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Notes to Accounts of Jammu & Kashmir Bank Ltd.

Mar 31, 2015

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 at Rs. 1.12 crores (previous year Rs. 1.13 crores). Depreciation in respect of immovable properties valued at Rs. 16.02 crores (previous year Rs.16.35 crores) bank holds agreement to sell along with the possession of the properties. The values have been re- calculated as per straight line method adopted by the bank during current financial year 2014-15.

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.33,30,70,800) 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 31.03.2015 (Previous year Rs.102.19 Crores). In compliance with RBI Letter No. DBOD.BP/-.17099/21.4.141/2008-09 dated 9th April 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.

8. A Shortfall in the Govt. Security has occurred due to non transferring of security to SGL account well before CCIL, security settlement. Securities were adequately available with the bank & the same has been represented to Reserve bank of India, the matter is under examination.

9 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. 370.00 Crores (FV) on 26/05/2014 (Previous year Rs.405 Crores) 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.30/21.04.141/2014-15 dated 05/08/2014, & circular No. DBOD.No.BP.BC.42/21.04.141/2014-15 dated 07.10.2014, with the approval of the Board Of Directors, the Bank undertook shifting of Govt. securities having face value of Rs.700 Crores & Rs. 800 Crores. on 07.08.2014 and 01.01.2015 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.

10. 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.

11. Details of single borrower limit/ group borrower limit exceeded by the Bank:

The Bank has not exceeded single borrower exposure limit (SGL)/Group Borrower Exposure Limit (GBL) during the year.

12. penalty imposed by Reserve Bank of India

Penalty imposed by Reserve Bank of India during the year: NIL (Previous year Rs. 2.501 crores).

13. disclosures as per Accounting standards (As) in terms of RBI guidelines.

14. Accounting standard 1.

Consequent upon enactment of the Companies Act 2013 and its applicability for accounting periods commencing from 1st April 2014, the bank has from 1st April 2014 changed the method of providing depreciation on fixed assets from written down value method under provisions of Income Tax Act 1961 to Straight line method based on remaining useful life of assets as per provisions Companies Act 2013. The Bank has as per new method charged depreciation of Rs.94.50 crores on fixed assets during the financial year 2014-15. Had the bank followed earlier method of providing depreciation, charge for the year would have been less by Rs.11.49 crores and resultant profit would have increased to that extent.

15. accounting standard 5

Net profit or loss for the period, prior period items and changes in accounting policies:

There is no material Prior Period item included in Profit & Loss Account required to be disclosed as per Accounting Standard-5 read with RBI Guidelines except as per Para 24.3 below.

16. accounting standard 6.

The bank has from 1st April 2014 changed the method of providing depreciation on fixed assets from written down value method under provisions of Income Tax Act 1961 to Straight line method based on remaining useful life of assets as per provisions of Companies Act 2013. Further due to this change in method of depreciation, retrospective re-computation of depreciation has resulted in over charge of depreciation amounting to Rs.135.67crores (Rs.89.55 Crores net of deferred tax liability) which has been credited to profit &loss account for the year ended 31st March 2015 in accordance with accounting standard 6 issued by Institute of Chartered Accountants of India on Depreciation Accounting.

17. accounting standard 9- revenue recognition

There are no material items of income, which are required to be disclosed as per Accounting Standard-9, read with the RBI guidelines.

18. Accounting Standard 15 - Retirement Benefit

Adoption of AS -15 (R) The bank has adopted accounting standards 15 (R ) - employee benefits , issued by the Institute of Chartered Accountants of India (ICAI ), the Bank recognized in its books of accounts the liability arising out of employee benefits as the sum of the present value of obligation as reduced by fair value of plan assets on the balance sheet date.

The disclosure required under Accounting Standard 15 "Employee Benefits- in line with the accounting policy as per the Accounting Standard- issued by the Institute of Chartered Accountants of India are as under":

Particular Basis of assumption:

Discount rate : Discount rate has been determined by reference to market yields on the balance sheet date on Government Bonds of term consistent with estimated term of the obligations as per para 78 of AS-15R.

Expected rate of return on plan assets : The expected return on plan assets is based on market expectations, at the beginning of the period, for returns over the entire life of the related obligation.

Rate of escalation in salary: The estimates of future salary increases considered in actuarial valuations taking into account inflation, seniority, promotion and other relevant factors mentioned in paras 83-91 of AS-15R.

Attrition rate : Attrition rate has been determined by reference to past and expected future experience and includes all types of withdrawals other than death but including those due to disability.

The above information is based on the information certified by the actuary

19. Accounting standard 19 - Leases

The bank has taken premises only on rental basis and has no long-term operating leases taken/given and hence reporting under AS-19 is not considered necessary.

20. Accounting Standard -21 (Consolidated Financial Statements)

The Bank has a fully owned subsidiary company "JKB Financial Services Ltd." in terms of the approval of Reserve Bank of India vide its letter No DBOD.FSD.No./1124/24.01.001/2007-08 dated July 31, 2007. The investment towards the capital of subsidiary company is Rs. 20.00 Crores (Previous Year Rs. 10.00 Crores). The consolidated financial statements are placed accordingly in terms of AS 21 issued by the Institute of Chartered Accountants of India.

21. Accounting Standard 26-Intangible Assets

The Bank has incurred an amount of Rs.137.19 Lacs on Brand names bifurcated into two heads namely Business Unit Signage and Brand Strategy Project. Expenditure on Business Unit Signage amounting to Rs.59.76 Lacs has been debited under the head Furniture & Fixture, whereas, Brand strategy project expenses amounting to Rs.77.43 Lacs has been charged to Profit & Loss account treating it as a Revenue expenditure for the reason that the Bank cannot declare dividend to shareholders without writing it off completely in view of the provisions of the Banking Regulation Act, 1949. Accordingly, the Bank has not evaluated useful life of this Brand strategy project over which the expenses could be amortized.

