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Accounting Policies of Oriental Bank of Commerce Company

Mar 31, 2015

1. BASIS OF PREPARATION

The fnancial statements have been prepared under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles(GAAP) in India, which comprises statutory provisions, regulatory/ Reserve Bank of India (RBI) guidelines, Accounting Standards/ guidance notes issued by the Institute of Chartered Accountants of India (ICAI) and the practices prevalent in the banking industry in India.

2. USE OF ESTIMATES

The preparation of fnancial statements requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of date of the fnancial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the fnancial statements are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognised prospectively in the current and future periods.

3. REVENUE RECOGNITION

3.1 Income and expenditure are accounted for on accrual basis except commission received / paid, locker rent, legal expenses for suit fled accounts and recoveries there against, dividend on investments, interest on overdue bills, insurance premium paid on Housing Loans and interest on tax refunds are accounted for on realisation/payment basis.

3.2 In view of uncertainty of collection of income in cases of Non-performing Assets/Investments, such income is accounted for only on realisation in terms of the RBI guidelines.

3.3 Interest on overdue deposits is provided for at the Saving Bank Deposit Rate and the balance is accounted for at the time of renewal.

4. INVESTMENTS

4.1 In accordance with RBI guidelines, investments are classifed into three categories.

i) Held to Maturity (Investments intended to be held till maturity)

ii) Held for Trading (Investments held for sale within 90 days from the date of acquisition)

iii) Available for Sale (Investments not classifed in (i) and (ii) above)

However, for disclosure in the Balance Sheet, Investments are classifed under the following heads. (a) Government Securities (b) Other Approved Securities

(c) Shares (d) Debentures and Bonds (e) Subsidiaries / Joint Ventures and (f) Others.

4.2 Valuation:

i) Held to Maturity: -

a. Investments under "Held to Maturity" category are carried at acquisition cost or amortized cost if acquired at a premium over face value. Wherever the book value is higher than the face value / redemption value, the premium is amortized over the remaining period of maturity.

b. Investments in joint venture are valued at carrying cost less diminution, in value, if any, other than temporary in nature.

c. Investment in venture capital is valued at carrying cost

The above valuation in category of Available for Sale and Held for Trading are done scrip wise and depreciation / appreciation is aggregated for each classifcation. Net depreciation for each classification, if any, is provided for while net appreciation is ignored.

4.3 Transfer of securities from one category to another is accounted for at the least of acquisition cost / book value / market value on the date of transfer. The Depreciation, if any, on such transfer is fully provided for.

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

4.5 Others:

i) Brokerage/commission received on subscription is booked in Profit and Loss Account.

ii) Brokerage, Commission, securities transaction tax etc. paid in connection with acquisition of investments are expensed upfront and excluded from cost.

iii) Broken period interest paid / received on purchase /sale of securities is recognised as interest expense / income.

iv) Prudential norms of RBI for non performing investment Classifcation are applied to Investments and appropriate provisions are made in respect of non performing securities.

v) Profit/Loss on sale of any Investment in any category is taken to Profit and Loss Account. However, in case of Profit on sale of Investments under ''Held to Maturity'' category, the residual amount after taxes and amount transferred to statutory reserve is appropriated to Capital Reserve Account.

vi) Valuation of HFT and AFS portfolio is done on daily basis and depreciation if any is provided on monthly and quarterly basis respectively.

vii) In line with RBI Master Circular on "Prudential norms for classifcation, Valuation and Operation of Investment Portfolio by Banks", bank has followed "Settlement date" accounting for recording purchase and sale of transactions in Investment book.

viii) In case of investment in Non-SLR securities, till the allotment of security in the Demat account, the amount of investment is shown under "Suspense Investment".

4.6 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under:

i) Hedge swaps: Interest rate swaps which hedges interest bearing asset or liability is accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost in the fnancial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability.

ii) Trading swaps: Trading swap transactions are marked to market with changes recorded in the fnancial statements.

5. ADVANCES / PROVISIONS / RECOVERIES

5.1 Advances are classifed as performing/ non- performing assets and provisions are made in accordance with prudential norms prescribed by the Reserve Bank of India.

5.2 Advances are net of provisions and technical write- offs made for non-performing Assets.

5.3 Provision for performing Assets is shown under the head "Other Liabilities and Provisions" in terms of RBI guidelines.

5.4 Recoveries in Non-Performing Assets are appropriated frst towards principal and thereafter towards interest.

6. FIXED ASSETS AND DEPRECIATION

6.1 Premises and other Fixed Assets are stated at historical cost except revalued premises which are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve and the incremental depreciation attributable to the revalued amount is deducted therefrom.

6.2 Premises include cost of land.

6.3 Fixtures and fttings in rented premises are treated as Temporary Erection.

6.4 Depreciation on Fixed assets including premises where value of land is not separable (other than those referred in para 6.5 given below) , is provided on the Written Down Value at the rates prescribed in the Income Tax Rules, 1962;

6.5 Depreciation on Computers and ATMs is provided on Straight line Method at the rate of 33.33% per annum as per the guidelines of RBI Computers softwares not forming an integral part of hardware is charged directly to Profit and Loss account.

6.6 No depreciation is provided in the year of sale/ disposal. Depreciation on additions to Fixed Assets during the fnancial year is provided at 100% of the prescribed rate of depreciation, if asset is put to use for 180 days or more during the fnancial year and at 50% of the prescribed rate of depreciation, if the asset is put to use for less than 180 days during the year.

6.7 Premium paid on leasehold land is amortised over the period of lease.

7. FOREIGN EXCHANGE TRANSACTIONS

7.1 Monetary assets and liabilities are revalued at exchange rates advised by Foreign Exchange Dealers Association of India (FEDAI) at the close of the fnancial year and the resultant gain/loss is taken to revenue.

