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Notes to Accounts of State Bank Of Mysore

Mar 31, 2015

1. INVESTMENTS

The Bank''s holding of total SLR securities in ''Held to Maturity'' Category (HTM) is 23.78% (previous year 22.42%) of DTL as on the last Friday of the second preceding fortnight. The total investment in HTM category is equal to 80.50% (Previous year 83.02%) of its total investments and the excess of ''Held to Maturity'' category investments over 25% of total investments comprises of SLR securities. The Bank''s holdings in Held to Maturity Category of investments are within the overall limits stipulated by RBI.

2.1. Sale and Transfer to/from HTM Category

2.1.1. As per RBI guidelines, the profit on sale of investment under Held to Maturity category amounting to Rs. 17.69 crore (previous year Rs. 14.67 crore) has been transferred to Capital Reserve.

2.1.2. Income on investment in Schedule 13 of Interest earned para II is net of amortization of premium on HTM Investments Rs.40.88 Crore (Previous year Rs.43.12 Crore).

2.1.3. RBI vide Circular DBOD.BPBC. NO.41/21.04.141/2013-14 Dated 2308-2013 has, as a one time measure, allowed banks to transfer SLR Securities from ''AFS/HFT'' TO ''HTM'' categories up to a limit of 24.50% of Net Demand and Time Liabilities. Further vide the same circular banks are allowed to distribute the net depreciation of the entire AFS/ HFT portfolio as measured on the valuation date over the current financial year in equal installments. Consequently the bank has transferred SLR securities with a book value of Rs 95.38crore from AFS to HTM category at the lower of book value or market value as of 9th June 2014, and no provisioning was done at the time of transfer since market value was higher than book value.

2.1.4. Also the Bank has shifted securities of Rs. 11.95 crore from ''HTM to AFS'' Category at Book Value

3.1 Disclosure on risk exposure in derivatives

3.1.1 Qualitative Disclosures

Forward Contracts are the only derivatives held in the books of the Bank. The Bank enters into forward contracts with the customers and covers the resultant position in the inter-bank market. The Bank also trades in Inter Bank forward contracts on its own with a view to derive profits. The Bank does not have any un-hedged foreign exchange exposure other than the open overnight position.

The Bank has put in place Board approved policy for monitoring various risks associated with the above mentioned transactions. The risks are managed by prescribing various limits and ensuring that the exposures are within the limits. Such limits are prescribed in the following areas:

a) Overnight Exposure Limits

b) Daylight exposure Limits

c) Aggregate and currency-wise gap Limits

d) Stop Loss Limits

e) VaR Limits

f) Limit on Proprietary Trading

g) Limit on Counter Party Bank

In terms of Board approved policy, the limits are monitored by Mid Office and discretionary power is vested with functionaries at various levels to ratify / approve the breaches, if any.

3.1.2.1 Provision for Diminution in Fair Value of Restructured Loan Assets

During the current year ended 31st March 2015, provision for diminution in fair value of Restructured Accounts is made and the amount provided for in FY 2014-15 is Rs. 142.69 Crore.

3.1.2.2 Provision on Restructured Loan Accounts:

The bank has made provision at the rate of 4.25% (previous year @ 3.50%) on the stock of restructured accounts as at 31st May 2013 in line with the guidelines issued by RBI.

On the stock of accounts restructured from 1st June 2013, the bank has made provision at the rate of 5.00% in line with the RBI guidelines.

3.1.3 Details of financial assets sold to Securitization/reconstruction company for Asset Reconstruction

* As per Prudential norms;

I. 15% of the capital funds as on

31.03.2014, for a single Borrower works out to Rs.769.01 crores (previous year Rs. 785.05 crore) and 40% for Group borrowers works out to Rs.2050.70 crores (previous year Rs. 2,093.46 crore).

II. Additional 5% Rs.256.34

crore (previous year Rs. 261.68 crore) of the capital funds as on 31.03.2014, for single Borrower provided the additional credit exposure is on account of extension of credit to Infrastructure Projects.

III. Additional 10% Rs.512.68

crore (previous year Rs. 523.36 crore) of the capital funds as on 31.03.2014, for Group borrowers provided the additional credit exposure is on account of extension of credit to Infrastructure Projects.

IV. Additional 10% Rs.512.68 crores (previous year Rs. 523.36 crore) of the capital funds as on 31.03.2014, for Oil Companies who have been issued Oil bonds (which do not have SLR Status) by the Govt of India.

Exposure to NBFCs:

* As per Prudential Norms;

I. 10% of the capital funds as on 31.03.2014, for single borrower (NBFC) works out to Rs.512.68 crores (previous year Rs. 523.36 crore).

II. 15% of the capital funds as on 31.03.2014, for a single borrower (NBFC-AFC (Asset financing Company) works out to Rs.769.01 crores (previous year Rs. 785.05 crore).

