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Notes to Accounts of Central Bank of India

Mar 31, 2015

(000''s Omitted)

PARTICULARS AS AT 31/03/2015 AS AT 31/03/2014

SCHEDULE 1 : CONTINGENT LIABILITIES

I. (a) Claims against the Bank not 1,094,250 1,196,346 acknowledged as Debts

(b)Disputed income tax demands under appeals, 18,134,088 14,005,895 revisions, etc

II. Liability for partly paid Investments

III. Liability on account of outstanding forward exchange contracts 667,746,178 640,602,389

IV. Guarantees given on behalf of constituents

a) In India 104,223,884 103,363,304

b) Outside India 10,854,478 5,673,489

115,078,362 109,036,793

V. Acceptances, Endorsements and Other 99,123,833 112,332,617 Obligations

VI. Other item for which the bank is contingently 7,750,000 8,351,107 liable

TOTAL 908,926,711 885,525,147

1. Capital:

Paid up Equity Share Capital of the Bank as on 31.03.2015 is Rs.1658.27 crore increased from Rs. 1350.44 crore of previous year by issue of fresh equity shares of Rs. 10/- each as detailed below:

1. Issue of equity share for Rs. 71.08 crore at a premium of Rs. 71.83 per share on 1st August 2014.

2. Issue of equity share for Rs. 82.89 crore at a premium of Rs. 65.55 per share on 1st January 2015.

3. Issue of equity shares for Rs. 153.86 crore at a premium of Rs. 95.09 per share to Government of India on 24th March 2015 by conversion of 1617000000 Perpetual Non-cumulative Preference Shares of the value of Rs. 10/- each held by Government of India aggregating up to Rs. 1617.00 crores

2. Balancing of Books / Reconciliation:

- The reconciliation of the following items are in progress :

- Inter Branch/Office Balance

- Inter Bank Accounts

- System Suspense Account

- Suspense Accounts

- Clearing & other Adjustment Accounts

- Balances related to ATM

- Certain balances in nominal account

- NOSTRO Accounts

- Mirror Accounts maintained by Centralcard Department

The management is of the opinion that the overall impact, if any, on the accounts will not be significant.

3. Income Tax / Deferred Tax:

3.1 Provision for Income Tax for the year is arrived at after due consideration of relevant statutory provisions and judicial decisions on disputed issues.

3.2 Other Assets [Schedule 11 (ii)] includes Rs. 1813.41 crore (previous year Rs. 1400.59 crore) towards disputed Income Tax paid by the Bank or adjusted by the Income Tax department. Provision for disputed amount of taxation is not considered necessary by the Bank on the basis of various judicial pronouncements and favourable decisions in Bank''s own case.

4. Premises:

Premises owned by the Bank include properties costing Rs. 32.06 crore (Previous Year Rs. 55.22 crore) for which registration formalities are still in progress.

5. Advances / Provisions:

5.1 Advances to units which have become sick including those under nursing/ rehabilitation/ restructuring programme and other advances classified as doubtful/ loss assets have been considered secured/ recoverable to the extent of estimated realizable value of securities carrying first or second charge based on valuers'' assessment of properties/ assets mortgaged to the Bank and other data available with the Bank.

5.2 In accordance with the guidelines issued by Reserve Bank of India, the Bank has utilized the Floating Provision of Rs. 100.56 crore (previous year Rs. 103.09 crore) and Countercyclical Provision of Rs. 47.34 crore (previous year Rs. 46.63 crore) being 50% (previous year 33%) of amount outstanding in these accounts towards specific provision for NPAs. The Bank has netted the balance Floating Provision amount of Rs. 100.56 crores (previous year Rs. 209.34 crore) and Countercyclical Provision amount of Rs. 47.34 crore (previous year Rs. 94.67 crore) from gross NPAs to arrive at net NPAs.

6. The following information is disclosed in terms of guidelines issued by Reserve Bank of India :

Disclosures on risk exposure in Derivatives

iii) Qualitative Disclosures

- Risk Management Policy approved by the Board of Directors for the use of derivative instruments to hedge/trade is in place.

- The investment portfolio of the Bank consists of assets with characteristics of fixed interest rate, zero coupon and floating interest rates and is subject to interest rate risk. The Bank has also Tier II bonds hedged for coupon swaps. The policy permits hedging the interest rate risk on this liability as well.

- Policy for Forward Rate Agreement, Interest Rate Swaps, currency futures and Interest Rate Futures for hedging the interest rate risk in the investment portfolio and also for market making is in place.

- The risk management policies and major control limits like stop loss limits, counter party exposure limits etc. as approved by the Board of Directors are in place. The risks are monitored and reviewed regularly. MIS reports are submitted periodically to Risk Management Committee.

Hedge Positions

- Accrual on account of interest expenses/income on the IRS are accounted and recognized as income/expense.

- If the swap is terminated before maturity, the Mark to Market (MTM) loss/gain and accrual till such date are accounted as expense/income under interest paid/received on IRS.

Trading positions

- Currency future and Interest Rate Future are marked to market on daily basis as per exchange guidelines of MCX-SX, NSE and United Stock Exchange.

- MTM profit/loss is accounted by credit/debit to the margin account on daily basis and the same is accounted in bankRs.s profit & loss account on final settlement.

- Trading swaps are marked to market at frequent intervals. Any MTM losses are booked and gains if any are ignored.

- Gains or losses on termination of swaps are recorded as immediate income/expense under the above head

(v) Statement of Loans and Advances secured by Intangible Assets viz., Rights, Licenses, Authorizations etc. which is shown as unsecured in Schedule-9.

Advances amounting to Rs. Nil (previous year Rs. Nil) against charge over intangible security such as Rights, Licences, Authorisation etc. are considered as unsecured..

The value of intangible security is Rs. Nil (previous year Rs. Nil)

7. Disclosure of penalties imposed by RBI

RBI has imposed a penalty of Rs. 4.92 crore in terms of Section 47A(1)(a) read with Section 46(4)(i) of the Banking Regulation Act 1949 for non-compliance of RBI norms.

8. The following information is disclosed in terms of Accounting Standards issued by The Institute of Chartered Accountants of India:

a) Accounting Standard - 5

There is no change in the accounting policy of the Bank during the year.

b) Accounting Standard - 9

Certain items of income are recognized on realization basis as per principal accounting policy No. 8. However, the said income is not considered to be material.

c) Accounting Standard - 15 (Revised)

In the year 2010-11, in accordance with circular No. DBOD No. BP.BC.80/21.04.018/2010-11, dated 09-02-2011 issued by Reserve Bank of India, the Bank had opted to amortize the additional liability on account of re-opening of Pension option for existing employees who had not opted for pension earlier, as well as the liability on enhancement in Gratuity limit, over a period of five years beginning with the financial year ended 31st March, 2011. Accordingly, out of the unamortized amount of Rs.295.38 crore as on 1st April, 2014, the Bank has fully amortized Rs.239.98 crore for Pension and Rs.55.40 crore for Gratuity being the balance amount during the year ended March 31,2015.

d) Accounting Standard 17 - Segment Reporting

i) As per the revised guidelines of Reserve Bank of India, the Bank has recognised Treasury Operations, Corporate/ Wholesale Banking, Retail Banking and other Banking business as primary reporting segments. There are no secondary reporting segments.

ii) Treasury Operations include dealing in Government and Other Securities, Money Market operations and Forex operations.

iii) The Retail Banking Segment consists of all exposures upto a limit of Rs. 5 crore (including Fund Based and Non Fund Based exposures) subject to orientation, product, granularity criteria and individual exposures

iv) The Corporate/ Wholesale Segment consist of all advances to Trusts/ Partnership Firms, Companies and statutory bodies, which are not included under Retail Banking.

v) The other Banking Segment includes all other Banking operations not covered under the above three categories.

vi) General Banking operations are the main resource mobilizing unit and Treasury Segment compensates the former for funds lent to it by taking into consideration the average funds used.

vii) Allocation of Costs:

a) Expenses directly attributable to a particular segment are allocated to the relative segment

b) Expenses not directly attributable to a specific segment are allocated on rational basis.

