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Notes to Accounts of Dhanlaxmi Bank Ltd.

Mar 31, 2015

BASIS OF PREPARATION

The Financial Statements have been prepared in accordance with the requirements prescribed under the "Third Schedule" of the Banking Regulation Act, 1949. The accounting and reporting policies used in the preparation of these financial statements conform in all material aspects to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by Reserve Bank of India (RBI) from time to time, the Accounting Standards (AS) notified under Sec. 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules 2014 to the extent applicable and practices generally prevalent in the banking industry in India. The bank follows the accrual method of accounting and the historical cost convention except where otherwise stated. The Accounting policies adopted by the bank are consistent with the previous year except as disclosed otherwise.

USE OF ESTIMATES

The preparation of Financial Statements requires the management to make estimates and assumptions 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. Management believes that the estimates and assumptions used in preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates.

1. DISCLOSURE OF LETTER OF COMFORTS (LOCs) ISSUED BY THE BANK During the year the Bank has not issued Letter of Comforts.

2. SEGMENT REPORTING (AS 17)

The Bank has recognized Business segments as primary reporting segment and Geographical segments as secondary segment in line with RBI guidelines on compliance with Accounting Standard 17.

I. Primary Segments: Business segments.

(a) Treasury Operations

(b) Corporate / Wholesale Banking

(c) Retail banking

(d) Other banking business operations

II. Secondary Segments: Geographical segments.

Since the Bank is having domestic operations only, no reporting does arise under this segment.

3. Penalties levied by the Reserve Bank of India

The Penalty imposed by RBI during the year ended March 31, 2015 was Rs. 10,500/- (Previous Year Rs. 2,00,16,800/- )

4. OTHER ASSETS (SCHEDULE NO.: 11), BALANCE WITH BANKS AND MONEY AT CALL AND SHORT NOTICE (SCHEDULE NO.: 7) & FIXED ASSETS (SCHEDULE NO.: 10)

Reconciliation of rent advance/ security deposit for premises occupied by branches/ offices, etc. (as per Schedule No. 11), and physical verification of fixed assets (Schedule No. 10) is in progress. In the opinion of the management no material impact of reconciliation of accounts is anticipated.

5. The Bank had entered into an agreement with M/s Bajaj Allianz Life insurance Company Ltd. ( BALIC) for sale of products of BALIC on specified terms and conditions. BALIC issued a demand notice to the Bank claiming a penalty amount of 1511 lakhs (for 2011-12) and Rs. 2123 lakhs ( for 2012-13) totaling Rs. 3634 lakhs for non-achievement of targets along with interest at 12% per annum for delay in paying the amount beyond fifteen days. Further, BALIC informed the bank that targets for the Financial year 2013-2014 had not been met by the bank and a further penalty of Rs. 2664 lakhs had to be paid to BALIC by the bank in addition to the earlier penalty of 3634 lakhs Considering the initiatives taken by both the parties to renegotiate the terms and conditions of the agreement and as legally advised, the demand of penalty of Rs. 6298 lakhs is shown as contingent liability (Schedule No. 12)

6. Pending settlement of wage revision w.e.f. 1st November, 2012, an adhoc provision of Rs.3164 lakhs is held as on 31.03.2015 which includes Rs.1962 lakhs provided during the current year.

7. In terms of RBI circular DBR No. BP. BC 79/ 21.04.048/ 2014-15 dated March 30, 2015 Banks were permitted to utilise up to 50% countercyclical provision buffer/ floating provision held by them as on 31.12.2014 for making specific provisions for non- performing assets, as per the policy approved by their Board of Directors. Accordingly, the Bank has utilised an amount of Rs. 364 lakhs for making specific provisions for non-performing assets.

8. a) In terms of RBI guidelines contained in Circular DBR No.BP.BC.83/21.01.048/2014-15 dated 01-04-2015, banks are required to provide, in case of fraud, the entire amount due to the Bank over a period not exceeding four quarters commencing from the quarter in which the fraud has been detected. As a prudent measure, the Bank has provided the entire amount during the year, thereby; the loss reported by the Bank is overstated by Rs. 4944 Lakhs.

b) Though a special dispensation is given by RBI vide its Letter No. DBR No. BP 17661/21.04.048/ 2014-15 dated 20-05-2015 for providing the amount due to the Bank over a period of three quarters commencing from March, 2015 in respect of a borrowal account, the Bank, as a prudent measure, has provided for the entire amount during the year, thereby the loss reported by the Bank is overstated by Rs. 4524 Lakhs.

