Mar 31, 2021
Basis of Preparation:
The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting policies used in the preparation of these financial statements, in all material aspects, conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by the Reserve Bank of India (RBI) from time to time, the Accounting Standards (AS) prescribed under Section 133 of Companies Act, 2013 (âAct'') read with Rules made there under, provisions of the Act (to the extent notified) and practices generally prevalent in the banking industry in India. The Bank follows the accrual method of accounting, except where otherwise stated, and the historical cost convention.
The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, expenses, income and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
Revenue is recognized to the extent it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured
Interest income is recognized on accrual basis except in the case of non-performing assets where it is recognized upon realization as per the prudential norms of the RBI.
Commissions on Letter of Credit (LC)/ Bank Guarantee (BG) are accrued over the period of LC/ BG.
Fee based income are accrued on certainty of receipt and is based on milestones achieved as per terms of agreement with the client.
Income on discounted instruments is recognized over the tenure of the instrument on a constant yield basis.
For listed companies, dividend is booked on accrual basis when the right to receive is established. For unlisted companies dividend is booked as and when received.
Advances are classified into Standard, Sub-standard, Doubtful and Loss assets and provisions are made in accordance with the prudential norms prescribed by RBI. Advances are stated net of provisions towards non-performing advances.
Advances are classified as ''Secured by Tangible Assets'' when security of at least 10% of the advance has been stipulated/ created against tangible security including book debts. Security in the nature of escrow, guarantee, comfort letter, charge on brand, license, patent, copyright etc are not considered as ''Tangible Assets''.
Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized as income in the Profit and Loss account.
The Bank does not make any floating provision for bad and doubtful advances and investments.
Provision on loans and advances restructured/rescheduled is made in accordance with the applicable RBI guidelines on restructuring of loans and advances by Banks.
The Bank had made countercyclical provisioning buffer as required by RBI guidelines, in earlier years, with the approval of the Board, which can be utilized within the limits and in the circumstances permitted by Reserve Bank of India (RBI).
Classification
In terms of extant guidelines of the RBI on investment classification and valuation, the entire investment portfolio is categorize as:
'' Held To Maturity
I Available For Sale and
Held For Trading.
Investments under each category are further classified as
'' Government Securities
/ Other Approved Securities
Shares
Debentures and Bonds
Subsidiaries/ Joint Ventures
Others (Commercial Paper, Mutual Fund Units, Security Receipts, Pass through Certificate).
Basis of Classification
Investments that the Bank intends to hold till maturity are classified as âHeld to Maturity''.
Investments that are held principally for sale within 90 days from the date of purchase are classified as âHeld for Trading''.
Investments, which are not classified in the above two categories, are classified as âAvailable for Sale''.
An investment is classified as âHeld To Maturity'', âAvailable For Sale'' or âHeld For Trading'' at the time of its purchase and
subsequent shifting amongst categories and its valuation is done in conformity with RBI guidelines
Investment in subsidiaries and joint venture are normally classified as âHeld To Maturity'' except in case, on need based reviews, which are shifted to âAvailable for Sale'' category as per RBI guidelines. The classification of investment in associates is done at the time of its acquisition.
In determining the acquisition cost of an investment:
a) Brokerage, commission, stamp duty, and other taxes paid are included in cost of acquisition in respect of acquisition of equity instruments from the secondary market whereas in respect of other investments, including treasury investments, such expenses are charged to Profit and Loss Account.
b) Broken period interest paid/ received is excluded from the cost of acquisition/ sale and treated as interest expense/ income.
c) Cost is determined on the weighted average cost method.
Investments âHeld To Maturity'' are carried at acquisition cost unless it is more than the face value, in which case the premium is amortized on straight line basis over the remaining period of maturity. Diminution, other than temporary, in the value of investments, including those in Subsidiaries, Joint Ventures and Associates, under this category is provided for each investment individually.
Investments âHeld For Trading'' and âAvailable For Sale'' are marked to market scrip-wise and the resultant net depreciation, if any, in each category is recognized in the Profit and Loss Account, while the net appreciation, if any, is ignored.
a) Treasury Bills, commercial papers and certificates of deposit being discounted instruments are valued at carrying cost.
b) In respect of traded/ quoted investments, the market price is taken from the trades/ quotes available on the stock exchanges.
c) Quoted Government Securities are valued at market prices and unquoted/non-traded government securities are valued at prices declared by Financial Benchmark India Pvt Ltd (FBIL).
d) Unquoted shares are valued at break-up value or at Net Asset Value if the latest balance sheet is available, else, at Re. 1/- per company and units of mutual fund are valued at repurchase price as per relevant RBI guidelines.
e) Unquoted fixed income securities (other than government securities) are valued on Yield to Maturity (YTM) basis with appropriate mark-up over the YTM rates for Central Government securities of equivalent maturity. Such markup and YTM rates applied are as per the relevant rates published by Fixed Income Money Market and Derivative Association of India (FIMMDA)/FBIL.
f) Security receipts issued by the asset reconstruction companies are valued in accordance with the guidelines applicable to such instruments, prescribed by RBI from time to time. Accordingly, in cases where the cash flows from security receipts issued by the asset reconstruction companies are limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the Bank reckons the net asset value obtained from the asset reconstruction company from time to time, for valuation of such investments at the end of each reporting period.
g) Quoted Preference shares are valued at market rates and unquoted/non-traded preference shares are valued at appropriate yield to maturity basis, not exceeding redemption value as per RBI guidelines.
h) Investment in Stressed Assets Stabilisation Fund (SASF) is categorized as Held To Maturity and valued at cost. Provision is made for estimated shortfall in eventual recovery by September 2024.
i) VCF investments held in HTM category are valued at Carrying Cost and those held in AFS category are valued on NAVs received from Fund Houses.
j) PTC investments are presently held only under AFS category and are valued on Yield to Maturity (YTM) basis with appropriate mark-up over the YTM rates for Central Government securities of equivalent maturity and the spreads applicable are that of NBFC bonds. Such mark-up and YTM rates applied are as per the relevant rates published by Fixed Income Money Market and Derivative Association of India (FIMMDA)/FBIL. MTM Provision is done on monthly basis.
Profit or Loss on sale of investments is credited/ debited to Profit and Loss Account. However, profits on sale of investments in âHeld to Maturity'' category is first credited to Profit and Loss Account and thereafter appropriated, net of applicable taxes to the Capital Reserve Account at the year/period end. Loss on sale is recognized in the Profit and Loss Account.
I Investments are stated net of provisions.
In accordance with the RBI guidelines repo and reverse repo transactions in government securities and corporate debt securities (including transactions conducted under Liquidity Adjustment Facility (âLAF'') and Marginal Standby Facility (âMSF'') with RBI) are reflected as borrowing and lending transactions respectively. Borrowing cost on repo transactions is accounted as interest expense and revenue on reverse repo transactions is accounted as interest income.
/ In Transactions designated as âHedge'':
a) Net interest payable/ receivable on derivative transactions is accounted on accrual basis.
b) On premature termination of hedge swaps, any profits/ losses are recognised over the remaining contractual life of the swap or the residual life of the asset/ liability whichever is lesser.
c) Re-designation of hedge swaps by change of underlying liability is accounted as the termination of one hedge and acquisition of another.
d) Hedge contracts are not marked to market unless the underlying is also marked to market. In respect of hedge contracts that are marked to market, changes in the market value are recognized in the profit and loss account.
/ In Transactions designated as âTradinaâ:
Outstanding derivative transactions designated as âTrading'', which includes interest rate swaps, cross currency swaps, cross currency options and credit default swaps, are measured at their fair value. The resulting profits/ losses are included in the profit and loss account. Premium on options is recorded as a balance sheet item and transferred to Profit and Loss Account on maturity/ cancellation.
Derivative Transactions in Exchange Traded Currency Futures (ETCF''s) segments designated as trading includes Currency Futures, Currency Options and Interest Rate Futures which are measured at their fair value and are cash settled on T 1 basis. The resulting profits / losses on these transactions are transferred to Profit and Loss Account on the month end settlement date stipulated by Respective Exchanges.
'' Fixed Assets and Depreciation:
Fixed assets other than Premises are stated at cost less accumulated depreciation. Premises are revalued in accordance with the Bank''s policy and RBI guidelines and the same are stated at revalued amount less accumulated depreciation.
Cost of asset includes purchase cost and all expenditure incurred on the asset before put to use. Subsequent expenditure incurred on assets which have been put to use is capitalized only when it increases the future benefits from such assets or their functioning capability.
The appreciation on revaluation, if any, is credited to Revaluation Reserve.
Depreciation in respect of fixed assets is calculated on Straight Line Method with reference to cost or revalued amounts, in case of assets revalued.
In respect of revalued assets, the additional depreciation consequent to revaluation is transferred from revaluation reserve to general reserve in the balance sheet.
Fixed assets individually costing less than '' 5,000/- are fully depreciated in the year of addition.
Depreciation on tangible assets is allocated over useful life of the asset as prescribed under Part C of Schedule II of the Companies Act 2013. The useful lives and residual values are reviewed periodically. If the management estimate of the useful life of an asset at the time of acquisition of the asset or of remaining useful life on subsequent review is shorter, depreciation is provided at a higher rate based on the management''s estimate of useful life / remaining useful life.
Depreciation on additions/ sale of fixed assets during the year is provided for the period for which assets are actually held.
The useful lives of Fixed assets are as follows:
Securitisation of various loans results in sale of these assets to Special Purpose Vehicles (âSPVs''), which, in turn issue securities to investors. Financial assets are partially or wholly derecognised when the control over the contractual rights in the securitised assets is lost. The Bank accounts for any loss arising on sale immediately at the time of sale and the profit/ premium arising on account of sale is amortised over the life of the securities issued/ to be issued by the SPV to which the assets are sold.
Sale of financial assets to Securitization Companies/ Reconstruction Companies:
Sale of financial assets to Securitisation Companies (SCs) / Reconstruction Companies (RCs) is reckoned at the lower of the redemption value of Security Receipts (SRs)/ Pass Through Certificates (PTCs) received and the net book value of the financial asset.
In case of sale of assets which are fully provided and Technically Written off, the Security Receipts (SRs) are reckoned at Rupee one in the investment book of the Bank.
In case the sale value is at a price below the Net Book Value (NBV) (i.e., book value less provision held), the shortfall is be debited to the profit and loss account of that year. The Bank also uses, with permission of RBI, countercyclical/floating provisions for meeting any shortfall on sale of NPAs i.e. when the sale is at a price below the NBV.
Foreign currency transactions, on initial recognition are recorded at the exchange rate prevailing on the date of transaction. Monetary foreign currency assets and liabilities are translated at the closing rates prescribed by Foreign Exchange Dealers Association of India (FEDAI) and the resultant gain or loss is recognized in the Profit and Loss account. Exchange differences arising on the settlement of monetary items are recognized as income or expense in the period in which they arise.
Premium or discount arising at the inception of Forward Exchange Contracts which are not intended for trading is amortized as expense or income over the life of the contract. Premium or discount on other Forward Exchange Contracts is not recognized.
Outstanding Forward Exchange Contracts which are not intended for trading are revalued at closing FEDAI rates. Other outstanding Forward Exchange Contracts are valued at rates of exchange notified by FEDAI for specified maturities or at interpolated rates for in-between maturities. The resultant profits/ losses are recognized in the Profit and Loss Account.
Profits/ losses arising on premature termination of Forward Exchange Contracts, together with unamortized premium or discount, if any, are recognized on the date of termination.
Contingent liabilities in respect of outstanding forward exchange contracts are calculated at the contracted rates of exchange and those in respect of guarantees, acceptances, endorsements and other obligations are calculated at the closing FEDAI rates.
Operations of foreign branch are classified as ''Integral Foreign Operations''. Assets and Liabilities are translated at the closing rates prescribed by Foreign Exchange Dealers Association of India (FEDAI) Income and Expenditure items are translated at quarterly average rates. The resultant gain or loss is recognized in the Profit and Loss Account.
Payments to defined contribution schemes are charged to Profit and Loss Account of the year when contribution are due.
For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains or losses are recognized in the profit and loss account for the period in which they occur.
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognized during the period when the employee renders the service.
The Bank operates in three segments wholesale banking, retail banking and treasury operations. These segments have been identified in line with AS-17 on segment reporting after considering the nature and risk profile of the products and services, the target customer profile, the organization structure and the internal reporting system of the Bank.
Segment revenue, results, assets, and liabilities include the amounts identifiable to each of the segments as also amounts allocated, as estimated by the management. Assets and liabilities that cannot be allocated to identifiable segments are grouped under unallocated assets and liabilities.
Tax expense comprises of current and deferred tax.
Current tax is the amount of Income tax determined to be payable (recoverable) in respect of taxable income (tax loss) for a period calculated in accordance with the provisions of the Income Tax Act, 1961 and the Income Computation and Disclosure Standards (ICDS).
Deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax rates and laws that have been substantively enacted as of the balance sheet date. Deferred tax assets arising from timing differences are recognized to the extent there is reasonable certainty that these would be realized in future.
Deferred tax assets in case of unabsorbed depreciation/ losses are recognized only if there is virtual certainty that such deferred tax asset can be realized against future taxable profits.
Disputed taxes not provided for including departmental appeals are included under Contingent Liabilities.
IDBI Bank has opted for the lower tax rate as per Section 115BAA of the Income Tax Act, 1961 through Taxation Laws (Amendments) Act, 2019 which provides, inter alia, that MAT would not be applicable for the domestic companies opting for the lower tax.
The Bank reports basic and diluted Earnings per Share in accordance with AS 20. Basic Earnings per Share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding at the year end.
Diluted Earnings per Share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the period. Diluted Earnings per Share is computed by dividing the net profit after tax by the sum of the weighted average number of equity shares and dilutive potential equity shares outstanding at the year end.
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 the estimated current realizable value and value in use. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds estimated current realizable value of the asset or value in use.
Provisions, Contingent Liabilities and Contingent Assets
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In conformity with AS 29, Provisions, Contingent Liabilities and Contingent Assets, 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.
Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date.
Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursement will be received.
Contingent Assets are neither recognized nor disclosed.
Mar 31, 2019
1. Basis of Preparation
The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting policies used in the preparation of these financial statements, in all material aspects, confirm to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by the Reserve Bank of India (RBI) from time to time, the Accounting Standards (AS) prescribed under Section 133 of Companies Act, 2013 (Actâ) read with Rules made there under, provisions of the Act (to the extent notified) and practices generally prevalent in the banking industry in India. The Bank follows the accrual method of accounting, except where otherwise stated, and the historical cost convention.
2. Use of Estimates
The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, expenses, income and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
3. Revenue Recognition
Revenue is recognized to the extent it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured
i. Interest income is recognized on accrual basis except in the case of non-performing assets where it is recognized upon realization as per the prudential norms of the RBI.
ii. Commissions on Letter of Credit (LC)/ Bank Guarantee (BG) are accrued over the period of LC/ BG.
iii. Fee based income are accrued on certainty of receipt and is based on milestones achieved as per terms of agreement with the client.
iv. Income on discounted instruments is recognized over the tenure of the instrument on a constant yield basis.
v. Dividend is accounted on an accrual basis when the right to receive the same is established.
vi. In case of Non-performing advances, recovery is appropriated as per the policy of the bank.
4. Advances and Provisions
i. Advances are classified into Standard, Sub-standard, Doubtful and Loss assets and provisions are made in accordance with the prudential norms prescribed by RBI. Advances are stated net of provisions towards non-performing advances.
ii. Advances are classified as ''Secured by Tangible Assets'' when security of at least 10% of the advance has been stipulated/ created against tangible security including book debts. Security in the nature of escrow, guarantee, comfort letter, charge on brand, license, patent, copyright etc are not considered as ''Tangible Assets.''
iii. Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized as income in the Profit and Loss account.
iv. The Bank does not make any floating provision for bad and doubtful advances and investments.
v. Provision on loans and advances restructured/rescheduled is made in accordance with the applicable RBI guidelines on restructuring of loans and advances by Banks.
vi. The Bank had made countercyclical provisioning buffer as required by RBI guidelines, in earlier years, with the approval of the Board, which can be utilized within the limits and in the circumstances permitted by Reserve Bank of India (RBI).
5. Investments
A. Classification
In terms of extant guidelines of the RBI on investment classification and valuation, the entire investment portfolio is categorized as
i. Held To Maturity,
ii. Available For Sale and
iii. Held For Trading.