(C) No disclosure is required in respect of related parties, which are state controlled enterprises as per Paragraph 9 of AS- 18. Further, in terms of Paragraph 5 of AS-18, transactions in the nature of banker-customer relationship have not been disclosed including those with Key Managerial Personnel & relatives of Key Managerial Personnel.

c) Accounting Standard 22 -Accounting for Taxes on Income

The Bank has recognized Deferred Tax Assets/ Liabilities.

Major components of Deferred Tax Assets and Deferred Tax Liabilities are as under:

d) Accounting Standard - 28 -Impairment of Assets

A substantial portion of Bank''s assets comprise financial assets to which Accounting Standard-28 on impairment of assets is not applicable. In the opinion of the management, there is no material impairment on Other Assets other than financial assets as at March 31,2015, requiring recognition in terms of the Standard.

e) Accounting Standard - 29 on Provisions, Contingent Liabilities and Contingent Assets

9. Provisioning Coverage Ratio (PCR)

The PCR (ratio of Provisioning to Gross NPA) stood at 55.16% (Previous Year 50.68%)

10. As per the information compiled by the Management, the Vendors, whose services are utilized and from whom purchases were made by the Bank, are not registered under Micro, Small and Medium Enterprises Development Act, 2006. This is relied upon by the Auditors.

11. Implementation of the Guidelines on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds

The Bank has formulated policies on Cyber Frauds in CBS system as per RBI circular RBI/2010-11/494 DBS.CO.ITC. BC.No.6/31.02.008/2010-11 dated April 29, 2011. These policies are being reviewed by the management of the bank on periodical basis.

12. Previous year figures have been re-grouped/ re-classified wherever considered necessary to conform to current year''s classification.


Mar 31, 2014

1. Capital:

Paid up Equity Share Capital of the Bank as on 31.03.2014 is Rs. 1350.44 crore increased from Rs. 1044.58 crore of previous year by issue of fresh equity shares of Rs. 305.86 crore at a premium of Rs. 58.85/- per share to Government of India.

2. Balancing of Books / Reconciliation:

The reconciliation of the following items is in progress : Inter Branch/Office Balance

Accounts for Govt. transactions (Central & State)

Inter Bank Accounts

System Suspense Account

Suspense Account

Clearing & other Adjustment Accounts

Balances related to ATM

Certain balances in nominal account

NOSTRO Accounts

Mirror Accounts maintained by Central card Department

Disclosure on particulars of restructured accounts Note No. 6d (ii) The management is of the opinion that the overall impact, if any, on the accounts will not be significant.

3. Income Tax / Deferred Tax:

3.1 Provision for Income Tax for the year is arrived at after due consideration of relevant statutory provisions and judicial decisions on disputed issues.

3.2 Other Assets [Schedule 11 (ii)] includes Rs. 1400.59 crore (previous year Rs. 912.60 crore) towards disputed Income Tax paid by the Bank or adjusted by the Income Tax department. Provision for disputed amount of taxation is not considered necessary by the Bank on the basis of various judicial decisions/ counsel''s opinion on such issues.

3.3 Out of Rs. 1400.59 crore (previous year Rs. 912.60 crore)of tax paid under dispute which relate to various Assessment Years, involving tax element of Rs. 490.98 crore (previous year Rs. 5.98 crore)have been decided by the Appellate authorities in favor of the Bank. The appeal effect for the same is pending.

4. Premises:

Premises owned by the Bank include properties costing Rs. 55.22 crore (Previous Year Rs. 39.93 crore) for which registration formalities are still in progress.

5. Advances / Provisions:

5.1 Advances to units which have become sick including those under nursing/ rehabilitation/ restructuring programme and other advances classified as doubtful/ loss assets have been considered secured/ recoverable to the extent of estimated realizable value of securities carrying first or second charge based on valuers'' assessment of properties/ assets mortgaged to the Bank and other data available with the Bank.

5.2 In accordance with the guidelines issued by Reserve Bank of India, the Bank has utilized the Floating Provision of Rs. 103.09 crore and Countercyclical Provision of Rs. 46.63 crore being 33% of amount outstanding in these accounts towards specific provision for NPAs. The Bank has netted the balance Floating Provision amount of Rs. 209.34 crores (previous year Rs. 312.43 crore) and Countercyclical Provision amount of Rs. 94.67 crore (previous year Rs. 141.30 crore ) from gross NPAs to arrive at net NPAs.

5.3 Advances considered good and secured includes investment of Rs. 2200 crore (Previous Year Rs. 2515 crore) in IBPCs (Inter Bank Participation Certificate) governed by the Uniform Code Governing Inter Bank Participations issued by IBA (Non Priority Sector) and investment in IBPCs issued by RRBs aggregating Rs. 2200 crore (Previous Year Rs. 2515 crore) of Priority Sector Advance/ Direct Agriculture.

Disclosures on Risk Exposure in Derivatives

iii) Qualitative Disclosures

- Risk Management Policy approved by the Board of Directors for the use of derivative instruments to hedge/ trade is in place.

- The investment portfolio of the Bank consists of assets with characteristics of fixed interest rate, zero coupon and floating interest rates and is subject to interest rate risk. The Bank has also Tier II bonds hedged for coupon swaps. The policy permits hedging the interest rate risk on this liability as well.

- Policy for Forward Rate Agreement, Interest Rate Swaps, currency futures and Interest Rate Futures for hedging the interest rate risk in the investment portfolio and also for market making is in place.

- The risk management policies and major control limits like stop loss limits, counter party exposure limits etc. as approved by the Board of Directors are in place. The risks are monitored and reviewed regularly. MIS reports are submitted periodically to Risk Management Committee.

Hedge Positions

- Accrual on account of interest expenses/income on the IRS are accounted and recognized as income/ expense.

- If the swap is terminated before maturity, the Mark to Market (MTM) loss/gain and accrual till such date are accounted as expense/income under Interest paid/received on IRS.

Trading positions

- Currency future and Interest Rate Future are marked to market on daily basis as per exchange guidelines of MCX-SX, NSE and United Stock Exchange.

- MTM profit/loss is accounted by credit/debit to the margin account on daily basis and the same is accounted in bank''s profit & loss account on final settlement.

- Trading swaps are marked to market at frequent intervals. Any MTM losses are booked and gains if any are ignored.

- Gains or losses on termination of swaps are recorded as immediate income/expense under the above head.

(v) Statement of Loans and Advances secured by Intangible Assets viz., Rights, Licenses, Authorizations etc. which is shown as unsecured in Schedule-9.

Advances amounting to Rs. Nil (previous year Rs. 495.74 crore) against charge over intangible security such as Rights, Licences, Authorisation etc. are considered as unsecured.

The value of intangible security is Rs. NIL (previous year Rs. 232.74 crore)

6. Disclosure of penalties imposed by RBI

RBI has imposed a penalty of Rs. 305.27 lacs in terms of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act 1949 for non-compliance of RBI norms.

7. Disclosure regarding concentration of Deposits, Advances, Exposures and NPAs:

8. The following information is disclosed in terms of Accounting Standards issued by The Institute of Chartered Accountants of India:

a) Accounting Standard - 5 Recovery in NPA:

- Due to change in accounting policy No. 5.2 regarding appropriation of recoveries in NPAs frost towards principal irregularity as against first towards interest w.e.f. 01.07.2013, the interest income for the year and advances are lower and loss for the year is more by Rs. 223.50 crore.

