Home  »  Company  »  Corporation Bank  »  Quotes  »  Accounting Policy
Enter the first few characters of Company and click 'Go'

Accounting Policies of Corporation Bank Company

Mar 31, 2016

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

a) The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting unless otherwise stated and except for items recognized on cash basis, as per guidelines issued by the Reserve Bank of India [‘RBI’] and comply with the Accounting standards issued by the Institute of Chartered Accountants of India and relevant requirements prescribed under the Banking Regulation Act, 1949 and Companies Act, 2013, and current practices prevailing within the banking industry in India.

b) The preparation of financial statements in conformity with generally accepted accounting principles [GAAP] requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actuals could differ from these estimates.

2. REVENUE RECOGNITION

a] Income is recognized on an accrual basis except:

(i) Commission on Bank Guarantees and Letters of Credit; arrangement of suppliers/buyers Credit; and Locker rent which are recognized on receipt basis.

(ii) Interest income on Non-Performing advances and investments, and securities guaranteed by Central Government where interest is not realized within 90 days is recognized on receipt basis.

(iii) Interest on Income-tax refunds is accounted for on receipt of Intimation order from the Income Tax Department.

b] Profit or loss on sale of investments is recognized in the profit and loss account on settlement basis at the time of sale except the realized profit on sale of investments in ‘Held to Maturity’ category which is recognized in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines.

c] Brokerage/commission/incentives received on Banks direct subscriptions are deducted from the cost of securities, whereas brokerage paid in connection with acquisition of securities is treated as revenue expenditure.

d] The broken period interest on sale or purchase of securities is treated as revenue item.

3. ADVANCES

a) Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the guidelines issued by the RBI and are stated net of specific provisions made towards Non-Performing Advances [‘NPAs’].

b) Credit Card dues are identified as NPAs where minimum dues receivable as mentioned in the statement are in default for a continuous period of more than 90 days from the payment due date mentioned in statement. Income from non-performing card accounts is not recognized in financial statements.

c) Provisions for sub-standard, doubtful and loss advances are made on the basis of asset classification and provisioning requirements under the prudential norms laid down by the Reserve Bank of India.

d) Recoveries in non-performing advances are appropriated first towards book balance, then to charges and thereafter to unrealized interest.

e) General provision for Standard Assets made in accordance with RBI Guidelines is included under “Other Liabilities & Provisions-others”.

f) Restructured Accounts: For restructured advances, provisions for erosion in fair value of loan are made in accordance with the guidelines issued by RBI, in addition to the provision otherwise required. The provision for erosion in fair value of advance is not reduced from advances and is included in the balance sheet under the head “Other Liabilities & Provisions-Others”

4. INVESTMENTS

4.1 Categorization & Classification

In accordance with the RBI guidelines, investments at the time of acquisition are categorized as

- Held to Maturity [HTM],

- Available for Sale [AFS] and

- Held for Trading [HFT].

The Bank shifts investments from AFS / HFT category to HTM category at the lower of book value or market value. In other words, in cases where the market value is higher than the book value at the time of transfer, the appreciation should be ignored and the security should be transferred at the book value. In cases where the market value is less than the book value, the provision against depreciation held against this security (including the additional provision, if any, required based on valuation done on the date of transfer) should be adjusted to reduce the book value to the market value and the security should be transferred at the market value.

If the security was originally placed under the HTM category at a discount, it may be transferred to AFS / HFT category at the acquisition price / book value. (It may be noted that as per existing instructions banks are not allowed to accrue the discount on the securities held under HTM category and, therefore, such securities would continue to be held at the acquisition cost till maturity). After transfer, these securities should be immediately re-valued and resultant depreciation, if any, may be provided.

If the security was originally placed in the HTM category at a premium, it may be transferred to the AFS / HFT category at the amortized cost. After transfer, these securities should be immediately re-valued and resultant depreciation, if any, may be provided.

In the case of transfer of securities from AFS to HFT category or vice-versa, the securities need not be re-valued on the date of transfer and the provisions for the accumulated depreciation, if any, held may be transferred to the provisions for depreciation against the HFT securities and vice-versa.

However, for disclosure in the Balance sheet, investments are classified under seven categories — Government securities, State Govt. special securities, other approved securities, shares, debentures and bonds, Investments in Subsidiaries/RRB/Joint Ventures and Others [units of Mutual Funds, Commercial Papers, certificate of deposits, Security Receipts and Venture Capital Funds].

Investments classified under ‘Held to Maturity’ include the following:

a) Investments in SLR securities up to 21.50% of Demand and Time liabilities or as notified by RBI from time to time.

b) Recapitalization bonds received from the Government of India towards recapitalization requirements.

c) Investments in share of subsidiaries and joint ventures.

d) Investment in Venture Capital Funds, for an initial period of 3 years of each draw down, after August 23, 2006.

Investments acquired primarily with an intention for trading are classified as HFT securities. As per RBI guidelines, securities in HFT category are not held beyond 90 days are transferred to AFS category.

All other investments are classified under AFS.


Mar 31, 2015

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

a) The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting unless otherwise stated and except for items recognized on cash basis, as per guidelines issued by the Reserve Bank of India [''RBI''] and comply with the Accounting standards issued by the Institute of Chartered Accountants of India and relevant requirements prescribed under the Banking Regulation Act, 1949 and Companies Act, 2013, and current practices prevailing within the banking industry in India.

b) The preparation of financial statements in conformity with generally accepted accounting principles [GAAP] requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actuals could differ from these estimates.

2. REVENUE RECOGNITION

a] Income is recognized on an accrual basis except:

(i) Commission on Bank Guarantees and Letters of Credit, arrangement of suppliers /buyers Credit, and Locker rent which are recognized on receipt basis.

(ii) Interest income on Non-Performing advances and investments, and securities guaranteed by Central Government where interest is not realized within 90 days is recognized on receipt basis.

(iii) Interest on Income-tax refunds is accounted for on receipt of Intimation order from the Income Tax Department.

b] Profit or loss on sale of investments is recognized in the profit and loss account on settlement basis at the time of sale except the realized profit on sale of investments in ''Held to Maturity'' category which is recognized in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines.

c] Brokerage/commission/incentives received on Banks direct subscriptions are deducted from the cost of securities, whereas brokerage paid in connection with acquisition of securities is treated as revenue expenditure.

d] The broken period interest on sale or purchase of securities is treated as revenue item.

3. ADVANCES

a) Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the guidelines issued by the RBI and are stated net of specific provisions made towards Non-Performing Advances [''NPAs''].

b) Credit Card dues are identified as NPAs where minimum dues receivable are in default for a continuous period of more than 90 days. Income from non performing card accounts is not recognized in financial statements.

c) Provisions for sub-standard, doubtful and loss advances are made on the basis of asset classification and provisioning requirements under the prudential norms laid down by the Reserve Bank of India.

d) Recoveries in non-performing advances are appropriated first towards book balance, then to charges and thereafter to unrealized interest.

e) General provision for Standard Assets made in accordance with RBI Guidelines is included under "Other Liabilities & Provisions-others".

f) Restructured Accounts: For restructured advances, provisions for erosion in fair value of loan are made in accordance with the guidelines issued by RBI, in addition to the provision otherwise required. The provision for erosion in fair value of advance is not reduced from advances and is included in the balance sheet under the head "Other Liabilities & Provisions- Others"

4. INVESTMENTS

4.1 Categorization & Classification

In accordance with the RBI guidelines, investments at the time of acquisition are categorized as

- Held to Maturity [HTM],

- Available for Sale [AFS] and

- Held for Trading [HFT].

The Bank shifts investments from AFS / HFT category to HTM category at the lower of book value or market value. In other words, in cases where the market value is higher than the book value at the time of transfer, the appreciation should be ignored and the security should be transferred at the book value. In cases where the market value is less than the book value, the provision against depreciation held against this security (including the additional provision, if any, required based on valuation done on the date of transfer) should be adjusted to reduce the book value to the market value and the security should be transferred at the market value.

If the security was originally placed under the HTM category at a discount, it may be transferred to AFS / HFT category at the acquisition price / book value. (It may be noted that as per existing instructions banks are not allowed to accrue the discount on the securities held under HTM category and, therefore, such securities would continue to be held at the acquisition cost till maturity). After transfer, these securities should be immediately re-valued and resultant depreciation, if any, may be provided.

If the security was originally placed in the HTM category at a premium, it may be transferred to the AFS / HFT category at the amortised cost. After transfer, these securities should be immediately re-valued and resultant depreciation, if any, may be provided.

In the case of transfer of securities from AFS to HFT category or vice-versa, the securities need not be re- valued on the date of transfer and the provisions for the accumulated depreciation, if any, held may be transferred to the provisions for depreciation against the HFT securities and vice-versa.

However, for disclosure in the Balance sheet, investments are classified under seven categories — Government securities, State Govt. special securities, other approved securities, shares, debentures and bonds, Investments in Subsidiaries/RRB/Joint Ventures and Others [units of Mutual Funds, Commercial Papers, certificate of deposits and Venture Capital Funds and investments in RIDF of NABARD, MSME Fund of SIDBI, NHB].

Investments classified under ''Held to Maturity'' include the following:

a) Investments in SLR securities upto 21.50% of Demand and Time liabilities or as notified by RBI from time to time.

b) Recapitalisation bonds received from the Government of India towards recapitalisation requirements.

c) Investments in share of subsidiaries and joint ventures.

d) RIDF Schemes of NABARD / MSME (Refinance) Fund of SIDBI/RHF deposits of NHB

e) Investment in Venture Capital Funds, for an initial period of 3 years of each draw down, after 23rd August, 2006.

