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Notes to Accounts of Punjab & Sind Bank

Mar 31, 2016

1 Balancing of Books and Reconciliaton.

1.1 In certain Branches, the balancing / reconciliaton of control accounts with subsidiary ledgers is in progress.

1.2 Initial matching of debit and credit outstanding of old entries in Inter Branch Account (IBR DD), prior to CBS System. Adjustments (including old outstanding entries) has been done up to 31.03.2016 and reconciliation is in progress.

1.3 Reconciliation of Drafts payable, Debit Note Receivable/ Payable, RTGS/NEFT (Suspense) etc. is in progress. Provisions have been made as per RBI norms.

In the opinion of the management, the impact of the above para 1.1 to 1.3, if any, on the Profit & Loss Account and Balance Sheet though not quantifiable, will not be material.

1.4 In terms of Reserve Bank of India guidelines, segregation of Debit and Credit entries in Inter Branch Accounts pertaining to the period up to 30.09.2015 and remained outstanding as on 31.03.2016 has been done which has resulted in either net Debit in some heads or net credit in other heads. Provision is to be made in respect of Net Debit Entries outstanding for period exceeding 6 months.

In Inter Branch Account there is net credit balance hence no provision is required to be made.

1.5 Aggregate net credit position in respect of outstanding NOSTRO Accounts relating to the period up to 31st March 1996 amounting to Rs 3.78 Crores as compared to previous year of Rs.3.64 Crores has been transferred to Blocked Nostro Sundry Creditors A/C out of which Rs 1.77 crores for period prior to 14.11.1989 is being carried at old book value. Credit entries for the period after 1st April 1996 remaining outstanding for more than 3 years amounting to Rs 4.75 Crores as compared to previous year of Rs.4.43 Crores have been segregated and kept in Blocked Unclaimed Nostro New A/C.

2.1 Legal formalities are yet to be completed in respect of 6 Bank''s properties having original cost of Rs.4.17 crore as on 31.03.2016 (Previous year 5 properties costing Rs.3.74 crore).

3. Derivatives

Bank has not entered into any derivative transactions (Forward rate agreement/Interest Rate Swap/ Exchange Traded Interest Rate Derivatives) during the year 2015-16. Accordingly, qualitative and quantitative disclosures under RBI guidelines with respect to derivative transactions are not required.

4. During the year, the Bank shifted securities worth Rs.826.02 crore (face value) from "Held till Maturity" to "Available for Sale Category".

5. The value of shifting/ sales from HTM category during the year does not exceed 5% of the book value of investments held in HTM category at the beginning of the year.

6. Risk Category wise Country Exposure

The net country-wise funded exposure of the Bank in respect of Foreign Exchange Transactions in respect of each country is within 1% of the total assets of the Bank. Hence, no provision is required as per RBI guidelines.

7. Disclosure as per Accounting Standard (AS)

7.1 AS-5 Net Profit or Loss for the period, prior period items and changes in accounting policies

8. There are no material prior period items included in Profit & Loss Account required to be disclosed as per AS-5 read with RBI guidelines except those disclosed elsewhere in the notes.

8.1 AS-6 Depreciation Accounting

Break-up of total depreciation for each class of assets

8.2 AS-9 Revenue Recognition

8.4 Certain items of income are recognized on realization basis as disclosed at point no. 8 – "Revenue Recognition" of Schedule 17 – Significant Accounting Policies. However, in terms of RBI guidelines, the said income is not considered to be material.

8.5 AS15 - Employees Benefit

8.6 Provisions for Pension, Gratuity, Leave Encashment and Other long term benefits have been made in accordance with the Revised Accounting Standard (AS - 15) issued by the ICAI.

9. The summarized position of post employment benefits recognized in the Profit & Loss A/c and Balance Sheet is as under:

10. AS 21 – Consolidated Financial Statement

The Bank does not have any subsidiary and as such AS 21 is not applicable.

11. AS 22 – Accounting for Taxes on Income

11.1 The Bank has accounted for Income Tax in compliance with Accounting Standard-22 ''Accounting for taxes on Income'' issued by ICAI.