Further, the Bank has incurred an amount of Rs.6.33 Crores on account of purchase of computer software, not forming integral part of computers, and has capitalized the cost of the same.

22. Accounting Standard 28 - Impairment of Assets

Majority of Fixed Assets of the Bank are considered as Corporate Assets and not cash generating assets and in the opinion of Management there is no material impairment in these Fixed Assets. Regarding other Fixed Assets generating cash there is no material impairment. As such no provision is required as per AS-28 issued by ICAI.

23. accounting standard 29- provisions, contingent Liabilities and contingent assets

In respect of Contingent Liabilities under each class shown as per Schedule 12, in the opinion of the Management, the possibility of any out flow in settlement is remote. A provision of Rs.1.90 Crores has been made during the year totaling to Rs.5.59 Crores upto 31.03.2015 against claims decreed against the Bank. Claims have not been acknowledged as debts owing to the appeal filed by the bank before the court of competent jurisdiction, pending adjudication.

24. Foreign Exchange

a) The net funded exposure of the Bank in respect of Foreign Exchange transactions with each country is within 1% of the Total Assets of the Bank and hence no Provision and Disclosure is required to be made as per the RBI Circular No. 96/21.04.103/2003 dated: 17.06.2004.

b) Claims pending with ECGC amounts Nil (Previous year Nil)

31. Letter of Comfort (LOC's) issued by the Bank.

The Bank has not issued any Letter of Comfort (LOC) on its behalf. However, Letters of Comfort issued on behalf of customers has been reported under respective heads of contingent liabilities in the financial statements of Bank as on 31st March 2015.

25. provision coverage Ratio (pcR)

The provision coverage ratio (PCR) for the Bank as on 31st March 2015 is 59.02% which is calculated taking into account the total technical write offs made by the Bank.

26. The Bank follows policy of providing interest on Overdue Time Deposits at Saving Bank interest rates in conformity with guidelines of Reserve Bank of India.

27. Payments to and Provisions for employees include Rs. 84.00 Crores towards liability for wage arrears calculated on estimated basis. (Previous year Rs. 82.50 Crores).

28. Pursuant to schedule II of the Companies Act 2013, the carrying cost amount of the assets as on 01.04.2014 after retaining the residual value shall be recognized in the opening balance of retained earning where the remaining useful life of an asset is nil. Whereas the Bank has charged carrying cost of such assets amounting to Rs.5.84 Crores in the current year's profit /loss account in absence of prior permission from RBI for any adjustment in revenue and other reserves.

29.. During the financial year ended 31st March 2015 fraudulent transactions on account of discounting of fake LC's were detected at two business units of the bank . An amount of Rs. 60.25 crores outstanding against such fake LC's has been classified under loss category and fully provided for as on 31st December 2014 . However during the quarter ended 31st March 2015, an amount of Rs.16.07 crores has been recovered and the provisions to the extent reversed. Further RBI on 20.01.2015 identified and intimated the Bank that advances made by different banks to a specific borrower fall in the category of fraud and in this regard as per directions of RBI, bank declared advance amounting to Rs.680 crores as fraud. Pursuant to RBI circular DBR. NO.BP.BC.83/21.04.048/2014-15 dated 01.04.2015, the amount of fraud irrespective of the value of security held by the bank, has to be provided for over a period not exceeding four quarters commencing with the quarter in which the fraud has been detected. RBI vide letter dated DBR.BP.No16804/21.04.048/2014-15 dated May07,2015 granted permission for making 50% of the required provisioning in March quarter and balance in two equal installments in quarter ending June 2015 and Sep.2015. Against the provisioning requirement of Rs.215.85 Crores, bank has made provisioning of Rs.297.63 Crores in March quarter (which is Rs.81.78 Crores more than the regulatory requirement).As on 31.03.2015 against outstanding exposure of Rs.675.31 Crores in the account, total provision held is Rs.544.75Crores.

30. During the recent devastating floods in the state of J&K, few business units /offices were affected causing loss to the infrastructural peripherals installed therein. The bank has lodged an insurance claim of Rs.27.00 crores based on acquisition cost of damaged infrastructural peripherals having book value of Rs.11.75 crores as on date of flood. An amount of Rs.10.00 Crores has been received from Insurance Company as part of insurance claim up to March 2015 which has been appropriated towards the adjustment of book value of assets and balance amount of Rs.1.75 Crores has been debited to profit & loss account as loss from damage of fixed assets. Further under Rehabilitation Plan approved in terms of RBI MASTER CIRCULAR no.rpcd. no.fsd.bc07/05.04.02/2014-15 dated 01.07.2014, the bank has restructured loan portfolio of Rs.463.74 crores for which provision of Rs.56.38 crores and Rs.23.11 crores has been made for DIFV and standard provisioning respectively

31. Corporate Social Responsibility (CSR Activities)

Pursuant to section 135 of the Companies Act, 2013 it is required to expend 2% of the average net profits made during three immediate proceeding financial years for CSR activities. Accordingly the bank is required to spendRs.29.86 crores for twelve months period ended 31st March 2015. During the year the bank has spent Rs. 13.75 crores for CSR activities. However in the opinion of the management , the balance amount of Rs. 16.13 crores could not be expended due to devastating floods that hit the state of J& K in September 2014 and derailed every activity of normal life. As a result the areas where bank was looking upon to do the CSR activities/programmers became inaccessible.

