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Notes to Accounts of Bank of India

Mar 31, 2015

1. The abridged financial statements do not contain all the disclosures required by the Accounting Standards applied in the preparation of the audited financial statements of the Bank. The abridged financial statements, therefore, is not a substitute of the audited financial statements of the Bank.

2. The Statutory Auditors of the Bank, without modifying their opinion have drawn attention to the following notes to the Financial Statements:

a. Note No.2 of the Standalone Financial Statements and Note No.7 of consolidated Financial Statements of Schedule 18 which reads as under:

During the year, the Bank has changed its accounting policy of provisioning in respect of NPAs classified as doubtful category (Secured Portion) up to one year from 50% (accelerated provision) to 25% (minimum provision) of net outstanding advances. Had the earlier accounting policy been followed, the provision for NPAs for the year would have been higher by Rs. 811 crores with consequential decrease in Net Profit for the year (net of tax) by Rs. 535.34 crores.

b. Note No.4.1.1 of the Standalone Financial Statements and Note No.10 of consolidated Financial Statements of Schedule 18 which reads as under:

In accordance with the RBI circular no.DBOD. BP.BC.80/21.04.018/2010-11dated 9th February 2011:

* Rs. 442.42 Crores for the Year has been charged to the Profit & Loss Account on proportionate basis towards additional liability of Rs.2212.15 Crores (being amortised over 5 years beginning from 31st March, 2011) on account of reopening of pension option for existing employees who had not opted for pension earlier calculated on actuarial basis. There remains no amount to be amortised in future periods.

* Rs. 85.79Crores for the Year has been charged to the Profit & Loss Account on proportionate basis towards additional liability of Rs.428.96 Crores (being amortised over 5 years beginning from 31st March 2011) on account of the enhancement of gratuity limits in Payment of Gratuity Act, 1972. There remains no amount to be amortised in future periods.

c. Note No.7 (f) of the Standalone Financial Statements and Note No. 7(B) of consolidated Financial Statements of Schedule 18 which reads as under:

Pursuant to Reserve Bank of India Letter No. DBS :CO:SSM:( BOI) 14657:13.37.001:2014-15 dated 20th May, 2015, the bank has deferred provision of Rs. 709.31 Crores in respect of certain NPAs and loss of Rs. 403.21 Crores on sale of certain NPAs to be amortized over a period of 3 quarters commencing from June 2015. Had this dispensation been not given to the bank, the provision for NPAs for the year would have been higher by Rs. 1112.52 Crores with consequential decrease in Net Profit for the year (net of tax) by Rs. 734.37 Crores.

d. Note No.7 (g) of the Standalone Financial Statements and Note No. 7(C) of consolidated Financial Statements of Schedule 18 which reads as under:

Pursuant to Reserve Bank of India Letter No. DBR:BP:17252:21.04.048:2014-15 dated 13th May, 2015, the bank has amortized the shortfall arising out of sale of financial assets to ARCs, sold between 26th February, 2014 and 31st March, 2015, over a period of 8 quarters from the quarter in which the asset was sold. Consequently, the bank has charged Rs. 112.66 Crores to Profit & Loss Account for the year and the balance amount of Rs. 478.91 Crores is being carried forward to be charged to Profit & Loss Account of future periods

3. Disclosures on risk exposure in derivatives

i. Qualitative Disclosure

The Bank enters into derivative contracts such as interest rate swaps, currency swaps and currency options to hedge on balance sheet assets and liabilities or to meet client requirements as well as for trading purpose as per policy approved by the Board. These products are used for hedging risk, reducing cost and increasing the yield. In such transactions the types of risks to which the bank is exposed to, are credit risk, market risk, operational risk etc.

Risk management is an integral part of bank''s business management. Bank has risk management policies designed to identify and analyse risks, to set appropriate risk limits and to monitor these risks and limits on an on-going basis by means of reliable and up to date management information systems. The risk management policies and major control limits are approved by the Board of Directors and they are monitored and reviewed regularly. The organization of the Bank is conducive to managing risks. There is sufficient awareness of the risks and the size of exposure of the trading activities in derivative operations.

The Bank has a Risk Management Committee of Directors presided over by the Chairman and Managing Director.

Hedging swaps are accounted for on an accrual basis except for swap designated with an asset and liability that is carried at market value or lower of cost/market value. In such cases, the swaps are marked to market and the resulting gain or loss is recorded as an adjustment to the market value of the designated asset or liability. Gains or losses on the termination of swaps are recognised when the offsetting gain or loss is recognised on the designated asset or liability. This implies that any gain or loss on the terminated swap would be deferred and recognised over the shorter of the remaining contracting life of the swap or the remaining life of the asset/liability.

Trading derivative positions are marked to market (MTM) and the resulting losses, if any, are recognised in the profit and loss account. Profit, if any, are not recognised on the settlement date. Gains or losses on termination of swaps are recorded as immediate income or expenses.

Bank has a proper system of submitting periodical reports to Senior and Top Management and Board as well as regulatory authorities as required by RBI and/or as per operational requirements. Bank has clearly spelt derivative guidelines on various aspects approved by the Board of Director. The derivative transactions are subject to concurrent, internal, statutory and regulatory audits.

The counter parties to the transactions are banks, primary dealers and corporate entities. The deals are done under approved exposure limits. The Bank has adopted the Current Exposure method prescribed by Reserve Bank of India for measuring Credit Exposures arising on account of interest rate and foreign exchange derivative transactions. Current exposure method is the sum of current credit exposure and potential future exposure of these contracts.

The current credit exposure is the sum of positive mark to market value of these contracts i.e. when the Bank has to receive money from the counter party.

Potential future credit exposure is determined by multiplying the notional principal amount of these contracts irrespective of whether the contract has zero, positive or negative mark to market value by the relevant add-on factors as under according to the nature and residual maturity of the instrument.

i) Primary Segment: Business Segments

a) Treasury Operations:

''Treasury'' for the purpose of Segment Reporting includes the entire investment portfolio i.e. dealing in Government and other Securities, Money Market Operations and Forex Operations.

b) Wholesale Banking: Wholesale Banking includes all advances which are not included under Retail Banking.

c) Retail Banking : Retail Banking includes exposures which fulfil following two criteria:

i) Exposure - The maximum aggregate exposure up to Rs. 5 Crores.

ii) The total annual turnover is less than ''50 Crores i.e. the average turnover of the last three years in case of existing entities and projected turnover in case of new entities.

