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Accounting Policies of Indian Overseas Bank Company

Mar 31, 2015

1.1 Valuation of Investments is done in accordance with the guidelines issued by Reserve Bank of India as under:

1.1.1. Individual securities under "Held for Trading" and "Available for Sale" categories are marked to market at quarterly intervals. Central Government securities are valued at market rates declared by FIMMDA. Securities of State Government, other Approved Securities and Bonds & Debentures are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA. Quoted equity shares are valued at market rates, Unquoted equity shares and units of Venture Capital Funds are valued at book value /NAV ascertained from the latest available balance sheets, otherwise the same are valued at Re. 1/- per company /Fund.

Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate markup over the YTM rates for Central Government Securities put out by the PDAI/FIMMDA periodically.

Based on the above valuations under each of the six classifications, net depreciation, if any, is provided for and net appreciation, if any, is ignored. Though the book value of individual securities would not undergo any change due to valuation, in the books of account, the investments are stated net of depreciation in the balance sheet.

1.1.2. "Held to Maturity": Such investments are carried at acquisition cost/amortised cost. The excess, if any, of acquisition cost over the face value of each security is amortised on an effective interest rate method, over the remaining period of maturity. Investments in subsidiaries, associates and sponsored institutions and units of Venture capital funds are valued at carrying cost.

2.1 Investments are subject to appropriate provisioning / de -recognition of income, in line with the prudential norms prescribed by Reserve Bank of India for NPA classification. Bonds and Debentures in the nature of advances are also subject to usual prudential norms and accordingly provisions are made, wherever applicable.

2.2 Profit/Loss on sale of Investments in any category is taken to Profit and Loss account. In case of profit on sale of investments in "Held to Maturity" category, profit net of taxes is appropriated to "Capital Reserve Account".

2.3 Broken period interest, Incentive / Front-end fees, brokerage, commission etc. received on acquisition of securities are taken to Profit and Loss account.

2.4 Repo / Reverse Repo transactions are accounted as per RBI guidelines.

2.5 Investments held by overseas branches are classified and valued as per guidelines issued by respective overseas Regulatory Authorities.

3. Advances

3.1 Advances in India have been classified as ''Standard'', ''Sub- standard'', ''Doubtful'' and ''Loss assets'' and provisions for losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In case of overseas branches, the classification and provision is made based on the respective country''s regulations or as per norms of Reserve Bank of India whichever is higher.

3.2 Advances are stated net of provisions except general provisions for standard advances.

4. Derivatives

4.1 The Bank enters into Derivative Contracts in order to hedge interest bearing assets/ liabilities, and for trading purposes.

4.2 In respect of derivative contracts which are entered for hedging purposes, the net amount receivable/payable is recognized on accrual basis. Gains or losses on termination on such contracts are deferred and recognized over the remaining contractual life of the derivatives or the remaining life of the assets/ liabilities, whichever is earlier. Such derivative contracts are marked to market and the resultant gain or loss is not recognized, except where the derivative contract is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset/ liability.

4.3 Derivative contracts entered for trading purposes are marked to market as per the generally accepted practices prevalent in the industry and the changes in the market value are recognized in the profit and loss account. Income and expenses relating to these contracts are recognized on the settlement date. Gain or loss on termination of the trading derivative contracts are recorded as income or expense.

5. Fixed Assets

5.1 Fixed Assets except revalued premises are stated at historical cost.

5.2 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

5.3 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

5.4 In respect of leasehold properties, premium is amortised over the period of lease.

5.5 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws/practices of the respective countries.

6. Staff Benefits

6.1 Contribution to Provident Fund is charged to Profit and Loss Account.

6.2 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is based on actuarial valuation at the year-end. However, additional liability accrued during the year on account of Re-opening of pension option and enhancement of Gratuity limit is being amortised over a period of five years.