32. Micro Small And Medium Enterprises Development Act

With regard to disclosure relating to MSME under the Micro Small & Medium Enterprises Development Act 2006, no Purchases have been made from Micro Small Medium Enterprises hence the disclosure be treated as NIL

33. Un-hedged Foreign Currency Exposure

In accordance with RBI circular no DBOD .BP.BC.85/21.06.200/2013-14 dated 15th January, 2014 and circular no DBOD. BP.BC.116/21.06.200/2013-14 dated 3rd June 2014, banks are required to make an additional provision in respect of borrowers with Un-hedged Foreign Currency Exposures (UFCE) from April 1, 2014 onwards. For the financial year 2014-15 bank has a provision requirement of Rs.4.09 Crores for the same as on 31.03.2015. However the bank during nine months period ended December 2014 has already made a provision of Rs.9.63 Crores for it on estimates basis and accordingly reversed the excess provision as on 31.03.2015.

34. Policy to manage currency induced Credit Risk:-

Foreign currency exposures are hedged under permitted hedging products in accordance with guidelines of RBI on Risk Management and inter bank dealings, FEDAI norms and guidelines. The objective of the policy is to maximize hedging on the foreign currency exposures of borrowers. Monitoring and review of the un-hedged foreign currency exposures to borrowers is undertaken by the bank on monthly basis by obtaining borrower-wise statements .Specific action/ suitable remedial measures including stipulation of additional cash margin and /or increase in pricing spread, wherever required are accordingly devised by the bank.

35 Qualitative disclosure for Liquidity Coverage Ratio (LCR) :

The Bank has a robust liquidity risk management framework in place that ensures sufficient liquidity including a cushion of unencumbered, high quality liquid assets, to withstand a range of stress events, including those involving the loss or impairment of both unsecured and secured funding sources.

Liquidity coverage ratio (LCR) BLR-1 aims to ensure that a bank maintains an adequate level of unencumbered High Quality Liquidity Asset (HQLAs) that can be converted into cash to meet liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario.

composition of High quality liquid assets (HQLAs)

High quality liquid assets (HQLAs) comprise of assets that can be readily sold or used as collateral to obtain funds in a range of stress scenario. These are assets categories which can be easily or immediately converted into cash at little or no loss in value.

With zero percent haircut Level 1 (HQLA) asset comprises of:

* Cash

* Excess CRR

* Government securities in excess of SLR

* Marginal Standing Facility (MSF)

* Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR)

* Marketable securities issued by foreign sovereigns

A minimum haircut of 15% is applied on the following assets and is placed in the category of Level 2 (HQLA) assets:

* Marketable securities guaranteed by sovereigns, PSEs or multilateral development banks assigned risk weights of up to 20% but are not issued by banks/financial institutions/NBFCs

* Corporate bonds not issued by banks/financial institutions/NBFCs

* Commercial Papers not issued by PDs/financial institutions/NBFCs

With a haircut of 50%following HQLAs are also placed in category of level 2 assets:

* Marketable securities guaranteed by sovereigns having risk weights of higher than 20% but not more than 50%.

* Common equity shares included in NSE CNX Nifty index or S&P BSE Sensex index but not issued by banks/financial institutions/NBFCs

All the relevant inflows and outflows are captured in the LCR template. concentration of Funding

Management of funding concentration risk is meant to identify those sources of funding that are of such significance, the withdrawal of which could trigger liquidity problems, thus encourages the diversification of funding sources .This aims to address the funding concentration by monitoring funding from each significant counterparty, each significant product / instrument and each significant currency. Presently, Bank is submitting the details of Top 20 depositors as part BLR report (Statement of funding concentration, BLR-3). Further, there are regulatory limits like Inter-bank liability and call borrowings, which address funding concentration.

36. Disclosure on Remuneration

Information relating to the Bank has constituted the Nomination composition and mandate of and Remuneration committee of the the Remuneration Committee. Board pursuant to the requirement of the Reserve Bank of India and the Companies Act, 2013, constitutes of following members of the Board.

Mr. A. M. Matto, (Chairman)

Mr. Vikrant Kuthiala (Member)

Mr. Dalip Kumar Kaul (Member)

Information relating to the design and structure of remuneration processes * Ensure effective governance and the key features and compensation alignment of objectives of remuneration compensation with prudent risk policy. taking.

* Ensure effective supervisory oversight and engagement by stakeholders.

* Comply with the regulatory directives whereby all Private Sector Banks are required to formulate and adopt a compre- hensive compensation policy covering all their employees and conduct annual review thereof.

* Identify persons who are qualified and may be appointed in senior management in accordance with the criteria laid down, recommend to the Board their appointment and removal.

* Recommend to the Board a policy, relating to the remuneration for directors the key managerial personnel and other employees.

* Formulae the policy which inter alia shall ensure that :

(a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Key Management Personnel and other employees of the company;

(b) relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and

(c) Remuneration to key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals.

Description of the ways Remuneration committee of the Board in which current and undertakes risk evaluations based future risks are on industry standards and risk taken into account in the profile of the bank. remuneration processes. It should include the nature and type of the key measures used to take account of these risks.

Description of the ways in The performance of the Bank as a which the bank seeks to whole is linked to the performance link performance during of its management and employees. a performance measurement However in individual cases variable period with levels of pay is withheld in case of remuneration. low performance of individual staff member.

A discussion of the bank's policy on deferral and vesting of NIL variable remuneration and a discussion of the bank's policy and criteria for adjusting deferred remuneration before vesting and after vesting.

Description of the different forms of variable remuneration (i.e. NIL cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms.