Investments acquired primarily with an intention for trading are classified as HFT securities. As per RBI guidelines, securities in HFT category are not held beyond 90 days and are transferred to AFS category under exceptional circumstances like not able to sell or extreme volatility or market becoming unidirectional, with the approval of the Board/ALCO/Investment Committee.

All other investments are classified under AFS.

a] Held to Maturity: Investments classified under ''Held-to-Maturity'' are carried at weighted average acquisition cost. Premium on acquisition, if any, is amortized on a straight-line basis over the remaining maturity period. In case ofinvestments in subsidiaries / joint ventures any diminution, other than temporary, in the value of such investment is recognized and provided for. Investments in Venture Capital Fund are valued at Cost.

b] Available for Sale and Held for Trading :

(i) Investments in these categories (classified under the category ''Held for Trading'' and ''Available for Sale'') are marked to market / estimated realizable value as per RBI guidelines at monthly and quarterly intervals for HFT and AFS respectively. While the resultant net depreciation, if any, within each category referred to in 4.1 above, is recognized in profit & loss account as "Provisions and Contingencies", the net appreciation is ignored except to the extent of depreciation previously provided. The book value of the individual scrip is not changed after revaluation. In the case of write back of excess provision of depreciation the same is credited to "Provisions and Contingencies "and a like amount (net of taxes and transfer to Statutory Reserve) is appropriated to Investment Reserve Account under Schedule 2 — "Reserves & Surplus".

(ii) For the purpose of (i) above, the market price / estimated realizable value is determined as under:

a] All such securities where repayment of principal or interest not serviced within 90 days from the due date are classified as Non-Performing Investments, except securities guaranteed by the Central Government which are treated as performing investments notwithstanding arrears of principal / interest payments. In respect of investments classified as Non-performing, appropriate provisions are made for the depreciation in the value of these investments. The depreciation requirement in respect of these securities is not set off against appreciation in respect of other performing securities.

b] Where the Bank has both credit and investment exposures to any borrower/ group and in the event the credit exposure is classified as Non-Performing asset, the investment exposure to them is also classified as Non-Performing.

Clarifications:

If any credit facility availed by the issuer is NPA in the books of the bank, investment in any of the securities, including preference shares issued by the same issuer would also be treated as NPI and vice versa. However, if only the preference shares are classified as NPI, the investment in any of the other performing securities issued by the same issuer may not be classified as NPI and any performing credit facilities granted to that borrower need not be treated as NPA.

4.4 ACCOUNTING FOR REPO TRANSACTIONS

The revised accounting guidelines effective from April 1, 2010 issued by Reserve Bank of India are applicable to market repo transactions in Government Securities and corporate debt securities. These accounting norms will, however, not apply to repo / reverse repo transactions conducted under the Liquidity Adjustment Facility (LAF) with the Reserve Bank.

The following procedure shall be applicable for Repo / Reverse Repo transactions:

Monies received/paid during the year on Repo / Reverse Repo transactions are debited / credited to Repo/ Reverse Repo Account and reversed on maturity of the transactions. Costs and revenues are accounted for as interest expenditure/income, as the case may be.

4.5 Accounting for Investment Transactions

i) The Bank follows settlement date method of accounting its investments;

ii) Cost is determined on weighted average cost method;

iii) Profit on sale is netted with loss on sale of securities;

iv) The difference between the sale/ redemption value of liquid Mutual Funds and the book value is treated as profit on sale of investments.

5. FIXED ASSETS

a] i. Fixed assets are stated at cost less accumulated depreciation and provision for impairment. Cost comprises of the purchase price and any cost attributable for bringing the asset to its working condition for its intended use. The carrying amounts of fixed assets are reviewed at each balance sheet date and adjusted for any impairment in accordance with the Accounting Standard 28 ("Impairment of Assets") issued in this regard by the Institute of Chartered Accountants of India.

ii. Impairment of Assets:

Fixed Assets are reviewed for impairment whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognised is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

iii. Capital Work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets.

b] Depreciation is provided under the straight line method from the date of capitalization. The assets are depreciated taking into consideration the useful life of the asset as provided in schedule II of the Companies Act, 2013. The Bank as a matter of prudence finds that the useful life of the following assets is lower than the useful life of the respective category of assets mentioned in Schedule II (ref.: Sec. 123) of the Companies Act, 2013:

a) Servers and networks

b) Mobile Phones

c) UPS and allied items

Depreciation in the case of Servers and networks and Mobile phones are depreciated at the rate of 1/3rd per annum and UPS and Allied items at the rate of 1/5th per annum. Leasehold improvements are depreciated at the rate of 1/5th per annum.

c] Depreciation on premises is provided for on composite cost, wherever the value of land and building is not separately identified.

6. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

a) Transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at the balance sheet date at closing exchange rates notified by Foreign Exchange Dealers Association of India [''FEDAI''] and the resulting profits/losses are recognized in the profit and loss account.

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

c) Outstanding foreign exchange spot and forward contracts meant for trading purpose are revalued at the exchange rates specified for spot and the respective forward maturities as notified by FEDAI. The resulting profit or loss is shown under Profit or Loss account.

d) Foreign exchange forward contracts, which are not intended for trading and are outstanding at the balance sheet date, are revalued at the closing spot rate as notified by FEDAI and the resulting profit or loss is shown under Profit or Loss account. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the period of the contract.

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

7. DERIVATIVES

a) The bank enters into derivative contracts such as foreign currency interest rate swaps, currency swaps, currency futures, options and forward rate agreements.

b) The income/expenses on derivative contracts classified as hedge are recorded on accrual basis.

c) All trading derivative contracts are marked to market and the resultant gains or losses are recognized in the profit and loss account.

d) All derivative transactions are classified under contingent liabilities and those denominated in foreign currencies are reported using the FEDAI closing spot rates.

8. TRANSACTIONS INVOLVING PRECIOUS METALS

a] Income from precious metals transactions is accounted for as "Other Income". In case of metals received on consignment basis, the income thereon is recognized at the time of sale.

b] Commodity loans to the constituents and deposits from public under the gold deposit scheme in the form of precious metals are translated at market related rates prevailing at the close of the period and shown under the head "Advances" and "Deposits" respectively.

c] Closing stock of precious metals [own dealing] is valued at lower of the cost and net realizable value.

d] Closing stock of gold held under Gold Deposit Scheme is valued at market related rates, as per RBI guidelines.

9. CASH AND BALANCES WITH RESERVE BANK OF INDIA

Cash and Balance with Reserve Bank of India include cash on hand and in ATM''s, and gold in hand and balances with RBI in current accounts.

10. EMPLOYEE BENEFITS

a) The Bank has accounted for Employee Benefits as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

b) i) Contributions payable to Gratuity, Pension and Leave Encashment etc., which are defined benefits, based on actuarial valuations, at the Balance Sheet date, carried out by an independent actuary;

ii) Contributions payable to the recognized provident fund/National Pension Scheme (NPS), which is a defined contribution scheme; are charged to the profit and loss account.

11. LEASE TRANSACTIONS

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account on a straight-line basis over the lease term.

12. CONTINGENT LIABILITIES AND PROVISIONS

In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, 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.

Past events leading to possible obligations existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Bank; or present obligations where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or a reliable estimate of the amount of obligation cannot be made, are treated as contingent liabilities and are dealt-with in accordance with AS 29.

Contingent Assets are not recognized in the financial statements.

13. TAXES ON INCOME

Income-tax expense comprises current tax [i.e. amount of tax for the period determined in accordance with the income-tax law] and deferred-tax charge or credit [reflecting tax effects of timing differences between accounting income and taxable income for the period].

a] Current tax is measured at the amount expected to be paid to the taxation authorities, using the applicable tax rates, tax laws and favourable judicial pronouncements / legal opinions.

b] The deferred-tax charge or credit and the corresponding deferred-tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. As per RBI guideline, Deduction under section 36(1)(viii) of the Income Tax Act 1961 is no longer considered as permanent difference and the Deferred Tax Liability is to be created. As regards depreciation on Investment Portfolio, since the difference in depreciation on Investments as per accounts and as per income tax computation is treated as permanent difference, creation of DTL against depreciation on investment portfolio not considered necessary. Deferred-tax assets are recognized keeping in view the consideration of prudence only to the extent there is virtual certainty that the assets can be realized in future. However Bank will not create Deferred Tax Assets on losses.

14. EARNINGS PER SHARE

Basic and Diluted Earnings per Equity Share are computed in accordance with Accounting Standard 20, Earnings Per Share, issued by the Institute of Chartered Accountants of India.

15. Treatment of Basel III compliant Additional Tier I Bonds and Tier II Bonds on occurrence of Trigger events:

A] On occurrence of Trigger event i.e. Common Equity Tier 1 trigger event the Bank shall write-down the outstanding principal of the Bonds not less than that the amount required to immediately return the Banks Common Equity Ratio to above the CET1 trigger event by creating "AT 1 Bond Reserve". The reserve so created shall be part of Common Equity Tier I Capital Bonds written down on occurrence of CET1 Trigger event temporarily may be re-instated in terms of Bond issue /RBI guidelines by debit to AT-1 Bond reserve.

b] On occurrence of Point of Non Viability [PONV] trigger event initiated by Reserve Bank of India, the Bank may create common equity Tier I capital by writing off Additional Tier I Bond principal amount permanently with corresponding creation of AT-1 Bond reserve/Tier II Bond Reserve as the case may be. The re-instatement clause is not applicable on occurrence of PONV trigger event.


