specifically referred to otherwise are consistent with the generally accepted accounting principles followed by the Company.
2. USE OF ESTIMATES:
The preparation of financial statements require the Management to make estimates and assumptions 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 expenses during the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.
3. REVENUE RECOGNITION
(a) FEE AND OTHER CHARGES
Income from log in fee, other charges and Penal Interest on Over dues / Additional Interest on Defaults, Prepayment charges etc. is recognized on receipt basis. Income on loan processing/management fees is recognized over the average tenure of the loan being the consideration received for continuing obligation over the life of loan.
(b) INCOME FROM INVESTMENT
Interest income on Bonds and Government Securities is recognized on accrual basis. Dividend income is accounted for in the year in which the same is received. The gain / loss on account of long term Investment at discount/premium in Debentures/Bonds and Government Securities, is amortized over the life of the security on a pro-rata basis.
(c) OTHER INCOME
Interest on tax refunds and other incomes are accounted for on receipt basis.
(d) INTEREST ON LOANS
Interest Income is recognized on accrual basis except in case of non-performing assets where interest is accounted on realization. In loans, the repayment is received by way of Equated Monthly Installments (EMIs) comprising principal and interest. Interest is calculated on the outstanding balance at the beginning of the month. EMIs generally commence once the entire loan is disbursed. Pending commencement of EMIs, Pre-EMI interest is charged every month. Income on loans purchased through direct assignment is recognized on accrual basis.
Recovery in case of Non-Performing Loans is appropriated first towards interest portion of overdue EMIs and their-after towards principal portion of overdue EMIs.
4. FIXED ASSETS
Fixed Assets are stated at cost of acquisition less accumulated depreciation. Costs include all expenses incidental to the acquisition of the fixed assets.
5. INTANGIBLE ASSETS
Intangibles are recognized where it is possible that the future economic benefit attributable to the asset will flow to the company and its cost can be reliably measured. Intangibles are stated at cost of acquisition less accumulated amortization
6. DEPRECIATION/AMORTISATION
(I) Depreciation on Fixed Assets is provided on the Written Down Value Method at the rates prescribed in Schedule XIV of the Companies Act, 1956 on prorata basis, except the following items on which higher rates of depreciation have been charged:
- Intangible Assets are amortized over a period of five years except website development costs which are amortized over a period of three years.
- Networking Equipments and Mobile phone instruments are depreciated over a period of five years.
- Leasehold Improvements are depreciated over a period of five years.
(ii) Assets costing up to Rs. 5000/- are charged to revenue.
7. INVESTMENTS
Investments are capitalized at cost inclusive of brokerage and stamp charges excluding interest/dividend accruing till the date of purchase. The difference between the carrying amount and disposal proceeds of investments, net of expenses, is recognized in the Profit & Loss Account. Investments are classified as long term investments ( Non Current Investment) and current investments and are valued in accordance with guidelines of National Housing Bank and Accounting Standard on Accounting for Investments (AS-13), issued by The Institute of Chartered Accountants of India. Long term investments are valued at cost net of amortization of premium / discount. However, when there is a decline, other than temporary, in the value of long term investment, the carrying amount is reduced to recognize the decline. Current investments are valued at lower of cost or market value determined on individual investment basis.
8. EMPLOYEE BENEFITS
(i) The company has taken LIC Policy to cover the accumulated gratuity liability till 31.03.2013 of its employees as Defined Contribution Plan. LIC has made actuarial valuation on renewal date i.e. 01-01 2013. The premium on this policy has been accounted for on accrual basis in line with the Accounting Standard on Accounting for Employee Benefits (AS-15)-Revised, issued by the Institute of Chartered Accountants of India.
(ii) Provision for leave encashment is made on the basis of actuarial valuation as on 31.03.2013.
(iii) Retirement benefits of employees on deputation from Punjab National Bank are borne by the Bank and hence no provision is considered necessary by the company.
(iv) Provident Fund Contribution paid to recognized Provident Fund Trust and Govt Provident Fund is debited to the Profit and Loss Account on accrual basis.
(v) Incentive paid to employees in terms of performance linked incentive scheme is charged to Profit & Loss Account on accrual basis.
9. TRANSACTION INVOLVING FOREIGN EXCHANGE
(i) Foreign currency monetary liabilities are translated at the rate which reflects the liability of the company in Indian Rupee which is likely to be repaid at the balance sheet date.
(ii) Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.
(iii) Generally Exchange differences arising on Foreign Currency transactions are recognized as income or expense as the case may be in the period in which they arise. However, in case of forward exchange contracts, the Exchange difference between the forward rate and the exchange rate at the date of transaction is recognized as an income or expense over the life of the forward contract in line with Accounting Standard on Accounting for the Effects of Changes in Foreign Exchange Rates (AS-11) issued by The Institute of Chartered Accountants of India.
