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Accounting Policies of Bank of India Company

Mar 31, 2017

1) BASIS OF PREPARATION:

The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated and conform, in all material aspects, to the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), Accounting Standards (AS), pronouncements issued by The Institute of Chartered Accountants of India (ICAI), Banking Regulation Act, 1949 and accounting practices prevalent in the banking industry in India. In respect of foreign offices/branches, statutory provisions and accounting practices prevailing in the respective foreign countries are complied with, except as specified elsewhere.

2) USE OF ESTIMATES:

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) as of date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. However, actual results can differ from estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

3) REVENUE RECOGNITION:

(a) Income/Expenditure is recognised on accrual basis, unless otherwise stated. In respect of foreign offices, income/expenditure is recognised as per local laws/ standards of host country.

(b) Interest income is recognised on time proportion basis except interest on Non-performing Assets and accounts coverd under SDR/S4A, which is recognised on realisation, in terms of the RBI guidelines.

(c) Commission on issue of Bank Guarantee and Letter of Credit is recognised over the tenure of BG/LC.

(d) All other Commission and Exchange, Brokerage, Fees and other charges are recognised as income on realisation.

(e) Income (other than interest) on investments in “Held to Maturity” category acquired at a discount to the face value, is recognised as follows:

1. On Interest bearing securities, it is recognised only at the time of sale/redemption.

2. On zero-coupon securities, it is accounted for over the balance tenor of the security on a constant yield basis.

(f) Profit or loss on sale of investments is recognised in the Profit and Loss account. As per RBI guidelines, in case of profit on sale of investments under ‘Held to Maturity’ category, an equivalent amount, net of taxes and amount required to be transferred to Statutory Reserves, is appropriated to ‘Capital Reserve Account’.

(g) Dividend is recognised when the right to receive the dividend is established.

(h) Interest on Income-tax refund is recognised in the year of passing of assessment order.

(i) The recoveries made from NPA accounts are appropriated first towards unrealised interest/income debited to borrowers accounts, expenditure/out of pocket expenses incurred, then principal dues and lastly towards uncharged interest.

4) ADVANCES:

(a) Advances are classified into “Performing” and “Non Performing Advances” (NPAs) in accordance with the applicable regulatory guidelines.

(b) NPAs are further classified into Sub-Standard, Doubtful and Loss Assets in terms of applicable regulatory guidelines.

(c) In respect of domestic branches, Provisions in respect of NPAs are made at the rates given as under:

(d) In respect of foreign branches, classification of advances as NPAs and provision in respect of NPAs is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.

(e) Provisions in respect of NPAs, unrealised interest, ECGC claims settled, etc., are deducted from total advances to arrive at net advances as per RBI norms.

(f) In respect of Rescheduled/Restructured advances, provision is made for the diminution in the fair value of restructured advances measured in present value terms as per RBI guidelines. The said provision is reduced to arrive at Net advances.

(g) In case of financial assets sold to Asset Reconstruction Company (ARC) / Securitisation Company (SC), if the sale is at a price higher than the Net Book Value (NBV), the surplus is retained and utilised to meet the shortfall/loss on account of sale of other financial assets to SC/ARC. If the sale is at a price below the net book value (NBV), (i.e.outstanding less provision held) the shortfall is to be debited to the Profit and Loss account. However, if surplus is available, such shortfall will be absorbed in the surplus. Any such shortfall arising due to sale of NPA on or after 26/02/2014 will be amortised over a period of two years if not absorbed in the surplus.

Excess provision arising out of sale of NPAs are reversed only when the cash received (by way of initial consideration only/or redemption of SRs/PTC) is higher than the net book value (NBV) of the asset. Reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.

(h) Provision for Standard assets, including restructured advances classified as standard, is made in accordance with RBI guidelines. In respect of foreign branches provision for Standard Assets is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.

(i) Provision for net funded country exposures (direct/ indirect) is made on a graded scale in accordance with the RBI guidelines.

5) FLOATING PROVISION:

The bank has a policy for creation and utilisation of floating provisions. The quantum of floating provisions to be created is assessed at the end of each financial year. The floating provisions are utilised only for contingencies under extraordinary circumstances specified in the policy with prior permission of Reserve Bank of India or on being specifically permitted by Reserve Bank of India for specific purposes.

6) DEBIT/CREDIT CARD REWARD POINTS:

Provision for reward points in relation to the debit cards is provided for on actuarial estimates and Provision for Reward Points on Credit cards is made based on the accumulated outstanding points.

7) INVESTMENTS:

A. Transactions in Government Securities are recognised on Settlement Date and all other Investments are recognised on trade date.

B. Investments are categorised under ‘Held to Maturity’, ‘Held for Trading’ and ‘Available for Sale’ categories as per RBI guidelines. For the purpose of disclosure of investments in India, these are classified, in accordance with RBI guidelines & Banking Regulation Act, 1949, under six classification viz. a) Government Securities, b) Other Approved Securities, c) Shares, d) Debentures and Bonds, e) Investment in Subsidiaries and Associates and f) Others. In respect of investments outside India, these are classified, in accordance with RBI guidelines, under three categories viz. Government Securities (including local authorities), Subsidiaries/ Joint Ventures abroad and Other Investments.

(a) Basis of categorisation

Categorisation of an investment is done at the time of its acquisition.

i) Held to Maturity

These comprise investments that the Bank intends to hold till maturity. Investments in subsidiaries, joint ventures and associates are also categorised under Held to Maturity.

ii) Held for Trading

This comprise investments acquired with the intention to trade by taking advantage of short term price/interest rate movements. These are intended to be traded within 90 days from the date of purchase.

iii) Available for Sale

This comprise investments which do not fall under “Held to Maturity” or “Held for Trading” classification.

(b) Acquisition Cost of Investment

i) Brokerage, commission, securities transaction tax etc. paid on acquisition of equity investments are included in cost.

ii) Brokerage, commission, broken period interest paid/ received on debt investments is treated as income/expense and is excluded from cost/ sale consideration.

iii) Brokerage and Commission received on subscription of investments is credited to Profit and Loss Account.

iv) Cost of investments is determined at weighted average cost method.

(c) Method of valuation

Investments in India are valued in accordance with the RBI guidelines and investments held at foreign branches are valued at lower of the value as per the statutory provisions prevailing at the respective foreign countries or as per RBI guidelines issued from time to time.

Treasury Bills and Commercial Papers are valued at carrying cost.

i) Held to Maturity

1 Investments included in this category are carried at their acquisition cost, net of amortisation, if any. The excess of acquisition cost, if any, over the face value is amortised over the remaining period to maturity using constant yield method. Such amortisation of premium is adjusted against income under the head “interest on investments”.

2 Investments in subsidiaries, joint ventures and associates (both in India and abroad) are valued at historical cost except for investments in Regional Rural Banks, which are valued at carrying cost (i.e. book value). A provision is made for diminution, other than temporary, for each investment individually.

ii) Held for Trading / Available for Sale

1 Investments under these categories are individually valued at the market price or fair value determined as per Regulatory guidelines and only the net depreciation in each classification for each category is provided for and net appreciation is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.

2 For the purpose of valuation of quoted investments in “Held for Trading” and “Available for Sale” categories, the market rates / quotes on the Stock Exchanges, the rates declared by Primary Dealers Association of India (PDAI) / Fixed Income Money Market and Derivatives Association (FIMMDA) are used. Investments for which such rates/quotes are not available are valued as per norms laid down by RBI, which are as under:

(d) Transfer of Securities between Categories

The transfer of securities between categories is carried out at the least of acquisition cost / book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

(e) Non performing Investments (NPIs) and valuation thereof

1 Investments are classified as performing and nonperforming, based on the guidelines issued by the RBI in case of domestic offices and respective regulators in case of foreign offices.

2 In respect of non performing investments, income is not recognised and provision is made for depreciation in value of such securities as per RBI guidelines.

(f) Repo / Reverse Repo

The securities sold and purchased under Repo/ Reverse repo are accounted as Collateralised lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/ purchase transactions and such movement of securities is reflected using the Repo/ Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity. Costs and revenues are accounted as interest expenditure/income, as the case may be. Balance in Repo Account is classified as Borrowings and balance in Reverse Repo account is classified as Balance with Banks and Money at Call & Short Notice.

8) Derivative

The Bank presently deals in Forex Forward Contracts, interest rate and currency derivatives. The interest rate derivatives dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures. Currency Derivatives dealt with by the Bank are Options, Currency Swaps and Currency Futures. Based on RBI guidelines, Derivatives are valued as under:

(a) The hedge/non hedge (market making) transactions are recorded separately.

(b) Income/expenditure on hedging derivatives are accounted on accrual basis.

(c) Forex forward contracts are Marked to market and the resultant gains and losses are recognized in the profit and loss account.

(d) Interest Rate Derivatives and currency derivatives other than exchange traded derivatives for trading purpose are marked to market and the resulting losses, if any, are recognised in the Profit & Loss account. Net Profit if any, is ignored.

(e) Exchange Traded Derivatives entered into for trading purposes are valued at prevailing market rates based on rates given by the Exchange and the resultant gains and losses are recognized in the Profit and Loss Account.

(f) Gains/ losses on termination of the trading swaps are recorded on the termination date as income/ expenditure. Any gain/loss on termination of hedging swaps are deferred and recognised over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/liabilities.

(g) Option fees/premium is amortised over the tenor of the option contract.

9) FIXED ASSETS:

(a) Fixed assets are stated at historic cost, except in the case of assets which have been revalued, which is stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve.

(b) Cost includes cost of purchase and all expenditure such as site preparation, installation costs, professional fees etc. incurred on the asset before it is put to use or capable of put to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefits from such assets or their functioning capability.

(c) Cost of premises includes cost of land, both freehold and leasehold.

10) DEPRECIATION ON FIXED ASSETS:

a) Depreciation on assets is charged on the Straight Line Method at the rates determined by the Bank, on the basis estimated useful use of respective assets except in respect of computers and computer software not forming integral part of hardware, where it is calculated on Straight Line Method, at the rates prescribed by RBI.

b) In respect of additions/sale, depreciation is provided on proportionate basis (except for computer software not forming integral part of hardware, where it is fully depreciated in the year of acquisition) for the number of days the assets have been put to use during the year.

c) Depreciation on the revalued portion of assets is adjusted against the Revaluation Reserve.

d) Premium on leasehold properties is amortised over the period of lease.

e) Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

f) Depreciation on fixed assets outside India is provided based on Straight Line Method, except at the centres where the rates/method have been prescribed by the local statutory authorities.

g) Depreciation on assets is provided at the following rates:

h) 5% residual value has been kept for all the assets except for the assets with estimated useful life less than 5 years (e.g. Computers, computer software and Cycles), where the entire cost of the assets is amortised over the useful life.

11) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

Transactions involving foreign exchange are accounted for in accordance with AS 11, “The Effect of Changes in Foreign Exchange Rates” read circular extant RBI guidelines:

a) Translation in respect of Integral Foreign operations:

Foreign currency transactions of Indian branches have been classified as integral foreign operations and foreign currency transactions of such operations are translated as under:

i) Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the daily closing rate as available from Cogencis/ Reuters page.

ii) Foreign currency monetary items are reported using the Foreign Exchange Dealers Association of India (FEDAI) closing spot rates.

iii) Foreign currency non-monetary items, which are carried in terms of historical cost, are reported using the exchange rate at the date of the transaction.

iv) Contingent liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.

v) Outstanding foreign exchange spot and forward contracts held for trading are revalued at the exchange rates notified by FEDAI for specified maturities, and the resulting notional profit or loss is recognised in the Profit and Loss account.

vi) Outstanding Foreign exchange forward contracts which are not intended for trading are valued at the closing spot rate as advised by FEDAI. The premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.

vii) Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.

viii) Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/losses are recognised in the Profit and Loss account.

b) Translation in respect of Non-Integral Foreign operations:

Transactions and balances of foreign branches are classified as non-integral foreign operations and their financial statements are translated as follows:

i) Assets and Liabilities (monetary and nonmonetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI.

ii) Income and expenses are translated at the quarterly average closing rates notified by FEDAI.

iii) All resulting exchange differences are accumulated in a separate account ‘Foreign Currency Translation Reserve’ till the disposal of the net investments by the bank in the respective foreign branches.

iv) The Assets and Liabilities of foreign offices in foreign currency (other than local currency of the foreign offices) are translated into local currency using spot rates applicable to that country.

12) EMPLOYEE BENEFITS:

i. Short Term Employee Benefit:

The undiscounted amount of short-term employee benefits, such as medical benefits etc. which are expected to be paid in exchange for the services rendered by employees are recognised during the period when the employee renders the service.

ii. Post Employment Benefit:

A. Defined Benefit Plan:-

a) Gratuity:

The Bank provides gratuity to all eligible employees. The benefit is in the form of lumpsum payments to vested employees on retirement, on death while in employment, or on termination of employment, for an amount equivalent to 15 days basic salary payable for each completed year of service, subject to a maximum prescribed as per The Payment of Gratuity Act 1972 or BOI (Employee) Gratuity Regulation whichever is higher. Vesting occurs upon completion of five years of service. The Bank makes periodic contributions to a fund administered by trustees based on an independent actuarial valuation carried out annually.

b) Pension:

The Bank provides pension to all eligible employees. The benefit is in the form of monthly payments as per rules and payments to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs at different stages as per rules. The Bank makes monthly contribution to the pension fund at 10% of pay in terms of BOI (Employees) Pension regulations. The pension liability is reckoned based on an independent actuarial valuation carried out annually and Bank makes such additional contributions periodically to the Fund as may be required to secure payment of the benefits under the pension regulations.

B. Defined Contribution Plan:

a) Provident Fund:

The Bank operates a Provident Fund scheme. All eligible employees are entitled to receive benefits under the Bank’s Provident Fund scheme. The Bank contributes monthly at a determined rate (currently 10% of employee’s basic pay plus eligible allowance). These contributions are remitted to a trust established for this purpose and are charged to Profit and Loss Account. The bank recognises such annual contributions as an expense in the year to which it relates.

b) Pension:

All Employees of the bank, who have joined from 1st April, 2010 are eligible for contributory pension. Such employees contribute monthly at a predetermined rate to the pension scheme. The bank also contributes monthly at a predetermined rate to the said pension scheme. Bank recognises its contribution to such scheme as expenses in the year to which it relates. The contributions are remitted to National Pension System Trust. The obligation of bank is limited to such predetermined contribution.

iii. Other Long term Employee Benefit:

a) Leave encashment benefit, which is a defined benefit obligation, is provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.

b) Other employee benefits such as Leave Fare Concession, Milestone award, resettlement benefits, Sick leave etc. which are defined benefit obligations are provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.

c) In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective territories.

13) EARNINGS PER SHARE:

Basic and Diluted earnings per equity share are reported in accordance with AS-20 “Earnings per share”. Basic earnings per equity share are computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the period.

Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the end of the period.

14) TAXES ON INCOME:

Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - “Accounting for Taxes on Income” respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.

Deferred Tax adjustments comprise changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognised by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognised in the profit and loss account.

Deferred tax assets are recognised and re-assessed at each reporting date, based upon management’s judgment as to whether their realisation is considered as reasonably certain. Deferred Tax Assets are recognised on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realised against future taxable income.

15) IMPAIRMENT OF ASSETS:

Impairment losses, if any on Fixed Assets (including revalued assets) are recognised and charged to Profit and Loss account in accordance with AS-28 “Impairment of Assets”.However, an impairment loss on a revalued asset is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount held in the revaluation surplus for that same asset.

16) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:

As per AS-29 “Provisions, Contingent Liabilities and Contingent Assets”, the Bank recognises provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefit is remote.

Contingent Assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised.

17) SHARE ISSUE EXPENSES:

Share issue expenses are charged to the Profit and Loss Account in the year of issue of shares


Mar 31, 2015

1) BASIS OF PREPARATION:

The abridged Standalone and Consolidated Financial Statements have been prepared from the audited Standalone and Consolidated financial statements of the Bank of India (''the Bank'') for the year ended 31st March,2015, which are prepared based on the accounting policies hereinafter appearing.

The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated and conform, in all material aspects, to the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and accounting practices prevalent in the banking industry in India. In respect of foreign offices/branches, statutory provisions and accounting practices prevailing in the respective foreign countries are complied with, except as specified elsewhere

In addition to above, for preparation of the consolidated financial statements applicable statutory provisions and regulatory norms prescribed by the Insurance Regulatory and Development Authority of India (IRDA and Companies Act 1956 have been followed to the extent these are applicable to the Joint ventures/subsidiaries/ associates being consolidated.

2) USE OF ESTIMATES:

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

3) REVENUE RECOGNITION:

3.1 Banking entities

(a) Income/Expenditure is recognised on accrual basis, unless otherwise stated. In respect of foreign offices, income is recognised as per local laws of host country.

(b) Interest income is recognised on time proportion basis except (i) interest on Non-performing Assets, which is recognised on realisation, in terms of the RBI guidelines.

(c) Commission on issue of Bank Guarantee and Letter of Credit is accrued over the tenure of BG/LC.

(d) All other Commission and Exchange, Brokerage, Fees and other charges are recognised as income on realisation.

(e) Income (other than interest) on investments in "Held to Maturity" category acquired at a discount to the face value, is recognised as follows:

1. On Interest bearing securities, it is recognised only at the time of sale/ redemption.

2. On zero-coupon securities, it is accounted for over the balance tenor of the security on a constant yield basis.

(f) Profit or loss on sale of investments is recognised in the Profit and Loss account. However, in case of profit on sale of investments under ''Held to Maturity'' category, an equivalent amount, net of taxes and amount required to be transferred to Statutory Reserves, is appropriated to ''Capital Reserve Account''.

(g) Dividend is recognised when the right to receive the dividend is established.

(h) Interest on Income-tax refund is recognised in the year of passing of assessment order.

(i) The recoveries made from NPA accounts are appropriated first towards unrealised interest/income debited to borrowers accounts, expenditure/out of pocket expenses incurred, then principal dues and lastly towards uncharged interest.

3.2 Non Banking entities:

Insurance:

a) Premium Income:

Premium (net of service tax) is recognised as income when due. For linked business, premium is recognised when the associated units are created. Top up premiums are considered as single premium. Premium on lapsed policies is recognised as income when such policies are reinstated.

b) Income from linked funds:

Income from linked funds which includes policy administrative charges, mortality charges, fund management charges etc. are recovered from the linked funds in accordance with the terms and conditions of policy and recognised when recovered.

c) Reinsurance Premium:

Reinsurance Premium ceded is accounted for at the time of recognition of premium income in accordance with the terms and conditions of the relevant treaties with the reinsurers.

d) Benefits paid (including claims):

Benefits paid comprise of policy benefits & claim settlement costs, if any.

Death, rider & surrender claims are accounted for on receipt of intimation from the policy holder. Withdrawals & surrenders under linked policies are accounted for in the respective schemes when the associated units are cancelled.

Survival benefit claims and maturity claims are accounted for when due.

Reinsurance recoveries on claims are accounted for in the period in which claims are settled.

e) Acquisition Costs

Acquisition costs are costs that vary with and are primarily related to acquisition of insurance contracts and are expensed in the period in which they are incurred.

Claw back in future, if any, for the first year commission paid, is accounted for in the year in which it is recovered.

f) Liability for life policies:

Actuarial liability for life policies in force and for policies in respect of which premium has been discontinued but a liability exists, is determined by the Appointed Actuary using the gross premium method and in case of group business unearned premium reserve method, in accordance with accepted actuarial practice, requirements of Insurance Act, 1938, IRDA regulations and the stipulations of Institute of Actuaries of India.

Linked liabilities comprise unit liability representing the fund value of policies and non-unit liability for meeting insurance claims etc. This is based on an actuarial valuation carried out by the Appointed Actuary.

Non-Banking Activities - Mutual Fund

Revenue from Operations Management fees from the scheme of mutual fund are accounted on an accrual basis in accordance with the investment management agreement and are dependent on the net asset value as recorded by the schemes of BOI AXA Mutual fund.

Other Income: Interest income is recorded on accrual basis. Profit or loss on sale of investment is recognised in the P & L Account on the trade date and determined on weighted average basis for individual security.

4) ADVANCES:

(a) Advances are classified into "Performing" and "Non-Performing Advances" (NPAs) in accordance with the applicable regulatory guidelines.

(b) NPAs are further classified into Sub-Standard, Doubtful and Loss Assets in terms of applicable regulatory guidelines.

(c) In respect of domestic branches, Provisions in respect of NPAs is made as per policy of the bank particularly in accelerated provisioning for NPAs which is at the rate given as under:

Category of NPAs % of net outstanding advance

Sub Standard:*

a) Exposures, which are unsecured ab initio 25%

b) Others 15%

Doubtful:

a) Secured portion (Period for which advance has remained in doubtful category)

- Up to one year 25%

- One year to three years 60%

- More than three years 100%

b) Unsecured portion 100%

Loss 100%

* on the outstanding advance

(d) In respect of foreign branches, classification of advances as NPAs and provision in respect of NPAs is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.