III. 20% of the capital funds as on 31.03.2014, on account of funds lent by NBFC - AFC to infrastructure sector works out to Rs.1025.35 crores (previous year Rs. 1046.73 crore).

The above statement is exclusive of Food Credit, which is outside the purview of prudential norms.

3.1 Penalties imposed by the Reserve Bank of india during the year 2014-15- Rs 4.48 lakh (Previous year Rs 2.20 lakh).

4. disclosure requirements as per accounting standards

The Bank has generally complied with all the applicable Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) read with the relevant guidelines of Reserve Bank of India. The following disclosures (not made elsewhere in the financial statements including Significant Accounting Policies and Notes on Accounts) are made hereunder in accordance with the provisions of the applicable mandatory Accounting Standards, issued by the Institute of Chartered Accountants of India.

4.1 Cash Flow Statements (AS 3 Revised)

In terms of para 45 of the Standard, the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by it, are Rs. NIL (excluding balances required to be maintained for the purpose of Cash Reserve Ratio).

4.2 Net Profit or Loss for the period, prior period items and changes in Accounting Policies (AS- 5)

4.2.1 In terms of Accounting Standard 5 issued by the Institute of Chartered Accountants of India read with RBI guidelines, prior period items are

Other Prior Period Items -

Expenditure - NIL

Income - RS. 0.10 lakhs

4.2.2 Change in Accounting Policy with

respect to Depreciation on Fixed Assets

1. The Bank has changed the method of charging depreciation from Written Down Value Method (WDV) to Straight Line Method (SLM) except in case of revalued assets (Buildings) and computers which were depreciated under SLM.

2. The revised rates are arrived based on the estimate of the management on the useful life of the asset.

3. Also, the bank has changed the policy* of charging depreciation on revalued assets, over the remaining useful life of the asset. The deprecation corresponding to the extent of revaluation was debited to the Depreciation Reserve and credited to the Revaluation Reserve Account.

4. Due to the change in accounting policy the impact is as follows -

a) In respect of item 1 above, the book value of Fixed Assets increased by Rs.10.35 crore and Accumulated Depreciation as on 31st March 2014 reduced by Rs. 13.08 crore. Also, the depreciation for the current year increased by Rs.2.73 crore.

Had, the bank followed the earlier method the depreciation for the year would have been Rs. 75.97 crore as against the actual charge of Rs.78.70 crore.

The depreciation in the profit and loss account is net off the adjustment due to reversal of accumulated depreciation of Rs. 13.08 crore resulting in net depreciation of Rs. 65.62 crore.

4.4 Revenue Recognition (AS 9)

The revenue has been recognized in terms of AS 9 on Revenue recognition, the guidelines issued by Reserve Bank of India and the Accounting Policy of the Bank.

4.5 Employees'' Benefits - Accounting Standards 15 (Revised)

4.5.1 In terms of AS 15 (revised), Bank has made provision for the following Employee benefits for the year ended

4.6 SEGMENT REPORTING - (AS-17) :

The following segments have been identified:

I. Primary Segment (Business Segment) :

Treasury Operations Corporate / Wholesale Banking Retail Banking

II. The Geographic segment consists of only the Domestic segment as the Bank does not have any foreign branches.

4.6.1 The Bank has got two main business segments namely Treasury Operations and Banking Operations. Banking Operations are further segmented to Corporate / Wholesale Banking and Retail Banking

4.6.2 PRIcING of Inter-Segmental Transfers:

Corporate / Wholesale banking and Retail Banking Operations Segment are the primary resource mobilising units. The Treasury segment is a recipient of funds from these operations apart from resource mobilised by treasury segment from REPO, CBLO, Call Money, IBTM and Export credit refinance. The cost of funds mobilised by treasury from corporate / wholesale banking and retail banking is computed at the cost of deposits of Corporate / Wholesale Banking and Retail banking. Pricing of Inter Segmental transfer in Treasury is reduced from the operating profit of Treasury Segment and added to the Operating Profit of Corporate / Wholesale banking in the ratio of deposits allocated to these segments.

4.6.3 REVENUE :

All income relating to Treasury Operations are considered under Treasury operations segment. All interest for all borrowal accounts with exposures above RS. 5crores are classified as Corporate/ Wholesale Banking segment. The balance interest is treated as relating to retail banking segment. The other interest income/other income is allocated under Corporate/Wholesale and Retail Banking segments in the ratio of total income of these segments (excluding other interest income/other income and interest segment revenue).