6.3 In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

7. Tax on Income

This comprises provision for current tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income & taxable income for the period) as determined in accordance with Accounting Standard 22 of ICAI, "Accounting for taxes on income". Deferred tax is recognized subject to consideration of prudence in respect of items of income and expenses those arise at one point of time and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the timing differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income statement in the period of enactment of the change.

8. Earning per Share

The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard - 20, "Earnings Per Share", issued by The Institute of Chartered Accountants of India. Basic earnings per equity share has been computed by dividing net profit for the year by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.

9. Impairment of Assets

The Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceed their estimated recoverable amount.

10. Accounting for Provisions, Contingent Liabilities and Contingent Assets

In accordance with Accounting Standard 29, "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Provisions are determined based on management estimate required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financial statements.

Contingent Assets, if any, are not recognized or disclosed in the financial statements.


Mar 31, 2012

1. Basis of Preparation

1.1 The financial statements have been prepared under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises statutory provisions, regulatory / Reserve Bank of India (RBI) guidelines, Accounting Standards / Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI) and practices prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with.

Use of Estimates

1.2 The preparation of financial statements requires the Management to make estimates and assumptions which are considered in the reported amounts of assets and liabilities (including Contingent Liabilities) as of the date of the financial statements and reported income and expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. Revenue Recognition and Expense Accounting

2.1 Income is recognized on accrual basis on performing assets and on realization basis in respect of non-performing assets as per the prudential norms prescribed by Reserve Bank of India. Recovery in non performing assets is first appropriated towards interest and the balance, if any, towards principal, except in the case of Suit Filed Accounts and accounts under One Time Settlement, where it would be appropriated towards principal.

2.2 Interest on Bills purchased/Mortgage Backed Securities, Commission (except on Letter of Credit / Letter of Guarantee/Government Business), Exchange, Locker Rent and Dividend are accounted for on realization basis.

2.3 Income from consignment sale of precious metals is accounted for as Other Income after the sale is complete.

2.4 Expenditure is accounted for on accrual basis, unless otherwise stated.

2.5 In case of matured overdue Term Deposits, interest is accounted for as and when deposits are renewed. In respect of Inoperative Savings Bank Accounts, unclaimed Savings Bank accounts and unclaimed Term Deposits, interest is accrued as per RBI guidelines.

2.6 Legal expenses in respect of Suit Filed Accounts are charged to Profit and Loss Account. Such amount when recovered is treated as income.

2.7 In respect of foreign branches, Income and Expenditure are recognized / accounted for as per local laws of the respective countries.

3. Foreign Currency Transactions

3.1 Accounting for transactions involving foreign exchange is done in accordance with Accounting Standard (AS) 11, "The Effects of Changes in Foreign Exchange Rates", issued by The Institute of Chartered Accountants of India.

3.2 Transaction in respect of Treasury (Foreign):

a) Foreign Currency transactions except foreign currency deposits and lending are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of transaction. Foreign Currency deposits and lendings are initially accounted at the then prevailing FEDAI weekly average rate.

b) Closing Balances in NOSTRO and ACU Dollar accounts are stated at closing rates. All foreign currency deposits and lendings including contingent liabilities are stated at the FEDAI weekly average rate applicable for the last week of each quarter. Other assets, liabilities and outstanding forward contracts denominated in foreign currencies are stated at the rates on the date of transaction.

c) The resultant profit or loss on revaluation of all assets, liabilities and outstanding forward exchange contracts including contingent liabilities at year-end exchange rates advised by FEDAI is taken to revenue with corresponding net adjustments to "Other Liabilities and Provisions"/"Other Asset Account" except in case of NOSTRO and ACU Dollar accounts where the accounts stand adjusted at the closing rates.

d) Income and expenditure items are translated at the exchange rates ruling on the date of incorporating the transaction in the books of accounts.