Pricing of Inter-Segmental transfers

Retail Banking Segment is a Primary resource mobilising unit and Wholesale Segment and Treasury Segment compensates the Retail banking segment for funds lent by it to them taking into consideration the average cost of deposits incurred by it.

Allocation of Costs

a) Expenses directly attributed to particular segment are allocated to the relative segment.

b) Expenses not directly attributable to specific segment are allocated in proportion to number of employees/business managed.

Secondary Segment: Geographical Segments

a) Domestic Operations

b) International Operations

4. Accounting Standard 18- Related Party Transactions (As compiled by Management):

I) List of Related Parties

(a) Key Managerial Personnel :

Chairperson &Managing Director : Smt. V.R.Iyer Executive Directors: Shri B.P.Sharma

Shri Arun Shrivastava (w.e.f. 05.08.2013)

Shri Koteeshwaran (w.e.f. 05.08.2013 to 31.12.2014)

Shri R.P. Marathe (w.e.f.10.03.2015)

b) Subsidiaries :

(i) BOI Shareholding Limited.

(ii) BOI AXA Investment Managers Private Limited

(iii) BOI AXA Trustee Services Private Limited

(iv) BOI Merchant Bankers Ltd.(w.e.f. from 31.10.2014)

(v) PT Bank of India Indonesia Tbk

(vi) Bank of India (Tanzania) Limited

(vii) Bank of India (New Zealand) Limited

(viii) Bank of India (Uganda) Limited

(ix) Bank of India (Botswana) Limited

(c) Associates :

(i) STCI Finance Limited

(ii) ASREC (India) Limited

(iii) Indo-Zambia Bank Limited

(iv) 4 Regional Rural Banks sponsored by the Bank

(a) Gramin Bank of Aryavart (Formerly known as Aryavart Kshetriya Gramin Bank)

(b) Jharkhand Gramin Bank;

(c) Narmada JhabuaGramin Bank

(d) VidharbhaKonkanGramin Bank

(d) Joint Venture:

(i) Star Union Dai—IchiLife Insurance Co. Ltd.

5. Impairment of Assets (Accounting Standard 28) : Rs. Nil

6. Accounting Standard 29: "Provisions, Contingent Liabilities and Contingent Assets":

A. Movement of Provisions for contingent liabilities

Particulars Legal cases/contingencies

2014-15 2013-14

Opening Balance 26.95 26.94

Provided during the year 1.25 0.01

Amounts used during the year 0.00 0.00

Closing Balance 28.20 26.95

Timing of outflow/uncertainties Outflow on Outflow on settlement / settlement / Crystallization Crystallization

B. Contingent Liabilities

Such liabilities are dependent upon, the outcome of court order/arbitration/out of court settlement, disposal of appeals, the amount being called up, terms of contractual obligations, devolvement and raising of demand by concerned parties, as the case may be. No reimbursement is expected in such cases.

Disclosure of Letters of Comfort (LoCs) issued by bank(As compiled by Management and relied upon by the Auditors)

During current year, the bank has not issued any letter of comforts. During the year 2011-12 the bank has issued and undertaking to the governor, Bank of Botswana in respect of its wholly owned subsidiary, Bank of India (BTW) Ltd., to meet its financial commitments if they fall due.

During the year 2010-11 the bank issued parental guarantee in favour of Royal Bank of New Zealand for its wholly owned subsidiary, BOI(New Zealand) Ltd. to meet its financial obligations, if they fall due.

As on 31.03.2015 no financial obligations have arisen on the above commitments.

7. Provisioning Coverage Ratio (PCR)

The Provisioning to Gross Non-Performing Assets of the Bank as on 31st March 2015 is 52.40% (Previous year: 58.68%)

8. Unamortised Pension and Gratuity Liabilities:

During the year ended 31.03.2011, the Bank had re-opened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of the option by 22,338 employees, the bank had incurred additional liability of Rs. 2,212.15 Crores. Further, during the year ended 31.03.2011, the limit of Gratuity payable to the employees was also enhanced pursuant to the amendment to the Payment of Gratuity Act, 1972. As a result the gratuity liability of the Bank had increased by Rs.428.96 Crores.

As per the Reserve Bank of India circular no. DBOD. BP.BC.80/21.04.018/2010-11) on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment, dated 9thFebruary 2011, the Bank had opted to defer the additional liability ofRs.2,641.11 Crores as mentioned above and amortise it over a period of five years commencing from financial year 2010-11 onwards. Accordingly, unamortised amount of Rs. NIL(Previous year 528.22 Crores) has been carried forward to be charged to the Profit and Loss account of future year/s.

9. Disclosure relating to Securitisation

The Bank has not floated any Special purpose Vehicle (SPV) during the Financial Year 2014-15.

10. Credit Default Swaps

The bank has not started dealing with Credit Default swaps up to end of the financial year 2014-15.

Note- Data to be entered only in blank & light grey cells For this quarter i.e. 31.03.2015, Data in the disclosure has been computed by arriving at an average of January, 2015, February, 2015 and March 2015.

Qualitative disclosures with regard to LCR

W.e.f. 1st January 2015, the Bank has implemented guidelines on Liquidity Coverage Ratio (LCR) as directed by Reserve bank of India.

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (HQLA) that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario. At a minimum, the stock of liquid assets should enable the bank to survive until day 30 under a severe liquidity stress scenario.

High Quality Liquid Assets LCR = Total net cash outflows over the next 30 calendar days Here,

* HQLA comprises of level 1 and level 2 assets, in other words these are cash or near to cash items which can be easily used / discounted in the market in case of need.

* Net cash outflows are excess of total inflows over total outflows under stressed situation as defined by Basel / RBI. While arriving at the net cash outflow, the inflows are taken with pre-defined hair-cuts and the outflows are taken at pre-defined run-off factors.

* In case stressed inflows are more than the stressed outflows, 25% of total outflows shall be taken as total net cash outflows to arrive at the LCR.

* With effect from 01.01.2015, Banks are required to maintain minimum 60% LCR on an on-going basis. The same shall reach 100% as on 01.01.2019 with incremental increase of 10% each year.