Mar 31, 2014

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

a) The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting unless otherwise stated and except for items recognized on cash basis, as per guidelines issued by the Reserve Bank of India [''RBI''] and comply with the Accounting standards issued by the Institute of Chartered Accountants of India and relevant requirements prescribed under the Banking Regulation Act, 1949 and Companies Act, 1956, and current practices prevailing within the banking industry in India.

b) The preparation of financial statements in conformity with generally accepted accounting principles [GAAP] requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actuals could differ from these estimates.

2. REVENUE RECOGNITION

a] Income is recognized on an accrual basis except:

(i) Commission on Bank Guarantees and Letters of Credit; arrangement of suppliers/buyers Credit; and Locker rent which are recognized on receipt basis.

(ii) Interest income on Non-Performing advances and investments, and securities guaranteed by Central Government where interest is not realized within 90 days is recognized on receipt basis.

(iii) Interest on Income-tax refunds is accounted for on receipt of Intimation order.

b] Profit or loss on sale of investments is recognized in the profit and loss account on settlement basis at the time of sale except the realized profit on sale of investments in ''Held to Maturity'' category which is recognized in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines.

c] Brokerage/commission/incentives received on Banks direct subscriptions are deducted from the cost of securities, whereas brokerage paid in connection with acquisition of securities is treated as revenue expenditure.

d] The broken period interest on sale or purchase of securities is treated as revenue item.

3. ADVANCES

a) Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the guidelines issued by the RBI and are stated net of specific provisions made towards Non-Performing Advances [''NPAs''].

b) Credit Card dues are identified as NPAs where minimum dues receivable are in default for a continuous period of more than 90 days. Income from non-performing card accounts is not recognized in financial statements.

c) Provisions for sub-standard, doubtful and loss advances are made on the basis of asset classification and provisioning requirements under the prudential norms laid down by the Reserve Bank of India.

d) Recoveries in non-performing advances are appropriated first towards book balance, then to charges and thereafter to unrealized interest.

e) General provision for Standard Assets made in accordance with RBI Guidelines is included under "Other liabilities-others".

f) Restructured Accounts: For restructured advances, provisions for erosion in fair value of loan are made in accordance with the guidelines issued by RBI, in addition to the provision otherwise required. The provision for erosion in fair value of advance is not reduced from advances and is included in the balance sheet under the head "Other Liabilities-Others".

4. INVESTMENTS

4.1 Categorization & Classification

In accordance with the RBI guidelines, investments at the time of acquisition are categorized as

- Held to Maturity [HTM],

- Available for Sale [AFS] and

- Held for Trading [HFT].

The Bank shifts investments to/from HTM at the least of Book Value/Market Value on the date of transfer and the depreciation, if any, on such transfer is recognized in the profit and loss account. For shifting of investments from AFS to HFT or vice versa, the securities need not be revalued on the date of transfer and the provision for the accumulated depreciation if any, held may be transferred to the provision for depreciation against HFT securities and vice-versa.

However, for disclosure in the Balance sheet, investments are classified under six categories – Government securities, other approved securities, shares, debentures and bonds, Investments in Subsidiaries/RRB/Joint Ventures and Others [units of Mutual Funds, Commercial Papers, certificate of deposits and Venture Capital Funds and investments in RIDF of NABARD, MSME Fund of SIDBI, NHB].

Investments classified under ''Held to Maturity'' include the following:

a) Investments in SLR securities upto 23% of Demand and Time liabilities or as notified by RBI from time-to-time.

b) Recapitalisation bonds received from the Government of India towards recapitalisation requirements.

c) Investments in share of subsidiaries and joint ventures.

d) RIDF Schemes of NABARD/MSME (Refinance) Fund of SIDBI/RHF deposits of NHB

e) Investment in Venture Capital Funds, for an initial period of 3 years of each draw down, after 23rd August, 2006.

Investments acquired primarily with an intention for trading are classified as HFT securities. As per RBI guidelines, securities in HFT category are not held beyond 90 days and are transferred to AFS category under exceptional circumstances like not able to sell or extreme volatility or market becoming unidirectional, with the approval of the Board/ALCO/Investment Committee.

All other investments are classified under AFS.

4.2 Valuation and consequential adjustments :

a] Held to Maturity: Investments classified under ''Held-to-Maturity'' are carried at weighted average acquisition cost. Premium on acquisition, if any, is amortized on a straight-line basis over the remaining maturity period. In case of investments in subsidiaries/ joint ventures any diminution, other than temporary, in the value of such investment is recognized and provided for. Investments in Venture Capital Fund are valued at Cost.

b] Available for Sale and Held for Trading:

(i) Investments in these categories (classified under the category ''Held for Trading'' and ''Available for Sale'') are marked to market/estimated realizable value as per RBI guidelines at monthly and quarterly intervals for HFT and AFS respectively. While the resultant net depreciation, if any, within each category referred to in 4.1 above, is recognized in profit & loss account as "Provisions and Contingencies", the net appreciation is ignored except to the extent of depreciation previously provided. The book value of the individual scrip is not changed after revaluation. In the case of write back of excess provision of depreciation the same is credited to "Provisions and Contingencies" and a like amount (net of taxes and transfer to Statutory Reserve) is appropriated to Investment Reserve Account under Schedule 2 – "Reserves & Surplus".

(ii) For the purpose of (i) above, the market price/ estimated realizable value is determined as under:

4.3 Non-performing Investments

a) All such securities where repayment of principal or interest not serviced within 90 days from the due date are classified as Non-Performing Investments, except securities guaranteed by the Central Government which are treated as performing investments notwithstanding arrears of principal/ interest payments. In respect of investments classified as Non-performing, appropriate provisions are made for the depreciation in the value of these investments. The depreciation requirement in respect of these securities is not set off against appreciation in respect of other performing securities.

b) Where the Bank has both credit and investment exposures to any borrower/ group and in the event the credit exposure is classified as Non-Performing asset, the investment exposure to them is also classified as Non-Performing.

4.4 Accounting for Repo Transactions

In line with the uniform accounting treatment prescribed by the RBI, monies received/paid during the year on Repo transactions are debited/credited to Repo Account and reversed on maturity of the transactions. Costs and revenues are accounted for as interest expenditure/income, as the case may be. Balance in Repo account is adjusted against the balance in the investment account.

In respect of Repo transactions under Liquidity Adjustment Facility with the RBI, monies borrowed during the year on such transactions are credited to REPO account from RBI. Expenditure thereon is accounted for as Interest Expenditure. Balance held in Repo account with RBI is not deducted from investment and are valued. SLR securities (including margin) acquired under the Reserve Bank of India (RBI)- Liquidity Adjustment Facility (LAF), are not treated as an eligible asset for maintenance of SLR.

In respect of Reverse Repo Transactions under LAF with the RBI, monies paid during the year are debited to ''Reverse REPO/Investment –RBI'' and reversed on maturity of the transaction. Revenue thereon is accounted as interest income. Balance held in Reverse Repo with RBI is included under investments as on the Balance Sheet date and are not valued.

4.5 Accounting for Investment Transactions

i) The Bank follows settlement date method of accounting its investments; ii) Cost is determined on weighted average cost method; iii) Profit on sale is netted with loss on sale of securities; iv) The difference between the sale/redemption value of liquid Mutual Funds and the book value is treated as profit on sale of investments.

5. Fixed assets

a] i. Fixed assets are stated at cost less accumulated depreciation and provision for impairment. Cost comprises of the purchase price and any cost attributable for bringing the asset to its working condition for its intended use. The carrying amounts of fixed assets are reviewed at each balance sheet date and adjusted for any impairment in accordance with the Accounting Standard 28 ("Impairment of Assets") issued in this regard by the Institute of Chartered Accountants of India.

ii. Impairment of Assets:

Fixed Assets are reviewed for impairment whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognised is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

iii. Capital Work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets.

b] Depreciation is provided on the diminishing balance method from the date of addition except in case of computers/ATMs and leasehold improvements where the straight-line method is used. The assets are depreciated at the rates prescribed in Schedule XIV to the Companies Act, 1956, except in the case of computers, ATMs and leasehold improvements which are depreciated at the rate of 1/3rd per annum, 1/7th per annum and over the period of the lease respectively.

c] Depreciation on premises is provided for on composite cost, wherever the value of land and building is not separately identified.

6. Transactions Involving Foreign Exchange

a) Transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at the balance sheet date at closing exchange rates notified by Foreign Exchange Dealers Association of India [''FEDAI''] and the resulting profits/losses are recognized in the profit and loss account.

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

c) Outstanding foreign exchange spot and forward contracts meant for trading purpose are revalued at the exchange rates specified for spot and the respective forward maturities as notified by FEDAI. The resulting profit or loss is shown under Profit or Loss account.

d) Foreign exchange forward contracts, which are not intended for trading and are outstanding at the balance sheet date, are revalued at the closing spot rate as notified by FEDAI and the resulting profit or loss is shown under Profit or Loss account. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the period of the contract.

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

7. Derivatives

a) The bank enters into derivative contracts such as foreign currency interest rate swaps, currency swaps, currency futures, options and forward rate agreements.

b) The income/expenses on derivative contracts classified as hedge are recorded on accrual basis.

c) All trading derivative contracts are marked to market and the resultant gains or losses are recognized in the profit and loss account.

d) All derivative transactions are classified under contingent liabilities and those denominated in foreign currencies are reported using the FEDAI closing spot rates.

8. Transactions involving Precious Metals

a) Income from precious metals transactions is accounted for as "Other Income". In case of metals received on consignment basis, the income thereon is recognized at the time of sale.

b] Commodity loans to the constituents and deposits from public under the gold deposit scheme in the form of precious metals are translated at market related rates prevailing at the close of the period and shown under the head "Advances" and "Deposits" respectively.

c] Closing stock of precious metals [own dealing] is valued at lower of the cost and net realizable value.

d] Closing stock of gold held under Gold Deposit Scheme is valued at market related rates, as per RBI guidelines.