Quantitative Disclosure

Particulars 31.03.2015

Number of meetings held The Committee met two times by the Remuneration during the year and total Committee during the sitting fee of Rs.75000/- financial year and @ Rs.15000 for each meeting remuneration paid attended by its members was to its members. paid.

(i) Number of employees Performance bonus during the having received a year to CEO @ 35% of salary variable remuneration Rs.19.95 Lacs. and to three award during the Executive Presidents Rs.9.00 financial year. Lacs (Rs.3.00Lac each) (The quantitative disclosures should only cover Whole Time Directors / Chief Executive Officer/ Other Risk Takers)

(ii) Number and total amount of sign-on awards made during NIL the financial year.

(iii) Details of guaranteed bonus, if any, paid as joining / sign on NIL bonus

(iv) Details of severance pay, in addition to accrued benefits, if any NIL

a. Total amount of outstanding deferred remuneration, split NIL into cash, shares and share-linked instruments and other forms.

b. Total amount of deferred remuneration paid out in the NIL financial year.

Breakdown of amount of No other remuneration awards remuneration awards other than performance bonus for the financial has been paid. year to show fixed and Performance bonus during the variable, deferred and to CEO and three Executive non-deferred. Presidents paid @ 35% of basic Pay (Rs. 3.00 Lacs each)

a. Total amount of outstanding deferred remuneration NIL and retained remuneration exposed to ex post explicit and / or implicit adjustments.

b. Total amount of reductions during the financial year NIL due to ex- post explicit adjustments.

c. Total amount of reductions during the financial year NIL due to ex- post implicit adjustments.

37 CONTiNGENT LiABiLiTiES

I) Claims against the Bank not acknowledged as debts 2,163,878 1,519,646

II) Liability for partly paid investments - 14,008

III) Liability on account of outstanding Forward Exchange Contracts 146,781,871 101,848,460

IV) Guarantees given on behalf of constituents:-

a) In India 15,844,900 15,504,100

b) Outside India 3,271,400 2,571,600

V) Acceptances, Endorsements & Other Obligations 48,748,900 39,949,300

VI) Other items for which the Bank is Contingently liable - 40

VII) Liabitty on account of Depositers Education Awareness Fund(DEAF) 161,436 -

total ( i to vi ) 216,972,385 161,407,154

38. The Principal Accounting Policies (Schedule 17) and Notes on Accounts (Schedule 18) form an integral part of these Accounts.

39.Previous year figures have been regrouped / rearranged, where ever necessary and possible, to conform to current year figures. In cases where disclosures have been made for the first time in terms of RBI guidelines, previous year's figures have not been given.


Mar 31, 2014

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 fnancial 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 certain immovable properties held by the bank valued at Rs.0.42 crores (previous year Rs.0.45 crores). In respect of immovable properties valued at Rs.4.99 crores (previous year Rs.5.54 crores) bank holds agreement to sell along with the possession of the properties.

b) The Bank has been consistently following the method of charging depreciation on fxed assets on diminishing balance as per the rates prescribed in Income Tax Rules which is higher in totality as compared to rates prescribed in Schedule XIV of the Companies Act, 1956. However, the depreciation on computers (including ATMs) along with software forming integral part of computers has been computed at the rate of 33.33% on straight-line method.

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 benefts that are contributable to this software will fow 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 the mobile phones are depreciated @50% on straight line method.

e) Depreciation on Banks property includes amortization in respect of leased properties amounting to Rs.0.14 Crores (previous year Rs.0.14 Crores). The book value of these properties as on 31.03.2014 was Rs.8.00 Crores (previous year Rs.7.88 Crores).

The subordinate debt of Rs.600 Crores raised by way of Unsecured Redeemable Lower tier-II Bonds on 30.12.2009, maturing on 30.12.2019 has been shown under Borrowings as per RBI guidelines.

4. Investments

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

5. The Bank has Rs.70,00,000 (previous year Rs.70,00,000) as share capital and Rs.33,30,70,800 (previous year Rs.21,40,70,800) in share capital deposit account in its sponsored Regional Rural Bank (J&K Grameen Bank).

6. The total investment of the Bank in the Met-life India Insurance Co Pvt. Ltd stood at Rs.102.19 Crores as on 31.03.2014 (Previous year Rs.102.19 Crores). In compliance with RBI Letter No. DBOD.BP.17099/21.4.141/ 2008- 09 dated 9th April 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.

7. Penalty imposed by Reserve Bank of India

Penalty imposed by Reserve Bank of India during the year: One amounting to Rs.2.501 Crores (Previous year Rs.10,000/-).

8. Disclosures as per Accounting Standards (AS) in terms of RBI guidelines.

8.1 Accounting Standard 5-Net proft or loss for the period, prior period items and changes in accounting policies:

There is no material Prior Period item included in Proft & Loss Account required to be disclosed as per Accounting Standard–5 read with RBI Guidelines.

8.2 Accounting Standard 9- Revenue Recognition

There are no material items of income, which are required to be disclosed as per Accounting Standard–9, read with the RBI guidelines.

8.3 Accounting Standard 15 – Retirement Beneft

The disclosure required under Accounting Standard 15 "Employee Benefts- issued by the Institute of Chartered Accountants of India are as under":

Defned Contribution Plan

In respect of employees, who hold the option of provident fund, matching contribution has been made.

Defned Beneft Plans

The Employee''s Gratuity Fund Scheme, Pension Fund and Leave Encashment are defned beneft plans. The present value of obligation is determined based on Actuarial Valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee beneft entitlement and measures each unit separately to build up the fnal obligation.

