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Accounting Policies of Bank of Maharashtra Company

Mar 31, 2016

1. Accounting Conventions:

1.1 The financial statements are prepared under the historical cost conventions except as otherwise stated and conform to the Generally Accepted Accounting Principles (GAAP) which include statutory provisions, practices prevailing within the Banking Industry in India , the regulatory/ Reserve Bank of India ("RBI") guidelines, applicable Accounting Standards/ Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI).

1.2 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 the date of financial statements and reported income and expenses for the period under report. Management is of the view that the estimates used in the preparation of financial statements are prudent and reasonable.

1.3 Revenue and costs are accounted for on accrual basis except as stated in para 6.1 below.

1.4 The accounting policies with regard to Revenue Recognition, Investments and Advances are in conformity with the prudential accounting norms issued by Reserve Bank of India from time to time.

2. Foreign Exchange Transactions:

2.1 The foreign currency transactions are translated at the weekly average closing rates for the preceding week as published by Foreign Exchange Dealers'' Association of India (FEDAI). Revaluation of foreign currency assets and liabilities as on Balance Sheet date is done at the closing exchange rate published by FEDAI and the resultant profit/ loss is accounted for in the profit & Loss Account.

2.2 Outstanding Forward Foreign Exchange Contracts are stated at contracted rates and revalued/ marked to market as on quarterly basis and on Balance Sheet date at the exchange rates published by FEDAI for specified maturities by discounting the same at the applicable MIFOR rate published by Fixed Income Money Market and Derivatives Association of India [FIMMDA]- Reuter, i.e. on PV01 basis. The resulting profit/loss, on revaluation, is recognized in the profit & Loss Account in accordance with RBI / FEDAI guidelines and the effect is taken to "Other Assets" in case of gain or to "Other Liabilities" in case of loss.

2.3 Contingent Liabilities on account of Guarantees and Letters of Credit issued in foreign currency are stated in the Balance Sheet at the closing exchange rates published by FEDAI.

2.4 Credit exposure of the un-hedged foreign currency exposure, if any, of the constituents shall attract provisioning and capital requirements as per RBI guidelines.

3. Investments:

As per Reserve Bank of India guidelines, the investments are classified and valued as under:

3.1 Investments are classified in the following categories:

a. Held to Maturity (HTM)

b. Available for sale (AFS)

c. Held for trading (HFT)

3.2 All the securities are further classified in the following six baskets:

a. Government Securities

b. Other approved Securities

c. Shares

d. Debentures and Bonds

e. Subsidiaries and Joint Ventures

f. Others (Commercial Papers, Mutual Fund Units, Rural Infrastructure Development Funds etc.)

3.3 Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Shifting of securities from one category to another, other than shifting / transfer from HFT to AFS category, is done once in a year with the approval of Board of Directors, at the least of acquisition cost / book value / market value on the date of shifting. The depreciation, if any, on such shifting is provided for and the book value of the security is adjusted accordingly. The transfer of securities from one category to another is made as per permission from or guidelines of RBI. Transfer / shifting of investments from HFT to AFS category will be executed under exceptional circumstances, like not being able to sell the securities within 90 days due to tight liquidity conditions, or extreme volatility, or market becoming unidirectional.

3.4 REPO / Reverse REPO

The Bank has adopted the Uniform Accounting Procedure prescribed by the RBI for accounting of market Repo and Reverse Repo transactions. Repo and Reverse Repo transactions are treated as Collateralized Borrowing / Lending Operations with an agreement to repurchase on the agreed terms. Securities sold under Repo are continued to be shown under investment and Securities purchased under Reverse Repo are not included in investment. Outstanding Repo /Term Repo is disclosed as borrowing and outstanding Reverse Repo is disclosed as lending. Costs and revenues are accounted for as interest expenditure / income, as the case may be.

3.5 Valuation of investments:

a. Held to Maturity:

(i) Securities under the category ''Held to Maturity'' are valued at average cost. Wherever the cost is higher than the face value, the premium is amortized over the remaining period of maturity on straight line basis. In case of investments, where the cost price is less than the face value, the difference is ignored

(ii) In case of investments in subsidiaries and joint ventures permanent diminution in value is recognized and provided for; investment in RRB is valued at carrying cost.

(iii) On sale of investments in this category (a) the net profit is initially taken to profit and loss account and thereafter net of applicable taxes and proportionate transfer to statutory reserve is appropriated to the ''Capital Reserve account''; and (b) the net loss is charged to the profit & Loss Account.

b. Available for Sale:

The individual securities under this category are marked to market on a quarterly basis. Central/ State Government securities are valued at market rates declared by FIMMDA. Other approved securities, debentures and bonds are valued as per the yield curve, average credit spread rating and methodology suggested by FIMMDA. Quoted shares are valued at market rates. Unquoted shares are valued at book value ascertained from the latest available Balance Sheet i.e. Balance Sheet of immediate preceding year and in case the latest Balance Sheet is not available, the same is valued at Re.1/- per company / scrip.

Investments in discounted instruments, viz. Treasury Bills, Certifcate of Deposits, Commercial Papers, Zero Coupon Bonds are valued at carrying cost. Mutual Fund Instruments are valued at market rate or repurchase price or net asset value in that order depending on their availability. Investments in Security Receipts (SRs) /Pass Through Certifcates (PTCs) issued by Asset Reconstruction Companies(ARCs) in respect of financial assets sold to ARCs are carried at lower of redemption value and net book value (i.e. book value less provision held), of the financial assets.

Based on the above valuation under each of six-sub classifcations under Rs.Available for Sale'':

(i)If it results in appreciation, the same is ignored.

(ii)If it results in net depreciation, the same is charged to profit & Loss account and credited to Provision for Depreciation on Investments (AFS) in the liability side.

Provided that, depreciation, if any, on equity shares allotted consequent to implementation of Strategic Debt Restructuring (SDR) shall be provided for over a maximum of 4 calendar quarters on straight line basis from the date of conversion of debt into equity.

(iii) The book value of securities is not changed in respect of marked to market (MTM) except as required by the RBI guidelines.

(iv) profit or Loss on sale of investment in this category is accounted for in the profit and loss account.

c. Held for Trading:

(i) The individual securities under this category are held at original cost and are marked to market every month. Central/ State Government securities are valued at market rates declared by FIMMDA. Other approved securities, debentures and bonds are valued as per the yield curve, average credit spread rating and methodology suggested by FIMMDA. Quoted Shares are valued at market rates.

(ii) Investments in discounted instruments, viz. Treasury Bills, Certificate of Deposits, Commercial Papers, Zero Coupon Bonds are valued at carrying cost. Mutual Fund Instruments are valued at market rate or repurchase price or net asset value in that order depending on their availability. Investments in SRs /PTCs issued by ARCs in respect of financial assets sold to ARCs are carried at lower of redemption value and net book value (i.e. book value less provision held), of the financial assets.

(iii) Net basket-wise depreciation if any, is charged to profit & Loss Account and credited to Provision on Depreciation on Investment (HFT) under liability. Net appreciation, if any is ignored. The book value of the securities is not changed after revaluation except as required by the RBI guidelines.

(iv) profit or loss on sale of investment in this category is accounted for in the profit & Loss Account.

d. Classification of and provisions on investments, including on restructured investments, are made in accordance with the prudential norms prescribed by and guidelines of RBI from time to time.

e. Costs such as brokerage, fees, commission, taxes etc. incurred at the time of acquisition of securities are capitalised.

f. Interest Rate Swaps:

(i) Valuation:

(a) Hedging Swaps: Interest Rate Swaps for hedging assets and liabilities are not marked to market.

(b) Trading Swaps: Interest Rate Swaps for trading purpose are marked to market.

(ii) Accounting of income on derivative deals:

(a) Hedging Swaps: Income is accounted for on realisation basis. Expenditure, if any, is accounted for on accrual basis, if ascertainable.

(b) Trading Swaps: Income or expenditure is accounted for on realisation basis on settlement date.

(iii) Accounting of gain or loss on termination of swaps:

(a) Hedging Swaps: Any gain or loss on the terminated swap is recognized over the shorter of (a) the remaining contractual life of the swap or (b) the remaining life of the asset/ liability.

(b) Trading Swaps: Any gain or loss on terminated swap is recognized as income or expenditure in the year of termination.

4. Advances:

4.1 Advances shown are net of write offs, provisions made for non-performing assets, claims settled with the credit guarantee institutions, provision for diminution in fair value for restructured advances and bills rediscounted.

4.2 Classification of advances and provisions thereon are made in accordance with the prudential norms prescribed by and guidelines of RBI from time to time.

4.3 Provision for performing assets, other than provision on standard restructured advances, is shown under the head "Other liabilities and provisions".