Main Drivers of LCR: The main drivers of the LCR is adequacy of High Quality Liquid Assets (HQLA) and lower net cash outflow on account of higher funding sources from retail customers. Adequate stock of HQLA helped the Bank to improve LCR as the Bank is maintaining significant amount of excess SLR.

Intra-period changes as well as changes over time: For the March 2015 quarter, the LCR during January 2015 (154.35%) and February 2015 (154.51%) months was consistent. However, in the month of March''2015 (94.26%), there was a fall in LCR on account of decrease in stock of excess SLR but the same was above the regulatory requirement of 60%.

Composition of HQLA: The composition of High Quality Liquid Assets (HQLA) mainly consists of cash balances, excess SLR, excess CRR and FALLCR (Facility to Avail Liquidity for Liquidity Coverage Ratio).

Concentration of funding sources: Majority of Bank''s funding sources are from retail customers (about 60%) therefore the stressed outflows are comparatively lower. However, in absence of any non-callable option for term deposits, the Bank has considered almost all deposits under outflow section as per RBI guidelines. Bank also does not have funding concentration from any significant counterparty. A significant counterparty is defined as a single counterparty or group of connected or affiliated counterparties accounting in aggregate for more than 1% of the bank''s total liabilities.

Derivative Exposures and potential collateral calls: Domestic operation of the Bank has very little exposure in derivative business. However, there is small derivative business in overseas operations but the same is not very significant.

Currency mismatch in the LCR:In terms of RBI guidelines, a significant currency is one where aggregate liabilities denominated in that currency amount to 5 per cent or more of the banks total liabilities. In our case, USD is the only significant currency therefore we also calculate LCR in USD currency. There is no such stipulation given by the RBI to maintain the LCR in significant currency up to a certain level. However, Bank is endeavouring to improve its USD denominated LCR further, which is presently at 39.16%.

Description of the degree of centralisation of liquidity management and interaction between the group''s units: The liquidity management of the Bank at enterprise level is a Board level function and a separate sub-committee of the Board (R.Com.) keeps close watch on that. The periodical monitoring of the liquidity management is being monitored to the ALCO on regular intervals. The entire liquidity management process of the Bank being governed by ALM Policy of the Bank.

The liquidity management for domestic operations is the central function, being managed at Head Office level. The overseas liquidity management is being handled at each centre jurisdiction wise to keep close monitoring and control and also to comply with the local regulatory requirements as well. International Division of the Bank keep watch on the overseas liquidity position and the overall liquidity monitoring is done at Head Office level centrally.

Other inflows and outflows in the LCR calculation that are not captured in the LCR common template but which the institution considers to be relevant for its liquidity profile: No such as per our notice.

11. Other Notes

a) Income Tax:

I. Claims against the Bank not acknowledged as debt under contingent liabilities (Schedule 12) include disputed income tax / interest tax liabilities of Rs. 961.37 Crores (previous year Rs. 857.58 Crores) for which no provision is considered necessary based on various judicial decisions for past assessments on such disputes. Payments/ adjustments against the said disputed dues are included under Other Assets (Schedule 11).

II. Provision for income tax for the year is arrived at after due consideration of the various judicial decisions on certain disputed issues.

III. During the year, the Bank has written back Provision for Taxation pertaining to earlier years of Rs.483.55 Crores (previous year Rs. 368.82 Crores) based on orders of Income Tax Authorities.

b) Pending settlement of the wage revision effective from November 2012, provision of Rs.540.06 Crores for the year (Previous year Rs. 269.51 Crores) has been made. The aggregate provision held as on 31st March, 2015 is Rs. 879.57 Crores (Previous year Rs. 339.51 Crores).

3. The financial statements of the subsidiaries, joint ventures and associates which are used in the consolidation have been drawn upto the same reporting date as that of the Parent Bank i.e. 31st March 2015 except for an associate IndoZambia Bank Limited (IZBL). IZBL''s financial statements were prepared up to 31st December 2014 and reported no significant transaction for the quarter ended 31st March 2015.

4. In case of Domestic subsidiaries/ joint venture/ associates, accounting adjustments arising due to different accounting policies followed by Parent Bank and subsidiaries/ joint venture/ associates have been carried out on the basis of data provided by subsidiaries/ joint venture/ associates.

5. The Consolidated Financial Statements have been prepared on the basis of :

(i) Financial statements of PT Bank of India Indonesia Tbkas on 31.03.2015certified by the Management and reviewed by an independent reviewer as per the local requirements of the country of incorporation.

(ii) Financial statements of Bank of India (Tanzania) Ltd.as on 31.03.2015 certified by the Management and reviewed by an independent reviewer.The Financial Statements as at 31.12.2014of Bank of India (Tanzania) Ltd. has been audited as per the local requirements of the country of incorporation.

(iii) Financial statements of Bank of India (New Zealand) Ltd. as on 31.03.2015 certified by the Management and reviewed by an independent reviewer.

(iv) Financial statements of Bank of India (Uganda) Ltd. as on 31.03.2015 certified by the Management and reviewed by an independent revieweras per the local requirements of the country of incorporation.

(v) Financial statements of Bank of India (Botswana) Ltd. as on 31.03.2015 certified by the Management and reviewed by an independent reviewer as per the local requirements of the country of incorporation.

(vi) Audited financial statements of BOI Shareholding Ltd., BOI Merchant Bankers Ltd., BOI AXA Investment Managers Pvt. Ltd., BOI AXA Trustee Services Pvt. Ltd.,Star UnionDai-ichi Life Insurance Company Ltd.,STCI Finance Ltd., Jharkhand Gramin Bank for the financial year ended 31.03.2015and Indo Zambia Bank Ltd.for the nine months ended 31.12.2014.

(vii) Unaudited financial statements of ASREC (India) Ltd., Vidharbha Konkan Gramin Bank, Narmada JhabuaGramin Bank and Gramin Bank of Aryavartfor the financial year ended 31.03.2015 certified by their management.

I. Primary Segment: Business Segments

1. Treasury Operations: ''Treasury'' for the purpose of Segment Reporting includes the entire investment portfolio i.e. dealing in Government and other Securities, Money Market Operations and Forex Operations.