(e) Provisions in respect of NPAs, unrealised interest, ECGC claims settled, etc., are deducted from total advances to arrive at net advances as per RBI norms.

(f) In respect of Rescheduled/Restructured advances, provision is made for the diminution in the fair value of restructured advances measured in present value terms as per RBI guidelines. The said provision is reduced to arrive at Net advances.

(g) In case of financial assets sold to Asset Reconstruction Company (ARC) / Securitisation Company (SC), if the sale is at a price higher than the NBV, the surplus is retained and utilised to meet the shortfall/loss on account of sale of other financial assets to SC/ARC. If the sale is at a price below the net book value (NBV), (i.e. outstanding less provision held) the shortfall is to be debited to the Profit and Loss account. However if surplus is available, such shortfall will be absorbed in the surplus. Any such shortfall arising due to sale of NPA on or after 26/02/2014 will be amortised over a period of two years if not absorbed in the surplus.

Excess provision arising out of sale of NPA''s are reversed only when the cash received (by way of initial consideration only/ or redemption of SRS/PTC) is higher then the net book value (NBV) of the asset. Reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.

(h) Provision for Standard assets, including restructured advances classified as standard, is made in accordance with RBI guidelines.

(i) Provision for net funded country exposures is made on a graded scale in accordance with the RBI guidelines.

5) FLOATING PROVISION:

The bank has a policy for creation and utilisation of floating provisions. The quantum of floating provisions to be created is assessed at the end of each financial year. The floating provisions are utilised only for contingencies under extraordinary circumstances specified in the policy with prior permission of Reserve Bank of India or on being specifically permitted by Reserve Bank of India for specific purposes.

6) Debit/Credit Card Reward Points:

Provision for Reward Points on Debit/Credit cards is made based on the accumulated outstanding points in each category.

7) INVESTMENTS:

Investments are categorised under ''Held to Maturity'', ''Held for Trading'' and ''Available for Sale'' categories as per RBI guidelines. For the purpose of disclosure of investments in India, these are classified, in accordance with RBI guidelines, under six classification viz. Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investment in Subsidiaries and Associates and Others. In respect of investments outside India, these are classified, in accordance with RBI guidelines, under four categories viz. Government Securities (including local authorities), Subsidiaries/ Joint Ventures abroad and Other Investments.

(a) Basis of categorisation

Categorisation of an investment is done at the time of its acquisition. Transactions in Government Securities are recognised on Settlement Date and all other investments are recognised on trade date.

i) Held to Maturity

These comprise investments that the Bank intends to hold till maturity. Investments in subsidiaries, joint ventures and associates are also categorised under Held to Maturity.

ii) Held for Trading

This comprise investments acquired with the intention to trade by taking advantage of short term price/interest rate movements. These are intended to be traded within 90 days from the date of purchase.

iii) Available for Sale

This comprise investments which do not fall under in "Held to Maturity" or "Held for Trading" classification.

(b) Acquisition Cost of Investment

i) Brokerage, commission, securities transaction tax etc. paid on acquisition of equity investments are included in cost.

ii) Brokerage, commission, broken period interest paid/ received on debt investments is treated as income/ expense and is excluded from cost/sale consideration.

iii) Brokerage and Commission received on subscription of investments is credited to Profit and Loss Account.

iv) Cost of investments is determined at weighted average cost method.

(c) Method of valuation

Investments in India are valued in accordance with the RBI guidelines and investments held at foreign branches are valued at lower of the value as per the statutory provisions prevailing at the respective foreign countries or as per RBI guidelines issued from time to time.

Treasury Bills and Commercial Papers are valued at carrying cost.

i) Held to Maturity

1 Investments included in this category are carried at their acquisition cost, net of amortisation, if any. The excess of acquisition cost, if any, over the face value is amortised over the remaining period to maturity using constant yield method. Such amortisation of premium is adjusted against income under the head "interest on investments".

2 Investments in subsidiaries, joint ventures and associates (both in India and abroad) are valued at historical cost except for investments in Regional Rural Banks, which are valued at carrying cost (i.e. book value). A provision is made for diminution, other than temporary, for each investment individually.

ii) Held for Trading / Available for Sale

1 Investments under these categories are individually valued at the market price or fair value determined as per Regulatory guidelines and only the net depreciation in each classification for each category is provided for and net appreciation is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.

2 For the purpose of valuation of quoted investments in "Held for Trading" and "Available for Sale" categories, the market rates / quotes on the Stock Exchanges, the rates declared by Primary Dealers Association of India (PDAI) / Fixed Income Money Market and Derivatives Association (FIMMDA) are used. Investments for which such rates/quotes are not available are valued as per norms laid down by RBI, which are as under:

Government Securities on Yield to Maturity basis

Other Approved Securities on Yield to Maturity basis

Equity Shares, PSU and At break up value as per the Trustee shares latest Balance Sheet (not more than 18 months old), otherwise Rs. 1 per company.

Preference Shares on Yield to Maturity basis

PSU Bonds on Yield to Maturity basis

Units of Mutual Funds at the latest repurchase price/NAV declared by the Fund in respect of each scheme

Venture Capital Funds Declared NAV or break up NAV as per (VCF) audited financials which are not more than 18 months old. If NAV/audited financials are not available for more than 18 months then at Rs. 1/- per VCF.

Security Receipts At NAV as declared by Securitisation Companies

(d) Transfer of Securities between Categories

The transfer of securities between categories are carried out at the least of acquisition cost / book value /market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

(e) Non performing Investments (NPIs) and valuation thereof

1 Investments are classified as performing and non- performing, based on the guidelines issued by the RBI in case of domestic offices and respective regulators in case of foreign offices.

2 In respect of non performing investments, income is not recognised and provision is made for depreciation in value of such securities as per RBI guidelines.

(f) Repo / Reverse Repo

The securities sold and purchased under Repo/ Reverse repo are accounted as Collateralised lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/ purchase transactions and such movement of securities is reflected using the Repo/ Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity. Costs and revenues are accounted as interest expenditure/income, as the case may be. Balance in Repo Account is classified as Borrowings and balance in Reverse Repo account is classified as Balance with Banks and Money at Call & Short Notice.

8) Derivative

The Bank presently deals in interest rate and currency derivatives. The interest rate derivatives dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures. Currency Derivatives dealt with by the Bank are Options, Currency Swaps and Currency Futures. Based on RBI guidelines, Derivatives are valued as under:

(a) The hedge/non hedge (market making) transactions are recorded separately.

(b) Income/expenditure on hedging derivatives are accounted on accrual basis

(c) Trading derivative positions are marked to market (MTM) and the resulting losses, if any, are recognised in the Profit & Loss Account. Profit, if any, is ignored.

(d) Gains/ losses on termination of the trading swaps are recorded on the termination date as income/expenditure. Any gain/ loss on termination of swap is deferred and recognised over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/liabilities.

(e) Option fees/premium is amortised over the tenor of the option contract.

9) FIXED ASSETS:

(a) Fixed assets are stated at historic cost, except in the case of assets which have been revalued, which is stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve.

(b) Cost includes cost of purchase and all expenditure such as site preparation, installation costs, professional fees etc. incurred on the asset before it is put to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefits from such assets or their functioning capability.

(c) Cost of premises includes cost of land, both freehold and leasehold.

10) DEPRECIATION ON FIXED ASSETS:

a) Depreciation on assets is charged on the Written Down Value at the rates determined by the Bank, except in respect of computers where it is calculated on the Straight Line Method, at the rates prescribed by RBI.

b) In respect of additions, depreciation is provided for the full year, irrespective of the date on which the assets were put to use whereas, depreciation is not provided in the year of sale/ disposal of an asset.

c) Depreciation on the revalued portion of assets is adjusted against the Revaluation Reserve.

d) Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

e) Premium paid on leasehold land is amortised over the period of lease.

f) Depreciation on assets in respect of domestic are provided as under:

Sr. Particulars Rate of No Depreciation

1. Premises 5.00%

2. Other Fixed Assets

Furniture, Fixtures, Electrical fittings 10.00% and Equipments

Air-conditioning plants, etc. and business 15.00% Machines

Motor cars, Vans & Motor cycles 20.00%

Computers and Computer Software forming 33.33% integral part of hardware.

Computer Software, not forming integral 100.00% part of hardware

g) Depreciation on fixed assets outside India is provided based on the estimated useful life determined by each centre.

11) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

Transactions involving foreign exchange are accounted for in accordance with AS 11, "The Effect of Changes in Foreign Exchange Rates".

a) Translation in respect of Integral Foreign operations:

Foreign currency transactions of Indian branches have been classified as integral foreign operations and foreign currency transactions of such operations are translated as under:

i) Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the weekly average closing rate as advised by Foreign Exchange Dealers Association of India (FEDAI)

ii) Foreign currency monetary items are reported using the FEDAI closing spot rates.

iii) Foreign currency non-monetary items, which are carried in terms of historical cost, are reported using the exchange rate at the date of the transaction.

iv) Contingent liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.

v) Outstanding foreign exchange spot and forward contracts held for trading are revalued at the exchange rates notified by FEDAI for specified maturities, and the resulting profit or loss is recognised in the Profit and Loss account.

vi) Outstanding Foreign exchange forward contracts which are not intended for trading are valued at the closing spot rate. The premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.

vii) Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.

viii) Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/losses are recognised in the Profit and Loss account.

b) Translation in respect of Non-Integral Foreign operations:

Transactions and balances of foreign branches are classified as non-integral foreign operations and their financial statements are translated as follows:

i) Assets and Liabilities (monetary and non-monetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI.

ii) Income and expenses are translated at the quarterly average closing rates notified by FEDAI.

iii) All resulting exchange differences are accumulated in a separate account ''Foreign Currency Translation Reserve'' till the disposal of the net investments by the bank in the respective foreign branches.

iv) The Assets and Liabilities of foreign offices in foreign currency (other than local currency of the foreign offices) are translated into local currency using spot rates applicable to that country.

12) EMPLOYEE BENEFITS:

i. Short Term Employee Benefit:

The undiscounted amount of short-term employee benefits, such as medical benefits etc. which are expected to be paid in exchange for the services rendered by employees are recognised during the period when the employee renders the service.

ii. Post Employment Benefit:

A. Defined Benefit Plan

a) Gratuity

The Bank provides gratuity to all eligible employees. The benefit is in the form of lump sum payments to vested employees on retirement, on death while in employment, or on termination of employment, for an amount equivalent to 15 days basic salary payable for each completed year of service, subject to a maximum prescribed as per The Payment of Gratuity Act 1972 or BOI (Employee) Gratuity Regulation whichever is higher. Vesting occurs upon completion of five years of service. The Bank makes periodic contributions to a fund administered by trustees based on an independent external actuarial valuation carried out annually.

b) Pension

The Bank provides pension to all eligible employees. The benefit is in the form of monthly payments as per rules and payments to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs at different stages as per rules. The Bank makes monthly contribution to the pension fund at 10% of pay in terms of BOI (Employees) Pension regulations. The pension liability is reckoned based on an independent actuarial valuation carried out annually and Bank makes such additional contributions periodically to the Fund as may be required to secure payment of the benefits under the pension regulations.