11.2 Based on the opinion of tax expert, the bank has considered the difference between accounting income and computation of taxable income on valuation of securities as permanent and accordingly, deferred tax liability of Rs. 355.05 crore (Previous Year Rs.379.26 crore) has not been considered necessary.

11.3 Provision for Income Tax, Deferred Tax and Fringe Benefit Tax held by the Bank is considered adequate taking into account the opinion of legal experts and favorable judicial pronouncements.

11.4 No provision has been considered necessary in respect of disputed demands of Income Tax, Fringe Benefit Tax and Interest Tax aggregating to Rs. 257.41 crore (Previous year Rs.293.19 crore) in view of decisions of appellate authorities / judicial pronouncements / opinions of legal experts.

11.5 Based on the opinion of tax expert, the bank has claimed the deduction under section 36(1)(vii) of the Income Tax Act, 1961 in respect of write of non-rural advances of Rs.332.04 crore (previous year Rs.249.17 crore) without adjusting the same with the unexhausted provision outstanding under section 36(1)(viia) of the Income Tax Act, 1961 holding that proviso read with Explanaton-2 to section 36(1)(vii) is not applicable to the bad debts written of non-rural advances.

11.6 AS 23 - Accounting for Investments in Associates in consolidated Financial Statements

The Bank does not have any subsidiary and as such AS 23 is not applicable.

12. AS 26 - Intangible Assets

The application software in use in the Bank has been developed in house and has evolved over a period of time. Hence ,the costs of software is essentially part of Bank''s operational expenses like wages etc. and as such are charged to the respective heads of expenditure in the Profit and Loss Account.

13. Accounting Standard 28 - Impairment of Assets

Fixed Assets possessed by Bank are treated as ''Corporate Assets'' and not ''Cash Generating Units'' as defined by AS-28. In the opinion of the Management, there is no impairment of the ''Fixed Assets'' of material amount as of 31.03.2016, requiring recognition in terms of AS-28 issued by the ICAI. The impairment of other assets has been provided for as per Prudential Norms prescribed by the Reserve Bank of India.

14. Accounting Standard 29 - Provisions, Contingent Liability and Contingent Assets

15. As per AS-29 - Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Bank recognizes no provision for -

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank, or

b) Any present obligation from the past events but is not recognized because

- It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

- A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as contingent liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate 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.

16. Movement of other significant provisions has been disclosed at the appropriate places in the Notes forming part of the accounts.

17. During the year, in terms of RBI Circular No. DBOD.No. BP.BC.85/21.06.200/2013-14 dt. 15.01.2014, the Bank has provided an amount of Rs.1.07 cr. (Previous Year Rs.0.51 cr.) towards Unhedged Foreign currency Exposure Based on the details furnished by the constituents.

18. The figures of the previous year have been re-grouped / re-arranged wherever necessary except where information was not available.


Mar 31, 2015

1 Balancing of Books and Reconciliation.

1.1 In certain Branches, the balancing / reconciliation of control accounts with subsidiary ledgers is in progress.

1.2 Initial matching of debit and credit outstanding entries in Inter Branch Account (IBR DD) Adjustments (including old outstanding entries) has been done up to 31.01.2015 and reconciliation is in progress.

1.3 Reconciliation of Drafts / TT payable, Dividend Warrants paid / payable, Debit Note Receivable/ Payable, RTGS (Suspense) etc. is in progress. Provisions have been made as per RBI norms.

In the opinion of the management, the impact of the above Para 1.1 to 1.3, if any, on the Profit & Loss Account and Balance Sheet though not quantifiable, will not be material.

1.4 In terms of Reserve Bank of India guidelines, segregation of Debit and Credit entries in Inter Branch Accounts pertaining to the period up to 30.09.2014 and remained outstanding as on 31.03.2015 has been done which has resulted in either net debit in some heads or net credit in other heads. Provision is to be made in respect of Net Debit entries outstanding for the period exceeding six months.

