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Accounting Policies of Allahabad Bank Company

Mar 31, 2014

1. Basis of Preparation

The financial statements have been prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

The financial statements also conform to the guidelines issued by the Reserve Bank of India (RBI) in respect to income recognition, asset classification, provisioning and other related matters and Accounting Standard and other pronouncements issued by the Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India.

In respect of foreign offices/branches statutory provisions and practices prevailing in respective foreign countries are complied with.

2. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (Including contingent liabilities) as of date of the financial statement and the reported income and expenses for the reporting period. Management believes that the estimates used in preparation of the financial statement are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

3. Transactions involving Foreign Exchange

3.1 Branches / Offices outside India

(i) Foreign Branches are classified as "Non-integral Foreign Operations" and their financial statements are translated as follows:

a) Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI) at the end of each quarter.

b) Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

c) All resulting exchange difference is accumulated in a separate account ''Foreign Currency Translation Reserve''.

(ii) Operations of representative offices abroad are classi fied as "Integral Foreign Operations" and their financial statements are accounted for as follows:

a) All monetary Assets and Liabilities, Guarantees, Acceptances, Endorsements and other obligations are translated to Indian rupee equivalent at the spot exchange rates prevailing at the end of each quarter as per FEDAI guidelines.

b) Non-monetary items are translated at exchange rate prevailing on the date of transaction.

c) Revenue items are accounted for at the exchange rates prevailing on the date of transaction.

d) All resulting exchange differences are accounted for in Profit & Loss Account.

(iii) Advances are classified under categories in line with those of Indian Offices. Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

3.2 Branches in India

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers'' Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rate prevailing as on the date of transaction.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

4. Investments

(i) In conformity with the requirements in Form A of the Third Schedule to the Banking Regulation Act, 1949, Investments are classified into the following six groups :

(a) Government Securities,

(b) Other Approved Securities,

(c) Shares,

(d) Debentures & Bonds,

(e) Subsidiaries/ Joint Ventures and

(f) Others

(ii) The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines into three categories viz.,

(a) Held to Maturity (HTM)

(b) Available for Sale (AFS)

(c) Held for Trading (HFT)

(iii) (a) Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

(b) Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

(c) Investments, which are not classified in the above two categories, are classified as Available for sale.

(d) An investment is classified as Held to Maturity, Held for Trading or Available for sale at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

e) Investments in subsidiaries, joint ventures and associates are classified as Held to Maturity.

(iv) As per RBI guidelines, the following principles have been adopted for the purpose of valuation.

(a) (i) Securities held in ''HTM'' - at acquisition cost

The excess of acquisition cost over the face value is amortized over the remaining period of maturity

(ii) Investments in Regional Rural Banks, subsidiaries and Joint Ventures are valued at carrying cost.

Diminution, other than temporary, if any, in valuation of such investments is provided for.

(b) (i) Securities held in ''AFS'' and ''HFT categories are valued scrip-wise. Appreciation/depreciation is aggregated for each class of securities and net depreciation as per applicable norms is recognized in the Profit and Loss Account, whereas net appreciation is ignored.

(v) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of asset classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(vi) Cost of acquisition of investments

- is net of incentives/commission and front-end fees received in case of securities subscribed, and

- excludes commission, brokerage, securities transaction tax and stamp duty.

(vii) Profit/loss on sale of investments in any category is recognized in the Profit and Loss Account. However, in case of profit on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve Account.

(viii) For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per norms laid down by the Reserve Bank of India.

(ix) Transfer of Securities between categories

The transfer of securities between categories specified at para 4 (ii) (a) to (c) above are carried out at the lower of acquisition cost / book value /market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

(x) As per RBI guidelines, the different categories of Swaps are valued as under:

- Hedge Swaps

Interest rate swaps which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an assets or liability that is carried at market value or lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

- Trading Swaps

Trading Swap transactions are marked to market with changes recorded in the financial statements.

5. Advances

(i) Advances in India are classified as Standard, Sub Standard, Doubtful or Loss assets and provisions for advances are made as per Prudential Norms of the RBI. In respect of advances made in overseas branches, advances are classified in accordance with prudential norms prescribed by the RBI or local laws of the host country in which advances are made, which ever is more stringent.

(ii) Advances disclosed are net of provisions made for non performing advances and provisions in lieu of diminution in the fair value of restructured advances. The provision for diminution in fair value of restructured advances is measured in net present value terms as per RBI guidelines.