3.3 Translation in respect of overseas branches:

a) As stipulated in Accounting Standard 11, all overseas branches are treated as Non Integral Operations.

b) Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter.

c) Income and Expenses are translated at quarterly average rate notified by FEDAI at the end of each quarter.

d) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account "Foreign Currency Translation Reserve" till the disposal of the net investment.

4. Investments

4.1 Investments in India are classified into "Held for Trading", "Available for Sale" and "Held to Maturity" categories in line with the guidelines from Reserve Bank of India. Disclosures of Investments are made under six classifications viz.,

a) Government Securities

b) Other Approved securities including those issued by local bodies,

c) Shares,

d) Bonds & Debentures,

e) Subsidiaries /Joint Ventures,

f) Units of Mutual Funds and Others.

4.2 Interest on Investments, where interest/principal is in arrears for more than 90 days and income from Units of Mutual Funds, is recognized on realisation basis as per prudential norms.

4.3 Valuation of Investments is done in accordance with the guidelines issued by Reserve Bank of India as under:

4.3.1.Individual securities under "Held for Trading" and " Available for Sale" categories are marked to market at quarterly intervals. Central Government securities are valued at market rates declared by FIMMDA. Securities of State Government, other Approved Securities and Bonds & Debentures are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA. Quoted equity shares are valued at market rates, Unquoted equity shares and units of Venture Capital Funds are valued at book value / NAV ascertained from the latest available balance sheets, otherwise the same are valued at Re.1/- per company / Fund.

Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate markup over the YTM rates for Central Government Securities put out by the PDAI / FIMMDA periodically.

Based on the above valuations under each of the six classifications, net depreciation, if any, is provided for and net appreciation, if any, is ignored. Though the book value of individual securities would not undergo any change due to valuation, in the books of account, the investments are stated net of depreciation in the balance sheet.

4.3.2."Held to Maturity": Such investments are carried at acquisition cost/amortised cost. The excess, if any, of acquisition cost over the face value of each security is amortised on an effective interest rate method, over the remaining period of maturity. Investments in subsidiaries, associates and sponsored institutions and units of Venture capital funds are valued at carrying cost.

4.4 Investments are subject to appropriate provisioning / de -recognition of income, in line with the prudential norms prescribed by Reserve Bank of India for NPA classification. Bonds and Debentures in the nature of advances are also subject to usual prudential norms and accordingly provisions are made, wherever applicable.

4.5 Profit/Loss on sale of Investments in any category is taken to Profit and Loss account. In case of profit on sale of investments in "Held to Maturity" category, profit net of taxes is appropriated to "Capital Reserve Account".

4.6 Broken period interest, Incentive / Front-end fees, brokerage, commission etc. received on acquisition of securities are taken to Profit and Loss account.

4.7 Repo / Reverse Repo transactions are accounted as per RBI guidelines.

4.8 Investments held by overseas branches are classified and valued as per guidelines issued by respective overseas Regulatory Authorities.

5. Advances

5.1 Advances in India have been classified as 'Standard', 'Sub-standard', 'Doubtful' and 'Loss assets' and provisions for losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In case of overseas branches, the classification and provision is made based on the respective country's regulations or as per norms of Reserve Bank of India whichever is higher.

5.2 Advances are stated net of provisions except general provisions for standard advances.

6. Derivatives

6.1 The Bank enters into Derivative Contracts in order to hedge interest bearing assets/ liabilities, and for trading purposes.

6.2 In respect of derivative contracts which are entered for hedging purposes, the net amount receivable / payable is recognized on accrual basis. Gains or losses on termination on such contracts are deferred and recognized over the remaining contractual life of the derivatives or the remaining life of the assets / liabilities, whichever is earlier. Such derivative contracts are marked to market and the resultant gain or loss is not recognized, except where the derivative contract is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset/ liability.

6.3 Derivative contracts entered for trading purposes are marked to market as per the generally accepted practices prevalent in the industry and the changes in the market value are recognized in the profit and loss account. Income and expenses relating to these contracts are recognized on the settlement date. Gain or losses on termination of the trading derivative contracts are recorded as income or expenses.

