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Accounting Policies of Indian Bank Company

Mar 31, 2017

1. ACCOUNTING CONVENTION

The financial statements are prepared by following the going concern concept on historical cost convention unless otherwise stated. They conform to generally accepted accounting principles in India, which comprises statutory provisions, regulatory / Reserve Bank of India guidelines, accounting standards / guidance notes issued by the Institute of Chartered Accountants of India and the practices prevalent in the Banking Industry in India. In respect of foreign branches as per statutory provisions and practices prevailing in the respective countries.

2. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

Foreign Currency transactions of Indian operations and non-integral foreign operations are accounted for as per Accounting Standard-11 (AS-11) issued by the Institute of Chartered Accountants of India (ICAI).

3.1 Translation in respect of Indian operations

1. Foreign exchange transactions are recorded at the Weekly Average Rate (WAR) notified by Foreign Exchange Dealers Association of India (FEDAI).

2. Foreign currency assets and liabilities are translated at the closing rates notified by FEDAI at the year end.

3. Acceptances, endorsements and other obligations and guarantees in foreign currency are carried at the closing rates notified by FEDAI at the yearend.

4. Exchange differences arising on settlement and translation of foreign currency assets and liabilities at the end of the financial year are recognized as income or expenses in the period in which they arise.

5. Outstanding forward exchange contracts are disclosed at the Contracted rates, and revalued at FEDAI closing rates, and the resultant effect is recognized in the Profit and Loss account.

3.2 Translation in respect of non-integral foreign operations.

Foreign branches are classified as non-integral foreign operations and the financial statements are translated as follows:

1. Assets and liabilities including contingent liabilities are translated at the closing rates notified by FEDAI at the year end.

2. Income and expenses are translated at the Quarterly Average Closing rate notified by FEDAI at the end of the respective quarter.

3. All resulting exchange differences are accumulated in a separate account “Foreign Currency Translation Reserve” (FCTR) till the disposal of the net investments.

4. INVESTMENTS

4.1 The entire investment portfolio of the Bank is classified in accordance with the RBI guidelines into three categories viz.

- Held To Maturity (HTM)

- Available For Sale (AFS)

- Held For Trading (HFT)

The securities acquired with the intention to be held till maturity are classified under "HTM” category. The securities acquired with the intention to trade by taking advantage of short term price / interest movements are classified as "HFT”. All other securities which do not fall under any of the two categories are classified under "AFS” category.

An investment is classified as Held to Maturity, Available for Sale or Held for Trading at the time of its purchase/acquisition and subsequent shifting is done in conformity with the Regulatory guidelines. Transfer of scrips, if any, from one category to another is done at the lowest of acquisition cost/book value/market value on the date of transfer and depreciation, if any, on such transfer is fully provided for.

Investment in Subsidiaries and Associates are classified as Held to Maturity.

4.2.1 Profit on sale of securities under HTM category is first taken to Profit and Loss account and thereafter appropriated to Capital Reserve account (net of taxes and amount required to be transferred to statutory reserves) and loss, if any, charged to Profit & Loss account.

4.2.2 Investments in India are valued in accordance with RBI guidelines, as under:

a) Securities in HTM category are valued at acquisition cost except where the acquisition cost is higher than the face value, in which case, such excess of acquisition cost over the face value is amortized over the remaining period of maturity. Any diminution, other than temporary, in value of investments in subsidiaries/joint ventures/Associates which are included under HTM category is recognized and provided. Such diminution is being determined and provided for each investment individually. Investment in units of Venture Capital funds (VCF) made after 23.08.2006 are classified under HTM category for initial period of 3 years and valued at cost.

b) Investment in Subsidiaries, Joint Ventures and Associates are valued at historical cost. Investment in sponsored Regional Rural Banks (RRB) are valued at carrying cost (i.e. Book value).

c) Investments in AFS category are marked to market, scrip-wise and classification wise, at quarterly intervals. Net depreciation, if any, is provided for in the Profit and Loss account while net appreciation, if any, is ignored. The book value of the individual securities does not undergo any change after marking to market.

d) The individual scripts in the HFT category are marked to market at daily intervals. Net depreciation, if any, is provided for in the Profit and Loss account while net appreciation, if any, is ignored. The Book Value of the individual securities in this category does not undergo any change.

e) Securities in AFS and HFT categories are valued asunder:

I. Central Government Securities are valued at prices / YTM rates as announced by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA).

ii. State Government and Other approved securities are valued applying the YTM method by marking up 25 basis points above the yields of the Central Government Securities of equivalent maturity put out by PDAI / FIMMD A periodically.

iii. Equity shares are valued at market price, if quoted. Unquoted equity shares are valued at break-up value (without considering revaluation reserves if any) as per the company’s latest balance sheet (not more than one year prior to the date of valuation). Otherwise, the shares are valued at Re. 1 per company.

iv. Preference shares are valued at market price, if quoted; otherwise at lower of the value determined based on the appropriate YTM rates or redemption value.

v. All debentures/bonds, other than those which are in the nature of advances, are valued on the YTM basis.

vi. Treasury bills, Certificate of deposits and Commercial papers are valued at carrying cost.

vii. Units of Mutual Funds are valued at market price, if quoted; otherwise at lower of repurchase price or

Net Asset Value (NAV). In case of funds with a lock-in period, where repurchase price / market quote is not available, units are valued at NAV, else valued at cost till the end of the lock-in period.

viii. Investment in units of Venture Capital funds (VCF) made after 23.08.2006 are classified under HTM category for initial period of 3 years and valued at cost. After period of 3 years from the date of disbursement, it will be shifted to AFS and marked-to-market as per RBI guidelines.

4.3 In respect of investment at Overseas branches, RBI guidelines or those of the host countries whichever are more stringent are followed. In case of those branches situated in countries where no guidelines are specified, the guidelines of RBI are followed.

4.4 Non-performing investment (NPI) are identified as stated below, as per guidelines issued by RBI.

a) Securities/Non-cumulative Preference shares where interest/fixed dividend/installment (including maturity proceeds) is due and remains unpaid for more than 90 days.

b) If any credit facility availed by the issuer from the Bank is a Non-performing advance, investment in any of the securities issued by the same issue is also treated as NPI.

4.5 Brokerages / Commission / incentive received on subscriptions are deducted from the cost of securities. Brokerage / Commission / Stamp duty paid in connection with acquisition of securities are treated as revenue expenses.

4.6 Interest Rate Swap transactions for trading is marked to market at quarterly intervals. The fair value of the total swaps is computed on the basis of the amount that would be received/ receivable or paid/ payable on termination of the swap agreements as on the balance sheet date. Losses arising there from, if any, are fully provided for, while the profit, if any, is ignored.

4.7 Exchange traded FX Derivatives i.e. Currency Futures, are valued at the Exchange determined prices and the resultant gains and losses are recognized in the Profit and Loss account.

4.8 Premium/interest arising at the inception of forward exchange swap facility of RBI for FCNR (B) dollar deposits is amortized as expense over the period of the swap contract.

4.9 Investments backed by guarantee of the Central Government though overdue are treated as Non Performing Asset (NPA) only when the Government repudiates its guarantee when invoked.

4.10 Investment in State Government guaranteed securities, including those in the nature of deemed advances, are subjected to asset classification and provisioning as per prudential norms if interest/ installment of principal (including maturity proceeds) or any other amount due to the Bank remains unpaid for more than 90 days.

4.11 Cost of investments is determined based on the Weighted Average Cost method in each category. Investments classified under HTM are carried at acquisition cost as arrived under Weighted Average Cost method and in case the weighted average cost is more than the face value, the premium is amortized over the remaining period of maturity.

4.12 Accounting for Repo/Reverse Repo transactions:

a. Under the Liquidity Adjustment Facility (LAF) with the RBI: Securities purchased/sold under LAF with RBI are debited/credited to Investment Account and reversed on maturity of the transaction. Interest expended/earned thereon is accounted for as expenditure/revenue.

b. Other than transactions under the Liquidity Adjustment Facility (LAF) with the RBI: The securities sold and purchased under Repo/Reverse Repo are accounted as Collateralized lending and borrowing transactions. However, securities are transferred as in the case of normal outright sale/purchase transactions and such movement of securities is reflected using the Repo/Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity. Costs and revenues are accounted as Interest expenditure/income, as the case may be. Balance in Repo Account is classified under Schedule 4 (Borrowings) and balance in Reverse Repo Account is classified under Schedule 7 (Balance with Banks and Money at Call & Short Notice).

5. FINANCIAL ASSETS SOLD TO RECOVERY COMPANIES (RC)

5.1 Security Receipts (SR) issued by RCs in respect of financial assets sold to them is recognized at lower of redemption value of SRs and Net Book Value of financial assets. SRs are valued at Net Asset Value declared by RCs on the Balance Sheet date and depreciation, if any, is provided for and appreciation is ignored.

5.2 In case of financial assets sold to RC, the valuation and, income recognition is being done as per RBI Guidelines. If the sale is for value lower than the Net Book Value (NBV) (i.e, book value less provisions held), the shortfall is debited to the Profit and Loss account or met out of utilization of Floating provision held, as per extant RBI guidelines

If the cash received (by way of initial consideration and /or redemption of security receipts) is higher than the Net Book value of the Non Performing Asset (NPA) sold to RC, then excess provision is reversed to the profit and Loss account. The quantum of excess provision reversed to profit and loss account is limited to the extent to which cash received exceeds the NBV of the NPA sold.

6 ADVANCES

6.1 In accordance with the prudential norms issued by RBI, advances in India are classified into Standard, Substandard, Doubtful and Loss assets borrower-wise.

6.2 Provisions are made for non performing advances as under:

a) Sub Standard:

i) 25% for Unsecured exposures

ii) 15% for Secured exposures

b) Doubtful category-1

i) 25% for Secured portion.

ii) 100% for Unsecured portion.

c) Doubtful Category-2

i) 40% for Secured portion.

ii) 100% for Unsecured portion.

d) Doubtful category-3 and Loss advances-100%.

6.3 Provision is made for standard advances including Restructured / Rescheduled standard advances as per RBI directives.

6.4 In respect of foreign branches, income recognition, asset classification and provisioning for loan losses are made as per local requirement or as per RBI prudential norms, whichever is more stringent.

Further, if an asset in the overseas books of the Bank requires to be classified as NPA at any point of time in terms of regulations issued by Reserve Bank of India, then all the facilities granted by the bank to the borrower and investment in all the securities issued by the borrower will be classified as NPAs/NPIs.

However, accounts classified as Nonperforming/Impaired assets (NPAs) by host regulators for reasons other than record of recovery, would be classified as NPAs at the time of consolidating financial statements in India and provided for, as required; whereas asset classification of other credit exposures to the same counterparties in other jurisdictions (including India) will continue to be governed by the extant guidelines in the respective jurisdictions.

6.5 Advances disclosed are net of provisions made for nonperforming assets, DICGC/ ECGC/ CGTMSE claims received and held pending adjustment, repayments received and kept in sundries account, participation certificates , since bills rediscounted and provision in lieu of diminution in the fair value of restructured accounts classified as standard assets.

7. FIXEDASSETS/DEPRECIATION

7.1. Premises and other fixed assets are stated at historical cost and at the revalued amount in respect of assets revalued.

7.2. Depreciation on buildings (including cost of land wherever inseparable/ not segregated) and other fixed assets in India is provided for on the straight-line method at the same rates in which the said assets were charged, as specified below:

7.3. Depreciation relatable to revalued component is charged against revaluation reserve. Depreciation on fixed assets acquired and put in to use on or before 30th September is charged at 100% of the prescribed rates and at 50% of the prescribed rates on the fixed assets acquired thereafter. No depreciation on the fixed assets is provided for in the year of sale/disposal. In respect of Assets where subsidy is received from Government, the same is credited to the respective asset account and depreciation has been charged accordingly.

7.4. Premium on leasehold land is capitalized in the year of acquisition and amortized over the period of lease.

7.5. Depreciation in respect of fixed assets at foreign branches is provided as per the practice prevailing in the respective countries.