2. Wholesale Banking: Wholesale Banking includes all advances which are not included under Retail Banking.

3. Retail Banking : Retail Banking includes exposures which fulfil following two criteria:

i) Exposure - The maximum aggregate exposure up to Rs. 5 Crore

ii) The total annual turnover is less than Rs. 50 crore i.e. the average turnover of the last three years in case of existing entities and projected turnover in case of new entities.

4. Pricing of Inter-Segmental transfers

Retail Banking Segment is a Primary resource mobilising unit and Wholesale Segment and Treasury Segment compensates the Retail banking segment for funds lent by it to them taking into consideration the average cost of deposits incurred by it.

5. Allocation of Costs

- Expenses directly attributed to particular segment are allocated to the relative segment

- Expenses not directly attributable to specific segment are allocated in proportion to number of employees / business managed.

II) Secondary Segment: Geographical Segments

b) Domestic Operations

c) International Operations

12. Previous year''s figures have been regrouped/rearranged, wherever considered necessary.


Mar 31, 2014

1. The abridged financial statements do not contain all the disclosures required by the Accounting Standards applied in the preparation of the audited financial statements of the Bank. The abridged financial statements, therefore, is not a substitute for the audited financial statements of the Bank.

2. The Statutory Auditors of the Bank, without modifying their opinion, have drawn attention to the following notes to the Financial Statements:

3.a. Note No. 3 of Standalone Financial Statements and Note No. 7 of Consolidated Financial Statements of Schedule 18, which reads as under:

During the year, the Bank has changed its accounting policy of provisioning in respect of NPAs classified as Sub-Standard (Secured) from 20%(accelerated provision) to 15%(minimum provision) which has resulted into write back of provision for NPAs of Rs. 248.71 Crores provided till 31st March 2013. Had the earlier accounting policy been followed, the provision for NPAs for the year would have been higher by Rs. 325.38 Crores with consequential decrease in Net profit for the year (net of tax) by Rs. 214.78 Crores.

b. Note No. 5.2 of Standalone Financial Statements and Note No. 11 of Consolidated Financial Statements of Schedule 18, which reads as under:

In accordance with the RBI circular no.DBOD. BP.BC.80/21.04.018/2010-11dated 9th February 2011:

- Rs. 442.44 Crores for the Year has been charged to the Profit & Loss Account on proportionate basis towards additional liability of Rs. 2212.15 Crores (being amortised over 5 years beginning from 31st March, 2011) on account of reopening of pension option for existing employees who had not opted for pension earlier calculated on actuarial basis.

- Rs. 85.79 Crores for the Year has been charged to the Profit & Loss Account on proportionate basis towards additional liability of Rs. 428.96 Crores (being amortised over 5 years beginning from 31st March 2011) on account of the enhancement of gratuity limits in Payment of Gratuity Act, 1972.

c. Note No. 5.5 of Standalone Financial Statements and Note No. 8 of Consolidated Financial Statements of Schedule 18, which reads as under:

The Bank creates Special Reserve through appropriation of profits, in order to avail tax deduction as per Section 36(1)(viii) of the Income-tax Act, 1961. The Reserve Bank of India, vide its circular dated 20th December 2013, has advised Banks to create a deferred tax liability (DTL) on outstanding amount in Special Reserve, as a matter of prudence. Accordingly, during the Year ended 31st March 2014, the Bank has created a DTL of Rs. 431.67 Crores on Special Reserve outstanding as at 31st March, 2013, by reducing the General Reserves. Further, DTL of Rs. 118.96 Crores has been created for the year on such Special Reserve created during the year. Accordingly, the tax expense for the year is higher by Rs. 118.96 Crores with corresponding decrease in net profit for the year.

4. The following information is disclosed in terms of guidelines issued by RBI:

4.1. Capital:

4.4.3. Disclosures on risk exposure in derivatives

i. Qualitative Disclosure

The Bank enters into derivative contracts such as interest rate swaps, currency swaps and currency options to hedge on balance sheet assets and liabilities or to meet client requirements as well as for trading purpose as per policy approved by the Board. These products are used for hedging risk, reducing cost and increasing the yield. In such transactions the types of risks to which the bank is exposed to, are credit risk, market risk, operational risk etc.

Risk management is an integral part of bank''s business management. Bank has risk management policies designed to identify and analyze risks, to set appropriate risk limits and to monitor these risks and limits on an on-going basis by means of reliable and up to date management information systems. The risk management policies and major control limits are approved by the Board of Directors and they are monitored and reviewed regularly. The organization of the Bank is conducive to managing risks. There is sufficient awareness of the risks and the size of exposure of the trading activities in derivative operations.

The Bank has a Risk Management Committee of Directors presided over by the Chairman and Managing Director.

Hedging swaps are accounted for on an accrual basis except for swap designated with an asset and liability that is carried at market value or lower of cost/ market value. In such cases, the swaps are marked to market and the resulting gain or loss is recorded as an adjustment to the market value of the designated asset or liability. Gains or losses on the termination of swaps are recognised when the offsetting gain or loss is recognised on the designated asset or liability. This implies that any gain or loss on the terminated swap would be deferred and recognised over the shorter of the remaining contracting life of the swap or the remaining life of the asset/liability.

Trading derivative positions are marked to market (MTM) and the resulting losses, if any, are recognised in the profit and loss account. Profit, if any, are not recognised on the settlement date. Gains or losses on termination of swaps are recorded as immediate income or expenses.

Bank has a proper system of submitting periodical reports to Senior and Top Management and Board as well as regulatory authorities as required by RBI and/or as per operational requirements. Bank has clearly spelt derivative guidelines on various aspects approved by the Board of Director. The derivative transactions are subject to concurrent, internal, statutory and regulatory audits.

The counter parties to the transactions are banks, primary dealers and corporate entities. The deals are done under approved exposure limits. The Bank has adopted the Current Exposure method prescribed by Reserve Bank of India for measuring Credit Exposures arising on account of interest rate and foreign exchange derivative transactions. Current exposure method is the sum of current credit exposure and potential future exposure of these contracts.

The current credit exposure is the sum of positive mark to market value of these contracts i.e. when the Bank has to receive money from the counter party.