Investments under each category are further classified as
i. Government Securities
ii. Other Approved Securities
iii. Shares
iv. Debentures and Bonds
v. Subsidiaries/ Joint Ventures
vi. Others (Commercial Paper, Mutual Fund Units, Security Receipts, Pass through Certificate).
B. Basis of Classification
a) Investments that the Bank intends to hold till maturity are classified as âHeld to Maturity.
b) Investments that are held principally for sale within 90 days from the date of purchase are classified as âHeld for Trading.
c) Investments, which are not classified in the above two categories, are classified as Available for Sale.
d) An investment is classified as âHeld To Maturity, Available For Saleâ or âHeld For Tradingâ at the time of its purchase and subsequent shifting amongst categories and its valuation is done in conformity with RBI guidelines.
e) Investments in subsidiaries and joint venture are classified as âHeld To Maturity. The classification of investments in associates is done at the time of its acquisition.
C. Valuation
i) In determining the acquisition cost of an investment:
a) Brokerage, commission, stamp duty, and other taxes paid are included in cost of acquisition in respect of acquisition of equity instruments from the secondary market whereas in respect of other investments, including treasury investments, such expenses are charged to Profit and Loss Account.
b) Broken period interest paid/ received is excluded from the cost of acquisition/ sale and treated as interest expense/ income.
c) Cost is determined on the weighted average cost method.
Investments âHeld To Maturityâ are carried at acquisition cost unless it is more than the face value, in which case the premium is amortized on straight line basis over the remaining period of maturity. Diminution, other than temporary, in the value of investments under this category is provided for each investment individually.
Investments âHeld For Tradingâ and Available For Saleâ are marked to market scrip-wise and the resultant net depreciation, if any, in each category is recognized in the Profit and Loss Account, while the net appreciation, if any, is ignored.
a) Treasury Bills, commercial papers and certificates of deposit being discounted instruments are valued at carrying cost,
b) In respect of traded/ quoted investments, the market price is taken from the trades/ quotes available on the stock exchanges.
c) The quoted Government Securities are valued at market prices and unquoted/non-traded government securities are valued at prices declared by Financial Benchmark India Pvt Ltd(FBIL).
d) The unquoted shares are valued at break-up value or at Net Asset Value if the latest balance sheet is available, else, at Re. 1/- per company and units of mutual fund are valued at repurchase price as per relevant RBI guidelines.
e) The unquoted fixed income securities (other than government securities) are valued on Yield to Maturity (YTM) basis with appropriate mark-up over the YTM rates for Central Government securities of equivalent maturity. Such mark-up and YTM rates applied are as per the relevant rates published by Fixed Income Money Market and Derivative Association of India (FIMMDA)/FBIL.
f) Security receipts issued by the asset reconstruction companies are valued in accordance with the guidelines applicable to such instruments, prescribed by RBI from time to time. Accordingly, in cases where the cash flows from security receipts issued by the asset reconstruction companies are limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the Bank reckons the net asset value obtained from the asset reconstruction company from time to time, for valuation of such investments at the end of each reporting period.
g) Quoted Preference shares are valued at market rates and unquoted/non-traded preference shares are valued at appropriate yield to maturity basis, not exceeding redemption value as per RBI guidelines.
Profit or Loss on sale of investments is credited/ debited to Profit and Loss Account. However, profits on sale of investments in âHeld to Maturityâ category is first credited to Profit and Loss Account and thereafter appropriated, net of applicable taxes to the Capital Reserve Account at the year/period end. Loss on sale is recognized in the Profit and Loss Account.
Investments are shown net of provisions.
In accordance with the RBI guidelines repo and reverse repo transactions in government securities and corporate debt securities (including transactions conducted under Liquidity Adjustment Facility (âLAFâ) and Marginal Standby Facility (âMSFâ) with RBI) are reflected as borrowing and lending transactions respectively. Borrowing cost on repo transactions is accounted as interest expense and revenue on reverse repo transactions is accounted as interest income.
6. Derivative Transactions
In Transactions designated as âHedgeâ:
a) Net interest payable/ receivable on derivative transactions is accounted on accrual basis.
b) On premature termination of Hedge swaps, any profit/ losses are recognised over the remaining contractual life of the swap or the residual life of the asset/ liability whichever is lesser.
c) Re-designation of hedge swaps by change of underlying liability is accounted as the termination of one hedge and acquisition of another.
d) Hedge contracts are not marked to market unless the underlying is also marked to market. In respect of hedge contracts that are marked to market, changes in the market value are recognized in the profit and loss account.
In Transactions designated as âTradingâ:
Outstanding derivative transactions designated as âTrading, which includes interest rate swaps, cross currency swaps, cross currency options and credit default swaps, are measured at their fair value. The resulting profits/ losses are included in the profit and loss account. Premium on options is recorded as a balance sheet item and transferred to Profit and Loss Account on maturity/ cancellation.
Derivative Transactions in Exchange Traded Currency Futures (ETCFâs) segments designated as trading includes Currency Futures, Currency Options and Interest Rate Futures which are measured at their fair value and are cash settled on T 1 basis. The resulting profits / losses on these transactions are transferred to Profit and Loss Account on the month end settlement date stipulated by Respective Exchanges.
7. Fixed Assets and depreciation
i) Fixed assets other than Premises are stated at cost less accumulated depreciation. Premises are revalued in accordance with the Bankâs policy and RBI guidelines and the same are stated at revalued amount less accumulated depreciation.
ii) Cost of asset includes purchase cost and all expenditure incurred on the asset before put to use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefits from such assets or their functioning capability.
iii) The appreciation on revaluation, if any, is credited to Revaluation Reserve.
iv) Depreciation in respect of fixed assets is calculated on Straight Line Method with reference to cost or revalued amounts, in case of assets revalued.
v) In respect of revalued assets, the additional depreciation consequent to revaluation is transferred from revaluation reserve to general reserve in the balance sheet.
vi) Fixed assets individually costing less than Rs. 5000/- are fully depreciated in the year of addition.
vii) Depreciation on tangible assets is allocated over useful life of the asset as prescribed under Part C of Schedule II of the Companies Act 2013. The useful lives and residual values are reviewed periodically. If the management estimate useful lives of an asset at the time of acquisition of the asset or of remaining useful life on subsequent review is shorter, depreciation is provided at a higher rate based on managementâs estimate of useful life / remaining useful life.
viii) Depreciation on additions/ sale of fixed assets during the year is provided for the period for which assets were actually held.
ix) The useful lives of Fixed assets are as follows:
x) Leasehold land is amortized over the period of lease.
xi) Computer Software (non-integral) individually costing more than Rs. 2.50 Lacs is capitalised and depreciated over its useful life, not exceeding 6 years.
8 Securitisation Transactions:
Securitisation of various loans results in sale of these assets to Special Purpose Vehicles (âSPVsâ), which, in turn issue securities to investors. Financial assets are partially or wholly derecognised when the control of the contractual rights in the securitised assets is lost. The Bank accounts for any loss arising on sale immediately at the time of sale and the profit/ premium arising on account of sale is amortised over the life of the securities issued or to be issued by the SPV to which the assets are sold.
9 Sale of financial assets to Securitization Companies/ Reconstruction Companies:
Sale of financial assets to Securitisation Companies (SCs) / Reconstruction Companies (RCs) is reckoned at the lower of the redemption value of Security Receipts (SRs)/ Pass Through Certificates (PTCs) received and the net book value of the financial asset.
In case of sale of assets which are fully provided i.e. Doubtful Assets-3 and Technical Write Off cases, the Security Receipts (SRs) are reckoned at Rupee one in the investment book of the Bank.
In case the sale value is at a price below the Net Book Value(NBV) (i.e., book value less provison held), the shortfall should be debited to the profit and loss account of that year. Banks can also use countercyclical/floating provisions for meeting any shortfall on sale of NPAs i.e. when the sale is at a price below the NBV.
In case, sale value is higher than the NBV, the excess provision is reversed to the profit and loss account in the year in which cash amounts are received. However, such reversal of excess provision is limited to the extent to which cash received exceeds the NBV of the asset.
10 Foreign Currency Transactions:
i. Foreign currency transactions, on initial recognition are recorded at the exchange rate prevailing on the date of transaction. Monetary foreign currency assets and liabilities are translated at the closing rates prescribed by Foreign Exchange Dealers Association of India (FEDAI) and the resultant gain or loss is recognized in the Profit and Loss account. Exchange differences arising on the settlement of monetary items are recognized as income or expense in the period in which they arise.
ii. Premium or discount arising at the inception of Forward Exchange Contracts which are not intended for trading is amortized as expense or income over the life of the contract. Premium or discount on other Forward Exchange Contracts is not recognized.
iii. Outstanding Forward Exchange Contracts which are not intended for trading are revalued at closing FEDAI rates. Other outstanding Forward Exchange Contracts are valued at rates of exchange notified by FEDAI for specified maturities or at interpolated rates for in-between maturities. The resultant profit/ losses are recognized in the Profit and Loss Account.
iv. Profit/ losses arising on premature termination of Forward Exchange Contracts, together with unamortized premium or discount, if any, is recognized on the date of termination.
v. Contingent liability in respect of outstanding forward exchange contracts is calculated at the contracted rates of exchange and in respect of guarantees; acceptances, endorsements and other obligations are calculated at the closing FEDAI rates.
vi. Operations of foreign branch are classified as ''Integral Foreign Operations.'' Assets and Liabilities are translated at the closing rates prescribed by Foreign Exchange Dealers Association of India (FEDAI) Income and Expenditure items are translated at quarterly average rates. The resultant gain or loss is recognized in the Profit and Loss Account.
11 Employee Benefits
i. Payments to defined contribution schemes are charged to Profit and Loss Account of the year when contribution are due.
ii. For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains or losses are recognized in the profit and loss account for the period in which they occur.
iii. The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognized during the period when the employee renders the service.
12 Segment Reporting
I. The Bank operates in three segments wholesale banking, retail banking and treasury operations. These segments have been identified in line with AS-17 on segment reporting after considering the nature and risk profile of the products and services, the target customer profile, the organization structure and the internal reporting system of the Bank.
Segment revenue, results, assets, and liabilities include the amounts identifiable to each of the segments as also amounts allocated, as estimated by the management. Assets and liabilities that cannot be allocated to identifiable segments are grouped under unallocated assets and liabilities.
13 Income Tax
i. Tax expense comprises of current and deferred tax.
Current tax is the amount of Income tax determined to be payable (recoverable) in respect of taxable income (tax loss) for a period calculated in accordance with the provisions of the Income Tax Act, 1961 and the Income Computation and Disclosure Standards (ICDS).
ii. Deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax rates and laws that have been substantively enacted as of the balance sheet date. Deferred tax assets arising from timing differences are recognized to the extent there is reasonable certainty that these would be realized in future.
iii. Deferred tax assets in case of unabsorbed depreciation/ losses are recognized only if there is virtual certainty that such deferred tax asset can be realized against future taxable profits.
iv. Disputed taxes not provided for including departmental appeals are included under Contingent Liabilities.
v. Tax credit is recognized in respect of Minimum Alternate Tax (MAT) as per the provisions of Section 115JAA of the Income tax Act, 1961 based on convincing evidence that the Company will pay normal income tax within the statutory time frame and is reviewed at each balance sheet date.
14 Earnings Per Share
i. The Bank reports basic and diluted Earnings Per Share in accordance with AS 20. Basic Earnings per Share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding at the year end.
ii. Diluted Earnings per Share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the period. Diluted Earnings per Share is computed by dividing the net profit after tax by the sum of the weighted average number of equity shares and dilutive potential equity shares outstanding at the year end.
15 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 the estimated current realizable value and value in use. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds estimated current realizable value of the asset or value in use.
16 Provisions, Contingent Liabilities and Contingent Assets
i. In conformity with AS 29, Provisions, Contingent Liabilities and Contingent Assets, 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.
ii. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date.
iii. Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursement will be received.
iv. Contingent Assets are neither recognized nor disclosed.
Mar 31, 2018
The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting policies used in the preparation of these financial statements, in all material aspects, conform 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) issued by the Institute of Chartered Accountants of India (ICAI) and prescribed under Section 133 of Companies Act, 2013 (Actâ) read with Rule 7 of the Companies (Account) Rules, 2014, the provisions of the Act (to the extent notified) and practices generally prevalent in the banking industry in India. The Bank follows the accrual method of accounting, except where otherwise stated, and the historical cost convention.
The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, expenses, income and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
Revenue is recognized to the extent it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured
Interest income is recognized on accrual basis except in the case of non-performing assets where it is recognized upon realization as per the prudential norms of the RBI.
Commissions on Letter of Credit (LC)/ Bank Guarantee (BG) are accrued over the period of LC/ BG.
Fee based income are accrued on certainty of receipt and is based on milestones achieved as per terms of agreement with the client.
Income on discounted instruments is recognized over the tenure of the instrument on a constant yield basis.
Dividend is accounted on an accrual basis when the right to receive the same is established.
In case of Non-performing advances, recovery is appropriated as per the policy of the bank.
4. Advances and Provisions
Advances are classified into Standard, Sub-standard, Doubtful and Loss assets and provisions are made in accordance with the prudential norms prescribed by RBI and additional provisions as decided by the management. Advances are stated net of provisions towards non-performing advances.
Advances are classified as âSecured by Tangible Assetsâ when security of at least 10% of the advance has been stipulated/ created against tangible security including book debts. Security in the nature of escrow, guarantee, comfort letter, charge on brand, license, patent, copyright etc are not considered as âTangible Assetsâ
Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized as income in the Profit and Loss account.
The Bank does not make any floating provision for bad and doubtful advances and investments.
Provision on loans and advances restructured/rescheduled is made in accordance with the applicable RBI guidelines on restructuring of loans and advances by Banks.
The Bank had made countercyclical provisioning buffer as required by RBI guidelines, amended from time to time, with the approval of the Board, which can be utilized within the limits and in the circumstances permitted by Reserve Bank of India (RBI).
5 .Investments
A. Classification
In terms of extant guidelines of the RBI on investment classification and valuation, the entire investment portfolio is categorized as
Held To Maturity,
Available For Sale and
Held For Trading.
Investments under each category are further classified as
Government Securities
Other Approved Securities
Shares
Debentures and Bonds
Subsidiaries/ Joint Ventures
Others (Commercial Paper, Mutual Fund Units, Security Receipts, Pass through Certificate).
B. Basis of Classification
a) Investments that the Bank intends to hold till maturity are classified as âHeld to Maturity.
b) Investments that are held principally for sale within 90 days from the date of purchase are classified as âHeld for Trading.
c) Investments, which are not classified in the above two categories, are classified as Available for Sale.
d) An investment is classified as âHeld To Maturity, Available For Saleâ or âHeld For Tradingâ at the time of its purchase and subsequent shifting amongst categories and its valuation is done in conformity with RBI guidelines.
e) Investments in subsidiaries, joint venture are classified as âHeld To Maturity.
C. Valuation
In determining the acquisition cost of an investment:
a) Brokerage, commission, stamp duty, and other taxes paid are included in cost of acquisition in respect of acquisition of equity instruments from the secondary market whereas in respect of other investments, including treasury investments, such expenses are charged to Profit and Loss Account.
b) Broken period interest paid/ received is excluded from the cost of acquisition/ sale and treated as interest expense/ income.
c) Cost is determined on the weighted average cost method.
Investments âHeld To Maturityâ are carried at acquisition cost unless it is more than the face value, in which case the premium is amortized on straight line basis over the remaining period of maturity. Diminution, other than temporary, in the value of investments in under this category is provided for each investment individually.
Investments âHeld For Tradingâ and Available For Saleâ are marked to market scrip-wise and the resultant net depreciation, if any, in each category is recognized in the Profit and Loss Account, while the net appreciation, if any, are ignored.
a) Treasury Bills, commercial papers and certificates of deposit being discounted instruments are valued at carrying cost.
b) In respect of traded/ quoted investments, the market price is taken from the trades/ quotes available on the stock exchanges.
c) The quoted Government Securities are valued at market prices and unquoted/non-traded government securities are valued at prices declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivative Association of India (FIMMDA).
d) The unquoted shares are valued at break-up value or at Net Asset Value if the latest balance sheet is available, else, at Rs, 1/- per company and units of mutual fund are valued at repurchase price as per relevant RBI guidelines.
e) The unquoted fixed income securities (other than government securities) are valued on Yield to Maturity (YTM) basis with appropriate mark-up over the YTM rates for Central Government securities of equivalent maturity. Such mark-up and YTM rates applied are as per the relevant rates published by FIMMDA.