B. Defined Contribution Plan:

a) Provident Fund

The Bank operates a Provident Fund scheme. All eligible employees are entitled to receive benefits under the Bank''s Provident Fund scheme. The Bank contributes monthly at a determined rate (currently 10% of employee''s basic pay plus eligible allowance). These contributions are remitted to a trust established for this purpose and are charged to Profit and Loss Account. The bank recognises such annual contributions as an expense in the year to which it relates.

b) Pension

All Employees of the bank, who have joined from 1st April, 2010 are eligible for contributory pension. Such employees contribute monthly at a predetermined rate to the pension scheme. The bank also contributes monthly at a predetermined rate to the said pension scheme. Bank recognises its contribution to such scheme as expenses in the year to which it relates. The contributions are remitted to National Pension System Trust. The obligation of bank is limited to such predetermined contribution.

iii. Other Long term Employee Benefit:

c) Leave encashment benefit, which is a defined benefit obligation, is provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.

d) Other employee benefits such as Leave Fare Concession, Milestone award, resettlement benefits, etc. which are defined benefit obligations are provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.

13) EARNINGS PER SHARE:

a) Basic and Diluted earnings per equity share are reported in accordance with AS 20 "Earnings per share". Basic earnings per equity share are computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the period.

b) Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the end of the period.

14) TAXES ON INCOME:

a) Income Tax comprises the current tax provision and net change in deferred tax assets or liabilities during the year, in accordance with AS 22 "Accounting for Taxes on Income". Current taxes are determined in accordance with the provisions of Accounting Standard 22 and tax laws prevailing in India after taking into account taxes of foreign offices, which are based on the tax laws of respective jurisdiction. Deferred tax adjustments comprise of changes in the deferred tax assets or liabilities during the period.

b) Deferred Tax is recognised subject to consideration of prudence in respect of items of income and expenses those arise at one point of time and are capable of reversal in one or more subsequent years.

c) Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

d) Deferred tax assets are recognised and reassessed at each reporting date, based upon management''s judgement as to whether realisation is considered reasonably certain. Deferred tax assets are recognised on carry forward of unabsorbed depreciation and tax losses, only if there is virtual certainty that such deferred tax assets can be realised against future profits.

15) IMPAIRMENT OF ASSETS:

"Impairment losses, if any on Fixed Assets (including revalued assets) are recognised and charged to Profit and Loss account in accordance with AS 28 "Impairment of Assets".However, an impairment loss on a revalued asset is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount held in the revaluation surplus for that same asset."

16) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:

As per AS 29 "Provisions, Contingent Liabilities and Contingent Assets", the Bank recognises provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefit is remote.

Contingent Assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised.

17) SHARE ISSUE EXPENSES:

Share issue expenses are charged to the Profit and Loss Account in the year of issue of shares.


Mar 31, 2014

1) BASIS OF PREPARATION:

The abridged Standalone and Consolidated Financial Statements have been prepared from the audited Standalone and Consolidated Financial Statements of Bank of India (''the Bank'') for the year ended 31st March 2014, which were prepared based on the accounting policies hereinafter appearing.

The Financial Statements are prepared following the going concern concept, on historical cost basis unless otherwise stated and conform, in all material aspects, to the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and accounting practices prevalent in the banking industry in India. In respect of foreign offices/branches, statutory provisions and accounting practices prevailing in the respective foreign countries are complied with, except as specified elsewhere.

In addition to above, for preparation of the Consolidated Financial Statements applicable statutory provisions and regulatory norms prescribed by the Insurance Regulatory and Development Authority (IRDA) and Companies Act 1956 have been followed to the extent these are applicable to the joint ventures/subsidiaries/associates being consolidated.

2) USE OF ESTIMATES:

The preparation of Financial Statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) as of date of the Financial Statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the Financial Statements are prudent and reasonable. However actual results can differ from estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.

3) REVENUE RECOGNITION: 3.1 Banking entities

(a) Income/Expenditure is recognised on accrual basis, unless otherwise stated. In respect of foreign offices, income is recognised as per local laws of host country.

(b) Interest income is recognised on time proportion basis except (i) interest on Non-performing Assets, which is recognised on realisation, in terms of the RBI guidelines.

(c) Commission on issue of Bank Guarantee and Letter of Credit is accrued over the tenure of BG/LC.

(d) All other Commission and Exchange, Brokerage, Fees and other charges are recognised as income on realisation.

(e) Income (other than interest) on investments in "Held to Maturity" category acquired at a discount to the face value, is recognised as follows:

1. On Interest bearing securities, it is recognised only at the time of sale/ redemption.

2. On zero-coupon securities, it is accounted for over the balance tenor of the security on a constant yield basis.

(f) Proft or loss on sale of investments is recognised in the Profit and Loss account. However, in case of profit on sale of investments under ''Held to Maturity'' category, an equivalent amount, net of taxes and amount required to be transferred to Statutory Reserves, is appropriated to ''Capital Reserve Account''.

(g) Dividend is recognised when the right to receive the dividend is established.

(h) Interest on Income-tax refund is recognised in the year of passing of assessment order.

(i) The recoveries made from NPA accounts are appropriated first towards unrealised interest/income debited to borrowers accounts, expenditure/out of pocket expenses incurred, then principal dues and lastly towards uncharged interest.

3.2 Non Banking Entities

Insurance:

a) Premium Income:

Premium (net of service tax) is recognised as income when due. For linked business, premium is recognised when the associated units are created. Top up premiums are considered as single premium.

Premium on lapsed policies is recognised as income when such policies are reinstated.

b) Income from linked funds:

Income from linked funds which includes policy administrative charges, mortality charges, fund management charges etc. are recovered from the linked funds in accordance with the terms and conditions of policy and recognised when recovered.

c) Reinsurance Premium:

Reinsurance Premium ceded is accounted for at the time of recognition of premium income in accordance with the terms and conditions of the relevant treaties with the reinsurers.

d) Benefits’ paid (including claims):

Benefits paid comprise of policy benefits & claim settlement costs, if any.

Death, rider & surrender claims are accounted for on receipt of intimation from the policy holder. Withdrawals & surrenders under linked policies are accounted for in the respective schemes when the associated units are cancelled.

Survival benefit claims and maturity claims are accounted for when due.

Reinsurance recoveries on claims are accounted for in the period in which claims are settled.

e) Acquisition Costs

Acquisition costs are costs that vary with and are primarily related to acquisition of insurance contracts and are expensed in the period in which they are incurred.

Claw back in future, if any, for the first year commission paid, is accounted for in the year in which it is recovered.

f) Liability for life policies:

Actuarial liability for life policies in force and for policies in respect of which premium has been discontinued but a liability exists, is determined by the Appointed Actuary using the gross premium method and in case of group business unearned premium reserve method, in accordance with accepted actuarial practice, requirements of Insurance Act, 1938, IRDA regulations and the stipulations of Institute of Actuaries of India.

Linked liabilities comprise unit liability representing the fund value of policies and non-unit liability for meeting insurance claims etc. This is based on an actuarial valuation carried out by the Appointed Actuary.

4) ADVANCES:

(a) Advances are classified into "Performing" and "Non-Performing Advances" (NPAs) in accordance with the applicable regulatory guidelines.

(b) NPAs are further classified into Sub-Standard, Doubtful and Loss Assets in terms of applicable regulatory guidelines.

(d) In respect of foreign branches, classification of advances as NPAs and provision in respect of NPAs is made as per the regulatory requirements prevailing at the respective foreign countries or as per guidelines applicable to domestic branches, whichever is stringent.

(e) Provisions in respect of NPAs, unrealised interest, ECGC claims settled, etc., are deducted from total advances to arrive at net advances as per RBI norms.

(f) In respect of Rescheduled/Restructured advances, provision is made for the diminution in the fair value of restructured advances measured in present value terms as per RBI guidelines. The said provision is reduced to arrive at Net advances.

(g) In case of financial assets sold to Asset Reconstruction Company (ARC) / Securitisation Company (SC), if the sale is at a price higher than the NBV, the surplus is retained and utilised to meet the shortfall/loss on account of sale of other financial assets to SC/ARC. If the sale is at a price below the net book value (NBV), (i.e. outstanding less provision held) the shortfall is to be debited to the Profit and Loss account. However if surplus is available, such shortfall will be absorbed in the surplus. Any such shortfall arising due to sale of NPA on or after 26/02/2014 will be amortised over a period of two years if not absorbed in the surplus.

Excess provision arising out of sale of NPA''s are reversed only when the cash received (by way of initial consideration only/ or redemption of SRS/PTC) is higher than the net book value (NBV) of the asset. Reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.

(h) Provision for Standard assets, including restructured advances classified as standard, is made in accordance with RBI guidelines.

(i) Provision for net funded country exposures is made on a graded scale in accordance with the RBI guidelines.

5) FLOATING PROVISION:

The bank has a policy for creation and utilisation of footing provisions. The quantum of footing provisions to be created is assessed at the end of each financial year. The footing provisions are utilised only for contingencies under extraordinary circumstances specified in the policy with prior permission of Reserve Bank of India or on being specifically permitted by Reserve Bank of India for specific purposes.

6) Debit/Credit Card Reward Points:

Provision for Reward Points on Debit/Credit cards is made based on the accumulated outstanding points in each category.

7) INVESTMENTS:

Investments are categorised under Held to Maturity'', ''Held for Trading'' and ''Available for Sale'' categories as per RBI guidelines. For the purpose of disclosure of investments in India, these are classified, in accordance with RBI guidelines, under six classification viz. Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investment in Subsidiaries and Associates and Others. In respect of investments outside India, these are classified, in accordance with RBI guidelines, under four categories viz. Government Securities (including local authorities), Subsidiaries/ Joint Ventures abroad and Other Investments.

(a) Basis of categorisation

Categorisation of an investment is done at the time of its acquisition. Transactions in Government Securities are recognised on Settlement Date and all other investments are recognised on trade date.

i) Held to Maturity

These comprise investments that the Bank intends to hold till maturity. Investments in subsidiaries, joint ventures and associates are also categorised under Held to Maturity.

ii) Held for Trading

This comprise investments acquired with the intention to trade by taking advantage of short term price/interest rate movements. These are intended to be traded within 90 days from the date of purchase.

iii) Available for Sale

This comprise investments which do not fall under in "Held to Maturity" or "Held for Trading" classification.