4.4 In respect of Rescheduled/ Restructured accounts, provision for diminution in fair value of restructured advances is made on present value basis as per RBI guidelines.

4.5 In respect of advances under SDR, provision is made in accordance with RBI guidelines, within a maximum period of four quarters.

4.6 In case of financial assets sold to Asset Reconstruction Company / Securitisation Company, if the sale is at price lower than the net book value, the short fall is amortised over a period of 2 years. If the sale value is higher than the net book value, the surplus provision is not reversed but will be utilized to meet the deficit/ loss on account of sale of other financial assets provided the excess provision on sale of NPAs, if the sale value is for a value higher than the NBV, shall be reversed to the profit & Loss A/c in the financial year in which amounts are received when the cash received (by way of initial consideration and / or redemption of SRs / PTCs) is higher than the NBV of the asset provided reversal of excess provision shall be limited to the extent to which cash received exceeds the NBV of the asset.

5. Fixed Assets and Depreciation:

5.1 Premises and Other Fixed Assets are accounted for at cost except for certain premises, which were revalued and stated at revalued amount.

5.2 Depreciation on fixed assets (other than those referred in para 5.3 and 5.4 below) is provided for on the diminishing balance method at the rates specified below, except in case of revalued assets, in respect of which higher depreciation is provided on the basis of estimated useful life of these revalued assets.

5.3 On computers, depreciation is provided at the rate of 33.33% on Straight Line Method (SLM) so as to write down the asset value in three years to Rupee One as per RBI guidelines. Computers include software, ATMs and UPS also.

5.4 Depreciation is provided for full year in respect of assets purchased during the year. No depreciation is provided on assets sold/discarded during the year.

5.5 Depreciation relating to revalued amount over and above the cost of the revalued assets, is provided on diminishing balance method over the residual life of the fixed assets as stated in para 5.2 and adjusted against the Revaluation Reserve. Revaluation Reserve on fully depreciated properties is amortized on the basis of their residual life as certified by approved valuers.

5.6 Leasehold land cost is amortized over the period of lease on SLM basis.

6. Revenue Recognition

6.1 All revenues and costs are accounted for on accrual basis except the following items, which are accounted for on cash basis:-

a Interest on Advances and Investments identified as Non-Performing Assets according to the prudential norms issued by RBI, from time to time.

b. Income from commission viz., on Guarantees, Letter of Credit, Government business, Bancassuarance, Mutual Fund business, credit & debit cards issued and Locker Rent.

c. Interest for overdue period on bills purchased and bills discounted.

d. Insurance claims.

e. Remuneration on Debenture Trustee Business.

f. Loan Processing Fees.

g. Income from Merchant Banking Operations and Underwriting Commission.

h. Transaction processing fees received on utility bill pay services through internet banking.

6.2 Pursuant to RBI guidelines, the interest payable on overdue term deposit is provided on accrual basis at Saving Bank rate effective from date of RBI circular dated 22.08.2008, and the balance at the time of renewal.

7. Employees'' Benefits:

Defined Contribution Plan: The contribution paid/ payable under defined contribution benefit schemes are charged to profit & Loss Account.

Defined Benefit Plans: Bank''s liabilities towards defined benefit schemes are determined on the basis of an actuarial valuation made at the end of financial year. Actuarial gains and losses are recognized in the profit & Loss Account.

8. Impairment of Assets:

Impairment losses, if any, on fixed assets including revalued fixed assets are recognized in accordance with Accounting Standard 28- Impairment of Assets issued by the ICAI and charged to profit & Loss Account.

9. Provisions Contingent Liabilities and Contingent Assets:

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

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

10. Net profit, Provisions and Contingencies:

The Net profit disclosed is after making the Provisions and Contingencies which include adjustment to the value of investments, on bad debts, provision for taxation (including deferred tax), provision for advances and contingencies/others.

11. Income Tax:

The provision for tax for the year comprises liability towards current Income Tax, Wealth Tax and also Deferred Tax. The deferred tax asset/ liability is recognized, subject to the consideration of prudence, taking into account the timing differences between the taxable income and accounting income, in terms of the Accounting Standard 22 issued by ICAI. The effect of change in tax rates on deferred tax assets and liabilities is recognized in the profit & Loss Account in the period of applicability of the change.

Interest income on refund of Income Tax is accounted for in the year the order is passed by the concerned authority.

The demand raised by the Income Tax authorities including the interest thereon is provided for when such demand is upheld in the second appeal (i.e. by ITAT).

12. Earnings 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 share is arrived by dividing net profit by the weighted average number of equity shares outstanding for the period. The diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.


Mar 31, 2015

1. Accounting Conventions:

1.1 The financial statements are prepared under the historical cost conventions except as otherwise stated and conform to the Generally Accepted Accounting Principles (GAAP) which include statutory provisions, practices prevailing within the Banking Industry in India , the regulatory/ Reserve Bank of India ("RBI") guidelines, applicable Accounting Standards/ Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI).

1.2 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 the date of financial statements and reported income and expenses for the period under report. Management is of the view that the estimates used in the preparation of financial statements are prudent and reasonable.

1.3 Revenue and costs are accounted for on accrual basis except as stated in para 6.1 below.

1.4 The accounting policies with regard to Revenue Recognition, Investments and Advances are in conformity with the prudential accounting norms issued by Reserve Bank of India from time to time.

2. Foreign Exchange Transactions:

2.1 The foreign currency transactions are translated at the weekly average closing rates for the preceding week as published by Foreign Exchange Dealers'' Association of India (FEDAI). Revaluation of foreign currency assets and liabilities as on Balance Sheet date is done at the closing exchange rate published by FEDAI and the resultant profit/ loss is accounted for in the Profit & Loss Account.

2.2 Outstanding Forward Foreign Exchange Contracts are stated at contracted rates and revalued/ marked to market as on quarterly basis and on Balance Sheet date at the exchange rates published by FEDAI for specified maturities by discounting the same at the applicable MIFOR rate published by FIMMDA - Reuter, i.e. on PV01 basis. The resulting profit/loss, on revaluation, is recognized in the Profit & Loss Account in accordance with RBI / FEDAI guidelines and the effect is taken to "Other Assets" in case of gain or to "Other Liabilities" in case of loss.

2.3 Contingent Liabilities on account of Guarantees and Letters of Credit issued in foreign currency are stated in the Balance Sheet at the closing exchange rates published by FEDAI.

2.4 Credit exposure of the un-hedged foreign currency exposure, if any, of the constituents shall attract provisioning and capital requirements as per RBI guidelines.

3. Investments:

As per Reserve Bank of India guidelines, the investments are classified and valued as under:

3.1 Investments are classified in the following categories:

a. Held to Maturity (HTM)

b. Available for sale (AFS)

c. Held for trading (HFT)

3.2 All the securities are further classified in the following six baskets:

a. Government Securities

b. Other approved Securities

c. Shares

d. Debentures and Bonds

e. Subsidiaries and Joint Ventures

f. Others (Commercial Papers, Mutual Fund Units, Rural

Infrastructure Development Funds, etc).

3.3 Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Shifting of securities from one category to another, other than shifting / transfer from HFT to AFS category, is done once in a year with the approval of Board of Directors, at the least of acquisition cost / book value / market value on the date of shifting. The depreciation, if any, on such shifting is provided for and the book value of the security is adjusted accordingly. The transfer of securities from one category to another is made as per permission from or guidelines of Reserve Bank of India. Transfer / shifting of investments from HFT to AFS category will be executed under exceptional circumstances, like not being able to sell the securities within 90 days due to tight liquidity conditions, or extreme volatility, or market becoming unidirectional.

3.4 REPO / Reverse REPO

The Bank has adopted the Uniform Accounting Procedure prescribed by the RBI for accounting of market Repo and Reverse Repo transactions. Repo and Reverse Repo Transactions are treated as Collateralized Borrowing / Lending Operations with an agreement to repurchase on the agreed terms. Securities sold under Repo are continued to be shown under investment and Securities purchased under Reverse Repo are not included in Investment. Outstanding Repo / Term Repo is disclosed as borrowing and outstanding Reverse Repo is disclosed as lending. Costs and revenues are accounted for as interest expenditure / income, as the case may be.

3.5 Valuation of investments:

a. Held to Maturity:

(i) Securities under the category ''Held to Maturity'' are valued at average cost. Wherever the cost is higher than the face value, the premium is amortized over the remaining period of maturity on straight line basis. In case of investments, where the cost price is less than the face value, the difference is ignored

(ii) In case of investments in subsidiaries and joint ventures permanent diminution in value is recognized and provided for; investment in RRB is valued at carrying cost.