In Inter Branch Account there is net credit balance hence no provision is required to be made.

1.5 Aggregate net credit position in respect of outstanding NOSTRO Accounts relating to the period up to 31st March 1996 amounting to Rs.3.64 crore (previous year Rs 3.69 crore) has been transferred to Blocked Nostro Sundry Creditors Account out of which Rs1.77 crore for period prior to 14.11.1989 is being carried at old book value. Credit entries for the period after 1st April 1996 remaining outstanding for more than 3 years amounting to Rs.4.43 crore (previous year Rs.4.63 crore) have been segregated and kept in Blocked Unclaimed Nostro New Account.

2.1 Legal formalities are yet to be completed in respect of 5 (five) Bank''s properties having original cost of Rs.3.74 crore as on

31.03.2015 (Previous year 5 properties costing Rs.3.47 crore).

3. Capital

During the year, Bank has issued 3,04,36,252 Equity Shares of Rs.10/ each to Life Insurance Corporation of India by way of Preferential Issue at a price of Rs.59.14 per share determined as per SEBI ICDR Regulation after taking necessary approval from RBI/ MOF.

Perpetual Non Cumulative Preference Shares (PNCPS) of Rs.200 crore, Perpetual Cumulative Preference Shares (PCPS) of Rs.200 crore and Innovative Perpetual Debt Instruments (IPDI) of Rs.160 crore held by Government of India have been converted into 9,46,90,563 Equity Shares of Rs.10/ each by way of Preferential Issue at a price of Rs.59.14 per share determined as per SEBI ICDR Regulation after taking necessary approval from RBI/ MOF.

Accordingly the Equity Share Capital of the Bank has increased by Rs.125.13 crore to Rs.400.41 crore and Share Premium has increased by Rs.614.06 crore (Share Premium Received Rs.614.87 crore minus Share Issue Expenses Rs.0.81 crore) to Rs.1318.04 crore.

4. Derivatives

Bank has not entered into any derivative transactions (Forward rate agreement/Interest Rate Swap/ Exchange Traded Interest Rate Derivatives) during the year 2014-15. Accordingly, qualitative and quantitative disclosures under RBI guidelines with respect to derivative transactions are not required.

5. Risk Category wise Country Exposure

The net country-wise funded exposure of the Bank in respect of Foreign Exchange Transactions in respect of each country is within 1% of the total assets of the Bank. Hence, no provision is required as per RBI guidelines.

6 Disclosure as per Accounting Standard (AS)

6.1 AS-5 Net Profit or Loss for the period, prior period items and changes in accounting policies

6.1.1There are no material prior period items included in Profit & Loss Account required to be disclosed as per AS-5 read with RBI guidelines except those disclosed elsewhere in the notes.

6.3 AS-9 Revenue Recognition

6.3.1 Certain items of income are recognized on realization basis as disclosed at point no. 8 - "Revenue Recognition" of Schedule 17 - Significant Accounting Policies. However, in terms of RBI guidelines, the said income is not considered to be material.

6.4 AS15 - Employees Benefit

6.4.1 Provisions for Pension, Gratuity, Leave Encashment and Other long term benefits have been made in accordance with the Revised Accounting Standard (AS - 15) issued by the ICAI. However, the additional liability towards re-opening of pension option and amendment in the Gratuity Act, 1972 has been dealt in accordance with the provisions contained in Reserve Bank of India circular no. DB0D.BP.BC.80/21.04.018/2010-11 dated 9th February 2011 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limit. Accordingly the Bank has amortized the balance amount of Rs. 146.12 Crores on account of Pension and Rs. 26.57 Crores on account of Gratuity.

6.4.2 The summarized position of post employment benefits recognized in the Profit & Loss A/c and Balance Sheet is as under:

6.8 AS 21 - Consolidated Financial Statement

The Bank does not have any subsidiary and as such AS 21 is not applicable.

6.9 AS 22 - Accounting for Taxes on Income

6.9.1 The Bank has accounted for Income Tax in compliance with Accounting Standard-22 ''Accounting for taxes on Income'' issued by ICAI.