(b) Acquisition Cost of Investment

i) Brokerage, commission, securities transaction tax etc. paid on acquisition of equity investments are included in cost.

ii) Brokerage, commission, broken period interest paid/ received on debt investments is treated as income/ expense and is excluded from cost/sale consideration.

iii) Brokerage and Commission received on subscription of investments is credited to Profit and Loss Account.

iv) Cost of investments is determined at weighted average cost method.

(c) Method of valuation

Investments in India are valued in accordance with the RBI guidelines and investments held at foreign branches are valued at lower of the value as per the statutory provisions prevailing at the respective foreign countries or as per RBI guidelines issued from time to time.

Treasury Bills and Commercial Papers are valued at carrying cost.

i) Held to Maturity

1 Investments included in this category are carried at their acquisition cost, net of amortisation, if any. The excess of acquisition cost, if any, over the face value is amortised over the remaining period to maturity using constant yield method. Such amortisation of premium is adjusted against income under the head "interest on investments".

2 Investments in subsidiaries, joint ventures and associates (both in India and abroad) are valued at historical cost except for investments in Regional Rural Banks, which are valued at carrying cost (i.e. book value). A provision is made for diminution, other than temporary, for each investment individually.

ii) Held for Trading / Available for Sale

1 Investments under these categories are individually valued at the market price or fair value determined as per Regulatory guidelines and only the net depreciation in each classification for each category is provided for and net appreciation is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.

2 For the purpose of valuation of quoted investments in "Held for Trading" and "Available for Sale" categories, the market rates / quotes on the Stock Exchanges, the rates declared by Primary Dealers Association of India (PDAI) / Fixed Income Money Market and Derivatives Association (FIMMDA) are used. Investments for which such rates/quotes are not available are valued as per norms laid down by RBI, which are as under:

(d) Transfer of Securities between Categories

The transfer of securities between categories are carried out at the least of acquisition cost / book value /market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

(e) Non performing Investments (NPIs) and valuation thereof

1 Investments are classified as performing and non- performing, based on the guidelines issued by the RBI in case of domestic offices and respective regulators in case of foreign offices.

2 In respect of non performing investments, income is not recognised and provision is made for depreciation in value of such securities as per RBI guidelines.

(f) Repo / Reverse Repo

The securities sold and purchased under Repo/ Reverse repo are accounted as Collateralised lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/ purchase transactions and such movement of securities is reflected using the Repo/ Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity. Costs and revenues are accounted as interest expenditure/income, as the case may be. Balance in Repo Account is classified as Borrowings and balance in Reverse Repo account is classified as Balance with Banks and Money at Call & Short Notice.

8) Derivative

The Bank presently deals in interest rate and currency derivatives. The interest rate derivatives dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures. Currency Derivatives dealt with by the Bank are Options, Currency Swaps and Currency Futures. Based on RBI guidelines, Derivatives are valued as under:

(a) The hedge/non hedge (market making) transactions are recorded separately.

(b) Income/expenditure on hedging derivatives are accounted on accrual basis

(c) Trading derivative positions are marked to market (MTM) and the resulting losses, if any, are recognised in the Profit & Loss Account. Profit, if any, is ignored.

(d) Gains/ losses on termination of the trading swaps are recorded on the termination date as income/expenditure. Any gain/ loss on termination of swap is deferred and recognised over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/liabilities.

(e) Option fees/premium is amortised over the tenor of the option contract.

9) FIXED ASSETS:

(a) Fixed assets are stated at historic cost, except in the case of assets which have been revalued, which is stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve.

(b) Cost includes cost of purchase and all expenditure such as site preparation, installation costs, professional fees etc. incurred on the asset before it is put to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefits from such assets or their functioning capability.

(c) Cost of premises includes cost of land, both freehold and leasehold.

10) DEPRECIATION ON FIXED ASSETS:

a) Depreciation on assets is charged on the Written Down Value at the rates determined by the Bank, except in respect of computers where it is calculated on the Straight Line Method, at the rates prescribed by RBI

b) In respect of additions, depreciation is provided for the full year, irrespective of the date on which the assets were put to use whereas, depreciation is not provided in the year of sale/ disposal of an asset.

c) Depreciation on the revalued portion of assets is adjusted against the Revaluation Reserve.

d) Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

e) Premium paid on leasehold land is amortised over the period of lease.

g) Depreciation on fxed assets outside India is provided as per the regulatory requirements/or prevailing practices of the respective country.

11) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

Transactions involving foreign exchange are accounted for in accordance with AS 11, "The Effect of Changes in Foreign Exchange Rates".

a) Translation in respect of Integral Foreign operations:

Foreign currency transactions of Indian branches have been classified as integral foreign operations and foreign currency transactions of such operations are translated as under:

i) Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the weekly average closing rate as advised by Foreign Exchange Dealers Association of India (FEDAI)

ii) Foreign currency monetary items are reported using the FEDAI closing spot rates.

iii) Foreign currency non-monetary items, which are carried in terms of historical cost, are reported using the exchange rate at the date of the transaction.

iv) Contingent liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.

v) Outstanding foreign exchange spot and forward contracts held for trading are revalued at the exchange rates notified by FEDAI for specified maturities, and the resulting proof or loss is recognised in the Proft and Loss account.

vi) Outstanding Foreign exchange forward contracts which are not intended for trading are valued at the closing spot rate. The premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.

vii) Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.

viii) Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/losses are recognised in the Profit and Loss account.

b) Translation in respect of Non-Integral Foreign operations:

Transactions and balances of foreign branches are classified as non-integral foreign operations and their Financial Statements are translated as follows:

i) Assets and Liabilities (monetary and non-monetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI.

ii) Income and expenses are translated at the quarterly average closing rates notified by FEDAI.

iii) All resulting exchange differences are accumulated in a separate account ''Foreign Currency Translation Reserve'' till the disposal of the net investments by the bank in the respective foreign branches.

iv) The Assets and Liabilities of foreign offices in foreign currency (other than local currency of the foreign offices) are translated into local currency using spot rates applicable to that country.

12) EMPLOYEE BENEFITS:

i. Short Term Employee Benefit:

The undiscounted amount of short-term employee benefits, such as medical benefits etc. which are expected to be paid in exchange for the services rendered by employees are recognised during the period when the employee renders the service.

ii. Post Employment Benefit:

A. Defend Benefit Plan

a) Gratuity

The Bank provides gratuity to all eligible employees. The benefit is in the form of lump sum payments to vested employees on retirement, on death while in employment, or on termination of employment, for an amount equivalent to 15 days basic salary payable for each completed year of service, subject to a maximum prescribed as per The Payment of Gratuity Act 1972 or BOI (Employee) Gratuity Regulation whichever is higher. Vesting occurs upon completion of five years of service. The Bank makes periodic contributions to a fund administered by trustees based on an independent external actuarial valuation carried out annually.

b) Pension

The Bank provides pension to all eligible employees. The benefit is in the form of monthly payments as per rules and payments to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs at different stages as per rules. The Bank makes monthly contribution to the pension fund at 10% of pay in terms of BOI (Employees) Pension regulations. The pension liability is reckoned based on an independent actuarial valuation carried out annually and Bank makes such additional contributions periodically to the Fund as may be required to secure payment of the benefits under the pension regulations.

B. Defined Contribution Plan:

a) Provident Fund

The Bank operates a Provident Fund scheme. All eligible employees are entitled to receive benefits under the Bank''s Provident Fund scheme. The Bank contributes monthly at a determined rate (currently 10% of employee''s basic pay plus eligible allowance). These contributions are remitted to a trust established for this purpose and are charged to Profit and Loss Account. The bank recognises such annual contributions as an expense in the year to which it relates.

b) Pension

All Employees of the bank, who have joined from 1st April, 2010 are eligible for contributory pension. Such employees contribute monthly at a predetermined rate to the pension scheme. The bank also contributes monthly at a predetermined rate to the said pension scheme. Bank recognises its contribution to such scheme as expenses in the year to which it relates. The contributions are remitted to National Pension System Trust. The obligation of bank is limited to such predetermined contribution.

iii. Other Long term Employee Benefit:

a) Leave encashment benefit, which is a defend benefit obligation, is provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.

b) Other employee benefits such as Leave Fare Concession, Milestone award, resettlement benefits, Casual Leave etc. which are defined benefit obligations are provided for on the basis of an actuarial valuation in accordance with AS 15 - Employee Benefits.

13) EARNINGS PER SHARE:

a) Basic and Diluted earnings per equity share are reported in accordance with AS 20 "Earnings per share". Basic earnings per equity share are computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the period.

b) Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at the end of the period.

14) TAXES ON INCOME:

a) Income Tax comprises the current tax provision and net change in deferred tax assets or liabilities during the year, in accordance with AS 22 "Accounting for Taxes on Income". Current taxes are determined in accordance with the provisions of Accounting Standard 22 and tax laws prevailing in India after taking into account taxes of foreign offices, which are based on the tax laws of respective jurisdiction. Deferred tax adjustments comprise of changes in the deferred tax assets or liabilities during the period.

b) Deferred Tax is recognised subject to consideration of prudence in respect of items of income and expenses those arise at one point of time and are capable of reversal in one or more subsequent years.

c) Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

d) Deferred tax assets are recognised and reassessed at each reporting date, based upon management''s judgment as to whether realisation is considered reasonably certain. Deferred tax assets are recognised on carry forward of unabsorbed depreciation and tax losses, only if there is virtual certainty that such deferred tax assets can be realised against future profits.

15) IMPAIRMENT OF ASSETS:

"Impairment losses, if any on Fixed Assets (including revalued assets) are recognised and charged to Proft and Loss account in accordance with AS 28 "Impairment of Assets". However, an impairment loss on a revalued asset is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount held in the revaluation surplus for that same asset."

16) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:

As per AS 29 "Provisions, Contingent Liabilities and Contingent Assets", the Bank recognises provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefit is remote.

Contingent Assets are not recognised in the Financial Statements since this may result in the recognition of income that may never be realised.

17) SHARE ISSUE EXPENSES:

Share issue expenses are charged to the Profit and Loss Account in the year of issue of shares.