7.2 Income and expenditure items are accounted for at the exchange rates prevailing on the date of the transaction.

7.3 Forward exchange contracts and bills are translated at the exchange rates prevailing on the date of commitment. Outstanding foreign exchange contracts and bills are revalued as per FEDAI rates and the resultant gain/loss is taken to revenue.

7.4 Foreign currency guarantees, acceptances, endorsements and other obligations are stated at FEDAI rates at the close of the fnancial year.

7.5 In case of Hedge swap to cover the foreign currency borrowing to raise Rupee fund as per eligibility under 100% of Un-impaired Tier-I capital, the premium paid to cover the foreign currency swap is amortised on monthly basis.

8. EMPLOYEE BENEFITS

8.1 Provident fund is a defned contribution as the bank pays fxed contribution at predetermined rates .The obligation of the bank is limited to such fxed contribution .The Contributions are charged to Profit and Loss account.

8.2 Gratuity and pension liability are defned benefit obligation and are provided for on the basis of Actuarial Valuation made at the end of the fnancial year .The schemes are funded by the Bank and are managed by separate trusts. New Pension Scheme which is applicable to employees who have joined bank on or after 01.04.2010 is a defned contribution scheme. Bank pays fxed contribution at pre determined rate. The obligation of the bank is limited to such fxed contribution. The contribution is charged to Profit and Loss Account.

8.3 Other Employee benefits such as leave

encashments, leave fare concessions are provided for based on actuarial valuation.

8.4 Short term employee benefits are recognized as an expense in the Profit and loss account of the year in which the related services are rendered.

9. TAXES ON INCOME

Income tax expense is the aggregate amount of current tax and deferred tax.

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made.

Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised only if there is virtual certainty of realisation of such assets in future.

10. IMPAIRMENT OF ASSETS

Impairment losses, if any, on Fixed Assets including Revalued Assets, are recognized in accordance with Accounting Standard 28 "Impairment of Assets" issued in this regard by the Institute of Chartered Accountants of India and charged to Profit and Loss Account.

11. PROVISIONS,CONTINGENT LIABILITIES AND CONTINGENT ASSETS

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

11.2 Contingent Assets are not recognized in the fnancial statements since this may result in the recognition of income that may never be realized.

12. EARNINGS PER SHARE

The bank reports basic and diluted earnings per equity share in accordance with the AS 20 (Earnings Per Share) issued by the ICAI. Basic earnings per equity share has been computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.


Mar 31, 2014

1. BASIS OF PREPARATION

The financial statements have been prepared under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles(GAAP) in India, which comprises statutory provisions, regulatory/ Reserve Bank of India (RBI) guidelines, Accounting Standards/ guidance notes issued by the Institute of Chartered Accountants of India (ICAI) and the practices prevalent in the banking industry in India.

2. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognised prospectively in the current and future periods .

3. REVENUE RECOGNITION

3.1 Income and expenditure are accounted for on accrual basis except , commission received / paid, locker rent, legal expenses for suit fled accounts and recoveries there against, dividend on investments, interest on overdue bills, insurance premium paid on Housing Loans and interest on tax refunds are accounted for on realisation/ payment basis.

3.2 In view of uncertainty of collection of income in cases of Non performing Assets/Investments, such income is accounted for only on realisation in terms of the RBI guidelines .

3.3 Interest on overdue deposits is provided for at the Saving Bank Deposit Rate and the balance is accounted for at the time of renewal.

4. INVESTMENTS

4.1 In accordance with RBI guidelines, investments are classified into three categories.

(i) Held to Maturity (Investments intended to be held till maturity)

(ii) Held for Trading (Investments held for sale within 90 days from the date of acquisition )

(iii) Available for Sale: (Investments not classified in (i) and (ii), above.)

However, for disclosure in the Balance Sheet, Investments are classified under the following heads. (a) Government Securities (b) Other Approved Securities (c) Shares (d) Debentures and Bonds (e) Subsidiaries / Joint Ventures and (f) Others.

4.2 Valuation:

i) Held to Maturity: -

a. Investments under "Held to Maturity" category are carried at acquisition cost or amortized cost if acquired at a premium over face value. Wherever the book value is higher than the face value / redemption value , the premium is amortized over the remaining period of maturity.

b. Investments in joint venture are valued at carrying cost less diminution in value, if any, other than temporary in nature.

c. Investment in venture capital is valued at carrying cost.

The above valuation in category of Available for Sale and Held for Trading are done scrip wise and depreciation / appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for while net appreciation is ignored.

4.3 Transfer of securities from one category to another is accounted for at the least of acquisition cost / book value / market value on the date of transfer. The Depreciation, if any, on such transfer is fully provided for.

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

4.5 Others:

i) Brokerage/commission received on subscription is booked in Proft and Loss Account.

ii) Brokerage, Commission, securities transaction tax etc. paid in connection with acquisition of investments are expensed upfront and excluded from cost .

iii) Broken period interest paid / received on purchase /sale of securities is recognised as interest expense / income.

iv) Prudential norms of RBI for non-performing investment Classification are applied to Investments and appropriate provisions are made in respect of non-performing securities.

v) Profit/Loss on sale of any Investment in any category is taken to Profit and Loss Account. However, in case of profit on sale of Investments under ''Held to Maturity'' category, an equal amount net of taxes and amount transferred to statutory reserve is appropriated to Capital Reserve Account.

vi) Valuation of HFT and AFS portfolio is done on daily and quarterly basis respectively and depreciation if any is provided on quarterly basis

vii) In line with RBI Master Circular on "Prudential norms for Classification, Valuation and Operation of Investment Portfolio by Banks", bank has followed "Settlement date" accounting for recording purchase and sale of transactions in Investment book.

viii) In case of investment in Non-SLR securities, till the allotment of security in the Demat account, the amount of investment is shown under "Suspense Investment".

