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Accounting Policies of Jammu & Kashmir Bank Ltd. Company

Mar 31, 2016

1. Basis of preparation of Financial Statements

The accompanying financial statements are prepared on historical cost basis, except as otherwise stated, following the "Going Concern" concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

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

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income over the period of contract.

4. Investments

i. Investments are classified into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories, in accordance with the guidelines issued by Reserve Bank of India.

ii. Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

iii. "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. "Available-for-Sale" securities are those, which do not qualify for being classified in either of the above categories.

iv. Investments classified as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity using straight line method.

v. (a) The individual scrip''s in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for trading" categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) Unquoted shares are valued at break-up value ascertained from the latest balance sheet (which should not be more than one year prior to the date of valuation) and in case the latest balance sheet is not available the same are valued at Rs.1/- per Company, as per RBI guidelines.

(d) Security receipts (SRs) issued by Asset Reconstruction Companies (ARCs) are valued at cost or NAV, whichever is lower, declared periodically by the ARCs. Depreciation, if any, in individual SRs is fully provided for. Appreciation, if any, is ignored.

(e) Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un- quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

vi. The individual scrip in the "held-for-trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

vii. The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

viii. (a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

(b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in "Held-to-Maturity" category, an equivalent amount of profit net of taxes is appropriated to the "Capital Reserve Account", ix. Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

x. Brokerage paid on securities purchased is charged to revenue account except for equity investment operations the same is added to the cost of purchase of investment.

xi. Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

xii. Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

xiii. Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

xiv. Bank is following settlement date accounting policy.

In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowing) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & money at call & short notice).

5. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classification norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA''s. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

iii) Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

6. Fixed Assets

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is charged on straight line method as per provisions of Companies Act 2013 based on the useful life of the assets prescribed in Part C of the schedule II of the Companies Act 2013 as given hereunder.

7. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered,

ii) Long Term Employee Benefit

iii) Defined Contribution Plan

(a) Provident Fund: Provident Fund is a defined contribution scheme as 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 & loss A/C .The bank is paying matching contribution towards those employees who have not opted for the pension,

iv) Defined Benefit Plan

(a) Gratuity: Gratuity liability is a defined obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

(b) Pension: Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

(c) Leave Salary: Leave salary is a defined benefit obligation and is provided for on the basis of an actuarial valuation determined on the basis of un-availed privilege leave of an employee at the time of leaving services of the company.

8. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classified as Non Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) The recovery in Non-Performing Assets has been first appropriated towards amount of principal and thereafter towards amount of interest.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/ other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

9. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on the reporting date.

10. Profit

The net profit is disclosed in the profit and loss account after providing for:

i) Income Tax, wealth tax and Deferred Tax.

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency fund.

v) Other usual and necessary provisions.

11. Taxation

Provision for tax is made for both current and deferred taxes in accordance with As-22 on "Accounting for Taxes on Income.

12. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".

1. Reconciliation/adjustment of inter-bank/inter-branch transactions, branch suspense, Government Transactions, NOSTRO, System Suspense, Clearing, and Sundry Deposits is in progress on an ongoing basis. The impact, in the opinion of the management of the un-reconciled entries, if any, on the financial statements would not be material.

2. Tax paid in Advance/ Tax deducted at source includes amount adjusted by Income Tax Department in respect of various disputed demands. Based on the favorable appellate orders and interpretation of law, no further provision has been considered by the management in respect of the disputed demands.

3. Fixed Assets:

a) Documentation formalities are pending in respect of two immovable properties held by the bank valued atRs.1.10 crores (previous year Rs.1.12 crores). Depreciation in respect of immovable properties valued at Rs.15.68 crores (previous year Rs.16.02 crores) bank holds agreement to sell along with the possession of the properties.

b) Depreciation is provided on straight line method in accordance with the provisions of Companies Act 2013 based on the useful life of the assets prescribed in Part C of the Schedule II of the Companies Act 2013. However the depreciation on computers (including ATMs) along with software forming integral part of the computers is computed at 33.33% on straight line method in terms of RBI guidelines issued vide letter no BP.1660/21.04.018/2001 dated 01.02.2001.

c) In compliance to Accounting Standard (AS-26) the acquisition cost of computer software, not forming integral part of the computers and where it is probable that the future economic benefits that are contributable to this software will flow to bank, is being capitalized and depreciation is charged at the rate of 33.33% on straight line method in terms of RBI guidelines.

d) Further useful life of mobile phones is continued to be 2 years and the depreciation is charged on straight line method as per provisions of Companies Act 2013 with no residual value.

e) Depreciation on Banks property includes amortization in respect of leased properties amounting to Rs.0.14 Crores (previous year Rs.0.14 Crores)

Investments

5. The Bank has made no profit on sale of HTM category securities during the year, as such no appropriation was made (Previous Year, Rs.Nil) to Capital Reserve Account.