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f) Security receipts issued by the asset reconstruction companies are valued in accordance with the guidelines applicable to such instruments, prescribed by RBI from time to time. Accordingly, in cases where the cash flows from security receipts issued by the asset reconstruction companies are limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the Bank reckons the net asset value obtained from the asset reconstruction company from time to time, for valuation of such investments at each reporting period end.
g) Quoted Preference shares are valued at market rates and unquoted/non-traded preference shares are valued at appropriate yield to maturity basis, not exceeding redemption value as per RBI guidelines.
Profit or Loss on sale of investments is credited/ debited to Profit and Loss Account. However, profits on sale of investments in âHeld to Maturityâ category is first credited to Profit and Loss Account and thereafter appropriated, net of applicable taxes to the Capital Reserve Account at the year/period end. Loss on sale is recognized in the Profit and Loss Account.
Investments are shown net of provisions.
D. Repo and reverse repo transactions
In accordance with the RBI guidelines repo and reverse repo transactions in government securities and corporate debt securities (including transactions conducted under Liquidity Adjustment Facility (âLAFâ) and Marginal Standby Facility (âMSFâ) with RBI) are reflected as borrowing and lending transactions respectively. Borrowing cost on repo transactions is accounted as interest expense and revenue on reverse repo transactions is accounted as interest income.
6 Derivative Transactions
In Transactions designated as âHedgeâ:
a) Net interest payable/ receivable on derivative transactions is accounted on accrual basis.
b) On premature termination of Hedge swaps, any profit/ losses are recognised over the remaining contractual life of the swap or the residual life of the asset/ liability whichever is lesser.
c) Re-designation of hedge swaps by change of underlying liability is accounted as the termination of one hedge and acquisition of another.
d) Hedge contracts are not marked to market unless the underlying is also marked to market. In respect of hedge contracts that are marked to market, changes in the market value are recognized in the profit and loss account.
In Transactions designated as âTradingâ:
Outstanding derivative transactions designated as âTrading, which includes interest rate swaps, cross currency swaps, cross currency options and credit default swaps, are measured at their fair value. The resulting profits/ losses are included in the profit and loss account. Premium on options is recorded as a balance sheet item and transferred to Profit and Loss Account on maturity/ cancellation.
Derivative Transactions in Exchange Traded Currency Futures (ETCFâs) segments designated as trading includes Currency Futures, Currency Options and Interest Rate Futures which are measured at their fair value and are cash settled on T 1 basis. The resulting profits / losses on these transactions are transferred to Profit and Loss Account on the month end settlement date stipulated by Respective Exchanges.
7 Fixed Assets and depreciation
Fixed assets other than Premises are stated at cost less accumulated depreciation. Premises are revalued in accordance with the Bankâs policy and RBI guidelines and the same are stated at revalued amount less accumulated depreciation.
Cost of asset includes purchase cost and all expenditure incurred on the asset before put to use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefits from such assets or their functioning capability.
The appreciation on revaluation, if any, is credited to Revaluation Reserve.
Depreciation in respect of fixed assets is calculated on Straight Line Method with reference to cost or revalued amounts, in case of assets revalued.
In respect of revalued assets, the additional depreciation consequent to revaluation is transferred from revaluation reserve to general reserve in the balance sheet.
Fixed assets individually costing less than '' 5000 are fully depreciated in the year of addition.
Depreciation on tangible assets is allocated over useful life of the asset as prescribed under Part C of Schedule II of the Companies Act 2013. The useful lives and residual values are reviewed periodically. If the management estimate useful lives of an asset at the time of acquisition of the asset or of remaining useful life on subsequent review is shorter, depreciation is provided at a higher rate based on managementâs estimate of useful life / remaining useful life.
Depreciation on additions/ sale of fixed assets during the year is provided for the period for which assets were actually held.
Leasehold land is amortized over the period of lease.
Computer Software (non-integral) individually costing more than Rs, 2.50 Lacs is capitalized and depreciated over its useful life, not exceeding 6 years.
Securitization Transactions:
Securitization of various loans results in sale of these assets to Special Purpose Vehicles (âSPVsâ), which, in turn issue securities to investors. Financial assets are partially or wholly derecognized when the control of the contractual rights in the securitized assets is lost. The Bank accounts for any loss arising on sale immediately at the time of sale and the profit/ premium arising on account of sale is amortized over the life of the securities issued or to be issued by the SPV to which the assets are sold.
Sale of financial assets to Securitization Companies (SCs)/ Reconstruction Companies (RCs) is reckoned at the lower of the redemption value of Security Receipts (SRs) / Pass Through Certificates (PTCs) received and the net book value of the financial asset.
In accordance with RBI guidelines on Sale of Non-performing Advances, in case the sale is at a price below the net book value (NBV) (i.e. book value less provision held), the shortfall is charged to profit and loss account of that year. Further, as per the extant RBI guidelines dated 13.06.2016, for assets sold from April 1, 2016 to March 31, 2017, shortfall is amortized over a period of 4 quarters from the quarter in which the sale has taken place. In case of sale of assets which are fully provided i.e. Doubtful Assets -3 and Technical Write Off cases, the Security Receipts (SRs) are reckoned at Rs, 1 in the investment book of the Bank.
In case, sale value is higher than the NBV, the excess provision is reversed to the profit and loss account in the year in which cash amounts are received. However, such reversal of excess provision is limited to the extent to which cash received exceeds the NBV of the asset.
Foreign Currency Transactions:
Foreign currency transactions, on initial recognition are recorded at the exchange rate prevailing on the date of transaction. Monetary foreign currency assets and liabilities are translated at the closing rates prescribed by Foreign Exchange Dealers Association of India (FEDAI) and the resultant gain or loss is recognized in the Profit and Loss account. Exchange differences arising on the settlement of monetary items are recognized as income or expense in the period in which they arise.
Premium or discount arising at the inception of Forward Exchange Contracts which are not intended for trading is amortized as expense or income over the life of the contract. Premium or discount on other Forward Exchange Contracts is not recognized.
Outstanding Forward Exchange Contracts which are not intended for trading are revalued at closing FEDAI rates. Other outstanding Forward Exchange Contracts are valued at rates of exchange notified by FEDAI for specified maturities or at interpolated rates for in-between maturities. The resultant profit/ losses are recognized in the Profit and Loss Account.
Profit/ losses arising on premature termination of Forward Exchange Contracts, together with unamortized premium or discount, if any, is recognized on the date of termination.
Contingent liability in respect of outstanding forward exchange contracts is calculated at the contracted rates of exchange and in respect of guarantees; acceptances, endorsements and other obligations are calculated at the closing FEDAI rates.
Operations of foreign branch are classified as âIntegral Foreign Operations. Assets and Liabilities are translated at the closing rates prescribed by Foreign Exchange Dealers Association of India (FEDAI) Income and Expenditure items are translated at quarterly average rates. The resultant gain or loss is recognized in the Profit and Loss Account.
11 Employee Benefits
Payments to defined contribution schemes are charged to Profit and Loss Account of the year when contribution are due.
For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains or losses are recognized in the profit and loss account for the period in which they occur.
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognized during the period when the employee renders the service.
Segment Reporting
12 The Bank operates in three segments wholesale banking, retail banking and treasury services. These segments have been identified in line with AS-17 on segment reporting after considering the nature and risk profile of the products and services, the target customer profile, the organization structure and the internal reporting system of the Bank
Segment revenue, results, assets, and liabilities include the amounts identifiable to each of the segments as also amounts allocated, as estimated by the management. Assets and liabilities that cannot be allocated to identifiable segments are grouped under unallocated assets and liabilities.
Current tax is the amount of Income tax determined to be payable (recoverable) in respect of taxable income (tax loss) for a period calculated in accordance with the provisions of the Income Tax Act, 1961 and the Income Computation and Disclosure Standards (ICDS).
Deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax rates and laws that have been substantively enacted as of the balance sheet date. Deferred tax assets arising from timing differences are recognized to the extent there is reasonable certainty that these would be realized in future.
Deferred tax assets in case of unabsorbed depreciation/ losses are recognized only if there is virtual certainty that such deferred tax asset can be realized against future taxable profits.
Disputed taxes not provided for including departmental appeals are included under Contingent Liabilities.
Tax credit is recognized in respect of Minimum Alternate Tax (MAT) as per the provisions of Section 115JAA of the Income tax Act, 1961 based on convincing evidence that the Company will pay normal income tax within the statutory time frame and is reviewed at each balance sheet date.
14 Earnings Per Share
The Bank reports basic and diluted Earnings Per Share in accordance with AS 20. Basic Earnings per Share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding at the year end.
Diluted Earnings per Share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the period. Diluted Earnings per Share is computed by dividing the net profit after tax by the sum of the weighted average number of equity shares and dilutive potential equity shares outstanding at the year end.
15 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 the estimated current realizable value and value in use. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds estimated current realizable value of the asset or value in use.
Provisions, Contingent Liabilities and Contingent Assets
In conformity with AS 29, Provisions, Contingent Liabilities and Contingent Assets, 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.
Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date.
Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursement will be received.
Contingent Assets are neither recognized nor disclosed.
A DISCLOSURE REQUIREMENTS AS PER ACCOUNTING STANDARDS
FIXED ASSETS (PROPERTY, PLANT & EQUIPMENTS AS-10)
Premises include Leasehold Land (revalued) of Rs, 2177.16 Crore (Rs, 2177.16 Crore) which was revalued at the end of business hours, on 31st March 2016. The net appreciation of Rs, 1129.05 Crore arising on revaluation, was credited to Revaluation Reserve on March 31, 2016.
The Bank has revalued its Freehold Land & Residential/ Office building at the end of business hours, on 31st March 2016 based on valuations made by independent valuers. The net appreciation of Rs, 2807.29 Crore arising on revaluation, being the difference between the net book value of Rs, 1202.71 Crore and revalued amount of Rs, 4010 Crore was credited to Revaluation Reserve on March 31, 2016.
The balance in Revaluation Reserve as at March 31, 2018 is Rs, 5053.88 Crore (Rs, 5417.75 Crore).
A book profit of Rs, 519.89 Crore on account of sale of residential/office buildings during the year is included in Schedule 14-Other Income..
Mar 31, 2017
1. Basis of Preparation
The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting policies used in the preparation of these financial statements, in all material aspects, conform 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) issued by the Institute of Chartered Accountants of India (ICAI) and prescribed under Section 133 of Companies Act, 2013 (âActâ) read with Rule 7 of the Companies (Account) Rules, 2014, the provisions of the Act (to the extent notified) and practices generally prevalent in the banking industry in India. The Bank follows the accrual method of accounting, except where otherwise stated, and the historical cost convention
2. Use of Estimates
The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, expenses, income and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
3. Revenue Recognition
Revenue is recognized to the extent it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured
I. Interest income is recognized on accrual basis except in the case of non-performing assets where it is recognized upon realization as per the prudential norms of the RBI.
ii. Commissions on Letter of Credit (LC)/ Bank Guarantee (BG) are accrued over the period of LC/ BG.
iii. Fee based income are accrued on certainty of receipt and is based on milestones achieved as per terms of agreement with the client.
iv. Income on discounted instruments is recognized over the tenure of the instrument on a constant yield basis.
v. Dividend is accounted on an accrual basis when the right to receive the same is established.
vi. In case of Non-performing advances, recovery is appropriated as per the policy of the bank.
4. Advances and Provisions
i. Advances are classified into Standard, Sub-standard, Doubtful and Loss assets and provisions are made in accordance with the prudential norms prescribed by RBI and additional provisions as decided by the management. Advances are stated net of provisions towards non-performing advances.
ii. Advances are classified as âSecured by Tangible Assetsâ when security of at least 10% of the advance has been stipulated/created against tangible security including book debts. Security in the nature of escrow, guarantee, comfort letter, charge on brand, license, patent, copyright etc are not considered as âTangible Assets.
iii. Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized as income in the Profit and Loss account.
iv. The Bank does not make any floating provision for bad and doubtful advances and investments.
v. Provision on loans and advances restructured/rescheduled is made in accordance with the applicable RBI guidelines on restructuring of loans and advances by Banks.
vi. The Bank had made countercyclical provisioning buffer as required by RBI guidelines, amended from time to time, with the approval of the Board, which can be utilized within the limits and in the circumstances permitted by Reserve Bank of India (RBI).
5. Investment
A. Classification
In terms of extant guidelines of the RBI on investment classification and valuation, the entire investment portfolio is categorized as
i. Held To Maturity,
ii. Available For Sale and
iii. Held For Trading.
Investments under each category are further classified as
i. Government Securities
ii. Other Approved Securities
iii. Shares
iv. Debentures and Bonds
v. Subsidiaries/ Joint Ventures
vi. Others (Commercial Paper, Mutual Fund Units, Security Receipts, Pass through Certificate).
B. Basis of Classification
a) Investments that the Bank intends to hold till maturity are classified as âHeld to Maturity.
b) Investments that are held principally for sale within 90 days from the date of purchase are classified as âHeld for Trading.
c) Investments, which are not classified in the above two categories, are classified as âAvailable for Sale.
d) An investment is classified as âHeld To Maturityâ âAvailable For Saleâ or âHeld For Tradingâ at the time of its purchase and subsequent shifting amongst categories and its valuation is done in conformity with RBI guidelines.
e) Investments in subsidiaries, joint venture are classified as âHeld To Maturity.
C. Valuation
i) In determining the acquisition cost of an investment:
a) Brokerage, commission, stamp duty, and other taxes paid are included in cost of acquisition in respect of acquisition of equity instruments from the secondary market whereas in respect of other investments, including treasury investments, such expenses are charged to Profit and Loss Account.
b) Broken period interest paid/ received is excluded from the cost of acquisition/ sale and treated as interest expense/ income.
c) Cost is determined on the weighted average cost method.
ii) Investments âHeld To Maturityâ are carried at acquisition cost unless it is more than the face value, in which case the premium is amortized on straight line basis over the remaining period of maturity. Diminution, other than temporary, in the value of investments in subsidiaries/ joint venture under this category is provided for each investment individually.
iii) Investments âHeld For Tradingâ and Available For Saleâ are marked to market scrip-wise and the resultant net depreciation, if any, in each category is recognized in the Profit and Loss Account, while the net appreciation, if any, are ignored.
a) Treasury Bills, commercial papers and certificates of deposit being discounted instruments are valued at carrying cost.
b) In respect of traded/ quoted investments, the market price is taken from the trades/ quotes available on the stock exchanges.
c) The quoted Government Securities are valued at market prices and unquoted/non-traded government securities are valued at prices declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivative Association of India (FIMMDA).
d) The unquoted shares are valued at break-up value or at Net Asset Value if the latest balance sheet is available, else, at Rs.1/- per company and units of mutual fund are valued at repurchase price as per relevant RBI guidelines.
e) The unquoted fixed income securities (other than government securities) are valued on Yield to Maturity (YTM) basis with appropriate mark-up over the YTM rates for Central Government securities of equivalent maturity. Such mark-up and YTM rates applied are as per the relevant rates published by FIMMDA.
f) Security receipts issued by the asset reconstruction companies are valued in accordance with the guidelines applicable to such instruments, prescribed by RBI from time to time. Accordingly, in cases where the cash flows from security receipts issued by the asset reconstruction companies are limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the Bank reckons the net asset value obtained from the asset reconstruction company from time to time, for valuation of such investments at each reporting period end.
g) Quoted Preference shares are valued at market rates and unquoted/non-traded preference shares are valued at appropriate yield to maturity basis, not exceeding redemption value as per RBI guidelines.
Profit or Loss on sale of investments is credited/ debited to Profit and Loss Account. However, profits on sale of investments in âHeld to Maturityâ category is first credited to Profit and Loss Account and thereafter appropriated, net of applicable taxes to the Capital Reserve Account at the year/period end. Loss on sale is recognized in the Profit and Loss Account.
Investments are shown net of provisions.
D. Repo and reverse repo transactions
In accordance with the RBI guidelines repo and reverse repo transactions in government securities and corporate debt securities (excluding transactions conducted under Liquidity Adjustment Facility (âLAFâ) and Marginal Standby Facility (âMSFâ) with RBI) are reflected as borrowing and lending transactions respectively. Borrowing cost on repo transactions is accounted as interest expense and revenue on reverse repo transactions is accounted as interest income.
In respect of repo transactions under LAF and MSF with RBI, amount borrowed from RBI is credited to investment account and reversed on maturity of the transaction. Costs thereon are accounted for as interest expense. In respect of reverse repo transactions under LAF, amount lent to RBI is debited to investment account and reversed on maturity of the transaction. Revenues thereon are accounted as interest income.