7. Fixed Assets

7.1 Fixed Assets except revalued premises are stated at historical cost.

7.2 Depreciation is provided on straight-line method at the rates considered appropriate by the Management as under:

Premises 2.50%

Furniture 10%

Electrical Installations, Vehicles & Office Equipments 20% Computers 33 1/3 %

Fire Extinguishers 100%

Depreciation on revalued portion of the fixed assets is withdrawn from revaluation reserve and credited to profit and loss account.

7.3 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

7.4 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

7.5 In respect of leasehold properties, premium is amortised over the period of lease.

7.6 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws/practices of the respective countries.

8. Staff Benefits

8.1 Contribution to Provident Fund is charged to Profit and Loss Account.

8.2 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is based on actuarial valuation at the year-end. However, additional liability accrued during the year on account of Re-opening of pension option and enhancement of Gratuity limit is being amortised over a period of five years.

8.3 In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

9. Tax on Income

This comprises provision for current tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income & taxable income for the period) as determined in accordance with Accounting Standard 22 of ICAI, Accounting for taxes on income. Deferred tax is recognized subject to consideration of prudence in respect of items of income and expenses those arise at one point of time and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the timing differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income statement in the period of enactment of the change.

10. Earning per Share

The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard - 20, Earnings Per Share, issued by The Institute of Char- tered Accountants of India. Basic earnings per equity share has been computed by dividing net profit for the year by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.

11. Impairment of Assets

The bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceed their estimated recoverable amount.

12. Accounting for Provisions, Contingent Liabilities and Contingent Assets

In accordance with Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Provisions ore determined based on management estimate required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financial statements.


Mar 31, 2011

1. Basis of Preparation

1.1 The financial statements have been prepared under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises statutory provisions, regulatory / Reserve Bank of India (RBI) guidelines, Accounting Standards / Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI) and practices prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with.

Use of Estimates

1.2 The preparation of financial statements requires the Management to make estimates and assumptions which are considered in the reported amounts of assets and liabilities (including Contingent Liabilities) as of the date of the financial statements and reported income and expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

2. Revenue Recognition and Expense Accounting

2.1 Income is recognized on accrual basis on performing assets and on realization basis in respect of non-performing assets as per the prudential norms prescribed by Reserve Bank of India. Recovery in Non Performing Assets is first appropriated towards interest and the balance, if any, towards principal, except in the case of Suit Filed Accounts and accounts under One Time Settlement, where it would be appropriated towards principal.

2.2 Interest on bills purchased/Mortgage Backed Securities, Commission (except on Letter of Credit/Letter of Guarantee/Government Business), Exchange, Locker Rent and Dividend are accounted for on realization basis.

2.3 Income from consignment sale of precious metals is accounted for as Other Income after the sale is complete.

2.4 Expenditure is accounted for on accrual basis, unless otherwise stated.

2.5 In case of matured overdue Term Deposits, interest is accounted for as and when deposits are renewed. In respect of Inoperative Savings Bank Accounts, unclaimed Savings Bank accounts and unclaimed Term Deposits, interest is accrued as per RBI guidelines.

2.6 Legal expenses in respect of Suit Filed Accounts are charged to Profit and Loss Account. Such amount when recovered is treated as income.

2.7 In respect of foreign branches, Income and Expenditure are recognized / accounted for as per local laws of the respective countries.

3. Foreign Currency Transactions

3.1 Accounting for transactions involving foreign exchange is done in accordance with Accounting Standard (AS) 11, "The Effects of Changes in Foreign Exchange Rates", issued by The Institute of Chartered Accountants of India.