- In view of the RBI circular No. RBI/2013-14/502 dated 26.02.2014, in case of sale to SCRC for a value higher than NBV, the excess provision to the extent of cash recovery amounting to Rs. 77 crore has been taken to the credit of profit & Loss Account which as per the extant accounting policy would have been retained in excess provision. The resultant impact is that the profit for the year is more by Rs. 77 crore and provision is less to that extent.

b) Accounting Standard - 9

Certain items of income are recognized on realization basis as per principal accounting policy No. 8. However, the said income is not considered to be material.

c) Accounting Standard - 15 (Revised)

In the year 2010-11, in accordance with circular No. DBOD No. BP.BC.80/21.04.018/2010-11, dated 09-02-2011 issued by Reserve Bank of India, the Bank had opted to amortize the additional liability on account of re-opening of Pension option for existing employees who had not opted for pension earlier, as well as the liability on enhancement in Gratuity limit, over a period of five years beginning with the financial year ended 31st March, 2011. Accordingly, out of the unamortized amount of Rs. 590.77 crore as on 1st April, 2013, the Bank has amortized Rs. 239.99 crore for Pension and Rs. 55.40 crore for Gratuity being proportionate amount during the year ended March 31, 2014. The balance amount to be amortized in future periods for Pension is Rs. 239.98 crore and for Gratuity is Rs. 55.40 crore.

ii) Treasury Operations include dealing in Government and Other Securities, Money Market operations and Forex operations.

iii) The Retail Banking Segment consists of all exposures upto a limit of Rs. 5 crore (including Fund Based and Non Fund Based exposures) subject to orientation, product, granularity criteria and individual exposures

iv) The Corporate/ Wholesale Segment consist of all advances to Trusts/ Partnership Firms, Companies and statutory bodies, which are not included under Retail Banking.

v) The other Banking Segment includes all other Banking operations not covered under the above three categories.

vi) General Banking operations are the main resource mobilizing unit and Treasury Segment compensates the former for funds lent to it by taking into consideration the average funds used.

vii) Allocation of Costs:

a) Expenses directly attributable to a particular segment are allocated to the relative segment

b) Expenses not directly attributable to a specific segment are allocated on rational basis.

e) Related Party disclosures as per Accounting Standard 18 - Related Party

(b) Subsidiaries -

i) Cent Bank Home Finance Ltd.

ii) Cent Bank Financial & Custodial Services Ltd.

(c) Associates

(I) Regional Rural Banks –

i) Central Madhya Pradesh Gramin Bank ii) Uttar Bihar Gramin Bank, Muzzaffarpur iii) Uttarbanga Kshetriya Gramin Bank, Cooch Behar

(II) Indo – Zambia Bank Ltd.

Pursuant to Reserve Bank of India''s (RBI''s) circular No. DBOD No.BP.BC.77/ 21.04.018/2013-14 dated 20.12.2013, the bank has created Deferred Tax Liability on the Special Reserve under Section 36(1)(viii) of the Income Tax Act, 1961. As required by said RBI Circular, the expenditure amounting to Rs. 33.99 crore due to the creation of DTL on Special Reserve as at March 31, 2013 not previously charged to the profit and Loss Account has now been adjusted directly from the Reserves.

h) Accounting Standard – 28 –Impairment of Assets

A substantial portion of Bank''s assets comprise financial assets to which Accounting Standard-28 on impairment of assets is not applicable. In the opinion of the management, there is no material impairment on Other Assets other than financial assets as at March 31, 2014, requiring recognition in terms of the Standard.

9. Provisioning Coverage Ratio (PCR)

The PCR (ratio of Provisioning to Gross NPA) stood at 50.68% (Previous Year 40.62%)

10. As per the information compiled by the Management, the Vendors, whose services are utilized and from whom purchases were made by the Bank, are not registered under Micro, Small and Medium Enterprises Development Act, 2006. This is relied upon by the Auditors.

11. Implementation of the Guidelines on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds

The bank has formulated policies on Cyber Frauds in CBS system as per RBI circular RBI/2010-11/494 DBS.CO.ITC. BC.No.6/31.02.008/2010-11 dated April 29, 2011. These policies are being reviewed by the management of the bank on periodical basis.



(000''s Omitted) PARTICULARS AS AT 31/03/2014 AS AT 31/03/2013 Rs. Rs.

SCHEDULE 12 : CONTINGENT LIABILITIES

I. (a) Claims against the Bank not acknowledged 1,196,346 635,671 as Debts

(b) Disputed income tax demands under 14,005,895 9,126,021 appeals, revisions, etc

II. Liability for partly paid Investments

III. Liability on account of outstanding forward

exchange contracts 640,602,389 357,696,828

IV. Guarantees given on behalf of constituents

a) In India 103,363,304 92,483,533

b) Outside India 5,673,489 8,313,332

109,036,793 100,796,865

V. Acceptances, Endorsements and Other 112,332,617 126,372,490 Obligations

VI. Other item for which the bank is contingently 8,351,107 562,464 liable

TOTAL 885,525,147 595,190,339



13. Previous year figures have been re-grouped/ re-classified wherever considered necessary to conform to current year''s classification.


Mar 31, 2013

1. Capital:

Paid up Equity Share Capital of the Bank as on 31.03.2013 is Rs. 1044.58 crore increased from Rs. 736.11 crore of previous year by issue of fresh equity shares of Rs. 308.47 crore at a premium of Rs. 68/- per share to Government of India.

2. Balancing of Books / Reconciliation:

The reconciliation of the following items is in progress :

- Inter Branch/Office Balance

- Accounts for Govt. transactions (Central & State)

- Inter Bank Accounts

- System Suspense Account

- Suspense Account

- Clearing & other Adjustment Accounts

- Balances related to ATM

- Certain balances in nominal account

- NOSTRO Accounts

The management is of the opinion that the overall impact, if any, on the accounts will not be significant.

3. Income Tax / Deferred Tax:

3.1 Provision for Income Tax for the year is arrived at after due consideration of relevant statutory provisions and judicial decisions on disputed issues.

3.2 Other Assets [Schedule 11 (ii)] includes Rs. 912.60 crore (previous year Rs.1424.58 crore) towards disputed Income Tax paid by the Bank or adjusted by the Income Tax department. Provision for disputed amount of taxation is not considered necessary by the Bank on the basis of various judicial decisions/ counsel''s opinion on such issues.

3.3 Out of Rs.912.60 crore of tax paid under dispute which relate to various Assessment Years, involving tax element of Rs.5.98 crore have been decided by the Appellate authorities in favour of the Bank. The appeal effect for the same is pending.

4. Premises:

Premises owned by the Bank include properties costing Rs. 39.93 crore (Previous Year Rs. 9.95 crore) revalued value Rs. 130.02 crore (Previous Year Rs. 122.31 crore) for which registration formalities are still in progress.

5. Advances / Provisions:

5.1 Advances to units which have become sick including those under nursing/ rehabilitation/ restructuring programme and other advances classified as doubtful/ loss assets have been considered secured/ recoverable to the extent of estimated realizable value of securities carrying first or second charge based on valuers'' assessment of properties/ assets mortgaged to the Bank and other data available with the Bank.

5.2 In accordance with the guidelines issued by Reserve Bank of India, the Bank has netted the Floating Provision amounting to Rs.312.42 crore (previous year Rs. 312.42 crore) and Countercyclical Provisioning Buffer amounting to Rs. 141.30 (previous year Rs. 141.30 crore) from Gross NPAs to arrive at Net NPAs.

5.3 Advances considered good and secured includes investment of Rs. 2515 crore (Previous Year Rs. 3000 crore) in IBPCs (Inter Bank Participation Certificate) governed by the Uniform Code Governing Inter Bank Participations issued by IBA (Non Priority Sector) and investment in IBPCs issued by RRBs aggregating Rs. 2515 crore (Previous Year Rs. 2080 crore) of Priority Sector Advance/ Direct Agriculture.

6. Innovative Perpetual Debt Instruments:

During the year, Bank has raised Rs. 500 crore by issue of Innovative Perpetual Debt Instruments taking the balance to Rs.1083.00 crore.

The above data has been compiled on the basis of guidelines of Reserve Bank of India and estimates in respect of certain Off Balance Sheet items, made by the management and relied upon by the Auditors. In respect of Basel II, the system deficiencies/ data errors noticed / reported were addressed at Central Office. Based on the extensive exercise undertaken, Bank is of the view that, unrectified deficiencies, if any, will not have a significant impact on the overall reported Capital Adequacy.