6. Derivative Transactions
In Transactions designated as âHedgeâ:
a) Net interest payable/ receivable on derivative transactions is accounted on accrual basis.
b) On premature termination of Hedge swaps, any profit/ losses are recognised over the remaining contractual life of the swap or the residual life of the asset/ liability whichever is lesser.
c) Re-designation of hedge swaps by change of underlying liability is accounted as the termination of one hedge and acquisition of another.
d) Hedge contracts are not marked to market unless the underlying is also marked to market. In respect of hedge contracts that are marked to market, changes in the market value are recognized in the profit and loss account.
In Transactions designated as âTradingâ:
Outstanding derivative transactions designated as âTradingâ, which includes interest rate swaps, cross currency swaps, cross currency options and credit default swaps, are measured at their fair value. The resulting profits/ losses are included in the profit and loss account. Premium on options is recorded as a balance sheet item and transferred to Profit and Loss Account on maturity/ cancellation.
Derivative Transactions in Exchange Traded Currency Futures (ETCFâs) segments designated as trading includes Currency Futures, Currency Options and Interest Rate Futures which are measured at their fair value and are cash settled on T 1 basis. The resulting profits / losses on these transactions are transferred to Profit and Loss Account on the month end settlement date stipulated by Respective Exchanges.
7. Fixed Assets (Property, Plant & Equipment) and depreciation
i) Fixed assets other than Premises are stated at cost less accumulated depreciation. Premises are revalued in accordance with the Bankâs policy and RBI guidelines and the same are stated at revalued amount less accumulated depreciation.
ii) Cost of asset includes purchase cost and all expenditure incurred on the asset before put to use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefits from such assets or their functioning capability.
iii) The appreciation on revaluation, if any, is credited to Revaluation Reserve.
iv) Depreciation in respect of fixed assets is calculated on Straight Line Method with reference to cost or revalued amounts, in case of assets revalued and the same is charged to Profit and Loss account.
v) In respect of revalued assets, the additional depreciation consequent to revaluation is transferred from revaluation reserve to general reserve in the balance sheet.
vi) Fixed assets individually costing less than Rs.5000 are fully depreciated in the year of addition.
vii) Depreciation on tangible assets is allocated over useful life of the asset as prescribed under Part C of Schedule II of the Companies Act 2013. The useful lives and residual values are reviewed periodically. If the management estimate useful lives of an asset at the time of acquisition of the asset or of remaining useful life on subsequent review is shorter, depreciation is provided at a higher rate based on managementâs estimate of useful life / remaining useful life.
viii) Depreciation on additions/ sale of fixed assets during the year is provided for the period for which assets were actually held.
ix) The useful lives of Fixed assets are as follows:
x) Leasehold land is amortized over the period of lease.
xi) Computer Software (non-integral) individually costing more than Rs.2.50 Lacs is capitalised and depreciated in 6 years.
8. Securitisation Transactions:
Securitisation of various loans results in sale of these assets to Special Purpose Vehicles (âSPVsâ), which, in turn issue securities to investors. Financial assets are partially or wholly derecognised when the control of the contractual rights in the securitised assets is lost. The Bank accounts for any loss arising on sale immediately at the time of sale and the profit/ premium arising on account of sale is amortised over the life of the securities issued or to be issued by the SPV to which the assets are sold.
9. Sale of financial assets to Securitization Companies/ Reconstruction Companies:
Sale of financial assets to Securitisation Companies (SCs)/ Reconstruction Companies (RCs) is reckoned at the lower of the redemption value of Security Receipts (SRs) / Pass Through Certificates (PTCs) received and the net book value of the financial asset.
In accordance with RBI guidelines on Sale of Non-performing Advances, in case the sale is at a price below the net book value (NBV) (i.e book value less provision held), the shortfall is charged to profit and loss account. Further, as per the extant RBI guidelines dated 13.06.2016, shortfall is amortised over a period of 4 quarters from the quarter in which the sale has taken place.
In case, sale value is higher than the NBV, the excess provision is reversed to the profit and loss account in the year in which cash amounts are received. However, such reversal of excess provision is limited to the extent to which cash received exceeds the NBV of the asset.
10. Foreign Currency Transactions:
i. Foreign currency transactions, on initial recognition are recorded at the exchange rate prevailing on the date of transaction. Monetary foreign currency assets and liabilities are translated at the closing rates prescribed by Foreign Exchange Dealers Association of India (FEDAI) and the resultant gain or loss is recognized in the Profit and Loss account. Exchange differences arising on the settlement of monetary items are recognized as income or expense in the period in which they arise.
ii. Premium or discount arising at the inception of Forward Exchange Contracts which are not intended for trading is amortized as expense or income over the life of the contract. Premium or discount on other Forward Exchange Contracts is not recognized.
iii. Outstanding Forward Exchange Contracts which are not intended for trading are revalued at closing FEDAI rates. Other outstanding Forward Exchange Contracts are valued at rates of exchange notified by FEDAI for specified maturities or at interpolated rates for in-between maturities. The resultant profit/ losses are recognized in the Profit and Loss Account.
iv. Profit/ losses arising on premature termination of Forward Exchange Contracts, together with unamortized premium or discount, if any, is recognized on the date of termination.
v. Contingent liability in respect of outstanding forward exchange contracts is calculated at the contracted rates of exchange and in respect of guarantees; acceptances, endorsements and other obligations are calculated at the closing FEDAI rates.
vi. Operations of foreign branch are classified as âIntegral Foreign Operationsâ. Assets and Liabilities are translated at the closing rates prescribed by Foreign Exchange Dealers Association of India (FEDAI) Income and Expenditure items are translated at quarterly average rates. The resultant gain or loss is recognized in the Profit and Loss Account.
11. Employee Benefits
i. Payments to defined contribution schemes are charged to Profit and Loss Account of the year when contribution are due.
ii. For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains or losses are recognized in the profit and loss account for the period in which they occur.
iii. The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognized during the period when the employee renders the service.
12. Segment Reporting
The Bank operates in three segments wholesale banking, retail banking and treasury services. These segments have been identified in line with AS-17 on segment reporting after considering the nature and risk profile of the products and services, the target customer profile, the organization structure and the internal reporting system of the Bank.
Segment revenue, results, assets, and liabilities include the amounts identifiable to each of the segments as also amounts allocated, as estimated by the management. Assets and liabilities that cannot be allocated to identifiable segments are grouped under unallocated assets and liabilities.
13. Income Tax
i. Tax expense comprises of current and deferred tax.
Current tax is the amount of Income tax determined to be payable (recoverable) in respect of taxable income (tax loss) for a period calculated in accordance with the provisions of the Income Tax Act, 1961 and the Income Computation and Disclosure Standards (ICDS).
ii. Deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax rates and laws that have been substantively enacted as of the balance sheet date. Deferred tax assets arising from timing differences are recognized to the extent there is reasonable certainty that these would be realized in future.
iii. Deferred tax assets in case of unabsorbed depreciation/ losses are recognized only if there is virtual certainty that such deferred tax asset can be realized against future taxable profits.
iv. Disputed taxes not provided for including departmental appeals are included under Contingent Liabilities.
14. Earnings Per Share
i. The Bank reports basic and diluted Earnings Per Share in accordance with AS 20. Basic Earnings per Share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding at the year end.
ii. Diluted Earnings per Share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the period. Diluted Earnings per Share is computed by dividing the net profit after tax by the sum of the weighted average number of equity shares and dilutive potential equity shares outstanding at the year end.
15. 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 the estimated current realizable value and value in use. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds estimated current realizable value of the asset or value in use.
16 . Provisions, Contingent Liabilities and Contingent Assets
i. In conformity with AS 29, Provisions, Contingent Liabilities and Contingent Assets, 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.
ii. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date.
iii. Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursement will be received.
iv. Contingent Assets are neither recognized nor disclosed.
Mar 31, 2015
Basis of Preparation
The financial statements have been prepared in accordance with
requirements prescribed under the Third Schedule of the Banking
Regulation Act, 1949. The accounting policies used in the preparation
of these financial statements, in all material aspects, conform 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) issued by the Institute of Chartered
Accountants of India (ICAI) and prescribed under Section 133 Companies
Act, 2013 (''Act'') read with Rule 7 of the Companies (Account)
Rules, 2014, the provisions of the Act (to the extent notified) and
practices generally prevalent in the banking industry in India. The
Bank follows the accrual method of accounting, except where otherwise
stated, and the historical cost convention.
Use of Estimates
The preparation of financial statements requires the Management to make
estimates and assumptions that affect the reported amount of assets,
liabilities, expenses, income and disclosure of contingent liabilities
as at the date of the financial statements. The Management believes
that these estimates and assumptions are reasonable and prudent.
However, actual results could differ from estimates. Any revision to
accounting estimates is recognised prospectively in current and future
periods.
Revenue Recognition
Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Bank and the revenue can be reliably measured
i. Interest income is recognised on accrual basis except in the case of
Non-Performing Assets where it is recognised upon realisation as per
the prudential norms of the RBI.
ii. Commissions on Letter of Credit (LC)/ Bank Guarantee (BG) are
accrued over the period of LC/ BG.
iii. Fee based income are accrued on certainty of receipt and is based
on milestones achieved as per terms of agreement with the client.
iv. Income on discounted instruments is recognised over the tenure of
the instrument on a constant yield basis.
v. Dividend is accounted on an accrual basis when the right to receive
the same is established.
vi. In case of advances, recovery is appropriated as per the order of
appropriation specified in the loan agreement / restructuring package.
Advances and Provisions
Advances are classified into Standard, Sub-standard, Doubtful and Loss
assets and provisions are made in accordance with the prudential norms
prescribed by RBI. Advances are stated net of provisions towards Non-
Performing Advances.
Advances are classified as Secured by langible Assets when security of
at least 10% of the advance has been stipulated/ created against
tangible security including book debts. Security in the nature of
escrow, guarantee, comfort letter, charge on brand, license, patent,
copyright etc are not considered as ''Tangible Assets''.
Amounts recovered against debts written-off in earlier years and
provisions no longer considered necessary in the context of the current
status of the borrower are recognised in the Profit and Loss Account.
The Bank does not make any floating provision for bad and doubtful
advances and investments.
Provision on loans and advances restructured/ rescheduled is made in
accordance with the applicable RBI guidelines on restructuring of loans
and advances by Banks.
The Bank makes countercyclical buffer as required by RBI guidelines,
amended from time to time, with the approval of the Board and utilise
the same within the limits and in the circumstances permitted by RBI.
'' Investments
In terms of extant guidelines of the RBI on investment classification
and valuation, the entire investment portfolio is categorised as:
i.Held To Maturity,
ii. Available For Sale and
iii. Held For Trading.
Investments under each category are further classified as
i. Government Securities
ii. Other Approved Securities
iii. Shares
iv. Debentures and Bonds
v. Subsidiaries/ Joint Ventures
vi. Others (Commercial Paper, Mutual Fund Units, Security Receipts,
Pass Through Certificates, SIDBI/ NABARD/ NHB / RIDF Deposits).
Basis of Classification
a) Investments that the Bank intends to hold till maturity are
classified as ''Held to Maturity''.
b) Investments that are held principally for resale within 90 days from
the date of purchase are classified as ''Held For Trading''.
c) Investments, which are not classified in the above two categories,
are classified as ''Available For Sale''.
d) An investment is classified as ''Held To Maturity'', ''Available
For Sale'' or ''Held For Trading'' at the time of its purchase and
subsequent shifting amongst categories and its valuation is done in
conformity with RBI guidelines.
e) Investments in Subsidiaries and Joint Venture are classified as
''Held To Maturity''.
Valuation
i) In determining the acquisition cost of an investment:
a) Brokerage, commission, stamp duty, and other taxes paid are included
in cost of acquisition in respect of acquisition of equity instruments
from the secondary market whereas in respect of other investments,
including treasury investments, such expenses are charged to Profit and
Loss Account.
b) Broken period interest paid/ received is excluded from the cost of
acquisition/ sale and treated as interest expense/ income.
c) Cost is determined on the weighted average cost method.
ii) Investments ''Held To Maturity'' are carried at acquisition cost
unless it is more than the face value, in which case the premium is
amortised on straight line basis over the remaining period of maturity.
Diminution, other than temporary, in the value of investments in
subsidiaries/ joint venture under this category is provided for each
investment individually.
iii) Investments ''Held For Trading'' and ''Available For Sale''
are marked to market scrip-wise and the resultant net depreciation, if
any, in each category is recognised in the Profit and Loss Account,
while the net appreciation, if any, are ignored.
a) Treasury Bills, commercial papers and certificates of deposit being
discounted instruments are valued at carrying cost,
b) In respect of traded/ quoted investments, the market price is taken
from the trades/ quotes available on the stock exchanges. Government
Securities are valued at market prices or prices declared by Primary
Dealers Association of India (PDAI) jointly with Fixed Income Money
Market and Derivative Association of India (FIMMDA).
c) The unquoted shares are valued at break-up value or at Net Asset
Value if the latest balance sheet is available, else, at Rs. 1/- per
company and units are valued at repurchase price as per relevant RBI
guidelines. The unquoted fixed income securities (other than
government securities) are valued on Yield to Maturity (YTM) basis with
appropriate mark-up over the YTM rates for Central Government
securities of equivalent maturity. Such mark-up and YTM rates applied
are as per the relevant rates published by FIMMDA.
d) Security receipts issued by Asset Reconstruction Companies are
valued in accordance with the guidelines applicable to such
instruments, prescribed by RBI from time to time. Accordingly, in cases
where the cash flows from security receipts issued by Asset
Reconstruction Companies are limited to the actual realisation of the
financial assets assigned to the instruments in the concerned scheme,
the Bank reckons the Net Asset Value obtained from the Asset
Reconstruction Company from time to time, for valuation of such
investments at each reporting period end.
e) Preference shares are valued at market rates, if quoted or on
appropriate yield to maturity basis not exceeding redemption value as
per RBI guidelines.
Profit or Loss on sale of investments is credited/ debited to Profit
and Loss Account. However, profits on sale of investments in Held to
Maturity category is first credited to Profit and Loss Account and
thereafter appropriated, net of applicable taxes and amount required to
be transferred to Statutory Reserves, to the Capital Reserve Account at
the year/ period end. Loss on sale is recognised in the Profit and Loss
Account.
Repo and Reverse Repo transactions
In accordance with the RBI guidelines, Repo and Reverse Repo
transactions in Government Securities and Corporate Debt Securities
(excluding transactions conducted under Liquidity Adjustment Facility
(LAF) and Marginal Standing Facility (MSF) with RBI) are reflected as
borrowing and lending transactions respectively. Borrowing cost on
Repo transactions is accounted as interest expense and revenue on
Reverse Repo transactions is accounted as interest income.
In respect of Repo transactions under LAF and MSF with RBI, amount
borrowed from RBI is credited to investment account and reversed on
maturity of the transaction. Costs thereon are accounted for as
interest expense. In respect of Reverse Repo transactions under LAF,
amount lent to RBI is debited to investment account and reversed on
maturity of the transaction. Revenues thereon are accounted as interest
income.
Derivative Transactions
In Transactions designated as ''Hedge'':
a) Net interest payable/ receivable on derivative transactions is
accounted on accrual basis.
b) On premature termination of Hedge swaps, any profit/ losses are
recognised over the remaining contractual life of the swap or the
residual life of the asset/ liability whichever is lesser.
c) Re-designation of hedge swaps by change of underlying liability is
accounted as the termination of one hedge and acquisition of another.
In Transactions designated as ''Trading'':
Outstanding derivative transactions designated as ''Trading'', which
includes interest rate swaps, cross currency swaps, cross currency
options and credit default swaps, are measured at their fair value. The
resulting profits/ losses are included in the profit and loss account.
Premium on options is recorded as a balance sheet item and transferred
to Profit and Loss Account on maturity/ cancellation.
Derivative transactions in Exchange Traded Currency Futures (ETCF)
segments designated as trading includes Currency Futures, Currency
Options and Interest Rate Futures which are measured at their fair
value and are cash settled on T 1 basis. The resulting profits / losses
on these transactions are transferred to Profit and Loss Account on the
month end settlement date stipulated by respective exchanges.