9. In respect of 259 employees who had opted for VRS in 2000 & 2004 and 424 retired employees, the Bank has not provided to the Pension Trust, funds required amounting to around Rs. 7938 lakhs for purchase of annuities for payment of pension/ increase in Dearness Allowance respectively. However, pension/ increase in dearness allowance is paid by the Bank by debiting Profit and Loss account.

10. Effective April 1, 2014 the Bank has changed the estimated useful life of certain fixed assets in line with the recommended useful life as per Part C of Schedule II to the Companies Act, 2013. On account of this change, the bank has reversed an amount of Rs. 901 lakhs during the year ended March 31, 2015, representing the excess depreciation charge and disclosed the same as an exceptional item. Except for this, there has been no change in the accounting policies followed during the quarter/ period ended 31st March, 2015 as compared to those followed in the preceding financial year ended 31st March, 2014. As a result of this change, the loss for the current financial year is decreased by Rs. 901 lakhs.

11. Disclosures on Remuneration

a. Information relating to the composition and mandate of the remuneration committee.

Composition

The remuneration committee of the Board consists of four members of which one member from the Risk Management Committee of the Board facilitates effective governance of compensation.

The rules and responsibilities of the remuneration committee are as follows;

- To oversee the framing, review and implementation of Bank's overall compensation and related policies on remunera- tion packages payable to all employees and the Whole Time Directors (WTDs)/ MD&CEO including perquisites, stock option scheme etc. with a view to attract, motivate and retain employees and review compensation level vis-à-vis other banks and the industry in general.

- The remuneration committee works in close coordination with the Risk Management Committee of the Bank in order to achieve effective alignment between remuneration and risks. The Committee also ensures that the cost income ratio of the Bank supports the remuneration package consistent with the maintenance of sound capital adequacy ratio.

- The committee also functions as the compensation committee as prescribed under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999 and is empowered to formulate detailed terms and conditions of the scheme, administer, supervise the same and to allot shares in compliance with the guidelines and other applicable laws.

- To conduct the annual review of the compensation policy.

- To fulfill such other powers and duties as may be delegated to it by the Board.

b. Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

The Bank has formed the compensation policy based on the Reserve Bank of India guidelines vide its Circular No. DBOD No.BC.72/29.67.001/2011-12 dated 13-01-2012.

The fixed remuneration and other allowances including retirement benefits of all subordinates, clerical and officers up to the rank of General Manager (Scale- VII) is governed by the industry level wage settlement under Indian Banks Association pattern. In respect of officers above the cadre of General Manager, the fixed remuneration is fixed by Board/Committee.

Further, the compensation structure for the Whole-Time Directors/Managing Director and Chief Executive Officer of the Bank is subject to approval of Reserve Bank of India in terms of Section 35B of the Banking Regulation Act, 1949.

c. Human Resource Management department under the guidance of MD & CEO shall administer the compensation and the benefit structure in line with the best suited practices and statutory requirements as applicable.

d. The Bank has not identified any employee as risk taker for the purpose of variable pay under the compensation policy.

e. Employee Stock Option Scheme as may be framed by the Board from time to time in conformity with relevant statutory provisions and SEBI guidelines as applicable will be excluded from the components of variable pay.

f. Variable pay means the compensation as fixed by the Board on the recommendation of the committee which is base on the performance appraisal of the employee in that role, i.e. how well they accomplish their goals.

12. Credit Default Swaps

The Bank has not taken any Credit Default Swaps during the year and the balance outstanding as on 31.03.2015 is "NIL"

13. Intra-Group Exposures

Bank does not have any group entities.

14. Unhedged Foreign Currency Exposures

Based on the available data, available financial statements and declarations from the borrowers wherever received, the Bank has estimated the liability of Rs. 108 lakhs as at 31.03.2015 (Previous Year – Nil) on Unhedged Foreign Currency Exposure to their constituents in terms of RBI circular DBOD.No.DP.BC.85/21.06.200/2013-14 dated 15.01.2014. The entire estimated amount is fully provided for.

Qualitative Disclosure

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario specified by supervi- sors. At a minimum, the stock of liquid assets should enable the bank to survive until day 30 of the stress scenario, by which time it is assumed that appropriate corrective actions can be taken.