7.6. In respect of Non Banking Assets, no depreciation is charged.

8. REVENUE RECOGNITION

8.1 Income and expenditure are generally accounted for on accrual basis, unless otherwise stated.

8.2 Income from non-performing assets, Central Government guaranteed assets (where it is overdue beyond 90 days), dividend income, insurance claims, commission on letters of credit/ guarantees issued (other than those relating to project finance), income from Banc assurance products, income from wealth management, additional interest/ overdue charges on bills purchased, finance charges on credit cards, income on Banks right to recompense, AMC charges on debit cards are accounted for on realization and Locker Rent received is accounted on accrual basis.

8.3 In case of overdue foreign bills, interest and other charges are recognized till the date of crystallization as per FEDAI guidelines.

9. CREDIT CARD REWARD POINTS

Reward points earned by card members on use of Card facility is recognized as expenditure on such use.

10. NETPROFIT/LOSS

The result disclosed in the Profit and Loss Account is after considering:

- Provision for Non-Performing Advances and / or Investments.

- General provision on Standard Advances

- Provision for Restructured Advances

- Provision for Depreciation on Fixed Assets

- Provision for Depreciation on Investments

- Transfer to/from Contingency Fund

- Provision for direct taxes

- Provision for Unheeded Foreign Currency Exposure

- Usual or/and other necessary provisions

11. STAFF RETIREMENT BENEFITS

I) PROVIDENTFUND

Provident fund is a statutory obligation and in the case of Contributory Provident Fund Optees, the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to Profit and LossAccount. The fund is managed by Indian Bank Staff Provident Fund Trust.

ii) GRATUITY

Gratuity liability is a statutory obligation as per Indian Bank Employees Gratuity Fund Rules and Regulations and is provided for on the basis of an actuarial valuation made at the end of the financial year. The gratuity liability is funded by the Bank and is managed by Indian Bank Employees Gratuity Fund Trust.

iii) PENSION

a) Pension liability is a defined benefit obligation under Indian Bank (Employees) Pension Regulations 1995 and is provided for on the basis of actuarial valuation, for the employees who have joined Bank up to 31.03.2010 and opted for pension..

b) New Pension Scheme (NPS) which is applicable to employees who joined bank on or after 01.04.2010 and it is a defined contribution scheme. Under NPS the Bank pays fixed contribution at pre determined rate and the obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit and Loss Account.

iv) COMPENSATEDABSENCES

Accumulating compensated absences such as Privilege Leave and Sick Leave are provided for based on actuarial valuation.

v) OTHER EMPLOYEE BENEFITS

Other Employee benefits such as Leave Fare Concession and Additional Retirement Benefit on Retirement are provided for based on actuarial valuation. In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective territories.

12. ACCOUNTING FORLEASES

Lease payments including cost escalation for assets taken on operating lease are recognized in the Profit and Loss Account over the lease term or life whichever is lower.

13. CONTINGENT LIABILITIESAND PROVISIONS

13.1 Contingent liability: Past events leading to, possible or present obligations are recognized as contingent liability in the following instances where:

(a) The existence of such obligations has not been confirmed

(b) no outflow of resources are required to settle such obligations

(c) a reliable estimate of the amount of the obligations cannot be made

(d) such amounts are not material

13.2 (a) Provision is recognized in case of present obligations where a reliable estimate can be made and/or where there are probable outflow of resources embodying foregoing of economic benefits to settle the obligations, excluding frivolous claims.

(b) Provision for Market Risk, Country Risk, etc., are made in terms of extant instructions of RBI.

(c) Floating provision as identified by the Bank Management is provided for. Floating provision may be utilized as per extant RBI guidelines, for-

(i) Making specific provisions for non-performing assets;

(ii) Meeting any shortfall in sale of non-performing assets.

14. IMPAIRMENTOFASSETS

Impairment losses, if any, on Fixed Assets (including revalued assets) are recognized and charged to Profit and Loss Account in accordance with the Accounting Standard 28 “Impairment of Assets”. However, an impairment loss on a revalued asset is recognized directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount held in the revaluation surplus for that same asset.

15. TAXESONINCOME

15.1 Provision for tax is made for both Current Tax and Deferred Tax.

15.2 Current tax is measured at the amount expected to be paid to the taxation authorities, using the applicable tax rates, tax laws and favorable judicial pronouncements / legal opinion.

15.3 Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is “virtual certainty” that sufficient future taxable income will be available against which such deferred tax assets will be realized.

‘Domestic SLR securities in HTM category as a percentage of Net Demand and Time Liabilities works out to 20.19% against the stipulated maximum level of20.50% (previous year 16.66% as against the stipulated maximum level of 21.50%).

‘‘Figures as per audited Balance Sheet as on 31.03.2016 was Rs.27383.61 crores. Security pledged for LAF Borrowing as on 31.03.2016 was Rs.3942.59crores. HTM Book Value without netting LAF Borrowing is Rs.31326.20 crores.

*** Figures as per audited Balance Sheet as on 31.03.2016 was Rs.23064.41 crores. Security received under LAF Lending as on

31.03.2016 was Rs.2288.00 crores. AFS Book Value without netting LAF Lending is Rs.20776.41 crores.

‘Figures as per audited Balance Sheet as on 31.03.2016 was Rs.50748.65 crores. Security pledged for LAF Borrowing as on

31.03.2016 was Rs.3942.59 crores. Security received under LAF Lending as on 31.03.2016 was Rs.2288.00 crores. Book value without netting LAF Lending/LAF Borrowing is Rs.52403.24 crores.

** Figures as per audited Balance Sheet as on 31.03.2016 was Rs.50514.67 crores. Security pledged for LAF Borrowing as on

31.03.2016 was Rs.3942.59 crores. Security received under LAF Lending as on 31.03.2016 was Rs.2288.00 crores. Book Value without netting LAF Lending/LAF Borrowing is Rs.52169.26 crores.

2.2.3 Sale and Transfers to/from HTM Category:

The value of sales and transfers of securities to / from HTM category did not exceed 5 per cent of the book value of investments held in HTM category at the beginning of the year as per RBI guidelines.

- Profit on account of sale of securities from HTM category amounting to Rs, 86.84 crores (previous yearRs, 45.82 crores) has been taken to Profit and Loss Account and thereafter an amount ofRs, 42.59 crores (previous yearRs, 22.48 crores) was transferred to Capital Reserve Account (net of taxes and the amount required to be transferred to statutory reserves).

- Shifting of securities

(i) In the beginning of the year, the Bank shifted

SLR Securities for Book Value of Rs, 6197.54 crores & Non-SLR VCF Securities for Book Value ofRs, 5.78 crores from HTM category to AFS category which has resulted in no additional provision and SLR Securities for Book Value of Rs, 5789.79 crores from AFS category to HTM category which has resulted in no adjustment of provision held against depreciation to reduce the book value to the market value.

(ii) On 20/02/2017, the Bank shifted Non-SLR securities for Book Value of Rs,10.18 crores from HFT category to AFS category.

In case of securities classified under HTM category, if acquisition cost is more than the face value, the premium is amortized over the remaining period to maturity. For the Financial Year 2016-17, a sum of Rs, 80.81 crore (previous yearRs, 61.69 crore) has been amortized and the same is reflected as a deduction from Income on Investments.

3.3 Disclosures on Risk Exposure in Derivatives

3.3.1 Qualitative Disclosures:

Banks policy permits hedging of asset as well as liability using IRS. The hedging transactions are to be accounted on an accrual basis. Swaps, which hedge interest bearing asset / liability, are accounted for as the asset or liability hedged. Outstanding swap contracts are marked to market.

All swap deals shall be based on the guidelines of International Swaps Dealers ‘Association. Bank has adequate control systems and also internal approvals prior to concluding transactions. There exists a clear functional segregation between (i) trading (Dealing)

(ii) back office (settlement, monitoring and control) and (iii) accounting sections.

In the derivatives segment, the bank’s policy permits doing proprietary trading in Overnight Index Swaps (OIS). The activities in this segment are governed by the Derivatives Policy approved by the Banks Board.

The gain or loss in OIS transactions is booked in the Profit and Loss account on the maturity or unwinding of the deal whichever is earlier. For the purpose of valuation of outstanding OIS deals, the fair value of the total swap is computed on the basis of the amount that would be receivable or payable on termination of the swap as on the balance sheet date. Losses arising there from, if any, are fully provided for while the profits, if any, are ignored.

Exchange traded FX Derivatives i.e. Currency Futures, are valued at the Exchange determined prices and the resultant gains and losses are recognized in the Profit and Loss account.

3.3.2 Quantitative Disclosures

The Bank is active in the following products under derivatives:-

- Overnight Index Swaps (OIS)

- Currency Futures

The outstanding OIS position as on 31st March 2017 was Rs, 150.00 crores (previous year Nil).

Outstanding position in Currency futures as on 31.03.2017 is Rs, 200.20 crores and previous year was Rs, 2584.92 crores

4.1.2 RBI vide their circular No.DBR.BP.BC.No.63/21.04.018/.2016-17 dated 18.04.2017 has prescribed Banks to make suitable disclosure in the “Notes to Accounts”, wherever the additional provisioning requirement assessed by RBI due to divergence in the Asset Classification exceeds certain threshold limit. No disclosure in this regard is required as divergences identified by RBI are within the threshold limits prescribed.

**As per the updated country risk classification by the ECGC, vide its circular ECGC/CUD/225/2017 dated 03.04.2017.

COUNTRY RISK MANAGEMENT:

The Bank has analyzed its net funded exposure to various countries as on 31.03.2017 and such exposure to countries other than Singapore and Sri Lanka are well within the stipulation of 1% of the total assets of the Bank. In respect of Singapore, which is classified under “Insignificant” risk category by ECGC Ltd, a provision of Rs,3.04 Cr (Previous year Rs,2.05 Cr) is available and in respect of Sri Lanka which is classified under “Low” risk category Rs,3.70 crore (Previous year Rs,4.22 Cr) is available

The disputed income tax demand as at 31.03.2017 is at Rs.2619.21 Crores (previous year Rs. 2350.60 Crores), also included under contingent liabilities, out of which Rs. 2576.67 Crores (previous year Rs. 2110.60 Crores) is the disputed income tax paid as at 31.03.2017. No provision is considered necessary for the said disputed demands on account of judicial pronouncements and favorable decisions in Banks own case.

8.1 Disclosure of Penalties imposed by RBI

During the year RBI has imposed penalty of 14.95lakhs (182entries) (Previous Year ending 2015-16 18.77lakhs-312 entries) for shortages, forgeries in soiled notes remittances and delayed / wrong reporting in ICCOMS / non adherence to RBI guidelines by the currency Chest operations.

8.2 Fixed Assets

8.2.1 The premises of the Bank include land and are stated at revalued amount. The Bank revalued its premises in the financial year 2015-16 at fair market value determined by the approved external valuers. For the year, depreciation amounting Rs.80.90 crores was charged on the opening revalued amount and adjusted against the “Revaluation Reserve Accounts”.

8.2.2 Premises include 4 properties costing 3.59 crores (Previous year 4 properties costing 3.59 crores) having revalued book value, net of depreciation at 53.75 Crore (Previous year 55.22 crore) for which registration formalities are pending.

9.2 Net Profit or loss for the period, prior period item and changes in Accounting Policies (AS 5)

During the year, the Bank has changed its accounting policy on Revenue Recognition in respect of income on Locker Rent from realization basis to accrual basis. This has impact on lowering the income on “Commission Exchange & Brokerage” by 11.45 crore in the current year withconsequentloweringof“OtherIncome,”“TotalIncome”and“NetProfit”fortheyear.

9.3 EMPLOYEE BENEFITS (AS 15)

9.3.1 Defined Contribution Plans:

Provident fund is a statutory obligation and in the case of Contributory Provident Fund Optees, the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to Profit and Loss Account. The fund is managed by Indian Bank Staff Provident Fund Trust. During the financial year 2016-17, the Bank has contributed 0.95crores(previousyearRs.2.11 crore).