Fixed assets are carried at historical cost (inclusive of installation
cost) except wherever revalued. The appreciation on revaluation, if
any, is credited to the Revaluation Reserve Account. In respect of
revalued assets, the additional depreciation consequent to revaluation
is transferred from Revaluation Reserve to the Profit and Loss Account.
ii. Fixed assets individually costing less than Rs. 5000 are fully
depreciated in the year of addition.
iii. Depreciation on tangible asset is allocated over useful life of
the asset as estimated by the Management. Depreciation and
amortisation methods, useful lives and residual values are reviewed
periodically. If the Management''s estimate of the useful life of a
fixed asset at the time of acquisition of the asset or of the remaining
useful life on a subsequent review is shorter, depreciation is provided
at a higher rate based on Management''s estimates of the useful life/
remaining useful life.
v. Leasehold land is amortised over the period of lease.
Computer Software (non-integral) individually costing more than Rs. 2.50
lakh is capitalised and depreciated over its useful life, not exceeding
5 years.
The useful lives for these assets are different from the useful lives
as prescribed under Part C of Schedule II of the Companies Act, 2013.
Based on internal assessment and technical evaluation carried out, the
Management believes that the useful lives as given above best represent
the period over which the Management expects to use these assets.
Depreciation on additions/ sale of fixed assets during the year is
provided for the period for which assets were actually held.
8 Securitisation Transactions:
Securitisation of various loans results in sale of these assets to
Special Purpose Vehicles (''SPVs''), which, in turn issue securities
to investors. Financial assets are partially or wholly derecognised
when the control of the contractual rights in the securitised assets is
lost. The Bank accounts for any loss arising on sale immediately at the
time of sale and the profit/ premium arising on account of sale is
amortised over the life of the securities issued or to be issued by the
SPV to which the assets are sold.
9 Sale of financial assets to Securitisation Companies/ Reconstruction
Companies:
Sale of financial assets to Securitisation Companies (SCs)/
Reconstruction Companies (RCs) is reckoned at the lower of the
redemption value of Security Receipts (SRs)/ Pass Through Certificates
(PTCs) received and the Net Book Value of the financial asset. Gains
arising on such sale or realisation are not recognised in the Profit
and Loss Account but earmarked as provisions for meeting the losses/
shortfall arising on sale of other financial assets to SCs/ RCs or
sale/ realisation of other SRs/ PTCs. Losses arising on such sale or
realisation are first set off against balance of provisions, if any,
created out of earlier gains and residual amount of losses are charged
to Profit and Loss Account.
Foreign Currency Transactions:
Foreign currency transactions on initial recognition are recorded at
the exchange rate prevailing on the date of transaction. Monetary
foreign currency assets and liabilities are translated at the closing
rates prescribed by Foreign Exchange Dealers Association of India
(FEDAI) and the resultant gain or loss is recognised in the Profit and
Loss Account. Exchange differences arising on the settlement of
monetary items are recognised as income or expense in the period in
which they arise.
Premium or discount arising at the inception of Forward Exchange
Contracts which are not intended for trading is amortised as expense or
income over the life of the contract. Premium or discount on other
Forward Exchange Contracts is not recognised.
iii. Outstanding Forward Exchange Contracts which are not intended for
trading are revalued at closing Foreign Exchange Dealers Association of
India (FEDAI) rates. Other outstanding Forward Exchange Contracts are
valued at rates of exchange notified by FEDAI for specified maturities
or at interpolated rates for in-between maturities. The resultant
profit/ losses are recognised in the Profit and Loss Account.
iv. Profit/ losses arising on premature termination of Forward
Exchange Contracts, together with unamortised premium or discount, if
any, is recognised on the date of termination.
v. Contingent liability in respect of outstanding Forward Exchange
Contracts is calculated at the contracted rates of exchange and in
respect of guarantees, acceptances, endorsements and other obligations
are calculated at the closing FEDAI rates.
vi. Operations of foreign branch are classified as Integral Foreign
Operations. Assets and Liabilities are translated at the closing rates
prescribed by FEDAI. Income and Expenditure items are translated at
quarterly average closing rates. The resultant gain or loss is
recognised in the Profit and Loss Account.
11 Employee Benefits
a) Payments to defined contribution schemes are charged to Profit and
Loss Account of the year when contribution are due.
b) For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each Balance Sheet date. Actuarial
gains or losses are recognised in the Profit and Loss Account for the
period in which they occur.
c) The undiscounted amount of short-term employee benefits expected to
be paid in exchange for the services rendered by employees is
recognised during the period when the employee renders the service.
Segment Reporting
The Bank operates in three segments - wholesale banking, retail banking
and treasury services. These segments have been identified in line with
Accounting Standard 17 on segment reporting after considering the
nature and risk profile of the products and services, the target
customer profile, the organisation structure and the internal reporting
system of the Bank.
Segment revenue, results, assets, and liabilities include the amounts
identifiable to each of the segments as also amounts allocated, as
estimated by the Management. Assets and liabilities that cannot be
allocated to identifiable segments are grouped under unallocated assets
and liabilities.
13 Income Tax
i. Tax expense comprises of current and deferred tax.
Current tax is the amount of Income Tax determined to be payable
(recoverable) in respect of taxable income (tax loss) for a period.
ii. Deferred tax for timing differences between the book and tax
profits for the year is accounted for, using the tax rates and laws
that have been substantively enacted as of the balance sheet date.
Deferred tax assets arising from timing differences are recognised to
the extent there is reasonable certainty that these would be realized
in future.
iii. Deferred tax assets in case of unabsorbed losses are recognised
only if there is virtual certainty that such deferred tax asset can be
realized against future taxable profits.
Disputed taxes not provided for including departmental appeals are
included under Contingent Liabilities.
14 Earnings Per Share
The Bank reports basic and diluted Earnings per share in accordance
with Accounting Standard 20. Basic Earnings per Share is computed by
dividing the Net Profit After Tax by the weighted average number of
equity shares outstanding for the year.
Diluted Earnings per share reflect the potential dilution that could
occur if securities or other contracts to issue equity shares were
exercised or converted during the period. Diluted Earnings per share is
computed by dividing the Net Profit After Tax by the sum of the
weighted average number of equity shares and dilutive potential equity
shares outstanding at the year end.
15 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 the estimated
current realisable value. 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 estimated current realisable value
of the asset.
16 Provisions, Contingent Liabilities and Contingent Assets
In conformity with Accounting Standard 29, Provisions, Contingent
Liabilities and Contingent Assets, the Bank recognises provisions only
when it has a present obligation as a result of a past event, when 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.
ii. Provisions are not discounted to its present value and are
determined based on best estimate required to settle the obligation at
the balance sheet date.
iii. Reimbursement expected in respect of expenditure required to
settle a provision is recognised only when it is virtually certain that
the reimbursement will be received.
Contingent Assets are not recognised.
Mar 31, 2014
1. Basis of Preparation
The financial statements have been prepared in accordance with
requirements prescribed under the Third Schedule of the Banking
Regulation Act, 1949. The accounting policies used in the preparation
of these financial statements, in all material aspects, conform 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) issued by the Institute of Chartered
Accountants of India (ICAI) and notified by the Companies (Accounting
Standards) Rules, 2006 (as amended) to the extent applicable and
practices generally prevalent in the banking industry in India. The
Bank follows the accrual method of accounting, except where otherwise
stated, and the historical cost convention.
2. Use of Estimates
The preparation of financial statements requires the management to make
estimates and assumptions that affect the reported amount of assets,
liabilities, expenses, income and disclosure of contingent liabilities
as at the date of the financial statements. Management believes that
these estimates and assumptions are reasonable and prudent. However,
actual results could differ from estimates. Any revision to accounting
estimates is recognized prospectively in current and future periods.
3. Revenue Recognition
Revenue is recognized to the extent it is probable that the economic
benefits will flow to the Bank and the revenue can be reliably measured
i. Interest income is recognized on accrual basis except in the case of
non-performing assets where it is recognised upon realisation as per
the prudential norms of the RBI.
ii. Commissions on Letter of Credit (LC)/ Bank Guarantee (BG) are
accrued over the period of LC/ BG.
iii. Fee based income are accrued on certainty of receipt and is based
on milestones achieved as per terms of agreement with the client.
iv. Income on discounted instruments is recognised over the tenure of
the instrument on a constant yield basis.
v. Dividend is accounted on an accrual basis when the right to receive
the same is established.
vi. In case of advances, recovery is appropriated as per the order of
appropriation specified in the loan agreement / restructuring package.
4. Advances and Provisions
i. Advances are classified into Standard, Sub-standard, Doubtful and
Loss assets and provisions are made in accordance with the prudential
norms prescribed by RBI. Advances are stated net of provisions towards
nonperforming advances.
ii. Advances are classified as Secured by Tangible Assets'' when
security of at least 10% of the advance has been stipulated/created
against tangible security including book debts. Security in the nature
of escrow, guarantee, comfort letter, charge on brand, license, patent,
copyright etc are not considered as Tangible Assets''.
iii. Amounts recovered against debts written-off in earlier years and
provisions no longer considered necessary in the context of the current
status of the borrower are recognised in the Profit And Loss account.
iv. The Bank does not make any floating provision for bad and doubtful
advances and investments.
v. Provision on loans and advances restructured/rescheduled is made in
accordance with the applicable RBI guidelines on restructuring of loans
and advances by Banks.
vi. The Bank makes countercyclical buffer as required by RBI
guidelines, amended from time to time, with the approval of the Board
and utilizes the same within the limits and in the circumstances
permitted by RBI.
5. Investments
Classification
In terms of extant guidelines of the RBI on investment classification
and valuation, the entire investment portfolio is categorised as
Schedules to the Financial Statements
i. Held To Maturity,
ii. Available For Sale and
iii. Held For Trading.
Investments under each category are further classified as
i. Government Securities
ii. Other Approved Securities
iii. Shares
iv. Debentures and Bonds
v. Subsidiaries/ Joint Ventures
vi. Others (Commercial Paper, Mutual Fund Units, Security Receipts and
Pass Through Certificate, SIDBI/NABARD/ NHB/RIDF Deposit).
Basis of Classification
a) Investments that the Bank intends to hold till maturity are
classified as ''Held to Maturity''.
b) Investments that are held principally for resale within 90 days from
the date of purchase are classified as ''Held For Trading''.
c) Investments, which are not classified in the above two categories,
are classified as ''Available For Sale''.
d) An investment is classified as ''Held To Maturity'', ''Available For
Sale'' or ''Held For Trading'' at the time of its purchase and subsequent
shifting amongst categories and its valuation is done in conformity
with RBI guidelines.
e) Investments in subsidiaries, joint venture are classified as ''Held
To Maturity''.
Valuation
i) In determining the acquisition cost of an investment:
a) Brokerage, commission, stamp duty and other taxes paid are included
in cost of acquisition in respect of acquisition of equity instruments
from the secondary market whereas in respect of other investments,
including treasury investments, such expenses are charged to Profit and
Loss Account.
b) Broken period interest paid/ received is excluded from the
acquisition cost/ sale and treated as interest expense/ income.
c) Cost is determined on the weighted average cost method.
ii) Investments ''Held To Maturity'' are carried at acquisition cost
unless it is more than the face value, in which case the premium is
amortised on straight line basis over the remaining period of maturity.
Diminution, other than temporary, in the value of investments in
subsidiaries/ joint venture under this category is provided for each
investment individually.
iii) Investments ''Held For Trading'' and ''Available For Sale'' are marked
to market scrip-wise and the resultant net depreciation, if any, in
each category is recognized in the Profit and Loss Account, while the
net appreciation, if any, are ignored.
a) Treasury Bills, commercial papers and certificates of deposit being
discounted instruments are valued at carrying cost,
b) In respect of traded/ quoted investments, the market price is taken
from the trades/ quotes available on the stock exchanges. Government
Securities are valued at market prices or prices declared by Primary
Dealers Association of India (PDAI) jointly with Fixed Income Money
Market and Derivative Association of India (FIMMDA).
c) The unquoted shares are valued at break-up value or at Net Asset
Value if the latest balance sheet is available, else, at Rs. 1/- per
company and units are valued at repurchase price as per relevant RBI
guidelines. The unquoted fixed income securities (other than
government securities) are valued on Yield to Maturity (YTM) basis with
appropriate mark-up over the YTM rates for Central Government
securities of equivalent maturity. Such mark-up and YTM rates applied
are as per the relevant rates published by FIMMDA.
d) Security receipts issued by the asset reconstruction companies are
valued in accordance with the guidelines applicable to such
instruments, prescribed by RBI from time to time. Accordingly, in cases
where the cash flows from security receipts issued by the asset
reconstruction companies are limited to the actual realisation of the
financial assets assigned to the instruments in the concerned scheme,
the Bank reckons the net asset value obtained from the asset
reconstruction company from time to time, for valuation of such
investments at each reporting period end.
e) Preference share valued at market rates, if quoted or on appropriate
yield to maturity basis not exceeding redemption value as per RBI
guidelines.
Profit or Loss on sale of investments is credited/ debited to Profit
and Loss Account. However, profits on sale of investments in Held to
Maturity category is first credited to Profit and Loss Account and
thereafter appropriated, net of applicable taxes and amount required to
be transferred to Statutory Reserves, to the Capital Reserve Account at
the year/period end. Loss on sale is recognized in the Profit and Loss
Account.
Investments are shown net of provisions.
Repo and reverse repo transactions
In accordance with the RBI guidelines repo and reverse repo
transactions in government securities and corporate debt securities
(excluding transactions conducted under Liquidity Adjustment Facility
(''LAF'') and Marginal Standby Facility (''MSF'') with RBI) are reflected
as borrowing and lending transactions respectively. Borrowing cost on
repo transactions is accounted as interest expense and revenue on
reverse repo transactions is accounted as interest income.
In respect of repo transactions under LAF and MSF with RBI, amount
borrowed from RBI is credited to investment account and reversed on
maturity of the transaction. Costs thereon are accounted for as
interest expense. In respect of reverse repo transactions under LAF,
amount lent to RBI is debited to investment account and reversed on
maturity of the transaction. Revenues thereon are accounted as interest
income.
6. Derivative Transactions
a) Net interest payable/ receivable on derivative transactions is
accounted on accrual basis.
b) On premature termination of Hedge swaps, any profit/ losses are
recognised over the remaining contractual life of the swap or the
residual life of the asset/ liability whichever is lesser.
c) Redesignation of hedge swaps by change of underlying liability is
accounted as the termination of one hedge and acquisition of another.
d) Hedge contracts are not marked to market unless the underlying is
also marked to market. In respect of hedge contracts that are marked to
market, changes in the market value are recognized in the profit and
loss account.
Outstanding derivative transactions designated as ''Trading'', which
includes interest rate swaps, cross currency swaps, cross currency
options and credit default swaps, are measured at their fair value. The
resulting profits/ losses are included in the profit and loss account.
Premium on options is recorded as a balance sheet item and transferred
to Profit and Loss Account on maturity/ cancellation.
Derivative Transactions in Exchange Traded Currency Futures (ETCF''s)
segments designated as trading includes Currency Futures, Currency
Options and Interest Rate Futures which are measured at their fair
value and are cash settled on T 1 basis. The resulting profits / losses
on these transactions are transferred to Profit & Loss Account on the
month end settlement date stipulated by Respective Exchanges.
i. Fixed assets are carried at historical cost (inclusive of
installation cost) except wherever revalued. The appreciation on
revaluation, if any, is credited to the Revaluation Reserve'' Account.
In respect of revalued assets, the additional depreciation consequent
to revaluation is transferred from Revaluation Reserve to the Profit
And Loss Account.
ii. Fixed assets individually costing less than Rs. 5000 are fully
depreciated in the year of addition.
iii. Depreciation is provided on Straight Line Method (SLM) from the
date of addition. The rates of depreciation prescribed in Schedule XIV
of the Companies Act, 1956 are considered as the minimum rates. If the
management''s estimate of the useful life of a fixed asset at the time
of acquisition of the asset or of the remaining useful life on a
subsequent review is shorter, depreciation is provided at a higher rate
based on management''s estimates of the useful life/ remaining useful
life. Pursuant to this policy, depreciation has been provided using the
following rates:
iv. Depreciation on additions/ sale of fixed assets during the year is
provided for the period for which assets were actually held.
v. Leasehold land is amortised over the period of lease.vi. Computer
Software (non-integral) individually costing more than Rs. 2.50 lacs is
capitalised and depreciated over its useful life, not exceeding 5
years.
8. Securitisation Transactions:
Securitisation of various loans results in sale of these assets to
Special Purpose Vehicles (''SPVs''), which, in turn issue securities to
investors. Financial assets are partially or wholly derecognised when
the control of the contractual rights in the securitised assets is
lost. The Bank accounts for any loss arising on sale immediately at the
time of sale and the profit/ premium arising on account of sale is
amortised over the life of the securities issued or to be issued by the
SPV to which the assets are sold.