Potential future credit exposure is determined by multiplying the notional principal amount of these contracts irrespective of whether the contract has zero, positive or negative mark to market value by the relevant add-on factors as under according to the nature and residual maturity of the instrument.

While computing the credit exposure, "sold options" are excluded wherever the entire premium/fee or any other form of income is received / realized.

As per the extant RBI guidelines credit exposures computed as per the current Mark to Market value of the contracts, also attracts provisioning requirement as applicable to the loan assets in the "Standard" category, of the concerned counterparty. At present the provision is to be maintained at 0.4% of the risk weighted assets. The Bank makes the requisite provision as aforesaid in the books.

The Bank has recognised Business Segments as Primary reporting segment and Geographical Segments as Secondary segment in line with RBI guidelines in compliance with Accounting Standard 17.

i) Primary Segment: Business Segments

a) Treasury Operations: ''Treasury'' for the purpose of Segment Reporting includes the entire investment portfolio i.e. dealing in Government and other Securities, Money Market Operations and Forex Operations.

b) Wholesale Banking: Wholesale Banking includes all advances which are not included under Retail Banking.

c) Retail Banking : Retail Banking includes exposures which fulfill following two criteria:

i) Exposure – The maximum aggregate exposure up to Rs. 5 Crores

ii) The total annual turnover is less than Rs. 50 Crores i.e. the average turnover of the last three years in case of existing entities and projected turnover in case of new entities.

d) Pricing of Inter-Segmental transfers

Retail Banking Segment is a Primary resource mobilising unit and Wholesale Segment and Treasury Segment compensates the Retail banking segment for funds lent by it to them taking into consideration the average cost of deposits incurred by it.

e) Allocation of Costs

a) Expenses directly attributed to particular segment are allocated to the relative segment.

b) Expenses not directly attributable to specific segment are allocated in proportion to number of employees/business managed.

ii) Secondary Segment: Geographical Segments

a) Domestic Operations

b) International Operations

5.4. Accounting Standard 18- Related Party Transactions (As compiled by Management):

I) List of Related Parties

a) Key Managerial Personnel :

Chairperson &Managing Director : Smt. V.R.Iyer

Executive Directors: Shri N. Seshadri

(up to 30.04.2013)

Shri M. S. Raghavan (up to 05.07.2013)

Shri B.P.Sharma

Shri Arun Shrivastava (w.e.f.05.08.13)

Shri R. Koteeswaran (w.e.f.05.08.2013)

(b) Subsidiaries:

(i) BOI Shareholding Limited.

(ii) PT Bank of India Indonesia Tbk

(iii) Bank of India (Tanzania) Limited

(iv) Bank of India (New Zealand) Limited

(v) Bank of India (Uganda) Limited

(vi) Bank of India (Botswana) Limited

(vii) BOI AXA Investment Managers Private Limited

(viii) BOI AXA Trustee Services Private Limited

(c) Associates :

(i) STCI Finance Limited

(ii) ASREC (India) Limited

(iii) Indo-Zambia Bank Limited

(iv) Gramin Bank of Aryavart (Formerly Known as AryavartKshetriyaGramin Bank)

(v) Jharkhand Gramin Bank

(vi) Narmada JhabuaGramin Bank

(vii) VidharbhaKonkanGramin Bank

(d) Joint Venture:

(i) Star Union Dai–Ichi Life Insurance Co. Ltd.

5.7. Impairment of Assets (Accounting Standard 28)

In respect of premises revalued earlier, there is an impairment loss of Rs. 10.46 crores, which, in accordance with the aforesaid accounting standard, has been charged to the revaluation surplus available for these assets.

Pursuant to Reserve Bank of India circular No. DBOD No. BP.95/21.04.048/2013-14 dated 7th February 2014, the Bank has utilised Rs. 179.49 Crores of floating provision, being 33% of floating provision of Rs. 543.92 Crores held on 31st March 2013 towards specific provisions for NPAs.

6.3. Draw Down from Reserves

The Reserve Bank of India, vide its circular dated 20th December 2013, has advised Banks to create a deferred tax liability (DTL) on outstanding amount in Special Reserve, as a matter of prudence. Accordingly, during the Year ended 31st March 2014, the Bank has made draw down of Rs. 431.67 Crores from General Reserve towards creation of DTL on Special Reserve outstanding as at 31st March, 2013.

6.4. Disclosure of complaints

6.5. Disclosure of Letters of Comfort (LoCs) issued by bank(As compiled by Management)

During current year, the bank has not issued any letter of comforts. During the year 2011-12 the bank has issued and undertaking to the governor, Bank of Botswana in respect of its wholly owned subsidiary, Bank of India (BTW) Ltd., to meet its financial commitments if they fall due.

During the year 2010-11 the bank issued parental guarantee in favour of Royal Bank of New Zealand for its wholly owned subsidiary, BOI(New Zealand) Ltd. to meet its financial obligations, if they fall due.

As on 31.03.2014 no financial obligations have arisen on the above commitments.

6.6. Provisioning Coverage Ratio (PCR)

The Provisioning to Gross Non-Performing Assets of the Bank as on 31st March 2014 is 58.68% (Previous year: 60.92%)

6.14. Unamortised Pension and Gratuity Liabilities:

During the year ended 31.03.2011, the Bank had re-opened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of the option by 22,338 employees, the bank had incurred additional liability of Rs. 2,212.15 Crores. Further, during the year ended 31.03.2011, the limit of Gratuity payable to the employees was also enhanced pursuant to the amendment to the Payment of Gratuity Act, 1972. As a result the gratuity liability of the Bank had increased by Rs. 428.96 Crores.

As per the Reserve Bank of India circular no. DBOD. BP.BC.80/21.04.018/2010-11) on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits – Prudential Regulatory Treatment, dated 9th February 2011, the Bank had opted to defer the additional liability of Rs. 2,641.11 Crores as mentioned above and amortise it over a period of five years commencing from financial year 2010-11 onwards. Accordingly, unamortised amount of Rs. 528.22 Crores (Previous year Rs. 1056.45 Crores) has been carried forward to be charged to the Profit and Loss account of future year/s.

6.15.Disclosure relating to Securitisation

The Bank has not floated any Special purpose Vehicle (SPV) during the Financial Year 2013-14.