4.6 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under:

i) Hedge swaps: Interest rate swaps which hedges interest bearing asset or liability is accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability.

ii) Trading swaps: Trading swap transactions are marked to market with changes recorded in the financial statements.

5. ADVANCES / PROVISIONS / RECOVERIES

5.1 Advances are classified as performing/ non- performing assets and provisions are made in accordance with prudential norms prescribed by the Reserve Bank of India.

5.2 Advances are net of provisions and technical write- offs made for non-performing Assets.

5.3 Provision for performing Assets is shown under the head "Other Liabilities and Provisions" in terms of RBI guidelines.

5.4 Recoveries in Non-Performing Assets are appropriated frst towards principal and thereafter towards interest.

6. FIXED ASSETS AND DEPRECIATION

6.1 Premises and other Fixed Assets are stated at historical cost except revalued premises which are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve and the incremental depreciation attributable to the revalued amount is deducted there from .

6.2 Premises include cost of land.

6.3 Fixtures and fittings in rented premises are treated as Temporary Erection.

6.4 Depreciation on Fixed assets including premises where value of land is not separable (other than those referred in para 6.5 given below) , is provided on the Written Down Value at the rates prescribed in the Income Tax Rules, 1962;

6.5 Depreciation on Computers and ATMs is provided on Straight line Method at the rate of 33.33% per annum as per the guidelines of RBI Computers software’s not forming an integral part of hardware is charged directly to Profit and Loss account.

6.6 No depreciation is provided in the year of sale/ disposal. Depreciation on additions during the period up to 180 days is provided for full year otherwise for half year.

6.7 Premium paid on leasehold land is amortised over the period of lease.

7. FOREIGN EXCHANGE TRANSACTIONS

7.1 Monetary assets and liabilities are revalued at exchange rates advised by Foreign Exchange Dealers Association of India (FEDAI) at the close of the financial year and the resultant gain/loss is taken to revenue.

7.2 Income and expenditure items are accounted for at the exchange rates prevailing on the date of the transaction.

7.3 Forward exchange contracts and bills are translated at the exchange rates prevailing on the date of commitment. Outstanding foreign exchange contracts and bills are revalued as per FEDAI rates and the resultant gain/loss is taken to revenue.

7.4 Foreign currency guarantees, acceptances, endorsements and other obligations are stated at FEDAI rates at the close of the financial year.

7.5 In case of Hedge swap to cover the foreign currency borrowing to raise Rupee fund as per eligibility under 100% of Un-impaired Tier-I capital, the premium paid to cover the foreign currency swap is amortised on monthly basis..

8. EMPLOYEE BENEFITS

8.1 Provident fund is a defend contribution as the bank pays fixed contribution at predetermined rates. The obligation of the bank is limited to such fixed contribution. The Contributions are charged to Profit and Loss account.

8.2 Gratuity and pension liability are defend benefit obligation and are provided for on the basis of Actuarial Valuation made at the end of the financial year. The schemes are funded by the Bank and are managed by separate trusts. New Pension Scheme which is applicable to employees who have joined bank on or after 01.04.2010 is a defend contribution scheme. Bank pays fixed contribution at pre-determined rate. The obligation of the bank is limited to such fixed contribution. The contribution is charged to Profit and Loss Account.

8.3 Other Employee benefits such as leave encashment, leave fare concessions and sick leave are provided for based on actuarial valuation.

8.4 Short term employee benefits are recognized as an expense in the Profit and Loss account of the year in which the related services are rendered.

9. TAXES ON INCOME

Income tax expense is the aggregate amount of current tax and deferred tax .

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made .

Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised only if there is virtual certainty of realisation of such assets in future.

10. IMPAIRMENT OF ASSETS

Impairment losses, if any, on Fixed Assets including Revalued Assets, are recognized in accordance with Accounting Standard 28 "Impairment of Assets" issued in this regard by the Institute of Chartered Accountants of India and charged to Profit and Loss Account.

11. PROVISIONS,CONTINGENT LIABILITIES AND CONTINGENT ASSETS

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

11.2 Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

12. EARNINGS PER SHARE

The bank reports basic and diluted earnings per equity share in accordance with the AS 20 (Earnings Per Share) issued by the ICAI. Basic earnings per equity share has been computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.


Mar 31, 2013

1. BASIS OF PREPARATION

The financial statements have been prepared under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises statutory provisions, regulatory/ Reserve Bank of India (RBI) guidelines, Accounting Standards/ guidance notes issued by the Institute of Chartered Accountants of India (ICAI) and the practices prevalent in the banking industry in India.

2. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognised prospectively in the current and future periods .

3. REVENUE RECOGNITION

3.1 Income and expenditure are accounted for on accrual basis except , commission received / paid, locker rent, legal expenses for suit filed accounts and recoveries there against, dividend on investments, interest on overdue bills, insurance premium paid on Housing Loans and interest on tax refunds are accounted for on realisation/ payment basis.

3.2 In view of uncertainity of collection of income in cases of Non performing Assets/Investments , such income is accounted for only on realisation in terms of the RBI guidelines.

3.3 Interest on overdue deposits is provided for at the Saving Bank Deposit Rate and the balance is accounted for at the time of renewal.

4. INVESTMENTS

4.1 In accordance with RBI guidelines, investments are classified into three categories.

i. Held to Maturity (Investments intended to be held till maturity)

ii. Held for Trading (Investments held for sale within 90 days from the date of acquisition )

iii. Available for Sale: (Investments not classified in (i) and (ii), above.)

However, for disclosure in the Balance Sheet, Investments are classified under the following heads. (a) Government Securities (b) Other Approved Securities (c) Shares (d) Debentures and Bonds (e) Subsidiaries / Joint Ventures and (f) Others.