Stock of high quality liquid assets (HQLAs) LCR =

Total net cash outflows over the next 30 calendar days

The LCR requirement of banks would be minimum 60% for the calendar year 2015 i.e. with effect from January 1, 2015, and rise in equal steps to reach the minimum required level of 100% on January 1, 2019.

High Quality Liquid Assets (HQLAs)

Assets are considered to be high quality liquid assets if they can be easily and immediately converted into cash at little or no loss of value. There are two categories of assets which can be included in the stock of HQLAs, viz. Level 1 and Level 2 assets.

Level 1 assets of banks would comprise of the following and these assets can be included in the stock of liquid assets without any limit as also without applying any haircut:

i. Cash including cash reserves in excess of required CRR.

ii. Government securities in excess of the minimum SLR requirement.

iii. Within the mandatory SLR requirement, Government securities to the extent allowed by RBI, under Marginal Standing Facility (MSF).

iv. Marketable securities issued or guaranteed by foreign sovereigns satisfying all the following conditions:

(a) assigned a 0% risk weight under the Basel II standardized approach for credit risk;

(b) Traded in large, deep and active repo or cash markets characterised by a low level of concentration; and proven record as a reliable source of liquidity in the markets (repo or sale) even during stressed market conditions.

(c) not issued by a bank/financial institution/NBFC or any of its affiliated entities.

Level 2 assets are sub-divided into Level 2A and Level 2B assets on the basis of their price-volatility. Assets to be included in each cat- egory are those that the bank is holding on the first day of the stress period. Level 2 assets (comprising Level 2A assets and Level 2B assets) can be included in the stock of liquid assets, subject to the requirement that they comprise not more than 40% of the overall stock of HQLAs after haircuts (minimum 15% for Level 2A & minimum 50% for Level 2B) have been applied. Further, Level 2B assets should comprise not more than 15% of the total stock of HQLA. They must also be included within the overall Level 2 assets.

Total net cash outflows

The total net cash outflows is defined as the total expected cash outflows minus total expected cash inflows for the subsequent 30 calendar days. Total expected cash outflows are calculated by multiplying the outstanding balances of various categories or types of liabilities and off-balance sheet commitments by the rates at which they are expected to run off or be drawn down. Total expected cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in up to an aggregate cap of 75% of total expected cash outflows.

15. Previous year figures have been re-grouped/ re-classified wherever considered necessary to conform to current year's classifica- tion.


Mar 31, 2014

1. OTHER ASSETS (SCHEDULE NO: 11) & OTHER LIABILITIES (SCHEDULE NO :5)

Reconciliation of rent advance /security deposit for premises occupied by branches/ offices, etc (as per Schedule No 11), exchange fuctuations (as per Schedule No.5) and physical verifcation of fixed assets (Schedule No 10) is in progress. In the opinion of the management no material impact of reconciliation of accounts is anticipated.

2. The Bank had entered into an agreement with M/S Bajaj Allianz Life insurance Company Ltd.(BALIC) for sale of products of BALIC on specified terms and conditions. BALIC issued a demand notice to the Bank claiming a penalty amount of 1511 lakhs (for 2011-12) and Rs. 2123 lakhs (for 2012-13) totaling Rs. 3634 lakhs for non-achievement of targets along with interest at 12% per annum for delay in paying the amount beyond ffteen days. Considering the initiatives taken by both the parties to renegotiate the terms and conditions of the agreement and as legally advised, the demand of penalty of Rs. 3634 lakhs is shown as contingent liability (Schedule No. 12)

3. The Bank had entered into a deal with M/s Shriram City Union Finance Ltd. (SCUF) for the buyout of retail loans portfolio including SME Advances for a purchase consideration of Rs. 35071 lakhs and SCUF was appointed as the collection and service agent for the Bank. SCUF prepaid the outstanding amount of certain loans in violation of the agreement and when the matter was taken up with SCUF, they defaulted subsequent monthly pay outs. The Bank approached the security trustee for appropriating the fixed deposits with Canara Bank. Aggrieved by this, SCUF obtained an injunction order from the Hon. High Court of Madras. The matter was reported to the Reserve Bank of India. The account has been classified by the Bank as a non-performing asset.

4. Pending settlement of wage revision w.e.f. 1st November 2012, an adhoc provision of Rs. 1202 lakhs is made during the current year.