New Pension Scheme (NPS) is applicable to employees who joined bank on or after 01.04.2010 and it is a defined contribution scheme. Under NPS the Bank pays fixed contribution at pre determined rate and the obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit and Loss Account. During the financial year 2016-17, the Bank has contributed Rs,35.77 crores (previous yearRs,26.47 crores).

9.3.2 Defined Benefit Plans:

The summarized position of Post-employment benefits and long term employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard 15 (Revised) are as under:

* Expected Rate of return on Plan Assets not applicable for Leave encashment.

The estimates of future salary increases are considered taking into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market and in tandem with Funding Guidelines for Superannuation Schemes communicated by IBA.

The liabilities of leave encashment are unfounded.

9.5 RELATED PARTY DISCLOSURES (AS 18)

Names of the Related Parties and their relationship with the Bank:

a) Subsidiaries:

i. Ind Bank Housing Ltd.

ii. Indian Merchant Banking Services Ltd.

b) Associates: (Regional Rural Banks)

i) Pallavan Grama Bank

ii) Saptagiri Grameena Bank

iii) Puduvai Bharathiar Grama Bank

c) Key Managerial Personnel:

Shri Mahesh Kumar Jain Executive Director (up to 01.11.2015) & Managing Director & Chief Executive Officer (w.e.f. 02.11.2015 up to 03.04.2017) Shri RSubramanian Kumar Executive Director (w.e.f. 22.01.2016 up to 28.09.2016) ShriAS Rajeev Executive Director (w.e.f. 22.01.2016)

Shri M K Bhattacharya Executive Director (w.e.f. 02.02.2017)

ii. The transactions with subsidiaries and associates have not been disclosed in view of para 9 of AS-18 Related Party Disclosure, which exempts state controlled enterprises from making any disclosure pertaining to their transactions with other related parties which are also state controlled enterprises.

9.6 Leases (AS 19)

a) The properties taken on lease / rental basis are renewable / cancellable at the option of the Bank.

The leases entered into by the Bank are for agreed period with an option to terminate the leases even during the currency of lease period by giving agreed calendar months notice in writing.

Lease rent paid for operating leases are recognized as an expense in the Profit & Loss account in the year to which it relates. The lease rent recognized during the year is Rs, 180.73 Crores (Previous year Rs,157.68 Crore).

10.7 Letter of comfort issued by the Bank:

During the year ended 31.03.2017,1093 (Previous year-967) letters of comfort have been issued by the bank amounting to Rs,2904.71 Crores (Previous Year: 2219.81 crores). The letters of comfort outstanding as on 31.03.2017 are 486 (Previous Year-326) amounting to Rs,1167.65 Crores (Previous Year: Rs,835.60 crores)

The estimated financial impact on the outstanding LOC/LOU would be to the tune of Rs,4.75 crores. During the year ended 31.03.2017, Letter of Comfort issued by our foreign branches (Singapore and Colombo) is NIL and outstanding as on 31.03.2017 is NIL.

10.8 Provision Coverage Ratio (PCR)

Non Performing Loan Provisioning Coverage Ratio is 58.14% (previous year 53.37%).

10.9 BANCASSURANCEBUSINESS

During the current year, the Bank has earned commission, etc, to the extent of Rs,12.75 Crore on sale/marketing of various Banc assurance products/Mutual Funds (previous year Rs, 9.15 Crore).

10.10 Indian Bank Trust for Rural Development

Indian Bank Trust for Rural Development has been setup by the Bank on 22.09.2008 to exclusively focus on rural development and accomplish better results by coordinating with various other players / agencies who are also engaged in the development of rural areas.

Under the Trust, Indian Bank Self Employment Training Institutes (INDSETIs) have been established in 12 centers, viz. Chittoor (in Andhra Pradesh), Puducherry (in uT of Puducherry), Cuddalore, Dharmapuri, Kancheepuram, Krishnagiri, Namakkal, Salem, Thiruvannamalai, Tiruvallur, Vellore and Villupuram (in Tamil Nadu) to impart skill oriented training to rural unemployed youth, to enable them to either self / wage employed as per the directions of Ministry of Rural Development, Govt. of India. Financial Literacy Centres (FLCs) have also been established under the Trust in 19 places viz. Chittoor, Machilipatnam (in Andhra Pradesh), Kollam, Chadayamangalam, Parassala(in Kerala), Puducherry (in UT of Puducherry), Cuddalore, Dharmapuri, Kancheepuram, Krishnagiri, Namakkal, Salem, Thiruvannamalai, Tiruvallur, Vellore, Villupuram (in Tamil Nadu) and Urban FLCs in Chennai, Delhi and Mumbai to provide financial literacy and counseling services to the general public to assist the banks in financial inclusion project.

The books of account of the T rust are being subjected to audit, independently by the Chartered Accountants appointed by the T rust

11.2 Unamortized Pension and Gratuity Liabilities:

Bank does not have any unamortized Pension and Gratuity Liability as on 31.03.2017.

11.3 Disclosures relating to Securitization:

Bank has not undertaken any securitization during the year.

11.4 Credit Default Swaps:

Bank has not entered into any Credit Default Swap during the year.

11.5 Intra Group Exposures:

No disclosure is required in view of para 9ofAS-18 Related Party Disclosure which exempts state-controlled enterprises from making any disclosure regarding related party relationships with other state-controlled enterprises and transactions with such enterprises.

11.6 Contingent liabilities include an A/c M/s Nimbus Communications Ltd., Guarantees were issued by Consortium Banks favoring BCCI. BCCI filed suit against Consortium Banks claiming guarantee liability and in the suit, conditional leave to defend was granted on making payment of 400 crores, wherein our Bank share is 100 crore. Remittance of our Banks share of 100 crore was made with the Prothonotary and Senior Master of the Honble High Court of Bombay. The summary suit is pending adjudication before Honble High Court of Bombay.

11.8 Foreign Currency Exposure:

The Bank has in place a policy on managing credit risk arising out of unhedged foreign currency exposures of its borrowers .Where there is no natural hedge, forward cover is suggested to customers in respect of import/export transactions. The forward cover will act as Unhedged risk mitigation on exchange risk. While sanctioning the facilities, bank is ensuring that all the exposures (fund based and non fund based including Letter of Comfort / Letter of Undertaking) in foreign currencies are covered by forward cover. Request for considering waiver of forward cover if any is considered only at corporate office level. While reviewing the borrowal accounts hedged and unhedged exposure are captured and impact is analyzed in credit proposals.

The Bank has retrieved an amount of 7.04 crores for the year ended 31st March 2017 and holds a provision of 8.33 crore and a capital of 8.34 crore as at the year end on Unhedged Foreign Currency Exposure to their constituents in terms of RBI circular dated January 15,2014.

11.9 Frauds reported during the year:

The Bank has reported 133 fraud cases amounting to Rs,480.45 crores and made a provision of Rs, 158.32 crores during the year net of provisions/collaterals already held. The Bank has no unamortized provision at the end of the year.

13. MISCELLANEOUS

13.1 Reconciliation and Adjustments

13.1.1 Reconciliation of Inter Branch Account is completed up to 31.03.2017. The Bank through various effective steps has achieved reduction in the old outstanding entries in IBGA. Adjustments of the remaining outstanding entries are in progress. As per the Management, 6798 IBGA credit entries aggregating to .5.67 crores are outstanding, pertaining to the period before 01/03/2009.

13.1.2 In view of the credit unreconciled entries in the Inter Branch Account outstanding for more than 6 months as on

31.03.2017, no provision is required.

13.1.3 Old outstanding entries in drafts payable, clearing adjustment, sundries receivable, sundry deposit accounts, etc. and in bank reconciliation relating to Reserve Bank of India and other banks are being regularly reviewed for appropriate adjustments.

13.1.4 Balancing of subsidiary / ledgers, registers and reconciliation with general ledgers are in branches. In the opinion of the management, consequential financial impact of the above will not be significant

13.1.5 As per information available with the Bank, there is no outstanding dues payable by the Bank to MSME units identified by the Bank, which is pending beyond the time limit prescribed under MSMED Act, 2006 and there have been no reported cases of accepted liability of delayed payments of principal amount or interest thereon for such parties during the year

13.1.6 Miscellaneous income includes

i) Asum of .212.74 crore (previous year 247.42 crore) being recovery in written-off accounts.

ii) Pursuant to Reserve Bank of India circular No. DBR No.BP.BC.75/21.04.048/2014-15 dt,11th March 2015, on sale of treatment of loss and profit made on sale of accounts, excess provision of earlier years of 2.94 crore has been reversed during the current year with consequential increase in profit for the year ended 31.03.2017

iii) Asum of 137.45 crore (previous year 125.06 crore) being recovery of processing charges during the year.

14. Dividend

Equity shares: Proposed Equity @ 60% amounting to 288.17 crore (Previous Year 72.04 crore) is appropriated from the current year profit (FY 2016-17).

15. Previous year s figures have been regrouped / reclassified, wherever necessary, to conform to current year s figures.


Mar 31, 2015

1. ACCOUNTING CONVENTION

The financial statements are prepared by following the going concern concept on historical cost convention unless otherwise stated. They conform to generally accepted accounting principles in India, which comprises statutory provisions, regulatory / Reserve Bank of India guidelines, accounting standards / guidance notes issued by the Institute of Chartered Accountants of India and the practices prevalent in the Banking Industry in India. In respect of foreign branches as per statutory provisions and practices prevailing in the respective countries.

2. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

Foreign Currency transactionsof Indian operations and non-integral foreign operations are accounted for as per Accounting Standard-11 (AS-11) issued by the InstituteofCharteredAccountantsofIndia (ICAI).

3.1 Translationinrespectof Indian operations

1. Foreign exchange transactions are recorded at the Weekly Average Rate (WAR) notified by Foreign Exchange Dealers''AssociationofIndia( FEDAI).

2. Foreign currency assets and liabilities are translated at the closing rates notifiedbyFEDAIatthe year end.

3. Acceptances, endorsements and other obligations and guarantees in foreign currency are carried at the closing rates notifiedbyFEDAI atthe year end.

4. Exchange differences arising on settlement and translation of foreign currency assets and liabilities at the end of the financial year are recognized as income or expenses inthe periodinwhich they arise.

5. Outstanding forward exchange contracts are disclosed at the Contracted rates, and revalued at FEDAI closing rates, and the resultant effect is recognized in the Profit and Loss account.

3.2 Translation in respect of non-integral foreign operations.

Foreign branches are classified as non-integral foreign operations and the financial statements are translated as follows:

1. Assets and liabilities including contingent liabilities are translated at the closing rates notified by FEDAI at the year end.

2. Income and expenses are translated at the Quarterly Average Closing rate notified by FEDAI at the end of the respective quarter.

3. All resulting exchange differences are accumulated ina separate account "Exchange Fluctuation Fund" till the disposalof the net investments.

4. INVESTMENTS

4.1 The entire investment portfolio of the Bank is classified in accordance with the RBI guidelines into three categories viz.

- Held To Maturity (HTM)

- Available For Sale (AFS)

- Held ForTrading(HFT)

The securities acquired with the intention to be held till maturity are classified under "HTM" category. The securities acquired with the intention to trade by taking advantage of short-term price / interest movements are classified as "HFT". All other securities which do not fall under any of the two categories are classified under "AFS" category.

An investment is classified as Held to Maturity, Available for Sale or Held for Trading at the time of its purchase/acquisition and subsequent shifting is done in conformity with the Regulatory guidelines. Transfer of scrips, if any, from one category to another is done at the lowest of acquisition cost/book value/market value on the date of transfer and depreciation, if any, on such transfer is fully provided for.

Investment in Subsidiaries and Associates are classified as Held to Maturity.

