Mar 31, 2019
1. Basis of Preparation of Financial Statements:
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 (âRBIâ) guidelines, applicable Accounting Standards/ Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI).
1.2 Use of Estimates
The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of Assets and Liabilities (including contingent liabilities) as of 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. Future results could differ from these estimates. Any revisions to the accounting estimates shall be recognized prospectively unless otherwise stated.
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 and guidelines 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 Dealersâ 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 âOther Assetsâ in case of gain or to âOther Liabilitiesâ 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 investments are further classified in the following six baskets in conformity with the requirement of Form-A of Third Schedule to the Banking Regulation Act, 1949:
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 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 Cost of investments is determined on the basis of Weighted Average Price method.
Interest paid for broken period / interest received for broken period at the time of purchase / sale of fixed income securities is treated as revenue expenditure / income.
Brokerage / incentive received / paid at the time of purchase/ sale of investment is deducted / added from the amount of investment.
3.6 Valuation of investments:
a. Held to Maturity:
(i) Securities under the category âHeld to Maturityâ are valued at weighted average acquisition cost. Wherever the cost of security 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 such profit net of applicable taxes and proportionate transfer to statutory reserve is appropriated to the âCapital Reserve accountâ; 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 break-up 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, 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 Security Receipts (SRs) /Pass Through Certificates (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 âAvailable for Saleâ:
(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.
a. 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.
b. 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 Swaps for trading purpose are 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 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 âOther liabilities and provisionsâ.
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 case of financial assets sold to Asset Reconstruction Company (ARC)/ Securitization Company (SC), if the sale is at a price higher than the NBV, the surplus is retained and utilised to meet the shortfall/loss on account of sale of other financial assets to SC/ARC. If the sale is at a price below the net book value (NBV), (i.e. outstanding less provision held) the shortfall is to be debited to the Profit and Loss account. However if surplus is available, such shortfall will be absorbed in the surplus. Any shortfall arising due to sale of NPA will be amortised over a period of two years if not absorbed in the surplus.
Excess provision arising out of sale of NPAs are reversed only when the cash received (by way of initial consideration only/or redemption of SRs/PTC) is higher than the net book value (NBV) of the asset. Reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.
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 is debited to Profit & Loss Account. Revaluation Reserve on fully depreciated properties is amortized on the basis of their residual life as certified by approved valuers. Further Equivalent amount has been transferred from Revaluation Reserve to Revenue Reserve
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 and guidelines 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, on the balance at the time of renewal.
7. Employeesâ Benefits:
Defined Contribution Plan: The contribution paid/ payable under defined contribution benefit schemes are charged to Profit & Loss Account.
Defined Benefit Plans: Bankâs liabilities towards defined benefit schemes are determined on the basis of an actuarial valuation made at the end of each quarter/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-âProvisions, Contingent Liabilities and Contingent Assetsâ 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), and provision for advances including cases identified as fraud and contingencies /others.
11. Income Tax:
The provision for tax for the year comprises liability towards current Income 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 & Loss Account in the period of applicability of the change.
Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future. In cases of unabsorbed depreciation or carried forward loss under taxation laws, all deferred tax assets are recognized only if there is virtual certainty of realization of such assets supported by convincing evidence. Deferred tax assets are reviewed at each balance sheet date and appropriately adjusted to reflect the amount that is reasonably/ virtually certain to be realized. 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 by High Court.
12. Earnings per Share:
The bank reports basic and diluted earnings per equity share in accordance with the Accounting Standard (AS-20) âEarnings Per Shareâ issued by ICAI. Basic Earnings per share is arrived by dividing net profit after tax 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.
Diluted earnings per share reflects the potential dilution that could occur in earnings per share if securities or other contracts to issue equity share are exercised or converted during the period.
During the FY 2018-19, Government of India infused capital of Rs. 4703 crores on preferential basis, out of which capital of Rs. 4498 crores was accounted as share application money pending for allotment.
* The same is considered in common Equity Tier 1 capital ratio.