Accounting policy relevant to consolidated financial statement

18) BASIS OF CONSOLIDATION:

Consolidated Financial Statements of the group have been prepared on the basis of:

1. The Financial Statements of Bank of India (the Parent bank) and its subsidiaries in accordance with Accounting Standard (AS) 21 "Consolidated Financial Statements" issued by the Institute of Chartered Accountants of India (ICAI), on a line by line basis by adding together like items of assets, liabilities, income and expenses after eliminating intra-group transactions, balances, unrealised proft/loss and making necessary adjustments wherever required to conform to uniform accounting policies except in case of overseas subsidiaries/ associates, where, the Financial Statements are prepared based on local regulatory requirements/ International Financial Reporting Standards (IFRS). Impact of such adjustments not being material is not given in Consolidated Financial Statements. The Financial Statements of the subsidiaries are drawn up to the same reporting date as that of Parent bank i.e. 31st March 2014.

2. The difference between cost to the parent bank of its investment in the subsidiaries and Parent bank''s share in the equity of the subsidiaries is recognised as goodwill/capital reserve. Goodwill, if any, is written off immediately on its recognition.

3. Minority interest in the Consolidated Financial Statement consists of the share of the minority shareholders in the net equity of the subsidiaries.

4. Accounting for Investment in Associate companies is done under Equity method in accordance with Accounting Standard (AS) 23, "Accounting for Investments in Associates in Consolidated Financial Statements", issued by ICAI.

5. Accounting for Investments in Joint Venture are consolidated on "Proportionate basis" as prescribed in Accounting Standard (AS) 27, "Financial Reporting of Interests in Joint Ventures" issued by ICAI.


Mar 31, 2012

1) ACCOUNTING CONVENTION:

The accompanying financial statements have been prepared following the going concern concept, on historical cost basis unless otherwise stated and conform to the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India, Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India. In respect of foreign offices/branches, statutory provisions and accounting practices prevailing in the respective foreign countries are complied with, except as specified elsewhere.

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) as of date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

2) REVENUE RECOGNITION:

(a) Income/Expenditure is generally accounted for on accrual basis, unless otherwise stated.

(b) Income on Non-performing Assets (NPAs) is recognised on realisation, in terms of the RBI guidelines The recoveries made from NPA accounts are appropriated first towards unrealised interest/income, principal dues and thereafter towards uncharged interest.

(c) Exchange Commission, Brokerage, Dividend Income, Commission on Government Business and Commission on Third Party Products are accounted for on realisation basis.

(d) Interest on Income-tax refunds is accounted for in the year of receipt of the assessment order.

3) ADVANCES:

(a) In terms of guidelines issued by the RBI, advances to borrowers are classified into "Performing" or "Non-Performing" assets based on recovery of principal/ interest. NPAs are further classified as Sub-Standard, Doubtful and Loss Assets.

(b) Provision for Standard assets is made as per RBI guidelines.

(c) In respect of advances at foreign offices/ branches, provision is made as per the statutory requirements prevailing at the respective foreign countries, or as per RBI guidelines, whichever is higher.

(d) Provisions in respect of NPAs, unrealised interest, ECGC claims settled, etc., are deducted from total advances to arrive at net advances as per RBI norms.

(e) In respect of Rescheduled/Restructured accounts, provision is made for the sacrifice of interest/diminution in the value of restructured advances measured in present value terms as per RBI guidelines. The said provision is reduced to arrive at Net advances.

(f) In case of financial assets sold to Asset Reconstruction Company (ARC) / Securitisation Company (SC), if the sale is at a price below the net book value (NBV), the shortfall is debited to the Profit and Loss account. If the sale value is higher than the NBV, the surplus provision is retained to meet the shortfall/loss on account of sale of other financial assets to SC/ARC.

4) INVESTMENTS:

Investments are classified under 'Held to Maturity', 'Held for Trading' and 'Available for Sale' categories as per RBI guidelines. In conformity with the requirements in Form A of the Third Schedule to the Banking Regulation Act, 1949, these are classified under six groups - Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries/Joint Ventures and Other Investments.

A) Basis of classification

Classification of an investment is normally done at the time of its acquisition:

i) Held to Maturity

These comprise investments the Bank intends to hold till maturity.

ii) Held for Trading

Investments acquired with the intention to trade within 90 days from the date of purchase are classified under this head.

iii) Available for Sale

Investments which are not classified either as "Held to Maturity" or as "Held for Trading" are classified under this head.

B) Method of valuation

Investments are valued in accordance with the RBI guidelines. Accordingly, the Bank follows "Settlement Date" for accounting of investment (in Government securities) transactions.

i) Held to Maturity

Investments included in this category are carried at their acquisition cost. Premium, if any, paid on acquisition is amortised using constant yield method over the remaining period of maturity.

ii) Held for Trading / Available for Sale

a. Investments under these categories are valued scrip-wise. Appreciation/ depreciation is aggregated for each class of securities and net depreciation as per applicable norms is recognised in the Profit and Loss account, whereas net appreciation is ignored.

b. For the purpose of valuation of quoted investments in "Held for Trading" and "Available for Sale" categories, the market rates / quotes on the Stock Exchanges, the rates declared by Primary Dealers Association of India (PDAI) / Fixed Income Money Market and Derivatives Association (FIMMDA) are used. Investments for which such rates/quotes are not available are valued as per norms laid down by RBI, which are as under:

iii) Held at Foreign Branches

Investments held at foreign branches are carried at lower of the value as per the statutory provisions prevailing at the respective foreign countries or as per RBI guidelines issued from time to time.

C) Transfer of Securities between Categories

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

D) Acquisition Cost of Investment

i) Brokerage, commission, securities transaction tax etc. paid on acquisition of Equity investments are included in cost.

ii) Brokerage, commission, broken period interest paid/ received on debt instruments is treated as income/expense and is excluded from cost/sale consideration.

iii) Brokerage and Commission received on subscription of investments is credited to Profit and Loss Account

iv) Cost of Investments is determined at weighted average cost method.

v) Treasury bills and Commercial Papers are valued at carrying cost.

E) Profit or loss on sale of investment

Profit or loss on sale of investments in any category is taken to Profit and Loss account. However, in case of profit on sale of investments under 'Held to Maturity' category, an equivalent amount net of taxes and amount required to be transferred to Statutory Reserves is appropriated to 'Capital Reserve Account'.

F) Provisioning and income recognition - Non performing Investments (NPIs)

In respect of non performing investments, income is not recognised and provision is made for depreciation in value of such securities as per RBI guidelines.

G) Repo / Reverse Repo

The Bank has adopted the Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions [other than transactions under the Liquidity Adjustment Facility (LAF) with the RBI]. The economic essence of repo transactions, viz., borrowing (lending) of funds by selling (purchasing) securities is reflected in the books of repo participants, by accounting the same as collateralized lending and borrowing transaction, with an agreement to repurchase, on the agreed terms. Costs and revenues are accounted for as interest expenditure / income, as the case may be. Balance in Repo/ Reverse Repo Account is adjusted against the balance in the Investment Account.

Securities purchased/sold under LAF with RBI are debited/credited to Investment Account and reversed on maturity of the transaction. Interest expended / earned thereon is accounted for as expenditure / revenue.

H) Derivative

The Bank presently deals in interest rate and currency derivatives. The interest rate derivatives dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures. Currency Derivatives dealt with by the Bank are Options, Currency Swaps and Currency Futures.

Based on RBI guidelines, Derivatives are valued as under:

The hedge/non hedge (market making) transactions are recorded separately.

Hedging derivatives are accounted on accrual basis.

Trading derivative positions are marked to market (MTM) and the resulting losses, if any, are recognised in the Profit & Loss Account. Profit, if any, is ignored. Income and Expenditure relating to interest rate swaps are recognised on the settlement date. Gains/ losses on termination of the trading swaps are recorded on the termination date as income/expenditure. Any gain/ loss on termination of swap is deferred and recognized over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/ liabilities.

5) FIXED ASSETS:

(a) Fixed assets are stated at historic cost, except in the case of assets which have been revalued. The appreciation on revaluation is credited to Revaluation Reserve.

(b) Cost of premises includes cost of land, both freehold and leasehold.

6) DEPRECIATION ON FIXED ASSETS:

i) Depreciation on assets is charged on the Written Down Value at the rates determined by the Bank, except in respect of computers where it is calculated on the Straight Line Method, at the rates prescribed by RBI

ii) In respect of on additions, depreciation is provided for the full year, irrespective of the date on which the assets were put to use whereas, depreciation is not provided in the year of sale/ disposal of an asset

iii) Depreciation on the revalued portion of assets is adjusted against the Revaluation Reserve.

a) Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

b) Premium paid on leasehold land is amortised over the period of lease.

d) Depreciation on fixed assets outside India is provided as per the regulatory requirements/or prevailing practices of the respective country.

7) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

Accounting for transactions involving foreign exchange is accounted for in accordance with Accounting Standard (AS) 11, "The Effect of Changes in Foreign Exchange Rates" issued by ICAI.

a) Translation in respect of Integral Foreign operations

Foreign currency transactions of Indian branches have been classified as integral foreign operations.

i) The transactions are initially recorded on weekly average closing rate as advised by FEDAI (Foreign exchange dealers association of India).

ii) Monetary Foreign currency assets and liabilities are translated at the closing rates notified by FEDAI at the year end.

iii) Acceptances, endorsements, other obligations and guarantees in foreign currencies are carried at the closing rates notified by FEDAI at the year end

iv) Foreign Currency Assets and Liabilities are translated at the closing spot rates notified by FEDAI at the end of each week.

v) The resulting exchange differences are recognized as income or expenses and are accounted through profit and loss account.

b) Translation in respect of Non-Integral Foreign operations

Transactions and balances of foreign branches are classified as non-integral foreign operations and their financial statements are translated as follows:

i) Assets and Liabilities (both monetary and non- monetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI at the year end.

ii) Income and expenses are translated at the quarterly average closing rates notified by FEDAI at the end of respective quarter.

iii) All resulting exchange differences are accumulated in a separate account 'Foreign Currency Translation Reserve' till the disposal of the net investments in the respective foreign branches.

c) Forward Exchange Contracts

In accordance with the guidelines of FEDAI and the provisions of AS-11, outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the corresponding forward rates for the residual maturity of the contract. The difference between revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/losses are recognised in the Profit and Loss account.

8) EMPLOYEE BENEFITS:

a) Provident Fund

Provident fund is a defined contribution scheme as the bank pays fixed contribution at predetermined rates. The obligation of the bank is limited to such fixed contribution. The contributions are charged to Profit and Loss Account.

b) Gratuity

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of the financial year. The scheme is funded by the bank and is managed by a separate trust.

c) Pension

Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of the financial year. The scheme is funded by the bank and is managed by a separate trust.

d) Leave encashment

The bank provides for leave encashment benefits which is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of the financial year.

e) Other employee benefits

The bank provides for other employee benefits such as Leave Fare Concession, Milestone and resettlement benefits which are defined benefit obligations and are provided for on the basis of an actuarial valuation made at the end of the financial year.