4.2.1 Profit on sale of securities under HTM category is first taken to Profit and Loss account and thereafter appropriated to Capital Reserve account (net of taxes and amount required to be transferred to statutory reserves) and loss, if any, charged to Profit & Loss account.

4.2.2 Investments in India are valued in accordance with RBI guidelines, as under:

a) Securities in HTM category are valued at acquisition cost except where the acquisition cost is higher than the face value, in which case, such excess of acquisition cost over the face value is amortised over the remaining period of maturity. Any diminution, other than temporary, in value of investments in subsidiaries/joint ventures/Associates which are included under HTM category is recognized and provided. Such diminution is being determined and provided for each investment individually. Investment in units of Venture Capital funds (VCF) made after 23.08.2006 are classified under HTM category for initial period of 3 years and valued at cost.

b) Investment in Subsidiaries, Joint Ventures and Associates are valued at historical cost. Investment in sponsored Regional Rural Banks (RRB) are valued at carrying cost (i.e. Book value).

c) Investments in AFS category are marked to market, scrip-wise and classification wise, at quarterly intervals. Net depreciation, if any, is provided for in the Profit and Loss account while net appreciation, if any, is ignored. The book value of the individual securities does not undergo any change after marking to market.

d) The individual scrips in the HFT category are marked to market at daily intervals. Net depreciation, if any, is provided for in the Profit and Loss account while net appreciation, if any, is ignored. The Book Value of the individual securities in this category does not undergo any change.

e) Securities in AFS and HFT categories are valued as under:

i Central Government Securities are valued at prices /

YTM rates as announced by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA).

ii. State Government and Other approved securities are valued applying the YTM method by marking up 25 basis points above the yields of the Central Government Securities of equivalent maturity put out by PDAI /FIMMDAperiodically.

iii. Equity shares are valued at market price, if quoted. Unquoted equity shares are valued at break-up value (without considering revaluation reserves if any) as per the company''s latest balance sheet (not more than one year prior to the date of valuation). Otherwise, the shares are valuedat Rs.1 per company.

iv. Preference shares are valued at market price, if quoted; otherwise at lower of the value determined based on the appropriate YTM rates or redemption value.

v. All debentures/bonds, other than those which are in the natureofadvances, are valuedontheYTM basis.

vi. Treasury bills, Certificate of deposits and Commercial papers are valuedat carrying cost.

vii. Units of Mutual Funds are valued at market price, if quoted; otherwise at lower of repurchase price or Net Asset Value (NAV). In case of funds with a lock-in period, where repurchase price / market quote is not available, units are valued atNAV, else valuedat cost till the endof the lock-in period.

viii. Investment in units of Venture Capital funds (VCF) made after 23.08.2006 are classified under HTM category for initial period of 3 years and valued at cost. After period of 3 years from the date of disbursement, it will be shifted toAFS and marked-to-market as per RBI guidelines.

4.3 In respect of investment at Overseas branches, RBI guidelines or those of the host countries whichever are more stringent are followed. In case of those branches situated in countries where no guidelines are specified, the guidelinesofRBI are followed.

4.4 Non-performing investment (NPI) are identified as stated below,as per guidelines issued byRBI.

a) Securities/Non-cumulative Preference shares where interest/fixed dividend/installment (including maturity proceeds) is due and remains unpaid for more than90days.

b) If any credit facility availed by the issuer from the Bank is a Non-performing advance, investment in any of the securities issued by the same issuer is also treatedasNPI.

4.5 Brokerages / Commission / incentive received on

subscriptions are deducted from the cost of securities. Brokerage / Commission / Stamp duty paid in connection with acquisition of securities are treated as revenue expenses.

4.6 Interest Rate Swap transactions for trading ismarked to market at quarterly intervals. The fair value of the total swaps is computed on the basis of the amount that would be received/ receivable or paid/ payable on termination of the swap agreements as on the balance sheet date. Losses arising there from, if any, are fully provided for, while the profit, if any, is ignored.

4.7 Exchange traded FX Derivatives i.e. Currency Futures, are valued at the Exchange determined prices and the resultant gains and losses are recognized in the Profit and Loss account.

4.8 Premium/interest arising at the inception of forward exchange swap facility of RBI for FCNR (B) dollar deposits is amortized as expense over the period of the swap contract.

4.9 Investments backed by guarantee of the Central Government though overdue are treated as Non Performing Asset (NPA) only when the Government repudiates its guarantee when invoked.

4.10 Investment in State Government guaranteed securities, including those in the nature of ''deemed advances'', are subjected to asset classification and provisioning as per prudential norms if interest/ installment of principal (including maturity proceeds) or any other amount due to the Bank remains unpaid for more than90days.

4.11 Cost of investments is determined based on the Weighted Average Cost method in each category. Investments classified under HTM are carried at acquisition cost as arrived under Weighted Average Cost method and in case the weighted average cost is more than the face value, the premium is amortised over the remaining period ofmaturity.

5. FINANCIAL ASSETS SOLD TO RECONSTRUCTION COMPANIES(RC)

5.1 Security Receipts (SR) issued by RCs in respect of financial assets sold to them is recognized at lower of redemption value of SRs and Net Book Value of financial assets. SRs are valued at Net Asset Value declared by RCs on the Balance Sheet date and depreciation, if any, is provided for and appreciation is ignored.

5.2 Incaseof financial assets sold to RC, the valuation and, income recognition is being done as per RBI Guidelines. If the sale is for value lower than the Net Book Value (NBV) (i.e, book value less provisions held), the shorfall is debited to the Profit and Loss account or met out of utilisation of Floating provision held, as per extant RBI guidelines. If the cash received (by way of initial consideration and /or redemption of security receipts) is higher than the Net Book value of the Non Performing Asset (NPA) sold to RC, then excess provision is reversed to the profit and Loss account. The quantum of excess provision reversed to profit and loss account is limited to the extent to which cash received exceeds the NBV ofthe NPAsold.

G6 ADVANCES

6.1 In accordance with the prudential norms issued by RBI, advances in India are classified into Standard, Sub-Standard, Doubtful and Loss assets borrower-wise,

6.2 Provisions are made for non performing advances as under:

a) Sub Standard:

i) 25% both for secured and unsecured category classified and/ orcategorized before 01.10.2014

ii) For accounts classified as Sub-Standard on or after 01.10.2014:

a)Accounts with unsecured exposures-25%

b)Others - 15%

b) Doubtful category-1

i) 100 % for secured and unsecured classified and / or categorized before 01.07.2011.

ii) 25 % for secured classified and / or categorized after 30.06.2011

iii)100% for Unsecured portion.

c) Doubtful Category -2

i) 100 % for secured and unsecured classified and / or categorized before 01.07.2011

ii) 40 % for secured classified and / or categorized after 30.06.2011

iii) 100% for Unsecured portion.

d) Doubtful category-3 and Loss advances- 100 %.

6.3 Provision is made for standard advances including Restructured / Rescheduled standard advances as per RBI directives.

6.4 In respect of foreign branches, income recognition, asset classification and provisioning for loan losses are made as per local requirement or as per RBI prudential norms, whichever ismore stringent.

Further, if an asset in the overseas books of the Bank requires to be classified as NPA at any point of time in terms of regulations issued by Reserve Bank of India, then all the facilities grantedby the banktothe borrower and investment in all the securities issued by the borrower willbeclassified asNPAs/NPIs.

However, accounts classified as Non - performing / Impaired assets (NPAs) by host regulators for reasons other than record of recovery, would be classified as NPAs at the time of consolidating financial statementsinIndia and provided for, as required; whereas asset classification of other credit exposures to the same counter parties in other jurisdictions (including India) will continue to be governed by the extant guidelines in the respective jurisdictions.

6.5 Advances disclosed are net of provisions made for non- performing assets, DICGC/ ECGC/ CGTMSE claims received and held pending adjustment, repayments received and kept in sundries account, participation certificates , usance bills rediscounted and provision in lieu of diminution in the fair value of restructured accounts classifiedasstandard assets..

7. FIXEDASSETS/DEPRECIATION

7.1. Premises and other fixed assets are stated at historical cost and at revalued amount in respect of assets revalued.

7.3. Depreciation relatable to revalued component is charged against revaluation reserve.

Depreciation on fixed assets acquired on or before 30th September is charged at 100% of the prescribed rates and at 50% of the prescribed rates on the fixed assets acquired thereafter. No depreciation on the fixed assets is provided for in the year of sale / disposal.

7.4 Premium on leasehold land is capitalised in the year of acquisition and amortized over the period oflease.

7.5 Depreciation in respect of fixed assets at foreign branches is provided as per the practice prevailing in the respective countries.

7.6 In respect of Non Banking Assets, no depreciation is charged.

8. REVENUE RECOGNITION

8.1 Income and expenditure are generally accounted for on accrual basis, unless otherwise stated.

8.2 Income from non-performing assets, Central Government guaranteed assets (where it is overdue beyond 90 days), dividend income, insurance claims, commission on letters of credit / guarantees issued (other than those relating to project finance), income from bancassurance products, income from wealth management, additional interest/ overdue charges on bills purchased, locker rent, finance charges on credit cards, income on Bank''s right to recompense, etc. are accounted for on realisation.

8.3 In case of overdue foreign bills, interest and other charges are recognised till the date of crystallisation as per FEDAI guidelines.

9. CREDIT CARD REWARD POINTS

Reward points earned by card members on use of Card facility is recognized as expenditure on such use.

10. NET PROFIT/LOSS

The result disclosed in the Profit and Loss Account is after considering:

- Provision for Non-Performing Advances and / or

Investments.

- General provision on Standard Advances

- Provision for Restructured Advances

- Provision for Depreciation on Fixed Assets

- Provision for Depreciation on Investments

- Transfer to/from Contingency Fund

- Provision for direct taxes

- Usual or/and other necessary provisions

11. STAFF RETIREMENT BENEFITS

i) PROVIDENT FUND

Provident fund is a statutory obligation and in the case of Contributory Provident Fund Optees, the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to Profit and Loss Account. The fund is managed by Indian Bank Staff Provident Fund Trust.

ii) GRATUITY

Gratuity liability is a statutory obligation as per Indian Bank Employees'' Gratuity Fund Rules and Regulations and is provided for on the basis of an actuarial valuation made at the end of the financial year. The gratuity liability is funded by the Bank and is managed by Indian Bank Employees Gratuity Fund Trust.

iii) PENSION

a) Pension liability is a defined benefit obligation under Indian Bank (Employees) Pension Regulations 1995 and is provided for on the basis of actuarial valuation, for the employees who have joined Bank up to 31.03.2010 and opted for pension.

b) New Pension Scheme (NPS) which is applicable to employees who joined bank on or after 01.04.2010 and it is a defined contribution scheme. Under NPS the Bank pays fixed contribution at pre determined rate and the obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit and LossAccount.

iv) COMPENSATED ABSENCES

Accumulating compensated absences such as Privilege Leave and Sick Leave are provided for based on actuarial valuation.

v) OTHER EMPLOYEE BENEFITS

Other Employee benefits such as Leave Encashment, Leave Fare Concession and Additional Retirement Benefit on Retirement are provided for based on actuarial valuation. In respect of overseas branches and offices, the benefits in respect of employees other than those ondeputation are valued and accounted for as per laws prevailing in the respective territories.

12. ACCOUNTING FOR LEASES

Lease payments including cost escalation for assets taken on operating lease are recognized in the Profit and Loss account over the lease term in accordance withAS19issuedbyICAI.

13. CONTINGENT LIABILITIES AND PROVISIONS

13.1 Contingent liability : Past events leading to, possible or present obligations are recognised as contingent liability in the following instances where :

(a) The existence of such obligations has not been confirmed

(b) no outflow of resources are required to settle such obligations

(c) a reliable estimate of the amount of the obligations cannotbemade

(d) such amounts are not material

13.2 (a) Provision is recognized in case of present

obligations where a reliable estimate can be made and/or where there are probable outflow of resources embodying foregoing of economic benefits to settle the obligations, excluding frivolous claims.