5. In terms of RBI circular DBOD No. B P. 95/ 21.04.048/ 2013-14 dated February 7, 2014 Banks were permitted to utilise up to 33% countercyclical provision buffer/ foating provision held by them as on 31.03.2013 for making Specific provisions for non-performing assets, as per the policy approved by their Board of Directors. Accordingly, the Bank has utlised an amount of Rs. 875 lakhs for making Specific provisions for non-performing assets.

6. In terms of RBI circular DBOD.BP.BC.No.41/21.04.141/2013-14 dated August 23, 2013 on "Investment portfolio of banks - Classifcation, Valuation and Provisioning", the Bank has opted to amortise the depreciation on the Available for Sale (AFS) and Held for Trading (HFT) portfolios on each of the valuation dates in the current financial year ie 2013-14 in equal installments. The Bank had amortised such depreciation during the quarters ended September and December 2013. During the quarter and year ended 31st March 2014, depreciation in respect of AFS and HFT portfolio has been recognised in full.


Mar 31, 2013

BACKGROUND

Dhanlaxmi Bank Limited was incorporated in November 1927 at Thrissur, in Kerala by a group of ambitious entrepreneurs. Dhanlaxmi Bank is a publicly held banking company engaged in providing a wide range of banking and financial services including commercial banking and treasury operations. Dhanlaxmi Bank is a banking company governed by The Banking Regulation Act, 1949. It became a scheduled commercial bank since 1977.

BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements have been prepared and presented under the historical cost convention and accrual basis of accounting, unless otherwise stated and in compliance with generally accepted accounting principles, statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (''RBI'') from time to time, Accounting Standards (''AS'') issued by the Institute of Chartered Accountants of India (''ICAI'') and notified by the Companies Accounting Standard Rules, 2006 to the extent applicable and incompliance of the current practices prevailing within the banking industry in India.

The preparation of financial statements 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 expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results may differ from these estimates. Any revision in the accounting estimates is recognized prospectively in the current and future period.

1. No penalty has been imposed during the year 2012-13 by RBI.

2. DISCLOSURE OF LETTER OF COMFORTS (LOCs) ISSUED BY THE BANK

The Bank has not issued any Letter of Comfort during the year 2012-13.

3. ESOP SCHEME

On May 11, 2010, 20,000 options were issued at an exercise price of Rs. 144.70 to new joinees in addition to 3,979,225 options granted on 6 August 2009 to employees under two different plans at a uniform option price of Rs. 118.35. Out of the above, 20,149 shares were exercised during 2010-11 and 570 shares are exercised in 2011-12 year and none of the employees were exercised the options during the current year (2012-13). All the options granted to the employees under the first plan (''Existing Employees'') and second plan (Joining employees) were fully vested as on 31-03-2013.

4. SEGMENT REPORTING (AS 17)

The Bank has recognized Business segments as primary reporting segment and Geographical segments as secondary segment in line with RBI guidelines on compliance with Accounting Standard 17.

I. Primary Segments: Business segments.

a) Treasury Operations

b) Corporate / Wholesale Banking

c) Retail banking

d) Other banking business operations

II. Secondary Segments: Geographical segments.

Since the Bank is having domestic operations only, no reporting does arise under this segment.

5. DRAW DOWN OF RESERVES

The bank has not undertaken any draw down of reserves during the year.

6. OTHER ASSETS (SCHEDULE NO. 11) AND OTHER LIABILITIES (SCHEDULE NO. 5)

The reconciliation of entries in other assets and liabilities are in progress. The impact if any on the accounts are not ascertainable now, as the work is in progress. The management is of the opinion that the overall impact, if any, on the accounts may not be significant and is not ascertainable at this stage.

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


Mar 31, 2012

Background

Dhanlaxmi Bank Limited was incorporated in November 1927 at Thrissur, in Kerala by a group of ambitious entrepreneurs. Dhanlaxmi Bank is a publicly held banking company engaged in providing a wide range of banking and financial services including commercial banking and treasury operations. Dhanlaxmi bank is a banking company governed by The Banking Regulation Act, 1949. It became a scheduled commercial bank since 1977.

Basis of preparation of financial statements

The financial statements have been prepared and presented under the historical cost convention and accrual basis of accounting, unless otherwise stated and in compliance with generally accepted accounting principles, statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India ('RBI') from time to time, Accounting Standards ('AS') issued by the Institute of Chartered Accountants of India ('ICAI') and notified by the Companies Accounting Standard Rules, 2006 to the extent applicable and in compliance of the current practices prevailing within the banking industry in India.