9. Accounting Standard –21 (Consolidated Financial Statements)

The Bank has a fully owned subsidiary company "JKB Financial Services Ltd." in terms of the approval of Reserve Bank of India vide its letter No DBOD.FSD.No./1124/24.01.001/2007-08 dated July 31, 2007. The investment towards the capital of subsidiary company is Rs.10.00 Crores (Previous Year Rs.10.00 Crores). The consolidated fnancial statements are placed accordingly in terms of AS-21 issued by the Institute of Chartered Accountants of India.

10. Accounting Standard 26-Intangible Assets

The Bank has incurred an amount of Rs.1.43 Crores on Brand names bifurcated into two heads namely Business Unit Signage and Brand Strategy Project. Expenditure on Business Unit Signage amounting to Rs.0.83 Crores has been debited under the head Furniture & Fixture, whereas, Brand strategy project expenses amounting to Rs.0.60 Crores has been charged to Proft & Loss account treating it as a Revenue expenditure for the reason that the Bank cannot declare dividend to shareholders without writing it off completely in view of the provisions of the Banking Regulation Act, 1949. Accordingly, the Bank has not evaluated useful life of this Brand strategy project over which the expenses could be amortized.

Further, the Bank has incurred an amount of Rs.13.60 Crores on account of purchase of computer software, not forming integral part of computers, and has capitalized the cost of the same.

11. Accounting Standard 28 – Impairment of Assets

Majority of Fixed Assets of the Bank are considered as Corporate Assets and not cash generating assets and in the opinion of Management there is no material impairment in these Fixed Assets. Regarding other Fixed Assets generating cash there is no material impairment. As such no provision is required as per AS-28 issued by ICAI.

12. Accounting Standard 29- Provisions, Contingent Liabilities and Contingent Assets

In respect of Contingent Liabilities under each class shown as per Schedule 12, in the opinion of the Management, the possibility of any out fow in settlement is remote. However, a provision of Rs.3.69 Crores is outstanding as on 31.03.2014 (During the year Rs.1.07 Crores) to meet certain claims decreed against the Bank but still not acknowledged as debts owing to the appeal fled by the bank before the court of competent jurisdiction, pending adjudication.

13. ADDITIONAL DISCLOSURES

14.1 Draw Down from Reserves

The Bank during the year 2012-13 created a special reserve under section 36(1) (viii) of the income tax act 1961 to the tune of Rs.123.16 crores without creating deferred tax liability on the grounds that the Bank does not have any intention to withdraw from such reserve in future. However pursuant to RBI circular letter no.BDOD.NO.BP.BC77/21. 04.018 / 2013-14 dated December 20, 2013 issued to all commercial banks, Bank created a deferred Tax liability of Rs.39.97 crores for the said special reserve out of revenue and other reserves.

14.2 Foreign Exchange

a) The net funded exposure of the Bank in respect of Foreign Exchange transactions with each country is within 1% of the Total Assets of the Bank and hence no Provision and Disclosure is required to be made as per the RBI Circular No. 96/21.04.103/2003 dated: 17.06.2004.

b) Claims pending with ECGC amounts to Rs.0.00 (Previous year Rs.0.00 Crores)

14.3 Letter of comfort (LOC''s) issued by the Bank.

The Bank has not issued any letter of comfort (LOC) on its behalf. However, Letters of Comfort issued on behalf of customers has been reported under respective heads of contingent liabilities in the fnancial statements of Bank as on 31st March 2014.

14.4 Provision Coverage Ratio (PCR)

The provision coverage ratio (PCR) for the Bank as on 31st March 2014 is 90.30% which is calculated taking into account the total technical write offs made by the Bank.

15. The Bank follows policy of providing interest on overdue time deposits at Saving Bank interest rates in conformity with guidelines of Reserve Bank of India.

16. Payments to and Provisions for employees include Rs.82.50 Crores toward liability for wage arrears calculated on estimated basis. (Previous year Rs.33.75 Crores).

17. The Bank w.e.f April 01, 2013 changed the accounting policy with regard to appropriation of recovery in Non- Performing Assets. The recovery in NPA accounts has been frst appropriated towards amount of principal and thereafter towards amount of interest. The impact in the opinion of the management of such change in accounting policy on the fnancial statements would not be material.

18. MICRO SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT

With regard to disclosure relating to MSME under the Micro Small & Medium Enterprises Development Act 2006, no Purchases have been made from Micro Small Medium Enterprises hence the disclosure be treated as NIL.


Mar 31, 2013

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 certain immovable properties held by the bank valued at Rs. 0.45 Crores (previous year Rs. 0.49 Crores). In respect of immovable properties valued at Rs. 5.54 Crores (previous year Rs. 6.15 Crores) bank holds agreement to sell along with the possession of the properties.

b) The Bank has certain fixed assets with Book Value at Rs. 258.96 lacs (Previous year Rs. 287.74 Lacs) generating cash, parked under respective heads, for the promotion and development of its business.

c) The Bank has been consistently following the method of charging depreciation on fixed assets on diminishing balance as per the rates prescribed in Income Tax Rules which is higher in totality as compared to rates prescribed in Schedule XIV of the Companies Act, 1956. However, the depreciation on computers (including ATMs) along with software forming integral part of computers has been computed at the rate of 33.33% on straight-line method.

d) 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.

e) Further the mobile phones are depreciated @50% on straight line method.

f) Depreciation on Banks property includes amortization in respect of leased properties amounting to Rs. 13.19 Lacs (previous year Rs. 13.19 Lacs). The book value of these properties as on 31.03.2013 was Rs. 7.88 Crores (previous year Rs. 8.02 Crores).

The subordinate debt of Rs. 600 Crores raised by way of Unsecured Redeemable Lower tier-II Bonds on 30.12.2009, maturing on 30.12.2019 has been shown under Borrowings as per RBI guidelines.