(b) Provision for Market Risk, Country Risk, etc., are madeintermsofextant instructionsofRBI.

(c) Floating provision as identified by the Bank Management is provided for. Floating provision may beutilizedasper extant RBI guidelines, for -

i) Making specific provisions for non-performing assets.

(ii) Meeting any shortfall in sale of non-performing assets.

14. IMPAIRMENT OF ASSETS

Impairment losses, if any, are recognised in accordance with theAccounting Standard 28 issued in this regard by the Institute ofCharteredAccountants of India (ICAI).

15. TAXES ON INCOME

15.1 Provision for tax is made for both Current Tax and Deferred Tax.

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

15.3 Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred TaxAssets are not recognised unless there is "virtual certainty" that sufficient future taxable income will be available against which such deferred tax assets will be realised.


Mar 31, 2014

1. ACCOUNTING CONVENTION

The financial statements are prepared by following the going concern concept on historical cost convention and conform to the statutory provisions and practices prevailing in India unless otherwise stated and in respect of foreign branches as per statutory provisions and practices prevailing in the respective countries.

2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

Foreign Currency transactions of Indian operations and non-integral foreign operations are accounted for as per Accounting Standard-11 (AS-11) issued by the Institute of Chartered Accountants of India (ICAI).

2.1 Translation in respect of Indian operations

1. Foreign exchange transactions are recorded at the Weekly Average Rate (WAR) notified by Foreign Exchange Dealers'' Association of India ( FEDAI).

2. Foreign currency assets and liabilities are translated at the closing rates notified by FEDAI at the year end.

3. Acceptances, endorsements and other obligations and guarantees in foreign currency are carried at the closing rates notified by FEDAI at the year end.

4. Exchange differences arising on settlement and translation of foreign currency assets and liabilities at the end of the financial year are recognized as income or expenses in the period in which they arise.

5. Outstanding forward exchange contracts are disclosed at the Contracted rates, and revalued at FEDAI closing rates, and the resultant effect is recognized in the Profit and Loss account.

2.2 Translation in respect of non-integral foreign operations.

Foreign branches are classified as non-integral foreign operations and the financial statements are translated as follows:

1. Assets and liabilities including contingent liabilities are translated at the closing rates notified by FEDAI at the year end.

2. Income and expenses are translated at the Quarterly Average Closing rate notified by FEDAI at the end of the respective quarter.

3. All resulting exchange differences are accumulated in a separate account "Exchange Fluctuation Fund" till the disposal of the net investments.

3. INVESTMENTS

3.1 The entire investment portfolio of the Bank is classified in

accordance with the RBI guidelines into three categories viz.

- Held To Maturity (HTM)

- Available For Sale (AFS)

- Held For Trading (HFT)

The securities acquired with the intention to be held till maturity are classified under "HTM" category. The securities acquired with the intention to trade by taking advantage of short-term price / interest movements are classified as "HFT". All other securities which do not fall under any of the two categories are classified under "AFS" category.

An investment is classified as Held to Maturity, Available for Sale or Held for Trading at the time of its purchase/acquisition and subsequent shifting is done in conformity with the Regulatory guidelines. Transfer of scrips, if any, from one category to another is done at the lowest of acquisition cost/book value/market value on the date of transfer and depreciation, if any, on such transfer is fully provided for.

Investment in Subsidiaries and Associates are classified as Held to Maturity.

3.2 Profit on sale of securities under HTM category is first taken to Profit and Loss account and thereafter appropriated to Capital Reserve account (net of taxes and amount required to be transferred to statutory reserves) and loss, if any, charged to Profit & Loss account.

3.3 Investments in India are valued in accordance with RBI guidelines, as under:

a) Securities in HTM category are valued at acquisition cost except where the acquisition cost is higher than the face value, in which case, such excess of acquisition cost over the face value is amortised over the remaining period of maturity. Any diminution, other than temporary, in value of investments in subsidiaries/joint ventures/Associates which are included under HTM category is recognized and provided. Such diminution is being determined and provided for each investment individually. Investment in units of Venture Capital funds (VCF) made after 23.08.2006 are classified under HTM category for initial period of 3 years and valued at cost.

b) Investment in Subsidiaries, Joint Ventures and Associates are valued at historical cost. Investment in sponsored Regional Rural Banks (RRB) are valued at carrying cost (i.e. Book value).

c) Investments in AFS category are marked to market, scrip-wise and classification wise, at quarterly intervals. Net depreciation, if any, is provided for in the Profit and Loss account while net appreciation, if any, is ignored. The book value of the individual securities does not undergo any change after marking to market.

d) The individual scrips in the HFT category are marked to market at daily intervals. Net depreciation, if any, is provided for in the Profit and Loss account while net appreciation, if any, is ignored. The Book Value of the individual securities in this category does not undergo any change.

e) Securities in AFS and HFT categories are valued as under:

i. Central Government Securities are valued at prices / YTM rates as announced by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA).

ii. State Government and Other approved securities are valued applying the YTM method by marking up 25 basis points above the yields of the Central Government Securities of equivalent maturity put out by PDAI / FIMMDA periodically.

iii. Equity shares are valued at market price, if quoted. Unquoted equity shares are valued at break-up value (without considering revaluation reserves if any) as per the company''s latest balance sheet (not more than one year prior to the date of valuation). Otherwise, the shares are valued at Re. 1 per company.

iv. Preference shares are valued at market price, if quoted; otherwise at lower of the value determined based on the appropriate YTM rates or redemption value.

v. All debentures/bonds, other than those which are in the nature of advances, are valued on the YTM basis.

vi. Treasury bills, Certificate of deposits and Commercial papers are valued at carrying cost.

vii. Units of Mutual Funds are valued at market price, if quoted; otherwise at lower of repurchase price or Net Asset Value (NAV). In case of funds with a lock- in period, where repurchase price / market quote is not available, units are valued at NAV, else valued at cost till the end of the lock-in period.

viii. Investment in units of Venture Capital funds (VCF) made after 23.08.2006 are classified under HTM category for initial period of 3 years and valued at cost. After period of 3 years from the date of disbursement, it will be shifted to AFS and marked- to-market as per RBI guidelines.

3.4 In respect of investment at Overseas branches, RBI guidelines or those of the host countries whichever are more stringent are followed. In case of those branches situated in countries where no guidelines are specified, the guidelines of RBI are followed.

3.5 Non-performing investment (NPI) are identified as stated below, as per guidelines issued by RBI.

a) Securities/Non-cumulative Preference shares where interest/fixed dividend/ installment (including maturity proceeds) is due and remains unpaid for more than 90 days.

b) If any credit facility availed by the issuer from the Bank is a Non-performing advance, investment in any of the securities issued by the same issue is also treated as NPI.

3.6 Brokerages / Commission / incentive received on subscriptions are deducted from the cost of securities. Brokerage / Commission / Stamp duty paid in connection with acquisition of securities are treated as revenue expenses.

3.7 Interest Rate Swap transactions for trading is marked to market at quarterly intervals. The fair value of the total swaps is computed on the basis of the amount that would be received/ receivable or paid/ payable on termination of the swap agreements as on the balance sheet date. Losses arising there from, if any, are fully provided for, while the profit, if any, is ignored.

3.8 Exchange traded FX Derivatives i.e. Currency Futures, are valued at the Exchange determined prices and the resultant gains and losses are recognized in the Profit and Loss account.

3.9 Premium/interest arising at the inception of forward exchange swap facility of RBI for FCNR (B) dollar deposits is amortized as expense over the period of the swap contract.

3.10 Investments backed by guarantee of the Central Government though overdue are treated as Non Performing Asset (NPA) only when the Government repudiates its guarantee when invoked.

3.11 Investment in State Government guaranteed securities, including those in the nature of ''deemed advances'', are subjected to asset classification and provisioning as per prudential norms if interest/ instalment of principal (including maturity proceeds) or any other amount due to the Bank remains unpaid for more than 90 days.

4. FINANCIAL ASSETS SOLD TO ASSET RECOVERY

COMPANIES (ARC)

4.1 Security Receipts (SR) issued by ARCs in respect of financial assets sold to them is recognized at lower of redemption value of SRs and Net Book Value of financial assets. SRs are valued at Net Asset Value declared by ARCs on the Balance Sheet date and depreciation, if any, is provided for and appreciation is ignored.

4.2 If the sale is for value lower than the Net Book Value (NBV) (i.e, book value less provisions held), the shorfall will be debited to the Profit and Loss account or will be met out of utilisation of Floating provision held, as per extant RBI guidelines If the sale is for value higher than the Net Book Value, the excess provision will be reversed to the Profit & Loss Account in the year the amounts are received

5 ADVANCES

5.1 In accordance with the prudential norms issued by RBI, advances in India are classified into standard, sub- standard, doubtful and loss assets borrower-wise,

5.2 Provisions are made for non performing advances as under:

a) Substandard category – 25 % both secured and unsecured category

b) Doubtful category-1

i) 100 % for secured and unsecured classified and / or categorized before 01.07.2011.

ii) 25 % for secured classified and / or categorized after 30.06.2011

iii) 100% for Unsecured portion.

c) Doubtful Category – 2

i) 100 % for secured and unsecured classified and / or categorized before 01.07.2011

ii) 40 % for secured classified and / or categorized after 30.06.2011

iii) 100% for Unsecured portion.

d) Doubtful category-3 and Loss advances – 100 %.

5.3 Provision is made for standard advances including restructured standard advances as per RBI directives.

5.4 In respect of foreign branches, income recognition, asset classification and provisioning for loan losses are made as per local requirement or as per RBI prudential norms, whichever is more stringent.

Further, if an asset in the overseas books of the Bank requires to be classified as NPA at any point of time in terms of regulations issued by Reserve Bank of India, then all the facilities granted by the bank to the borrower and investment in all the securities issued by the borrower will be classified as NPAs/NPIs.

However, accounts classified as Non- performing/Impaired assets (NPAs) by host regulators for reasons other than record of recovery, would be classified as NPAs at the time of consolidating financial statements in India and provided for, as required; whereas asset classification of other credit exposures to the same counterparties in other jurisdictions (including India) will continue to be governed by the extant guidelines in the respective jurisdictions.

5.5 Advances disclosed are net of provisions made for non- performing assets, DICGC/ ECGC/ CGTMSE claims received and held pending adjustment, repayments received and kept in sundries account, participation certificates , since bills rediscounted and provision in lieu of diminution in the fair value of restructured accounts classified as standard assets..

6. FIXED ASSETS / DEPRECIATION

6.1. Premises and other fixed assets are stated at historical cost and at re valued amount in respect of assets re valued.

6.2. Depreciation on buildings (including cost of land wherever inseparable/ not segregated) and other fixed assets (excluding items referred in 6.3 to 6.5) in India is provided for on the straight-line method at rates specified in Schedule XIV to the Companies Act, 1956 and at the Bank determined rates based on Residual Life in the case of ''Re valued Assets''. Depreciation relatable to re valued component is charged against revaluation reserve.

6.3. Depreciation on computers (hardware and software) and Uninterrupted Power Supply Systems (UPS) is provided at the rate of 33.33% per annum on Straight Line Method (SLM).

6.4. The rate of depreciation on motor car is 20 % on straight line method.

6.5. 100% depreciation is provided on all cell phones and on small value items costing up to Rs.5000/- .

6.6. Depreciation on fixed assets acquired on or before 30th September is charged at 100% of the prescribed rates and at 50% of the prescribed rates on the fixed assets acquired thereafter. No depreciation on the fixed assets is provided for in the year of sale / disposal.

6.7. Premium on leasehold land is capitalised in the year of acquisition and amortized over the period of lease.

6.8. Depreciation in respect of fixed assets at foreign branches is provided as per the practice prevailing in the respective countries.