4.6.4 ALLOCATION OF EXPENSES:

Expenses incurred at Corporate Centre establishment directly attributable to Treasury Operations are allocated accordingly. As regards Corporate/ Wholesale and retail banking segment interest paid on deposits is segregated to these segments in the ratio of deposits to these segments (deposits are allocated on the basis of outstanding advances pertaining to these segments). Employees'' expenses are allocated to the Treasury segment in proportion to the number of Employees of that segment to the total employees of the Bank. Other interest paid, provisions relating to employees and other operative expenditure for Corporate/ Wholesale and Retail Banking segment are allocated based on the income earned by these segments (excluding inter segmental revenue). Interest paid on Tier I/Tier II/Subordinated bonds are classified as ''Unallocated''.

4.6.5 SEGMENT ASSETS:

All assets which are directly attributable to treasury operations are considered for Treasury Operations Segment. All outstandings in advance accounts for borrowers with exposures above RS. 5crores is considered as assets pertaining to Corporate/Wholesale Banking segment. Other outstanding in advances segments is shown as pertaining to Retail Banking Segment. All other assets are segregated and added to the segment advances pertaining to Corporate/Wholesale and Retail Banking segment in the ratio of outstanding balances of advances in these segments.

4.6.6 SEGMENT LIABILITIES:

All liabilities which are directly attributable to Treasury Operations segment are allocated accordingly. Other deposits are allocated and segregated for Corporate/ Wholesale segment in the ratio of outstanding balances of advances for the respective segments. With regard to other liabilities, provisions and contingencies, the allocation to Corporate/Wholesale and Retail Banking segments are made on the basis of the outstanding balances of advances under these segments. Tier I/Tier II/Subordinated bonds are classified as ''Unallocated''.

4.7 RELATED PARTY DISCLOSURES (AS 18)

4.7.1 In accordance with AS 18 issued by the ICAI and the RBI guidelines, details relating to Related Party transactions are disclosed hereunder:

4.7.2 All the other related parties are State Controlled enterprises as defined in AS 18 issued by the Institute of Chartered Accountants of India as such transactions with them are not required to be disclosed.

4.8 LEASES (AS 19)

i) 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.

ii) No financial lease has been executed after April 1, 2001.

4.10 ACCOUNTING FOR TAXES ON INCOME (AS - 22)

In compliance with AS 22 "Accounting for taxes on income" issued by the Institute of Chartered Accountants of India, the Bank has recognised Deferred Tax Assets and Liabilities on the basis of timing difference by adoption of Profit and Loss Approach . Deferred Tax Asset (net of liabilities) of RS.203.54 Crores (Previous Year : RS.154.33 Crores) has been recognised as at March 31, 2015.

4.11 INTANGIBLE ASSETS AS - 26

There are no intangible asset other than application and operating software, which are depreciated as per Accounting Policy of the Bank (i.e., Application Software at 100% and Operating Software at 33.33%).

4.12 IMPAIRMENT OF ASSETS AS - 28

There are no impairments identified by the bank in any of its assets.

4.13 continGent liaBilitieS and continGent aSSetS aS - 29

(b) continGent liaBilitieS

As on 31.03.2014 Particulars As on 31.03.2015

1. Claims not acknowledged as debt

0.01 a) Counter suits filed by the borrowers 0 against whom the Bank has initiated legal action

1.26 b) Cases filed in Consumer / Civil Courts 1.62 for deficiency in services

307.28 c) Any other claims against the Bank not 592.29 acknowledged as debts

2666.99 2. Guarantees issued on behalf of 3036.92 constituents

4170.99 3. Acceptance, endorsements & other 5083.73 obligations*

20733.82 4. Other items for which the Bank is 31335.9 contingently liable

27880.35 Total 40050.46

* Includes Letters of Comfort amounting to ` 1670.52 Crore (Previous Year- Rs. 874.80 Crores) (details furnished in para 5.5 below)

Demands (comprising of short deduction, late payment, late deduction, interest, penalty etc) in respect of tax deducted/ deductible as reported by TRACES (portal of IT Dept) is not provided for as the bank is in the process of rectification of the same and the amount is not ascertainable.

5. ADDITIONAL DISCLOSURES

5.1 PROVISIONS AND CONTINGENCIES

5.1.1 In terms of the Reserve Bank of India guidelines, the following additional disclosures have been made.

5.2 DRAW DOWN FROM RESERVES:

Current year - NIL (Previous year Rs.96.81 crore has been debited to Revenue Reserve and credited to Deferred Tax Liability in terms of RBI Circular No. DBOD No.BPBC. 77/2014018/2013-14 dated 20.12.2013 on account of Reserve under section 36 (1) (viii) of the IT Act 1961)

5.3 DISCLOSURE OF LETTERS OF COMFORT (LOCs) ISSUED BY THE BANK:

The position of Letters of Comfort issued by the Bank during the year and outstanding Letters of Comfort as at the end of the year is given hereunder:

Out of the above, Letters of Comfort issued in respect of financing arrangements from Overseas Banks for availment of Trade Credits (Buyers Credit) and their Currency wise outstanding, is as under:

5.4 PROVISION COVERAGE RATIO:

The Provision to Gross NPA of the Bank as on 31st March 2015 is 69.34 % (Previous Year - 59.47%)

5.5 BANCASSURANCE BUSINESS :

During the Financial Year 2014-15, the Bank has earned a sum of Rs 11.08 Crores (Previous Year Rs 9.18 Crores) as fees and remuneration from Bancassurance Business. The details of the fees / remuneration earned are as under:

1. Income from SBI Life Business Rs 8.90 Crs (Previous Year Rs 7.54 Crores)

2. Income from General Insurance Business Rs 1.74 Crs (Previous Year Rs 1.06 Crores)

3. Others (SBI Cards, Mutual Funds) Rs 0.45 Crs (Previous Year Rs 0.58 Crores)

5.6. Unamortised Pension and Gratuity Liabilities

During the year 2010-11, the Bank reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of the said option by 2947 employees, the Bank incurred a liability of RS.58.49 crores in respect of the 2616 continuing employees. Further, during the year 2010-11, the limit of gratuity payable to the employees of the Bank was also enhanced pursuant to the amendment to the Payment of Gratuity Act, 1972, which resulted in increase in Gratuity liability of the Bank by RS.74.69 crores.

In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of ''133.18 crores was required to be charged to the Profit and Loss Account for the year 2010-11. However, the Reserve Bank of India has issued a circular No.DBOD. BPBC.80/21.04018/2010-11 on reopening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits -Prudential Regulatory Treatment, dated 9th February 2011. In accordance with the guidelines of the Reserve Bank of India, the Bank opted to amortise an amount of RS.133.18 crores over the period of five years. Accordingly, RS.26.64 crores (representing one-fifth of RS.133.18 crores) has been amortised and charged to the Profit & Loss Account for the year and the balance un-amortised amount carried forward is NIL.

Had such circular not been issued by Reserve Bank of India, the profits of the Bank would have been higher by RS.26.64 crores.

5.7 Disclosures on Remuneration -NOT APPLICABLE

5.8 Disclosures relating to Securitisation

The Notes to Accounts of the originating banks should indicate the outstanding amount of securitised assets as per books of the SPVs sponsored by the bank and total amount of exposures retained by the bank as on the date of balance sheet to comply with the Minimum Retention Requirements (MRR). These figures should be based on the information duly certified by the SPV''s auditors obtained by the originating bank from the SPV. These disclosures should be made in the format given below.

5.9 Unhedged Foreign Currency Exposure (UFCE)

In terms of RBI circulars No. RBI/2013-14/448 DBOD.No.BP.BC.85 /21.06.200/ 2013-14dtd.15.01.2014 and Circular No.RBI /2013-14, DBOD. No.BP.BC.116/21.06.200/201 3-14 dated 3.06.2014 on requirements of incremental capital and provisions for Banks on account of Unhedged Foreign Currency Exposure of borrowers, we have implemented the provisions with effect from 1.04.2014.The total provisions comes to Rs.6.99 crore and the same has been provided for as on 31.03.2015.

6. Qualitative disclosure around LCR:

Reserve Bank of India had issued LCR reporting and monitoring guidelines on June 9, 2014 vide circular No.DBOD. BPB.C.No.120/ 21.04.098/2013-14,giving new guidelines on LCR, Risk Monitoring Tools and LCR Disclosure standards effective from Jan 1, 2015. These guidelines are issued under Basel-III framework.RBI wants ''Banks to maintain an adequate level of unencumbered high quality liquid assets (HQLAs) that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under severe liquidity stress scenario.

High Quality Liquid Assets (HQLAs):

The HQLAs are categorized into Level

1 and Level 2 assets and sub-divided into Level 2A and Level 2B assets on the basis of their price-volatility as under.

Level 1 assets of banks would comprise of the following and these assets can be included in the stock of liquid assets without any limit as also without applying any haircut:

i. Cash including cash reserves in excess of required CRR.

ii. Government securities in excess of the minimum SLR requirement.

iii.Within the mandatory SLR requirement, Government securities to the extent allowed by RBI, under Marginal Standing Facility (MSF) at 2% on NDTL and facility to avail another 5% of NDTL under FALCR ass per RBI 4th bi-monthly Monetary Policy statement 2014-15 dated 30.09.2014.

iv. Marketable securities issued or guaranteed by foreign sovereigns satisfying all the conditions referred in RBI circular.

Level 2 assets (comprising Level 2A assets and Level 2B assets) can be included in the stock of liquid assets, subject to the requirement that they comprise no more than 40% of the overall stock of HQLAs after haircuts have been applied. The portfolio of Level 2 assets held by the bank should be well diversified in terms of type of assets, type of issuers and specific counterparty or issuer.