6. The Bank has Rs.70,00,000 as share capital (previous year Rs.70,00,000) and Rs.44,97,47,715 in share capital deposit account (previous year Rs.44,97,47,715) in its sponsored Regional Rural Bank (J&K Grameen Bank).

7. The total investment of the Bank in the Met-life India Insurance Co Pvt. Ltd stood at Rs.102.19 Crores as on 31.03.2016 (Previous year Rs.102.19 Crores). In compliance with RBI Letter No. DB0D.BP/-17099/21.4.141/ 2008-09 dated 9th Apri 2009, the investment stands transferred to AFS Category on October 1st, 2009. The valuation has been carried out at an average of two independent valuation reports obtained from Category I Merchant Bankers as per RBI guidelines & the consequent appreciation has been ignored in view of the Accounting Policy in respect of such investments.

10.2 Sale and Transfers to/from Held to Maturity (HTM) Category

a) Bank has not sold any HTM category securities during the year (previous year nil) as such no appropriation was made to Capital Reserve Account.

b) With the approval of the Board of Directors, the Bank has shifted securities amounting to Rs.753.75 Cr (FV) on 08/06/2015 (Previous year Rs.370.00 Cr) at lower of book value or market value, scrip wise, from Held to Maturity (HTM) to Available for Sale (AFS) category in accordance with RBI guidelines.

c) On the basis of special dispensation being allowed by the Reserve Bank of India vide its Circular No. DBOD.No.BP. BC.42/21.04.141/2014-15, dated 07/10/2014 & Circular No.DBR.No.BP.BC.65/21.04.141/2015-16, Dated 10/12/2015, the Bank undertook shifting of Govt. Securities having face value of Rs.650 Cr & 825 Cr on 02/09/2015 & 01/01/2016 respectively from HTM to AFS Category.

d) The value of sales and transfer of securities to/from HTM category (excluding the exempted transfer) did not exceed 5% of book value of the investment in HTM category at the beginning of the year.

11.3 Disclosures on Risk exposures in derivatives

a) Qualitative Disclosures

The only derivatives traded by the Bank in the foreign exchange market are forward contracts. Forward contracts are being used to hedge /cover the exposure in foreign exchange arising out of Merchant transactions and trading positions.

To cover the risks arising out of above derivatives, various limits like AGL, IGL and stop loss have been prescribed in the trading policy of the bank which are monitored through VaR.

Outstanding forward exchange contracts held for trading are revalued at the exchange rates for appropriate maturity rates as announced by FEDAI at the year-end exchange rates and the resultant gain/ loss is taken to revenue.


Mar 31, 2015

1. Basis of preparation of Financial Statements

The accompanying financial statements are prepared on historical cost basis, except as otherwise stated, following the "Going Concern" concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/ Guidance Notes/pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

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

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income over the period of contract.

4. Investments

(i) Investments are classified into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories, in accordance with the guidelines issued by Reserve Bank of India.

(ii) Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

(iii) "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. "Available-for-Sale" securities are those, which do not qualify for being classified in either of the above categories.

(iv) Investments classified as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity.

(v) (a) The individual scrip's in the "Available-for-Sale" category are marked to market at weekly intervals in case of equity and quarterly intervals in case of other investments. The net depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for Trading" categories is based on the market price available from the trades/quotes on stock exchanges. Central/ State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) Un-quoted shares are valued at break-up value ascertained from the latest balance sheet and in case the latest balance sheet is not available the same are valued at Rs. 1/- per Company, as per RBI guidelines.

Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

(vi) The individual scrip in the "Held-for-Trading" category are marked to market at weekly intervals in case of equity and monthly intervals in case of other investments and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

(vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

(viii) a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in "Held-to-Maturity" category, an equivalent amount of profit net of taxes is appropriated to the "Capital Reserve Account".