4.2 Valuation:

i) Held to Maturity: -

a. Investments under "Held to Maturity" category are carried at acquisition cost or amortized cost if acquired at a premium over face value. Wherever the book value is higher than the face value / redemption value, the premium is amortized over the remaining period of maturity.

b. Investments in joint venture are valued at carrying cost less diminution, in value, if any, other than temporary in nature.

c. Investment in venture capital is valued at carrying cost

The above valuation in category of Available for Sale and Held for Trading are done scrip wise and depreciation / appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for while net appreciation is ignored.

4.3 Transfer of securities from one category to another is accounted for at the least of acquisition cost / book value / market value on the date of transfer. The Depreciation, if any, on such transfer is fully provided for.

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

4.5 Others:

i. Brokerage/commission received on subscription is booked in Profit and Loss Account.

ii. Brokerage, Commission, securities transaction tax etc. paid in connection with acquisition of investments are expensed upfront and excluded from cost .

iii. Broken period interest paid / received on purchase / sale of securities is recognised as interest expense / income.

iv. Prudential norms of RBI for non performing investment Classification are applied to Investments and appropriate provisions are made in respect of non performing securities.

v. Profit/Loss on sale of any Investment in any category is taken to Profit and Loss Account. However, in case of profit on sale of Investments under ''Held to Maturity'' category, an equal amount is appropriated to Capital Reserve Account.

vi. Valuation of HFT and AFS portfolio is done on daily and quarterly basis respectively and depreciation, if any, is provided on quarterly basis

4.6 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under:

i. Hedge swaps: Interest rate swaps which hedges interest bearing asset or liability is accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability.

ii. Trading swaps: Trading swap transactions are marked to market with changes recorded in the financial statements.

5. ADVANCES / PROVISIONS / RECOVERIES

5.1 Advances are classified as performing/ non performing assets and provisions are made in accordance with prudential norms prescribed by the Reserve Bank of India.

5.2 Advances are net of provisions and technical write-offs made for non-performing Assets.

5.3 Provision for performing Assets is shown under the head "Other Liabilities and Provisions" in terms of RBI guidelines.

5.4 Recoveries in Non-Performing Assets are appropriated first towards principal and thereafter towards interest.

6. FIXED ASSETS AND DEPRECIATION

6.1 Premises and other Fixed Assets are stated at historical cost except revalued premises which are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve and the incremental depreciation attributable to the revalued amount is deducted therefrom.

6.2 Premises include cost of land.

6.3 Fixtures and fittings in rented premises are treated as Temporary Erection.

6.4 Depreciation on Fixed assets including premises where value of land is not separable (other than those referred in para 6.5 given below) , is provided on the Written Down Value at the rates prescribed in the Income Tax Rules, 1962;

6.5 Depreciation on Computers and ATMs is provided on Straight line Method at the rate of 33.33% per annum as per the guidelines of RBI .Computers softwares not forming an integral part of hardware is charged directly to Profit and Loss account.

6.6. No depreciation is provided in the year of sale/disposal. Depreciation on additions during the period upto 180 days is provided for full year otherwise for half year.

6.7 Premium paid on leasehold land is amortised over the period of lease.

7. FOREIGN EXCHANGE TRANSACTIONS

7.1 Monetary assets and liabilities are revalued at exchange rates advised by Foreign Exchange Dealers Association of India (FEDAI) at the close of the financial year and the resultant gain/loss is taken to revenue.

7.2 Income and expenditure items are accounted for at the exchange rates prevailing on the date of the transaction.

7.3 Forward exchange contracts and bills are translated at the exchange rates prevailing on the date of commitment. Outstanding foreign exchange contracts and bills are revalued as per FEDAI rates and the resultant gain/loss is taken to revenue.

7.4 Foreign currency guarantees, acceptances, endorsements and other obligations are stated at FEDAI rates at the close of the financial year.

8. EMPLOYEE BENEFITS

8.1 Provident fund is a defined contribution as the bank pays fixed contribution at predetermined rates. The obligation of the bank is limited to such fixed contribution.The Contributions are charged to Profit and Loss account.

8.2 Gratuity and pension liability are defined benefit obligation and are provided for on the basis of Actuarial Valuation made at the end of the financial year. The schemes are funded by the Bank and are managed by separate trusts. New Pension Scheme which is applicable to employees who have joined bank on or after 01.04.2010 is a defined contribution scheme. Bank pays fixed contribution at pre determined rate. The obligation of the bank is limited to such fixed contribution. The contribution is charged to Profit and Loss Account.

8.3 Other Employee benefits such as leave encashments, leave fare concessions and sick leave are provided for based on actuarial valuation .

8.4 Short term employee benefits are recognized as an expense in the profit and loss account of the year in which the related services are rendered.

9. TAXES ON INCOME

Income tax expense is the aggregate amount of current tax and deferred tax.

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made.

Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised only if there is virtual certainty of realisation of such assets in future.

10. IMPAIRMENT OF ASSETS

Impairment losses, if any, on Fixed Assets including Revalued Assets, are recognized in accordance with Accounting Standard 28 "Impairment of Assets" issued in this regard by the Institute of Chartered Accountants of India and charged to Profit and Loss Account.

11. PROVISIONS,CONTINGENT LIABILITIES AND CONTINGENT ASSETS

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

11.2 Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

12. EARNINGS PER SHARE

The bank reports basic and diluted earnings per equity share in accordance with the AS 20 (Earnings Per Share) issued by the ICAI. Basic earnings per equity share has been computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.