6.9.3 Based on the opinion of tax expert, the bank has considered the difference between accounting income and computation of taxable income on valuation of securities as permanent and accordingly, deferred tax liability of Rs 379.26 crore (Previous Year Rs.403.80 crore) has not been considered necessary.

6.9.4 Provision for Income Tax, Deferred Tax and Fringe Benefit Tax held by the Bank is considered adequate taking into account the opinion of legal experts and favorable judicial pronouncements.

6.9.5 No provision has been considered necessary in respect of disputed demands of Income Tax, Fringe Benefit Tax and Interest Tax aggregating to Rs. 293.19 crore (Previous year Rs.477.79 crore) in view of decisions of appellate authorities / judicial pronouncements / opinions of legal experts.

6.9.6 In computing the provision for Income Tax for the current Financial Year, based on the opinion of tax consultant, the bank has claimed the deduction under section 36(1)(vii) of the Income Tax Act 1961 in respect of write off of non-rural advances of Rs.249.17 crore (previous year Rs.216.70 crore) without adjusting the same with the unexhausted provision outstanding under section 36(1)(viia) of the Income Tax Act 1961 holding that proviso read with Explanation-2 to section 36(1)(vii) is not applicable to the bad debts written off of non-rural advances. This has resulted into increase in Profit after Tax, MAT credit entitlement by Rs.74.27 crore (previous year Rs.68.10 crore) and creation of Deferred Tax Liability of Rs.59.61 crore (previous year Deferred Tax Asset of Rs.59.61 crore). The management is hopeful of enforcing its claim of above referred deduction in tax litigation.

6.10 AS 23 - Accounting for Investments in Associates in consolidated Financial Statements

The Bank does not have any subsidiary and as such AS 23 is not applicable.

6.11 AS 26 - Intangible Assets

The application software in use in the Bank has been developed in house and has evolved over a period of time. Hence ,the costs of software is essentially part of Bank''s operational expenses like wages etc. and as such are charged to the respective heads of expenditure in the Profit and Loss Account.

6.12 Accounting Standard 28 - Impairment of Assets

Fixed Assets possessed by Bank are treated as ''Corporate Assets'' and not ''Cash Generating Units'' as defined by AS-28. In the opinion of the Management, there is no impairment of the ''Fixed Assets'' of material amount as of 31.03.2015, requiring recognition in terms of AS-28 issued by the ICAI. The impairment of other assets has been provided for as per Prudential Norms prescribed by the Reserve Bank of India.

6.13 Accounting Standard 29 - Provisions, Contingent Liability and Contingent Assets

6.13.1 As per AS-29 - Provisions, Contingent Liabilities and Contingent Assets, issued by the Institute of Chartered Accountants of India, the Bank recognizes no provision for -

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank, or

b) Any present obligation from the past events but is not recognized because

* It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

* A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as contingent liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate 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.

6.13.2 Movement of Provision against Contingent Liabilities:

(Rs. in crore)

Opening Balance Additions Reduction Closing Particulars during during Balance the year the year

2014 2013 2014 2013 2014 2013 2014 2013 -15 -14 -15 -14 -15 -14 -15 -14 Claims against 26.61 18.16 0.75 8.70 0.61 0.25 26.75 26.61 the Bank not acknowledged as Debt

Invoked Bank 6.44 3.87 3.00 6.38 0.43 0.06 6.44

L.C Devolved Nil Nil Nil Nil Nil Nil Nil NII

6.13.3 Movement of other significant provisions has been disclosed at the appropriate places in the Notes forming part of the accounts.

7. Draw down from Reserve

A sum of Rs. Nil lacs (previous year Rs. Nil lacs) has been drawn from the General Reserve on account of payment to the claimant of old entries.


Mar 31, 2014

1 Balancing of Books and Reconciliation.

1.1 In certain Branches, the balancing / reconciliation of control accounts with subsidiary ledgers is in progress.

1.2 Initial matching of debit and credit outstanding entries in Inter Branch Account (IBR DD) Adjustments (including old outstanding entries) has been done up to 28.02.2014 and reconciliation is in progress.