Disclosures on Risk Exposure in Derivatives

iii) Qualitative Disclosures

- Risk Management Policy approved by the Board of Directors for the use of derivative instruments to hedge/ trade is in place.

- The investment portfolio of the Bank consists of assets with characteristics of fixed interest rate, zero coupon and floating interest rates and is subject to interest rate risk. The Bank has also Tier II bonds hedged for coupon swaps. The policy permits hedging the interest rate risk on this liability as well.

- Policy for Forward Rate Agreement, Interest Rate Swaps, currency futures and Interest Rate Futures for hedging the interest rate risk in the investment portfolio and also for market making is in place.

- The risk management policies and major control limits like stop loss limits, counter party exposure limits etc. as approved by the Board of Directors are in place. The risks are monitored and reviewed regularly. MIS reports are submitted periodically to Risk Management Committee.

- Hedge Positions

- Accrual on account of interest expenses/income on the IRS are accounted and recognized as income/ expense.

- If the swap is terminated before maturity, the Mark to Market (MTM) loss/gain and accrual till such date are accounted as expense/income under Interest paid/received on IRS.

- Trading positions

- Currency future and Interest Rate Future are marked to market on daily basis as per exchange guidelines of MCX-SX, NSE and United Stock Exchange.

- MTM profit/loss is accounted by credit/debit to the margin account on daily basis and the same is accounted in bank''s profit & loss account on final settlement.

Figures of Movement of Net NPAs as on 31.03.2012 has been recasted.

- after netting Rs. 84.00 crores held in nominal towards amount received from ECGC and Court Borrowers pending adjustment

-- excluding floating provision of Rs. 312.43 crore (previous year Rs. 312.43crore) & Countercyclical provision of Rs. 141.30 crore (previous year Rs.141.30 crore)

(v) Statement of Loans and Advances secured by Intangible Assets viz., Rights, Licenses, Authorizations etc. which is shown as unsecured in Schedule-9.

Advances amounting to Rs. 495.74 crore (previous year Rs. 291.52 crore) against charge over intangible security such as Rights, Licences, Authorisation etc. are considered as unsecured.

The value of intangible security is Rs. 232.74 crore.

7. Disclosure of Penalties imposed by RBI

RBI has imposed a penal interest of Rs.28.85 lacs on the Bank under Section 46(4) of the Banking Regulation Act, 1949.

8. The following information is disclosed in terms of Accounting Standards issued by The Institute of Chartered Accountants of India:

a) Accounting Standard - 5

Accounting for LAF Repo with Reserve Bank of India

Hitherto the bank was following the policy of deducting the net amount of borrowings under LAF repo from gross value of investments for the purpose of year end accounting. Due to change in accounting policy effective from the current accounting year, bank has shown net amount due to RBI under LAF repo as borrowing from RBI. In case the accounting treatment of the preceding year had been followed, the loans and investments would have been less by Rs.5500 crores. There is no impact on the profit for the year due to this change.

b) Accounting Standard - 9

Certain items of income are recognized on realization basis as per principal accounting policy No. 8. However, the said income is not considered to be material.

c) Accounting Standard - 15 (Revised)

In the year 2010-11, in accordance with circular No. DBOD No. BP.BC.80/21.04.018/2010-11, dated 09-02- 2011 issued by Reserve Bank of India, the Bank had opted to amortize the additional liability on account of re- opening of Pension option for existing employees who had not opted for pension earlier, as well as the liability on enhancement in Gratuity limit, over a period of five years beginning with the financial year ended 31st March, 2011. Accordingly, out of the unamortized amount Rs.886.15 crore as on 1st April, 2012, the Bank has amortized Rs.239.98 crore for Pension and Rs. 55.40 crore for Gratuity being proportionate amount during the year ended March 31, 2013. The balance amount to be amortized in future periods for Pension is Rs.479.97 crore and for Gratuity is Rs. 110.80 crore.

ii) Treasury Operations include dealing in Government and Other Securities, Money Market operations and Forex operations.

iii) The Retail Banking Segment consists of all exposures upto a limit of Rs. 5 crore (including Fund Based and Non Fund Based exposures) subject to orientation, product, granularity criteria and individual exposures.

iv) The Corporate/ Wholesale Segment consist of all advances to Trusts/ Partnership Firms, Companies and statutory bodies, which are not included under Retail Banking.

iv) The other Banking Segment includes all other Banking operations not covered under the above three categories.

v) General Banking operations are the main resource mobilizing unit and Treasury Segment compensates the former for funds lent to it by taking into consideration the average funds used.

vii) Allocation of Costs:

a Expenses directly attributable to a particular segment are allocated to the relative segment. b Expenses not directly attributable to a specific segment are allocated on rational basis. e) Related Party disclosures as per Accounting Standard 18 - Related Party 1 List of Related Parties:

(a) Key Managerial Personnel -

(b) Subsidiaries -

i) Cent Bank Home Finance Ltd.

ii) Cent Bank Financial & Custodial Services Ltd.

(c) Associates -

(I) Regional Rural Banks -

i) Central Madhya Pradesh Gramin Bank,

ii) Surguja Kshetriya Gramin Bank, Ambikapur

ii) Uttar Bihar Gramin Bank, Muzzaffarpur

iv) Vidharbha Konkan Gramin Bank,

v) Ballia Etawah Gramin Bank, Ballia

vi) Hadoti Kshetriya Gramin Bank, Kota

vii) Uttarbanga Kshetriya Gramin Bank, Cooch Behar

(II) Indo - Zambia Bank Ltd.

Note: Vide notification No. F.No. 7/9/2011-RRB (Maharashtra) dated February 28, 2013 issued by Government of India, Ministry of Finance, approved the amalgamation of Vidarbha KGB sponsored by Central Bank of India with Wainganga Krishna Gramin Bank sponsored by Bank of India. Also, vide notification dated April 01, 2013 issued by Government of India, Ministry of Finance, approved amalgamation of Balia Etawah KGB sponsored by Central Bank of India with Purvanchal Gramin Bank sponsored by State Bank of India.

Pending completion of merger formalities and financial transactions, the said investments continue to be shown in our books of accounts.

(c) No disclosure is required in respect of related parties, which are state controlled enterprise as per Paragraph 9 of AS-18. Further, in terms of Paragraph 5 of AS-18, transactions in the nature of banker-customer relationship have not been disclosed including those with Key Management Personnel & relatives of Key Management Personnel.

h) Accounting Standard - 28 -Impairment of Assets

A substantial portion of Bank''s assets comprise financial assets to which Accounting Standard-28 on impairment of assets is not applicable. In the opinion of the management, there is no material impairment on Other Assets other than financial assets as at March 31, 2013, requiring recognition in terms of the Standard.

9. Provisioning Coverage Ratio (PCR)

The PCR (ratio of Provisioning to Gross NPA) stood at 47.75% (Previous Year 40.62%)

10. As per the information compiled by the Management, the Vendors, whose services are utilized and from whom purchases were made by the Bank, are not registered under Micro, Small and Medium Enterprises Development Act, 2006. This is relied upon by the Auditors.

11. Implementation of the Guidelines on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds as required in terms of Para F of RBI Circular DBS.CO.IT.BC.No.6/31.02.008/2010-11 dated April 29, 2011.

The bank has formulated policies on Cyber Frauds in CBS system as per RBI circular RBI/2010-11/494 DBS.CO.ITC. BC.No.6/31.02.008/2010-11 dated April 29, 2011. These policies are being reviewed by the management of the bank on periodical basis.

12. Acceptances, Endorsements and other Obligations under contingent liabilities include certain invocation of Stand by Letters of Credit before the actual due date of the relevant Letter of Credit extended to Merchant Exporters and manufacturers of Diamond/Jewellery. In the opinion of the Management, there is no indication as on date that there would be any consequential financial impact on the Bank.

13. Previous year figures have been re-grouped/ re-classified wherever considered necessary to conform to current year''s classification.