Mar 31, 2012

1) GENERAL

a) The financial statements are prepared under historical cost convention, on a going concern basis and conform to the statutory provisions and practices prevailing in the country except as otherwise stated.

b) Revenue and expenses have generally been accounted for on accrual basis. However, commission received / paid, locker rent, legal expenses for suit filed accounts and recoveries there against, income on non- performing assets, dividend on investments, interest on overdue bills, insurance premium paid on Housing Loans and interest on tax refunds are accounted for on cash basis.

c) The interest on overdue deposits is provided for at the Saving Bank Deposit Rate and the balance is accounted for at the time of renewal.

2) FOREIGN EXCHANGE TRANSACTIONS

a) Monetary assets and liabilities are revalued at exchange rates advised by Foreign Exchange Dealers Association of India (FEDAI) at the close of the financial year and the resultant gain/loss is taken to revenue.

b) Income and expenditure items are accounted for at the exchange rates prevailing on the date of the transaction.

c) Forward exchange contracts and bills are translated at the exchange rates prevailing on the date of commitment. Outstanding foreign exchange contracts and bills are revalued as per FEDAI rates and the resultant gain/loss is taken to revenue.

d) Foreign currency guarantees, acceptances, endorsements and other obligations are stated at FEDAI rates at the close of the financial year.

3) INVESTMENTS

a) Classification:-

In accordance with RBI guidelines, investments are classified into three categories.

i) Held to Maturity (Investments intended to be held till maturity)

ii) Held for Trading (Investments held for sale within 90 days from the date of acquisition )

iii) Available for Sale: (Investments not classified in (i) and (ii), above.)

However, for disclosure in the Balance Sheet, Investments are classified under the following heads.

(a) Government Securities

(b) Other Approved Securities

(c) Shares

(d) Debentures and Bonds

(e) Subsidiaries / Joint Ventures and

(f) Others.

a) Valuation:

Held to Maturity: -

i. Investments under "Held to Maturity" category are carried at acquisition cost. Wherever the book value is higher than the face value / redemption value , the premium is amortized over the remaining period of maturity.

ii. Investments in joint venture are valued at carrying cost less diminution, in value, if any, other than temporary in nature.

iii. Investment in venture capital is valued at carrying cost.

The above valuation in category of Available for Sale and Held for Trading are done scrip wise and depreciation / appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for while net appreciation is ignored

c) Transfer of securities from one category to another is accounted for at the least of acquisition cost / book value / market value on the date of transfer. The Depreciation, if any, on such transfer is fully provided for.

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

b) Others:

i) Brokerage/commission received on subscription is booked in Profit & Loss Account.

ii) Broken period interest paid / received on purchase /sale of securities is recognised as interest expense / income.

iii) Prudential norms of RBI for non performing investment Classification are applied to Investments and appropriate provisions are made in respect of non performing securities.

iv) Profit/Loss on sale of any Investment in any category is taken to Profit & Loss Account. However, in case of profit on Sale of Investments under 'Held to Maturity' category, an equal amount is appropriated to Capital Reserve Account.

v) Valuation of HFT and AFS portfolio is done on daily and quarterly basis respectively and depreciation if any is provided on quarterly basis

c) The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under:

i) Hedge swaps: Interest rate swaps which hedges interest bearing asset or liability is accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability.

ii) Trading swaps: Trading swap transactions are marked to market with changes recorded in the financial statements.

4) ADVANCES / PROVISIONS / RECOVERIES

a) Classification of Advances into performing / non-performing assets and provisions thereon are made as per the Prudential Norms Prescribed by the Reserve Bank of India.

b) Advances are net of provisions and technical write-offs made for non-performing Assets.

c) Provision for performing Assets is shown under the head "Other Liabilities & Provisions".

d) Recoveries in Non-Performing Assets are appropriated first towards principal and thereafter towards interest.

5. a) FIXED ASSETS

(i) Fixed Assets are stated at historical cost less accumulated depreciation except in the case of assets which have been revalued. The appreciation on account of revaluation is credited to Revaluation Reserve.

(ii) Premises include cost of land.

(iii) Fixtures and fittings in rented premises are treated as Temporary Erection.

b) DEPRECIATION ON FIXED ASSETS:

(i) Depreciation:

- on assets (including revalued assets), is charged on the Written Down Value at the rates prescribed by the Income Tax Rules, 1962; except in respect of computers on which depreciation is provided on Straight Line Method @ 33.33% as per RBI guidelines;

- is not provided in the year of sale/disposal of asset;

- on the revalued portion of assets, is adjusted against the Revaluation Reserve

(ii) Wherever the cost of land cannot be separately segregated, from buildings depreciation is provided on the composite amount, at the rate applicable to buildings.

(iii) Premium paid on leasehold land is amortised over the period of lease.

(iv) Software expenditure is charged to Revenue in the year of incurrence.

6) LEASE TRANSACTIONS:

a) i) Accounting for assets given under finance lease before April 1, 2001, has been done as per the Guidance Note issued by the Institute of Chartered Accountants of India. Such assets are included under Other Fixed Assets and depreciation thereon is provided equally over the lease period.

ii) Finance leases are classified as performing and non- performing in accordance with prudential norms issued by RBI and accordingly provisions are made.

b) Assets taken under financial lease are recognized at the lower of the fair value of the leased assets and the present value of the minimum lease payments and included under Other Fixed Assets.

The lease payments are apportioned between finance charge and the outstanding liability so as to account for the finance charge at the constant periodic rate of interest over the lease period.

c) Lease other than financial lease is classified as operating lease.

d) Lease rental and depreciation are accounted for as per Accounting Standard (AS-19) issued by the Institute of Chartered Accountants of India.