9. Sale of financial assets to Securitization Companies/ Reconstruction
Companies:
Sale of financial assets to Securitisation Companies (SCs)/
Reconstruction Companies (RCs) is reckoned at the lower of the
redemption value of Security Receipts (SRs)/ Pass Through Certificates
(PTCs) received and the net book value of the financial asset. Gains
arising on such sale or realisation are not recognised in the profit
and loss account but earmarked as provisions for meeting the losses/
shortfall arising on sale of other financial assets to SCs/ RCs or
sale/ realisation of other SRs/ PTCs. Losses arising on such sale or
realisation are first set off against balance of provisions, if any,
created out of earlier gains and residual amount of losses are charged
to profit and loss account.
10. Foreign Currency Transactions:
i. Foreign currency transactions, on initial recognition are recorded
at the exchange rate prevailing on the date of transaction. Monetary
foreign currency assets and liabilities are translated at the closing
rates prescribed by Foreign Exchange Dealers Association of India
(FEDAI) and the resultant gain or loss is recognised in the Profit and
Loss account. Exchange differences arising on the settlement of
monetary items are recognised as income or expense in the period in
which they arise.
ii. Premium or discount arising at the inception of Forward Exchange
Contracts which are not intended for trading is amortised as expense or
income over the life of the contract. Premium or discount on other
Forward Exchange Contracts is not recognised.
iii. Outstanding Forward Exchange Contracts which are not intended for
trading are revalued at closing FEDAI rates. Other outstanding Forward
Exchange Contracts are valued at rates of exchange notified by FEDAI
for specified maturities or at interpolated rates for in-between
maturities. The resultant profit/ losses are recognised in the Profit
and Loss Account.
iv. Profit/ losses arising on premature termination of Forward Exchange
Contracts, together with unamortized premium or discount, if any, is
recognised on the date of termination.
v. Contingent liability in respect of outstanding forward exchange
contracts is calculated at the contracted rates of exchange and in
respect of guarantees; acceptances, endorsements and other obligations
are calculated at the closing FEDAI rates.
vi. Operations of foreign branch are classified as Integral Foreign
Operations''. Assets and Liabilities are translated at the closing rates
prescribed by Foreign Exchange Dealers Association of India (FEDAI).
Income and Expenditure items are translated at quarterly average
closing rates. The resultant gain or loss is recognised in the Profit
and Loss Account.
11. Employee Benefits
a) Payments to defined contribution schemes are charged to Profit and
Loss Account of the year when contribution are due.
b) For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each Balance Sheet date. Actuarial
gains or losses are recognized in the profit and loss account for the
period in which they occur.
c) The undiscounted amount of short-term employee benefits expected to
be paid in exchange for the services rendered by employees is
recognized during the period when the employee renders the service.
12. Segment Reporting
The Bank operates in three segments wholesale banking, retail banking
and treasury services. These segments have been identified in line with
AS-17 on segment reporting after considering the nature and risk
profile of the products and services, the target customer profile, the
organization structure and the internal reporting system of the Bank.
Segment revenue, results, assets and liabilities include the amounts
identifiable to each of the segments as also amounts allocated, as
estimated by the management. Assets and liabilities that cannot be
allocated to identifiable segments are grouped under unallocated assets
and liabilities.
13. Income Tax
i. Tax expense comprises of current and deferred tax.
Current tax is the amount of Income tax determined to be payable
(recoverable) in respect of taxable income (tax loss) for a period.
ii. Deferred tax for timing differences between the book and tax
profits for the year is accounted for, using the tax rates and laws
that have been substantively enacted as of the balance sheet date.
Deferred tax assets arising from timing differences are recognized to
the extent there is reasonable certainty that these would be realized
in future.
iii. Deferred tax assets in case of unabsorbed losses are recognized
only if there is virtual certainty that such deferred tax asset can be
realized against future taxable profits.
iv. Disputed taxes not provided for including departmental appeals are
included under Contingent Liabilities
14. Earnings Per Share
i. The Bank reports basic and diluted Earnings Per Share in accordance
with AS 20. Basic Earnings Per Share is computed by dividing the net
profit after tax by the weighted average number of equity shares
outstanding for the year.
ii. Diluted Earnings Per Share reflect the potential dilution that
could occur if securities or other contracts to issue equity shares
were exercised or converted during the period. Diluted Earnings Per
Share is computed by dividing the net profit after tax by the sum of
the weighted average number of equity shares and dilutive potential
equity shares outstanding at the year end.
15. 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 the estimated
current realizable value. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the asset exceeds estimated current realizable value
of the asset.
16. Provisions, Contingent Liabilities and Contingent Assets
i. In conformity with AS 29, Provisions, Contingent Liabilities and
Contingent Assets, 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.
ii. Provisions are not discounted to its present value and are
determined based on best estimate required to settle the obligation at
the balance sheet date.
iii. Reimbursement expected in respect of expenditure required to
settle a provision is recognised only when it is virtually certain that
the reimbursement will be received.
Mar 31, 2013
1 Basis of Preparation
The financial statements have been prepared in accordance with
requirements prescribed under the Third Schedule of the Banking
Regulation Act, 1949. The accounting policies used in the preparation
of these financial statements, in all material aspects, conform 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) issued by the Institute of Chartered
Accountants of India (ICAI) and notified by the Companies (Accounting
Standards) Rules, 2006 (as amended) to the extent applicable and
practices generally prevalent in the banking industry in India. The
Bank follows the accrual method of accounting, except where otherwise
stated, and the historical cost convention.
2 Use of Estimates
The preparation of financial statements requires the management to make
estimates and assumptions that affect the reported amount of assets,
liabilities, expenses, income and disclosure of contingent liabilities
as at the date of the financial statements. Management believes that
these estimates and assumptions are reasonable and prudent. However,
actual results could differ from estimates. Any revision to accounting
estimates is recognized prospectively in current and future periods.
3 Revenue Recognition
Revenue is recognized to the extent it is probable that the economic
benefits will flow to the Bank and the revenue can be reliably measured
i. Interest income is recognized on accrual basis except in the case
of non-performing assets where it is recognised upon realisation as per
the prudential norms of the RBI.
ii. Commissions on Letter of Credit (LC)/ Bank Guarantee (BG) are
reckoned as accrued, upfront in cases where the commission does not
exceed Rs. 1 lac and, in other cases, accrued over the period of LC/
BG.
iii. Fee based income are accrued on certainty of receipt and is based
on milestones achieved as per terms of agreement with the client.
iv. Income on discounted instruments is recognised over the tenure of
the instrument on a constant yield basis.
v. Dividend is accounted on an accrual basis when the right to receive
the same is established.
vi. In case of advances, recovery is appropriated as per the order of
appropriation specified in the loan agreement / restructuring package.
4 Advances and Provisions
i. Advances are classified into Standard, Sub- standard, Doubtful and
Loss assets and provisions are made in accordance with the prudential
norms prescribed by RBI. Advances are stated net of provisions towards
non- performing advances.
ii. Advances are classified as ''Secured by Tangible Assets'' when
security of at least 10% of the advance has been stipulated/created
against tangible security including book debts. Security in the nature
of escrow, guarantee, comfort letter, charge on brand, license, patent,
copyright etc are not considered as ''Tangible Assets''.
iii. Amounts recovered against debts written- off in earlier years and
provisions no longer considered necessary in the context of the current
status of the borrower are recognised in the Profit And Loss account.
5 Investments classification
In terms of extant guidelines of the RBI on investment classification
and valuation, the entire investment portfolio is categorised as
i, Held To Maturity,
ii, Available For Sale and
iii, Held For Trading,
Investments under each category are further classified as
i, Government Securities
ii, Other Approved Securities
iii, Shares
iv, Debentures and Bonds
v, Subsidiaries/ Joint Ventures
vi, Others (Commercial Paper, Mutual Fund Units, Security Receipts and
Pass Through Certificate),
Basis of Classification
a) Investments that the Bank intends to hold till maturity are
classified as ''Held to Maturity'',
b) Investments that are held principally for resale within 90 days from
the date of purchase are classified as ''Held For Trading'',
c) Investments, which are not classified in the above two categories,
are classified as ''Available For Sale'',
d) An investment is classified as ''Held To Maturity'', ''Available For
Sale'' or ''Held For Trading'' at the time of its purchase and subsequent
shifting amongst categories and its valuation is done in conformity
with RBI guidelines,
e) Investments in subsidiaries, joint venture are classified as ''Held
To Maturity'',
Valuation
i) In determining the acquisition cost of an investment:
a) Brokerage, commission, stamp duty and other taxes paid are included
in cost of acquisition in respect of acquisition of equity instruments
from the secondary market whereas in respect of other investments,
including treasury investments, such expenses are charged to Profit and
Loss Account,
b) Broken period interest paid/ received is excluded from the
acquisition cost/ sale and treated as interest expense/ income,
c) Cost is determined on the weighted average cost method,
ii) Investments ''Held To Maturity'' are carried at acquisition cost
unless it is more than the face value, in which case the premium is
amortised on straight line basis over the remaining period of maturity,
Diminution, other than temporary, in the value of investments in
subsidiaries/ joint venture under this category is provided for each
investment individually,
iii) Investments ''Held For Trading'' and ''Available For Sale'' are marked
to market scrip-wise and the resultant net depreciation, if any, in
each category is recognized in the Profit and Loss Account, while the
net appreciation, if any, are ignored,
a) Treasury Bills, commercial papers and certificates of deposit being
discounted instruments are valued at carrying cost,
b) In respect of traded/ quoted investments, the market price is taken
from the trades/ quotes available on the stock exchanges, Government
Securities are valued at market prices or prices declared by Primary
Dealers Association of India (PDAI) jointly with Fixed Income Money
Market and Derivative Association of India (FIMMDA),
c) The unquoted shares are valued at break- up value or at Net Asset
Value if the latest balance sheet is available, else, at Rs. 1/- per
company and units are valued at repurchase price as per relevant RBI
guidelines. The unquoted fixed income securities (other than government
securities) are valued on Yield to Maturity (YTM) basis with
appropriate mark-up over the YTM rates for Central Government
securities of equivalent maturity. Such mark-up and YTM rates applied
are as per the relevant rates published by FIMMDA.
d) Security receipts issued by the asset reconstruction companies are
valued in accordance with the guidelines applicable to such
instruments, prescribed by RBI from time to time. Accordingly, in cases
where the cash flows from security receipts issued by the asset
reconstruction companies are limited to the actual realisation of the
financial assets assigned to the instruments in the concerned scheme,
the Bank reckons the net asset value obtained from the asset
reconstruction company from time to time, for valuation of such
investments at each reporting period end.
e) The debentures/ bonds/ preference shares deemed to be in the nature
of advance, are subject to the usual prudential norms of asset
classification and provisioning that are applicable to advances.
f) Preference share valued at market rates, if quoted or on appropriate
yield to maturity basis not exceeding redemption value as per RBI
guidelines.
Profit or Loss on sale of investments is credited/ debited to Profit
and Loss Account. However, profits on sale of investments in Held to
Maturity category is first credited to Profit and Loss Account and
thereafter appropriated net of applicable taxes to the Capital Reserve
Account at the year/period end. Loss on sale is recognized in the
Profit and Loss Account.
Investments are shown net of provisions.
Repo and reverse repo transactions
In accordance with the RBI guidelines repo and reverse repo
transactions in government securities and corporate debt securities
(excluding transactions conducted under Liquidity Adjustment Facility
(''LAF'') and Marginal Standby Facility (''MSF'') with RBI) are reflected
as borrowing and lending transactions respectively. Borrowing cost on
repo transactions is accounted as interest expense and revenue on
reverse repo transactions is accounted as interest income.
In respect of repo transactions under LAF and MSF with RBI, amount
borrowed from RBI is credited to investment account and reversed on
maturity of the transaction. Costs thereon are accounted for as
interest expense. In respect of reverse repo transactions under LAF,
amount lent to RBI is debited to investment account and reversed on
maturity of the transaction. Revenues thereon are accounted as
interest income.
6 Derivative Transactions
In Transactions designated as ''hedge'':
a) Net interest payable/ receivable on derivative transactions is
accounted on accrual basis.
b) On premature termination of Hedge swaps, any profit/ losses are
recognised over the remaining contractual life of the swap or the
residual life of the asset/ liability whichever is lesser.
c) Redesignation of hedge swaps by change of underlying liability is
accounted as the termination of one hedge and acquisition of another.
d) Hedge contracts are not marked to market unless the underlying is
also marked to market.
In respect of hedge contracts that are marked to market, changes in the
market value are recognized in the profit and loss account.
In Transactions Designated As ''Trading'':
Outstanding derivative transactions designated as ''Trading'', which
includes interest rate swaps, cross currency swaps, cross currency
options and credit default swaps, are measured at their fair value. The
resulting profits/ losses are included in the profit and loss account.
Premium on options is recorded as a balance sheet item and transferred
to Profit and Loss Account on maturity/ cancellation.
7 Fixed Assets and depreciation
i Fixed assets are carried at historical cost (inclusive of
installation cost) except wherever revalued. The appreciation on
revaluation, if any, is credited to the ''Revaluation Reserve'' Account.
In respect of revalued assets, the additional depreciation consequent
to revaluation is transferred from Revaluation Reserve to the Profit
And Loss Account.
ii Fixed assets individually costing less than Rs. 5000 are fully
depreciated in the year of addition.
iii Depreciation is provided on Straight Line Method (SLM) from the
date of addition. The rates of depreciation prescribed in Schedule XIV
of the Companies Act, 1956 are considered as the minimum rates. If the
management''s estimate of the useful life of a fixed asset at the time
of acquisition of the asset or of the remaining useful life on a
subsequent review is shorter, depreciation is provided at a higher rate
based on management''s estimates of the useful life/ remaining useful
life. Pursuant to this policy, depreciation has been provided using the
following rates:
iv Depreciation on additions/ sale of fixed assets during the year is
provided for the period for which assets were actually held.
v Leasehold land is amortised over the period of lease.
vi Computer Software (non-integral) individually costing more than Rs.
2.50 lacs is capitalised and depreciated over its useful life, not
exceeding 5 years.
8 Securitisation Transactions:
Securitisation of various loans results in sale of these assets to
Special Purpose Vehicles (''SPVs''), which, in turn issue securities to
investors. Financial assets are partially or wholly derecognised when
the control of the contractual rights in the securitised assets is
lost. The Bank accounts for any loss arising on sale immediately at the
time of sale and the profit/ premium arising on account of sale is
amortised over the life of the securities issued or to be issued by the
SPV to which the assets are sold.
9 Sale of financial assets to Securitization Companies/ Reconstruction
Companies:
Sale of financial assets to Securitisation Companies (SCs)/
Reconstruction Companies (RCs) is reckoned at the lower of the
redemption value of Security Receipts (SRs)/ Pass Through Certificates
(PTCs) received and the net book value of the financial asset, Gains
arising on such sale or realisation are not recognised in the profit
and loss account but earmarked as provisions for meeting the losses/
shortfall arising on sale of other financial assets to SCs/ RCs or
sale/ realisation of other SRs/ PTCs, Losses arising on such sale or
realisation are first set off against balance of provisions, if any,
created out of earlier gains and residual amount of losses are charged
to profit and loss account,
10 Foreign currency Transactions:
i Foreign currency transactions, on initial recognition are recorded at
the exchange rate prevailing on the date of transaction, Monetary
foreign currency assets and liabilities are translated at the closing
rates prescribed by Foreign Exchange Dealers Association of India
(FEDAI) and the resultant gain or loss is recognised in the Profit and
Loss account, Exchange differences arising on the settlement of
monetary items are recognised as income or expense in the period in
which they arise,
ii Premium or discount arising at the inception of Forward Exchange
Contracts which are not intended for trading is amortised as expense or
income over the life of the contract, Premium or discount on other
Forward Exchange Contracts is not recognised,
iii Outstanding Forward Exchange Contracts which are not intended for
trading are revalued at closing FEDAI rates, Other outstanding Forward
Exchange Contracts are valued at rates of exchange notified by FEDAI
for specified maturities or at interpolated rates for in- between
maturities, The resultant profit/ losses are recognised in the Profit
and Loss Account,
iv Profit/ losses arising on premature termination of Forward Exchange
Contracts, together with unamortized premium or discount, if any, is
recognised on the date of termination,
v Contingent liability in respect of outstanding forward exchange
contracts is calculated at the contracted rates of exchange and in
respect of guarantees; acceptances, endorsements and other obligations
are calculated at the closing FEDAI rates,
vi Operations of foreign branch are classified as ''Integral Foreign
Operations'', Assets and Liabilities are translated at the closing rates
prescribed by Foreign Exchange Dealers Association of India (FEDAI)
Income and Expenditure items are translated at quarterly average
closing rates, The resultant gain or loss is recognised in the Profit
and Loss Account,
11 Employee benefits
i post-employment benefit plans
a) Payments to defined contribution schemes are charged to Profit and
Loss Account of the year when contribution are due,
b) For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each Balance Sheet date, Actuarial
gains or losses are recognized in the profit and loss account for the
period in which they occur,
Ii Short-Term Employee Benefit
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
during the period when the employee renders the service,
12 Segment Reporting
The Bank operates in three segments wholesale banking, retail banking
and treasury services, These segments have been identified in line with
AS-17 on segment reporting after considering the nature and risk
profile of the products and services, the target customer profile, the
organization structure and the internal reporting system of the Bank.