(iii) The provision made for standard advances (performing) in terms of RBI guidelines is however included in "Other Liabilities and Provisions".

6. Fixed Assets and Depreciation

(i) Premises including Freehold and other Fixed Assets are stated at historical cost except certain premises, which are stated at their revalued amount.

(ii) Capital expenditure incurred during construction period is included under ''Other Assets''.

(iii) Depreciation is provided on diminishing balance method at the rates and the manner prescribed in Schedule XIV of the Companies Act, 1956 except that in respect of ALPMs and Computers, where depreciation is provided on straight line method @ 33.33% as per guidelines of Reserve Bank of India.

(iv) In respect of revalued assets, the amount of additional depreciation consequent to revaluation is transferred from Revaluation Reserve to the Profit & Loss Account.

(v) Premium on leasehold land is amortized over the period of the lease on straight line method.

(vi) Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws prevalent in that country.

7. Intangible Assets (Computer Software)

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets. Where the software is not an integral part of the related hardware, computer soft- ware is recognised as an Intangible Asset.

(ii) Computer software acquired from vendors is recognised as Intangible Asset only if the value /cost of the software is more than Rs.10 Lakhs. Such intangible assets are amortised over its effective life subject to a maximum period of ten years.

8. Employee Benefits

(i) The Bank has applied Accounting Standard 15(Revised) Employees Benefits, issued by the Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

(ii) Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the quarter as well as in year-end by using various Actuarial Assumptions chosen following the modalities documented in the Bank''s Policy on Funding Superannuation Schemes and the Projected Unit Credit method as per policies mentioned herein below:

a. Gratuity

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability.

b. Pension (ABEPR)

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995(ABEPR-1995) to employees, who exercised option under the Regulations and also to Employees joining the Bank''s Service during the period from 29.09.1995 to 31.03.2010. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. There is also provision for commutation of pension to a pensioner, against written request, to the maximum extent of 1/3rd of Basic Pension. The commuted basic pension is restored after completion of 15 years of commutation. Employees covered under ABEPR – 1995 are not eligible for Bank''s contribution to Provident Fund. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect of Pension, which is conducted by approved Actuary, in addition to the statutory monthly contribution of 10% of Pay of the covered employees, ranking for PF.

c. Leave Fare Concession (LFC)

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the Scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non-funded scheme and the Bank maintains a provision on account of its liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment in respect of LFC facility is made through the Profit and Loss Account.

d. Leave Encashment

The Bank permits encashment of Privilege Leave balance to it employees availing LFC facility, up to the maximum limit of 30 days leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment of such leave encashment is made through the Profit and Loss Account.

(iii) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to Profit & Loss account.

(iv) In terms of Industry wide Settlement/Joint Note dated 27.04.2010, employees joining the services of the Bank on or after 01.04.2010 are covered by defined contribution retirement benefit scheme.

(v) Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

9. Recognition of Income and Expenditure

(i) Income and Expenditure are generally accounted for on accrual basis unless otherwise stated.

(ii) Interest and Other Income in cases of Non Performing Assets/Investments are recognized to the extent realized.

(iii)Income from interest on refund of Income Tax and on Interest Tax are accounted for in the year in which it is received.

10. Lease

Rentals received by the Bank are recognized in the profit and loss account on accrual basis.

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account.

11. Earnings Per Share

Basic and Diluted Earnings per Equity Share are reported in accordance with the Accounting Standard 20 "Earnings per share" issued by the Institute of Chartered Accountants of India.

12. Taxation

(i) Provision is made for both current tax (including Minimum Alternative Tax - MAT) and deferred tax. Current tax is provided on the taxable income using applicable tax rate and tax laws. In compliance with Accounting Standard 22 : "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India, deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet.

(ii) Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period specified under the Income Tax Act, 1961.

13. Cash and Cash equivalents

Cash and cash equivalent include cash on hand and in ATMs and balances with RBI.

14. Impairment of Assets

Impairment losses (if any) on Fixed Assets (including revalued assets) are recognized and charged to Profit & Loss Account in accordance with the Accounting Standard 28 "Impairment of Assets" issued by The Institute of Chartered Accountants of India.

15. Provisions, Contingent Liabilities & Contingent Assets

(i) In conformity with AS 29. "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when

a) it has a present obligation as a result of a past event;

b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

c) when a reliable estimate of the amount of the obligation can be made.