9. Cash and Balances with Reserve Bank of India

Cash and Balance with Reserve Bank of India include cash on hand and in ATM''s, and gold in hand and balances with RBI in current accounts.

10. Employee benefits

a) The Bank has accounted for Employee Benefits as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

b) i) Contributions payable to Gratuity, Pension and Leave Encashment, Sick Leave, etc., which are defined benefits, based on actuarial valuations, at the Balance Sheet date, carried out by an independent actuary;

ii) Contributions payable to the recognized provident fund, which is a defined contribution scheme; are charged to the profit and loss account.

11. Lease transactions

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account on a straight-line basis over the lease term.

12. Contingent Liabilities and Provisions

In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, 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.

Past events leading to possible obligations existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Bank; or present obligations where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or a reliable estimate of the amount of obligation cannot be made, are treated as contingent liabilities and are dealt-with in accordance with AS29.

Contingent Assets are not recognized in the financial statements.

13. Taxes on Income

Income-tax expense comprises current tax [i.e. amount of tax for the period determined in accordance with the income-tax law] and deferred-tax charge or credit [reflecting tax effects of timing differences between accounting income and taxable income for the period].

a] Current tax is measured at the amount expected to be paid to the taxation authorities, using the applicable tax rates, tax laws and favourable judicial pronouncements/legal opinions.

b] The deferred-tax charge or credit and the corresponding deferred-tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. As per RBI guideline, Deduction under Section 36(1)(viii) of the Income Tax Act, 1961 is no longer considered as permanent difference. The Deferred Tax Liability is to be created on accumulated Special reserve as well as for the current year Financial Year 2013-14. As regards depreciation on Investment Portfolio, since the difference in depreciation on Investments as per accounts and as per income tax computation is treated as permanent difference, creation of DTL against depreciation on investment portfolio not considered necessary. Deferred-tax assets are recognized keeping in view the consideration of prudence only to the extent there is virtual certainty that the assets can be realized in future. However Bank will not create Deferred Tax Assets on losses.

14. Earnings per Share

Basic and Diluted Earnings per Equity Share are computed in accordance with Accounting Standard 20, Earnings Per Share, issued by the Institute of Chartered Accountants of India.


Mar 31, 2013

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

a. The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting unless otherwise stated and except for items recognized on cash basis, as per guidelines issued by the Reserve Bank of India [''RBI''] and comply with the Accounting Standards issued by the Institute of Chartered Accountants of India and relevant requirements prescribed under the Banking Regulation Act, 1949 and Companies Act, 1956, and current practices prevailing within the banking industry in India.

b. The preparation of financial statements in conformity with generally accepted accounting principles [GAAP] requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actuals could differ from these estimates.

2. REVENUE RECOGNITION

a] Income is recognized on an accrual basis except:

i) Commission on Bank Guarantees and Letters of Credit; arrangement of suppliers /buyers Credit; and Locker rent which are recognized on receipt basis.

ii) Interest income on Non-Performing advances and investments, and securities guaranteed by Central Government where interest is not realized within 90 days is recognized on receipt basis.

b] Profit or loss on sale of investments is recognized in the profit and loss account on settlement basis at the time of sale except the realized profit on sale of investments in ''Held to Maturity'' category which is recognized in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines.

c] Brokerage/commission/incentives received on Banks direct subscriptions are deducted from the cost of securities, whereas brokerage paid in connection with acquisition of securities is treated as revenue expenditure.

d] The broken period interest on sale or purchase of securities is treated as revenue item.

3. ADVANCES

a. Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the guidelines issued by the RBI and are stated net of specific provisions made towards Non-Performing Advances [''NPAs''].

b. Credit Card dues are identified as NPAs where minimum dues receivable are in default for a continuous period of more than 90 days. Income from non-performing card accounts is not recognized in financial statements.

c. Provisions for sub-standard, doubtful and loss advances are made on the basis of asset classification and provisioning requirements under the prudential norms laid down by the Reserve Bank of India.

d. Recoveries in non-performing advances are appropriated first towards book balance, then to charges and thereafter to unrealized interest.

e. General provision for Standard Assets made in accordance with RBI Guidelines is included under "Other liabilities-others".

f. Restructured Accounts: For restructured advances, provisions for erosion in fair value of loan are made in accordance with the guidelines issued by RBI, in addition to the provision otherwise required. The provision for erosion in fair value of advance is not reduced from advances and is included in the balance sheet under the head "Other Liabilities-Others".

4. INVESTMENTS

4.1 Categorization & Classification

In accordance with the RBI guidelines, investments at the time of acquisition are categorized as Held to Maturity [HTM], Available for Sale [AFS] and Held for Trading [HFT].

The Bank shifts the investments category inter-se as permitted by RBI, at the least of acquisition cost / book value / market value, on the date of transfer and the depreciation, if any, on such transfer is recognized in the profit and loss account.

However, for disclosure in the Balance sheet, investments are classified under six categories — Government securities, other approved securities, shares, debentures and bonds, Investments in Subsidiaries/RRB/Joint Ventures and Others [units of Mutual Funds, Commercial Papers, certificate of deposits and Venture Capital Funds and investments in RIDF of NABARD, MSME Fund of SIDBI, NHB].

Investments classified under ''Held to Maturity'' include the following:

a. Investments in SLR securities upto 25% of Demand and Time liabilities.

b. Recapitalisation bonds received from the Government of India towards recapitalisation requirements.

c. Investments in share of subsidiaries and joint ventures.

d. RIDF Schemes of NABARD / MSMS (Refinance) Fund of SIDBI/RHF deposits of NHB

e. Investment in Venture Capital Funds, for an initial period of 3 years of each draw down, after 23rd August 2006.

Investments acquired primarily with an intention for trading are classified as HFT securities. As per RBI guidelines, securities in HFT category are not held beyond 90 days and are transferred to AFS category under exceptional circumstances like not able to sell or extreme volatility or market becoming unidirectional, with the approval of the Board/ALCO/Investment Committee.

All other investments are classified under AFS.

4.2 Valuation and consequential adjustments :

a. Held to Maturity: Investments classified under ''Held- to-Maturity'' are carried at weighted average acquisition cost. Premium on acquisition, if any, is amortized on a straight-line basis over the remaining maturity period. In case of investments in subsidiaries /joint ventures any diminution, other than temporary, in the value of such investment is recognized and provided for. Investments in Venture Capital Fund are valued at Cost.

b. Available for Sale and Held for Trading:

(i) Investments in these categories (classified under the category ''Held for Trading'' and ''Available for Sale'') are marked to market / estimated realizable value as per RBI guidelines at monthly and quarterly intervals for HFT and AFS respectively. While the resultant net depreciation, if any, within each category referred to in 4.1 above, is recognized in profit & loss account as ''''Provisions and Contingencies'''', the net appreciation is ignored except to the extent of depreciation previously provided. The book value of the individual scrip is not changed after revaluation. In the case of write back of excess provision of depreciation the same is credited to "Provisions and Contingencies" and a like amount (net of taxes and transfer to Statutory Reserve) is appropriated to Investment Reserve Account under Schedule 2 — "Reserves & Surplus''''.

4.3 Non-performing Investments

a) All such securities where repayment of principal or interest not serviced within 90 days from the due date are classified as Non-Performing Investments, except securities guaranteed by the Central Government which are treated as performing investments notwithstanding arrears of principal/interest payments. In respect of investments classified as Non-performing, appropriate provisions are made for the depreciation in the value of these investments. The depreciation requirement in respect of these securities is not set off against appreciation in respect of other performing securities.

b) Where the Bank has both credit and investment exposures to any borrower/ group and in the event the credit exposure is classified as Non-Performing asset, the investment exposure to them is also classified as Non-Performing.

4.4 Accounting for Repo Transactions

In line with the uniform accounting treatment prescribed by the RBI, monies received/paid during the year on Repo transactions are debited/credited to Repo Account and reversed on maturity of the transactions. Costs and revenues are accounted for as interest expenditure/income, as the case may be. Balance in Repo account is adjusted against the balance in the investment account.

In respect of Repo transactions under Liquidity Adjustment Facility with the RBI, monies borrowed during the year on such transactions are credited to Repo account from RBI. Expenditure thereon is accounted for as Interest Expenditure. Balance held in Repo account with RBI is not deducted from investment and are valued. SLR securities (including margin) acquired under the Reserve Bank of India (RBI) - Liquidity Adjustment Facility (LAF), are not treated as an eligible asset for maintenance of SLR.

In respect of Reverse Repo Transactions under LAF with the RBI, monies paid during the year are debited to ''Reverse REPO/ Investment —RBI'' and reversed on maturity of the transaction. Revenue thereon is accounted as interest income. Balance held in Reverse Repo with RBI is included under investments as on the Balance Sheet date and are not valued.

4.5 Accounting for Investment Transactions

i) The Bank follows settlement date method of accounting its investments;

ii) Cost is determined on weighted average cost method;

iii) Profit on sale is netted with loss on sale of securities;

iv) The difference between the sale/redemption value of liquid Mutual Funds and the book value is treated as profit on sale of investments.

5. Fixed assets

a] i. Fixed assets are stated at cost less accumulated depreciation and provision for impairment. Cost comprises of the purchase price and any cost attributable for bringing the asset to its working condition for its intended use. The carrying amounts of fixed assets are reviewed at each balance sheet date and adjusted for any impairment in accordance with the Accounting Standard 28 ("Impairment of Assets") issued in this regard by the Institute of Chartered Accountants of India.

ii. Impairment of Assets:

Fixed Assets are reviewed for impairment whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognised is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

iii. Capital Work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets.

b] Depreciation is provided on the diminishing balance method from the date of addition except in case of computers/ATMs and leasehold improvements where the straight-line method is used. The assets are depreciated at the rates prescribed in Schedule XIV to the Companies Act 1956, except in the case of computers, ATMs and leasehold improvements which are depreciated at the rate of 1/3rd per annum, 1/7th per annum and over the period of the lease respectively.

c] Depreciation on premises is provided for on composite cost, wherever the value of land and building is not separately identified.