During the FY 2018-19, Bank has redeemed Basel II /Basel III Compliant Bonds for Rs 200.00 crore as per due date of redemption of Bond. Details of the same are as under:
Mar 31, 2018
1. Basis of Preparation of Financial Statements:
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 (âRBIâ) guidelines, applicable Accounting Standards/ Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI).
1.2 Use of Estimates
The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of Assets and Liabilities (including contingent liabilities) as of 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. Future results could differ from these estimates. Any revisions to the accounting estimates shall be recognized prospectively unless otherwise stated.
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 and guidelines 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 Dealersâ 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 âOther Assetsâ in case of gain or to âOther Liabilitiesâ 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 investments are further classified in the following six baskets in conformity with the requirement of Form-A of Third Schedule to the Banking Regulation Act, 1949:
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 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 Cost of investments is determined on the basis of Weighted Average Price method.
Interest paid for broken period / interest received for broken period at the time of purchase / saleof fixed income securities is treated as revenue expenditure / income.
Brokerage / incentive received at the time of investment is deducted from the amount of investment.
3.6 Valuation of investments:
a. Held to Maturity:
(i) Securities under the category âHeld to Maturityâ are valued at weighted average acquisition cost. Wherever the cost of security 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 such profit net of applicable taxes and proportionate transfer to statutory reserve is appropriated to the âCapital Reserve accountâ; 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 break up 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, 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 Security Receipts (SRs) /Pass Through Certificates (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 âAvailable for Saleâ:
(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 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 Swaps for trading purpose are 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 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 âOther liabilities and provisionsâ.
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 case of financial assets sold to Asset Reconstruction Company (ARC)/ Securitization Company (SC), if the sale is at a price higher than the NBV, the surplus is retained and utilised to meet the shortfall/loss on account of sale of other financial assets to SC/ARC. If the sale is at a price below the net book value (NBV), (i.e. outstanding less provision held) the shortfall is to be debited to the Profit and Loss account. However if surplus is available, such shortfall will be absorbed in the surplus. Any shortfall arising due to sale of NPA will be amortised over a period of two years if not absorbed in the surplus.
Excess provision arising out of sale of NPAs are reversed only when the cash received (by way of initial consideration only/or redemption of SRS/PTC) is higher then the net book value (NBV) of the asset. Reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.
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 and guidelines 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. Employeesâ Benefits:
Defined Contribution Plan: The contribution paid/ payable under defined contribution benefit schemes are charged to Profit & Loss Account.
Defined Benefit Plans: Bankâs liabilities towards defined benefit schemes are determined on the basis of an actuarial valuation made at the end of each quarter/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-âProvisions, Contingent Liabilities and Contingent Assetsâ 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), and provision for advances including cases identified as fraud and contingencies /others.
11. Income Tax:
The provision for tax for the year comprises liability towards current Income 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 & Loss Account in the period of applicability of the change.
Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future. In cases of unabsorbed depreciation or carried forward loss under taxation laws, all deferred tax assets are recognized only if there is virtual certainty of realization of such assets supported by convincing evidence. Deferred tax assets are reviewed at each balance sheet date and appropriately adjusted to reflect the amount that is reasonably/ virtually certain to be realized.
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:
The bank reports basic and diluted earnings per equity share in accordance with the Accounting Standard (AS-20) âEarnings Per Shareâ issued by ICAI. Basic Earnings per share is arrived by dividing net profit after tax 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.
Diluted earnings per share reflects the potential dilution that could occur in earnings per share if securities or other contracts to issue equity share are exercised or converted during the period.
Mar 31, 2017
SCHEDULE 17 - SIGNIFICANT ACCOUNTING POLICIES 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 (âRBIâ) 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 and guidelines 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 âOther Assetsâ in case of gain or to âOther Liabilitiesâ 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 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 âHeld to Maturity'' are valued at average cost. Wherever the cost of security 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 such profit net of applicable taxes and proportionate transfer to statutory reserve is appropriated to the âCapital 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, 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 Security Receipts (SRs) / Pass Through Certificates (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 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 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 Swaps for trading purpose are 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 expenditure in the year of termination.
4. Advances:
4.1 Advances shown are net of write offs, provisions made for nonperforming 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 âOther liabilities and provisionsâ.