6.16.Credit Default Swaps

The bank has not started dealing with Credit Default swaps up to end of the financial year 2013-14.

7. Other Notes

a) i) Claims against the Bank not acknowledged as debt under contingent liabilities (Schedule 12) include disputed income tax/ interest tax liabilities of Rs. 857.58 Crores (Previous year 2012-13: Rs. 621.35 Crores) for which no provision is considered necessary based on various judicial decisions for past assessments on such disputes Payment/adjustments against the said disputed dues are included under Other Assets (Schedule 11)

a) iii) Provision of Income tax of Rs. 368.82 Crores (previous year Rs.603.89 Crores) has been written back during the year on the basis of favorable decisions of various appellate authorities.

f) Pending settlement of the proposed wage revision effective from November 2012, an ad-hoc provision of Rs. 269.51 Crores for the year (Previous year Rs. 70 Crores) has been made. The aggregate provision held as on 31st March, 2014 is Rs. 339.51 Crores (Previous year Rs. 70 Crores).

3. The financial statements of the subsidiaries, joint ventures and associates which are used in the consolidation have been drawn up to the same reporting date as that of the Parent Bank i.e. 31st March 2014 except for an associate Indo Zambia Bank Limited (IZBL). IZBL''s financial statements were prepared up to 31st December 2013 and reported no significant transaction for the quarter ended 31st March 2014.

4. In case of Domestic subsidiaries/ joint venture/ associates, accounting adjustments arising due to different accounting policies followed by Parent Bank and subsidiaries/ joint venture/ associates have been carried out on the basis of data provided by subsidiaries/ joint venture/ associates.

5. The Consolidated Financial Statements have been prepared on the basis of :

(i) Financial statements of PT Bank of India Indonesia Tbk as on 31.03.2014 certified by the Management and reviewed by an independent reviewer as per the local requirements of the country of incorporation.

(ii) Financial statements of Bank of India (Tanzania) Ltd. as on 31.03.2014 certified by the Management and reviewed by an independent reviewer. The Financial Statements as at 31.12.2013 of Bank of India (Tanzania) Ltd. has been audited as per the local requirements of the country of incorporation.

(iii) Financial statements of Bank of India (New Zealand) Ltd. as on

31.03.2014 certified by the Management and reviewed by an independent reviewer.

(iv) Financial statements of Bank of India (Uganda) Ltd. as on 31.03.2014 certified by the Management and reviewed by an independent reviewer as per the local requirements of the country of incorporation.

(v) Financial statements of Bank of India (Botswana) Ltd. as on 31.03.2014 certified by the Management and reviewed by an independent reviewer as per the local requirements of the country of incorporation.

(vi) Audited financial statements of BOI Shareholding Ltd., Star Union Dai-ichi Life Insurance Company Ltd., STCI Finance Ltd., Jharkhand Gramin Bank, Vidharbha Konkan Gramin Bank for the financial year ended 31.03.2014 and Indo Zambia Bank Ltd. for the nine months ended 31.12.2013.

(vii) Unaudited financial statements of BOI AXA Investment Managers Pvt. Ltd., BOI AXA Trustee Services Pvt. Ltd., ASREC (India) Ltd., Narmada Jhabua Gramin Bank and Gramin Bank of Aryavart for the financial year ended 31.03.2014 certified by their management.

The BOI group has recognised Business Segments as Primary reporting segment and Geographical Segments as Secondary segment in line with RBI guidelines in compliance with Accounting Standard 17.

i) Primary Segment: Business Segments

a) Treasury Operations: ''Treasury'' for the purpose of Segment Reporting includes the entire investment portfolio i.e. dealing in Government and other Securities, Money Market Operations and Forex Operations.

b) Wholesale Banking: Wholesale Banking includes all advances which are not included under Retail Banking.

c) Retail Banking : Retail Banking includes exposures which fulfill following two criteria:

i) Exposure – The maximum aggregate exposure up to Rs. 5 Crores

ii) The total annual turnover is less than Rs. 50 Crores i.e. the average turnover of the last three years in case of existing entities and projected turnover in case of new entities.

d) Pricing of Inter-Segmental transfers

Retail Banking Segment is a Primary resource mobilising unit and Wholesale Segment and Treasury Segment compensates the Retail banking segment for funds lent by it to them taking into consideration the average cost of deposits incurred by it.

e) Allocation of Costs

a) Expenses directly attributed to particular segment are allocated to the relative segment.

b) Expenses not directly attributable to specific segment are allocated in proportion to number of employees/business managed.

ii) Secondary Segment: Geographical Segments

a) Domestic Operations

b) International Operations

G. AS 27 "Financial Reporting of Interests in Joint Ventures":

Aggregate amount of assets, liabilities, income and expenses related to the group''s interest in jointly controlled entities:


Mar 31, 2012

1. During the year bank has allotted 2,73,00,000 equity shares of Rs 10/- each at a premium of Rs 370.02 per share to Life Insurance Corporation of India as determined by the Board in terms of the Chapter VII of the Securities Exchange Board of India (SEBI) Regulations, 2009, as amended from time to time (the "SEBI ICDR Regulations") on preferential basis. The total amount of capital received by the bank on this account is Rs 1037.45 crore and consequently the Government holding has decreased from 65.86% to 62.72%.

2. Balancing of Subsidiary Ledger Accounts and confirmation/reconciliation of balances with foreign branches and NOSTRO Accounts, and Suspense, Drafts Payable, Clearing Difference, etc. is in progress on an on-going basis. Pending final clearance/adjustment of the above, including foreign branches, the overall impact, if any, on the accounts, in the opinion of the management, is not likely to be significant.

As regards Inter office adjustments, initial matching of debit and credit outstanding entries has been completed upto 31st March 2012. Reconciliation of residual entries is in progress. Pending final clearance/ adjustment of the entries, the overall impact, if any, on the accounts, in the opinion of the management, is not likely to be significant.

3. The following information is disclosed in terms of guidelines issued by RBI:

3.1 Sale and transfers to/from HTM Category:

The value of sales and transfers of securities to/from HTM category has not exceeded 5% of the book value of investments held in HTM category at the beginning of the year.