(ix) Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

(x) Brokerage paid on securities purchased is charged to revenue account except for equity investment operations the same is added to the cost of purchase of investment.

(xi) Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

(xii) Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

(xiii) Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

(xiv) Bank is following settlement date accounting policy.

(xv) In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue 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 & Money at Call & Short Notice).

5. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classification norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA's. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

iii) Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

6. Fixed Assets

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is charged on straight line method as per provisions of Companies Act, 2013 based on the useful life of the assets prescribed in Part C of the schedule II of the Companies Act, 2013 as given hereunder.

S.No. Block Useful Life

a Building (with RCC Frame Structure Commercial 60 yrs

Residential 60 yrs

b Building (with Other than RCC Frame Structure)

Commercial 30 yrs

Residential 30 yrs

c Plant&Machinery 15 yrs

d Furniture Fixture 10 yrs

e Vehicles 8 yrs

f Fences 5 yrs

g Others (including temporary structures etc) 3 yrs

Depreciation on computers (including ATMs) along with software forming integral part of the computers is computed at 33.33% on straight line method in terms of RBI guidelines issued vide letter no BP.1660/21.04.018/2001 dated 01.02.2001

The depreciation on computer software where it is probable that the future benefits that are contributable to such software will flow to Bank is being capitalized and depreciation is charged @33.33% in terms of RBI guidelines on straight line method Useful life of the mobile phones is continued to be 2 years and the depreciation is charged on straight line method as per provisions of Companies Act, 2013 with no residual value.

e) Premium paid for Leasehold properties is amortized over the period of the lease.

7. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered.

ii) Long Term Employee Benefits Defined Contribution Plan

(a) Provident Fund:- Provident Fund is a defined contribution scheme as 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 & loss a/c. The bank is paying matching contribution towards those employees who have not opted for the pension.

iii) Defined Benefit Plan

a) Gratuity:- Gratuity liability is a defined obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

b) Pension:- Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation The scheme is funded by the bank and is managed by a separate trust.

c) Leave Salary:- Leave salary is a defined benefit obligation and is provided for on the basis of an actuarial valuation determined on the basis of un-availed privilege leave of an employee at the time of leaving services of the company.

8. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classified as Non Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) The recovery in Non-Performing Assets has been first appropriated towards amount of principal and thereafter towards amount of interest.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/ other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

9. Credit Card Reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on the reporting date.

10. Profit

The net profit is disclosed in the profit and loss account after providing for:

i) Income Tax, Wealth Tax and Deferred Tax.

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ Amortization on Investments.

iv) Transfer to contingency fund.

v) Other usual and necessary provisions.

11. Taxation

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on "Accounting for Taxes on Income".

12. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".


Mar 31, 2014

1. Basis of preparation of Financial Statements

The accompanying fnancial statements are prepared on historical cost basis, except as otherwise stated, following the "Going Concern" concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/pronouncements issued by the Institute of Chartered Accountants of India (ICIA) and practices prevailing in the banking industry in India.

2. Use of Estimates

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

3. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income over the period of contract.

4. Investments

(i) Investments are classifed into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories, in accordance with the guidelines issued by Reserve Bank of India.

(ii) Bank decides the category of each investment at the time of acquisition and classifes the same accordingly.

(iii) "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. "Available-for-Sale" securities are those, which do not qualify for being classifed in either of the above categories.

(iv) Investments classifed as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity.

(v) (a) The individual scrip''s in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifcations under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifcations is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for Trading" categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) Unquoted shares are valued at break-up value ascertained from the latest balance sheet and in case the latest balance sheet is not available the same are valued at Rs.1/- per Company, as per RBI guidelines. signifcant accounting policies and notes on accounts

Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

(vi) The individual scrip in the "Held for Trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifcations under which investments are presented in the Balance Sheet is accounted for in the Proft and Loss account and appreciation is ignored.

(vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non- performing Non-SLR investments are treated applying RBI prudential norms on NPA Classifcation and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

(viii) a) Proft or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

b) Proft or loss on sale of investments in any category is taken to the Proft and Loss account. In case of proft on sale of investments in "Held-to-Maturity" category, an equivalent amount of proft net of taxes is appropriated to the "Capital Reserve Account".