6.9. In respect of Non Banking Assets, no depreciation is charged.

7. REVENUE RECOGNITION

7.1 Income and expenditure are generally accounted for on accrual basis, unless otherwise stated.

7.2 Income from non-performing assets, Central Government guaranteed assets (where it is overdue beyond 90 days), dividend income, insurance claims, commission on letters of credit/ guarantees issued (other than those relating to project finance), income from banc assurance products, income from wealth management, additional interest/ overdue charges on bills purchased, locker rent, finance charges on credit cards, income on Bank''s right to recompense, etc. are accounted for on realisation.

7.3 In case of overdue foreign bills, interest and other charges are recognised till the date of crystallisation as per FEDAI guidelines.

8. CREDIT CARD REWARD POINTS

Reward points earned by card members on use of Card facility is recognized as expenditure on such use.

9. NET PROFIT / LOSS

The result disclosed in the Profit and Loss Account is after considering:

- Provision for Non-Performing Advances and / or Investments.

- General provision on Standard Advances

- Provision for Restructured Advances

- Provision for Depreciation on Fixed Assets

- Provision for Depreciation on Investments

- Transfer to/ from Contingency Fund

- Provision for direct taxes

- Usual or/and other necessary provisions

10. STAFF RETIREMENT BENEFITS

10.1 Annual contributions to Pension Fund and Gratuity Fund are determined and provided for:

(i) on the basis of actuarial valuation and

(ii) as per the local laws in respect of foreign branches.

10.2 Leave encashment benefit for employees is accounted for on actuarial basis.

10.3 Transitional liability relating to employee benefits determined as per actuarial valuation is written- off over a period of five years in terms of Revised Accounting Standard 15 (AS -15) - "Employee Benefits", issued by ICAI.

10.4 Liability determined in respect of pension (second option) for existing employees and gratuity is amortised equally over a period of five years in accordance with RBI Guidelines.

11. CONTINGENT LIABILITIES AND PROVISIONS

11.1 Contingent liability : Past events leading to, possible or present obligations are recognised as contingent liability in the following instances where :

(a) The existence of such obligations has not been confirmed

(b) no outflow of resources are required to settle such obligations

(c) a reliable estimate of the amount of the obligations cannot be made

(d) such amounts are not material

11.2 (a) Provision is recognized in case of present obligations where a reliable estimate can be made and/or where there are probable outflow of resources embodying foregoing of economic benefits to settle the obligations, excluding frivolous claims.

(b) Provision for Market Risk, Country Risk, etc., are made in terms of extant instructions of RBI.

(c) Floating provision as identified by the Bank Management is provided for. Floating provision may be utilized as per extant RBI guidelines, for -

i) Making specific provisions for non-performing assets;

(ii) Meeting any shortfall in sale of non-performing assets.

12. IMPAIRMENT OF ASSETS

Impairment losses, if any, are recognised in accordance with the Accounting Standard 28 issued in this regard by the Institute of Chartered Accountants of India (ICAI).

13. TAXES ON INCOME

13.1 Provision for tax is made for both Current Tax and Deferred Tax.

13.2 Current tax is measured at the amount expected to be paid to the taxation authorities, using the applicable tax rates, tax laws and favorable judicial pronouncements / legal opinion.

13.3 Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognised unless there is "virtual certainty" that sufficient future taxable income will be available against which such deferred tax assets will be realised.


Mar 31, 2012

1. ACCOUNTING CONVENTION

The financial statements are prepared by following the going concern concept on historical cost convention and conform to the statutory provisions and practices prevailing in India unless otherwise stated and in respect of foreign branches as per statutory provisions and practices prevailing in the respective countries.

2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

Foreign Currency transactions of Indian operations and non-integral foreign operations are accounted for as per Accounting Standard-11 (AS-11) issued by the Institute of Chartered Accountants of India (ICAI).

2.1 Translation in respect of Indian operations

1. Foreign exchange transactions are recorded at the Weekly Average Rate (WAR) notified by Foreign Exchange Dealers' Association of India (FEDAI).

2. Foreign currency assets and liabilities are translated at the closing rates notified by FEDAI at the year end.

3. Acceptances, endorsements and other obligations and guarantees in foreign currency are carried at the closing rates notified by FEDAI at the year end.

4. Exchange differences arising on settlement and translation of foreign currency assets and liabilities at the end of the financial year are recognized as income or expenses in the period in which they arise.

5. Outstanding forward exchange contracts are disclosed at the Contracted rates, and revalued at FEDAI closing rates, and the resultant effect is recognized in the Profit and Loss account.

2.2 Translation in respect of non-integral foreign operations.

Foreign branches are classified as non-integral foreign operations and the financial statements are translated as follows:

1. Assets and liabilities including contingent liabilities are translated at the closing rates notified by FEDAI at the year end.

2. Income and expenses are translated at the Quarterly Average Closing rate notified by FEDAI at the end of the respective quarter.

3. All resulting exchange differences are accumulated in a separate account "Exchange Fluctuation Fund" till the disposal of the net investments.

3. INVESTMENTS

3.1 The investment portfolio of the Bank is classified in accordance with the RBI guidelines into three categories viz.,

-- Held To Maturity (HTM)

-- Available For Sale (AFS)

-- Held For Trading (HFT)

The securities acquired with the intention to be held till maturity are classified under "HTM" category. The securities acquired with the intention to trade by taking advantage of short-term price/interest movements are classified as "HFT". All other securities which do not fall under any of the two categories are classified under "AFS" category.

3.2 Profit on sale of securities under HTM category is first taken to Profit and Loss account and thereafter appropriated to Capital Reserve account (net of taxes and amount required to be transferred to statutory reserves) and loss, if any, charged to Profit & Loss account.

3.3 Investments in India are valued in accordance with RBI guidelines, as under:

a) Securities in HTM category are valued at acquisition cost except where the acquisition cost is higher than the face value, in which case, such excess of acquisition cost over the face value is amortised over the remaining period of maturity. Any diminution, other than temporary, in value of investments in subsidiaries/joint ventures which are included under HTM category is recognized and provided. Such diminution is being determined and provided for each investment individually.

b) Investments in AFS category are marked to market, scrip-wise and classification wise, at quarterly intervals. Net depreciation, if any, is provided for in the Profit and Loss account while net appreciation, if any, is ignored. The book value of the individual securities does not undergo any change after marking to market.

c) The individual scrips in the HFT category are marked to market at daily intervals. Net depreciation, if any, is provided for in the Profit and Loss account while net appreciation, if any, is ignored. The Book Value of the individual securities in this category does not undergo any change.

d) Securities in AFS and HFT categories are valued as under:

i) Central Government Securities are valued at prices/ Yield To Maturity (YTM) rates as announced by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA).

ii) State Government and Other approved securities are valued applying the YTM method by marking up 25 basis points above the yields of the Central Government Securities of equivalent maturity put out by PDAI / FIMMDA periodically.

iii) Equity shares are valued at market price, if quoted. Unquoted equity shares are valued at break-up value (without considering revaluation reserves if any) as per the company's latest balance sheet (not more than one year prior to the date of valuation). Otherwise, the shares are valued at Rs1 per company.

iv) Preference shares are valued at market price, if quoted; otherwise at lower of the value determined based on the appropriate YTM rates or redemption value.

v) All debentures/bonds, other than those which are in the nature of advances, are valued on the YTM basis.

vi) Treasury bills, Certificate of deposits and Commercial papers are valued at carrying cost.

vii) Units of Mutual Funds are valued at market price, if quoted; otherwise at lower of repurchase price or Net Asset Value (NAV). In case of funds with a lock-in period, where repurchase price / market quote is not available, units are valued at NAV, else valued at cost till the end of the lock-in period.

3.4 Investments by Foreign Branches are valued as per the practice prevailing in the respective countries.

3.5 Debentures and Bonds, where interest/ principal is in arrears for more than 90 days are subject to prudential norms prescribed by RBI.

3.6 Brokerages / Commission / incentive received on subscriptions are deducted from the cost of securities. Brokerage / Commission / Stamp duty paid in connection with acquisition of securities are treated as revenue expenses.

3.7 Interest Rate Swap transactions for hedging are accounted on accrual basis and transactions for trading are marked to market at quarterly intervals. The fair value of the total swaps is computed on the basis of the amount that would be received/ receivable or paid/ payable on termination of the swap agreements as on the balance sheet date. Losses arising therefrom, if any, are fully provided for, while the profit, if any, is ignored. Gains or loss on termination of swaps is deferred and recognised over the shorter period of the remaining contractual life of the swap or the remaining life of the designated asset or liability.

3.8 Exchange traded FX Derivatives i.e., Currency Futures, are valued at the Exchange determined prices and the resultant gains and losses are recognized in the Profit and Loss account.

3.9 Investments backed by guarantee of the Central Government though overdue are treated as Non Performing Asset (NPA) only when the Government repudiates its guarantee when invoked.

3.10 Investment in State Government guaranteed securities, including those in the nature of 'deemed advances', are subjected to asset classification and provisioning as per prudential norms if interest/ instalment of principal (including maturity proceeds) or any other amount due to the Bank remains unpaid for more than 90 days.

4. FINANCIAL ASSETS SOLD TO ASSET RECOVERY COMPANIES

4.1 Security Receipts (SR) issued by ARCs in respect of financial assets sold to them is recognized at lower of redemption value of SRs and Net Book Value of financial assets. SRs are valued at Net Asset Value declared by ARCs on the Balance Sheet date and depreciation, if any, is provided for and appreciation is ignored.

4.2 The net-shortfall, if any, arising on sale of financial assets to ARCs is charged to Profit & Loss Account.

5. ADVANCES

5.1 In accordance with the prudential norms issued by RBI, advances in India are classified into standard, sub- standard, doubtful and loss assets, borrower-wise.

5.2 Provisions are made for non performing advances as under:

a) Substandard category - 25 % both secured and unsecured category.

b) Doubtful category-1 :

i) 100 % for secured and unsecured classified and / or categorized before 01.07.2011.

ii) 25 % for secured classified and / or categorized after 30.06.2011.

iii) 100% for Unsecured portion.

c) Doubtful Category - 2:

i) 100 % for secured and unsecured classified and / or categorized before 01.07.2011.

ii) 40 % for secured classified and / or categorized after 30.06.2011.

iii) 100% for Unsecured portion.

d) Doubtful category-3 and Loss advances - 100 %.

5.3 Provision is made for standard advances including restructured standard advances as per RBI directives.

5.4 In respect of foreign branches, income recognition, asset classification and provisioning for loan losses are made as per local requirement or as per RBI prudential norms, whichever is more stringent.

5.5 Advances disclosed are net of provisions made for non-performing assets, DICGC/ eCgC/ CGTMSE claims received and held pending adjustment, repayments received and kept in sundries account, participation certificates, usance bills rediscounted and provision in lieu of diminution in the fair value of restructured accounts classified as standard assets.

6. FIXED ASSETS / DEPRECIATION

6.1 Premises and other fixed assets are stated at historical cost and at revalued amount in respect of assets revalued.

6.2 Depreciation on buildings (including cost of land wherever inseparable/ not segregated) and other fixed assets (excluding items referred in 6.3 to 6.5) in India is provided for on the straight-line method at rates specified in Schedule XIV to the Companies Act, 1956 and at the Bank determined rates based on Residual Life in the case of 'Revalued Assets'. Depreciation relatable to revalued component is charged against revaluation reserve.

6.3 Depreciation on computers (hardware and software) and Uninterrupted Power Supply Systems (UPS) is provided at the rate of 33.33% per annum on Straight Line Method (SLM).

6.4 The rate of depreciation on motor car is 20 % on straight line method.

6.5 100% depreciation is provided on all cell phones and on small value items costing upto Rs.5000/-.

6.6 Depreciation on fixed assets acquired on or before 30th September is charged at 100% of the prescribed rates and at 50% of the prescribed rates on the fixed assets acquired thereafter.

6.7 Premium on leasehold land is capitalised in the year of acquisition and amortized over the period of lease.

6.8 Depreciation in respect of fixed assets at foreign branches is provided as per the practice prevailing in the respective countries.