6. Transactions Involving Foreign Exchange

a) Transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at the balance sheet date at closing exchange rates notified by Foreign Exchange Dealers Association of India [''FEDAI''] and the resulting profits/losses are recognized in the profit and loss account.

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

c) Outstanding foreign exchange spot and forward contracts meant for trading purpose are revalued at the exchange rates specified for spot and the respective forward maturities as notified by FEDAI. The resulting profit or loss is shown under Profit or Loss account.

d) Foreign exchange forward contracts, which are not intended for trading and are outstanding at the balance sheet date, are revalued at the closing spot rate as notified by FEDAI and the resulting profit or loss is shown under Profit or Loss account. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the period of the contract.

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

7. Derivatives

a) The bank enters into derivative contracts such as foreign currency interest rate swaps, currency swaps, currency futures, options and forward rate agreements.

b) The income/expenses on derivative contracts classified as hedge are recorded on accrual basis.

c) All trading derivative contracts are marked to market and the resultant gains or losses are recognized in the profit and loss account.

d) All derivative transactions are classified under contingent liabilities and those denominated in foreign currencies are reported using the FEDAI closing spot rates.

8. Transactions involving Precious Metals

a) Income from precious metals transactions is accounted for as ''''Other Income''''. In case of metals received on consignment basis, the income thereon is recognized at the time of sale.

b) Commodity loans to the constituents and deposits from public under the gold deposit scheme in the form of precious metals are translated at market related rates prevailing at the close of the period and shown under the head ''''Advances'''' and ''''Deposits'''' respectively.

c) Closing stock of precious metals [own dealing] is valued at lower of the cost and net realizable value.

d) Closing stock of gold held under Gold Deposit Scheme is valued at market related rates, as per RBI guidelines.

9. Cash and Balances with Reserve Bank of India

Cash and Balance with Reserve Bank of India include cash on hand and in ATM''s, and gold in hand and balances with RBI in current accounts.

10. Employee benefits

a) The Bank has accounted for Employee Benefits as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

b) i) Contributions payable to Gratuity, Pension and Leave Encashment, Sick Leave, etc., which are defined benefits, based on actuarial valuations, at the Balance Sheet date, carried out by an independent actuary;

ii) Contributions payable to the recognized provident fund, which is a defined contribution scheme; are charged to the profit and loss account.

11. Lease transactions

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account on a straight-line basis over the lease term.

12. Contingent Liabilities and Provisions

In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, 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.

Past events leading to possible obligations existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Bank; or present obligations where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or a reliable estimate of the amount of obligation cannot be made, are treated as contingent liabilities and are dealt-with in accordance with AS 29.

Contingent Assets are not recognized in the financial statements.

13. Taxes on Income

Income-tax expense comprises current tax [i.e. amount of tax for the period determined in accordance with the income-tax law] and deferred-tax charge or credit [reflecting tax effects of timing differences between accounting income and taxable income for the period].

a) Current tax is measured at the amount expected to be paid to the taxation authorities, using the applicable tax rates, tax laws and favourable judicial pronouncements / legal opinions.

b) The deferred-tax charge or credit and the corresponding deferred-tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deduction under Section 36 (1) (viii) of the Income Tax Act, 1961 is considered as permanent difference. Deferred-tax assets are recognized keeping in view the consideration of prudence only to the extent there is virtual certainty that the assets can be realized in future.

14. Earnings per Share

Basic and Diluted Earnings per Equity Share are computed in accordance with Accounting Standard 20, Earnings Per Share, issued by the Institute of Chartered Accountants of India.


Mar 31, 2012

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

a) The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting unless otherwise stated and except for items recognized on cash basis, as per guidelines issued by the Reserve Bank of India ['RBI'] and comply with the Accounting Standards issued by the Institute of Chartered Accountants of India and relevant requirements prescribed under the Banking Regulation Act, 1949 and Companies Act, 1956, and current practices prevailing within the banking industry in India.

b) The preparation of financial statements in conformity with generally accepted accounting principles [GAAP] requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual could differ from these estimates.

2. REVENUE RECOGNITION

a] Income is recognized on an accrual basis except:

(i) Commission on Bank Guarantees and Letters of Credit; arrangement of suppliers/buyers Credit; and Locker rent which are recognized on receipt basis.

(ii) Interest income on Non-Performing advances and investments, and securities guaranteed by Central Government where interest is not realized within 90 days is recognized on receipt basis.

b] Profit or loss on sale of investments is recognized in the profit and loss account on settlement basis at the time of sale except the realized profit on sale of investments in 'Held to Maturity' category which is recognized in the profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines.

c] Brokerage/commission/incentives received on Banks direct subscriptions are deducted from the cost of securities, whereas brokerage paid in connection with acquisition of securities is treated as revenue expenditure.

d] The broken period interest on sale or purchase of securities is treated as revenue item.

3. ADVANCES

a) Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the guidelines issued by the RBI and are stated net of specific provisions made towards Non-Performing Advances ['NPAs'].

b) Credit Card dues are identified as NPAs where minimum dues receivable are in default for a continuous period of more than 90 days. Income from non-performing card accounts is not recognized in financial statements.

c) Provisions for sub-standard, doubtful and loss advances are made on the basis of asset classification and provisioning requirements under the prudential norms laid down by the Reserve Bank of India.

d) Recoveries in non-performing advances are appropriated first towards book balance, then to charges and thereafter to unrealized interest.

e) General Provision for Standard Assets made in accordance with RBI Guidelines is included under "Other liabilities-others".

f) Restructured Accounts: For restructured advances, provisions for erosion in fair value of loan are made in accordance with the guidelines issued by RBI, in addition to the provision otherwise required. The provision for erosion in fair value of advance is not reduced from advances and is included in the balance sheet under the head "Other Liabilities-Others".

4. INVESTMENTS

4.1 Categorization & Classification

In accordance with the RBI guidelines, investments at the time of acquisition are categorized as

- Held to Maturity [HTM],

- Available for Sale [AFS] and

- Held for Trading [HFT].

The Bank shifts the investments category inter-se as permitted by RBI, at the least of acquisition cost / book value/market value, on the date of transfer and the depreciation, if any, on such transfer is recognized in the profit and loss account.

However, for disclosure in the Balance Sheet, investments are classified under six categories — Government securities, other approved securities, shares, debentures and bonds, Investments in Subsidiaries/RRB/Joint Ventures and Others [units of Mutual Funds, Commercial Papers, Certificate of Deposits and Venture Capital Funds and investments in RIDF of NABARD, MSME Fund of SIDBI, NHB].

Investments classified under 'Held to Maturity' include the following:

a) Investments in SLR securities upto 25% of Demand and Time liabilities.

b) Recapitalisation bonds received from the Government of India towards recapitalisation requirements.

c) Investments in share of subsidiaries and joint ventures.

d) RIDF Schemes of NABARD/MSMS (Refinance) Fund of SIDBI/RHF deposits of NHB.

e) Investment in Venture Capital Funds, for an initial period of 3 years of each draw down, after 23rd August 2006.

Investments acquired primarily with an intention for trading are classified as HFT securities. As per RBI guidelines, securities in HFT category are not held beyond 90 days and are transferred to AFS category under exceptional circumstances like not able to sell or extreme volatility or market becoming unidirectional, with the approval of the Board/ALCO/Investment Committee.

All other investments are classified under AFS.

4.2 Valuation and consequential adjustments :

a] Held to Maturity: Investments classified under 'Held- to-Maturity' are carried at weighted average acquisition cost. Premium on acquisition, if any, is amortized on a straight-line basis over the remaining maturity period. In case of investments in subsidiaries / joint ventures any diminution, other than temporary, in the value of such investment is recognized and provided for. Investments in Venture Capital Fund are valued at Cost.

b] Available for Sale and Held for Trading:

(i) Investments in these categories (classified under the category 'Held for Trading' and 'Available for Sale') are marked to market / estimated realizable value as per RBI guidelines at monthly and quarterly intervals for HFT and AFS respectively. While the resultant net depreciation, if any, within each category referred to in 4.1 above, is recognized in profit & loss account as "Provisions and Contingencies", the net appreciation is ignored except to the extent of depreciation previously provided. The book value of the individual scrip is not changed after revaluation. In the case of write back of excess provision of depreciation the same is credited to "Provisions and Contingencies" and a like amount (net of taxes and transfer to Statutory Reserve) is appropriated to Investment Reserve Account under Schedule 2 — "Reserves & Surplus".

(ii) For the purpose of (i) above, the market price / estimated realizable value is determined as under:

4.3 Non-performing Investments

a] All such securities where repayment of principal or interest not serviced within 90 days from the due date are classified as Non-Performing Investments, except securities guaranteed by the Central Government which are treated as performing investments notwithstanding arrears of principal/ interest payments. In respect of investments classified as Non-performing, appropriate provisions are made for the depreciation in the value of these investments. The depreciation requirement in respect of these securities is not set off against appreciation in respect of other performing securities.

b] Where the Bank has both credit and investment exposures to any borrower/ group and in the event the credit exposure is classified as Non-Performing Asset, the investment exposure to them is also classified as Non-Performing.