(ix) Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

(x) Brokerage paid on securities purchased is charged to revenue account except for equity investment operations the same is added to the cost of purchase of investment.

(xi) Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

(xii) Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

(xiii) Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

(xiv) Bank is following settlement date accounting policy.

(xv) In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is refected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classifed under schedule 4 (Borrowing) and balance in Reverse Repo account is classifed under schedule 7 (Balance with Banks & money at call & short notice).

5. Advances

i) Classifcation of Advances and Provisions thereof have been made as per the Income Recognition

and Asset Classifcation norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA''s. Provisions for advances classifed as Standard Assets is shown under Other Liabilities & Provisions.

iii) Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

6. Fixed Assets

a) Premises and other fxed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is provided on diminishing balance method in accordance with the provisions of Income Tax Act 1961, as per the rates prescribed in Income Tax Rules given below: -

S. No. Heads Rates

A Furniture & Fixtures (including electric fttings) 10%

B Wooden partitions 100%

C Vehicles 15%

D Plant & Machinery 15%

E Premises

i) Offce Premises 10%

ii) Residential & STC buildings 5%

However, in terms of RBI guidelines depreciation on computers (including ATMs) along with software forming integral part of computers is charged at the rate of 33.33% on straight-line method for the full year even if the computers (including ATMs) have been purchased during the second half.

The depreciation on computer software where it is probable that the future benefts that are contributable to such software will fow to Bank is being capitalized and depreciation is charged @33.33% in terms of RBI guidelines on straight line method.

The depreciation on mobile phones is being charged @50% on straight line method.

e) The expenditure incurred towards furniture & fxture in building (M-6G) being used as Chairman''s residence has been treated as asset of the Bank under this head. The expenditure on repairs and renovation of this building has been charged to revenue, as the building is not owned by the Bank, hence not capitalized.

f) Depreciation on additions to Assets made up to 30th September of the year is provided for at full rates and on additions thereafter at 50% of the rates. No depreciation is provided on assets sold/ discarded during the year.

g) Premium paid for Leasehold properties is amortized over the period of the lease.

signifcant accounting policies and notes on accounts

7. Employees Benefts

i) Short-term employee benefts are charged to revenue in the year in which the related service is rendered.

ii) In respect of employees who have opted for provident fund scheme, matching contribution is made.

iii) Contribution to Defned Beneft Plans (Gratuity, Pension and Leave Encashment) has been made as per AS-15 (on Employees benefts) issued by the Institute of Chartered Accountants of India.

8. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classifed as Non Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) The recovery in Non-Performing Assets has been frst appropriated towards amount of principal and thereafter towards amount of interest.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/ other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

9. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on the reporting date.

10. Proft

The net proft is disclosed in the proft and loss account after providing for: i) Income Tax, wealth tax and Deferred Tax.

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency fund.

v) Other usual and necessary provisions.

11. Taxation

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on "Accounting for Taxes on Income".

12. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".


Mar 31, 2013

1. Accounting Conventions

The accompanying financial statements are prepared by following the going concern concept and on the historical cost basis unless otherwise stated and conform to the statutory provisions and practices prevailing within the Banking Industry in the country.

2. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income over the period of contract.

3. Investments

(i) Investments are classified into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories in accordance with the guidelines issued by Reserve Bank of India.

(ii) Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

(iii) "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. "Available-for-Sale" securities are those which do not qualify for being classified in either of the above categories.

(iv) Investments classified as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity.

(v) (a) The individual scrips in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for trading" categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) Unquoted shares are valued at break-up value ascertained from the latest balance sheet and in case the latest balance sheet is not available the same are valued at Rs. 1/- per Company, as per RBI guidelines.

Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/ market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

(vi) The individual scrip in the "Held-for-Trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

(vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

(viii) a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in "Held-to-Maturity" category, an equivalent amount of profit net of taxes is appropriated to the "Capital Reserve Account".

(ix) Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

(x) Brokerage paid on securities purchased is charged to revenue account.

(xi) Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

(xii) Transfer of securities from one category to another is done at the least of the acquisition cost/book value/ market value on the date of transfer.

(xiii) Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

(xiv) Bank is following settlement date accounting policy as per RBI guidelines.

(xv) In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/ Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowing) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & money at call & short notice).

4. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classification norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA''s. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

5. Fixed Assets

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is provided on diminishing balance method in accordance with the provisions of Income Tax Act 1961, as per the rates prescribed in Income Tax Rules given below: -

However, in terms of RBI guidelines depreciation on computers (including ATMs) along with software forming integral part of computers is charged at the rate of 33.33% on straight-line method for the full year even if the computers (including ATMs) have been purchased during the second half.

The depreciation on computer software where it is probable that the future benefits that are contributable to such software will flow to Bank is being capitalized and depreciation is charged @33.33% in terms of RBI guidelines on straight line method.

The depreciation on mobile phones is being charged @50% on straight line method.

e) The expenditure incurred towards furniture & fixture in building (M-6G) being used as Chairman''s residence has been treated as asset of the Bank under this head. The expenditure on repairs and renovation of this building has been charged to revenue, as the building is not owned by the Bank, hence not capitalized.

f) Depreciation on additions to Assets made up to 30th September of the year is provided for at full rates and on additions thereafter at 50% of the rates. No depreciation is provided on assets sold/ discarded during the year.

g) Premium paid for Leasehold properties is amortized over the period of the lease.

6. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered.

ii) In respect of employees who have opted for provident fund scheme, matching contribution is made.

iii) Contribution to Defined Benefit Plans (Gratuity, Pension and Leave Encashment) has been made as per AS 15 (Revised 2005) issued by the Institute of Chartered Accountants of India.

7. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classified as Non Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) Recovery in Non-Performing Assets is appropriated first towards the interest and there after towards principal/ arrears of asset.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than commission on insurance & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/ other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

8. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on the reporting date.

9. Profit

The net profit is disclosed in the profit and loss account after providing for:

i) Income Tax, wealth tax and Deferred Tax.

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency reserves.

v) Other usual and necessary provisions.

10. Taxation

Tax expense includes Income Tax, Wealth Tax and Deferred Tax determined in accordance with the provisions of Income/Wealth Tax Act, and the Accounting Standards issued by The Institute of Chartered Accountants of India.

The deferred tax charge or credit is recognized using the tax rates that have been enacted or substantially enacted by the Balance Sheet date. In terms of Accounting Standard 22 issued by ICAI, provision for deferred tax liability is made on the basis of review at each Balance Sheet date and deferred tax assets are recognized only if there is virtual certainty of realization of such assets in future.

11. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".


Mar 31, 2012

1. Accounting Conventions

The accompanying financial statements are prepared by following the going concern concept and on the historical cost basis unless otherwise staThed and conform to the statutory provisions and practices prevailing within the Banking Industry in the country.

2. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translaThed using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange diff erences arising on settlement of monetary items have been recognised as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not inThended for trading purpose, has been amortised as expense or income over the period of contract.

3. Investments

(i) Investments are classified into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" caThegories, in accordance with the guidelines issued by Reserve Bank of India.

(ii) Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

(iii) "Held-to- Maturity" caThegory comprises securities acquired by the Bank with the inThention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the inThention of trading. "Available-for-Sale" securities are those, which do not qualify for being classifi ed in either of the above caThegories.

(iv) Investments classified as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortised over the period remaining to the maturity.

(v) (a) The individual scrip's in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifi cations under which investments are presenThed in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifi cations is ignored.

(b) T e market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for trading" caThegories is based on the market price available from the trades/quoThes on stock exchanges. Central/State Government securities, other approved securities, debentures and bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) UnquoThed shares are valued at break up value ascertained from the laThest balance sheet and in case the latest balance sheet is not available the same are valued at Rs. 1/- per Company, as per RBI guidelines.

Investment in quoThed Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular Scheme. In case of Funds with a lock-in period, where repurchase price/market quoThe is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

(vi) The individual scrips in the "held-for-trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and loss account and appreciation is ignored.

(vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognised.

(viii) a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of Profit on sale of investments in "Held-to-Maturity" caThegory, an equivalent amount of Profit net of taxes is appropriated to the "Capital Reserve Account".

(ix) Interest accrued up to the date of acquisition of securities i.e. broken period inTherest is excluded from the acquisition cost and recognised as interest expense. Broken period inTherest received on Sale of securities is recognised as interest income.

(x) Brokerage paid on securities purchased is charged to revenue account.

(xi) Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

(xii) Transfer of securities from one caThegory to another is done as per RBI guidelines.