(ii) No provision is recognized for;

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

b) Any present obligation that arises from past events but is not recognized because

i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii) a reliable estimate of the amount of obligation cannot be made.

iii) Contingent Liabilities are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

iv) Contingent Assets are not recognized in the financial statements as this may result in the recognition of income that may never be realized.


Mar 31, 2013

1. Basis of Preparation:

The financial statements have been prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

The financial statements also conform to the guidelines issued by the Reserve Bank of India (RBI) in respect to income recognition, asset classification, provisioning and other related matters and Accounting Standard and other pronouncements issued by the Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India.

In respect of foreign offices/branches, statutory provisions and practices prevailing in respective foreign countries are complied with.

2. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (Including contingent liabilities) as of date of the financial statement and the reported income and expenses for the reporting period. Management believes that the estimates used in preparation of the financial statement are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

3. Transactions involving Foreign Exchange:

3.1 Branches / Offices outside India

(i) Foreign Branches are classified as "Non-integral Foreign Operations" and their financial statements are translated as follows:

a) Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI) at the end of each quarter.

b) Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

c) All resulting exchange difference is accumulated in a separate account ''Foreign Currency Translation Reserve''.

(ii) Operations of representative offices abroad are classified as "Integral Foreign Operations" and their financial statements are accounted for as follows:

a) All monetary Assets and Liabilities, Guarantees, Acceptances, Endorsements and other obligations are translated to Indian rupee equivalent at the spot exchange rates prevailing at the end of each quarter as per FEDAI guidelines.

b) Non-monetary items are translated at exchange rate prevailing on the date of transaction.

c) Revenue items are accounted for at the exchange rates prevailing on the date of transaction.

d) All resulting exchange differences are accounted for in Profit & Loss Account.

(iii) Advances are classified under categories in line with those of Indian Offices. Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

3.2 Branches in India

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers'' Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rate prevailing as on the date of transaction.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

4. Investments:

(i) In conformity with the requirements in Form A of the Third Schedule to the Banking Regulation Act, 1949, Investments are classified into the following six groups :

a) Government Securities,

b) Other Approved Securities,

c) Shares,

d) Debentures & Bonds,

e) Subsidiaries/ Joint Ventures and

f) Others

(ii) The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines into three categories viz.,

(a) Held to Maturity (HTM)

(b) Available for Sale (AFS)

(c) Held for Trading (HFT)

(iii) a) Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

b) Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

c) Investments, which are not classified in the above two categories, are classified as Available for Sale.

d) An investment is classified as Held to Maturity, Held for Trading or Available for Sale at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

e) Investments in subsidiaries, joint ventures and associates are classified as Held to Maturity.

(iv) As per RBI guidelines, the following principles have been adopted for the purpose of valuation

(a) (i) Securities held in ''HTM'' - at acquisition cost

The excess of acquisition cost over the face value is amortized over the remaining period of maturity

(ii) Investments in Regional Rural Banks, subsidiaries and Joint Ventures are valued at carrying cost.

Diminution, other than temporary, if any, in valuation of such investments is provided for.

(b) (i) Securities held in ''AFS'' and ''HFT'' categories are valued scrip-wise. Appreciation/depreciation is aggregated for each class of securities and net depreciation as per applicable norms is recognized in the Profit and Loss Account, whereas net appreciation is ignored.

(v) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of asset classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(vi) Cost of acquisition of investments:

- is net of incentives/commission and front-end fees received in case of securities subscribed, and

- excludes commission, brokerage, securities transaction tax and stamp duty.

(vii)Profit/loss on sale of investments in any category is recognized in the Profit and Loss Account. However, in case of profit on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve Account.

(viii)For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per norms laid down by the Reserve Bank of India.

(ix) Transfer of Securities between categories:

The transfer of securities between categories specified at para 4 (ii) (a) to (c) above are carried out at the lower of acquisition cost / book value /market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

(x) As per RBI guidelines, the different categories of Swaps are valued as under:

- Hedge Swaps

Interest rate swaps which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an assets or liability that is carried at market value or lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

- Trading Swaps

Trading Swap transactions are marked to market with changes recorded in the financial statements.

5. Advances:

(i) Advance in India are classified as Standard, Sub Standard, Doubtful or Loss assets and provisions for advances are made as per Prudential Norms of the RBI. In respect of advances made in overseas branches, advances are classified in accordance with prudential norms prescribed by the RBI or local laws of the host country in which advances are made, which ever is more stringent.