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 (ARC)/ Securitization Company (SC), if the sale is at a price higher than the NBV, the surplus is retained and utilised to meet the shortfall/loss on account of sale of other financial assets to SC/ARC. If the sale is at a price below the net book value (NBV), (i.e. outstanding less provision held) the shortfall is to be debited to the Profit and Loss account. However if surplus is available, such shortfall will be absorbed in the surplus. Any shortfall arising due to sale of NPA will be amortised over a period of two years if not absorbed in the surplus.
Excess provision arising out of sale of NPAs are reversed only when the cash received (by way of initial consideration only/ or redemption of SRS/PTC) is higher than the net book value (NBV) of the asset. Reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.
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.
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-âProvisions, Contingent Liabilities and Contingent Assetsâ 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), and provision for advances including cases identified as fraud 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.
Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognized only to the extent there is reasonable certainly that the assets can be realized in future. In cases of unabsorbed depreciation or carried forward loss under taxation laws, all deferred tax assets are recognized only if there is virtual certainty of realization of such assets supported by convincing evidence. Deferred tax assets are reviewed at each balance sheet date and appropriately adjusted to reflect the amount that is reasonably/ virtually certain to be realized.
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) âEarnings Per Shareâ 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.
**In terms of Reserve Bank of India letter DBR.CO.BP No. 11544/21.01.002/2016-17 dated March 30,2017 the Bank has considered such amount received from Government of India as a part of Common Equity Tier 1 (CET 1) as on March 31, 2017 .
Bank has issued Basel III compliant Unsecured, Perpetual, NonConvertible Additional Tier 1 (AT-1) Bond of Rs. 500.00 crores, and Basel III compliant Unsecured Non-Convertible Tier 2 Bond of Rs. 500.00 crores on private placement basis. The details are as under:
2. Investments:
The Bank has classified the investment portfolio into three categories
i.e. âHeld to Maturity (HTM)â, âAvailable for Sale (AFS)â, and âHeld for Trading (HFT)â and valued the investments in terms of the Reserve Bank of India (RBI) guidelines.
During the financial year 2016-17, the Bank has not shifted securities from HFT category to AFS category. Also, during the FY 2016-17, the Bank has not shifted securities from AFS and HFT categories to HTM Category.
During the FY 2016-17, the Bank has transferred securities from HTM category to AFS category amounting to Rs. 3158.65 crores (Rs. 1321.20 crores) and charged to Profit & Loss depreciation amounting to Rs. Nil due to such transfer taking in terms of RBI guidelines RBI/2015-16/97 DBR No BP. BC.6/21.04.141/2015-16 dated 1.7.2015.
Note:
Investments as in (v) being âSubsidiaries / Joint Ventures, & (vi) being âOthersâ are exempt from rating & listing requirements as per RBI guidelines.
Amounts reported under columns 4, 5, 6 & 7 may not be mutually exclusive.
The total investment of Rs. 6991.33 crores (Rs. 6025.06 crores) includes Rajasthan Special Bonds of Rs. 875.61 crores (Rs 1194.93 crores) UP state Power Bonds of Rs. 153.76 crores (Rs 284.63 crores)
Haryana State Special Bonds Rs. 199.59 crores (Rs.199.59 crores) Punjab State Special bonds Rs 276.58 crores (Rs. 439.99 crores) The same has been included in Govt. Securities in Schedule 8 to the Balance Sheet.
As per RBI letter DBR.BP.No.11657/21.04.132/2015-16 dated
17.03.2016, Investment amounting to Rs. 476.80 crores in UDAY bonds is treated as NPI and provision at 25% amounting to Rs. 119.20 crores is made on the same.
2.4 The value of the sales and transfer of securities to / from HTM category during the financial year 2016-17, excluding onetime transfer with the approval of the Board, sales to RBI under pre announced OMO auctions and as permitted by RBI, does not exceed 5 percent of the book value of the investments in HTM category at the beginning of the year.