(iii) On sale of investments in this category (a) the net profit is initially taken to profit and loss account and thereafter net of applicable taxes and proportionate statutory reserve is appropriated to the ''Capital Reserve account''; and (b) the net loss is charged to the Profit & Loss Account.

b. Available for Sale:

The individual securities under this category are marked to market on a quarterly basis. Central/ State Government securities are valued at market rates declared by Fixed Income Money Market and Derivatives Association of India [FIMMDA]. Other approved securities, Debentures and Bonds are valued as per the yield curve, average credit spread rating and methodology suggested by FIMMDA. Quoted Shares are valued at market rates. Unquoted shares are valued at book value ascertained from the latest available Balance Sheet i.e Balance sheet of immediate preceding year and in case the latest Balance Sheet is not available, the same is valued at Rs..1/- per company / Scrip.

Investments in discounted instruments, viz. Treasury bills, Certificate of deposits and commercial papers, Zero coupon Bonds are valued at carrying cost. Mutual Fund Instruments are valued at market rate or repurchase price or net asset value in that order depending on their availability. Investments in Security Receipts /PTCs issued by Asset Reconstruction Companies (ARCs) in respect of financial assets sold to ARCs are carried at lower of redemption value and net book value (i.e. book value less provision held), of the financial assets.

Based on the above valuation under each of six-sub classifications under ''Available for Sale'':

(i) If it results in appreciation, the same is ignored.

(ii) If it results in net depreciation, the same is charged toProfit & Loss accountand credited to Provisionfor Depreciation on Investments (AFS) in the liability side.

(iii) The book value of securities is not changed in respect of marked to market (MTM) except as required by the RBI guidelines.

(iv) Profit orLosson sale of investmentin this category i s accounted for in the Profit and loss account.

c. Held for Trading:

(i) The individual securities under this category are held at original cost and are marked to market every month. Central/ State Government securities are valued at market rates declared by Fixed Income Money Market and Derivatives Association of India [FIMMDA]. Other approved securities, Debentures and Bonds are valued as per the yield curve, average credit spread rating and methodology suggested by FIMMDA. Quoted Shares are valued at market rates.

(ii) Investments in discounted instruments, viz. Treasury bills, Certificate of deposits and commercial papers, Zero coupon Bonds are valued at carrying cost. Mutual Fund Instruments are valued at market rate or repurchase price or net asset value in that order depending on their availability. Investments in Security Receipts /PTCs issued by Asset Reconstruction Companies (ARCs) in respect of financial assets sold to ARCs are carried at lower of redemption value and net book value (i.e. book value less provision held), of the financial assets.

(iii) Net basket-wise depreciation if any, is charged to Profit & Loss Account and credited to Provision onDepreciation onInvestment (HFT) underliabiMty. Netappreciation, ifanyis i gnored.Thebookvalueof thesecuritiesisnotchangedafterrevaluationexcept as required by the RBI guidelines.

(iv) Profit or loss on sale of investment in this category is accounted for in the Profit & Loss Account.

d. The non-performing investments are identified and depreciation/ provision are made as per RBI guidelines.

e. Costs such as brokerage, fees, commission , taxes etc. incurred at the time of acquisition of securities are capitalized.

f. Interest Rate Swaps:

(i) Valuation:

(a) Hedging Swaps: Interest Rate Swaps for hedging assets and liabilities are not marked to market.

(b) Trading Swaps: Interest Rate Swap for trading purpose is marked to market.

(ii) Accounting of income on derivative deals:

(a) Hedging Swaps: Income is accounted for on realization basis. Expenditure, if any, is accounted for on accrual basis, if ascertainable.

(b) Trading Swaps: Income or expenditure is accounted for on realization basis on settlement date.

(iii) Accounting of gain or loss on termination of swaps:

(a) Hedging Swaps: Any gain or loss on the terminated swap is recognized over the shorter of (a) the remaining contractual life of the swap or (b) the remaining life of the asset/ liability.

(b) Trading Swaps: Any gain or loss on terminated swap is recognized as income or expenses in the year of termination.

4. Advances:

4.1 Advances shown are net of write offs, provisions made for non-performing assets, claims settled with the credit guarantee institutions, provision on restructured advances and rediscounts.

4.2 Classification of advances and provisions are made in accordance with the prudential norms prescribed by RBI from time to time.

4.3 Provision for performing assets, other than provision on standard restructured advances, is shown under the head "Other liabilities and provisions".

4.4 In respect of Rescheduled/ Restructured accounts, provision for diminution in fair value of restructured advances is made in present value basis as per RBI guidelines.

4.5 In case of financial assets sold to Assets Reconstruction Company (ARC)/ Securitization Company (SC), if the sale is at price lower than the net book value, the short fall is charged to Profit & Loss Account. If the sale value is higher than the net book value, the surplus provision is not reversed but will be utilized to meet the deficit / loss on account of sale of other financial assets provided the excess provision on sale of NPAs, if the sale value is for a value higher than the NBV, shall be reversed to the Profit & Loss A/c in the financial year in which amounts are received when the cash received (by way of initial consideration and / or redemption of SRs / PTCs) is higher than the net book value (NBV) of the asset provided reversal of excess provision shall be limited to the extent to which cash received exceeds the NBV of the asset.

5. Fixed Assets and Depreciation:

5.1 Premises and Other Fixed Assets are accounted for at cost except for certain premises, which were revalued and stated at revalued amount.

5.2 Depreciation on fixed assets (other than those referred in para 5.3 and 5.4 below) is provided for on the diminishing balance method at the rates specified below, except in case of revalued assets, in respect of which higher depreciation is provided on the basis of estimated useful life of these revalued assets.

5.3 On computers, depreciation is provided at the rate of 33.33% on Straight Line Method so as to write down the asset value in three years to Rupee One as per RBI guidelines. Computers include software, ATMs and UPS also.

5.4 Depreciation is provided for full year in respect of assets purchased during the year. No depreciation is provided on assets sold / discarded during the year.

5.5 Depreciation relating to revalued amount over and above the cost of the revalued assets, is provided on diminishing balance method over the residual life of the fixed assets as stated in para 5.2 and adjusted against the Revaluation Reserve. Revaluation Reserve on fully depreciated properties is amortized on the basis of their residual life as certified by approved valuers

5.6 Leasehold land cost is amortized over the period of lease on Straight Line Method (SLM).

6. Revenue Recognition

6.1 All revenues and costs are accounted for on accrual basis except the following items, which are accounted for on cash basis:-

a Interest on Advances and Investments identified as Non-Performing Assets according to the prudential norms issued by RBI, from time to time.

b. Income from commission viz on Guarantees, Letter of Credit, Government business, Bancassuarance, Mutual Fund business, credit & debit cards issued and Locker Rent.

c. Interest for overdue period on bills purchased and bills discounted.

d. Insurance claims.

e. Remuneration on Debenture Trustee Business.

f. Loan Processing Fees.

g. Income from Merchant Banking Operations and Underwriting Commission.

h. Transaction processing fees received on utility bill pay services through internet banking.

6.2 Pursuant to RBI guidelines, the interest payable on overdue term deposit is provided on accrual basis at Saving Bank rate effective from date of RBI circular dated 22.08.2008, and the balance at the time of renewal.

7. Employees'' Benefits:

Defined Contribution Plan: The contribution paid / payable under defined contribution benefit schemes are charged to Profit & Loss Account.

Defined Benefit Plans: Bank''s liabilities towards defined benefit schemes are determined on the basis of an actuarial valuation made at the end of financial year. Actuarial gains and losses are recognized in the Profit & Loss Account.

8. Impairment of Assets:

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

9. Provisions Contingent Liabilities and Contingent Assets:

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

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

10. Net Profit, Provisions and Contingencies:

The Net Profit disclosed is after making the Provisions and Contingencies which include adjustment to the value of investments, on bad debts, provision for taxation (including deferred tax), provision for advances and contingencies/others.

11. Income Tax:

The provision for tax for the year comprises liability towards current Income Tax, Wealth Tax and also Deferred Tax. The deferred tax asset/ liability is recognized, subject to the consideration of prudence, taking into account the timing differences between the taxable income and accounting income, in terms of the Accounting Standard 22 issued by ICAI. The effect of change in tax rates on deferred tax assets and liabilities is recognized in the Profit & Loss Account in the period of applicability of the change.

The demand raised by the Income Tax authorities including the interest thereon is provided for when such demand is upheld in the second appeal (i.e. by ITAT).

12. Earnings 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 share is arrived by dividing net profit by the weighted average number of equity shares outstanding for the period. The diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.

* Represents depreciation on shifting of securities from HFT portfolio to AFS portfolio in FY 2013-14 on completion of 90 days, the maximum period available for holding such security in HFT portfolio.