(xiii) Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

(xiv) Bank is following settlement daThe accounting policy as per RBI guidelines.

(xv) In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 daThed 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collaTheralised lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the daThe of maturity. Cost and revenue are accounted as inTherest expenditure/Income as the case may be. Balance in Repo account is classifi ed under schedule 4 (Borrowing) and balance in Reverse Repo account is classifi ed under schedule 7 (Balance with Banks & money at call & short notice).

4. Advances

i) Classifi cation of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classifi cation norms formulaThed by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisiThe provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA's. Provisions for advances classifi ed as Standard Assets is shown under Other Liabilities & Provisions.

5. Fixed Assets

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

Hitherto acquisition cost of compuTher software, not forming inThegral part of compuThers, was being charged fully in the year of purchase. In compliance to Accounting Standard(AS)-26, the Bank has changed its accounting policy w.e.f. 1st April, 2011. Accordingly, acquisition cost of such software where it is probable that the future economic benefi ts that are contributable to this software will fl ow to bank is being capitalised and depreciation is charged at the raThe of 33.33% in Therms of RBI guidelines on straight line method.

T e depreciation on mobile phones is being charged @50% on straight line method.

e) T e expenditure incurred towards furniture & fixture in building (M-6G) being used as Chairman's residence has been treaThed as asset of the Bank under this head. T e expenditure on repairs and renovation of this building has been charged to revenue, as the building is not owned by the Bank, hence not capitalised.

f) Depreciation on additions to Assets made up to 30th SepThember of the year is provided for at full raThes and on additions thereafter at 50% of the raThes. No depreciation is provided on assets sold/ discarded during the year.

g) Premium paid for Leasehold properties is amortised over the period of the lease.

6. Employees Benefi ts

i) Short-Therm employee benefi ts are charged to revenue in the year in which the relaThed service is rendered.

ii) In respect of employees who have opThed for provident fund scheme, matching contribution is made.

iii) Contribution to Defi ned Benefi t Plans (Gratuity, Pension and Leave Encashment) has been made as per AS 15 (Revised 2005) issued by the Institute of Chartered Accountants of India. However, in respect of transition liability the Bank has opThed an irrevocable choice to recognise the increase in its defi ned benefi t liability deThermined as per Actuarial valuation as an expense on a straight-line basis over a period of fi ve years beginning from 01.04.2007.

7. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise staThed

a) InTherest and other income on advances/ investments classifi ed as Non Performing Advances/ investments are recognised to the exThent realised in accordance with the guidelines issued by the Reserve Bank of India.

b) Recovery in Non Performing Assets is appropriaThed fi rst towards the inTherest and there after towards principal/ arrears of asset.

c) InTherest on overdue Therm deposits is provided at Savings Bank RaThe of InTherest.

d) Fee, commission (other than commission on insurance & Government business ), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognised on realisation basis.

e) Income from inTherest on income tax/ other tax refunds is accounted for on the basis of orders passed by the CompeThent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

8. Credit Card reward Points

T e Bank has estimaThed the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on the reporting daThe.

9. Profit

T e net Profit is disclosed in the Profit and loss account after providing for:

i) Income Tax , wealth tax and Deferred Tax .

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortisation on Investments.

iv) Transfer to contingency reserves.

v) Other usual and necessary provisions.

10. Taxation

Tax expense includes Income Tax , Wealth Tax and Deferred Tax deThermined in accordance with the provisions of Income/Wealth Tax Act, and the Accounting Standards issued by The Institute of Chartered Accountants of India.

The deferred tax charge or credit is recognised using the tax rates that have been enacted or substantially enacted by the Balance Sheet daThe. In Therms of Accounting Standard 22 issued by ICAI, provision for deferred tax liability is made on the basis of review at each Balance Sheet daThe and deferred tax assets are recognised only if there is virtual certainty of realisation of such assets in future.

11. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".


Mar 31, 2010

1. Accounting Conventions

T e accompanying fi nancial statements are prepared by following the going concern concept and on the historical cost basis unless otherwise stated and conform to the statutory provisions and Practices prevailing within the Banking Industry in the country.

2. Transactions involving Foreign Exchange

i) Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii) Exchange diff erences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii) The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income as on the balance sheet date.