The preparation of financial statements 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 expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results may differ from these estimates. Any revision in the accounting estimates is recognized prospectively in the current and future period.

Disclosures on risk exposure in derivatives Qualitative Disclosure

Bank discusses its risk management policies pertaining to derivatives with particular reference to the extent to which derivatives are used, the associated risks and business purposes served. The discussion includes:

a) the structure and organization for management of risk in derivatives trading;

b) the scope and nature of risk measurement, risk reporting and risk monitoring systems;

c) policies for hedging and/or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants; and

d) accounting policy for recording hedge and non-hedge transactions; recognition of income, premiums and discounts; valuation of outstanding contracts; provisioning, collateral and credit risk mitigation.

1. Asset Quality

i. Claim pertaining to debt relief arising till December 31, 2009 was Rs.15.16 Lakhs which was shown as receivable from Government of India under Agricultural Debt Relief Scheme 2008, which was received from RBI during 2010-11. Additional claim amount of Rs.2.20 Lakhs pertaining to the extended period of Debt Relief Scheme from January 1, 2010 to June 30, 2010 (which was clubbed under head advances) was also received from RBI during 2011-12 and receivable from RBI in this regard is Rs. Nil.

2. ESOP Scheme

On May 11, 2010, 20,000 options were issued at an exercise price of Rs.144.70 to new joinees in addition to 3,979,225 options granted on 6 August, 2009 to employees under two different plans at a uniform option price of Rs.118.35. Out of the above, 20,149 shares were exercised during the previous year and 570 shares were exercised during the current year. Options granted to the employees under the first plan ('Existing Employees') shall vest at the rate of 30%, 30% and 40% on each successive anniversary of the grant date. Options granted to the employees under the second plan ('Joining Employees') shall vest after completion of 12 months from the date of grant. Further, all the option granted to Joining Employees' under the scheme shall be subject to a lock in period of twenty four months from date of vesting of options under this scheme.

3. Exercise period will commence from the date of vesting of option and will end on 10 years from the date of grant of options or 10 years from the date of vesting of Option, whichever is later.

Note:

a) The compensation Committee has granted a total of 3,999,225 options convertible into 3,999,225 Equity shares which represent 6.24% of the paid up share capital of the Bank. The fair market value one day before the date of grant is Rs.118.35 which is also the exercise price of the option.

b) The Bank accounts for 'Employee Share Based Payments' using the fair value method.

Note:

Consequent on the reopening of the pension option and enhancement of the gratuity limit following the amendments to Payment of Gratuity Act 1972, RBI has allowed amortisation of the additional expenses over a period of five years beginning with the financial year ending March 31, 2011 subject to a minimum of 1/5th of the total amount involved every year. Out of the total liability of Rs.2,554 lakhs arising on account of above mentioned amendments, Rs.511 lakhs has been charged to the Profit and Loss Account in the current year and the balance unrecognised portion shall be amortised with in next three years.

4. Segment Reporting (AS 17)

The Bank has recognized Business segments as primary reporting segment and Geographical segments as secondary segment in line with RBI guidelines on compliance with Accounting Standard 17.

I. Primary Segments: Business segments.

a) Treasury Operations

b) Corporate / Wholesale Banking

c) Retail banking

d) Other banking business operations

II. Secondary Segments: Geographical segments.

Since the Bank is having domestic operations only, no reporting does arise under this segment.

5. Draw Down of Reserves

The bank has not undertaken any draw down of reserves during the year except expenses incurred towards increasing of Authorised share capital, which have been adjusted against the Share Premium Account.

6. Impact of Change in Accounting Policy

Till the previous year, income from bills discounting was recognized upfront except where the tenure exceeds one year. However, during the year, the Bank has changed its method of recognizing income, wherein the income is apportioned to the profit and loss account on a daily basis to the extent it relates to the year and the balance amount in subsequent periods. Had the Bank had followed the earlier accounting policy, income for the year would have been higher by Rs.205 Lakhs and the Loss for the Year would have been lower by the like amount.

7. Previous year figures are regrouped wherever necessary.


Mar 31, 2011

1. Capital commitments Rs. 249 Lakhs (Previous Year - Rs. 774 Lakhs).

2. Derivatives

The bank uses forward exchange contract to hedge against its foreign currency exposures relating to the underlying transaction and firm commitments. The bank has not entered into any derivative instruments for trading/speculative purposes either in foreign exchange or domestic treasury operations.