(ii) Advances disclosed are net of provisions made for non performing advances and provisions in lieu of diminution in the fair value of restructured advances. The provision for diminution in fair value of restructured advances is measured in net present value terms as RBI guidelines.

(iii) The provision made for standard advances (performing) in terms of RBI guidelines is however included in "Other Liabilities and Provisions".

6. Fixed Assets and Depreciation:

(i) Premises including Freehold and other Fixed Assets are stated at historical cost except certain premises, which are stated at their revalued amount.

(ii) Capital expenditure incurred during construction period is included under ''Other Assets''.

(iii) Depreciation is provided on diminishing balance method at the rates and the manner prescribed in Schedule XIV of the Companies Act, 1956 except that in respect of ALPMs and Computers, where depreciation is provided on straight line method @ 33.33% as per guidelines of Reserve Bank of India

(iv) In respect of revalued assets, the amount of additional depreciation consequent to revaluation is transferred from Revaluation Reserve to the Profit & Loss Account.

(v) Premium on leasehold land is amortized over the period of the lease on straight line method.

(vi) Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws prevalent in that country.

7. Intangible Assets (Computer Software)

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets. Where the software is not an integral part of the related hardware, computer software is recognised as an Intangible Asset.

(ii) Computer software acquired from vendors is recognised as Intangible Asset only if the value /cost of the software is more than Rs.10 Lakhs. Such intangible assets are amortised over its effective life subject to a maximum period of ten years.

8. Employee Benefits:

(i) The Bank has applied Accounting Standard 15(Revised) - Employees Benefits, issued by the Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

(ii) Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the year-end by using Projected Unit Credit method as per policies mentioned herein below:

a. Gratuity:

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability.

b. Pension (ABEPR):

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995(ABEPR) to employees, who exercised option under the Regulations and also to Employees joining the Bank'' Service during the period from 29/09/1995 to 31.03.2010. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. Employees covered under ABEPR - 1995 are not eligible for Bank''s contribution to Provident Fund. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect of Pension, which is conducted by approved Actuary.

c. Leave Fare Concession (LFC):

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non-funded scheme and the Bank maintains a provision on account of its liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment in respect of LFC facility is made through the Profit and Loss Account.

d. Leave Encashment:

The Bank permits encashment of Privilege Leave balance to its employees availing LFC facility, up to the maximum limit of 30 days'' leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary . Payment of such leave encashment is made through the Profit and Loss Account.

(iii) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to Profit & Loss account.

(iv) In terms of Industry wide Settlement/Joint Note dated 27.04.2010, employees joining the services of the Bank on or after 01.04.2010 are covered by defined contribution retirement benefit scheme.

(v) Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

9. Recognition of Income and Expenditure:

(i) Income and Expenditure are generally accounted for on accrual basis unless otherwise stated.

(ii) Interest and Other Income in cases of Non Performing Assets/Investments are recognized to the extent realized.

(iii) Income from interest on refund of Income Tax and Interest Tax are accounted for in the year in which it is received.

10. Lease

Rentals received by the Bank are recognized in the profit and loss account on accrual basis.

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account.

11. Earnings Per Share

Basic and Diluted Earnings per Equity Share are reported in accordance with the Accounting Standard 20 "Earnings per share" issued by the Institute of Chartered Accountants of India.

12. Taxation

(i) Provision is made for both current tax (including Minimum Alternative Tax - MAT) and deferred tax. Current tax is provided on the taxable income using applicable tax rate and tax laws. In compliance with Accounting Standard 22 :Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India, deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet.

(ii) Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period specified under the Income Tax Act 1961.

13. Cash and Cash equivalents

Cash and cash equivalent include cash on hand and in ATM''s and balances with RBI.

14. Impairment of Assets

Impairment losses (if any) on Fixed Assets (including revalued assets) are recognized and charged to Profit & Loss Account in accordance with the Accounting Standard 28 "Impairment of Assets" issued by The Institute of Chartered Accountants of India.

15. Provisions, Contingent Liabilities & Contingent Assets

(i) In conformity with AS 29 "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when

a. it has a present obligation as a result of a past event;

b. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

c. when a reliable estimate of the amount of the obligation can be made.

(ii) No provision is recognized for

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

b) Any present obligation that arises from past events but is not recognized because

i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii) a reliable estimate of the amount of obligation cannot be made.

iii) Contingent Liabilities are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

iv) Contingent Assets are not recognized in the financial statements as this may result in the recognition of income that may never be realized.