During the FY 2014-15, the Bank has transferred securities from HFT category to AFS category amounting to Rs.309.54 crore upon completion of 90 days.

During the FY 2014-15, the Bank has shifted securities from HTM category to AFS category amounting to Rs.777.25 crore in terms of RBI guidelines DBOD.BPBC. No.21.04.141/2014-15 dated July 1,2014. No depreciation was required to be provided on account of such shifting.

During the FY 2014-15, the Bank has transferred securities from HTM category to AFS category amounting to Rs. 88.07 crore taking into account the RBI guidelines DBOD. BP.BC.No.21.04.141/2014-15 dated August 5, 2014; no depreciation arose on account of such transfer.

During the FY 2014-15, the Bank has not shifted from AFS and HFT categories to HTM category.


Mar 31, 2014

1. ACCOUNTING CONVENTIONS:

1.1 The financial statements are prepared under the historical cost conventions except as otherwise stated and conform to the Generally Accepted Accounting Principles (GAAP) which include statutory provisions, practices prevailing within the Banking Industry in India, the regulatory/ Reserve Bank of India ( ACI-RBI ACI-) guidelines, Accounting Standards/ Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI).

1.2 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 the date of financial statements and reported income and expenses for the period under report. Management is of the view that the estimates used in the preparation of financial statements are prudent and reasonable.

1.3 Revenue and costs are accounted for on accrual basis except as stated in para 6.1 below.

1.4 The accounting policies with regard to Revenue Recognition, Investments and Advances are in conformity with the prudential accounting norms issued by Reserve Bank of India from time to time.

2. FOREIGN EXCHANGE TRANSACTIONS:

2.1 The foreign currency transactions are translated at the weekly average closing rates for the preceding week as published by Foreign Exchange Dealers'' Association of India (FEDAI). Revaluation of foreign currency assets and liabilities as on Balance Sheet date is done at the closing exchange rate published by FEDAI and the resultant profit/loss is accounted for in the Profit ACY- Loss Account.

2.2 Outstanding Forward Exchange Contracts are stated at contracted rates and revalued as on Balance Sheet date at the exchange rates published by FEDAI for specified maturities. The resulting profit/loss is recognized in the Profit ACY- Loss Account in accordance with RBI / FEDAI Guidelines.

2.3 Contingent Liabilities on account of Guarantees and Letters of Credit issued in foreign currency are stated in the Balance Sheet at the closing exchange rates published by FEDAI.

3. INVESTMENTS:

As per Reserve Bank of India guidelines, the investments are classified and valued as under:

3.1 Investments are classified in the following categories:

a. Held to maturity

b. Available for sale

c. Held for trading

3.2 All the securities are further classified in the following six baskets:

a. Government Securities

b. Other approved Securities

c. Shares

d. Debentures and Bonds

e. Subsidiaries and Joint Ventures

f. Others (Commercial Papers, Mutual Fund Units. Rural Infrastructure Development Funds, etc).

3.3 Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Shifting of securities from one category to another is done once in a year with the approval of Board of Directors, at the least of acquisition cost / book value / market value on the date of shifting. The depreciation, if any, on such shifting is provided for and the book value of the security is changed accordingly. The transfer of securities from one category to another is made as per permission from or guidelines of Reserve Bank of India.

3.4 REPO / Reverse REPO

The Bank has adopted the Uniform Accounting Procedure prescribed by the RBI for accounting of market Repo and Reverse Repo transactions. Repo and Reverse Repo Transactions are treated as Collateralized Borrowing / Lending Operations with an agreement to repurchase on the agreed terms. Securities sold under Repo are continued to be shown under investment and Securities purchased under Reverse Repo are not included in Investment. Outstanding Repo / Term Repo is disclosed as borrowing and outstanding Reverse Repo is disclosed as lending. Costs and revenues are accounted for as interest expenditure / income, as the case may be.

3.5 Valuation of investments:

a. Held to Maturity:

(i) Securities under the category ''Held to Maturity1 are valued at average cost. Wherever the cost is higher than the face value, the premium is amortized over the remaining period of maturity.

(ii) In case of other investments under ACI-Held to Maturity ACI- category, where the cost price is less than the face value, the difference is ignored. In case of investments in subsidiaries and joint ventures permanent diminution in value is recognized and provided for. Investment in RRBs is valued at carrying cost.

(iii) On sale of investments in this category (a) the net profit is initially taken to profit and loss account and thereafter net of applicable taxes and statutory reserve is appropriated to the ''Capital Reserve account'' and (b) the net loss is charged to the Profit ACY- Loss Account.

b. Available for Sale:

The individual securities under this category are marked to market. Central Government securities are valued at market rates declared by Fixed Income Money Market and Derivatives Association of India AFs-FIMMDA AF0-. State Government securities, other approved securities, Debentures and Bonds are valued as per the yield curve, average credit spread rating and methodology suggested by FIMMDA. Quoted Shares are valued at market rates. Unquoted shares are valued at book value ascertained from the latest available Balance Sheet and in case the latest Balance Sheet is not available, the same is valued at X 1/- per company.

Investments in discounted instruments, viz. Treasury bills, Certificate of deposits and commercial papers are valued at carrying cost. Mutual Fund Instruments are valued at market rate or repurchase price or net asset value in that order depending on their availability. Investments in Security Receipts /PTCs issued by Asset Reconstruction Companies (ARCs) in respect of financial assets sold to ARCs are carried at lower of redemption value and net book value (i.e. book value less provision held), of the financial assets.

Based on the above valuation under each of six-sub classifications under ACI-Available for Sale'':

(i) If it results in appreciation, the same is ignored.

(ii) If it results in net depreciation, the same is charged to Profit ACY- Loss account and credited to Provision for Depreciation on Investments (AFS) in the liability side.

(iii) The book value of securities is not changed in respect of marked to market (MTM) except as required by the RBI guidelines.

(iv) Profit or Loss on sale of investment in this category is accounted for in the Profit and loss account.

c. Held for Trading :

(i) The individual scrips under this category are held at original cost. The same is valued at monthly intervals at market rates or as per the prices declared by FIMMDA and in respect of each classification under this category, net depreciation if any, is charged to Profit ACY- Loss Account and credited to Provision on Depreciation on Investment (HFT) under liability. Net appreciation, if any is ignored. The book value of the securities is not changed after revaluation except as required by the RBI guidelines.

(ii) Profit or loss on sale of investment in this category is accounted for in the Profit ACY- Loss Account.

d. The non-performing investments are identified and depreciation/ provision is made as per RBI guidelines.

e. Costs such as brokerage, fees etc. incurred at the time of acquisition of securities (except equity / preference shares, where it is treated as cost of acquisition) are recognized as expenses.

f. Interest Rate Swaps:

(i) Valuation:

(a) Hedging Swaps: Interest Rate Swaps for hedging assets and liabilities are not marked to market.

(b) Trading Swaps: Interest Rate Swap for trading purpose is marked to market.

(ii) Accounting of income on derivative deals:

(a) Hedging Swaps: Income is accounted for on realization basis. Expenditure, if any, is accounted for on accrual basis, if ascertainable.

(b) Trading Swaps: Income or expenditure is accounted for on realization basis on settlement date.

(iii) Accounting of gain or loss on termination of swaps:

(a) Hedging Swaps: Any gain or loss on the terminated swap is recognized over the shorter of (a) the remaining contractual life of the swap or (b) the remaining life of the asset/ liability.

(b) Trading Swaps: Any gain or loss on terminated swap is recognized as income or expenses in the year of termination.

4. ADVANCES:

4.1 Advances shown are net of write offs, provisions made for non-performing assets, claims settled with the credit guarantee institutions and rediscounts.

4.2 Classification of advances and provisions are made in accordance with the prudential norms prescribed by RBI from time to time.

4.3 Provision for performing assets is shown under the head ACI-Other liabilities and provisions ACI-.

4.4 In respect of Rescheduled/ Restructured accounts. provision for diminution in fair value of restructured advances is made in present value basis as per RBI guidelines.

4.5 In case of financial assets sold to Assets Reconstruction Company (ARC)/ Securitization Company (SC), if the sale is at price lower than the net book value, the short fall is debited to Profit ACY- Loss Account. If the sale value is higher than the net book value, the surplus provision is not reversed but will be utilized to meet the deficit/ loss on account of sale of other financial assets.

5. FIXED ASSETS AND DEPRECIATION:

5.1 Premises and Other Fixed Assets are accounted for at cost except for certain premises, which were revalued and stated at revalued amount.