3. Asset quality

i) In terms of Agricultural Debt Waiver and Debt Relief Scheme 2008, framed by the Government of India, the bank had received Rs. 313 Lakhs from RBI on account of loans to small and marginal farmers out of the amount eligible for debt waiver of Rs. 435 Lakhs during FY 2010. The balance amount of Rs. 122 Lakhs had been shown as receivables and clubbed under the head "Advances" as on March 31, 2010. The amount of Rs. 122 Lakhs was also received from RBI during 2010-11 and hence receivable from RBI in this regard as at March 31, 2011 is Rs. Nil.

The position with reference to Agricultural Debt Relief Scheme is as under:

Claim pertaining, to Debt Relief Scheme arising till December 31, 2009 of Rs. 16 Lakhs, which was pending receipt" from Government of India, was subsequently received from Reserve Bank of India during 2010-11.

Additional claim amount of Rs. 2.20 Lakhs pertaining to the extended period of the Debt Relief Scheme from January 1,2010 to June 30, 2010 is due from Government of India under Agricultural Debt Relief Scheme 2008 (clubbed under head advances)

4. Details of single borrower limit, group borrower limit exceeded by the bank

The bank has not exceeded single borrower limit or group borrower limit during the year.

5. No penalty has been imposed during the year 2010-11 by RBI.

6. Disclosure of letter of comforts (Iocs) issued by the bank

The Bank has not issued any Letter of Comfort during the year ended March 31, 2011.

7. Employee stock option plan

On May 11, 2010, 20,000 options were issued at an exercise price of Rs. 144.70 to new joiners in addition to 3,979,225 options granted on August 6, 2009 to employees under two different plans at a uniform option price of Rs. 118.35. Out of the above, 20,149 shares were exercised during the current year. Options granted to the employees under the first plan (Existing Employees - "ESOP") shall vest at the rate of 30%, 30% and 40% on each successive anniversary of the grant date. Options granted to the employees under the second plan (Joining Employees - "JESOP") shall vest after completion of 12 month Rs. from the date of grant. Further, all the option granted to Joining Employees under the scheme shall be subject to a lock in period of twenty four months from date of vesting of options under this scheme.

Notes:

a) The Compensation Committee has granted a total of 3,999,225 options convertible into 3,999,225 Equity Shares which represents 6.24% of the paid up share capital of the Bank. The fair market value one day before the date of grant is Rs. 118.35 which is also the exercise price of the Option.

b) The Bank accounts for Employee Share Based Payments using the fair value method.

8. Employee benefits (Accounting Standard -15)

The summarized position of various defined benefits recognized in the profit and loss account and balance sheet along with the funded status are as under:

F. Actuarial assumptions

Note :-

Consequent on the reopening of the pension option and enhancement of the gratuity limit following the amendments to payment of gratuity act 1972, RBI has allowed amortization of the additional expenses over a period of five years beginning with the financial year ending March 31, 2011 subject to a minimum of 1/5th of the total amount involved every year. Out of the total liability of 25.54 crores arising on account of above mentioned amendments, Rs. 5.11 crores has been charged to the Profit and Loss account in the current year and the balance unrecognized portion shall be amortized with in next four years

9. Segment reporting (AS-17)

The Bank has recognized Business segments as primary reporting segment and Geographical segments as secondary segment in line with RBI guidelines on compliance with Accounting Standard 17.

I. Primary Segments: Business segments.

a) Treasury Operations

b) Corporate/Wholesale Banking

c) Retail banking

d) Other banking business operations

II. Secondary Segments: Geographical segments.

Since the Bank is having domestic operations only, no reporting does arise under this segment.

10. Particulars of related party transactions (AS-18)

Particulars March 31,2011 March 31, 2010

a) Key Management personnel Mr. Amitabh Chaturvedi, Mr. Amitabh Chaturvedi,

b) Nature of transaction: Managing Director and Chief Managing Director and Chief Remuneration (including Executive Officer Executive Officer perquisites) Rs. 5,371,000 Rs. 3,600,000

11. Miscellaneous income under schedule 14 includes Rs. 3,000 Lakhs being Commitment Fee received from M/s. Bajaj Allianz Life Insurance Company with whom the Bank has entered into agency agreement for life and general insurance. (Previous Year Rs. 2,700 Lakhs)

12. The declaration of dividend is subject to RBI approval.

13. Previous Years figures are regrouped/rearranged wherever necessary to conform to current years classification.

 
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