10. BORROWING COSTS
Borrowing costs are recognized as an expense in the year in which they are incurred. Expenditure incurred on issue of shares/bonds is charged to Statement of Profit and Loss in the year on accrual basis except brokerage costs directly attributable to a borrowing which are amortized over the period of borrowing.
11. OPERATING LEASES
Lease payments for assets taken on operating lease are recognized as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.
12. EARNINGS PER SHARE
The basic earnings per share is computed by dividing the net profit / loss attributable to the equity shareholders for the period by the weighted average number of equity shares outstanding during the reporting period. The number of shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving earnings per share, and also the weighted average number of equity shares, which could have been issued on the conversion of all dilutive potential shares. In computing dilutive earnings per share, only potential equity shares that are dilutive and that reduce profit per share are included.
13. TAXES ON INCOME
Taxes on Income are accounted for in accordance with Accounting Standard (AS)-22-âAccounting for taxes on incomeâ, issued by the Institute of Chartered Accountants of India. Income tax comprises both current and deferred tax.
Current tax is measured on the basis of estimated taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961.
The tax effect of timing differences that result between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using substantially enacted tax rates and tax regulations as of the Balance Sheet date.
Deferred tax assets arising mainly on account of brought forward losses and unabsorbed depreciation under tax laws, are recognized, only if there is virtual certainty of its realization, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognized only to the extent there is a reasonable certainty of its realization.
14. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (AS-29)
Provisions are recognized when the Company has a legal and constructive obligation as a result of a past event, for which it is probable that cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Contingent liabilities are disclosed when the Company has a possible or present obligation where it is not probable that an outflow of resources will be required to settle it. Contingent Assets are neither recognized nor disclosed.
15. POSSESSION OF SECURED ASSETS
(i) As per the National Housing Bank Directions 2010, the land and buildings, including Assets/ Properties acquired from NPA Advances in settlement of Loans, are held as ''Other Current Assets'' till their disposal. These assets are required to be disposed off within 3 years from the date of acquisition (if it exceeds 10% of net owned funds of the company) unless and until extended by the NHB. All the expenses incurred on the upkeep of the property including safeguarding, insurance, rates & taxes etc are charged to Profit & Loss Account in the year of incurrence.
(ii) Where the possession of the secured assets has been taken by the Company under SARFAESI Act, 2002 such assets are classified in ''Current Assets'' at cost or market price (as per valuation report), whichever is less till its final disposal. The diminution in value is provided as ''Provision for Doubtful Debts & Contingencies''. The loss, if any, is ascertained and accounted for in the year of its disposal.
16. LOAN ORIGINATION / ACQUISITION COST
All direct costs incurred for the loan origination are amortized over the average tenure of the loan.
17. UNCLAIMED DEPOSITS
Deposits, which have become due but have not been presented for payment or renewal, are transferred to unclaimed deposits. Interest for the period from last maturity date till the date of renewal of unclaimed deposits is accounted for during the year of its renewal.
18. IMPAIRMENT OF ASSETS
The company assesses at each balance sheet date weather there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
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PNB Housing Finance Ltd. குறித்த கூடுதல் தகவல்களை
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PNB Housing Finance Ltd. டூல்ஸ்
- பல்க் டீல்ஸ்
- பிளாக் டீல்ஸ்
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PNB Housing Finance Ltd. நிறுவன தகவல்கள்
- நிறுவன சுயவிவரம்
- நிறுவன வரலாறு
- நிர்வாக குழு
- மூலதன வடிவம்
- புராடெக்ட் மிக்ஸ்
- வங்கியாளர்/தணிக்கையாளர்/பதிவாளர்
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நிறுவன வரலாறு
- உரிமை
- மும்பை பங்குச் சந்தையில் விலை வரலாறு
- என்எஸ்இ விலை வரலாறு
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PNB Housing Finance Ltd. முக்கிய நிதியில் விகிதங்கள்
- விகிதங்கள்
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PNB Housing Finance Ltd. முடிவுகள்
- காலாண்டு முடிவுகள்
- அரையாண்டு முடிவுகள்
- 9 மாத முடிவுகள்
- வருடாந்திர முடிவுகள்
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PNB Housing Finance Ltd. நிதியியல் தகவல்கள்
- தணிக்கை முடிவுகள்
- பணப்பாய்வு
- இருப்பு நிலைக்குறிப்பு
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PNB Housing Finance Ltd. அறிக்கை
- கணக்கியல் கோட்பாடுகள்
- தணிக்கையாளர்கள் அறிக்கை
- இயக்குநர்கள் அறிக்கை
- கணக்கு குறிப்புகள்
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PNB Housing Finance Ltd. கார்ப்பரேட் அறிவிப்புகள்
- புத்தக முடிவு
- ஈவுத்தொகை
- நிர்வாகக் குழுக் கூட்டங்கள்