7) STAFF RETIREMENT BENEFITS

a) The Bank has applied Accounting Standard 15 (Revised) - Employees Benefits, issued by the Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

b) Liability towards long term defined employee benefits - gratuity, pension, leave encashment, leave fare concession and sick leave are determined on actuarial valuation by independent actuaries at the year end by using Projected Unit Cost method. Liability so determined is funded, to the approved trusts of the bank, in the case of gratuity and pension and provided for in other cases.

c) In respect of Pension scheme opted by existing employees who had not opted for Pension earlier, the Pension liability is amortized minimum one-fifth starting from financial year 2010-11 as permitted by RBI.

d) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to profit and loss account.

e) Short term employee benefits are recognized as an expense at an undiscounted amount in the profit and loss account of the year in which the related services are rendered.

8) INCOME TAX

a) Provision for Tax is made for both current and deferred taxes.

b) Current tax is provided on the taxable income using applicable tax rates and tax laws.

c) Minimum Alternative Tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the Bank will pay income tax higher than that computed under MAT, during the period that MAT is permitted to be set off under the Income Tax Act, 1961 (specified period). In the year, in which the MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in the guidance note issued by the Institute of Chartered Accountants of India (ICAI), the said asset is created by way of a credit to the profit and loss account and shown as mAt credit entitlement. The Bank reviews the same at each balance sheet date and writes down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that the Bank will pay income tax higher than MAT during the specified period.

d) Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet.

e) Deferred Tax Assets are not recognized unless there is 'virtual certainty' that sufficient future taxable income will be available against which such deferred tax assets will be realized.

9) IMPAIRMENT OF ASSETS

Impairment losses, if any, on Fixed Assets including Revalued Assets, are recognized in accordance with Accounting Standard 28 "Impairment of Assets" issued in this regard by the Institute of Chartered Accountants of India and charged to Profit and Loss Account.

10) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

As per the Accounting Standard 29 "Provisions, Contingent Liabilities and Contingent Assets" issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

11) NET PROFIT:

The Net Profit is arrived at after accounting for the following "Provisions and Contingencies":

a) Provision for taxes on income and wealth tax in accordance with statutory requirements.

b) Provision on Standard Assets.

c) Provision for Non Performing Advances and depreciation on Investments.

d) Bad debts written off.

e) Other usual and necessary provisions.


Mar 31, 2011

1) GENERAL

a) The financial statements are prepared on historical cost convention, on a going concern basis and conform to the statutory provisions and practices prevailing in the country except as otherwise stated.

b) Revenue and expenses have generally been accounted for on accrual basis. However, commission received / paid, locker rent, legal expenses for suit filed accounts and recoveries there against, income on non- performing assets, dividend on investments, interest on overdue bills, insurance premium paid on Housing Loans and interest on tax refunds are accounted for on cash basis.

c) The interest on overdue deposits is provided for at the Saving Bank Deposit Rate and the balance is accounted for at the time of renewal.

2) FOREIGN EXCHANGE TRANSACTIONS

a) Monetary assets and liabilities are revalued at exchange rates advised by Foreign Exchange Dealers Association of India (FEDAI) at the close of the financial year and the resultant gain/loss is taken to revenue.

b) Income and expenditure items are accounted for at the exchange rates prevailing on the date of the transaction.

c) Forward exchange contracts and bills are translated at the exchange rates prevailing on the date of commitment. Outstanding foreign exchange contracts and bills are revalued as per FEDAI rates and the- resultant gain/loss is taken to revenue.

d) Foreign currency guarantees, acceptances, endorsements and other obligations are stated at FEDAI rates as at the close of the financial year.

3) INVESTMENTS

a) Classification:-

In accordance with RBI guidelines, investments are classified into three categories. i) Held to Maturity (Investments intended to be held till maturity)

ii) Held for Trading (Investments held for sale within 90 days from the date of acquisition) iii) Available for Sale: (Investments not classified in (i) and (ii), above.) However, for disclosure in the Balance Sheet, Investments are classified under the following heads, (a) Government Securities (b) Other Approved Securities (c) Shares (d) Debentures and Bonds (e) Subsidiaries/ Joint Ventures and (f) Others. b) Valuation:

Held to Maturity: -

i. Investments under "Held to Maturity" category are carried at acquisition cost. Wherever the book value is higher than the face value / redemption value , the premium is amortized over the remaining period of maturity.

ii. Investments in joint venture ere valued at carrying cost less diminution, in vaiue, if any, other than temporary in nature.

iii. Investment in venture capital is valued at carrying cost. Available for Sale and Held for Trading

1. Government of India Securities

At market prices as per quotations published by Fixed Income Money Market and Derivatives Association (FIMMDA).

2. State Development Loans /Other Approved Securities

At appropriate yield to maturity basis as per FIMMDAguidelines.

3- Treasury Bills, Commercial Papers and Certificate of Deposits

At carrying cost.

4- Equity Shares

(i) Quoted: At market price.

(ii) Unquoted: At break up value, where latest balance sheet is available (not more than one year old), otherwise at Re. 1 /- per companv.

5. Preference Shares

(i) Quoted: At market price.

(ii) Unquoted: On appropriate yield to maturity.

6. Debentures / Bonds

(i) Quoted: At market price.

(ii) Unquoted: At appropriate yield to maturity based on rating assigned by Rating Agencies.

1 Units of Mutual Funds

(i) Quoted: At market price.

(ii) Unquoted: At repurchase price/ Net Asset Value.

8. Security receipts of Asset

Reconstruction Company of _ India Ltd. (ARCIL)

At net asset value of the asset as declared by ARCIL.

The above valuation in category of Available for Sale and Held for Trading are done scrip wise and depreciation / appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for while net appreciation is ignored.

c) Transfer of securities from one category to another is accounted for at the least of acquisition cost / book value / market value on the date of transfer. The Depreciation, if any, on such transfer is fully provided for.