9) LEASED ASSETS:

Lease Income is recognised based on the Internal Rate of Return method over the primary period of the lease and is accounted for in accordance with the Accounting Standard (AS) 19 on "Accounting for Leases", issued by ICAI.

10) EARNING PER SHARE:

Basic and Diluted earnings per equity share are reported in accordance with the Accounting Standard (AS) 20 "Earnings per share" issued by ICAI. Basic earnings per equity share are computed by dividing net profit after tax by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.

11) TAXES ON INCOME:

Income Tax comprises the current tax provision and net change in deferred tax assets or liabilities during the year, in accordance with the Accounting Standard (AS) 22, "Accounting for Taxes on Income" issued by ICAI. Deferred Tax is recognised subject to consideration of prudence in respect of items of income and expenses those arise at one point of time and are capable of reversal in one or more subsequent years. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

12) IMPAIRMENT OF ASSETS:

Impairment losses, if any on Fixed Assets (including revalued assets) are recognised and charged to Profit and Loss account in accordance with the Accounting Standard (AS) 28 "Impairment of Assets" issued by ICAI.

13) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:

As per the Accounting Standard (AS) 29 "Provisions, Contingent Liabilities and Contingent Assets", issued by ICAI, the Bank recognises provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realised.


Mar 31, 2011

1) ACCOUNTING CONVENTION

The accompanying financial statements have been prepared following the going concern concept, on historical cost basis unless otherwise stated and conform to the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India, Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India. In respect of foreign offices/branches, statutory provisions & accounting practices prevailing in the respective foreign countries are complied with.

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) as of date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

2) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

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

2.1 Translation in respect of Integral Foreign operations:

i) Indian branches having foreign currency transactions have been classified as integral foreign operations.

ii) Monetary Foreign currency assets and liabilities are translated at the closing rates notified by Foreign Exchange Dealers Association of India (FEDAI) at the year end and non-monetary items are translated at the rates prevailing on the transaction date.

iii) Acceptances, endorsements, other obligations and guarantees in foreign currencies are carried at the closing rates notified by FEDAI at the year end. Exchange differences arising on settlement and translation of monetary items at the end of the financial year are recognised as income or expenses in the period in which they arise.

2.2 Translation in respect of Non-Integral Foreign operations:

Foreign branches are classified as non-integral foreign operations and their financial statements are translated as follows:

i) Assets and Liabilities (both monetary and non- monetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI at the year end.

ii) Income and expenses are translated at the quarterly average closing rates notified by FEDAI at the end of respective quarter.

iii) All resulting exchange differences are accumulated in a separate account ‘Foreign Currency Translation Reserve till the disposal of the net investments in the respective foreign branches.

2.3 Forward Exchange Contracts:

In accordance with the guidelines of FEDAI and the provisions of AS-11, outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the corresponding forward rates for the residual maturity of the contract. The difference between revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/losses are recognised in the Profit and Loss account.

3) INVESTMENTS:

Investments are classified under `Held to Maturity, ‘Held for Trading and ‘Available for Sale categories as per Reserve Bank of India (RBI) guidelines. In conformity with the requirements in Form A of the Third Schedule to the Banking Regulation Act, 1949, these are classified under six groups – Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries/ Joint Ventures and Other Investments.

3.1 Basis of classification

Classification of an investment is normally done at the time of its acquisition:

(a) Held to Maturity

These comprise investments the Bank intends to hold on to maturity.

(b) Held for Trading

Investments acquired with the intention to trade within 90 days from the date of purchase are classified under this head.

(c) Available for Sale

Investments which are not classified either as “Held to Maturity” or as “Held for Trading” are classified under this head.

3.2 Method of valuation

Investments are valued in accordance with the RBI guidelines.

(a) Held to Maturity

Investments included in this category are carried at their acquisition cost. Premium, if any, paid on acquisition is amortised using constant yield method over the remaining period of maturity.

(b) Held for Trading / Available for Sale

1. Investments under these categories are valued scrip-wise. Appreciation / depreciation is aggregated for each class of securities and net depreciation as per applicable norms is recognised in the Profit and Loss account, whereas net appreciation is ignored.

2. For the purpose of valuation of quoted investments in ”Held for Trading” and “Available for Sale” categories, the market rates / quotes on the Stock Exchanges, the rates declared by Primary Dealers Association of India (PDAI) / Fixed Income Money Market and Derivatives Association (FIMMDA) are used. Investments for which such rates / quotes are not available are valued as per norms laid down by Reserve Bank of India, which are as under:

Government / on Yield to Maturity basis Approved securities

Equity Shares, PSU at book value as per the latest and Trustee shares Balance Sheet (not more than 12 months old), otherwise Rs. 1 per company.

Preference Shares on Yield to Maturity basis

PSU Bonds on Yield to Maturity basis with appropriate credit spread mark-up

Units of Mutual Funds at the latest repurchase price / NAV declared by the Fund in respect of each scheme

Venture Capital Declared NAV or break up NAV as per audited balance sheet which is not more than 18 months old. If NAV/ audited financials are not available for more than 18 months continuously then at Rs. 1/- per VCF

(c) Held at Foreign Branches

Investments held at foreign branches are carried at lower of the value as per the statutory provisions prevailing at the respective foreign countries or as per RBI guidelines issued from time to time.

(d) Transfer of Securities between Categories

The transfer of a security between categories specified in (a) to (c) above are accounted for at the acquisition cost / book value /market value on the date of transfer, whichever is the least, and the depreciation, if any, on such transfer is fully provided for.

(e) Profit or loss on sale of investment

Profit or loss on sale of investments in any category is taken to Profit and Loss account. However, in case of profit on sale of investments under ‘Held to Maturity category, an equivalent amount net of taxes and amount required to be transferred to Statutory Reserves is appropriated to ‘Capital Reserve Account.

(f) Provisioning and income recognition - Non performing Investments (NPIs):

In respect of non performing investments, income is not recognised and provision is made for depreciation in value of such securities as per Reserve Bank of India Guidelines.

(g) Repo / Reverse Repo

The Bank has adopted the Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions [other than transactions under the Liquidity Adjustment Facility (LAF) with the RBI]. The economic essence of repo transactions, viz., borrowing (lending) of funds by selling (purchasing) securities is refected in the books of repo participants, by accounting the same as collateralized lending and borrowing transaction, with an agreement to repurchase, on the agreed terms. Costs and revenues are accounted for as interest expenditure / income, as the case may be. Balance in Repo/ Reverse Repo Account is adjusted against the balance in the Investment Account.

Securities purchased/ sold under LAF with RBI are debited/ credited to Investment Account and reversed on maturity of the transaction. Interest expended / earned thereon is accounted for as expenditure / revenue.

h) Derivative

The Bank presently deals in interest rate and currency derivatives. The interest rate derivatives

dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures. Currency Derivatives dealt with by the Bank are Options, Currency Swaps and Currency Futures.

Based on RBI guidelines, Derivatives are valued as under:

The hedge/non hedge (market making) transactions are recorded separately. Hedging derivative are accounting on an accrual basis. Trading derivative positions are marked to market (MTM) and the resulting losses, if any, are recognised in the Profit & Loss Account. Proft, if any, is ignored. Income and Expenditure relating to interest rate swaps are recognised on the settlement date. Gains/ losses on termination of the trading swaps are recorded on the termination date as income/expenditure. Any gain/loss on termination of swap is deferred and recognized over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/liabilities.

4) ADVANCES:

(a) In terms of guidelines issued by the RBI, advances to borrowers are classified into “Performing” or “Non-Performing” assets based on recovery of principal/ interest. Non-Performing Assets (NPAs) are further classified as Sub- Standard, Doubtful and Loss Assets.

(b) Provision for standard assets is made as per RBI norms.

(d) In respect of advances at foreign offices/branches, provision is made as per the statutory requirements prevailing at the respective foreign countries, or as per RBI guidelines, whichever is higher.

(e) Provisions in respect of NPAs, unrealised interest, ECGC claims settled, etc., are deducted from total advances to arrive at net advances as per RBI norms.

(f) In respect of Rescheduled/Restructured accounts, provision is made for the sacrifice of interest/ diminution in the value of restructured advances measured in present value terms as per RBI guidelines. The said provision is reduced to arrive at Net advances.

(g) In case of financial assets sold to Asset Reconstruction Company (ARC) / Securitisation Company (SC), if the sale is at a price below the net book value (NBV), the shortfall is debited to the Profit and Loss account. If the sale value is higher than the NBV, the surplus provision is not reversed but will be utilised to meet the shortfall/ loss on account of sale of other financial assets to SC/ ARC.

5) FIXED ASSETS:

(a) Fixed assets are stated at historic cost, except in the case of assets which have been revalued. The appreciation on revaluation is credited to Revaluation Reserve.

(b) Cost of premises includes cost of land, both freehold and leasehold.

6) DEPRECIATION ON FIXED ASSETS:

(i) Depreciation

(a) on assets (including revalued assets), is charged on the Written Down Value at the rates determined by the Bank, except in respect of computers where it is calculated on the Straight Line Method, at the rates prescribed by the RBI;

(b) on additions is provided for the full year, irrespective of the date on which the assets were put to use;

(c) is not provided in the year of sale/disposal of an asset;

(d) on the revalued portion of assets, is adjusted against the Revaluation Reserve.

(ii) Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

(iii) Premium paid on leasehold land is amortised over the period of lease.

v) Computer Software, not forming integral part of hardware, is depreciated fully during the year of purchase.

vi) Depreciation on fixed assets outside India is provided as per the regulatory requirements / or prevailing practices of respective country / industry.

7) REVENUE RECOGNITION:

(a) Income/Expenditure is generally accounted for on accrual basis, except in the case of income on NPAs which is recognised on realisation, in terms of the RBI guidelines issued from time to time.

(b) The recoveries made from NPA accounts are appropriated first towards unrealised interest/ income, principal dues and thereafter towards uncharged interest.

(c) Dividend Income, Commission on Government Business, Commission on Third Party Products are accounted on actual realisation basis.

(d) Interest on Income-tax refunds is accounted for in the year of receipt of the assessment order.