Total net cash outflows :

The total net cash outflows is defined as the total expected cash outflows minus total expected cash inflows for the next 30 calendar days.

LCR is the ratio of stock of high quality liquid assets (HQLAs) to Total Net Cash Outflows (TNCO) over next 30 days period expressed in percentage.

7. TAX LIABILITIES:

7.1 The disputed Income tax demands as at 31st March, 2015 amounting to RS.592.01 crores (Previous Year - RS.307.04 crores) out of which RS.412.78 crores (Previous Year - RS.247.54 crores) has been paid / adjusted by the Income Tax Dept against refund orders.

7.2 The Bank has considered the provisions of Section 115JB (MAT) and it is found that MAT is not applicable to the Bank for the current financial year since the TAX Computed under regular provision of Income Tax Act is higher than the Tax Computed under section 115JB.

8 RECONCILIATION:

I. INTER BRANCH:

1. Inter Branch Reconciliation is an ongoing process and is under progress. In terms of RBI guidelines, the Banks are required to close inter-branch reconciliation within six months. The Inter Branch Reconciliation upto 31.03.2015 has been closed after reconciliation of all the debit entries.

2. A sum of Rs.157.15 Lacs was transferred to Profit & Loss Account in 2005-06 being the net credit balance in the Inter Branch Drafts Accounts upto 31st March 1999 pending reconciliation, in terms of RBI letter No.DBS/CO.SMC. No.8809/22.09.001/2005-06 dated 19.12.2005. Out of this, a claim of Rs.3.01 lacs was preferred and debited during the earlier years, leaving a balance of Rs.154.14 lacs as on 31.03.2015.

3. The bank has transferred all outstanding unreconciled credit entries from 01.04.1999 to 31.03.2005 to a blocked account as per RBI guidelines vide letter No.BP/BC/73/21.04.018/98 dated 27.07.1998. The balance in Blocked accounts in respect of both BCG and Drafts as on 31.03.2015 is Rs.9.77 crores.

4. Unclaimed liabilities where amount due has been transferred to DEAF account (other credits - Drafts) as per RBI Circular No.RBI/2013-14/527 dated 21.03.2014.

INTER BANK:

Reconciliation of Accounts under SBI Agency Clearing Scheme and Associate Bank Settlement of Transactions (ABSOT) Scheme is an on-going process and is under progress.

5. Other Fixed assets include assets jointly owned by the Bank, State Bank of India and Other Associate Banks as on 31.03.2015

6. REVALUATION OF FIXED ASSETS

The Premises (Land & Building) of the Bank consisting of Land & Building were revalued on 01-04-2008 on the basis of reports of approved valuers and upward revision in value amounting to RS.607.97 crores was credited to Revaluation Reserve Account. The bank has changed the policy of charging depreciation on revalued amount, over the remaining useful life of the asset. The deprecation corresponding to the extent of revaluation was debited to the Depreciation Reserve and credited to the Revaluation Reserve Account

7. SHARE HOLDING:

7.1 The shareholding of State Bank of India in the Bank''s Paid up Capital as at 31st March 2015 is 90.00% (Previous year 90.00%).

7.2 EMPLOYEE STOCK OPTION: Nil

8. Advances shown in the Balance Sheet are net of provision for diminution in fair value, as such advances shown are less to the extent of RS.262.78 crore (PY- RS. 202.82 crore) (Refer Accounting Policy No3.6 Schedule17).

9. The management and Officer''s Association/Workmen Union have entered into an agreement on wages on 23rd February 2015. As a part of agreement the wage revision shall be effective from 1st November 2012 and the wage increase shall be @ 15% of the current average salary & allowances per annum. Bank has provided Rs. 105.28 Crores towards the same.

10. The figures of the previous years have been regrouped/ re-arranged, wherever considered necessary.


Mar 31, 2013

1.1. Sale and Transfer to/from HTM Category

1.2.1 The Bank has not undertaken any sale of investments held under Held To Maturity category which needs disclosure in terms of RBI circular No.DBOP.BP.BC 34/21.04.141/2010-11 dated 6th April 2010 wherein the Bank has to disclose the excess of book value over the market value for which provision is not made, excluding onetime transfer of security to/from HTM and pre- announced OMO auctions.

1.2.2 As per RBI guidelines, an amount of Rs.19.86 crores (Previous year Nil) being the balance amount of Profit on Sale of securities [net of applicable taxes and Statutory Reserve] in "Held to Maturity'' category has been transferred to Capital Reserve.

1.2.3 Income on Investments in Schedule 13 of Interest earned para II is net of amortization of premium on HTM Investments Rs.47.40 Crores (Previous Year Rs.56.22 Crores).