5.2 Depreciation on fixed assets (other than those referred in para 5.3, 5.4, 5.5 below) is provided for on the diminishing balance method at the rates specified in Schedule XIV to the Companies Act, 1956 except in case of revalued assets, in respect of which higher depreciation is provided on the basis of estimated useful life of these revalued assets.

5.3 On computers, depreciation is provided at the rate of 33.33 ACU- on Straight Line Method so as to write down the asset value in three years to Rupee One as per RBI guidelines. Computers include software IBk-s, ATMs and UPS also.

5.4 On Fixed Assets having original cost below X 5,000/-. depreciation is provided for at applicable rates instead of providing 100 ACU- depreciation in the year of purchase.

5.5 Depreciation is provided for full year in respect of assets purchased during the year. No depreciation is provided on assets sold / discarded during the year.

5.6 Depreciation relating to revalued amount over and above the cost of the revalued assets, is provided on diminishing balance method over the residual life of the fixed assets as stated in para 5.2 and adjusted against the Revaluation Reserve. Revaluation Reserve on fully depreciated properties is amortized on the basis of their residual life as certified by approved values.

5.7 Leasehold land cost is amortized over the period of lease on Straight Line Method (SLM).

6. REVENUE RECOGNITION

6.1 All revenues and costs are accounted for on accrual basis except the following items, which are accounted for on cash basis:-

a. Interest on Advances and Investments identified as Non-Performing Assets according to the prudential norms issued by RBI, from time to time.

b. Income from commission viz on Guarantees, Letter of Credit, Government business, Bancassuarance. Mutual Fund business and Locker Rent.

c. Interest for overdue period on bills purchased and bills discounted.

d. Insurance claims.

e. Remuneration on Debenture Trustee Business.

f. Loan Processing Fees.

g. Income from Merchant Banking Operations and Underwriting Commission.

h. Transaction processing fees received on utility bill pay services through internet banking.

6.2 Pursuant to RBI guidelines, the interest payable on overdue term deposit is provided on accrual basis at Saving Bank rate effective from date of RBI circular dated 22.08.2008, and the balance at the time of renewal.

7. EMPLOYEES'' BENEFITS:

Defined Contribution Plan: The contribution paid / payable under defined contribution benefit schemes are charged to Profit ACY- Loss Account.

Defined Benefit Plans: Bank''s liabilities towards defined benefit schemes are determined on the basis of an actuarial valuation made at the end of financial year. Actuarial gains and losses are recognized in the Profit ACY- Loss Account.

8. IMPAIRMENT OF ASSETS:

Impairment losses if any, on fixed assets including Revalued Assets, are recognized in accordance with Accounting Standard 28- Impairment of Assets issued by the Institute of Chartered Accountants of India (ICAI) and charged to Profit ACY- Loss Account.

9. PROVISIONS CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

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

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

10. NET PROFIT, PROVISIONS AND CONTINGENCIES:

The Net Profit disclosed is after making the Provisions and Contingencies which include adjustment to the value of investments, write off of bad debts, provision for taxation (including deferred tax), provision for advances and contingencies/others.

11. INCOME TAX:

The provision for tax for the year comprises liability towards Current Income Tax, Wealth Tax and Deferred Tax. The deferred tax asset/ liability is recognized, subject to the consideration of prudence, taking into account the timing differences between the taxable income and accounting income, in terms of the Accounting Standard 22 issued by ICAI. The effect of change in tax rates on deferred tax assets and liabilities is recognized in the Profit ACY- Loss Account in the period of applicability of the change.

Interest income on refund of Income Tax is accounted for in the year the order is passed by the concerned authority.

The demand raised by the Income Tax authorities including the interest thereon is provided for when the demand is upheld in the second appeal (i.e. by ITAT).

12. EARNINGS PER SHARE

Basic and Diluted earnings per equity share are reported in accordance with the Accounting Standard (AS-20) ACI-Earnings Per Share ACI- issued by ICAI. Basic Earnings per share is arrived by dividing net profit by the weighted average number of equity shares outstanding for the period. The diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.


Mar 31, 2013

1. ACCOUNTING CONVENTIONS:

1.1 The financial statements are prepared under the historical cost conventions except as otherwise stated and conform to the Generally Accepted Accounting Principles (GAAP) which include statutory provisions, practices prevailing within the Banking Industry in India, the regulatory/ Reserve Bank of India ("RBI") guidelines, Accounting Standards/ guidance notes issued by Institute of Chartered Accountants of India (ICAI).

1.2 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 the date of financial statements and reported income and expenses for the period under report. Management is of the view that the estimates used in the preparation of financial statements are prudent and reasonable.

1.3 Revenue and costs are accounted for on accrual basis except as stated in para 6.1 below.

1.4 The accounting policies with regard to Revenue Recognition, Investments and Advances are in conformity with the prudential accounting norms issued by Reserve Bank of India from time to time.

2. FOREIGN EXCHANGE TRANSACTIONS:

2.1 The foreign currency transactions are translated at the weekly average closing rates for the preceding week as published by Foreign Exchange Dealers'' Association of India (FEDAI). Revaluation of foreign currency assets and liabilities as on Balance Sheet date is done at the closing exchange rate published by FEDAI and the resultant profit/loss is accounted for in the Profit & Loss Account.

2.2 Outstanding Forward Exchange Contracts are stated at contracted rates and revalued as on Balance Sheet date at the exchange rates published by FEDAI for specified maturities. The resulting profit/loss is recognized in the Profit & Loss Account in accordance with RBI / FEDAI Guidelines.

2.3 Contingent Liabilities on account of Guarantees and Letters of Credit issued in foreign currency are stated in the Balance Sheet at the closing exchange rates published by FEDAI.

3. INVESTMENTS:

As per Reserve Bank of India guidelines, the investments are classified and valued as under:

3.1 Investments are classified in the following categories:

a. Held to maturity

b. Available for sale

c. Held for trading

3.2 All the securities are further classified in the following six classifications:

a. Government Securities

b. Other approved securities

c. Shares

d. Debentures and bonds

e. Subsidiaries and Joint Ventures

f. Others (Commercial Papers, Mutual Fund Units, Rural Infrastructure Development Funds etc).

3.3 Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Shifting of securities from one category to another is done once in a year with the approval of Board of Directors, at the least of acquisition cost / book value / market value on the date of shifting. The depreciation, if any, on such shifting is provided for and the book value of the security is changed accordingly.

3.4 REPO / Reverse REPO

The Bank has adopted the Uniform Accounting Procedure prescribed by the RBI for accounting of market Repo and Reverse Repo transactions. Repo and Reverse Repo Transactions are treated as Collateralized Borrowing / Lending Operations with an agreement to repurchase on the agreed terms. Securities sold under Repo are continued to be shown under investment and Securities purchased under Reverse Repo are not included in Investment. Outstanding REPO / Reverse REPO is disclosed as borrowing / lending respectively from FY 2012-13. Costs and revenues are accounted for as interest expenditure / income, as the case may be.

3.5 Valuation of investments:

a. Held to Maturity:

(i) Securities under the category ''Held to Maturity'' are valued at cost. Wherever the cost is higher than the face value, the premium is amortized over the remaining period of maturity.

(ii) In case of other investments under "Held to Maturity" category, where the cost price is less than the face value, the difference is ignored. In case of investments in subsidiaries and joint ventures permanent diminution in value is recognized and provided for. Investment in RRBs is valued at carrying cost.

(iii) On sale of investments iri this category (a) the net profit is initially taken to profit and loss account and thereafter net of applicable taxes and statutory reserve is appropriated to the ''Capital Reserve account'' and (b) the net loss is charged to the profit and loss account.

b. Available for Sale:

The individual securities under this category are marked to market. Central Government securities are valued at market rates declared by Fixed Income Money Market and Derivatives Association of India [FIMMDA], State Government securities, other approved securities, Debentures and Bonds are valued as per the yield curve, average credit spread rating and methodology suggested by FIMMDA. Quoted Shares are valued at market rates. Unquoted shares are valued at book value ascertained from the latest available Balance Sheet and in case the latest Balance Sheet is not available, the same is valued at Rs. 1/- per company.

Treasury bills and commercial papers are valued at carrying cost. Mutual Fund Instruments are valued at market rate or repurchase price or net asset value in that order depending on their availability.

Based on the above valuation under each of six-sub classifications under ''Available for Sale'':

(i) If it results in appreciation, the same is ignored.

(ii) If it results in depreciation, the same is charged to Profit & Loss account and credited to Provision for Depreciation on Investment (AFS) under the head Provision & Contingencies under liability.

(iii) The book value of securities is not changed after revaluation except as required by the RBI guidelines.