4.4 Accounting for Repo Transactions

In line with the uniform accounting treatment prescribed by the RBI, monies received/paid during the year on Repo transactions are debited/credited to Repo Account and reversed on maturity of the transactions. Costs and revenues are accounted for as interest expenditure/income, as the case may be. Balance in Repo account is adjusted against the balance in the investment account.

In respect of Repo transactions under Liquidity Adjustment Facility with the RBI, monies borrowed during the year on such transactions are credited to REPO account from RBI. Expenditure thereon is accounted for as Interest Expenditure. Balance held in Repo account with RBI is not deducted from investment and are valued. SLR securities (including margin) acquired under the Reserve Bank of India (RBI)- Liquidity Adjustment Facility (LAF), are not treated as an eligible asset for maintenance of SLR.

In respect of Reverse Repo Transactions under LAF with the RBI, monies paid during the year are debited to 'Reverse REPO/Investment - RBI' and reversed on maturity of the transaction. Revenue thereon is accounted as interest income. Balance held in Reverse Repo with RBI is included under investments as on the Balance Sheet date and are not valued.

4.5 Accounting for Investment Transactions

i) The Bank follows settlement date method of accounting its investments;

ii) Cost is determined on weighted average cost method;

iii) Profit on sale is netted with loss on sale of securities;

iv) The difference between the sale/redemption value of liquid Mutual Funds and the book value is treated as profit on sale of investments.

5. FIXED ASSETS

a] Fixed assets are stated at cost less accumulated depreciation and provision for impairment. Cost comprises of the purchase price and any cost attributable for bringing the asset to its working condition for its intended use. The carrying amounts of fixed assets are reviewed at each balance sheet date and adjusted for any impairment in accordance with the Accounting Standard 28 ("Impairment of Assets") issued in this regard by the Institute of Chartered Accountants of India.

Capital Work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets.

b] Depreciation is provided on the diminishing balance method from the date of addition except in case of computers/ATMs and leasehold improvements where the straight-line method is used. The assets are depreciated at the rates prescribed in Schedule XIV to the Companies Act 1956, except in the case of computers, ATMs and leasehold improvements which are depreciated at the rate of 1/3rd per annum, 1/7th per annum and over the period of the lease respectively.

c] Depreciation on premises is provided for on composite cost, wherever the value of land and building is not separately identified.

6. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

a) Transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at the balance sheet date at closing exchange rates notified by Foreign Exchange Dealers Association of India ['FEDAI'] and the resulting profits/losses are recognized in the profit and loss account.

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

c) Outstanding foreign exchange spot and forward contracts meant for trading purpose are revalued at the exchange rates specified for spot and the respective forward maturities as notified by FEDAI. The resulting profit or loss is shown under Profit or Loss account.

d) Foreign exchange forward contracts, which are not intended for trading and are outstanding at the balance sheet date, are not revalued. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the period of the contract.

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

7. DERIVATIVES

a) The bank enters into derivative contracts such as foreign currency interest rate swaps, currency swaps, currency futures, options and forward rate agreements.

b) The income/expenses on derivative contracts classified as hedge are recorded on accrual basis.

c) All trading derivative contracts are marked to market and the resultant gains or losses are recognized in the profit and loss account.

d) All derivative transactions are classified under contingent liabilities and those denominated in foreign currencies are reported using the FEDAI closing spot rates.

8. TRANSACTIONS INVOLVING PRECIOUS METALS

a] Income from precious metals transactions is accounted for as "Other Income". In case of metals received on consignment basis, the income thereon is recognized at the time of sale.

b] Commodity loans to the constituents and deposits from public under the gold deposit scheme in the form of precious metals are translated at market related rates prevailing at the close of the period and shown under the head "Advances" and "Deposits" respectively.

c] Closing stock of precious metals [own dealing] is valued at lower of the cost and net realizable value.

d] Closing stock of gold held under Gold Deposit Scheme is valued at market related rates, as per RBI guidelines.

9. CASH AND BALANCES WITH RESERVE BANK OF INDIA

Cash and Balance with Reserve Bank of India include cash on hand and in ATM's, and gold in hand and balances with RBI in current accounts.

10. EMPLOYEE BENEFITS

a) The Bank has accounted for Employee Benefits as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

b) i) Contributions payable to Gratuity, Pension and

Leave Encashment, Sick Leave, etc., which are defined benefits, based on actuarial valuations, at the Balance Sheet date, carried out by an independent actuary;

ii) Contributions payable to the recognized provident fund, which is a defined contribution scheme; are charged to the profit and loss account.

11. LEASE TRANSACTIONS

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account on a straight-line basis over the lease term.

12. CONTINGENT LIABILITIES AND PROVISIONS

In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, 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.

Past events leading to possible obligations existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Bank; or present obligations where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or a reliable estimate of the amount of obligation cannot be made, are treated as contingent liabilities and are dealt-with in accordance with AS 29.

Contingent Assets are not recognized in the financial statements.

13. TAXES ON INCOME

Income-tax expense comprises current tax [i.e. amount of tax for the period determined in accordance with the income-tax law] and deferred-tax charge or credit [reflecting tax effects of timing differences between accounting income and taxable income for the period].

a] Current tax is measured at the amount expected to be paid to the taxation authorities, using the applicable tax rates, tax laws and favourable judicial pronouncements / legal opinions.

b] The deferred-tax charge or credit and the corresponding deferred-tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deduction under Section 36 (1) (viii) of the Income Tax Act, 1961 is considered as permanent difference. Deferred-tax assets are recognized keeping in view the consideration of prudence only to the extent there is virtual certainty that the assets can be realized in future.

14. EARNINGS PER SHARE

Basic and Diluted Earnings per Equity Share are computed in accordance with Accounting Standard 20, Earnings Per Share, issued by the Institute of Chartered Accountants of India.


Mar 31, 2011

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

a) The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting unless otherwise stated and except for items recognized on cash basis, as per guidelines issued by the Reserve Bank of India [‘RBI] and comply with the Accounting standards issued by the Institute of Chartered Accountants of India and relevant requirements prescribed under the Banking Regulation Act, 1949 and Companies Act, 1956, and current practices prevailing within the banking industry in India.

b) The preparation of financial statements in conformity with generally accepted accounting principles [GAAP] requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actuals could differ from these estimates.

2. REVENUE RECOGNITION

a] Income is recognized on an accrual basis except:

(i) Commission on Bank Guarantees and Letters of Credit; arrangement of suppliers /buyers Credit; and Locker rent which are recognized on receipt basis.

(ii) Interest income on Non-Performing advances and investments, and securities guaranteed by Central Government where interest is not realized within 90 days is recognized on receipt basis.

b] Profit or loss on sale of investments is recognized in the Profit and loss account on settlement basis at the time of sale except the realized Profit on sale of investments in ‘Held to Maturity category which is recognized in the Profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines.

c] Brokerage/commission/incentives received on Banks direct subscriptions are deducted from the cost of securities, whereas brokerage paid in connection with acquisition of securities is treated as revenue expenditure.

d] The broken period interest on sale or purchase of securities is treated as revenue item.

3. ADVANCES

a) Advances are classifed into standard, sub-standard, doubtful and loss assets in accordance with the guidelines issued by the RBI and are stated net of specifc provisions made towards Non-Performing Advances [‘NPAs].

b) Credit Card dues are identifed as NPAs where minimum dues receivable are in default for a continuous period of more than 90 days. Income from non performing card accounts is not recognized in financial statements.

c) Provisions for sub-standard, doubtful and loss advances are made on the basis of asset classifcation and provisioning requirements under the prudential norms laid down by the Reserve Bank of India.

d) Recoveries in non-performing advances are appropriated frst towards book balance, then to charges and thereafter to unrealized interest.

e) General provision for Standard Assets made in accordance with RBI Guidelines is included under "Other liabilities- others".

f) Restructured Accounts: For restructured advances, provisions for erosion in fair value of loan are made in accordance with the guidelines issued by RBI, in addition to the provision otherwise required. The provision for erosion in fair value of advance is not reduced from advances and is included in the balance sheet under the head "Other Liabilities-Others".

4. INVESTMENTS

4.1 Categorization & Classifcation

In accordance with the RBI guidelines, investments at the time of acquisition are categorized as

- Held to Maturity [HTM],

- Available for Sale [AFS] and

- Held for Trading [HFT].

The Bank shifts the investments category inter-se as permitted by RBI at the least of acquisition cost / book value / market value, on the date of transfer and the depreciation, if any, on such transfer is recognized in the Profit and loss account.

However, for disclosure in the balance sheet, investments are classifed under six categories – Government securities, other approved securities, shares, debentures and bonds, Investments in Subsidiaries/ RRB/Joint Ventures and Others [units of Mutual Funds, Commercial Papers, certifcate of deposits and Venture Capital Funds and investments in RIDF of NABARD, MSME Fund of SIDBI,NHB].

Investments classifed under ‘Held to Maturity include the following:

a) Investments in SLR securities upto 25% of Demand and Time liabilities.

b) Recapitalisation bonds received from the Government of India towards recapitalisation requirements.

c) Investments in share of subsidiaries.

d) RIDF Schemes of NABARD/MSME (Refnance) Fund of SIDBI/ RHF Deposits of NHB.

e) Investment in Venture Capital Funds, for an initial period of 3 years of each draw down, after 23rd August 2006.

Investments acquired primarily with an intention for trading are classifed as HFT securities. As per RBI guidelines, securities in HFT category are not held beyond 90 days and are transferred to AFS category under exceptional circumstances like not able to sell or extreme volatility or market becoming unidirectional, with the approval of the ALCO/Investment Committee.

All other investments are classifed under AFS.