Profit on sale of investments in HTM category should be first taken to the Profit & Loss Account, and thereafter be appropriated to the âCapital Reserve Account'' after netting off taxes and amount required to be transferred to Statutory Reserves as per RBI circular RPCD.CO.RRB.BC. No. 74/03.05.33/2013-14 dated 7th January 2014.
As per RBI guidelines, an amount of Rs. 87.25 crores net of taxes being profit on sale of investment in âHeld to Maturity'' category is transferred to Capital Reserve. In the previous FY i.e. 2015-16, amount of Rs. 28.83 crores net of taxes and appropriate transfer to statutory reserve had been transferred to capital reserve
2.5 The Bank has amortized Rs.62.55 crores during the year (Rs. 52.46 crores) for securities classified under âHeld to Maturity'' category, and the amount has been charged to Profit & Loss account by reducing the value of respective securities to that extent.
2.6 During the current financial year 2016-17, an amount of Rs.
8.12 crores net of taxes has been drawn down from Investment Reserve Account on account of depreciation required to be made for investment held under AFS & HFT categories.
In the previous FY i.e. 2015-16, amount of Rs. 12.96 crores net of taxes and appropriate transfer to statutory reserve had been drawn down from Investment Reserve on account of depreciation required to be made for investment held under AFS & HFT categories
The Bank has policy guidelines in place for IRS/ FRA''s. The approved ceiling for IRS / FRAs in terms of notional principal is Rs 2000 crores. As on 31st March 2017, the Bank had 4 outstanding swaps for notional principal of Rs 100 crores which were for trading purpose. MTM valuation for outstanding trading swaps is Rs. (-) 0.46 crores.
3.2 Exchange Traded Interest Rate
3.3 Disclosures on risk exposure in derivatives
3.3.1 Qualitative Disclosure
(i) Derivative policy is approved by the Board, which includes measurement of credit & market risk.
(ii) Policy for hedging and processes for monitoring the same are in place.
(iii) The hedged transactions are undertaken for Balance Sheet management. Proper system for reporting and monitoring of risks is in place.
(iv) Risk Management of derivative operations is headed by a Top Management Executive who reports to Head Office. The swaps are tracked on regular basis.
(v) Accounting Policy for recording hedge and non-hedge transactions is in place, which includes recognition of income, expenditure, valuation of outstanding contracts and credit risk mitigation as given in para 3.5 (f)(ii) of Schedule 17, viz., Significant Accounting Policies.
(vi) The Bank has made requisite provision on credit exposure of derivative contracts computed as per current exposure method & as per RBI guidelines.
* Credit Exposure calculated as per RWA guidelines of Basel III.
3.5 Credit Default Swaps (CDS):
The Bank has no credit default swaps during the year 2016-17 or as on March 31, 2017 is Nil.
4. Asset Quality
4.1 Non-Performing Assets
During the year 2016-17, the Bank has sold non-performing assets of the book value of Rs. 86.97 crores (Rs.72.10 crores) including Rs. 86.97 crores (Rs.1.94 crores), during the quarter ended March 31, 2017 resulting in reduction of NPAs.
As per guidelines issued by RBI vide master circular DBR.No.BP. BC.2/21.04.048/2015-16,dated 01.07.2015, banks have been allowed to amortise shortfall arising from sale of financial assets to ARC, for assets sold from 26.02.2014 and up to 31.03.2016 over a period of two years. Consequently the Bank has amortized Rs. 14.33 crores during the year ended March 31, 2017 (Rs. 14.39 crores for previous year March 2016). During the current financial year, there is no shortfall arising from sale of financial assets to ARCs.
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, 2011
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 (ÃRBIÃ).
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 ÃHeld to Maturityà 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 ÃCapital
Reserve accountà 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 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 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 except
that provision on NPA-secured substandard assets of the Bank is made @
15% instead of 10% as per IRAC norms issued by RBI
4.3 Provision for performing assets is shown under the head ÃOther
liabilities and provisionsÃ.
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. Employeesà Benefits:
Defined Contribution Plan: The contribution paid/ payable under defined
contribution benefit schemes are charged to profit and loss account.
Defined Benefit Plan: BankÃs 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-ÃProvisions, Contingent Liabilities
and Contingent Assetsà 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.
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.