3.2 Transaction in respect of Treasury(Foreign):

a) Foreign Currency transactions except foreign currency deposits and lending are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of transaction. Foreign Currency deposits and tendings are initially accounted at the then prevailing FEDAI weekly average rate.

b) Closing Balances in NOSTRO and ACU Dollar accounts are stated at closing rates. All foreign currency deposits and lendings including contingent liabilities are stated at the FEDAI weekly average rate applicable for the last week of each quarter. Other assets, liabilities and outstanding forward contracts denominated in foreign currencies are stated at the rates on the date of transaction.

c) The resultant profit or loss on revaluation of all assets, liabilities and outstanding fdrward exchange contracts including contingent liabilities at year-end exchange rates advised

by FEDAI is taken to revenue with corresponding net adjustments to "Other Liabilities and ProvisionsVOther Asset Account" except in case of NOSTRO and ACU Dollar accounts where the accounts stand adjusted at the closing rates.

d) Income and expenditure items are translated at the exchange rates ruling on the date of incorporating the transaction in the books of accounts.

3.3 Translation in respect of overseas branches:

a) As stipulated in Accounting Standard 11, all overseas branches are treated as Non Integral Operations.

b) Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter.

c) Income and Expenses are translated at quarterly average rate notified by FEDAI at the end of each quarter.

d) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account "Foreign Currency Translation Reserve" till the disposal of the net investment.

4. Investments

4.1 Investments in India are classified into "Held for Trading", "Available for Sale" and "Held to Maturity" categories in line with the guidelines from Reserve Bank of India. Disclosures of Investments are made under six classifications viz.,

a) Government Securities

b)Other Approved securities including those issued by local bodies,

c) Shares,

d) Bonds &Debentures,

e) Subsidiaries/Joint Ventures,

f) Units of Mutual Funds and Others.

4.2 Interest on Investments, where interest/principal is in arrears for more than 90 days and income from Units of Mutual Funds , is recognized on realisation basis as per prudential norms.

4.3 Valuation of Investments is done in accordance with the guidelines issued by Reserve Bank of India as under:

4.3.1. Individual securities under "Held for Trading"and "Available for Sale" categories are marked to market at quarterly intervals. Central Government securities are valued at market rates declared by FIMMDA. Securities of State Government, other Approved Securities and Bonds & Debentures are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA. Quoted equity shares are valued at market rates, Unquoted equity shares and units of Venture Capital Funds are valued at book value /NAV ascertained from the latest available balance sheets, otherwise the same are valued at Re. 1/- per company /Fund.

Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate markup over the YTM rates for Central Government Securities put out by the PDAI/FIMMDA periodically.

Based on the above valuations under each of the six classifications, net depreciation, if any, is provided for and net appreciation, if any, is ignored. Though the book value of individual securities would not undergo any change due to valuation, in the books of account, the investments are stated net of depreciation in the balance sheet.

4.3.2."Held to Maturity": Such investments are carried at acquisition cost/amortised cost. The excess, if any, of acquisition cost over the face value of each security is amortised on an effective interest rate method, over the remaining period of maturity. Investments in subsidiaries, associates and sponsored institutions and units of Venture capital funds are valued at carrying cost.

4.4 Investments are subject to appropriate provisioning / de -recognition of income, in line with the prudential norms prescribed by Reserve Bank of India for NPA classification. Bonds and Debentures in the nature of advances are also subject to usual prudential norms and accordingly provisions are made, wherever applicable.

4.5 Profit/Loss on sale of Investments in any category is taken to Profit and Loss account. In case of profit on sale of investments in "Held to Maturity" category, profit net of taxes is appropriated to "Capital Reserve Account".

4.6 Broken period interest, Incentive / Front-end fees, brokerage, commission etc. received on acquisition of securities are taken to Profit and Loss account.

4.7 Repo / Reverse Repo transactions are accounted as per RBI guidelines.

4.8 Investments held by overseas branches are classified and valued as per guidelines issued by respective overseas Regulatory Authorities.

5. Advances

5.1 Advances in India have been classified as Standard, Sub-standard, Doubtful and Loss assets and provisions for losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In case of overseas branches, the classification and provision is made based on the respective countrys regulations or as per norms of Reserve Bank of India whichever is higher.