8) EMPLOYEE BENEFITS:

a) Contribution to the Provident Fund is charged to Profit and Loss Account.

b) Contribution to recognised Gratuity Fund, Pension Fund and the provision for encashment of accumulated leave and additional retirement benefits are made on actuarial basis and charged to Profit and Loss account.

c) The effect of transitional liability till 31.03.2007 as required by Revised AS 15 has been recognised as an expense on straight line basis over a period of five years.

d) The additional liability on account of reopening of pension option for existing employees who had not opted for pension earlier and the enhancement of gratuity limits as per Payment of Gratuity Act, 1972 has been amortised over a

period of five years beginning with the financial year ending 31.03.2011.

9) LEASED ASSETS:

Lease Income is recognised based on the Internal Rate of Return method over the primary period of the lease and is accounted for in accordance with the Accounting Standard (AS) 19 on “Accounting for Leases”, issued by the Institute of Chartered Accountants of India (ICAI).

10) EARNING PER SHARE:

Basic and Diluted earnings per equity share are reported in accordance with the Accounting Standard (AS) 20 “Earnings per share” issued by the Institute of Chartered Accountants of India. Basic earnings per equity share are computed by dividing net profit by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.

11) TAXES ON INCOME

Income Tax comprises the current tax provision and net change in deferred tax assets or liabilities during the year, in accordance with the Accounting Standard (AS) 22, “Accounting for Taxes on Income” issued by The Institute of Chartered Accountants of India (ICAI). Deferred Tax is recognised subject to consideration of prudence in respect of items of income and expenses those arise at one point of time and are capable of reversal in one or more subsequent years. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

12) IMPAIRMENT OF ASSETS

Impairment losses, if any on Fixed Assets (including revalued assets) are recognised and charged to Profit and Loss account in accordance with the Accounting Standard (AS) 28 “Impairment of Assets” issued by The Institute of Chartered Accountants of India.

13) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS

As per the Accounting Standard (AS) 29 “Provisions, Contingent Liabilities and Contingent Assets” issued by The Institute of Chartered Accountants of India, the Bank recognises provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realised.


Mar 31, 2010

1) ACCOUNTING CONVENTION:

The accompanying fi nancial statements have been prepared following the going concern concept, on historical cost basis unless otherwise stated and conform to the Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India, Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India. In respect of foreign offi ces / branches, statutory provisions & accounting practices prevailing in the respective foreign countries are complied with.

2) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

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

2.1 Translation in respect of Integral Foreign operations:

i) Indian branches having foreign currency transactions have been classifi ed as integral foreign operations and foreign exchange transactions at these branches have been recorded at the rates prevailing on the date of the transaction.

ii) Monetary Foreign currency assets and liabilities are translated at the closing rates notifi ed by Foreign Exchange Dealers Association of India (FEDAI) at the year end and non-monetary items are translated at the rates prevailing on the transaction date.

iii) Acceptances, endorsements, other obligations and guarantees in foreign currencies are carried at the closing rates notifi ed by FEDAI at the year end. Exchange differences arising on settlement and translation of monetary items at the end of the fi nancial year are recognised as income or expenses in the period in which they arise.

2.2 Translation in respect of Non-Integral Foreign operations:

Foreign branches are classifi ed as non-integral foreign operations and their fi nancial statements are translated as follows:

i) Assets and Liabilities (both monetary and non- monetary as well as contingent liabilities) are translated at the closing rates notifi ed by FEDAI at the year end.

ii) Income and expenses are translated at the quarterly average closing rates notifi ed by FEDAI at the end of respective quarter.

iii) All resulting exchange differences are accumulated in a separate account ‘Foreign Currency Translation Reserve’ till the disposal of the net investments in the respective foreign branches.

2.3 Forward Exchange Contracts:

In accordance with the guidelines of FEDAI and the provisions of AS-11, outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the corresponding forward rates for the residual maturity of the contract. The difference between revalued amount and the contracted amount is recognized as profi t or loss, as the case may be.

Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/losses are recognised in the Profi t and Loss account.

3) INVESTMENTS:

Investments are classifi ed under `Held to Maturity’, ‘Held for Trading’ and ‘Available for Sale’ categories as per Reserve Bank of India (RBI) guidelines. In conformity with the requirements in Form A of the Third Schedule to the Banking Regulation Act, 1949, these are classifi ed under six groups – Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries/Joint Ventures and Other Investments.

3.1 Basis of classifi cation

Classifi cation of an investment is normally done at the time of its acquisition:

a) Held to Maturity

These comprise investments the Bank intends to hold on to maturity.

b) Held for Trading

Investments acquired with the intention to trade within 90 days from the date of purchase are classifi ed under this head.

c) Available for Sale

Investments which are not classifi ed either as “Held to Maturity” or as “Held for Trading” are classifi ed under this head.

3.2 Method of valuation

Investments are valued in accordance with the RBI guidelines.

a) Held to Maturity

Investments included in this category are carried at their acquisition cost. Premium, if any, paid on

acquisition is amortised using constant yield method over the remaining period of maturity.

b) Held for Trading / Available for Sale Investments under these categories are valued scrip- wise. Appreciation / depreciation is aggregated for each class of securities and net depreciation as per applicable norms is recognised in the Profi t and Loss account, whereas net appreciation is ignored.

c) Held at Foreign Branches

Investments held at foreign branches are carried at lower of the value as per the statutory provisions prevailing at the respective foreign countries or as per RBI guidelines issued from time to time.

d) Transfer of Securities between Categories

The transfer of a security between categories specifi ed in (a) to (c) above are accounted for at the acquisition cost / book value /market value on the date of transfer, whichever is the least, and the depreciation, if any, on such transfer is fully provided for.

e) Profi t or loss on sale of investment

Profi t or loss on sale of investments in any category is taken to Profi t and Loss account. However, in case of profi t on sale of investments under ‘Held to Maturity’ category, an equivalent amount is appropriated to ‘Capital Reserve Account’.

f) Provisioning and income recognition – Non performing Investments (NPIs):

In respect of non performing investments, income is not recognised and provision is made for depreciation in value of such securities as per Reserve Bank of India Guidelines.

g) Derivative: The Bank presently deals in interest rate and currency derivatives. The interest rate derivatives dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps, Forward Rate Agreements and Interest Rate Futures. Currency Derivatives dealt with by the Bank are Options, Currency Swaps and Currency Futures.

Based on RBI guidelines, Derivatives are valued as under:

The hedge /non hedge (market making) transactions are recorded separately. Hedging derivative are accounting on an accrual basis. Trading derivative positions are marked to market (MTM) and the resulting losses, if any, are recognised in the Profi t & Loss Account. Profi t, if any, is ignored Income and Expenditure relating to interest rate swaps are recognised on the settlement date. Gains/ losses on termination of the trading swaps are recorded on the termination date as income/expenditure. Any gain/ loss on termination of swap is deferred and recognized over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/liabilities.

4) ADVANCES:

(a) In terms of guidelines issued by the RBI, advances to borrowers are classifi ed into “Performing” or “Non- Performing” assets based on recovery of principal / interest. Non-Performing Assets (NPAs) are further classifi ed as Sub-Standard, Doubtful and Loss Assets.

(b) Provision for standard assets is made as per RBI norms.

(d) In respect of advances at foreign offi ces/branches, provision is made as per the statutory requirements prevailing at the respective foreign countries, or as per RBI guidelines, whichever is higher.

(e) Provisions in respect of NPAs, unrealised interest, ECGC claims settled, etc., are deducted from total advances to arrive at net advances as per RBI norms.

(f) In respect of Rescheduled / Restructured accounts, provision is made for the sacrifi ce of interest/ diminution in the value of restructured advances measured in present value terms as per RBI guidelines. The said provision is reduced to arrive at Net advances.

(g) In case of fi nancial assets sold to Asset Reconstruction Company (ARC) / Securitisation Company (SC), if the sale is at a price below the net book value (NBV), the shortfall is debited to the Profi t and Loss account. If the sale value is higher than the NBV, the surplus provision is not reversed but will be utilised to meet the shortfall/loss on account of sale of other fi nancial assets to SC/ARC.

5) FIXED ASSETS:

(a) Fixed assets are stated at historic cost, except in the case of assets which have been revalued. The appreciation on revaluation is credited to Revaluation Reserve.

(b) Cost of premises includes cost of land, both freehold and leasehold.

6) DEPRECIATION ON FIXED ASSETS:

(i) Depreciation

(a) on assets (including revalued assets), is charged on the Written Down Value at the rates determined by the Bank, except in respect of computers where it is calculated on the Straight Line Method, at the rates prescribed by the RBI;

(b) on additions is provided for the full year, irrespective of the date on which the assets were put to use;

(c) is not provided in the year of sale/disposal of an asset;

(d) on the revalued portion of assets, is adjusted against the Revaluation Reserve.

(ii) Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

(iii) Premium paid on leasehold land is amortised over the period of lease.

7) REVENUE RECOGNITION:

(a) Income/Expenditure is generally accounted for on accrual basis, except in the case of income on NPAs which is recognised on realisation, in terms of the RBI guidelines issued from time to time.

(b) The recoveries made from NPA accounts are appropriated fi rst towards interest and thereafter towards other dues.

(c) Dividend Income, Commission on Government Business, Commission on Third Party Products are accounted on actual realisation basis.

(d) Interest on Income-tax refunds is accounted for in the year of receipt of the assessment order.

8) EMPLOYEE BENEFITS:

a) Contribution to the Provident Fund is charged to Profi t and Loss Account.

b) Contribution to recognised Gratuity Fund, Pension Fund and the provision for encashment of accumulated leave and additional retirement benefi ts are made on actuarial basis and charged to Profi t and Loss account.

c) The effect of transitional liability till 31.03.2007 as required by Revised AS 15 has been recognised as an expense on straight line basis over a period of fi ve years.

9) LEASED ASSETS:

Lease Income is recognised based on the Internal Rate of Return method over the primary period of the lease and is accounted for in accordance with the Accounting Standard 19 on “Accounting for Leases”, issued by the Institute of Chartered Accountants of India (ICAI).

10) EARNING PER SHARE:

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

11) TAXES ON INCOME

Income Tax comprises the current tax provision and net change in deferred tax assets or liabilities in the year, in accordance with the Accounting Standard 22 , “Accounting for Taxes on Income” issued by The Institute of Chartered Accountants of India (ICAI)

12) IMPAIRMENT OF ASSETS:

Impairment losses, if any on Fixed Assets (including revalued assets) are recognised and charged to Profi t and Loss account in accordance with the Accounting Standard 28 “Impairment of Assets” issued by The Institute of Chartered Accountants of India.

13) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS:

As per the Accounting Standard 29 “Provisions, Contingent Liabilities and Contingent Assets” issued by The Institute of Chartered Accountants of India, the Bank recognises provisions only when it has a present obligation as a result of a past event and it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Contingent Assets are not recognized in the fi nancial statements since this may result in the recognition of income that may never be realised.

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