3.2 Disclosures on risk exposure in derivatives

i. Qualitative Disclosure

The Bank enters into derivative contracts such as interest rate swaps, currency swaps and currency options to hedge on balance sheet assets and liabilities or to meet client requirements as well as for trading purpose as per policy approved by the Board. These products are used for hedging risk, reducing cost and increasing the yield. In such transactions the types of risks to which the bank is exposed to, are credit risk, market risk, operational risk etc.

Risk management is an integral part of bank's business management. Bank has risk management policies designed to identify and analyse risks, to set appropriate risk limits and to monitor these risks and limits on an ongoing basis by means of reliable and up to date management information systems. The risk management policies and major control limits are approved by the Board of Directors and they are monitored and reviewed regularly. The organization of the Bank is conducive to managing risks. There is sufficient awareness of the risks and the size of exposure of the trading activities in derivative operations.

The Bank has a Risk Management Committee of Directors presided over by the Chairman and Managing Director.

Hedging swaps are accounted for on an accrual basis except for swap designated with an asset and liability that is carried at market value or lower of cost/ market value. In such cases, the swaps are marked to market and the resulting gain or loss is recorded as an adjustment to the market value of the designated asset or liability. Gains or losses on the termination of swaps are recognised when the offsetting gain or loss is recognised on the designated asset or liability. This implies that any gain or loss on the terminated swap would be deferred and recognised over the shorter of the remaining contracting life of the swap or the remaining life of the asset/liability.

Trading derivative positions are marked to market (MTM) and the resulting losses, if any, are recognised in the profit and loss account. Profit, if any, are not recognised on the settlement date. Gains or losses on termination of swaps are recorded as immediate income or expenses.

Bank has a proper system of submitting periodical reports to Senior and Top Management and Board as well as regulatory authorities as required by RBI and/or as per operational requirements. Bank has clearly spelt derivative guidelines on various aspects approved by the Board of Directors. The derivative transactions are subject to concurrent, internal, statutory and regulatory audits.

The counter parties to the transactions are banks, primary dealers and corporate entities. The deals are done under approved exposure limits. The Bank has adopted the Current Exposure method prescribed by

Reserve Bank of India for measuring Credit Exposures arising on account of interest rate and foreign exchange derivative transactions. Current exposure method is the sum of current credit exposure and potential future exposure of these contracts.

The current credit exposure is the sum of positive mark to market value of these contracts i.e. when the Bank has to receive money from the counter party.

Potential future credit exposure is determined by multiplying the notional principal amount of these contracts irrespective of whether the contract has zero, positive or negative mark to market value by the relevant add-on factors as under according to the nature and residual maturity of the instrument.

While computing the credit exposure, "sold options" are excluded wherever the entire premium/fee or any other form of income is received / realized.

As per the extant RBI guidelines credit exposures computed as per the current Mark to Market value of the contracts, also attracts provisioning requirement as applicable to the loan assets in the "Standard" category, of the concerned counter party. At present the provision is to be maintained at 0.4% of the risk weighted assets. The Bank makes the requisite provision as aforesaid in the books.

Exposure is reckoned as Sanctioned Limit or Balance outstanding whichever is higher. The above position is arrived at after taking into consideration all exposure such as Interest Rate Swaps, Derivatives and Forward Exchange Contracts)

Housing Development Finance Corporation Limited has been considered as NBFC based on RBI's views contained in their report on Annual Financial Inspection for 2010-11.

Tax expense for the year is after recognising Minimum Alternate Tax (MAT) credit entitlement of Rs 77.01 crore for earlier years.

3.3 Disclosures of Penalties imposed by RBI

During the financial year 2011-12, bank has not been subjected to any penalty for contravention or non- compliance with any requirement of the Banking Regulation Act, 1949, or any rules or conditions specified by the Reserve Bank of India in accordance with the said Act, except for a penalty of Rs 1 lakh paid to RBI for bouncing of SGL deal which was subsequently recovered from the constituent.

4. Disclosure requirements as per Accounting Standards (AS) where RBI has issued guidelines in respect of disclosure items for Notes to Accounts:

4.1 Accounting Standard 9 - Revenue recognition

Certain items of income are recognised on realisation basis as per Accounting Policy no. 2 of Schedule 17: Significant Accounting Policies. However, the said income is not considered to be material.

i) The effect of transitional liability till 31.03.2007 as required by the accounting standard has been recognised as an expense on straight line basis over a period of five years pursuant to limited revision of Standard on 17.10.2007. Accordingly, an amount of Rs 125.27 Crores has been charged to the Profit and Loss account for the year ended 31.03.2012 being 1/5th of the total transitional liability.

ii) As per the past practice, the bank has recognised contribution to employee provident fund as an expense. During the year, the bank has contributed Rs 28.67 crore (previous year Rs 56.83 crore) towards such fund which is a defined contribution plan.

iii) During the year ended 31.03.2011, the Bank reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of which by 22,338 employees, the bank has incurred a liability of Rs 2,212.15 crore. Further, during the year ended 31.03.2011, the limit of Gratuity payable to the employees of the banks was also enhanced pursuant to the amendment to the Payment of Gratuity Act, 1972. As a result the gratuity liability of the Bank has increased by Rs 428.96 crore.

iv) In terms of the requirements of the Accounting Standard (AS) 15 : Employee Benefits, the entire amount of Rs 2,641.11 crore (i.e. Rs 2,212.15 crore Rs.428.96 crore) was required to be charged to the Profit and Loss Account during the year ended 31.03.2011. However, the Reserve Bank of India issued a circular no. DBOD.BP.BC.80/21.04.018/2010-11 on re-opening of pension option to employees of Public Sector Banks and Enhancement in Gratuity limits - Prudential Regulatory Treatment, dated 9th February 2011. In accordance with the provisions of the said Circular, the Bank would amortise the amount of Rs 2,641.11 crore over a period of five years. Accordingly an amount of Rs 528.22 crore (representing one-fifth of Rs 2,641.11 crore) has been charged to the profit and loss account for the current year and the balance of Rs 1,584.67 crore is being carried forward to be charged to profit and loss account of the bank in the coming years.

1. The Bank has recognised Business Segments as Primary reporting segment and Geographical Segments as Secondary segment in line with RBI guidelines in compliance with Accounting Standard 17.