5.2 Advances are stated net of provisions except general provisions for standard advances.

6. Derivatives

6.1 The Bank enters into Derivative Contracts in order to hedge interest bearing assets/ liabilities, and for trading purposes.

6.2 In respect of derivative contracts which are entered for hedging purposes, the net amount receivable/payable is recognized on accrual basis. Gains or losses on termination on such contracts are deferred and recognized over the

remaining contractual life of the derivatives or the remaining life of the assets/ liabilities, whichever is earlier. Such derivative contracts are marked to market and the resultant gain or loss is not recognized, except where the derivative contract is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset/ liability.

6.3 Derivative contracts entered for trading purposes are marked to market as per the generally accepted practices prevalent in the industry and the changes in the market value are recognized in the profit and loss account. Income and expenses relating to these contracts are recognized on the settlement date. Gain or losses on termination of the trading derivative contracts are recorded as income or expenses.

7. Fixed Assets

7.1 Fixed Assets except revalued premises are stated at historical cost.

Depreciation on revalued portion of the fixed assets is withdrawn from revaluation reserve and credited to profit and loss account.

7.3 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

7.4 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

7.5 In respect of leasehold properties, premium is amortised over the period of lease.

7.6 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws/practices of the respective countries.

8. Staff Benefits

8.1 Contribution to Provident Fund is charged to Profit and Loss Account.

8.2 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is based on actuarial valuation at the year-end. However, additional liability accrued during the year on account of Re-opening of pension option and enhancement of Gratuity limit is being amortised over a period of five years.

8.3 In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

9. Tax on Income

This comprises provision for current tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income & taxable income for the period) as determined in accordance with Accounting Standard 22 of ICAI, Accounting for taxes on income. Deferred tax is recognized subject to consideration of prudence in respect of items of income and expenses those arise at one point of time and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the timing differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the income statement in the period of enactment of the change.

10. Earning per Share

The Bank reports basic and diluted earnings per equity share in accordance with Accounting Standard - 20, Earnings Per Share, issued by The Institute of Chartered Accountants of India. Basic earnings per

equity share has been computed by dividing net profit for the year by the weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.

11. Impairment of Assets

The bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceed their estimated recoverable amount.

12. Accounting for Provisions, Contingent Liabilities and Contingent Assets

In accordance with Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Provisions ore determined based on management estimate required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure is made in the financial statements.

Contingent Assets, if any, are not recognized or disclosed in the financial statements.


Mar 31, 2010

1. General

The financial statements have been prepared on historical cost basis unless otherwise stated and further on the assumption of going concern concept.

2. Revenue Recognition

2.1 Income is recognized on accrual basis on performing assets and on realization basis in respect of non-performing assets as per the prudential norms prescribed by Reserve Bank of India. Recovery in Non Performing Assets is first appropriated towards interest and the balance, if any towards principal, except in the case of Suit Filed Accounts and accounts under One Time Settlement.

2.2 Interest on bills purchased/Mortgage Backed Securities, commission (except on Letter of Credit/Letter of Guarantee/Government Business), Exchange, Locker Rent and Dividend are accounted for on realization basis.

2.3 Income from consignment sale of precious metals is accounted for as Other Income after the sale is complete.

2.4 Expenditure is accounted for on accrual basis, except otherwise stated.

2.5 In case of matured Term Deposits, interest is accounted for as and when deposits are renewed. In respect of Inoperative Savings Bank Accounts, unclaimed Savings Bank accounts and unclaimed Term Deposits, interest is accrued as per RBI guidelines.

2.6 Legal expenses in respect of Suit Filed Accounts are charged to Profit and Loss Account. Such amount when recovered is treated as income.

2.7 In respect of foreign branches, Income & Expenditure are recognized / accounted for as per local laws of the respective countries.