Mar 31, 2012

1. Capital:

The Authorized Capital of the Bank is Rs.3000 crore.

The paid-up Capital of the Bank is Rs.2353.11 crore increased from Rs.2021.14 crore by issue of equity shares by way of Rights issue to the tune of Rs.242.46 crores to the existing share holders at a premium of Rs.93/- per share, which was allotted to the share holders in April 2011. Further, the Bank raised equity by way of Preferential Issue of Equity Shares to Government of India and Life Insurance Corporation of India on March 31, 2012 to the tune of Rs.89.51 crore at a premium of Rs.95.61 per share.

2. Balancing of Books / Reconciliation:

The reconciliation of the following items is in progress :

- Inter Branch/Office Balance

- Accounts for Govt. transactions (Central & State)

- Inter Bank Accounts

- System Suspense Account

- Suspense Account

- Clearing & other Adjustment Accounts

- Balances related to ATM

- Certain balances in nominal account

The management is of the opinion that the overall impact, if any, on the accounts will not be significant.

3. Income Tax / Deferred Tax:

3.1 Provision for Income Tax for the year is arrived at after due consideration of relevant statutory provisions and judicial decisions on disputed issues, net of reversal of excess provision of earlier years Rs.112.38 crore (Refer Note 8(b)).

3.2 Other Assets [Schedule 11 (ii)] includes Rs.1424.58 crore (previous year Rs.601.64 crore) towards disputed Income Tax paid by the Bank or adjusted by the Income Tax department. Provision for disputed amount of taxation is not considered necessary by the Bank in respect of above disputed demands based on various judicial decisions/ counsel's opinion on such disputed issues.

3.3 Out of Rs.1424.58 crore of tax paid under dispute, disputes relating to various Assessment Years, involving tax element of Rs.4.82 crore have been decided by the Appellate authorities in favour of the Bank. The appeal effect for the same is pending.

4. Share Issue Expenses:

Unamortized amount of Rs.1.31 crore (Previous Year Rs.6.72 crore) towards share issue expenses are included in Other Assets.

5. Premises:

5.1 The premises of the Bank were revalued during financial year 2007-08 to reflect the market value as at March 31, 2008. The appreciation amounting to Rs.1565.97 crore is included in Revaluation Reserve Account.

5.2 Premises owned by the Bank include properties costing Rs.9.95 crore (Previous Year Rs.12.21 crore) revalued at Rs.122.31 crore (Previous Year Rs.198.46 crore) for which registration formalities are still in progress.

6. Advances / Provisions:

6.1 Advances to units which have become sick including those under nursing / rehabilitation / restructuring programme and other advances classified as doubtful / loss assets have been considered secured / recoverable to the extent of estimated realizable value of securities carrying first or second charge based on valuers' assessment of properties/ assets mortgaged to the Bank and other data available with the Bank.

6.2 In the current year, in accordance with the guidelines issued by Reserve Bank of India, the Bank has netted the Floating Provision amounting to Rs.312.42 crore (previous year Rs.312.42 crore) from Gross NPAs to arrive at Net NPAs.

6.3 Advances considered good and secured includes investment of Rs.3000 crore (Previous Year Rs.2000 crore) in IBPCs (Inter Bank Participation Certificate) governed by the Uniform Code Governing Inter Bank Participations issued by IBA (Non Priority Sector) and investment in IBPCs issued by RRBs aggregating Rs.2080 crore (Previous Year Rs.1440 crore) of Priority Sector Advance / Direct Agriculture.

7. Subordinated Debt:

During the year, Bank has raised Rs.500 crore by issue of Unsecured Redeemable Bonds under Tier II Capital (Subordinate Debt) taking the balance to Rs.2637.30 crore (Previous Year Rs.2137.30 crore) and Upper Tier II Bonds stands at Rs.2885.00 crore (Previous Year Rs.2885.00 crore)

The above data has been compiled on the basis of guidelines of Reserve Bank of India and estimates in respect of certain Off Balance Sheet items, made by the management and relied upon by the Auditors. In respect of Basel II, the system deficiencies / data errors noticed / reported were addressed at Central Office. Based on the extensive exercise undertaken, Bank is of the view that, unrectified deficiencies, if any, will not have a significant impact on the overall reported Capital Adequacy.

b. Provisions and Contingencies:

The break up of 'Provisions and Contingencies' appearing in the Profit and Loss Account is as under:

Disclosures on Risk Exposure in Derivatives

iii) Qualitative Disclosures

- Risk Management Policy approved by the Board of Directors for the use of derivative instruments to hedge/trade is in place.

- The investment portfolio of the Bank consists of assets with characteristics of fixed interest rate, zero coupon and floating interest rates and is subject to interest rate risk. The Bank has also Tier II bonds hedged for coupon swaps. The policy permits hedging the interest rate risk on this liability as well.

- Policy for Forward Rate Agreement, Interest Rate Swaps, currency futures and Interest Rate Futures for hedging the interest rate risk in the investment portfolio and also for market making is in place.

- The risk management policies and major control limits like stop loss limits, counter party exposure limits etc approved by the Board of Directors are in place. The risks are monitored and reviewed regularly. MIS reports are submitted periodically to Risk Management Committee.

- Hedge Positions

- Accrual on account of interest expenses/income on the IRS are accounted and recognized as income/ expense.

- If the swap is terminated before maturity, the Mark to Market (MTM loss/gain and accrual till such date are accounted as expense/income under Interest paid/received on IRS.

- Trading positions

- Currency future and Interest Rate Future are marked to market on daily basis as per exchange guidelines of MCX-SX, NSE and United Stock Exchange.

- MTM profit/loss are accounted by credit/debit to the margin account on daily basis and the same is accounted in bank's profit & loss account on final settlement.

- Trading swaps are marked to market at frequent intervals. Any MTM losses are booked and gains if any are ignored.

- Gains or losses on termination of swaps are recorded as immediate income/expense under the above head.

(v) Statement of Loans and Advances secured by Intangible Assets viz., Rights, Licenses, Authorizations etc. which is shown as unsecured in Schedule-9.

Advances amounting to Rs. 291.52 crore (previous year Rs.231.22 crore) for which charge over intangible security such as Rights, Licences, Authorisation etc. has been considered as unsecured.

(vi) Balance outstanding under credit exposure to telecom companies as at the year-end amounts to Rs.2038.15 crore and in the opinion of the management the same are considered good for recovery. There are no credit exposures towards acquisition of 2G Licences. In addition, investment in the form of Shares, Bonds, Debentures etc. of the bank in telecom companies aggregates Rs.1355.51 crore as at the year-end.

8. Disclosure of Penalties imposed by RBI

RBI has not imposed any penalty on the Bank under Section 46(4) of the Banking Regulation Act, 1949.

9. The following information is disclosed in terms of Accounting Standards issued by The Institute of Chartered Accountants of India:

a) Accounting Standard - 9

Certain items of income are recognized on realization basis as per principal accounting policy No. 8. However, the said income is not considered to be material.

b) Accounting Standard - 15 (Revised)

In previous year, in accordance with circular No. DBOD No. BP.BC.80/21.04.018/2010-11, dated 09-02-2011 issued by Reserve Bank of India, the Bank had opted to amortize the additional liability on account of re-opening of Pension option for existing employees who had not opted for pension earlier, as well as the liability on enhancement in Gratuity limit, over a period of five years beginning with the financial year ended 31st March, 2011. Accordingly, out of the unamortized amount Rs.1181.53 crore as on 1st April, 2011, the Bank has amortized Rs.239.98 crore for Pension and Rs.55.40 crore for Gratuity being proportionate amount during the year ended March 31, 2012. The balance amount to be amortized in future periods for Pension is Rs. 719.95 crore and for Gratuity is Rs.166.20 crore. Had such an accounting treatment not been approved by the RBI, the profit of the bank would have been lower by Rs.886.15 crore pursuant to application of the requirements of AS-15.