1.3 Reconciliation of Drafts / TT payable, Dividend Warrants paid / payable, Debit Note Receivable/ Payable, NEFT/RTGS (Suspense) etc. is in progress. Provisions have been made as per RBI norms.

In the opinion of the management, the impact of the above Para 1.1 to 1.3, if any, on the Profit & Loss Account and Balance Sheet though not quantifiable, will not be material.

1.4 AS 15 - Employees Benefit

1.4.1 Provisions for Pension, Gratuity, Leave Encashment and Other long term benefits have been made in accordance with the Revised Accounting Standard (AS - 15) issued by the ICAI. However, the additional liability towards re-opening of pension option and amendment in the Gratuity Act, 1972 has been dealt in accordance with the provisions contained in Reserve Bank of India circular no. DBOD.BP.BC.80/21.04.018/2010-11) dated 9th February 2011 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limit. Accordingly the Bank has amortized Rs. 146.12 Crores on account of Pension and Rs. 26.57 Crores on account of Gratuity. The balance amount carried forward on account of Pension Rs. 146.12 Crores and Rs. 26.57 Crores shall be carried forward to be amortized in next year i.e 2014-15.

1.5 AS 22 – Accounting for Taxes on Income

1.6 Based on the opinion of tax expert, the bank has considered the difference between accounting income and computation of taxable income on valuation of securities as permanent and accordingly, deferred tax liability of Rs 403.80 crore (Previous Year Rs.277.77 crore) has not been considered necessary.

1.7 No provision has been considered necessary in respect of disputed demands of Income Tax, Fringe Benefit Tax and Interest Tax aggregating to Rs 477.79 crore Previous year (Rs.261.07 crore) in view of decisions of appellate authorities / judicial pronouncements / opinions of legal experts.

1.8 Pursuant to Reserve Bank of India''s (RBI''s) Circular No. DBOD. No. BP. BC.77/ 21.04.018/2013-

1.9 dated 20.12.2013, Deferred Tax Liability on Special Reserve under section 36(1)(viii) of the Income Tax Act, 1961 has been created. As required by the said RBI Circular, the expenditure, amounting to Rs.22.43 crore due to creation of DTL on Special Reserve as at March 31, 2013, not previously charged to Profit & Loss Account, has now been adjusted directly from the Reserves. Had this amount been charged to Proft & Loss Account in accordance with the generally accepted accounting principles in India, the amount of Profit for the year had been lower for the year by such amount.

1.10 In computing the provision for Income Tax for the current Financial Year, based on the opinion of tax consultant, the bank has claimed the deduction under section 36(1)(vii) of the Income Tax Act 1961 in respect of write off of non-rural advances of Rs. 216.70 crore without adjusting the same with the unexhausted provision outstanding under section 36(1)(viia) of the Income Tax Act 1961 holding that proviso read with Explanation-2 to section 36(1)(vii) is not applicable to the bad debts written off of non-rural advances. This has resulted into increase in Profit after Tax, MAT credit entitlement by Rs.68.10 crore and Deferred Tax Asset by Rs.59.61 crore. The management is hopeful of enforcing its claim of above referred deduction in tax litigation.


Mar 31, 2013

1 Balancing of Books and Reconciliation.

1.1 In certain Branches, the balancing / reconciliation of control accounts with subsidiary ledgers is in progress.

1.2 Initial matching of debit and credit outstanding entries in Inter Branch Account (IBR DD) Adjustments(including old out- standing entries) has been done up to 28.02.2013.and reconciliation is in progress.

1.3 Reconciliation of accounts with banks, NOSTRO, Drafts / TT payable, Dividend Warrants paid / payable, Debit Note Receiv- able/ Payable, NEFT/RTGS (Suspense) etc. is in progress. Provisions have been made as per RBI norms.

In the opinion of the management, the impact of the above para 1.1 to 1.3, if any, on the Profit & Loss Account and Balance Sheet is not quantifiable.

 
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