4. Investments

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.

5. The Bank has Rs. 70,00,000 as share capital and Rs. 21,40,70,800 in share capital deposit account in its sponsored Regional Rural Bank (J&K Grameen Bank).

6. (a) The total investment of the Bank in the Met-life India Insurance Co Pvt. Ltd stood at Rs. 102.19 Crores as on 31.03.2013 (Previous year Rs. 220.27 Crores). In compliance with RBI Letter No. DB0D.BP.07099/21.4.141/ 2008-09 dated 9th April, 2009, the investment stands transferred to AFS Category on 1st October, 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.

(b) Other income (Schedule 14) includes a profit of Rs. 71.91 Crores on account of sale of equity shares of Met-life India Insurance Co. Pvt. Ltd to Punjab National Bank & Met-life International Holdings Inc. Post-sale the holding of the Bank in Met-life India Insurance Co. Pvt. Ltd has reduced from 11.18% to 5.08%.

7. Derivatives

7.1 No forward rate agreements / interest rate swaps were undertaken by the bank during the year.

7.2 The bank has not entered into exchange traded interest rate derivatives transactions during the year

7.3 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.

**Net NPA has been arrived at after adding net interest suspense of Rs. 0.61 Crores.(Previous year Rs. 0.61 Crores) and net ECGC claims of Rs. 2.37 Crores (Previous year Rs. 11.64 Crores) and reducing Interest Capitalization of Rs. 11.70 Crores (previous year NIL).

*Information regarding movement of Net NPA''s has been compiled at Corporate Office and relied upon by the Auditors.

*Including floating provision of Rs. 52.90 Crores. The Provision Coverage Ratio for the Bank as on 31.03.2013 is 94.01% which is calculated after taking into account technical write off.

8. Statement of loans & Advances secured by Intangible Assets viz. Rights, Licenses, Authorizations etc.

The advances of the Bank as on 31st March, 2013 against intangible security of Rights, Licenses and Authorizations are Rs. 41.51 Crores.

9. Penalty imposed by Reserve Bank of India during the year: One amounting to Rs. 10,000/- (Previous year Nil).

10. Information in respect of Accounting Standards issued by the Institute of Chartered Accountants of India:

10.1 Accounting Standard 5-Net profit or loss for the period, prior period items and changes in accounting policies:

There is no material Prior Period item included in Profit & Loss Account required to be disclosed as per Accounting Standard-5 read with RBI Guidelines.

10.2 Accounting Standard 9- Revenue Recognition

There are no material items of income, which are required to be disclosed as per Accounting Standard-9, read with the RBI guidelines.

10.3 Accounting Standard 15 - Retirement Benefit

The disclosure required under Accounting Standard 15 "Employee Benefits- issued by the Institute of Chartered Accountants of India is as under":

Defined Contribution Plan

In respect of employees, who hold the option of provident fund, matching contribution has been made.

Defined Benefit Plans

The Employee''s Gratuity Fund Scheme, Pension Fund and Leave Encashment are defined benefit plans. The present value of obligation is determined based on Actuarial Valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

10.4. Accounting standard 19 - Leases

The Bank has taken premises only on rental basis and has no long-term operating leases taken/given and hence reporting under AS-19 is not considered necessary.

10.5. Accounting Standard -21 (Consolidated Financial Statements)

The Bank has a fully owned subsidiary company "JKB Financial Services Ltd." in terms of the approval of Reserve Bank of India vide its letter No DB0D.FSD.No./1124/24.01.001/2007-08 dated 31st July, 2007. The investment towards the capital of subsidiary company is Rs. 10.00 Crores (Previous Year Rs. 5.00 Crores). The consolidated financial statements are placed accordingly in terms of AS 21 issued by the Institute of Chartered Accountants of India.

10.6. Accounting standard 22 - Accounting for taxes on income

a. The Bank has accounted for Income Tax in compliance with Accounting Standard-22 accordingly deferred Tax assets and liabilities are recognized.

b. The Bank has created Special Reserve of Rs. 74.41 Crores under section 36(1)(viii) of the Income Tax Act, 1961. After the approval of the Board of Directors that it has no intention to withdraw from special Reserve, no DTL on the amount of Special Reserve of Rs. 74.41 Crores has been considered.

10.7 Accounting Standard 26-Intangible Assets

The Bank has incurred an amount of Rs. 0.31 Crores on Brand names bifurcated into two heads namely Business Unit Signage and Brand Strategy Project. Expenditure on Business Unit Signage amounting to Rs. 0.20 Crores has been debited under the head Furniture & Fixture, whereas, Brand strategy project expenses amounting to Rs. 0.11 Crores has been charged to Profit & Loss account treating it as a Revenue expenditure for the reason that the Bank cannot declare dividend to shareholders without writing it off completely in view of the provisions of the Banking Regulation Act, 1949. Accordingly, the Bank has not evaluated useful life of this Brand strategy project over which the expenses could be amortized.

Further, the Bank has incurred an amount of Rs. 2.84 Crores on account of purchase of computer software, not forming integral part of computers, and has capitalized the cost of the same.

10.8 Accounting Standard 28 - Impairment of Assets

Majority of Fixed Assets of the Bank are considered as Corporate Assets and not cash generating assets and in the opinion of Management there is no material impairment in these Fixed Assets. Regarding other Fixed Assets generating cash there is no material impairment. As such no provision is required as per AS-28 issued by ICAI.