Primary Segment: Business Segments

a) Treasury Operations: 'Treasury' for the purpose of Segment Reporting includes the entire investment portfolio i.e. dealing in Government and other Securities, Money Market Operations and Forex Operations.

b) Wholesale Banking: Wholesale Banking includes all advances which are not included under Retail Banking.

c) Retail Banking: Retail Banking includes exposures which fulfil following two criteria:

i) Exposure - The maximum aggregate exposure up to Rs 5 Crores

ii) The total annual turnover is less than Rs 50 Crores i.e. the average turnover of the last three years in case of existing entities and projected turnover in case of new entities.

Pricing of Inter-Segmental transfers

Retail Banking Segment is a Primary resource mobilising unit and Wholesale Segment and Treasury Segment compensates the Retail banking segment for funds lent by it to them taking into consideration the average cost of deposits incurred by it.

Allocation of Costs

a) Expenses directly attributed to particular segment are allocated to the relative segment.

b) Expenses not directly attributable to specific segment are allocated in proportion to number of employees/ business managed.

Secondary Segment: Geographical Segments

a) Domestic Operations

b) International Operations

4.2 Accounting Standard 18 - Related Party Transactions

I) List of Related Parties:

(a) Key Managerial Personnel :

Chairman &

Managing Director : Shri Alok K Misra

Executive Directors : Shri N. Seshadri

Shri. M. S. Raghavan (w.e.f. 01.01.2012)

Shri. B. A. Prabhakar (upto 15.12.2011)

(b) Subsidiaries :

(i) BOI Shareholding Limited.

(ii) PT Bank of India Indonesia Tbk (Formerly known as PT Bank Swadeshi)

(iii) Bank of India (Tanzania) Ltd.

(iv) Bank of India (New Zealand) Limited.

(v) Bank of India (Uganda) Ltd.

(c) Associates :

(i) STCI Finance Limited.

(Formerly known as Securities Trading Corporation of India Ltd.)

(ii) ASREC (India) Ltd.

(iii) Indo-Zambia Bank Ltd.

(iv) 5 Regional Rural Banks sponsored by the Bank

Aryavart Gramin Bank; Baitarani Gramya Bank; Jharkhand Gramin Bank; Narmada Malwa Gramin Bank; Wainganga Krishna Gramin Bank;

(d) Joint Venture :

(i) Star Union Dai-Ichi Life Insurance Co. Ltd.

The transactions with the subsidiaries and regional rural banks, being state controlled, have not been disclosed in view of para 9 of AS-18 on Related party disclosure issued by the ICAI exempting state controlled enterprises from making any disclosure pertaining to their transactions with other related parties which are also state controlled.

4.3 Accounting Standard 27 - Investments in Joint Venture

Investments include Rs 120 crore (Previous year Rs 120 crore) representing Bank's interest in the following jointly controlled entity:

4.4 Accounting Standard 19 - Lease Financing

(i) The contractual maturities of the Bank's investment in lease financing and its components, which are included in advances, are set out below:

B. Contingent Liabilities

Such liabilities are dependent upon, the outcome of court order/arbitration/out of court settlement, disposal of appeals, the amount being called up, terms of contractual obligations, devolvement and raising of demand by concerned parties, as the case may be. No reimbursement is expected in such cases.

5.1 Draw Down from Reserves

During the year, the bank has made a draw down of Rs 3.19 crore (Previous year Rs 1.44 crore) from the Special reserve currency swaps in terms of the RBI guidelines.

5.2 Disclosure of Letters of Comfort (LoCs) issued by bank

(As compiled by Management)

During the year 2011-2012, the Bank has issued an undertaking to the Governor, Bank of Botswana in respect of its wholly owned subsidiary, Bank of India (BTW) Ltd. (yet to be opened) to meet its financial commitments if they fall due.

During the year 2010-11 the Bank issued parental guarantee in favour of Royal Bank of New Zealand, for its wholly owned subsidiary, BOI (New Zealand) Ltd. to meet its financial obligations, if they fall due.

However, as on 31.03.2012 no financial obligations have arisen on the above commitments.

5.3 Provisioning Coverage Ratio (PCR)

The Provisioning to Gross Non-Performing Assets of the Bank as on 31st March 2012 is 64.18% (Previous year: 72.18%)

5.4 Unamortised Pension and Gratuity Liabilities:

As per the Reserve Bank of India circular no. DBOD. BP.BC.80/21.04.018/2010-11) on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment, dated 9th February 2011, the Bank opted to amortise the said liability of Rs 2,641.11 Crores over a period of five years. Accordingly, Rs 528.22 Crores (representing one- fifth of Rs 2,641.11 Crores) has been charged to the Profit and Loss Account. In terms of the requirements of the aforesaid RBI circular, the balance amount carried forward, i.e., Rs 1,584.67 Crores (Rs 2,641.11 Crores minus Rs 1056.44 Crores) does not include any amount relating to the employees separated/retired.

6. Other Notes

a) Income Tax:

I) Claims against the Bank not acknowledged as debt under contingent liabilities (Schedule 12) include disputed income tax/interest tax liabilities of Rs 420.67 crore for which no provision is considered necessary based on various judicial decisions for past assessments on such disputes. Payments/adjustments against the said disputed dues are included under Other Assets (Schedule 11).

II) Provision for income tax for the year is arrived at after due consideration of the various judicial decisions on certain disputed issues.

b) Shifting of securities:

i) For the year ended 31-03-2012, Bank has shifted securities amounting to Rs 981.67 crore from HTM to AFS category and Rs 4.83 Crores loss has been booked as loss on such transfer.

ii) Securities amounting to Rs 7,340.94 Crores were shifted from AFS to HTM category and loss arised upon such transfer amounting to Rs 200.01 Crores has been provided for during the year.

iii) For the year ended 31.03.2012, bank has shifted portfolio of Venture Fund amounting Rs 29.55 crores from HTM to AFS and Rs3.11 crores of loss has arised due to such transfer.

(d) Profit on sale of Investments held under "Held to Maturity" category amounting to Rs 19.98 crore has been taken to the Profit & Loss Account and thereafter an amount of Rs 10.12 crore has been appropriated to the Capital Reserve, net of taxes and transfer to Statutory Reserve under section 17 of the Banking Regulation Act, 1949.

 
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