Mar 31, 2012

1. Basis of Accounting:

(i) The financial statements have been prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

(ii) The financial statements also conform to the guidelines issued by the Reserve Bank of India (RBI) from time to time in respect of income recognition, asset classification, provisioning and other related matters. Accounting Standard and pronouncements issued by the Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India.

2. Transactions involving Foreign Exchange:

2.1 Branches / Offices outside India

(i) Foreign Branches are classified as "Non-integral Foreign Operations" and their financial statements are translated as follows:

a) Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI) at the end of each quarter.

b) Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

c) All resulting exchange difference is accumulated in a separate account 'Foreign Currency Translation Reserve'.

(ii) Operations of representative offices abroad are classified as "Integral Foreign Operations" and their financial statements are accounted for as follows:

a) All monetary Assets and Liabilities, Guarantees, Acceptances, Endorsements and other obligations are translated to Indian rupee equivalent at the spot exchange rates prevailing at the end of each quarter as per FEDAI guidelines.

b) Non-monetary items are translated at exchange rate prevailing on the date of transaction.

c) Revenue items are accounted for at the exchange rates prevailing on the date of transaction.

d) All resulting exchange differences are accounted for in Profit & Loss Account.

(iii) Advances are classified under categories in line with those of Indian Offices. Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

2.2 Branches in India

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers' Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rate prevailing as on the date of transaction.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

3. Investments:

(i) Investments are classified in accordance with RBI guidelines under three categories viz. "Held to Maturity", "Held for Trading" and "Available for Sale".

(ii) The disclosures of Investments are further classified into the following six groups :

a) Government Securities,

b) Other Approved Securities,

c) Shares,

d) Debentures & Bonds,

e) Subsidiaries/ Joint Ventures and

f) Others

(iii) a) Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

b) Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

c) Investments, which are not classified in the above two categories, are classified as Available for sale.

d) An investment is classified as Held to Maturity, Held for Trading or Available for sale at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

e) Investments in subsidiaries, joint ventures and associates are classified as Held to Maturity.

(iv) Investments classified as 'Held to Maturity' (other than in Regional Rural Banks) are carried at acquisition cost. In case the acquisition cost is higher than the face value, the excess is amortized over the period remaining to maturity and provision is made for:

a) Depreciation in the value of debentures / bonds which are deemed to be in the nature of advances by applying the RBI prudential norms of asset classification and provisioning applicable to advances.

b) Diminution, other than temporary, in the value of investments in subsidiaries / joint ventures.

(v) Investments classified as "Held for Trading" are revalued scrip-wise at monthly interval and resultant net depreciation is recognized and net appreciation, if any, is ignored under each classification. The book value of the individual scrip is not changed with the revaluation as indicated above.

(vi) Investments classified as "Available for Sale" are marked to market scrip-wise at quarterly intervals and resultant net depreciation is recognized and net appreciation, if any, is ignored under each classification. The book value of the individual scrip is not changed with the revaluation as indicated above.

(vii) Investments in Regional Rural Banks are valued at carrying cost.

(viii) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of asset classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(ix) Cost of acquisition of investments: is net of incentives/commission and front-end fees received in case of securities subscribed, and excludes commission, brokerage, securities transaction tax and stamp duty.

(x) Profit/loss on sale of investments is recognized in the Profit and Loss Account. An amount equivalent to the profit on sale of investments under "Held to Maturity" category is first taken to the Profit and Loss Account and thereafter, appropriated to the "Capital Reserve Account".

(xi) For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per norms laid down by the Reserve Bank of India.

(xii) As per RBI guidelines, the different categories of Swaps are valued as under:

a) Hedge Swaps :

Interest rate swaps which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an assets or liability that is carried at market value or lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

b) Trading Swaps :

Trading Swap transactions are marked to market with changes recorded in the financial statements.

4. Advances:

(i) Advances are classified as performing and non- performing as per guidelines prescribed by RBI and are shown net of provisions for non-performing advances.

(ii) The provision made for standard advances (performing) in terms of RBI guidelines is however included in "Other Liabilities and Provisions".

5. Fixed Assets and Depreciation:

(i) Premises including Freehold and other Fixed Assets are stated at historical cost except certain premises, which are stated at their revalued amount.

(ii) Capital expenditure incurred during construction period is included under 'Other Assets'.