3. Foreign exchange Transactions of Indian Operations

3.1 Balances in NOSTRO and ACU Dollar accounts are stated at closing rates. FCNR/ EEFC/RFC/FCA (all foreign currency deposits including interest accrued thereon) and PCFC/WCFC/TLFC/FCL (all foreign currency lendings) are stated at the FEDAI weekly average rate applicable for the last week of the quarter. Other Assets, Liabilities and Outstanding Forward Contracts denominated in foreign currencies are stated at the rates on the date of transaction.

Profit/Loss on valuation of all assets, liabilities and outstanding forward exchange contracts at year-end exchange rates advised by FEDAI is taken to revenue with corresponding net adjustments retained in "Other Liabilities and Provisions"/ "Other Assets Account" except in case of NOSTRO and ACU Dollar accounts where the accounts stand adjusted at the closing rates.

3.2 Acceptances, Endorsements and other obligations including guarantees of Indian operations denominated in foreign currencies are stated at the FEDAI weekly average rate applicable for the last week of the quarter.

3.3 Income and Expenditure items are translated at the exchange rate ruling on the date of incorporating the transaction in the books of account.

4. Translation of the Financial Statements of Foreign Branches

Assets and Liabilities of Foreign branches are translated at the year-end closing rate in compliance with Accounting Standard 11 and the net gain/ loss arising out of this is kept under Foreign Currency Translation Reserve until the disposal of the net investment.

5. Investments

5.1 Investments in India are classified into "Held for Trading", "Available for Sale" and "Held to Maturity" categories in line with the guidelines from Reserve Bank of India. Valuation and disclosures of Investments are made under six classifications viz.,

a) Government securities (including State Government securities), b) Other Approved securities, c) Shares, d) Bonds & Debentures, e) Subsidiaries / Joint ventures, f) Units of Mutual Funds and Others.

5.2 Interest on Investments, where interest / principal is in arrears for more than 90 days and income from units of Mutual Funds is recognised on cash basis as per prudential norms.

5.3 Valuation of Investments is done in accordance with the guidelines issued by Reserve Bank of India as under:-

5.3.1. "Held for Trading":- Individual scrips under this category (both long and short-not to be netted off) are held at original cost. The same is valued at daily basis at market rate, wherever available, or as per the prices declared by FIMMDA and in respect of each classification under this category, net depreciation, if any, is charged to revenue and net appreciation, if any, is ignored.

5.3.2. "Available for Sale":- Individual securities under this category are marked to market at quarterly intervals. Central Government securities are valued at market rates declared by FIMMDA. State Government, other Approved securities and Debentures / bonds are valued as per the yield curve, credit spread rating-wise and other methodologies suggested by FIMMDA. Quoted equity shares are valued at market rates, Unquoted equity shares and Units of Venture Capital Funds are valued at book value/NAV ascertained from the latest available balance sheet, otherwise the same is valued at Re.1/ - per Company/Fund.

Treasury Bills and Commercial Papers and Certificate of Deposits are valued at carrying cost. Units held in Mutual fund schemes are valued at Market Price or Repurchase price or Net Asset Value in that order depending on availability.

Valuation of Preference shares is made on YTM basis with appropriate mark up over the YTM rates for Central Govt. Securities put out by the PDAI / FIMMDA periodically.

Based on the above valuations under each classification, net depreciation, if any, is provided for and net appreciation, if any is ignored. The book value of the individual securities would not undergo any change due to valuation.

5.3.3. "Held to Maturity":- Such investments are carried at acquisition cost/ amortized cost.

The excess, if any, of acquisition cost over the face value of each security is amortized over the remaining period of maturity. Investments in subsidiaries, associates and sponsored Institutions and Units of Venture Capital Funds are valued at carrying cost.

5.4 Investments are subject to appropriate provisioning / de-recognition of income, in line with the prudential norms prescribed by Reserve Bank of India for NPA classification. Debentures / bonds in the nature of advances are also subject to usual prudential norms and accordingly provided for, wherever appropriate.