10.9 Accounting Standard 29- Provisions, Contingent Liabilities and Contingent Assets

In respect of Contingent Liabilities under each class shown as per Schedule 12, in the opinion of the Management, the possibility of any out flow in settlement is remote. However, a provision of Rs. 2.62 Crores is outstanding as on 31.03.2013 to meet certain claims decreed against the Bank but still not acknowledged as debts owing to the appeal filed by the bank before the court of competent jurisdiction, pending adjudication.

10.10 Letter of comfort (LOC''s) issued by the Bank.

The Bank has not issued any letter of comfort (LOC) on its behalf. However, Letters of Comfort issued on behalf of customers has been reported under respective heads of contingent liabilities in the financial statements of Bank as on 31st March, 2013.

11. OTHER DISCLOSURES Foreign Exchange

a) The net funded exposure of the Bank in respect of Foreign Exchange transactions with each country is within 1% of the Total Assets of the Bank and hence no Provision and Disclosure is required to be made as per the RBI Circular No. 96/21.04.103/2003 dated: 17.06.2004.

b) Claims pending with ECGC amounts to Rs. NIL (Previous year Rs. 5.08 Crores)

12. The Bank follows policy of providing interest on overdue time deposits at Saving Bank interest rates in conformity with guidelines of Reserve Bank of India.

13. MICRO SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT

With regard to disclosure relating to MSME under the Micro Small & Medium Enterprises Development Act 2006, no Purchases have been made from Micro Small Medium Enterprises hence the disclosure be treated as NIL.

14. BANCASSURANCE BUSINESS:

The Bank has tie ups with M/S Met-Life Insurance (P ) Ltd and Bajaj Alliance ( P ) Ltd for mobilizing insurance business both life and non-life. The details of the commission earned by the Bank during FY 2012-13 on account of mobilizing said business is given hereunder:-

15. The Bank has transferred its entire business of depository services to JKB Financial Services Ltd (Fully owned Subsidiary Company of the Bank) as on 31.12.2012 at Book Value and hence w.e.f., 1st January, 2013 no business of the depository has been incorporated in the financials of the Bank.

The Special Reserve has been created after approval of the Board of Directors that it has no intention to withdraw any amount from the Special Reserve.

16. The Principal Accounting Policies (Schedule 17) and Notes on Accounts (Schedule 18) form an integral part of these Accounts.

17. Previous year figures have been regrouped / rearranged, where ever necessary and possible, to conform to current year figures. In cases where disclosures have been made for the first time in terms of RBI guidelines, previous year''s figures have not been given.


Mar 31, 2010

1. Reconciliation/adjustment of inter bank/ inter branch transactions, branch suspense, Government Transactions [State], 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 fi nancial 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

i) Documentation formalities are pending in respect of certain immovable properties held by the bank valued at Rs. 0.62 Crores (Previous Year Rs. 4.38 Crores). In respect of immovable properties valued at Rs. 7.60 Crores (Previous Year Rs. 12.82 Crores) bank hold agreement to sell along with possession of the properties.

ii) The Bank has also acquired certain fi xed assets generating cash, parked under respective heads, for the promotion and development of its business.

iii) The Bank has been consistently following the method of charging depreciation on fi xed assets on diminishing balance as per the rates prescribed in Income Tax Rules which is higher in totality as compared to rates prescribed in Schedule XIV of the Companies Act, 1956.However, the depreciation on computers (including ATMs) along with software forming integral part of computers has been computed at the rate of 33.33% on straight-line method.

iv) 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 and there is no material eff ect on the profi tability of the Bank.

v) Depreciation on Banks property includes amortization in respect of leased properties amounting to Rs. 22.98 Lacs (Previous Year Rs 34.54 Lacs). The book value of these properties as on 31.03.2010 was Rs. 11.69 Crores (Previous Year Rs 11.92 Crores).

4. Investments

The bank has made no profi t on sale of HTM category securities during the year, as such no appropriation was made (Previous Year, Rs. Nil) to capital Reserve Account.

5. Consequent upon the amalgamation of two sponsored Regional Rural Banks viz., Kamraz Rural Bank and Jammu Rural Bank into a single RRB called as J & K Grameen Bank (as notifi ed by the GOI the Ministry of Finance vide no. S O 1580(E) dated 30th June, 2009), the Bank has Rs. 70 Lacs as share capital in the new entity and Rs 214,070,800/- as share capital Deposit account. (Totaling to Rs. 221,070,800).

6. The total investment of the Bank in the Met-life India Insurance Co Pvt. Ltd stood at Rs. 220.27 Crores as on 31.03.2010 (Previous Year, Rs. 220.27 Crores). In compliance with RBI Letter DBOD.BP.07099/21.4.141/2008-09 dated 9th April 2009, the investment stands transferred to AFS Category on 1st October, 2009. The valuation has been carried out at average of two independent valuation reports obtained from Category I merchant Bankers as per RBI guidelines and the consequent appreciation has been ignored in view of the accounting policy in respect of such investments.

7. Derivatives

7.1 No Forward Rate Agreements / Interest Rate Swaps were undertaken by the bank during year.

7.2 The bank has not entered into exchange traded interest rate derivatives transactions during the year

7.3 Disclosures on Risk exposures in derivatives

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 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.

8.1 Statement of Loans & Advances secured by Intangible Assets viz. Rights, Licenses, Authorizations etc.

The advances of the bank as on 31st March, 2010 against intangible security of Rights, Licenses and Authorization are Nil.

9. The Government of India has notifi ed Relief Scheme viz., "Agricultural Debt Waiver & Debt Relief Scheme-2008," for giving debt waivers to marginal & small farmers and to other farmers who have availed direct agricultural loans. Advances include Rs. 6.87 Crores claim due from Government under Agriculture Debt Waiter and Debt Relief Scheme-2008".