Segment revenue, results, assets and liabilities include the amounts
identifiable to each of the segments as also amounts allocated, as
estimated by the management. Assets and liabilities that cannot be
allocated to identifiable segments are grouped under unallocated assets
and liabilities.
13 Income Tax
i Tax expense comprises of current and deferred tax.
Current tax is the amount of Income tax determined to be payable
(recoverable) in respect of taxable income (tax loss) for a period.
ii Deferred tax for timing differences between the book and tax profits
for the year is accounted for, using the tax rates and laws that have
been substantively enacted as of the balance sheet date. Deferred tax
assets arising from timing differences are recognized to the extent
there is reasonable certainty that these would be realized in future.
iii Deferred tax assets in case of unabsorbed losses are recognized
only if there is virtual certainty that such deferred tax asset can be
realized against future taxable profits.
iv Disputed taxes not provided for including departmental appeals are
included under Contingent Liabilities.
14 Earnings Per Share
i The Bank reports basic and diluted Earnings Per Share in accordance
with AS 20. Basic Earnings Per Share is computed by dividing the net
profit after tax by the weighted average number of equity shares
outstanding for the year.
ii Diluted Earnings Per Share reflect the potential dilution that could
occur if securities or other contracts to issue equity shares were
exercised or converted during the period. Diluted Earnings Per Share is
computed by dividing the net profit after tax by the sum of the
weighted average number of equity shares and dilutive potential equity
shares outstanding at the year end.
15 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 the estimated
current realizable value. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the asset exceeds estimated current
realizable value of the asset.
16 Provisions, Contingent Liabilities and Contingent Assets
i In conformity with AS 29, Provisions, Contingent Liabilities and
Contingent Assets, 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.
ii Provisions are not discounted to its present value and are
determined based on best estimate required to settle the obligation at
the balance sheet date.
iii Reimbursement expected in respect of expenditure required to settle
a provision is recognised only when it is virtually certain that the
reimbursement will be received.
iv Contingent Assets are not recognized.
Mar 31, 2012
1. Basis of Preparation
The accompanying financial statements have been prepared on historical
basis and conform, in all material aspects, to Generally Accepted
Accounting Principles (GAAP) in India which encompasses applicable
statutory provisions, regulatory norms prescribed by Reserve Bank of
India (RBI), Accounting Standards (AS) and prevailing practices in
Banking industry.
2. Use of Estimates
The preparation of financial statements requires the management to
make estimates and assumptions that affect the reported amount of
assets, liabilities, expenses, income and disclosure of contingent
liabilities as at the date of the financial statements. Management
believes that these estimates and assumptions are reasonable and
prudent. However, actual results could differ from estimates. Any
revision to accounting estimates is recognized prospectively in current
and future periods.
3. Revenue Recognition
Revenue is recognized to the extent it is probable that the economic
benefits will fl ow to the Bank and the revenue can be reliably
measured:
i. Interest income and lease rentals are accrued except in the case of
non performing assets where it is recognised upon realisation as per
the prudential norms of the RBI.
ii. Commissions on LC/ guarantee are reckoned as accrued, upfront in
cases where the commission does not exceed Rs. 1 lakh and, in other
cases, accrued over the period of LC/ Guarantees.
iii. Fee based income are accrued on certainty of receipt and is based
on milestones achieved as per terms of agreement with the client.
iv. Income on discounted instruments is recognised over the tenure of
the instrument on a constant yield basis.
v. Dividend is accounted on an accrual basis when the right to receive
the same is established.
4. Advances and Provisions:
i. Advances are classified into Standard, Sub-standard, Doubtful and
Loss assets and provisions are made in accordance with the prudential
norms prescribed by RBI. Advances are stated net of provisions towards
non- performing advances.
ii. Advances are classified as 'Secured by Tangible Assets' when
security of at least 10% of the advance has been stipulated/created
against tangible security including book debts. Security in the nature
of escrow, guarantee, comfort letter, charge on brand, license, patent,
copyright etc are not considered as 'Tangible Assets'.
5. Investments:
Classification:
In terms of extant guidelines of the RBI, the entire investment
portfolio is categorized as
i. Held To Maturity,
ii. Available For Sale and
iii. Held For Trading.
Investments under each category are further classifi ed as
i. Government Securities
ii. Other Approved Securities
iii. Shares
iv. Debentures and Bonds
v. Subsidiaries/ Joint Ventures
vi. Others (Commercial Paper, Mutual Fund Units, etc.).
Basis of Classification:
a) Investments that the Bank intends to hold till maturity are classifi
ed as 'Held to Maturity'.
b) Investments that are held principally for resale within 90 days from
the date of purchase are classified as 'Held For Trading'.
c) Investments, which are not classified in the above two categories,
are classified as 'Available For Sale'.
d) An investment is classified as 'Held To Maturity', 'Available For
Sale' or 'Held For Trading' at the time of its purchase and subsequent
shifting amongst categories and its valuation is done in conformity
with regulatory guidelines.
e) Investments in subsidiaries and joint ventures are classified as
'Held To Maturity'.
f) The debentures/ bonds/ preference shares deemed to be in the nature
of advance, are subject to the usual prudential norms of asset classifi
cation and provisioning that are applicable to advances.
Valuation:
In determining the acquisition cost of an investment:
a) Brokerage, commission, stamp duty and other taxes paid are included
in cost of acquisition in respect of acquisition of equity instruments
from the secondary market whereas in respect of other investments,
including treasury investments, such expenses are charged to revenue.
b) Upfront incentives received on subscription to securities are
recognized as income.
c) Broken period interest paid/ received is excluded from the
acquisition cost/ sale and treated as interest expense/ income.
d) Cost is determined on the weighted average cost method.
ii) Investments 'Held To Maturity' are carried at acquisition cost
unless it is more than the face value, in which case the premium is
amortised on straight line basis over the remaining period of maturity.
Diminution, other than temporary, in the value of investments in
subsidiaries/ joint ventures under this category is provided for each
investment individually. Profits on sale of investments in this
category is first credited to Profit and Loss Account and thereafter
appropriated net of applicable taxes to the Capital Reserve Account at
the year/period end. Loss on sale is recognized in the Profit and Loss
Account.
iii) Investments 'Held For Trading' and Available For Sale' are marked
to market scrip-wise and the resultant net depreciation, if any, in
each category is recognized in the Profit and Loss account, while the
net appreciation, if any, is ignored.
a) Treasury Bills, commercial papers and certificates of deposit being
discounted instruments are valued at carrying cost,
b) In respect of traded/ quoted investments, the market price is taken
from the trades/ quotes available on the stock exchanges. Government
Securities are valued at market prices or prices declared by Primary
Dealers Association of India (PDAI) jointly with Fixed Income Money
Market and Derivative Association of India (FIMMDA)
c) The unquoted shares/ units are valued at break-up value/ repurchase
price or at Net Asset Value if the latest balance sheet is available,
else, at Rs. 1/- per company, as per relevant RBI guidelines. The
unquoted fixed income securities (other than government securities)
are valued on Yield to Maturity (YTM) basis with appropriate mark-up
over the YTM rates for Central Government securities of equivalent
maturity. Such mark- up and YTM rates applied are as per the relevant
rates published by FIMMDA.
d) Profit or Loss on sale of investments is credited/ debited to Profi
t and Loss Account (Sale of Investments).
iv) Investments are shown net of provisions.
v) Investments are shown net of securities given against borrowing and
include securities received against lending under Repo/ Reverse Repo
arrangements respectively.
6. Derivative Transactions:
i. In Transactions designated as 'Hedge':
a. Net interest payable/ receivable on derivative transactions is
accounted on accrual basis.
b. On premature termination of Hedge swaps, any profit/ losses are
recognised over the remaining contractual life of the swap or the
residual life of the asset/ liability whichever is lesser.
c. Re designation of hedge swaps by change of underlying liability is
accounted as the termination of one hedge and acquisition of another.
d. Hedge contracts are not marked to market unless the underlying is
also marked to market. In respect of hedge contracts that are marked to
market, changes in the market value are recognized in the profit and
loss account.
ii. In Transactions designated as 'Trading':
Outstanding derivative transactions designated as 'Trading', which
includes interest rate swaps, cross currency swaps, cross currency
options and forward rate agreements, are measured at their fair value.
The resulting profits/ losses are included in the profit and loss
account. Premium on options is recorded as a balance sheet item and
transferred to Profit and Loss Account on maturity/ cancellation.
7. Fixed Assets and depreciation:
i. Fixed assets are carried at historical cost (inclusive of
installation cost) except wherever revalued. The appreciation on
revaluation, if any, is credited to the 'Revaluation Reserve' Account.
In respect of revalued assets, the additional depreciation consequent
to revaluation is transferred from Revaluation Reserve to the Profit
and Loss account.
ii. Fixed assets individually costing less than Rs. 5000 are fully
depreciated in the year of addition.
iii. Depreciation is provided on Straight Line Method (SLM) from the
date of addition. The rates of depreciation prescribed in Schedule XIV
of the Companies Act, 1956 are considered as the minimum rates. If the
management's estimate of the useful life of a fixed asset at the time
of acquisition of the asset or of the remaining useful life on a
subsequent review is shorter, depreciation is provided at a higher rate
based on management's estimates of the useful life/ remaining useful
life. Pursuant to this policy, depreciation has been provided using the
following rates:
iv. Depreciation on additions/ sale of fixed assets during the year is
provided for the actual period.
v. Leasehold land is amortised over the period of lease.
vi. Computer Software (non-integral) individually costing more than Rs.
2.50 lakh is capitalised and depreciated over its useful life, not
exceeding 5 years.
8. Assets given on lease
Assets given on finance lease by the Bank on or before March 31, 2001
are classified as "Leased Assets" under "Fixed Assets". Depreciation
thereon is provided on SLM basis at the rates prescribed under Schedule
XIV of the Companies Act, 1956. The amount of "Lease Equalisation"
representing the difference between the annual lease charge and the
depreciation is adjusted in the Profit & Loss Account.
ii. Assets given under finance lease after March 31, 2001 are
accounted in accordance with the provisions of AS 19 and included under
"Advances".
9. Securitisation Transactions:
Securitisation of various loans result in sale of these assets to
Special Purpose Vehicles ('SPVs'), which, in turn issue securities to
investors. Financial assets are partially or wholly derecognised when
the control of the contractual rights in the securitised assets is
lost. The Bank accounts for any loss arising on sale immediately at the
time of sale and the profit/ premium arising on account of sale is
amortised over the life of the securities issued or to be issued by the
SPV to which the assets are sold.
Sale of financial assets to Securitization Companies/ Reconstruction
Companies:
Sale of financial assets to Securitisation Companies (SCs)/
Reconstruction Companies (RCs) is reckoned at the lower of the
redemption value of Security Receipts (SRs)/ Pass Through Certificates
(PTCs) received and the net book value of the financial asset. Gains
arising on such sale or realisation are not recognised in the profit
and loss account but earmarked as provisions for meeting the losses/
shortfall arising on sale of other financial assets to SCs/ RCs or
sale/ realisation of other SRs/ PTCs. Losses arising on such sale or
realisation are first set off against balance of provisions, if any,
created out of earlier gains and residual amount of losses are charged
to profit and loss account. The PTCs are carried at the value as
determined above, till their sale or realisation. The SRs are carried,
in the aggregate, at book value or at latest NAV, whichever is lower.
11. Foreign Currency Transactions:
i. Foreign currency transactions, on initial recognition are recorded
at the exchange rate prevailing on the date of transaction. Monetary
foreign currency assets and liabilities are translated at the closing
rates prescribed by Foreign Exchange Dealers Association of India
(FEDAI) and the resultant gain or loss is recognised in the profit and
loss account. Exchange differences arising on the settlement of
monetary items are recognised as income or expense in the period in
which they arise.
Premium or discount arising at the inception of Forward Exchange
Contracts which are not intended for trading or speculation is
amortised as expense or income over the life of the contract. Premium
or discount on other Forward Exchange Contracts is not recognised.
iii. Outstanding Forward Exchange Contracts which are not intended for
trading or speculation are revalued at closing FEDAI rates. Other
outstanding Forward Exchange Contracts are revalued at rates of
exchange notified by FEDAI for specified maturities or at
interpolated rates for in-between maturities. The resultant profit/
losses are included in the profit and loss account.
iv. Profit/ losses arising on premature termination of Forward
Exchange Contracts, together with unamortized premium or discount, if
any, is recognised on the date of termination.
v. Contingent liability in respect of outstanding forward exchange
contracts is calculated at the contracted rates of exchange and in
respect of guarantees, acceptances, endorsements and other obligations
are calculated at the closing FEDAI rates.
vi. Operations of foreign branch are classified as 'Integral Foreign
Operations' and are translated using the same principles and procedures
as those of the bank.
12. Employee Benefits
i. Post-employment benefit plans
a) Payments to defined contribution schemes are charged as expense as
they fall due.
b) For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each Balance Sheet date. Actuarial
gains or losses are recognized in full in the profit and loss account
for the period in which they occur. Past Service cost is recognized
immediately to the extent that the benefits are already vested and
otherwise is amortised on a straight-line basis over the average period
until the benefits become vested.
ii. Short-term employee Benefit:
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
during the period when the employee renders the service.
iii. Transitional Liability
The Bank has adopted Accounting Standard-15 (Revised 2005), 'Employee
Benefits' with effect from April 1, 2007. The transitional liability
arising on such adoption is amortised over a period of five years
commencing from the financial year 2007-08 in accordance with the
provisions of AS-15.
iv. The intrinsic value of options under Employee Stock Option Plan
(ESOP) is expensed on a straight-line basis over the vesting period of
the ESOP.
13. Income Tax
Tax expense comprises of current and deferred tax.
Minimum Alternate Tax (MAT) credit is recognized as an asset only when
and to the extent there is convincing evidence that the Bank will pay
normal income tax during the specified period.
Deferred tax for timing differences between the book and tax profits
for the year is accounted for, using the tax rates and laws that have
been substantively enacted as of the balance sheet date. Deferred tax
assets arising from timing differences are recognized to the extent
there is reasonable certainty that these would be realized in future.
iv. Deferred tax assets in case of unabsorbed losses are recognized
only if there is virtual certainty that such deferred tax asset can be
realized against future taxable profits.
Disputed taxes not provided for including departmental appeals are
included under Contingent Liabilities.
14. Earnings Per Share:
i. The Bank reports basic and diluted Earnings Per Share in accordance
with AS 20. Basic Earnings Per Share is computed by dividing the net
profit after tax by the weighted average number of equity shares
outstanding for the year.
Diluted Earnings Per Share reflect the potential dilution that could
occur if securities or other contracts to issue equity shares were
exercised or converted during the period. Diluted Earnings Per Share is
computed by dividing the net profit after tax by the sum of the
weighted average number of equity shares and dilutive potential equity
shares outstanding at the year end.
15. 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 the estimated
current realizable value. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the asset exceeds estimated current realizable value
of the asset.
16. Provisions, Contingent Liabilities and Contingent Assets
i. In conformity with AS 29, Provisions, Contingent Liabilities and
Contingent Assets, 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.
Provisions are not discounted to its present value and are determined
based on best estimate required to settle the obligation at the balance
sheet date.
iii. Reimbursement expected in respect of expenditure required to
settle a provision is recognised only when it is virtually certain that
the reimbursement will be received.
iv. Contingent Assets are not recognized.
A Disclosure Requirements as per Accounting Standards
1. PREMISES (AS-10)
Premises include Leasehold Land (revalued) of Rs. 1339,70,11 Thousand (Rs.
1339,70,11 Thousand) which was revalued in the year 2006-07.