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

e) Others:

i) Brokerage/commission received on subscription is deducted from cost of acquisition.

ii) Broken period interest paid / received on purchase /sale of securities is recognised as interest expense / income.

iii) Prudential norms of RBI for non performing investment Classification are applied to Investments and appropriate provisions are made in respect of non performing securities.

iv) Profit/Loss on sale of any Investment in any category is taken to Profit & Loss Account. However, in case of profit on Sale of Investments under Held to Maturity category, an equal amount is appropriated to Capital Reserve Account.

v) Valuation of HFT and AFS portfolio is done on daily and quarterly basis respectively and depreciation if any is booked on quarterly basis.

f) The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under:

i) Hedge swaps: Interest rate swaps which hedges interest bearing asset or liability is accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability. ii) Trading swaps: Trading swap transactions are marked to market with changes recorded in the financial statements.

4) ADVANCES / PROVISIONS / RECOVERIES

a) Classification of Advances into performing / non-performing assets and provisions thereon are made as per the Prudential Norms Prescribed by the Reserve Bank of India.

b) Advances are net of provisions and technical write-offs made for non-performing Assets.

c) Provision for performing Assets is shown under the head "Other Liabilities & Provisions".

d) Recoveries in Non-Performing Assets are appropriated first towards principal and thereafter towards interest.

5. a) FIXED ASSETS

(i) Fixed Assets are stated at historical cost less accumulated depreciation except in the case of assets which have been revalued. The appreciation on account of revaluation is credited to Revaluation Reserve.

(ii) Premises include cost of land.

(iii) Fixtures and fittings in rented premises are treated as Temporary Erection.

b) DEPRECIATION ON FIXED ASSETS:

(i) Depreciation:

O on assets (including revalued assets), is charged on the Written Down Value at the rates prescribed by the Income Tax Rules, 1962; except in respect of computers on which depreciation is provided on Straight Line Method @ 33.33% as per RBI guidelines;

O is not provided in the year of sale/djsposal of asset;

O on the revalued portion of assets, is adjusted against the Revaluation Reserve

(ii) Wherever the cost of land cannot be separately segregated, from buildings depreciation is provided on the composite amount, at the rate applicable to buildings.

(iii) Premium paid on leasehold land is amortised over the period of lease.

(iv) Software expenditure is charged to Revenue in the year of incurrence.

6) LEASE TRANSACTIONS:

a) i) Accounting for assets given under finance lease before

April 1, 2001, has been done as per the Guidance Note issued by the Institute of Chartered Accountants of India. Such assets are included under Other Fixed Assets and depreciation thereon is provided equally over the lease period. ii) In accordance with prudential norms issued by RBI, finance leases are classified as performing and non- performing and accordingly provisions are made.

b) Assets taken under financial lease are recognized at the lower of the fair value of the leased assets and the present value of the minimum lease payments are included under Other Fixed Assets.

The lease payments are apportioned between finance charge and the outstanding liability so as to account for the finance charge at the constant periodic rate of interest ever the lease period.

c) Lease other than financial lease is classified as operating lease.

d) Lease rental and depreciation are accounted for as per Accounting Standard (AS-19) issued by the Institute of Chartered Accountants of India.

7) STAFF RETIREMENT BENEFITS

a) The Bank has applied Accounting Standard 15 (Revised) - Employees Benefits, issued by the Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

b) Liability towards long term defined employee benefits - gratuity, pension, leave encashment, leave fare concession and sick leave are determined on actuarial valuation by independent actuaries at the year end by using Projected Unit Cost method. Liability so determined is funded, to the approved trusts of the bank, in the case of gratuity and pension and provided for in other cases.

c) In respect of Pension scheme opted by existing employees who had not opted for Pension earlier, the Pension liability is amortized minimum one-fifth starting from financial year 2010-11 as permitted by RBI.

d) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to profit and loss account.

e) Short term employee benefits are recognized as an expense at an undiscounted amount in the profit and loss account of the year in which the related services are rendered.

8) INCOME TAX

a) Provision for Tax is made for both current and deferred taxes.

b) Current tax is provided on the taxable income using applicable tax rates and tax laws.

c) Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet.

d) Deferred Tax Assets are not recognized unless there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets will be realized.

9) IMPAIRMENT OF ASSETS

Impairment losses, if any, on Fixed Assets including Revalued Assets, are recognized in accordance with Accounting Standard 28 "Impairment of Assets" issued in this regard by the Institute of Chartered Accountants of India and charged to Profit and Loss Account.

10) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

As per the Accounting Standard 29 "Provisions, Contingent Liabilities and Contingent Assets" issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

11) NET PROFIT:

The Net Profit is arrived at after accounting for the following "Provisions and Contingencies":

a) Provision for taxes on income and wealth tax in accordance with statutory requirements.

b) Provision on Standard Assets.

c) Provision for Non Performing Advances and depreciation on Investments.

d) Bad debts written off.

e) Other usual and necessary provisions.


Mar 31, 2010

1. GENERAL

a) The financial statements are prepared on historical cost convention, on a going concern basis and conform to the statutory provisions and practices prevailing in the country except as otherwise stated.

b) Revenue and expenses have generally been accounted for on accrual basis. However, commission received / paid, locker rent, legal expenses for suit filed accounts and recoveries there against, income on non-performing assets, dividend on investments, interest on overdue bills, insurance premium paid on Housing Loans and interest on tax refunds are accounted for on cash basis.

c) The interest on overdue deposits is provided for at the Saving Bank Deposit Rate and the balance is accounted for at the time of renewal.

2. FOREIGN EXCHANGE TRANSACTIONS

a) Monetary assets and liabilities are revalued at exchange rates advised by Foreign Exchange Dealers Association of India (FEDAI) at the close of the financial year and the resultant gain/loss is taken to revenue.

b) Income and expenditure items are accounted for at the exchange rates prevailing on the date of the transaction.

c) Forward exchange contracts and bills are translated at the exchange rates prevailing on the date of commitment. Outstanding foreign exchange contracts and bills are revalued as per FEDAI rates and the resultant gain/loss is taken to revenue.

d) Foreign currency guarantees, acceptances, endorsements and other obligations are stated at FEDAI rates as at the close of the financial year.