(iv) Profit or Loss on sale of investment in this category is accounted for in the Profit and loss account.

c. Held for Trading :

(i) The individual scrips under this category are held at original cost. The same is valued at monthly intervals at market rates or as per the prices declared by FIMMDA and in respect of each classification under this category, net depreciation if any, is charged to profit and loss account and credited to Provision on Depreciation on Investment (HFT) under liability. Net appreciation, if any is ignored. The book value of the securities is not changed 1 after revaluation except as required by the RBI guidelines.

(ii) Profit or loss on sale of investment in this category is accounted for in the Profit and Loss account.

d. The non-performing investments are identified and depreciation/ provision is made as per RBI guidelines.

e. Costs such as brokerage, fees etc. incurred at the time of acquisition of securities (except equity/ preference shares, where it is treated as cost of acquisition) are recognized as expenses.

f. Interest Rate Swaps:

(i) Valuation:

(a) Hedging Swaps: Interest Rate Swaps for hedging assets and liabilities are not marked to market.

(b) Trading Swaps: Interest Rate Swap for trading purpose is marked to market.

(ii) Accounting of income on derivative deals:

(a) Hedging Swaps: Income is accounted for on realization basis. Expenditure, if any, is accounted for on accrual basis, if ascertainable.

(b) Trading Swaps: Income or expenditure is accounted for on realization basis on settlement date.

(iii) Accounting of gain or loss on termination of swaps:

(a) Hedging Swaps: Any gain or loss on the terminated swap is recognized over the shorter of (a) the remaining contractual life of the swap or (b) the remaining life of the asset/ liability.

(b) Trading Swaps: Any gain or loss on terminated swap is recognized as income or expenses in the year of termination.

4. ADVANCES:

4.1 Advances shown are net of write offs, provisions made for non-performing assets, claims settled with the credit guarantee institutions and rediscounts.

4.2 Classification of advances and provisions are made in accordance with the prudential norms prescribed by RBI from time to time.

4.3 Provision for performing assets is shown under the head "Other liabilities and provisions".

4.4 In respect of Rescheduled/ Restructured accounts, provision for diminution in fair value of restructured advances is made in present value basis as per RBI guidelines.

4.5 In case of financial assets sold to Assets Reconstruction Company (ARC)/ Securitization company (SC), if the sale is at price lower than the net book value, the short fall is debited to profit and loss account. If the sale value is higher than the net book value, the surplus provision is not reversed but will be utilized to meet the deficit/ loss on account of sale of other financial assets.

5. FIXED.ASSETS AND DEPRECIATION:

5.1 Premises and Other Fixed Assets are accounted for at cost except for certain premises, which were revalued and stated at revalued amount.

5.2 Depreciation on fixed assets (other than those referred in para 5.3, 5.4, 5.5 below) is provided for on the diminishing balance method at the rates specified in Schedule XIV to the Companies Act, 1956 except in case of revalued assets, in respect of which higher depreciation is provided on the basis of estimated useful life of these revalued assets.

5.3 On computers, depreciation is provided at the rate of 33.33% on Straight Line Method so as to write down the asset value in three years to Rupee One as per RBI guidelines. Computers include softwares, ATMs and UPS also.

5.4 On Fixed Assets having original cost below Rs. 5,000/-, depreciation is provided for at applicable rates instead of providing 100% depreciation in the year of purchase.

5.5 Depreciation is provided for full year in respect of assets purchased during the year. No depreciation is provided on assets sold I discarded during the year.

5.6 Depreciation relating to revalued amount over and above the cost of the revalued assets, is provided on diminishing balance method over the residual life of the fixed assets as stated in para 5.2 and adjusted against the Revaluation Reserve. Revaluation reserve on fully depreciated properties is amortized on the basis of their residual life as certified by approved valuers.

5.7 Leasehold land cost is amortized over the period of lease on Straight Line Method (SLM).

6. REVENUE RECOGNITION

6.1 All revenues and costs are accounted for on accrual basis except the following items, which are accounted for on cash basis:-

a. Interest on Advances and Investments identified as Non-Performing Assets according to the prudential norms issued by RBI, from time to time.

b. Income from commission viz on Guarantees, Letter of Credit, Government business, Bancassuarance, Mutual Fund business and Locker Rent.

c. Interest for overdue period on bills purchased and bills discounted.

d. Insurance claims.

e. Remuneration on Debenture Trustee Business.

f. Loan Processing Fees.

g. Income from Merchant Banking Operations and Underwriting Commission.

h. Transaction processing fees received on utility bill pay services through internet banking.

6.2 Pursuant to RBI guidelines, the interest payable on overdue term deposit is provided on accrual basis at Saving Bank rate effective from date of RBI circular dated 22.08.2008, and the balance at the time of renewal.

7. EMPLOYEES'' BENEFITS:

Defined Contribution Plan: The contribution paid / payable under defined contribution benefit schemes are charged to profit and loss account.

Defined Benefit Plans: Bank''s liabilities towards defined benefit schemes are determined on the basis of an actuarial valuation made at the end of financial year. Actuarial gains and losses are recognized in the Profit and Loss account.

8. IMPAIRMENT OF ASSETS:

Impairment losses if any, on fixed assets including Revalued Assets, are recognized in accordance with Accounting Standard 28 - Impairment of Assets issued by the Institute of Chartered Accountants of India (ICAI) and charged to profit and loss account.

9. PROVISIONS CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

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

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

10. NET PROFIT, PROVISIONS AND CONTINGENCIES:

The Net Profit disclosed is after making the Provisions and Contingencies which include adjustment to the value of investments, write off of bad debts, provision for taxation (including deferred tax), provision for advances and contingencies/others.

11. INCOME TAX:

The provision for tax for the year comprises liability towards Current Income Tax, Wealth Tax and Deferred Tax. The deferred tax asset/ liability is recognized, subject to the consideration of prudence, taking into account the timing differences between the taxable income and accounting income, in terms of the Accounting Standard 22 issued by ICAI. The effect of change in tax rates on deferred tax assets and liabilities is recognized in the profit and loss account in the period of applicability of the change.

Interest income on refund of Income Tax is accounted for in the year the order is passed by the concerned authority.

The demand raised by the Income Tax authorities including the interest thereon is provided for when the demand is upheld in the second appeal (i.e. by ITAT)

12. EARNINGS 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 share is arrived by dividing net profit by the weighted average number of equity shares outstanding for the period. The diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.


Mar 31, 2012

1. ACCOUNTING CONVENTIONS:

1.1 The financial statements are prepared under the historical cost conventions except as otherwise stated and conform to the Generally Accepted Accounting Principles (GAAP) which include statutory provisions, practices prevailing within the Banking Industry in India, the regulatory/ Reserve Bank of India ("RBI") guidelines, Accounting Standards/guidance notes issued by Institute of Chartered Accountants of India (ICAI).

1.2 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 the date of financial statements and reported income and expenses for the period under report. Management is of the view that the estimates used in the preparation of financial statements are prudent and reasonable.

1.3 Revenue and costs are accounted for on accrual basis except as stated in para 6.1 below.

1.4 The accounting policies with regard to Revenue Recognition, Investments and Advances are in conformity with the prudential accounting norms issued by Reserve Bank of India from time to time.

2. FOREIGN EXCHANGE TRANSACTIONS:

2.1 The foreign currency transactions are translated at the weekly average closing rates for the preceding week as published by Foreign Exchange Dealers' Association of India (FEDAI). Revaluation of foreign currency assets and liabilities as on Balance Sheet date is done at the closing exchange rate published by FEDAI and the resultant profit/loss is accounted for in the Profit & Loss Account.

2.2 Outstanding Forward Exchange Contracts are stated at contracted rates and revalued as on Balance Sheet date at the exchange rates published by FEDAI for specified maturities. The resulting profit/loss is recognized in the Profit & Loss Account in accordance with RBI/FEDAI Guidelines.

2.3 Contingent Liabilities on account of Guarantees and Letters of Credit issued in foreign currency are stated in the Balance Sheet at the closing exchange rates published by FEDAI.

3. INVESTMENTS:

As per Reserve Bank of India guidelines, the investments are classified and valued as under:

3.1 Investments are classified in the following categories:

a. Held to maturity

b. Available for sale

c. Held for trading

3.2 All the securities are further classified in the following six classifications:

a. Government Securities

b. Other approved securities

c. Shares

d. Debentures and bonds

e. Subsidiaries and Joint Ventures

f. Others (Commercial Papers, Mutual Fund Units, Rural Infrastructure Development Funds etc).

3.3 Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Shifting of securities from one category to another is done once in a year with the approval of Board of Directors, at the least of acquisition cost/book value/market value on the date of shifting. The depreciation, if any, on such shifting is provided for and the book value of the security is changed accordingly.