Bank has revalued its Freehold Land & Residential/ Office building
based on valuations made by independent valuers during the financial
year 2006-07. The net appreciation of Rs. 2063,91,00 Thousand arising on
revaluation, being the difference between the net book value of Rs.
529,02,00 Thousand and revalued amount of Rs. 2592,93,00 Thousand as on
March 31, 2007, was credited to Revaluation Reserve.
2. EMPLOYEE BENEFITS (AS-15) (REVISED)
i. Transitional Liability
The transitional liability arising on account of adoption of Accounting
Standard-15 (Revised 2005) on "Employee Benefits" is Rs. 63,22,00
Thousand (Pension - Rs. 31,09,00 Thousand, Gratuity - Rs. 16,41,00
Thousand, Disability Assistance - Rs. 13,28,00 Thousand and Leave
encashment - Rs. 2,44,00 Thousand) (Rs. 63,22,00 Thousand) is to be charged
to revenue over the period of five years. The remaining balance of Rs.
12,50,00 Thousand (Rs. 12,50,00 Thousand) has been charged to Profit &
Loss Account being the fifth year.
ii. Defined Contribution Schemes
Bank's employees are covered by Provident Fund to which the Bank makes
a defined contribution measured as a fixed percentage of basic
salary. The Provident Fund plan is administered by the Administrators
of 'IDBI Bank Employees Provident Fund Trust'. In respect of employees
of erstwhile IHFL and IGL, provident fund contributions were made to
Regional Provident fund commissioner up to May, 2011 and thereafter the
contributions have been made to aforementioned trust. During the year
an amount of Rs. 4,54,73 Thousand (Rs. 4,26,73 thousand) has been charged
to Profit and Loss Account.
The Bank's employees joined after April 1, 2008 are covered by Defined
Contribution Pension Scheme (DCPS) to which Bank makes a defined
contribution as a fixed percentage of Pay and Dearness Allowance.
During the year an amount of Rs. 3,20,476 Thousand (Rs. 1,52,526 Thousand)
has been charged to Profit and Loss Account.
iii. Defined Benefit Schemes
a. The Bank makes contributions for the gratuity liability of the
employees, to the 'IDBI Bank Employees Gratuity Fund Trust'. The
Gratuity Fund of employees of erstwhile IHFL and erstwhile IGL is
continued with LIC under Group Gratuity Scheme.
b. Some of the employees of the Bank are also eligible for Pension
which is administered by the 'IDBI Pension Fund Trust'.
The present value of these defined benefit obligations and the
related current service cost are measured using the Projected Unit
Credit Method with actuarial valuation being carried out at each
balance sheet date.
iv. Other long term benefits
Employees of the Bank are entitled to accumulate their earned/
privilege leave up to a maximum of 180 days for officers and 300 days
for other staff. A maximum of 15 days leave is eligible for encashment
in each year. Some of the employees are eligible for Disability
Assistance and Voluntary Health Scheme which is borne by the Bank as
and when the disability/liability events occur.
In respect of erstwhile IHFL the employees are entitled to accumulate
leave upto maximum of 180 days/240 days based on their cadre and in
respect of employees of erstwhile IGL leave upto 240 days can be
accumulated.
Actuarial valuation of these benefits have been carried out using the
Projected Unit Credit Method and an amount of Rs. 51,07,18 Thousand (Rs.
39,54,98 Thousand) has been charged to Profit and Loss Account during
the year.
Mar 31, 2011
1. Basis of Preparation
The accompanying financial statements have been prepared on historical
basis and conform, in all material aspects, to Generally Accepted
Accounting Principles (GAAP) in India which encompasses applicable
statutory provisions, regulatory norms prescribed by Reserve Bank of
India (RBI), Accounting Standards (AS) and prevailing practices in
Banking industry.
2. Use of Estimates
The preparation of financial statements requires the management to make
estimates and assumptions that affect the reported amount of assets,
liabilities, expenses, income and disclosure of contingent liabilities
as at the date of the financial statements. Management believes that
these estimates and assumptions are reasonable and prudent. However,
actual results could differ from estimates. Any revision to accounting
estimates is recognized prospectively in current and future periods.
3. Revenue Recognition
Revenue is recognized to the extent it is probable that the economic
benefits will flow to the Bank and the revenue can be reliably
measured:
Interest income and lease rentals are accrued except in the case of non
performing assets where it is recognised upon realisation as per the
prudential norms of the RBI.
Commissions on LC/ guarantee are reckoned as accrued, upfront in cases
where the commission does not exceed Rs 1 lakh and, in other cases,
accrued over the period of LC/ Guarantees.
iii. Fee based income are accrued on certainty of receipt and is based
on milestones achieved as per terms of agreement with the client.
iv. Income on discounted instruments is recognised over the tenure of
the instrument on a constant yield basis.
v. Dividend is accounted on an accrual basis when the right to receive
the same is established.
4. Advances and Provisions:
i. Advances are classified into Standard, Sub-standard, Doubtful and
Loss assets and provisions are made in accordance with the prudential
norms prescribed by RBI. Advances are stated net of provisions towards
non- performing advances.
ii. Advances are classified as "Secured by Tangible Assets' when
security of at least 10% of the advance has been stipulated/created
against tangible security including book debts. Security in the nature
of escrow, guarantee, comfort letter, charge on brand, license, patent,
copyright etc are not considered as Tangible Assets'.
5. Investments:
Classification:
i. Held To Maturity,
ii. Available For Sale and
iii. Held For Trading.
Investments under each category are further classified as
i. Government Securities
ii. Other Approved Securities
iii. Shares
iv. Debentures and Bonds
v. Subsidiaries/Joint Ventures
vi. Others (Commercial Paper, Mutual Fund Units, etc.).
Basis of Classification:
a) Investments that the Bank intends to hold till maturity are
classified as 'Held to Maturity'.
b) Investments that are held principally for resale within 90 days from
the date of purchase are classified as 'Held F Trading'.
c) Investments, which are not classified in the above two categories,
are classified as 'Available For Sale'.
d) An investment is classified as 'Held To Maturity', 'Available For
Sale' or 'Held For Trading' at the time of purchase and subsequent
shifting amongst categories and its valuation is done in conformity
with regulat guidelines.
e) Investments in subsidiaries and joint ventures are classified as
'Held To Maturity'.
f) The debentures/ bonds/ preference shares deemed to be in the nature
of advance, are subject to the usual prude norms of asset
classification and provisioning that are applicable to advances.
Valuation:
i) In determining the acquisition cost of an investment:
a) Brokerage, commission, stamp duty and other taxes paid are included
in cost of acquisition in r< of acquisition of equity instruments from
the secondary market whereas in respect of other investments, including
treasury investments, such expenses are charged to revenue.
b) Upfront incentives received on subscription to securities are
recognized as income.
c) Broken period interest paid/ received is excluded from the
acquisition cost/ sale and treated as interest expense/ income.
d) Cost is determined on the weighted average cost method.
ii) Investments 'Held To Maturity' are carried at acquisition cost
unless it is more than the face value, in which case the premium is
amortised on straight line basis over the remaining period of maturity.
Diminution, other than temporary, in the value of investments in
subsidiaries/ joint ventures under this category is provided for each
investment individually. Profits on sale of investments in this
category is first credited to Profit and Loss Account and thereafter
appropriated net of applicable taxes to the Capital Reserve Account at
the year/period end. Loss on sale is recognized in the Profit and Loss
Account.
iii) Investments 'Held For Trading' and 'Available For Sale' are marked
to market scrip-wise and the resultant net depreciation, if any, in
each category is recognized in the Profit and Loss account, while the
net appreciation, if any, is ignored.
a) Treasury Bills, commercial papers and certificates of deposit being
discounted instruments are valued at carrying cost,
b) In respect of traded/ quoted investments, the market price is taken
from the trades/ quotes available on the stock exchanges. Government
Securities are valued at market prices or prices declared by Primary
Dealers Association of India (PDAI) jointly with Fixed Income Money
Market and Derivative Association of India (FIMMDA)
c) The unquoted shares/ units are valued at break-up value/ repurchase
price or at Net Asset Value if the latest balance sheet is available,
else, at Rs 1/- per company, as per relevant RBI guidelines. The
unquoted fixed income securities (other than government securities) are
valued on Yield to Maturity (YTM) basis with appropriate mark-up over
the YTM rates for Central Government securities of equivalent maturity.
Such mark-up and YTM rates applied are as per the relevant rates
published by FIMMDA.
d) Profit or Loss on sale of investments is credited/ debited to Profit
and Loss Account (Sale of Investments).
iv) Investments are shown net of provisions.
v) Investments are shown net of securities given against borrowing and
include securities received against lending under Repo/ Reverse Repo
arrangements respectively.
6. Derivative Transactions:
In Transactions designated as 'Hedge':
a. Net interest payable/ receivable on derivative transactions is
accounted on accrual basis.
b. On premature termination of Hedge swaps, any profit/ losses are
recognised over the remaining contractual life of the swap or the
residual life of the asset/ liability whichever is lesser.
c. Redesignation of hedge swaps by change of underlying liability is
accounted as the termination of one hedge and acquisition of another.
d. Hedge contracts are not marked to market unless the underlying is
also marked to market. In respect of hedge contracts that are marked to
market, changes in the market value are recognized in the profit and
loss account.
ii. ' In Transactions designated as 'Trading':
Outstanding derivative transactions designated as 'Trading', which
includes interest rate swaps, cross currency swaps, cross currency
options and forward rate agreements, are measured at their fair value.
The resulting profits/ losses are included in the profit and loss
account. Premium on options, is recorded as a balance sheet item and
transferred to Profit and Loss Account on maturity/ cancellation.
7. Fixed Assets and depreciation:
i. Fixed assets are carried at historical cost (inclusive of
installation cost) except wherever revalued. The appreciation on
revaluation, if any, is credited to the Revaluation Reserve' Account.
In respect of revalued assets, the additional depreciation consequent
to revaluation is transferred from Revaluation Reserve to the Profit
and Loss account.
ii. Fixed assets individually costing less than Rs 5000 are fully
depreciated in the year of addition.
iii. Depreciation is provided on Straight Line Method (SLM) from the
date of addition. The rates of depreciation prescribed in Schedule XIV
of the Companies Act, 1956 are considered as the minimum rates. If the
management's estimate of the useful life of a fixed asset at the time
of acquisition of the asset or of the remaining useful life on a
subsequent review is shorter, depreciation is provided at a higher rate
based on management's estimates of the useful life/ remaining useful
life. Pursuant to this policy, depreciation has been provided using the
following rates:
iv. Depreciation on additions/ sale of fixed assets during the year is
provided for the actual period.
v. Leasehold land is amortised over the period of lease.
vi. Computer Software (non-integral) individually costing more than Rs
2.50 lakh is capitalised and depreciated over its useful life, not
exceeding 5 years.
8. Assets given on lease
i. Assets given on finance lease by the Bank on or before March 31,
2001 are classified as "Leased Assets" under "Fixed Assets".
Depreciation thereon is provided on SLM basis at the rates prescribed
under Schedule XIV of the Companies Act, 1956. The amount of "Lease
Equalisation" representing the difference between the annual lease
charge and the depreciation is adjusted in the Profit & Loss Account.
ii. Assets given under finance lease after March 31, 2001 are accounted
in accordance with the provisions of AS 19 and included under
"Advances".
9. Securitisation Transactions:
Securitisation of various loans result in sale of these assets to
Special Purpose Vehicles ('SPVs'), which, in turn issue securities to
investors. Financial assets are partially or wholly derecognised when
the control of the contractual rights in the securitised assets is
lost. The Bank accounts for any loss arising on sale immediately at the
time of sale and the profit/ premium arising on account of sale is
amortised over the life of the securities issued or to be issued by the
SPV to which the assets are sold.
10. Sale of financial assets to Securitization Companies/
Reconstruction Companies:
Sale of financial assets to Securitisation Companies (SCs)/
Reconstruction Companies (RCs) is reckoned at the lower of the
redemption value of Security Receipts (SRs)/ Pass Through Certificates
(PTCs) received and the net book value of the financial asset. Gains
arising on such sale or realisation are not recognised in the profit
and loss account but earmarked as provisions for meeting the losses/
shortfall arising on sale of other financial assets to SCs/ RCs or
sale/ realisation of other SRs/ PTCs. Losses arising on such sale or
realisation are first set off against balance of provisions, if any,
created out of earlier gains and residual amount of losses are charged
to profit and loss account. The PTCs are carried at the value as
determined above, till their sale or realisation. The SRs are carried,
in the aggregate, at book value or at latest NAV, whichever is lower.
11. Foreign Currency Transactions:
i. Foreign currency transactions, on initial recognition are recorded
at the exchange rate prevailing on the date of transaction. Monetary
foreign currency assets and liabilities are translated at the closing
rates prescribed by Foreign Exchange Dealers Association of India
(FEDAI) and the resultant gain or loss is recognised in the profit and
loss account. Exchange differences arising on the settlement of
monetary items are recognised as income or expense in the period in
which they arise.
ii. Premium or discount arising at the inception of Forward Exchange
Contracts which are not intended for trading or speculation is
amortised as expense or income over the life of the contract. Premium
or discount on other Forward Exchange Contracts is not recognised.
iii. Outstanding Forward Exchange Contracts which are not intended for
trading or speculation are revalued at closing FEDAI rates. Other
outstanding Forward Exchange Contracts are revalued at rates of
exchange notified by FEDAI for specified maturities or at interpolated
rates for in-between maturities. The resultant profit/ losses are
included in the profit and loss account.
iv. Prof it/losses arising on premature termination of Forward Exchange
Contracts, together with unamortized premium or discount, if any, is
recognised on the date of termination.
V. Contingent liability in respect of outstanding forward exchange
contracts is calculated at the contracted rates of exchange and in
respect of guarantees, acceptances, endorsements and other obligations
are calculated at the closing FEDAI rates.
vi. Operations of foreign branch are classified as integral Foreign
Operations' and are translated using the same principles and procedures
as those of the bank.
12. ' Employee Benefits
i. a) Payments to defined contribution schemes are charged as expense
as they fall due.
b) For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each Balance Sheet date. Actuarial
gains or losses are recognized in full in the profit and loss account
for the period in which they occur. Past Service cost is recognized
immediately to the extent that the benefits are already vested and
otherwise is amortised on a straight-line basis over the average period
until the benefits become vested.
ii. Short-term employee Benefit:
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
during the period when the employee renders the service.
iii. Transitional Liability
The Bank has adopted Accounting Standard-15 (Revised 2005), 'Employee
Benefits' with effect from April 1, 2007. The transitional liability
arising on such adoption is amortised over a period of five years
commencing from the financial year 2007-08 in accordance with the
provisions of AS-15.
iv. The intrinsic value of options under Employee Stock Option Plan
(ESOP) is expensed on a straight-line basis over the vesting period of
the ESOP.
13. Income Tax
i. Tax expense comprises of current and deferred tax.
ii. Minimum Alternate Tax (MAT) credit is recognized as an asset only
when and to the extent there is convincing evidence that the Bank will
pay normal income tax during the specified period.
iii. Deferred tax for timing differences between the book and tax
profits for the year is accounted for, using the tax rates and laws
that have been substantively enacted as of the balance sheet date.
Deferred tax assets arising from timing differences are recognized to
the extent there is reasonable certainty that these would be realized
in future.
iv. Deferred tax assets in case of unabsorbed losses are recognized
only if there is virtual certainty that such deferred tax asset can be
realized against future taxable profits.
v. Disputed taxes not provided for including departmental appeals are
included under Contingent Liabilities.
14. Earnings Per Share:
i. The Bank reports basic and diluted Earnings Per Share in accordance
with AS 20. Basic Earnings Per Share is computed by dividing the net
profit after tax by the weighted average number of equity shares
outstanding for the year.
ii. Diluted Earnings Per Share reflect the potential dilution that
could occur if securities or other contracts to issue equity shares
were exercised or converted during the period. Diluted Earnings Per
Share is computed by dividing the net profit after tax by the sum of
the weighted average number of equity shares and dilutive potential
equity shares outstanding at the year end.
15. 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 the estimated
current realizable value. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the asset exceeds estimated current realizable value
of the asset.
16. Provisions, Contingent Liabilities and Contingent Assets
i. In conformity with AS 29, Provisions, Contingent Liabilities and
Contingent Assets, 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.
ii. Provisions are not discounted to its present value and are
determined based on best estimate required to settle the obligation at
the balance sheet date.
iii. Reimbursement expected in respect of expenditure required to
settle a provision is recognised only when it is virtually certain that
the reimbursement will be received.
iv. Contingent Assets are not recognized.
Mar 31, 2010
Not Available