3. INVESTMENTS

a) Classification :-

In accordance with RBI guidelines, investments are classified into three categories.

i) Held to Maturity (Investments intended to be held till maturity)

ii) Held for Trading (Investments held for sale within 90 days from the date of acquisition )

iii) Available for Sale: (Investments not classified in (i) and (ii), above.) However, for disclosure in the Balance Sheet, Investments are classified under the following heads, (a) Government Securities (b) Other Approved Securities (c) Shares (d) Debentures and Bonds (e) Subsidiaries / Joint Ventures and (f) Others.

b) Valuation:

Held to Maturity: -

i. Investments under "Held to Maturity" category are carried at

acquisition cost. Wherever the book value is higher than the face value / redemption value , the premium is amortized over the remaining period of maturity.

ii. Investments in joint venture are valued at carrying cost less diminution, in value, if any, other than temporary in nature.

iii. Investment in venture capital is valued at carrying cost.

c) Transfer of securities from one category to another is accounted for at the least of acquisition cost / book value/ market value on the date of transfer. The Depreciation, if any, on such transfer is fully provided for.

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

e) Others:

i) Brokerage/commission received on subscription is deducted from Cost of acquisition.

ii) Broken period interest paid / received on purchase /sale of securities is recognised as interest expense / income.

iii) Prudential norms of RBI for non performing investment classification are applied to Investments and appropriate provisions are made in respect of non performing securities.

iv) Profit/Loss on sale of any Investment in any category is taken to Profit & Loss Account. However, in case of profit on Sale of Investments under Held to Maturity category, an equal amount is appropriated to Capital Reserve Account.

4. ADVANCES / PROVISIONS / RECOVERIES

a) Classification of Advances into performing / non-performing assets and provisions thereon are made as per the Prudential Norms Prescribed by the Reserve Bank of India.

b) Advances are net of provisions and technical write-offs made for non-performing Assets.

c) Provision for performing Assets is shown under the head "Other Liabilities & Provisions".

d) Recoveries in Non-Performing Assets are appropriated first towards principal and thereafter towards interest.

5. a) FIXED ASSETS

(i) Fixed Assets are stated at historical cost less accumulated depreciation except in the case of assets which have been - revalued. The appreciation on account of revaluation is credited to Revaluation Reserve.

(ii) Premises include cost of land.

(iii) Fixtures and fittings in rented premises are treated as Temporary Erection.

b) DEPRECIATION ON FIXED ASSETS:

(i) Depreciation:

- on assets (including revalued assets), is charged on the Written Down Value at the rates prescribed by the Income Tax Rules, 1962; except in respect of computers on which depreciation is provided on Straight Line Method @ 33.33% as per RBI guidelines;

- is not provided in the year of sale/disposal of asset;

- on the revalued portion of assets, is adjusted against the Revaluation Reserve

(ii) Wherever the cost of land cannot be separately segregated, from buildings depreciation is provided on the composite amount, at the rate applicable to buildings.

(iii) Premium paid on leasehold land is amortised over the period of lease.

(iv) Software expenditure is charged to Revenue in the year of incurrence.

6. LEASE TRANSACTIONS:

a) i) Accounting for assets given under finance lease before April 1, 2001, has been done as per the Guidance Note issued by the Institute of Chartered Accountants of India. Such assets are included under Other Fixed Assets and depreciation thereon is provided equally over the lease period.

ii) In accordance with prudential norms issued by RBI, finance leases are classified as performing and non- performing and accordingly provisions are made.

b) Assets taken under financial lease are recognized at the lower of the fair value of the leased assets and the present value of the minimum lease payments and included under Other Fixed Assets.

The lease payments are apportioned between finance charge and theoutstanding liability so as toaccountforthe finance charge at the constant periodic rate of interest over the lease period.

c) Lease other than financial lease is classified as operating lease.

d) Lease rental and depreciation are accounted for as per Accounting Standard (AS-19) issued by the Institute of Chartered Accountants of India.

7. STAFF RETIREMENT BENEFITS

a) The Bank has applied Accounting Standard 15 (Revised) - Employees Benefits, issued by the Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

b) Liability towards long term defined employee benefits - gratuity, pension, leave encashment, leave fare concession and sick leave are determined on actuarial valuation by independent actuaries at the year end by using Projected Unit Cost method. Liability so determined is funded, to the approved trusts of the bank, in the case of gratuity and pension and provided for in other cases.

c) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to profit and loss account.

d) Short term employee benefits are recognized as an expense at an undiscounted amount in the profit and loss account of the year in which the related services are rendered.

8. INCOME TAX

a) Provision for Tax is made for both current and deferred taxes.

b) Current tax is provided on the taxable income using applicable tax rates and tax laws.

c) Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet.

d) Deferred Tax Assets are not recognized unless there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets will be realized.

9. IMPAIRMENT OF ASSETS

Impairment losses, if any, on Fixed Assets including Revalued Assets, are recognized in accordance with Accounting Standard 28 "Impairment of Assets" issued in this regard by the Institute of Chartered Accountants of India and charged to Profit and Loss Account.

10. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

As per the Accounting Standard 29 "Provisions, Contingent Liabilities and Contingent Assets" issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

11. NET PROFIT:

The Net Profit is arrived at after accounting for the following "Provisions and Contingencies":

a) Provision for taxes on income and wealth tax in accordance with statutory requirements.

b) Provision on Standard Assets.

c) Provision for Non Performing Advances and depreciation on Investments.

d) Bad debts written off.

e) Other usual and necessary provisions.

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