3.4 REPO/Reverse REPO

The Bank has adopted the Uniform Accounting Procedure prescribed by the RBI for accounting of market Repo and Reverse Repo transactions [other than the Liquidity Adjustment Facility (LAF)]. Repo and Reverse Repo Transactions are treated as Collateralized Borrowing/ Lending Operations with an agreement to repurchase on the agreed terms. Securities sold under Repo are continued to be shown under investment and Securities purchased under Reverse Repo are not included in Investment. Costs and revenues are accounted for as interest expenditure/income, as the case may be.

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

3.5 Valuation of investments:

a. Held to Maturity:

(i) Securities under the category 'Held to Maturity' are valued at cost. Wherever the cost is higher than the face value, the premium is amortized over the remaining period of maturity.

(ii) In case of other investments under "Held to Maturity" category, where the cost price is less than the face value, the difference is ignored. In case of investments in subsidiaries and joint ventures permanent diminution in value is recognized and provided for. Investment in RRBs is valued at carrying cost.

(iii) On sale of investments in this category (a) the net profit is initially taken to profit and loss account and thereafter net of applicable taxes and statutory reserve is appropriated to the 'Capital Reserve account' and (b) the net loss is charged to the profit and loss account.

b. Available for Sale:

The individual securities under this category are marked to market. Central Government securities are valued at market rates declared by Fixed Income Money Market and Derivatives Association of India [FIMMDA]. State Government securities, other approved securities, Debentures and Bonds are valued as per the yield curve, average credit spread rating and methodology suggested by FIMMDA. Quoted Shares are valued at market rates. Unquoted shares are valued at book value ascertained from the latest available Balance Sheet and in case the latest Balance Sheet is not available, the same is valued at Re.1/- per company.

Treasury bills and commercial papers are valued at carrying cost. Mutual Fund Instruments are valued at market rate or repurchase price or net asset value in that order depending on their availability.

Based on the above valuation under each of six-sub classifications under 'Available for Sale':

(i) If it results in appreciation, the same is ignored.

(ii) If it results in depreciation, the same is charged to Profit & Loss account and credited to Provision for Depreciation on Investment (AFS) under the head Provision & Contingencies under liability.

(iii) The book value of securities is not changed after revaluation except as required by the RBI guidelines.

(iv) Profit or Loss on sale of investment in this category is accounted for in the Profit and loss account.

c. Held for Trading:

(i) The individual scrip's under this category are held at original cost. The same is valued at monthly intervals at market rates or as per the prices declared by FIMMDA and in respect of each classification under this category, net depreciation if any, is charged to profit and loss account and credited to Provision on Depreciation on Investment (HFT) under liability. Net appreciation, if any is ignored. The book value of the securities is not changed after revaluation except as required by the RBI guidelines.

(ii) Profit or loss on sale of investment in this category is accounted for in the Profit and Loss account.

d. The non-performing investments are identified and depreciation/provision is made as per RBI guidelines.

e. Costs such as brokerage, fees etc. incurred at the time of acquisition of securities (except equity/ preference shares, where it is treated as cost of acquisition) are recognized as expenses.

f. Interest Rate Swaps:

(i) Valuation:

(a) Hedging Swaps: Interest Rate Swaps for hedging assets and liabilities are not marked to market.

(b) Trading Swaps: Interest Rate Swap for trading purpose is marked to market.

(ii) Accounting of income on derivative deals:

(a) Hedging Swaps: Income is accounted for on realization basis. Expenditure, if any, is accounted for on accrual basis, if ascertainable.

(b) Trading Swaps: Income or expenditure is accounted for on realization basis on settlement date.

(iii) Accounting of gain or loss on termination of swaps:

(a) Hedging Swaps: Any gain or loss on the terminated swap is recognized over the shorter of (a) the remaining contractual life of the swap or (b) the remaining life of the asset/liability.

(b) Trading Swaps: Any gain or loss on terminated swap is recognized as income or expenses in the year of termination.

4. ADVANCES:

4.1 Advances shown are net of write offs, provisions made for non-performing assets, claims settled with the credit guarantee institutions and rediscounts.

4.2 Classification of advances and provisions are made in accordance with the prudential norms prescribed by RBI from time to time.

4.3 Provision for performing assets is shown under the head "Other liabilities and provisions.

4.4 In respect of Rescheduled/Restructured accounts, provision for diminution in fair value of restructured advances is made in present value basis as per RBI guidelines.

4.5 In case of financial assets sold to Assets Reconstruction Company (ARC)/Securitization company(SC), if the sale is at price lower than the net book value, the short fall is debited to profit and loss account. If the sale value is higher than the net book value, the surplus provision is not reversed but will be utilized to meet the deficit/loss on account of sale of other financial assets.

5. FIXED ASSETS AND DEPRECIATION:

5.1 Premises and Other Fixed Assets are accounted for at cost except for certain premises, which were revalued and stated at revalued amount.

5.2 Depreciation on fixed assets (other than those referred in para 5.3, 5.4, 5.5 below) is provided for on the diminishing balance method at the rates specified in Schedule XIV to the Companies Act, 1956 except in case of revalued assets, in respect of which higher depreciation is provided on the basis of estimated useful life of these revalued assets.

5.3 On computers, depreciation is provided at the rate of 33.33% on Straight Line Method so as to write down the asset value in three years to Rupee One as per RBI guidelines. Computers include softwares, ATMs and UPS also.

5.4 On Fixed Assets having original cost below t 5,000/-, depreciation is provided for at applicable rates instead of providing 100% depreciation in the year of purchase.

5.5 Depreciation is provided for full year in respect of assets purchased during the year. No depreciation is provided on assets sold/discarded during the year.

5.6 Depreciation relating to revalued amount over and above the cost of the revalued assets, is provided on diminishing balance method over the life of the fixed assets as stated in para 5.2 and adjusted against the Revaluation Reserve.

5.7 Leasehold land cost is amortized over the period of lease on Straight Line Method (SLM).

6. REVENUE RECOGNITION

6.1 All revenues and costs are accounted for on accrual basis except the following items, which are accounted for on cash basis:-

a. Interest on Advances and Investments identified as Non-Performing Assets according to the prudential norms issued by RBI, from time to time.

b. Income from commission viz on Guarantees, Letter of Credit, Government business, Bancassuarance, Mutual Fund business and Locker Rent.

c. Interest for overdue period on bills purchased and bills discounted.

d. Insurance claims.

e. Remuneration on Debenture Trustee Business.

f. Loan Processing Fees.

g. Income from Merchant Banking Operations and Underwriting Commission.

h. Transaction processing fees received on utility bill pay services through internet banking.

6.2 Pursuant to RBI guidelines, the interest payable on overdue term deposit is provided on accrual basis at Saving Bank rate effective from date of RBI circular dated 22.08.2008, and the balance at the time of renewal.

7. EMPLOYEES' BENEFITS:

Defined Contribution Plan: The contribution paid/payable under defined contribution benefit schemes are charged to profit and loss account.

Defined Benefit Plan: Bank's liabilities towards defined benefit schemes are determined on the basis of an actuarial valuation made at the end of financial year. Actuarial gains and losses are recognized in the Profit and Loss account.

8. IMPAIRMENT OF ASSETS:

Impairment losses if any, on fixed assets including Revalued Assets, are recognized in accordance with Accounting Standard 28- Impairment of Assets issued by the Institute of Chartered Accountants of India (ICAI) and charged to profit and loss account.

9. PROVISIONS CONTINGENT LIABILITIES AND CONTIN- GENT ASSETS:

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

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

10. NET PROFIT, PROVISIONS AND CONTINGENCIES:

The Net Profit disclosed is after making the Provisions and Contingencies which include adjustment to the value of investments, write off of bad debts, provision for taxation (including deferred tax), provision for advances and contingencies/others.

11. INCOME TAX:

The provision for tax for the year comprises liability towards Current Income Tax, Wealth Tax and Deferred Tax. The deferred tax asset/liability is recognized, subject to the consideration of prudence, taking into account the timing differences between the taxable income and accounting income, in terms of the Accounting Standard 22 issued by ICAI.

The effect of change in tax rates on deferred tax assets and liabilities is recognized in the profit and loss account in the period of applicability of the change. Interest income on refund of Income Tax is accounted for in the year the order is passed by the concerned authority.

The demand raised by the Income Tax authorities including the interest thereon is provided for when the demand is upheld in the second appeal (i.e. by ITAT).

12. EARNINGS 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 share is arrived by dividing net profit by the weighted average number of equity shares outstanding for the period. The diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.