3. Investments

i) Investments are classifi ed into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories, in accordance with the guidelines issued by Reserve Bank of India.

ii) Bank decides the category of each investment at the time of acquisition and classifi es the same accordingly.

iii) "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. Available-for-Sale" securities are those, which do not qualify for being classifi ed in either of the above categories.

iv) Investments classifi ed as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity.

v) (a) The individual scrips in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifi cations under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifi cations above is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in Available for Sale and Held for trading categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

Unquoted shares are valued at break up value ascertained from the latest balance sheet and in case the latest balance sheet is not available the same are valued at Re1/- per Company, as per RBI guidelines.

Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un- quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular Scheme. (In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period). Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

vi) The individual scrips in the "held-for-trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifi cations under which investments are presented in the Balance Sheet is accounted in the Profi t and loss account and appreciation is ignored.

vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classifi cation and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

viii) (a) Profi t or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

(b) Profi t or loss on sale of investments in any category is taken to the Profi t and Loss account. In case of profi t on sale of investments in "Held-to-Maturity" category, an equi-valued amount of profi t net of taxes is appropriated to the "Capital Reserve Account".

ix) Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

x) Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

Revenue Recognition

Income

The dividend on Investment in shares and units of Mutual Funds are recognized on realization basis.

4. Advances

i) Classifi cation of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classifi cation norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPAs. Provisions for advances classifi ed as Standard Assets is shown under Other Liabilities & Provisions.

5. Fixed Assets

a) Premises and other fi xed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

e) However, in terms of RBI guidelines depreciation on computers (including ATMs) along with software forming integral part of computers is charged at the rate of 33.33% on straight-line method for the full year even if the computers (including ATMs) have been purchased during the second half. In respect of Computer software, not forming integral part of computers, acquisition cost has been charged fully in the year of purchase.

f) The Bank has changed the policy of charging depreciation on Mobile Phones from @33.33% to 50% from this year on the Straight Line Method.

g) The expenditure incurred towards furniture & fi xture on building (M-6G) being used as Chairmans residence has been treated as asset of the Bank under this head. The expenditure on repairs and renovation of this building has been charged to revenue, as the building is not owned by the Bank, hence not capitalized.

h) Depreciation on additions to Assets made up to 30th September of the year is provided for at full rates and on additions thereafter at 50% of the rates. No depreciation is provided on assets sold/ discarded during the year.

i) Premium paid for leasehold properties is amortized over the period of the lease.

6. Employees Benefits

i) Short-term employee benefi ts are charged to revenue in the year in which the related service is rendered. ii) In respect of employees who have opted for provident fund scheme, matching contribution is made.

iii) Contribution to Defi ned Benefi t Plans (Gratuity, Pension and Leave Encashment) has been made as per AS 15 (Revised 2005) issued by the Institute of Chartered Accountants of India. The Bank has opted an irrevocable choice to recognize the increase in its defi ned benefi t liability determined as per Actuarial valuation as an expense on a straight-line basis over a period of fi ve years beginning from 01.04.2007.

7. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated

a) Interest and other income on advances/ investments classifi ed as Non Performing Advances/ investments are recognized to the extent realized in accordance with guidelines issued by the Reserve Bank of India.

b) Recovery in Non Performing Assets is appropriated fi rst towards the interest and there after towards principal/ arrears of asset.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission), exchange, locker rent and insurance claims are recognized on realization basis.

e) Income from interest on income tax/ other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

8. Credit Card Reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on close of balance on 31.03.2010.

9. Profit

The net profi t is disclosed in the profi t and loss account after providing for:

i) Income Tax, wealth tax and Deferred Tax

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines

iii) Depreciation/ amortization on Investments

iv) Transfer to contingency reserves

v) Other usual and necessary provisions

10. Taxation

Tax expense includes income tax, wealth tax and Deferred Tax determined in accordance with the provisions of Income/ Wealth Tax Act, and the accounting standards issued by The Institute of Chartered Accountants of India.

The deferred tax charge or credit is recognized using the tax rates that have been enacted or substantially enacted by the balance sheet date. In terms of accounting standard 22 issued by ICAI, provision for deferred tax liability is made on the basis of review at each balance sheet date and deferred tax assets are recognized only if there is virtual certainty of realization of such assets in future. Deferred Tax Assets/ Liabilities are reviewed at each balance sheet date based on developments during the year.

11. Contingency Funds

Contingency funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".

 
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