(iii) Depreciation is provided on diminishing balance method at the rates and the manner prescribed in Schedule XIV of the Companies Act, 1956 except that in respect of ALPMs and Computers, where depreciation is provided on straight line method @ 33.33% as per guidelines of Reserve Bank of India

(iv) In respect of revalued assets, the amount of additional depreciation consequent to revaluation is transferred from Revaluation Reserve to the Profit & Loss Account.

(v) Premium on leasehold land is amortized over the period of the lease.

(vi) Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws prevalent in that country.

6. Intangible Assets (Computer Software) :

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets. Where the software is not an integral part of the related hardware, computer software is recognised as an Intangible Asset.

(ii) Computer software acquired from vendors is recognised as Intangible Asset only if the value /cost of the software is more than Rs.10 Lakhs. Such intangible assets are amortised over its effective life subject to a maximum period of ten years.

7. Employee Benefits:

(i) The Bank has applied Accounting Standard 15(Revised) - Employees Benefits, issued by the Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

(ii) Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the year-end by using Projected Unit Credit method as per policies mentioned herein below:

a. Gratuity:

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Bank's contribution is maintained by an in- house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability.

b. Pension (ABRPR):

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995(ABEPR) to employees, who exercised option under the Regulations and also to Employees joining the Bank' Service during the period from 29/09/1995 to 31.03.2010. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. Employees covered under ABEPR - 1995 are not eligible for Bank's contribution to Provident Fund. A fund created out of Bank's contribution is maintained by an in- house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect of Pension, which is conducted by approved Actuary.

c. Leave Fare Concession (LFC):

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the Scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non- funded scheme and the Bank maintains a provision on account of it s liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment in respect of LFC facility is made through the Profit and Loss Account.

d. Leave Encashment:

The Bank permits encashment of Privilege Leave balance to it employees availing LFC facility, up to the maximum limit of 30 days' leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary . Payment of such leave encashment is made through the Profit and Loss Account.

e. Sick Leave:

The Bank maintains a provision for its liability on account of any contingency arising out of employees going on sick leave on medical ground, which is permissible in terms of prevailing service conditions / rules. It is a non-funded scheme and the Bank maintains the provision on the basis of actuarial valuation, which is conducted by approved Actuary..

(iii) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to Profit & Loss account.

(iv) In terms of Industry wide Settlement/Joint Note dated 27.04.2010, employees joining the services of the Bank on or after 01.04.2010 are covered by defined contribution retirement benefit scheme.

(v) Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

8. Recognition of Income and Expenditure:

Income and Expenditure are accounted for on accrual basis other than those stated below:

(i) Interest and Other Income on advances classified as non-performing assets are recognized to the extent realized.

(ii) Income from interest on refund of Income Tax and Interest Tax are accounted for in the year the order is passed by the concerned assessing officer.

9. Lease :

Rentals received by the Bank are recognized in the profit and loss account on accrual basis.

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account.

10. Earnings Per Share :

Basic and Diluted Earnings per Equity Share are reported in accordance with the Accounting Standard 20 "Earnings per share" issued by the Institute of Chartered Accountants of India. Basic earnings per equity share are computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.

11. Taxation :

(i) Provision is made for both current tax (including Minimum Alternative Tax - MAT) and deferred tax. Current tax is provided on the taxable income using applicable tax rate and tax laws. In compliance with Accounting Standard 22 "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India, deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognised unless there is "virtual certainty" that sufficient future taxable income will be available against which such deferred tax assets will be realised.

(ii) Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period specified under the Income Tax Act 1961.

12. Cash and Cash equivalents :

Cash and cash equivalent include cash on hand and in ATM's and balances with RBI.

13. Impairment of Losses (if any) on Fixed Assets (including revalued assets) are recognized and charged to Profit & Loss Account in accordance with the Accounting Standard 28 "Impaired of Assets" issued by The Institute of Chartered Accountants of India.

14. Contingent Liabilities and Provisions & Contingent Assets

(i) In conformity with AS 29. "Provisions, Contingent Liabilities and contingent Assets", issued by the Institute of Chartered Accounts of India, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

(ii) No provision is recognized for :

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

b) Any present obligation that arises from past events but is not recognized because :

i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii) A reliable estimate of the amount of obligation cannot be made. Such obligations are recorded as contingent Liabilities. These are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

(iii) Contingent Assets are not recognized in the financial statements as this may result in the recognition of income that never be realized.

 
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