10. Information in respect of Accounting Standards issued by the Institute of Chartered Accountants of India:

10.1. Accounting Standard 5 - Net profi t or loss for the period, prior period items and changes in accounting policies There are no material Prior Period items included in Profi t & Loss Account required to be disclosed as per Accounting Standard-5 read with RBI Guidelines.

10.2. Accounting Standard 9- Revenue recognition

There are no material items of income, which are required to be disclosed as per Accounting Standard - 9, read with RBI guidelines.

10.3. Accounting Standard 15 - Retirement benefi ts

a) In view of Accounting Standard 15 (Revised 2005) issued by the Institute of Chartered Accountants of India, the Bank in respect of its Defi ned Benefi t Plans (Pension, Gratuity, and Leave Encashment) on fi rst adopting this statement as on 1-04-2007, has a transitional Liability of Rs. 149.70 Crores as per Actuarial Valuation. The 1/5th of this liability on a straight-line basis amounting to Rs. 29.94 Crores has been recognized as an expense during the year 2009-10 (3rd year) and the remaining unrecognized amount of Rs. 59.88 Crores is spread over to next two years.

b) The disclosures required under Accounting Standard 15 "Employee Benefi ts-issued by the Institute of Chartered Accountants of India are as under:

Defined Contribution Plan

Contribution to Defi ned Contribution Plan recognized and charged off is as under:

(Amount in Rs.)

Employers Contribution to Provident Fund 67,855,637.66



Defined Benefit Plans

The Employees Gratuity Fund Scheme, Pension Fund and Leave Encashment are Defi ned Benefit Plans.

The present value of obligation is determined based on Actuarial Valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefi t entitlement and measures each unit separately to build up the fi nal obligation.

10.4. Accounting Standard -21 (Consolidated Financial Statements)

The Bank has a fully owned subsidiary company "JKB Financial Services Ltd." in terms of the approval of Reserve Bank of India vide its letter No DBOD.FSD.No./1124/24.01.001/2007-08 dated 31st July, 2007. The investment towards the capital of subsidiary company is Rs. 5.00 Crores. The consolidated fi nancial statements are placed accordingly in terms of AS 21 issued by the Institute of Chartered Accountants of India.

10.5. Accounting Standard 26-Intangible Assets

The Bank has incurred an amount of Rs. 0.37 Crores on Branding bifurcated into two heads namely Business Unit Signage and Brand Strategy Project. Expenditure on Business Unit Signage amounting to Rs. 0.33 Crores has been debited under the head Furniture & Fixture, whereas, Brand Strategy project expenses amounting to Rs. 0.04 Crores has been charged to Profi t & Loss account treating it as a Revenue Expenditure for the reason that the Bank cannot declare dividend to shareholders without writing it off completely in view of the provisions of the Banking Regulation Act, 1949. Accordingly, the Bank has not evaluated useful life of this Brand Strategy project over which the expenses could be amortized.

11.00. Accounting Standard 28 - Impairment of Assets

Majority of Fixed Assets of the Bank are considered as Corporate Assets and not cash generating assets and in the opinion of Management there is no material impairment in these Fixed Assets. Regarding other Fixed Assets generating cash there is no material impairment. As such no provision is required as per AS-28 issued by ICAI.

11.1. Accounting Standard 29- Provisions, Contingent Liabilities and Contingent Assets

In respect of Contingent Liabilities under each class shown as per Schedule 12, in the opinion of the Management, the possibility of any out fl ow in settlement is remote. However, a provision of Rs. 41.57 lacs has been made during the year to meet certain claims decreed against the Bank but still not acknowledged as debts owing to the appeal fi led by the bank before the court of competent jurisdiction, pending adjudication. Further as the Bank does not have any overseas subsidiary, no letter of comfort has been issued.

12. Other Disclosures

12.1. Foreign Exchange

a) The net funded exposure of the Bank in respect of Foreign Exchange transactions with each country is within 1% of the Total Assets of the Bank and hence no Provision and Disclosure is required to be made as per the RBI Circular No. 96/21.04.103/2003 dated: 17.06.2004.

b) Claims pending with ECGCI amounts to Rs. 22.53 Crores (Previous year Rs. 21.52 Crores)

c) The bank in terms of RBI circular no.DBOD.BP.BCNo.133/21.04.018 /2008-09 dated 11.05.2009 appropriated an amount of Rs. 5,699,616.00 to Profi t & Loss account on account of un-reconciled credit outstanding entries of value less than $2500 in Nostro /mirror accounts from 1.04.1996 to31.03.2002 and transferred it to the General Reserve Account. The action has resulted in increase of the profi ts of the bank to the extent of such amount.

12.2. The Bank follows policy of providing interest on overdue time deposits at Saving Bank interest rates in conformity with guidelines of Reserve Bank of India. In CBS Business units of the Bank the system itself takes care of providing interest on overdue time deposits at the gross root/individual constituent level. However for other than CBS Business units and the consolidated balances lying in overdue time deposits in Finacle business units, the bank has made a provision of RS 7.50 Crores on adhoc basis, which is suffi cient enough to meet the requirements.

12.3. Payments to and Provisions for employees include Rs. 75.92 Crores towards liability for wage arrears calculated on estimated basis.

12.4. Penalty imposed by Reserve Bank of India during the year Nil (Previous year Nil).

13. The Principal Accounting Policies (Schedule 17) and Notes on Accounts (Schedule 18) form an integral part of these Accounts.

14. Previous year figures have been regrouped / rearranged wherever necessary and possible to conform to current year figures. In cases where disclosures have been made for the first time in terms of RBI guidelines, Previous Years figures have not been given.

 
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