4.2 Valuation and consequential adjustments :

a] Held to Maturity: Investments classifed under ‘Held- to-Maturity are carried at weighted average acquisition cost. Premium on acquisition, if any, is amortized on

a straight-line basis over the remaining maturity period. In case of investments in subsidiaries any diminution, other than temporary, in the value of such investment is recognized and provided for. Investments in Venture Capital Fund is valued at Cost.

b] Available for Sale and Held for Trading:

(i) Investments in these categories (classifed under the category Rs.Held for Trading and Rs.Available for Sale) are marked to market / estimated realizable value as per RBI guidelines at monthly and quarterly intervals for HFT and AFS respectively. While the resultant net depreciation, if any, within each category referred to in 4.1 above, is recognized in Profit & loss account as "Provisions and Contingencies", the net appreciation is ignored except to the extent of depreciation previously provided. The book value of the individual scrip is not changed after revaluation. In the case of write back of excess provision of depreciation the same is credited to "Provisions and Contingencies " and a like amount (net of taxes and transfer to Statutory Reserve) is appropriated to Investment Reserve Account under Schedule 2 – "Reserves & Surplus".

(ii) For the purpose of (i) above, the market price / estimated realizable value is determined as under:

4.3 Non-performing Investments

a] All such securities where repayment of principal or interest not serviced within 90 days from the due date are classifed as Non-Performing Investments, except securities guaranteed by the Central Government

which are treated as performing investments notwithstanding arrears of principal / interest payments. In respect of investments classifed as Non- performing, appropriate provisions are made for the depreciation in the value of these investments. The

depreciation requirement in respect of these securities is not set off against appreciation in respect of other performing securities.

b] Where the Bank has both credit and investment exposures to any borrower/ group and in the event the credit exposure is classifed as Non-Performing asset, the investment exposure to them is also classifed as Non-Performing.

4.4 ACCOUNTING FOR REPO TRANSACTIONS

In line with the uniform accounting treatment prescribed by the RBI, monies received/paid during the year on Repo transactions are debited/credited to Repo Account and reversed on maturity of the transactions. Costs and revenues are accounted for as interest expenditure/income, as the case may be. Balance in Repo account is adjusted against the balance in the investment account.

In respect of Repo transactions under Liquidity Adjustment Facility with the RBI, monies borrowed during the year on such transactions are credited to REPO account from RBI. Expenditure thereon is accounted for as Interest Expenditure. Balance held in Repo account with RBI is not deducted from investment and are valued. SLR securities (including margin) acquired under the Reserve Bank of India (RBI)- Liquidity Adjustment Facility (LAF), are not treated as an eligible asset for maintenance of SLR.

In respect of Reverse Repo Transactions under LAF with the RBI, monies paid during the year are debited to ‘Reverse REPO/Investment –RBI and reversed on maturity of the transaction. Revenue thereon is accounted as interest income. Balance held in Reverse Repo with RBI is included under investments as on the Balance Sheet date and are not valued.

4.5 Accounting For Investment Transactions

i) The Bank follows settlement date method of accounting its investments;

ii) Cost is determined on weighted average cost method;

iii) Profit on sale is netted with loss on sale of securities;

iv) The difference between the sale/ redemption value of liquid Mutual Funds and the book value is treated as Profit on sale of investments.

5. FIXED ASSETS

a] Fixed assets are stated at cost less accumulated depreciation and provision for impairment. Cost comprises of the purchase price and any cost attributable for bringing the asset to its working condition for its intended use. The carrying amounts of fxed assets are reviewed at each balance sheet date

and adjusted for any impairment in accordance with the Accounting Standard 28 ( "Impairment of Assets") issued in this regard by the Institute of Chartered Accountants of India.

Capital Work-in-progress includes cost of fxed assets that are not ready for their intended use and also includes advances paid to acquire fxed assets.

b] Depreciation is provided on the diminishing balance method from the date of addition except in case of computers /ATMs and leasehold improvements where the straightline method is used. The assets are depreciated at the rates prescribed in Schedule XIV to the Companies Act 1956, except in the case of computers, ATMs and leasehold improvements which are depreciated at the rate of 1/3rd per annum, 1/7th per annum and over the period of the lease respectively.

c] Depreciation on premises is provided for on composite cost, wherever the value of land and building is not separately identifed.

6. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

a) Transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at the balance sheet date at closing exchange rates notifed by Foreign Exchange Dealers Association of India [‘FEDAI] and the resulting Profits/losses are recognized in the Profit and loss account.

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

c) Outstanding foreign exchange spot and forward contracts meant for trading purpose are revalued at the exchange rates specifed for spot and the respective forward maturities as notifed by FEDAI. The resulting Profit or loss is shown under Profit or Loss account.

d) Foreign exchange forward contracts, which are not intended for trading and are outstanding at the balance sheet date, are not revalued. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the period of the contract.

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

7. DERIVATIVES

a) The bank enters into derivative contracts such as foreign currency interest rate swaps, currency swaps, currency futures, options and forward rate agreements.

b) The income/expenses on derivative contracts classifed as hedge are recorded on accrual basis.

c) All trading derivative contracts are marked to market and the resultant gains or losses are recognized in the Profit and loss account.

d) All derivative transactions are classifed under contingent liabilities and those denominated in foreign currencies are reported using the FEDAI closing spot rates.

8. TRANSACTIONS INVOLVING PRECIOUS METALS

a] Income from precious metals transactions is accounted for as "Other Income". In case of metals received on consignment basis, the income thereon is recognized at the time of sale.

b] Commodity loans to the constituents and deposits from public under the gold deposit scheme in the form of precious metals are translated at market related rates prevailing at the close of the period and shown under the head "Advances" and "Deposits" respectively.

c] Closing stock of precious metals [own dealing] is valued at lower of the cost and net realizable value.

d] Closing stock of gold held under Gold Deposit Scheme is valued at market related rates, as per RBI guidelines.

9. CASH AND BALANCES WITH RESERVE BANK OF INDIA

Cash and Balance with Reserve Bank of India include cash on hand and in ATMs, and gold in hand and balances with RBI in current accounts.

10. EMPLOYEE BENEFITS

a) The Bank has accounted for Employee Benefts as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

b) i) Contributions payable to Gratuity, Pension and

Leave Encashment, Sick Leave, etc., which are defned benefts, based on actuarial valuations, at the Balance Sheet date, carried out by an independent actuary;

ii) Contributions payable to the recognized provident fund, which is a defned contribution scheme; are charged to the Profit and loss account.

11. LEASE TRANSACTIONS

Lease payments for assets taken on operating lease are recognized as an expense in the Profit and loss account on a straight-line basis over the lease term.

12. CONTINGENT LIABILITIES AND PROVISIONS

In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, 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 benefts will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

Past events leading to possible obligations existence of which will be confrmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Bank; or present obligations where it is not probable that an outflow of resources embodying economic benefts will be required to settle the obligation; or a reliable estimate of the amount of obligation cannot be made, are treated as contingent liabilities and are dealt-with in accordance with AS29.

Contingent Assets are not recognized in the financial statements.

13. TAXES ON INCOME

Income-tax expense comprises current tax [i.e. amount of tax for the period determined in accordance with the income-tax law] and deferred-tax charge or credit [refecting tax effects of timing differences between accounting income and taxable income for the period].

a] Current tax is measured at the amount expected to be paid to the taxation authorities, using the applicable tax rates, tax laws and favourable judicial pronouncements / legal opinions.

b] The deferred-tax charge or credit and the corresponding deferred-tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deduction under Section 36(1)(viii) of the Income Tax Act,1961 is considered as permanent difference. Deferred-tax assets are recognized keeping in view the consideration of prudence only to the extent there is virtual certainty that the assets can be realized in future.

14. EARNINGS PER SHARE

Basic and diluted Earnings Per Equity Share are computed in accordance with Accounting Standard 20, Earnings Per Share, issued by the Institute of Chartered Accountants of India.


Mar 31, 2010

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

a) The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting unless otherwise stated and except for items recognized on cash basis, as per guidelines issued by the Reserve Bank of India [RBI] and comply with the Accounting standards issued by the Institute of Chartered Accountants of India and relevant requirements prescribed under the Banking Regulation Act, 1949 and Companies Act, 1956, and current practices prevailing within the banking industry in India.

b) The preparation of financial statements in conformity with generally accepted accounting principles [GAAP] requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actuals could differ from these estimates.

2. REVENUE RECOGNITION

a] Income is recognized on an accrual basis except:

(i) Commission on Bank Guarantees and Letters of Credit; arrangement of suppliers /buyers Credit; and Locker rent which are recognized on receipt basis.

(ii) Interest income on Non-Performing advances and investments, and securities guaranteed by Central Government where interest is not realized within 90 days is recognized on receipt basis.

b] Profit or loss on sale of investments is recognized in the profit and loss account on settlement basis at the time of sale except the realized profit on sale of investments in Held to Maturity category which is recognized in die profit and loss account and subsequently appropriated to capital reserve account in accordance with RBI guidelines.

c] Brokerage/commission/incentives received on Banks direct subscriptions are deducted from the cost of securities, whereas brokerage paid in connection with acquisition of securities is treated as revenue expenditure.

d] The broken period interest on sale or purchase of securities is treated as revenue item.

3. ADVANCES

a) Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the guidelines issued by the RBI and are stated net of specific provisions made towards Non-Performing Advances [NPAs].

b) Credit Card dues are identified as NPAs where minimum dues receivable are in default for a continuous period of more than 90 days. Income from non performing card accounts is not recognized in financial statements.

c) Provisions for sub-standard, doubtful and loss advances are made on the basis of asset classification and provisioning requirefhents under the prudential norms laid down by the Reserve Bank of India.

d) Recoveries in non-performing advances are appropriated first towards book balance, then to charges and thereafter to unrealized interest.

e) General provision for Standard Assets made in accordance with RBI Guidelines is included under "Other liabilities- others".

f) Restructured Accounts: For restructured advances, provisions for erosion in fair value of loan are made in accordance with the guidelines issued by RBI, in addition to the provision otherwise required. The provision for erosion in fair value of advance is not reduced from advances and is included in the balance sheet under the head "Other Liabilities-Others".