2.1 Disclosure on risk exposure in derivatives

2.1.1 Qualitative Disclosures :

Forward Contracts are the only derivatives held in the books of the Bank. The Bank enters into forward contracts with the customers and covers the resultant position in the inter bank market. The Bank also trades in Inter Bank forward contracts on its own with a view to derive profits. The Bank does not have any unhedged foreign exchange exposure other than the open overnight position.

The Bank has put in place Board approved policy for monitoring various risks associated with the above mentioned transactions. The risks are managed by prescribing various limits and ensuring that the exposures are within the limits. Such limits are prescribed in the following areas.

a) Overnight Exposure Limits

b) Daylight exposure Limits

c) Aggregate and currency-wise gap Limits

d) Stop Loss Limits

e) VaR Limits

f) Limit on Proprietary Trading

g) Limit on Counter Party Bank

In terms of Board approved policy, the limits are monitored by Mid Office and discretionary power is vested with functionaries at various levels to ratify/ approve the breaches, if any.

2.2.1.1 Provision on Restructured Loan Assets

During the current year ended 31st March'' 2013, provision for diminution in fair value of Restructured Accounts irrespective of amounts have been individually calculated at all the branches and provision thereof made at Head Office.

2.3.5 Unsecured Advances against collaterals like Rights, licences, authorizations etc charged to the bank in respect of projects (including infrastructure projects) financed by the Bank.

3. Disclosure requirements as per Accounting Standards

The Bank has generally complied with all the applicable Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) read with the relevant guidelines of Reserve Bank of India. The following disclosures (not made elsewhere in the financial statements including Significant Accounting Poiicies and Notes on Accounts) are made hereunder in accordance with the provisions of the applicable mandatory Accounting Standards, issued by the Institute of Chartered Accountants of India.

4.1 Cash Flow Statements (AS 3 Revised)

In terms of Para 45 of the Standard, the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by it, are Rs. Nil. (excluding balances required to be maintained for the purpose of Cash Reserve Ratio).

4.2 Net Profit or Loss for the period, prior period items and changes in Accounting Policies (AS - 5)

4.2.1 In terms of Accounting Standard 5 issued by the Institute of Chartered Accountants of India read with RBI guidelines, prior period items are Other Prior Period Items Expenditure - NIL Income - NIL.

4.2.2 The Bank during the year has changed its method of depreciation of Fixed Assets except revalued assets and computers, from Straight Line Method to Written Down Value Method w.e.f. 01.04.2012, and surplus amounting to Rs.47.33 crores, arising from retrospective computation is accounted and disclosed under Other Incomes. This change in method of depreciation and consequently increase in tax expense (deferred tax) of Rs.43.56 crores has resulted in increase in Net Profit for the year by Rs.3.77 crores. Further, due to the change in method of depreciation, charge on account of depreciation for the year is lower by Rs.12.28 crores and correspondingly increase in profit (Net of Tax) for the year to the extent of Rs.8.30 crores.

4.3 Revenue Recognition (AS 9)

The revenue has been recognized in terms of AS 9 on Revenue recognition, the guidelines issued by Reserve Bank of India and the Accounting Policy of the Bank.

4.4 Employees'' Benefits - Accounting Standards 15 (Revised)

4.4.1 In terms of AS 15 (revised),

Bank has made provision for the following Employee benefits for the year 2012-13 as per Actuarial valuation.

4.5 Segmental Reporting - (AS-17):

The following segments have been identified:

I. Primary Segment (Business Segment):

Treasury Operations CorporateA/Vholesale Banking Retail Banking

II- The Geographic segment consists of only the Domestic segment as the Bank does not have any foreign branches.

4.5.1 The Bank has got two main business segments namely Treasury Operations and Banking Operations. Banking Operations are further segmented to Corporate/Wholesale Banking and Retail Banking and there is no ''Other Banking Operations''

4.5.2 PRICING OF INTER-SEGMENTAL TRANSFERS:

Corporate/Wholesale banking and Retail Banking Operations Segment are the primary resource mobilising units. The Treasury segment is a recipient of funds from these operatons apart from resource mobilized by treasury segment from REPO, CBLO, Call Money, IBTM and Export credit refinance. The cost of funds mobilized by treasury from corporate/ wholesale banking and retail banking is computed at the cost of deposits of Corporate/Wholesale Banking and Retail banking. Pricing of Inter Segmental transfer in Treasury is reduced from the operating profit of Treasury Segment and added to the Operating Profit of Corporate/Wholesale banking in the ratio of deposits allocated to these segments.

4.5.3 REVENUE :

All income relating to Treasury Operations are considered under Treasury operations segment. All interest as furnished by ITS Department and as certified by the Management for all borrowal accounts with exposures above Rs.5crores are classified as Corporate/Wholesale Banking segment. The balance interest is treated as relating to retail banking segment. The other interest income/other income is allocated under Corporate/Wholesale and Retail Banking segments in the ratio of total income of these segments (excluding other interest income/other income and interest segment revenue).