Employee Benefits:

Reconciliation of opening and closing balance of the present value of the defined benefit obligation for pension and gratuity benefits as per actuarial valuations is given below:

b) Accounting Standard 17 - Segment Reporting

i) As per the revised guidelines of Reserve Bank of India, the Bank has recognised Treasury Operations, Corporate/ Wholesale Banking, Retail Banking and other Banking business as primary reporting segments. There are no secondary reporting segments.

ii) Treasury Operations include dealing in Government and Other Securities, Money Market operations and Forex operations.

iii) The Retail Banking Segment consists of all exposures upto a limit of Rs.5 crore (including Fund Based and Non Fund Based exposures) subject to orientation, product, granularity criteria and individual exposures.

iv) The Corporate/ Wholesale Segment consist of all advances to Trusts/ Partnership Firms Companies and statutory bodies, which are not included under Retail Banking.

iv) The other Banking Segment includes all other Banking operations not covered under the above three categories.

v) General Banking operations are the main resource mobilizing unit and Treasury Segment compensates the former for funds lent to it by taking into consideration the average funds used.

vii) Allocation of Costs:

a Expenses directly attributable to a particular segment are allocated to the relative segment.

b Expenses not directly attributable to a specific segment are allocated in proportion to the funds employed.

(e) Accounting Standard - 28 -Impairment of Assets

A substantial portion of Bank's assets comprise financial assets to which Accounting Standard-28 on Impairment of Assets is not applicable. In the opinion of the management, there is no material impairment on Other Assets other than financial assets as at March 31, 2012, requiring recognition in terms of the Standard.

The above mentioned Letters of Comfort are issued within the sanctioned Trade Credit Limits.

10. As per the information compiled by the Management, the Vendors, whose services are utilized and from whom purchases were made by the Bank, are not registered under Micro, Small and Medium Enterprises Development Act, 2006. This is relied upon by the Auditors.

11. Previous year figures have been re-grouped / re-classified wherever considered necessary to conform to current year's classification.


Mar 31, 2011

These Financial Statements which were approved by the Board of Directors on 06th May 2011 and authenticated by the Auditors have undergone a change due to appropriation of additional amount towards proposed dividend for the shares allotted under Rights Issue which was opened on March 24, 2011 and closed on April 07, 2011. The allotment was made on April 19, 2011 on pari passu basis. The effect of this change in Financial Statements is an increase in proposed dividend on equity capital by Rs. 36.37 crore and dividend tax by Rs. 5.90 crore and consequent decrease in Revenue reserve by Rs. 42.27 crore.

1.1 Capital:

The Authorised Capital of the Bank is Rs. 3000 crore.

The paid-up Capital of the Bank is Rs. 2021.14 crore i.e. increased from Rs. 1771.14 crore to Rs. 2021.14 crore by issue of Perpetual Non-cumulative Preference Shares [PNCPS] to the tune of Rs. 250 crore to Government of India.

During the year, the Bank has come out with Right Issue of Rs. 2497.38 Crore comprising of 24,24,84,876 nos fully paid up equity shares of Rs. 10 each at premium of Rs. 93. The issue opened on 24th March 2011 and was closed on 7th April 2011. A sum of Rs. 2025.68 Crore has been received till 31st March 2011 and the same has been shown as Share Application Money. The said money is parked in account with Reserve Bank of India maintained by our Bank.

1.2 The proposed dividend of Rs. 137.41 crore on Equity Capital includes Rs. 36.37 crore payable on shares allotted under Rights Issue, subject to approval by AGM. Proposed dividend includes interim dividend paid Rs. 40.41 crore as declared by the Board on October 26, 2010, on the existing Capital, on the relevant record date.

2. Balancing of Books / Reconciliation:

The reconciliation of the following items is in progress at various stages on ongoing basis and consequential impact arising on account of such reconciliation is unascertained.

- Inter Branch/Office Balance

- Accounts for Govt. transactions (Central & State)

- Inter Bank Accounts

- System Suspense Account

- Suspense Account

- Clearing & other Adjustment Accounts

The management is of the opinion that the overall impact, if any, on the accounts will not be significant.

3. Income Tax / Deferred Tax:

3.1 Provision for Income Tax for the year is arrived at after due consideration of relevant statutory provisions and judicial decisions on disputed issues.

3.2 Other Assets [Schedule 11 (ii)] includes Rs. 601.64 crore (previous year Rs. 1507.45 crore) towards disputed Income Tax paid by the Bank/ adjusted by the authorities. Provision for taxation is not considered necessary by the Bank in respect of above disputed demands based on various judicial decisions/ counsels opinion on such disputed issues.

3.3 Out of Rs. 601.64 crore of tax paid under dispute, disputes relating to various Assessment Years, involving tax element of Rs. 21.46 crore have been decided by the Appellate Authorities in favour of the Bank. The appeal effect for the same is pending.

4. Share Issue Expenses:

Unamortized amount of Rs. 6.72 crore towards share issue expenses are included in Other Assets.

5. Premises:

5.1 The premises of the Bank were revalued during financial year 2007-08 to reflect the market value as at March 31, 2008. The additional appreciation amounting to Rs. 1565.97 crore have been credited to Revaluation Reserve Account.

5.2 Premises owned by the Bank include properties costing Rs. 12.21 crore revalued at Rs. 198.46 crore for which registration formalities are still in progress.

7. Advances / Provisions:

7.1 Advances to units which have become sick including those under nursing/ rehabilitation/ restructuring programme and other advances classified as doubtful/ loss assets have been considered secured/ recoverable to the extent of estimated realizable value of securities carrying first or second charge based on valuers assessment of properties/ assets mortgaged to the Bank and other data available with the Bank.

7.2 In the current year, in accordance with the guidelines issued by Reserve Bank of India, the Bank has opted to utilize the Floating Provision amounting to Rs. 312.42 crore (previous year Rs. 312.42 crore) for netting off from Gross NPAs to arrive at Net NPAs.

7.3 Advances considered good and secured includes investment of Rs. 2000 crore in IBPCs governed by the Uniform Code Governing Inter Bank Participations issued by IBA (Non Priority Sector) and investment in IBPCs issued by RRBs aggregating Rs. 1440 crore (Priority Sector Advance/ Direct Agriculture).

8 Agricultural Debt Waiver and Debt Relief Scheme, 2008

In terms of the Reserve Bank of India Circular Ref RBI:2009-10/371/ DBOD.No.BP.BC.82/21.04.048/2009-10 dated March 30, 2010 and vide Government of India Notification No.3/3/208-AC dated April 5, 2010, Bank has extended the Debt Relief Scheme to all eligible farmers upto June 30, 2010. Banks claim of Rs. 147.77 crore under Debt Relief Scheme for the period ended 31/12/2009 is fully reimbursed during the month of February 2011. Claim for the extended period i.e. 1/01/2010 to 30/06/2010 (grievance redressal up to 31/07/2010) of Rs. 54.26 crore is pending to be lodged with Reserve Bank of India up to 30/06/2011 as per Reserve Bank of India guidelines.

9. Upper Tier II Debt Instrument:

During the year, Bank has raised Upper Tier II Debt to the tune of Rs.1300.00 crore (previous year Rs. 1000.00 crore) by issue of Unsecured Redeemable Bonds under Upper Tier II Debt and the amount is shown in Schedule 4 "Borrowings" of the Balance Sheet.

The above data has been compiled on the basis of guidelines of Reserve Bank of India and estimates in respect of certain Off Balance Sheet items, made by the management and relied upon by the Auditors. In respect of Basel II, the system deficiencies/ data errors noticed / reported were addressed at Central Office. Based on the extensive exercise undertaken, Bank is of the view that, unrectified deficiencies, if any, will not have a significant impact on the overall reported Capital Adequacy.

Disclosures on Risk Exposure in Derivatives

iii) Qualitative Disclosures

. Risk Management Policy approved by the Board of Directors for the use of derivative instruments to hedge/ trade is in place.

. The investment portfolio of the Bank consists of assets with characteristics of fixed interest rate, zero coupon and floating interest rates and is subject to interest rate risk. The Bank has also Tier II bonds hedged for coupon swaps. The policy permits hedging the interest rate risk on this liability as well.