6.9 In respect of Non Banking Assets, no depreciation is charged.

7 REVENUE RECOGNITION

7.1 Income and expenditure are generally accounted for on accrual basis, unless otherwise stated.

7.2 Income from non-performing assets, Central Government guaranteed assets (where it is overdue beyond 90 days), dividend income, insurance claims, commission on letters of credit/ guarantees issued (other than those relating to project finance), income from bancassurance products, additional interest / overdue charges on bills purchased, locker rent, finance charges on credit cards, income on Bank's right to recompense, etc., are accounted for on realisation.

7.3 In case of overdue foreign bills, interest and other charges are recognised till the date of crystallisation as per FEDAI guidelines.

8. CREDIT CARD REWARD POINTS:

Reward points earned by card members on use of card facility is recognized as expenditure on such use.

9. NET PROFIT / LOSS

The result disclosed in the Profit and Loss Account is after considering:

-- Provision for Non Performing Advances and / or Investments

-- General provision on Standard Advances

-- Provision for Restructured Advances

-- Provision for Depreciation on Fixed Assets

-- Provision for Depreciation on Investments

-- Transfer to / from Contingency Fund

-- Provision for direct taxes

-- Usual or/ and other necessary provisions

10. STAFF RETIREMENT BENEFITS

10.1 Annual contributions to Pension Fund and Gratuity Fund are determined and provided for:

-- on the basis of actuarial valuation

-- as per the local laws in respect of foreign branches

10.2 Leave encashment benefit for employees is accounted for on actuarial basis.

10.3 Transitional liability relating to employee benefits determined as per actuarial valuation is written off over a period of five years in terms of Revised Accounting Standard 15 (AS -15) - "Employee Benefits", issued by ICAI.

10.4 Liability determined in respect of pension (second option) for existing employees and gratuity is amortised equally over a period of five years in accordance with RBI Guidelines.

11. CONTINGENT LIABILITIES AND PROVISIONS

11.1 Contingent liability : Past events leading to, possible or present obligations are recognised as contingent liability in the following instances where :

(a) The existence of such obligations has not been confirmed

(b) no outflow of resources are required to settle such obligations

(c) a reliable estimate of the amount of the obligations cannot be made

(d) such amounts are not material

11.2 (a) Provision is recognized in case of present

obligations where a reliable estimate can be made and/or where there are probable outflow of resources embodying foregoing of economic benefits to settle the obligations, excluding frivolous claims.

(b) Provision for Market Risk, Country Risk, etc., are made in terms of extant instructions of RBI.

(c) Floating provision as identified by the Bank Management is provided for.

12. IMPAIRMENT OF ASSETS

Impairment losses if any, are recognised in accordance with the Accounting Standard (AS) -28 issued in this regard by the ICAI.

13. TAXES ON INCOME

13.1 Provision for tax is made for both Current Tax and Deferred Tax.

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

13.3 Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognised unless there is "virtual certainty" that sufficient future taxable income will be available against which such deferred tax assets will be realised.


Mar 31, 2011

1. ACCOUNTING CONVENTION

The financial statements are prepared by following the going concern concept on historical cost convention and conform to the statutory provisions and practices prevailing in India unless otherwise stated and in respect of foreign branches as per statutory provisions and practices prevailing in the respective countries.

2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

Foreign Currency transactions of Indian operations and non-integral foreign operations are accounted for as per Accounting Standard-11 (AS-11) issued by the Institute of Chartered Accountants of India (ICAI).

2.1 Translation in respect of Indian operations

1. Foreign exchange transactions are recorded at the Weekly Average Rate (WAR) notified by Foreign Exchange Dealers Association of India ( FEDAI).

2. Foreign currency assets and liabilities are translated at the closing rates notified by FEDAI at the year end.

3. Acceptances, endorsements and other obligations and guarantees in foreign currency are carried at the closing rates notified by FEDAI at the year end.

4. Exchange differences arising on settlement and translation of foreign currency assets and liabilities at the end of the financial year are recognized as income or expenses in the period in which they arise.

5. Outstanding forward exchange contracts are disclosed at the Contracted rates and revalued at FEDAI closing rates, and the resultant effect is recognized in the Profit and Loss account.

2.2 Translation in respect of non-integral foreign operations.

Foreign branches are classified as non-integral foreign operations and the financial statements are translated as follows:

1. Assets and liabilities including contingent liabilities are translated at the closing rates notified by FEDAI at the year end.

2. Income and expenses are translated at the Quarterly Average Closing rate notified by FEDAI at the end of the respective quarter.

3. All resulting exchange differences are accumulated in a separate account "Exchange Fluctuation Fund" till the disposal of the net investments.

3. INVESTMENTS

3.1 The investment portfolio of the Bank is classified in accordance with the RBI guidelines into three categories viz.,

> Held To Maturity (HTM)

> Available For Sale (AFS)

> Held For Trading (HFT)

The securities acquired with the intention to be held till maturity are classified under "HTM" category. The securities acquired with the intention to trade by taking advantage of short-term price/interest movements are classified as "HFT". All other securities which do not fall under any of the two categories are classified under "AFS" category.

3.2 Profit on sale of securities under HTM category is first taken to Profit and Loss account and thereafter appropriated to Capital Reserve account (net of taxes and amount required to be transferred to statutory reserves) and loss, if any, charged to Profit & Loss account.

3.3 Investments in India are valued in accordance with RBI guidelines, as under:

a) Securities in HTM category are valued at acquisition cost except where the acquisition cost is higher than the face value, in which case, such excess of acquisition cost over the face value is amortised over the remaining period of maturity. Any diminution, other than temporary, in value of investments in subsidiaries/joint ventures which are included under HTM category is recognized and provided. Such diminution is being determined and provided for each investment individually.

b) Investments in AFS category are marked to market, scrip-wise and classification wise, at quarterly intervals. Net depreciation, if any, is pro vided for in the Profit and Loss account while net appreciation, if any, is ignored. The book value of the individual securities does not undergo any change after marking to market.

c) The individual scrips in the HFTcategory are marked to market at daily intervals. Net depreciation, if any, is provided for in the Profit and Loss account while net appreciation, if any, is ignored. The Book Value of the individual securities in this category does not undergo any change.

d) Securities in AFS and HFT categories are valued as under:

i) Central Government Securities are valued at prices / YTM Rates as announced by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA).

ii) State Government and Other approved securities are valued applying the YTM method by marking up 25 basis points above the yields of the Central Government Securities of equivalent maturity put out by PDAI / FIMMDA periodically.

iii) Equity shares are valued at market price, if quoted. Unquoted equity shares are valued at break-up value (without considering revaluation reserves if any) as per the companys latest balance sheet (not more than one year prior to the date of valuation). Otherwise, the shares are valued at Re. 1 per company.

iv) Preference shares are valued at market price, if quoted; otherwise at lower of the value determined based on the appropriate YTM rates or redemption value.

v) All debentures/bonds, other than those which are in the nature of advances, are valued on the YTM basis.

vi) Treasury bills, Certificate of deposits and Commercial papers are valued at carrying cost.

vii) Units of Mutual Funds are valued at market price, if quoted; otherwise at lower of repurchase price or Net Asset Value (NAV). In case of funds with a lock-in period, where repurchase price / market quote is not available, units are valued at NAV, else valued at cost till the end of the lock-in period.

3.4 Investments of Foreign Branches are valued as per the practice prevailing in the respective countries.

3.5 Debentures and Bonds, where interest/ principal is in arrears for more than 90 days are valued applying the prudential norms prescribed by RBI.

3.6 Brokerages / Commission / incentive received on subscriptions are deducted from the cost of securities. Brokerage / Commission / Stamp duty paid in connection with acquisition of securities are treated as revenue expenses.

3.7 Interest Rate Swap transactions for hedging are accounted on accrual basis and transactions for trading are marked to market at quarterly intervals. The fair value of the total swaps is computed on the basis of the amount that would be received/ receivable or paid/ payable on termination of the swap agreements as on the balance sheet date. Losses arising therefrom, if any, are fully provided for, while the profit, if any, is ignored. Gains or loss on termination of swaps is deferred and recognised over the shorter period of the remaining contractual life of the swap or the remaining life of the designated asset or liability.

3.8 Exchange traded FIX Derivatives i.e. Currency Futures, are valued at the Exchange determined prices and the resultant gains and losses are recognized in the Profit and Loss account.

3.9 Investments backed by guarantee of the Central Government though overdue are treated as Non Performing Asset (NPA) only whentheGovernment repudiates its guarantee when invoked.

3.10 Investment in State Government guaranteed securities, including those in the nature of deemed advances, are subjected to asset classification and provisioning as per prudential norms if interest/instalment of principal (including maturity proceeds) or any other amount due to the Bank remains unpaid for more than 90 days.

4. FINANCIAL ASSETS SOLD TO ASSET RECOVERY COMPANIES

4.1 Security Receipts (SR) issued by ARCs in respect of financial assets sold to them is recognized at lower of redemption value of SRs and Net Book Value of financial assets. SRs are valued at Net Asset Value declared by ARCs on the Balance Sheet date and depreciation, if any, is provided for and appreciation is ignored.

4.2 The net-shortfall, if any, arising on sale of financial assets to ARCs is charged to Profit & Loss Account.

5 ADVANCES

5.1 In accordance with the prudential norms issued by RBI, advances in India are classified into standard, sub-standard, doubtful and loss assets borrower-wise.

5.2 Provisions are made for non performing advances irrespective of availablility of security:

For substandard category - 20 % For others-100%

5.3 General provision is made for standard advances as per RBI directives.

5.4 In respect of foreign branches, income recognition, asset classification and provisioning for loan losses are made as per local requirement or as per RBI prudential norms, whichever is more stringent.

5.5 Advances disclosed are net of provisions made for non-performing assets, DICGC/ ECGC/ CGTSI claims received and held pending adjustment, repayments received and kept in sundries account, participation certificates and usance bills rediscounted.

6. FIXED ASSETS / DEPRECIATION

6.1 Premises and other fixed assets are stated at historical cost and at revalued amount in respect of assets revalued.

6.2 Depreciation on buildings (including cost of land wherever inseparable/ not segregated) and other fixed assets (excluding items referred in 6.3 to 6.5) in India is provided for on the straight-line method atratesspecifiedinScheduleXIVtotheCompanies Act, 1956 and at the Bank determined rates based on Residual Life in the case of Revalued Assets. Depreciation relatable to revalued component is charged against revaluation reserve.

6.3 Depreciation on computers (hardware and software) and Uninterrupted Power Supply Systems (UPS) is provided at the rate of 33.33% per annum on Straight Line Method (SLM).

6.4 The rate of depreciation on motor car is 20 % on straight line method.

6.5 100% depreciation is provided on all cell phones and on small value items costing upto Rs.5000/-

6.6 Depreciation on fixed assets acquired on or before 30th September is charged at 100% of the prescribed rates and at 50% of the prescribed rates on the fixed assets acquired thereafter.

6.7 Premium on leasehold land is capitalised in the year of acquisition and amortized over the period of lease.

6.8 Depreciation in respect of fixed assets at foreign branches is provided as perthe practice prevailing in the respective countries.

6.9 In respect of Non Banking Assets, no depreciation is charged.

7. REVENUE RECOGNITION

7.1 Income and expenditure are generally accounted for on accrual basis, unless otherwise stated.

7.2 Income from non-performing assets, Central Government guaranteed assets (where it is overdue beyond 90 days), dividend income, insurance claims, commission on letters of credit/ guarantees issued (other than those relating to project finance), income from bancassurance products, additional interest/ overdue charges on bills purchased, locker rent, finance charges on credit cards income on Banks rightto recompense, etc. are accounted for on realisation.

7.3 In case of overdue foreign bills, interest and other charges are recognised till the date of crystallisation as per FEDAI guidelines.

8. CREDIT CARD REWARD POINTS

Reward points earned by card members on use of Card facility is recognized as expenditure on such use.

9. NET PROFIT / LOSS

The result disclosed in the Profit and Loss Account is after considering:

Provision for Non-Performing Advances and/ or Investments.