4.5.4 ALLOCATION OF EXPENSES:

Expenses incurred at Corporate Centre establishment directly attributable to Treasury Operations are allocated accordingly. As regards Corporate/ Wholesale and retail banking segment interest paid on deposits is segregated to these segments in the ratio of deposits to these segments (deposits are allocated on the basis of outstanding advances pertaining to these segments). Employees'' expenses are allocated to the Treasury segment in proportion to the number of Employees of that segment to the total employees of the Bank. Other interest paid, provisions relating to employees and other operative expenditure for Corporate/Wholesale and Retail Banking segment are allocated based on the income earned by these segments(excluding inter segmental revenue). Interest paid on Tier I/Tier 11/ Subordinated bonds are classified as ''Unallocated''.

4.5.5 SEGMENT ASSETS:

All assets which are directly attributable to treasury operations are considered for Treasury Operations Segment. All outstandings in advance accounts for borrowers with exposures above Rs. 5 crores as furnished by ITS Department and as certified by the Management is considered as assets pertaining to Corporate/Wholesale Banking segment. Other outstandings in advances segments is shown as pertaining to Retail Banking Segment. All other assets are segregated and added to the segment advances pertaining to Corporate/ Wholesale and Retail Banking segment in the ratio of outstanding balances of advances in these segments.

4.5.6 SEGMENT LIABILITIES:

All liabilities which are directly attributable to Treasury Operations segment are allocated accordingly. Other deposits are allocated and segregated for Corporate/ Wholesale segment in the ratio of outstanding balances of advances for the respective segments. With regard to other liabilities, provisions and contingencies, the allocation to Corporate/Wholesale and Retail Banking segments are made on the basis of the outstanding balances of advances under these segments. Tier I/Tier 11/ Subordinated bonds are classified as ''Unallocated''.

(iii) The credit exposure to the above key managerial personnel and their relatives during the year is NIL.

4.6.2 All the other related parties are State Controlled enterprises as defined in AS 18 issued by the Institute of Chartered Accountants of India as such Transactions with them are not required to be disclosed.

4.7 Leases (AS 19)

(i) 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.

(ii) No financial lease has been executed after April 1, 2001.

4.9 Accounting for Taxes on income (AS 22)

In compliance with AS 22 "Accounting for taxes on income" issued by the Institute of Chartered Accountants of India, the Bank has recognised deferred tax assets and liabilities on the basis of timing difference by adoption of Profit and Loss Approach. Deferred Tax Asset (net of liabilities) of Rs.115.75 Crores (Previous Year - Rs. 129.31 Crores) has been recognised as at March 31, 2013, the major components of which are as under:

4.10 : INTANGIBLE ASSETS AS -26

There are no intangible asset other than application and operating software, which are depreciated as per Accounting Policy of the Bank (i.e., Application Software at 100% and Operating Software at 33.33%).

4.11 IMPAIRMENT OF ASSETS AS-28

There is no impairment in any of the assets of the Bank.

5.1. PROVISION COVERAGE RATIO:

The Provision to Gross NPA of the Bank as on 31st March 2013 is 60.10% (Previous Year 65.22%)

5.2. BANCASSURANCE BUSINESS:

During the financial year 2012 -13, the Bank has earned a sum of Rs. 8.95 Crores (Previous Year Rs. 8.77 Crores as fees and remuneration from Bancassurance business. The details of the fees / remuneration earned are as under:

1. Income from SBI life business Rs. 6.90 Crores (Previous Year Rs. 6.48 Crores)

2. Income from General Insurance business Rs. 0.86 Crores (Previous Year Rs. 1.67 Crores)

3. Others (SBI Cards, SBI Mutual Funds) Rs. 1.19 crores (Previous Year Rs. 0.62 crores)

5.3. Unamortised Pension and Gratuity Liabilities

During the year 2010-11, the Bank reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of the said option by 2947 employees, the Bank incurred a liability of Rs.58.49 crores in respect of the 2616 continuing employees. Further, during the year 2010-11, the limit of gratuity payable to the employees of the Banks was also enhanced pursuant to the amendment to the Payment of Gratuity Act, 1972, which resulted in increase in Gratuity liability of the Bank by Rs.74.69 crores.

In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs.133.18 crores was required to be charged to the Profit and Loss Account for the year 2010-11. However, the Reserve Bank of India has issued a circular No.DBOD.BP.BC.80/21.04018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment, dated 9th February 2011. In accordance with the guidelines of the Reserve Bank of India, the Bank opted to amortise an amount of Rs.133.18 crores over the period of five years. Accordingly, Rs.26.64 crores (representing one-fifth of Rs.133.18 crores) has been amortised and charged to the Profit & Loss Account for the year and the balance unamortised amount carried forward is Rs.53.27 crores.