4. INVESTMENTS

4.1 Categorization & Classification

In accordance with the RBI guidelines, investments at the time of acquisition are categorized as

- Held to Maturity [HTM],

- Available for Sale [AFS] and

- Held for Trading [HFT].

The Bank shifts the investments category in ter-se as permitted by RBI at the least of acquisition cost / book value / market value, on the date of transfer and the depreciation, if any, on such transfer is recognized in the profit and loss account.

However, for disclosure in the balance sheet, investments are classified under six categories - Government securities, other approved securities, shares, debentures and bonds, Investments in Subsidiaries/ RRB/Joint Ventures and Others

[units of Mutual Funds, Commercial Papers, certificate of deposits and Venture Capital Funds].

Investments classified under Held to Maturity include the following:

a) Investments in SLR securities upto 25% of Demand and Time liabilities.

b) Recapitalisation bonds received from the Government of India towards recapitalisation requirements.

c) Investments in share of subsidiaries.

d) RIDF Schemes of NABARD/MSME (Refinance) Fund of SIDBI/ RHF Deposits of NHB.

e) Investment in Venture Capital Funds, for an initial period of 3 years of each draw down, after 23rd August 2006.

Investments acquired primarily with an intention for trading are classified as HFT securities. As per RBI guidelines, securities in HFT category are not held beyond 90 days and are transferred to AFS category under exceptional circumstances like not able to sell or extreme volatility or market becoming unidirectional, with the approval of the ALCO/Investment Committee. All other investments are classified under AFS.

4.2 Valuation and consequential adjustments :

a] Held to Maturity : Investments classified under Held- to-Maturity are carried at weighted average acquisition

cost. Premium on acquisition, if any, is amortized on a straight-line basis over the remaining maturity period. In case of investments in subsidiaries any diminution, other than temporary, in the value of such investment is recognized and provided for. Investments in Venture Capital Fund is valued at Cost.

b] Available for Sale and Held for Trading:

(i) Investments in these categories (classified under the category "Held for Trading and Available for Sale) are marked to market / estimated realizable value as per RBI guidelines at monthly and quarterly intervals for HFT and AFS respectively. While the resultant net depreciation, if any, within each category referred to in 4.1 above, is recognized in profit &C loss account as "Provisions and Contingencies", the net appreciation is ignored except to the extent of depreciation previously provided. The book value of the individual scrip is not changed after revaluation. In the case of write back of excess provision of depreciation the same is credited to "Provisions and Contingencies" and a like amount (net of taxes and transfer to Statutory Reserve) is appropriated to Investment Reserve Account under Schedule 2 — "Reserves & Surplus".

(ii) For the purpose of (i) above, the market price / estimated realizable value is determined as under:

4.3 Non-performing Investments

a] All such securities where repayment of principal or interest not serviced within 90 days from the due date are classified as Non-Performing Investments, except securities guaranteed by the Central Government which are treated as performing investments notwithstanding arrears of principal / interest payments. In respect of investments classified as Non-performing, appropriate provisions are made for the depreciation in the value of these investments. The depreciation requirement in respect of these securities is not set off against appreciation in respect of other performing securities.

b] Where the Bank has both credit and investment exposures to any borrower/ group and in the event the credit exposure is classified as Non-Performing asset, the investment exposure to them is also classified as Non-Performing.

4.4 ACCOUNTING FOR REPO TRANSACTIONS

In line with the uniform accounting treatment prescribed by the RBI, monies received/paid during the year on Repo transactions are debited/credited to Repo Account and reversed on maturity of the transactions. Costs and revenues are accounted for as interest expenditure/income, as the case may be. Balance in Repo account is adjusted against the balance in the investment account.

In respect of Repo transactions under Liquidity Adjustment Facility with the RBI, monies borrowed during the year on such transactions are credited to REPO account from RBI. Expenditure thereon is accounted for as Interest Expenditure. Balance held in Repo account with RBI is not deducted from investment and are valued. The balance in Repo account is reduced from the amount of securities held while furnishing SLR investments.

In respect of Reverse Repo Transactions under LAP with the RBI, monies paid during the year are debited to Reverse REPO/Investment —RBI and reversed on maturity of the transaction. Revenue thereon is accounted as interest income. Balance held in Reverse Repo with RBI is included under investments as on the Balance Sheet date and are not valued. The balance in Reverse Repo is included in the amount of securities held while furnishing data on SLR investments.

4.5 Accounting For Investment Transactions

i) The Bank follows value date method of accounting its investments.;

ii) Cost is determined on weighted average cost method.;

iii) Profit on sale is netted with loss on sale of securities.;

iv) The difference between the sale/ redemption value of liquid Mutual Funds and the book value, is treated as interest income. The difference between the Net Asset value and book value is accounted on accrual basis as interest income at the end of each quarter.

5. FIXED ASSETS

a] Fixed assets are stated at cost less accumulated depreciation and provision for impairment. Cost comprises of the purchase price and any cost attributable for bringing the asset to its working condition for its intended use. The carrying amounts of fixed assets are reviewed at each balance sheet date and adjusted for any impairment in accordance with the Accounting Standard 28 ( "Impairment of Assets") issued in this regard by the Institute of Chartered Accountants of India.

Capital Work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets.

b] Depreciation is provided on the diminishing balance method from the date of addition except in case of computers /ATMs and leasehold improvements where the straightline method is used. The assets are depreciated at the rates prescribed in Schedule XIV to the Companies Act 1956, except in the case of computers, ATMs and leasehold improvements which are depreciated at the rate of 1 /3rd per annum, l/7th per annum and over the period of the lease respectively.

c] Depreciation on premises is provided for on composite cost, wherever the value of land and building is not separately identified.

6. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

a) Transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at the balance sheet date at closing exchange rates notified by Foreign Exchange Dealers Association of India [TEDAF] and the resulting profits/losses are recognized in the profit and loss account.

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

c) Outstanding foreign exchange spot and forward contracts meant for trading purpose are revalued at the exchange rates specified for spot and the respective forward maturities as notified by FEDAI. The resulting profit or loss is shown under Profit or Loss account.

d) Foreign exchange forward contracts, which are not intended for trading and are outstanding at the balance sheet date, are valued at the closing spot rate and the resulting profit or loss is included in the Profit or Loss account. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the life of the contract.

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

7. DERIVATIVES

a) The bank enters into derivative contracts such as foreign currency interest rate swaps, currency swaps, currency futures, options and forward rate agreements.

b) The income/expenses on derivative contracts classified as hedge are recorded on accrual basis.

c) All trading derivative contracts are marked to market and the resultant gains or losses are recognized in the profit and loss account.

d) All derivative transactions are classified under contingent liabilities and those denominated in foreign currencies are reported using the FEDAI closing spot fates.

8. TRANSACTIONS INVOLVING PRECIOUS METALS

a] Income from precious metals transactions is accounted for as "Other Income". In case of metals received on consignment basis, the income thereon is recognized at the time of sale.

b] Commodity loans to the constituents and deposits from public under the gold deposit scheme in the form of precious metals are ttanslated at market related rates prevailing at the close of the period and shown under the head "Advances" and "Deposits" respectively.

c] Closing stock of precious metals [own dealing] is valued at lower of the cost and net realizable value.

d] Closing stock of gold held under Gold Deposit Scheme is valued at market related rates, as per RBI guidelines.

9. CASH AND BALANCES WITH RESERVE BANK OF INDIA

Cash and Balance with Reserve Bank of India include cash on hand and in ATMs, and gold in hand and balances with RBI in cutrent accounts.

10. EMPLOYEE BENEFITS

a) The Bank has accounted for Employee Benefits as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

b) i) Contributions payable to Gtatuity, Pension and

Leave Encashment, Sick Leave, etc., which are defined benefits, based on actuatial valuations, at the Balance Sheet date, earned out by an independent actuary;

ii) Conttibutions payable to the recognized provident fund, which is a defined contribution scheme; ate charged to the profit and loss account.

11. INTANGIBLES

Intangible assets comprising of Computer software is amortised @l/3 p.a.

12. LEASE TRANSACTIONS

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account on a straight-line basis over the lease term.

13. CONTINGENT LIABILITIES AND PROVISIONS

In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, 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 requited to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

Past events leading to possible obligations existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Bank; or present obligations where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or a reliable estimate of the amount of obligation cannot be made, are treated as contingent liabilities and are dealt- with in accordance with AS29.

Contingent Assets ate not recognized in the financial statements.

14. TAXES ON INCOME

Income-tax expense compiises current tax [i.e. amount of tax for the period determined in accordance with the income-tax law] and deferred-tax charge or credit [reflecting tax effects of timing differences between accounting income and taxable income for the period].

a] Current tax is measured at the amount expected to be paid to the taxation authorities, using the applicable tax rates, tax laws and favourable judicial pronouncements/ legal opinions.

b] The deferred-tax charge or credit and the corresponding deferred-tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred-tax assets are recognized keeping in view the consideration of prudence only to the extent there is virtual certainty that the assets can be realized in future.

15. EARNINGS PER SHARE

Basic and diluted Earnings Per Equity Share are computed in accordance with Accounting Standard 20, Earnings Per Share, issued by the Institute of Chartered Accountants of India.

Find IFSC