5.5 Profit / Loss on sale of Investments in any category is taken to Profit and Loss account. In case of profit on sale of investments in "Held to Maturity" category, an equivalent amount is appropriated to "Capital Reserve Account".

5.6 Incentive / Front-end fees, etc. received on subscription to securities are taken to Profit and Loss account.

5.7 Investments held by Overseas Branches are classified and valued as per guidelines issued by the respective regulatory authorities.

6. Advances

6.1 Advances have been classified as Standard, Sub-standard, Doubtful and Loss assets and provisions for possible losses on such advances are made as per prudential norms issued by Reserve Bank of India and also as per the directives of Reserve Bank of India from time to time. In case of overseas branches, the provision is made on the respective countrys regulations or as per norms of Reserve Bank of India whichever is higher.

6.2 The Bank holds floating provision for non- performing advances over and above the prudential norms. Such floating provisions built over different periods would not be used for any profit or dividend equalisation across accounting periods.

6.4 Advances are stated net of provisions except general provisions for standard advances.

7. Gold Business

Transactions in Gold other than purchase and sale are accounted for at prevalent notional rates.

8. Derivatives

8.1 The Bank enters into Interest Rate Swaps in order to hedge interest bearing assets / liabilities, and for trading purposes.

8.2 In respect of Interest Rate Swaps which are contracted for hedging purposes, the net amount receivable / payable is recognized on accrual basis. Gains or losses on termination on swaps are deferred and recognized over the remaining contractual life of the swaps or the remaining life of the assets/ liabilities, whichever is earlier. Such Interest rate swaps are marked to market, but the resultant gain or loss is not recognized, except where the swap is designated with an asset/ liability which is also marked to market, in which case, the resulting gain or loss is recorded as an adjustment to the market value of the underlying asset / liability.

8.3 Trading Swaps outstanding at the year end are marked to market as per the generally accepted practices prevailing in the industry and the changes in the market value are recognized in the Profit & Loss Account. Income and expenses relating to these swaps are recognized on the settlement date.

Gains or losses on termination of the trading swaps are recorded as income or expenses.

9. Fixed Assets

9.1 Fixed Assets except revalued premises are stated at historical cost and are broadly classified/ grouped under the following heads:

i) Premises.

ii) Capital Work-in-progress.

iii) Other Fixed Assets including

a) Metal Furniture. b) Wooden Furniture. c) Electrical Installation. d) Vehicles. e) Computers.*

* ATMs along with cost of development of the leasehold and freehold sites, computer peripherals like UPS, Batteries, etc and their replacement costs are capitalized under the head computers.

9.3 Depreciation is provided for the full year irrespective of the date of acquisition / revaluation.

9.4 Depreciation is provided on Land and Building as a whole where separate costs are not ascertainable.

9.5 In respect of leasehold properties, premium is amortised over the period of lease.

9.6 Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws of the respective countries.

10. Staff Benefits

10.1 Provision for gratuity and pension liability is made on actuarial basis and contributed to approved Gratuity and Pension Fund. Provision for encashment of accumulated leave payable on retirement or otherwise is made on actuarial valuation at the year-end, in compliance with Accounting Standard 15.

10.2In respect of overseas branches gratuity is accounted for as per laws prevailing in the respective countries.

11. Net Profit / Loss

Net Profit / Loss disclosed in the Profit and Loss Account is after:

i) Provision for taxes on income and wealth

ii) Provision for non-performing advance and general provision for Standard Advances

iii) Depreciation/Amortisation/ provision on investments

iv) Other usual and necessary provisions

12. Provision for Taxation

I) Provision for Taxes has been made on the basis of estimated tax liability which includes adjustments for Deferred Tax in compliance with Accounting Standard 22.

ii) Securities Transactions Tax is charged to Profit & Loss Account.



 
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