General provision on Standard Advances

Provision for Restructured Advances

Provision for Depreciation on Fixed Assets

Provision for Depreciation on Investments

Transfer to/ from Contingency Fund

Provision for direct taxes

Usual or/and other necessary provisions

10. STAFF RETIREMENT BENEFITS

10.1 Annual contributions to Pension Fund and Gratuity Fund are determined and provided for:

(i) on the basis of actuarial valuation

(ii) as per the local laws in respect of foreign branches.

10.2 Leave encashment benefit for employees is accounted for on actuarial basis.

10.3.1 Transitional liability relating to employee benefits determined as per actuarial valuation is written off over a period of five years in terms of Revised Accounting Standard 15 (AS -15), "Employee Benefits", issued by ICAI.

10.3.2 Liability determined in accordance with RBI Guidelines in respect of pension (second option) for existing employees and gratuity is amortised equally over a period of five years

11. CONTINGENT LIABILITIES AND PROVISIONS

(a) Past events leading to, possible or present obligations are treated as contingent liability. Provision is recognised in case of present obligations where a reliable estimate can be made and/or where there are probable outflow of resources embodying foregoing of economic benefits to settle the obligations.

(b) Provisions for Market Risks, Country Risk, etc., are made in terms of extant instructions of RBI.

(c) Floating provision as identified by the Bank Management is provided for.

12. IMPAIRMENT OF ASSETS

Impairment losses, if any, are recognised in accordance with the Accounting Standard 28 issued in this regard by the Institute of Chartered Accountants of India.

13. TAXES ON INCOME

13.1 Provision for tax is made for both Current Tax and Deferred Tax.

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

13.3 Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognised unless there is "virtual certainty" that sufficient future taxable income will be available against which such deferred tax assets will be realised.


Mar 31, 2010

1. ACCOUNTING CONVENTION

The financial statements are prepared by following the going concern concept on historical cost convention and conform to the statutory provisions and practices prevailing in India unless otherwise stated and in respect of foreign branches as per statutory provisions and practices prevailing in the respective countries.

2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

Foreign Currency transactions of Indian operations and non-integral foreign operations are accounted for as per Accounting Standard-11 (AS-11) issued by the Institute of Chartered Accountants of India (ICAI).

2.1 Translation in respect of Indian operations

1. Foreign exchange transactions are recorded at the Weekly Average Rate (WAR) notified by Foreign Exchange Dealers Association of India ( FEDAI).

2. Foreign currency assets and liabilities are translated at the closing rates notified by FEDAI at the year end.

3. Acceptances, endorsements and other obligations and guarantees in foreign currency are carried at the closing rates notified by FEDAI at the year end.

4. Exchange differences arising on settlement and translation of foreign currency assets and liabilities at the end of the financial year are recognized as income or expenses in the period in which they arise.

5. Outstanding forward exchange contracts are disclosed at the Contracted rates and revalued at FEDAI closing rates, and the resultant effect is recognized in the Profit and Loss account.

2.2 Translation in respect of non-integral foreign operations.

Foreign branches are classified as non-integral foreign operations and the financial statements are translated as follows:

1. Assets and liabilities including contingent liabilities are translated at the closing rates notified by FEDAI at the year end.

2. Income and expenses are translated at the Quarterly Average Closing rate notified by FEDAI at the end of the respective quarter.

3. All resulting exchange differences are accumulated in a separate account "Exchange Fluctuation Fund" till the disposal of the net investments.

3. INVESTMENTS

3.1 The investment portfolio of the Bank is classified in accordance with the RBI guidelines into three categories viz.,

> Held To Maturity (HTM)

> Available For Sale (AFS)

> Held For Trading (HFT))

The securities acquired with the intention to be held till maturity are classified under "HTM" category. The securities acquired with the intention to trade by taking advantage of short- term price/interest movements are classified as "HFT". All other securities which do not fall under any of the two categories are classified under "AFS" category.

3.2 Profit on sale of securities under HTM category is first taken to Profit and Loss account and thereafter appropriated to Capital Reserve account and loss, if any, charged to Profit & Loss account.

3.3 Investments in India are valued in accordance with RBI guidelines, as under:

a) Securities in HTM category are valued at acquisition cost except where the acquisition cost is higher than the face value, in which case, such excess of acquisition cost over the face value is amortised over the remaining period of maturity. Any diminution, other than temporary, in value of investments in subsidiaries/joint ventures which are included under HTM category is recognized and provided. Such diminution is being determined and provided for each investment individually.

b) Investments in AFS category are marked to market, scrip-wise and classification wise, at quarterly intervals. Net depreciation, if any, is provided for in the Profit and Loss account while net appreciation, if any, is ignored. The book value of the individual securities does not undergo any change after marking to market.

c) The individual scrips in the HFT category are marked to market at monthly intervals. Net depreciation, if any, is provided for in the Profit and Loss account while net appreciation, if any, is ignored. The Book Value of the individual securities in this category does not undergo any change.

d) Securities in AFS and HFT categories are valued as under:

i) Central Government Securities are valued at market price on the basis of appropriate Yield To Maturity (YTM) rates as announced by Primary Dealers Association of India (PDAI), Fixed Income Money Market and Derivatives Association of India (FIMMDA) and Bloomberg.

ii) State Government and Other approved securities are valued applying the YTM method by marking up 25 basis points above the yields of the Central Government Securities of equivalent maturity put out by PDAI, FIMMDA and Bloomberg.

iii) Equity shares are valued at market price, if quoted. Unquoted equity shares are valued at break-up value (without considering revaluation reserves if any) as per the companys latest balance sheet (not more than one year prior to the date of valuation). Otherwise, the shares are valued at Rupee One per company.

iv) Preference shares are valued at market price, if quoted; otherwise at lower of the value determined based on the appropriate YTM rates or redemption value.

v) All debentures/bonds, other than those which are in the nature of advances, are valued on the YTM basis.

vi) Treasury bills, Certificate of deposits and Commercial papers are valued at carrying cost.

vii) Units of Mutual Funds are valued at market price, if quoted; otherwise at lower of repurchase price or Net Asset Value (NAV). In case of funds with a lock-in period, where repurchase price / market quote is not available, units are valued at NAV, else valued at cost till the end of the lock-in period.

3.4 Investments by Foreign Branches are valued as per the practice prevailing in the respective countries.

3.5 Debentures and Bonds, where interest/ principal is in arrears for more than 90 days are valued applying the prudential norms prescribed by RBI.

3.6 Brokerages / Commission / incentive received on subscriptions are deducted from the cost of securities. Brokerage / Commission / Stamp duty paid in connection with acquisition of securities are treated as revenue expenses.

3.7 Interest Rate Swap transactions for hedging are accounted on accrual basis and transactions for trading are marked to market at fortnightly intervals, in line with the RBI guidelines. The fair value of the total swaps is computed on the basis of the amount that would be received/ receivable or paid/ payable on termination of the swap agreements as on the balance sheet date. Losses arising therefrom, if any, are fully provided for, while the profit, if any, is ignored. Gains or loss on termination of swaps is deferred and recognised over the shorter period of the remaining contractual life of the swap or the remaining life of the designated asset or liability.

3.8 Investments backed by guarantee of the Central Government though overdue are treated as Non Performing Asset (NPA) only when the Government repudiates its guarantee when invoked.

3.9 Investment in State Government guaranteed securities, which are not in the nature of deemed advances, are subjected to asset classification and provisioning norms if interest/ instalment of principal (including maturity proceeds) or any other amount due to the Bank remains unpaid for more than 90 days.

4 ADVANCES

4.1 In accordance with the prudential norms issued by RBI, advances in India are classified into standard, sub-standard, doubtful and loss assets borrower-wise.

4.2 Provisions are made for non performing advances:

For substandard category - 20 %

For others - 100 % irrespective of availablility of security.

4.3 General provision is made for standard advances as per RBI directives.

4.4 In respect of foreign branches, income recognition, asset classification and provisioning for loan losses are made as per local requirement or as per RBI prudential norms, whichever is more stringent.

4.5 Advances disclosed are net of provisions made for non-performing assets, DICGC/ ECGC/ CGTSI claims received and held pending adjustment, repayments received and kept in sundries account, participation certificates and usance bills rediscounted.

5. FIXED ASSETS / DEPRECIATION

5.1 Premises and other fixed assets are stated at historical cost and at revalued amount in respect of assets revalued.

5.2 Depreciation on buildings (including cost of land wherever inseparable/ not segregated) and other fixed assets (excluding items referred in 5.3 to 5.5) in India is provided for on the straight-line method at rates specified in Schedule XIV to the Companies Act, 1956 and at the Bank determined rates based on Residual Life in the case of Revalued Assets. Depreciation relatable to revalued component is charged against revaluation reserve.

5.3 Depreciation on computers (hardware and software) and Uninterrupted Power Supply Systems (UPS) is provided at the rate of 33.33% per annum on Straight Line Method (SLM).

5.4 The rate of depreciation on motor car is 20 % on straight line method.

5.5 100% depreciation is provided on all cell phones and on small value items costing upto Rs.5000/- (refer notes on accounts 8.4.3).

5.6 Depreciation on fixed assets acquired on or before 30th September is charged at 100% of the prescribed rates and at 50% of the prescribed rates on the fixed assets acquired thereafter.

5.7 Premium on leasehold land is capitalised in the year of acquisition and amortized over the period of lease.

5.8 Depreciation in respect of fixed assets at foreign branches is provided as perthe practice prevailing in the respective countries.

5.9 In respect of Non Banking Assets, no depreciation is charged.

6. REVENUE RECOGNITION

6.1 Income and expenditure are generally accounted for on accrual basis, unless otherwise stated.

6.2 Incomefrom non-performing assets, Government guaranteed assets (where interest is not serviced regularly), dividend income, insurance claims, commission on letters of credit/ guarantees issued (other than those relating to project finance), income from bancassurance products, additional interest/ overdue charges on bills purchased, locker rent, finance charges on credit cards etc. are accounted for on realisation.

6.3 In case of overdue foreign bills, interest and other charges are recognised till the date of crystallisation as per FEDAI guidelines.

7. Credit Card Reward Points

Reward points earned by card members on use of Card facility is recognized as expenditure on such use.

8. NET PROFIT / LOSS

The result disclosed in the Profit and Loss Account is after considering:

Provision for Non-Performing Advances and/ or Investments.

General provision on Standard Advances

Provision for Restructured Advances

Provision for Depreciation on Fixed Assets

Provision for Depreciation on Investments

Transfer to/ from Contingency Fund

Provision for direct taxes

Usual or/and other necessary provisions

9. STAFF RETIREMENT BENEFITS

9.1 Annual contributions to Pension Fund and Gratuity Fund are determined and provided for:

(i) on the basis of actuarial valuation and

(ii) as per the local laws in respect of foreign branches.

9.2 Leave encashment benefit for employees is accounted for on actuarial basis.

9.3 Transitional liability relating to employee benefits determined as per actuarial valuation is written off over a period of five years in terms of Revised

Accounting Standard 15 (AS -15), "Employee Benefits", issued by ICAI.

10. CONTINGENT LIABILITIES AND PROVISIONS

(a) Past events leading to, possible or present obligations are treated as contingent liability. Provision is recognised in case of present obligations where a reliable estimate can be made and/or where there are probable outflow of resources embodying forgoing of economic benefits to settle the obligations.

(b) Provisions for Market Risks, Country Risk, etc., are made in terms of extant instructions of RBI and floating provision requirements are identified by the Bank Management and provided for.

11. IMPAIRMENT OF ASSETS

Impairment losses, if any, are recognised in accordance with the Accounting Standard 28 issued in this regard by the Institute of Chartered Accountants of India.

12. TAXES ON INCOME

12.1 Provision for tax is made for both Current Tax and Deferred Tax.

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

12.3 Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognised unless there is "virtual certainty" that sufficient future taxable income will be available against which such deferred tax assets will be realised.

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