. Policy for Forward Rate Agreement, Interest Rate Swaps, currency futures and Interest Rate Futures for hedging the interest rate risk in the investment portfolio and also for market making is in place.

. The risk management policies and major control limits like stop loss limits, counter party exposure limits etc approved by the Board of Directors are in place. The risks are monitored and reviewed regularly. MIS reports are submitted periodically to Risk Management Committee.

a) Accounting policy. Hedge Positions

. Accrual on account of interest expenses/income on the IRS are accounted and recognized as income/ expense.

. If the swap is terminated before maturity, the Marked to Market (MTM loss/gain and accrual till such date are accounted as expense/income under Interest paid/received on IRS.

Trading positions

. Currency future and Interest Rate Future are marked to market on daily basis as per exchange guidelines of MCX-SX, NSE and United Stock Exchange.

. MTM profit/loss are accounted by credit/debit to the margin account on daily basis and the same is accounted in Banks Profit & Loss Account on final settlement.

. Trading swaps are marked to market at frequent intervals. Any MTM losses are booked and gains if any are ignored.

. Gains or losses on termination of swaps are recorded as immediate income/expense under the above head.

(b) During the year, 219 accounts under SME were subjected to Restructuring and the balance outstanding as on March 31, 2011 was Rs. 27.45 crore (Previous Year 349 accounts – Amount Rs. 170.95 crore).

12 b Gold Coins - During the year the Bank has sold 61.612 kgs. and the total sale consideration is Rs. 1337 lacs. The Profit accrued on the sale of Gold Coins is Rs. 46.00 lacs and is accounted for in Misc. Income.

12 c The Provisioning Coverage Ratio (PCR) of the Bank is 67.64%.

13. Disclosure of Penalties imposed by RBI

RBI has not imposed any penalty on the Bank under Section 46(4) of the Banking Regulation Act, 1949.

14. The following information is disclosed in terms of Accounting Standards issued by The Institute of Chartered Accountants of India:

a) Accounting Standard - 15 (Revised)

During the year, the Bank reopened the pension option for such of its employees who had not opted for the pension scheme earlier. In accordance with RBI circular No.DBOD No. BP.BC.80/21.04.018/2010-11, dated 09-02-2011, for second option for pension, one-fifth of additional liability of Rs. 239.98 crore towards pension fund for 13494 serving employees and 100% of such liability of Rs. 569.62 crore for 4046 retired/separated employees aggregating to Rs. 809.60 crore has been charged to Profit & Loss Account for the year. The unrecognized pension liability for second option for pension for serving employees is Rs. 959.93 crore.

In accordance with RBI circular No.DBOD No. BP.BC.80/21.04.018/2010-11, dated 09/02/2011, an amount of Rs. 55.40 crore has been charged to Profit & Loss Account for the year, being 1/5th of additional Gratuity liability due to amendment of Payment of Gratuity Act 1972. The unrecognized Gratuity liability is Rs. 221.60 crore.

Had such a circular not been issued by the RBI, the profit of the bank would have been lower by Rs. 1181.53 crore pursuant to application of the requirements of AS-15.

b) Accounting Standard 17 – Segment Reporting

i) As per the revised guidelines of Reserve Bank of India, the Bank has recognised Treasury Operations, Corporate/ Wholesale Banking, Retail Banking and other Banking business as primary reporting segments. There are no secondary reporting segments.

ii) Treasury Operations include dealing in Government and Other Securities, Money Market operations and Forex operations.

iii) The Retail Banking Segment consists of all exposures upto a limit of Rs. 5 crore (including Fund Based and Non Fund Based exposures) subject to orientation, product, granularity criteria and individual exposures.

iv) The Corporate/ Wholesale Segment consist of all advances to Trusts/ Partnership Firms Companies and statutory bodies, which are not included under Retail Banking.

iv) The other Banking Segment includes all other Banking operations not covered under the above three categories.

v) General Banking operations are the main resource mobilizing unit and Treasury Segment compensates the former for funds lent to it by taking into consideration the average funds used.

vii) Allocation of Costs:

a Expenses directly attributable to a particular segment are allocated to the relative segment.

b Expenses not directly attributable to a specific segment are allocated in proportion to the funds employed.

(b) Subsidiaries –

i) Cent Bank Home Finance Ltd.

ii) Centbank Financial Services Ltd.

(c) Associates –

(I) Regional Rural Banks -

i) Satpura Narmada Kshetriya Gramin Bank, Chhindwara

ii) Surguja Kshetriya Gramin Bank, Ambikapur

iii) Uttar Bihar Gramin Bank, Muzzaffarpur

iv) Vidharbha Kshetriya Gramin Bank, Akola

v) Ballia Etawah Gramin Bank, Ballia

vi) Hadoti Kshetriya Gramin Bank, Kota

vii) Uttarbanga Kshetriya Gramin Bank, Cooch Behar

(e) Accounting Standard – 28 –Impairment of Assets

A substantial portion of Banks assets comprise financial assets to which Accounting Standard-28 on impairment of assets is not applicable. In the opinion of the management, there is no material impairment on Other Assets other than financial assets as at March 31, 2011, requiring recognition in terms of the Standard.

17 As per the information compiled by the Management, the Vendors, whose services are utilized and from whom purchases were made by the Bank, are not registered under Micro, Small and Medium Enterprises Development Act, 2006. This is relied upon by the Auditors.

18. Previous year figures have been re-grouped / re-classified wherever considered necessary to conform to current years classification.


Mar 31, 2010

1. Capital:

The Authorised Capital of the Bank was Rs.1500 crore as on April 01, 2009. The Board of Directors vide Resolution dated July 27, 2009 recommended to increase the Authorized Capital of the Bank from the present Rs.1500 crore to Rs.3000 crore for the approval of shareholders of the Bank and the shareholders in the Annual General Meeting held on August 4, 2009 approved the same.

The Government of India by its official Gazette Notification dated November 27, 2009 increased the authorized Capital from Rs.1500 crore to Rs.3000 crore.

The paid-up Capital of the Bank is increased from Rs.1321.14 crore to Rs.1771.14 crore by issue of Perpetual Non- cumulative preference shares (PNCPS) to the tune of Rs.450 crore to Government of India.

2. Balancing of Books / Reconciliation:

Reconciliation of Inter-Branch Accounts is in progress. Balancing of Subsidiary Ledgers and reconciliation with General Ledger is also in progress at some branches. Pending final clearance of the above, the overall impact, if any, on the accounts, in the opinion of the management will not be significant.

The bank is in the process covering all of its branches under the CBS platform. During the year, an additional 324 branches have come under the CBS platform. Certain migration errors in the master data and inherent bugs in the system were noticed in branches remedial action was initiated by the banks IT department and the service provider. The management is of the opinion that this does not have any material impact on the Financial Statements.

3. Income Tax / Deferred Tax:

3.1 Provision for Income Tax for the year is arrived at after due consideration of relevant statutory provisions and judicial decisions on disputed issues.

3.2 Other Assets [Schedule 11 (ii)] includes Rs.1507.45 crore (previous year Rs.1366.17 crore) towards disputed Income Tax paid by the Bank/ adjusted by the authorities. Provision for taxation is not considered necessary by the Bank in respect of above disputed demands based on various judicial decisions/ counsels opinion on such disputed issues.

3.3 Out of Rs. 1507.45 crore of tax paid under dispute, disputes relating to various Assessment Years, involving tax element of Rs.7.06 crore have been decided by the Appellate authorities in favour of the Bank. The appeal effect for the same is pending.

4. Share Issue Expenses:

Unamortized amount of Rs. 12.12 crore towards share issue expenses are included in Other Assets.

5. Premises:

5.1 The premises of the Bank were revalued during financial year 2007-08 to reflect the market value as at March 31, 2008. The additional appreciation amounting to Rs.1565.97 crore have been credited to Revaluation Reserve Account.