Mar 31, 2010

1. Accounting Conventions:

1.1 The financial statements are prepared under the historical cost conventions except as otherwise stated and conform to the statutory provisions and practices prevailing within the Banking Industry in India and the guidelines issued by Reserve Bank of India (RBI).

1.2 Revenue and costs are accounted for on accrual basis except as otherwise stated.

1.3 The accounting policies with regard to Revenue Recognition, Investments and Advances are in conformity with the prudential accounting norms issued by Reserve Bank of India from time to time.

2. Foreign Exchange Transactions:

2.1. The foreign currency transactions are translated at the weekly average closing rates for the preceding week as published by Foreign Exchange Dealers Association of India (FEDAI). Revaluation of foreign currency assets and liabilities as on Balance Sheet date is done at the closing exchange rate published by FEDAI and the resultant profit/loss is accounted for in the Profit & Loss Account.

2.2. Outstanding Forward Exchange Contracts are stated at contracted rates and revalued as on Balance Sheet date at the exchange rates published by FEDAI for specified maturities. The resulting profit/loss is recognized in the Profit & Loss Account in accordance with RBI / FEDAI Guidelines.

2.3 Contingent Liabilities on account of Guarantees and Letters of Credit issued in foreign currency are stated in the Balance Sheet at the closing exchange rates published by FEDAI.

3. Investments:

As per Reserve Bank of India guidelines, the investments are classified and valued as under:

3.1 Investments in SLR and Non-SLR securities (Shares, Debentures, Bonds, units of MF, CP, CD etc.) are classified in the following categories:

a. Held to maturity

b. Available for sale

c. Held for trading

3.2 All the securities are classified in the following six classifications:

a. Government Securities

b. Other approved securities

c. Shares

d. Debentures and bonds

e. Subsidiaries and Joint Ventures

f. Others (Commercial Papers, Mutual Fund Units, RIDF etc).

3.3 Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Shifting of securities from one category to another is done once in a year with the approval of Board of Directors, at the least of acquisition cost/ book value / market value on the date of shifting. The depreciation, if any, on such shifting is provided for and the book value of the security is changed accordingly.

3.4 Valuation of investments:

a. Held to Maturity:

(i) Securities under the category Held to Maturity are valued at cost. Wherever the cost is higher than the face value, the premium is amortized over the remaining period of maturity.

(ii) In case of other investments under "Held to Maturity" category, where the cost price is less than the face value, the difference, is ignored. In case of investments in subsidiaries and joint ventures permanent diminution in value is recognized and provided for. Investment in RRBs is valued at carrying cost.

(iii) On sale of investments in this category (a) the net profit is initially taken to profit and loss account and thereafter net of applicable taxes and statutory reserve is appropriated to the Capital Reserve account and (b) the net loss is charged to the profit and loss account.

b. Available (or Sale:

The individual securities under this category are marked to market. Central Government securities are valued at market rates declared by Fixed Income Money Market and Derivatives Association of India [FIMMDAJ. State Government securities, other approved securities. Debentures and Bonds are valued as per the yield curve, average credit spread rating and methodology suggested by FIMMDA. Quoted Shares are valued at market rates. Unquoted shares are valued at book value ascertained from the latest available Balance Sheet and in case the latest Balance Sheet is not available, the same is valued at Re.1/- per company.

Treasury bills and commercial papers are valued at carrying cost. Mutual Fund Instruments are valued at market rate or repurchase price or net asset value in that order depending on their availability.

Based on the above valuation under each of six-sub classifications under Available for Sale:

i. If the figure results in appreciation, the same is ignored.

ii. If the figure results in depreciation, the same is charged to Profit & Loss account.

iii. The book value of securities is not changed after revaluation except as required by the RBI guidelines.

iv. Profit or Loss on sale of investment in this category is accounted for in the Profit and loss account.

c. Held for Trading:

(i) The individual scrips under this category are held at original cost. The same is valued at monthly intervals at market rates or as per the prices declared by FIMMDA and in respect of each classification under this category, net depreciation if any, is charged to profit and loss account and net appreciation, if any is ignored. The book value of the securities is not changed after revaluation except as required by the RBI guidelines.

(ii) Profit or loss on sale of investment in this category is accounted for in the Profit and Loss account.

d. The non-performing investments are identified and depreciation/ provision is made as per RBI guidelines.

e. Costs such as brokerage, fees etc. incurred at the time of acquisition of securities (except equity / preference shares, where it is treated as cost of acquisition) are recognized as expenses.

f. Interest Rate Swaps: (i) Valuation:

(a) Hedging Swaps: Interest Rate Swaps for hedging assets and liabilities are not marked to market.

(b) Trading Swaps: Interest Rate Swaps for trading purpose is marked to market.

(ii) Accounting of income on derivative deals:

(a) Hedging Swaps: Income is accounted for on realization basis. Expenditure, if any, is accounted for on accrual basis, if ascertainable

(b) Trading Swaps: Income or expenditure is accounted for on realization basis on settlement date.

(ili) Accounting of gain or loss on termination of swaps:

(a) Hedging Swaps: Any gain or loss on the terminated swap is recognized over the shorter of (a) the remaining contractual life of the swap or (b) the remaining life of the asset/ liability.

(b) Trading Swaps: Any gain or loss on terminated swap is recognized as income or expenses in the year of termination.

4. Advances:

4.1 Advances shown are net of write offs, provisions made for non-performing assets, claims settled with the credit guarantee institutions and rediscounts.

4.2 Classification of advances and provisions are made in accordance with the prudential norms prescribed by RBI from time to time.

4.3 Provision for performing assets is shown under the head "Other liabilities and provisions".

4.4 Recoveries in the Non Performing Assets are appropriated first towards principal and thereafter towards interest.

5. Fixed Assets and Depreciation:

5.1 Premises and Other Fixed Assets are accounted for at cost except for certain premises, which were revalued and stated at revalued amount.

5.2 Depreciation is provided for on the diminishing balance method at the rates specified in Schedule XIV to the Companies Act, 1956 on fixed assets except for:-

a. On computers, depreciation is provided at the rate of 33.33% on Straight Line Method so as to write down the asset value in three years to Rupee One as per RBI guidelines. Computers include softwares, ATMs and UPS also.

b. On Fixed Assets having original cost below Rs. 5,000/-, depreciation is provided for at applicable rates instead of providing 100% depreciation in the year of purchase.

c. Depreciation is provided for full year in respect of assets purchased during the year. No depreciation is provided on assets sold/discarded during the year.

5.3 Depreciation relating to revaluation is adjusted against the Revaluation Reserve.

5.4 Leasehold land cost is amortized over the period of lease.

6. Revenue Recognition:

6.1 All revenues and costs are accounted for on accrual basis except the following items, which are accounted for on cash basis:-

a. Interest on Advances and Investments identified as Non-Performing Assets according to the prudential norms issued by RBI, from time to time.

b. Income from commission viz on Guarantees, Letter of Credit, Government business, Bancassuarance, Mutual Fund business and Locker Rent.

c. Interest for overdue period on bills purchased and bills discounted.

d. Insurance claims.

e. Remuneration on Debenture Trustee Business.

f Processing Fees.

g Income from Merchant Banking Operations and Underwriting Commission.

6.2 Interest income on refund of Income Tax is accounted for in the year the order is passed by the concerned authority.

6.3 Pursuant to RBI guidelines, the interest payable on overdue term deposit is provided on accrual basis at Saving Bank rate effective from date of RBI circular dated 22.08.2008, and the balance at the time of renewal.

7. Employees Benefits:

Defined Contribution Plan:The contribution paid/ payable under defined contribution benefit schemes are charged to profit and loss account.

Defined Benefit Plan: Bank s liabilities towards defined benefit schemes are determined using Projected Unit Credit Method. Actuarial Valuations under the Projected Unit Credit Method are carried out as at the Balance Sheet date. Actuarial gains and losses are recognized in the Profit and Loss account.

8. Impairment of Assets

Impairment losses if any, on fixed assets including Revalued Assets, are recognized in accordance with Accounting Standard 28- Impairment of Assets issued by the Institute of Chartered Accountants of India (ICAI) and charged to profit and loss account.

9. Provisions Contingent Liabilities and Contingent Assets

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

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

10. Net Profit, Provisions and Contingencies:

The Net Profit disclosed is after making the Provisions and Contingencies which include adjustment to the value of investments, write off of bad debts, provision for taxation (including deferred tax), provision for advances and contingencies/others.

11. Income tax:

The provision for tax for the year comprises liability towards Current Income Tax, Wealth Tax and Deferred Tax. The deferred tax asset is recognized, subject to the consideration of prudence, taking into account the timing differences between the taxable income and accounting income, in terms of the Accounting Standard 22 issued by ICAI.

 
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