5.2 Premises owned by the Bank include properties costing Rs.10.94 crore revalued at Rs.306.85 crore for which registration formalities are still in progress.

6.2 in terms of the Guidelines of Reserve Bank of India, the profit of Rs.46.62 crore (net of taxes and statutory reserves) on sale/ redemption of investments in the "Held to Maturity" category has been appropriated to the Investment Reserve.

7. Advances / Provisions:

7.1 Advances to units which have become sick including those under nursing/ rehabilitation/ restructuring programme and other advances classified as doubtful/ loss assets have been considered secured/ recoverable to the extent of estimated realizable value of securities carrying first or second charge based on valuers assessment of properties/ assets mortgaged to the Bank and other data available with the Bank.

7.2 Last year the Bank considered the Floating Provision of Rs.312.43 crore as part of Tier II Capital. In the current year, in accordance with the guidelines issued by Reserve Bank of India the Bank has opted to utilize the Floating Provision for netting off from Gross NPAs to arrive at Net NPAs.

8 Agricultural Debt Waiver and Debt Relief Scheme, 2008

8.1 Government of India has notified "Agricultural Debt Waiver & Debt Relief Scheme 2008" for Debt Waiver to marginal and small farmers and Relief to other farmers, which has been implemented by the bank. Claims have been preferred with RBI for Agricultural Debt Waiver amounting to Rs.978.54 crore (inclusive of additional claim of Rs.3.71 crore). The Bank has received Rs.631.06 crore being 64.49% of the Claim amount.

8.2 In terms of Government of India, Ministry of Finance, Department of Financial Services, Notification dated October 16, 2008 and Reserve Bank of India circular dated November 11, 2008, Interest amounting to Rs.38.05 crore (previous year Rs.15.33 crore) on the amount outstanding under Agricultural Debt Waiver Scheme, 2008, for the period April 2009 to March, 2010, have been accounted in the books as Interest Income.

8.3 In terms of the Reserve Bank of India Circular Ref RBI:2009-10/371/ DBOD.No.BP.BC.82/21.04.048/2009-10 dated March 30, 2010 and vide Government of India Notification No.3/3//208-AC dated April 5, 2010, Bank has extended the Debt Relief Scheme to all eligible farmers upto June 30, 2010. Provision of Rs.6.17 crore is made by the Bank for the loss in present value terms for all receivables from the Borrowers. Claim for reimbursement of 25% Government share is subject to verification by the Statutory Central Auditors.

9. Upper Tier II Debt Instrument:

During the year, Bank has raised Upper Tier II Debt to the tune of Rs.1000.00 crore (previous year Rs.585.00 crore) by issue of Unsecured Redeemable Bonds under Upper Tier II Debt and the amount is shown in Schedule 4 "Borrowings" of the Balance Sheet.

Disclosures on Risk Exposure in Derivatives (iii) Qualitative Disclosures

The Treasury Risk Management Policy, approved by the Board of Directors, on the use of derivative instruments to hedge/ trade is in place.

a) The Investment Portfolio of the Bank consists of assets with characteristics of fixed interest rate, zero coupon and floating interest rates and is subject to interest rate risk. The Bank has also Tier II bonds hedged for Interest rate swaps which do not have exit option. The policy permits hedging the interest rate risk on this liability as well.

Forward Rate Agreement, Interest Rate Swaps, Currency Futures and Interest Rate Futures are used not only for hedging the interest rate risk in the investment portfolio but also for market making.

b) The risk management policies and major control limits like stop loss limits, counter party exposure limits etc. approved by the Board of Directors are in place. These risks are monitored and reviewed regularly. MIS/ Reports are submitted periodically to Risk Management Committee. The hedge effectiveness of the outstanding derivative deals is monitored in relation to the underlying asset/ liability on an ongoing basis.

c) Accounting Policy

Hedge Positions

- Accrual on account of interest expenses/ income on the IRS are accounted and recognised as income/ expense.

- Hedge effectiveness of the outstanding derivative deals is monitored in relation to the fair value of the swap and underlying asset/ liability. If the hedge is not effective, hedge swaps is accounted as trading swaps. If the swap is terminated before maturity, the Marked to Market (MTM) loss/ gain and accrual till such data are accounted as expense/ income under Interest paid/ received on IRS.

- Trading positions

- Currency Future and Interest Rate Future are marked to market on daily basis as per exchange guidelines of MCX-SX and NSE.

- MTM profit/ loss are accounted by credit/ debit to our margin account on daily basis and the same is accounted in banks Profit & Loss account on daily basis.

- Trading swaps are marked to market at frequent intervals. Any MTM losses are booked and gains if any are ignored.

- Gains or losses on termination of swaps are recorded as immediate income expense under the above head.

(Iv) Nostro/Mirror Credit Balances:

The Bank has transferred Rs. 20.01 Crores to Profit & Loss account during the financial year 2009-10 as net credit balances from unreconciled Nostro/Mirror accounts and appropriated Rs. 9.91 Crores(Net of Tax and Statutory Reserves) towards General Reserves.

10 a Fees/ remunerations received in respect of the Bancassurance Business during the current year is Rs. 15.56 crores.

10 b Miscellaneous Income includes Rs.31.51 crore being write back of excess depreciation made in the earlier years on Premises.

10 c Gold Coins - During the year the Bank has sold 37,900 Gold Coins along with velvet boxes for a total price of Rs.6746.52 lakhs. The cost of the coins with boxes amounted to Rs.6663.61 lakhs inclusive of Rs.0.95 lakhs VAT paid on purchase of boxes. The Profit accrued on the sale of Gold Coins is Rs.82.91 lakhs, and is accounted for in misc. income.

11. Wage Revision -

The Bank has made a Provision of Rs.200 crore during the current year on adhoc basis towards Wage Revision of Employees.

12. Disclosure of Penalties imposed by RBI

RBI has not imposed any penalty on the Bank under Section 46(4) of the Banking Regulation Act, 1949.

ii) Treasury Operations include dealing in Government and Other Securities, Money Market operations and Forex operations.

iii) The Retail Banking Segment consists of all exposures upto a limit of Rs.5 crore (including Fund Based and Non Fund Based exposures) subject to orientation, product, granularity criteria and individual exposures.

iv) The Corporate/ Wholesale Segment consists of all advances to Trusts/ Partnership Firms Companies and statutory bodies, which are not included under Retail Banking.

iv) The other Banking Segment includes all other Banking operations not covered under the above three categories.

v) General Banking operations are the main resource mobilizing unit and Treasury Segment compensates the former for funds lent to it by taking into consideration the average funds used.

vii) Allocation of Costs:

a. Expenses directly attributable to a particular segment are allocated to the relative segment.

b. Expenses not directly attributable to a specific segment are allocated in proportion to the funds employed.

(b) Subsidiaries -

i) Cent Bank Home Finance Ltd.

ii) Cent Bank Financial Services Ltd.

(c) Associates -

(I) Regional Rural Banks -

0 Satpura Narmada Kshetriya Gramin Bank, Chhindwara.

ii) Surguja Kshetriya Gramin Bank, Ambikapur.

iii) Uttar Bihar Gramin Bank, Muzzaffarpur

iv) Vidharbha Kshetriya Gramin Bank, Akola

v) Ballia Etawah Gramin Bank, Ballia.

vi) Hadoti Kshetriya Gramin Bank, Kota.

vii) Uttarbanga Kshetriya Gramin Bank, Cooch Behar

(e) Accounting Standard - 28 -Impairment of Assets

A substantial portion of Banks assets comprise financial assets to which Accounting Standard-28 on impairment of assets is not applicable. In the opinion of the management, there is no material impairment on Other Assets other than financial assets as at March 31, 2010, requiring recognition in terms of the Standard.

13. As per the information compiled by the Management, the Vendors, whose services are utilized and from whom purchases were made by the Bank, are not registered under Micro, Small and Medium Enterprises Development Act, 2006. This is relied upon by the Auditors.

14. Previous year figures have been re-grouped/ re-classified wherever considered necessary to conform to current years classification.