Had such circular not been issued by Reserve Bank of India, the profits of the Bank would have been higher by Rs.26.64 crores.

6.1 The disputed Income tax demands as at 31st March, 2013 amounting to Rs.296.58 crores ( Previous Year - Rs.238.42 crores) out of which Rs.248.96 crores ( Previous Year - Rs.223.03 crores) has been paid / adjusted by the Income Tax Dept against refund orders. The Bank has received favourable decisions for appeal petitions filed before various Appellate Authorities regarding demands raised disclosed in the Contingent Liability amounting to
6.2 The Bank has considered the provisions of Section 115JB (MAT) and it is found that MAT is not applicable to the Bank for the current financial year since the TAX Computed under regular provision of Income Tax Act is higher than the Tax Computed under section 115JB.The Bank had created MAT Credit amounting to Rs.61.55 crores during the financial year 2010-11 which is eligible for reversal in subsequent financial years. An amount of Rs.27.70 crores has been reversed till date and the residual balance of MAT Credit is Rs.33.85 crores.

7. RECONCILIATION:

I. Inter Branch:

1. Inter Branch Reconciliation is an ongoing process and is under progress. In terms of RBI guidelines, the Banks are required to close inter-branch reconciliation within six months. The Inter Branch Reconciliation up to 31.12.2012 has been closed after reconciliation of all the debit entries.

2. A sum of Rs.157.15 lacs was transferred to Profit & Loss Account in 2005-06 being the net credit balance in the inter branch accounts upto 31st March 1999 pending reconciliation, in terms of RBI letter No. DBS/ CO.SMC.No.8809/22.09.001/2005-06 dated 19.12.2005. Out of this, a claim of Rs.2.98 lacs was preferred and debited during the earlier years, leaving a balance of T154.17 lacs as on 31.03.2012. There was a claim in Inter Branch Drafts A/c for Rs.2500.00 during the year 2012-13, thus reducing the amount of unreconciled entries in Inter Branch account up to 31.03.1999 to 54.14 lacs as on 31.03.2013.

3. The Bank has transferred all outstanding unreconciled credit entries from 01.04.1999 to 31.03.2005 to a blocked account as per RBI guidelines vide letter No BP/.BC/73/21.04.018/98 dated 27.07.1998. The balance in Blocked accounts in respect of both BCG & Drafts as on 31st December, 2012 is Rs.18.87 crores.

4. The Core Inter Branch Account being maintained in CBS is reconciled automatically by the system as per yearly statement of affairs as on 31st March, 2013.

II. Inter-Bank: Reconciliation of Accounts under SBI Agency Clearing Scheme and Associate Bank Settlement of Transactions (ABSOT) Scheme is an on-going process and is under progress.

III Others: The reconciliation of various accounts including National & Local Clearing Account, Branch System Suspense Account, FCNR Account, PCFC Account, Currency Transactions Account, ATM Transactions and IBIT Account is an on going process and is under progress.

IV Impact of the above, if any, on the Profit & Loss Account and Balance Sheet is not material.

8. Other Fixed assets include assets jointly owned by the Bank, State Bank of India and Other Associate Banks as on 31.03.2013

9. REVALUATION OF FIXED ASSETS

The Premises (Land & Building) of the Bank consisting of Land & Building were revalued on 01-04-2008 on the basis of reports of approved valuers and upward revision in value amounting to Rs.607.97 crores was credited to Revaluation Reserve Account. The depreciation for the year on incremental value amounting to Rs.8.04 crores is withdrawn from Revaluation Reserve, as such there is no impact on the profits for the year. The Revaluation Reserve as at 31st March 2013 stands at Rs.567.76 crores (Previous Year Rs.575.81 crores).

10. SHAREHOLDING:

10.1 The shareholding of State Bank of India in the Bank''s Paid up Capital as at 31st March 2013 is 92.33 % (Previous year 92.33%).

10.2 EMPLOYEE STOCK OPTION: Nil

11. Advances shown in the Balance Sheet are net of provision for diminution in fair value, as such advances shown are less to the extent of Rs.194.20 crores (Refer Accounting Policy No3.6 Schedule17).

12. The current Bipartite settlement between IBA & employees/officers union on wage has expired on 31.10.2012. IBA has advised the Bank to make provision towards any wage increase effective from 01.11.2012. Accordingly, the Bank has provided a sum of Rs.31 crores towards wage revision, representing 15% of the current average salary and allowance per annum.

13. Investment includes Equity Shares having book value of Rs.14.89 crores and Compulsory Convertible Debentures(CCD) of Rs.13.50 crores against which allotment is yet to be made. Further the Bank has invested Rs.8.50 crores in Equity shares of Kaveri Grameeena Bank at face value of Rs.10 per share in order to acquire Vishvesharaya Grameeena Bank sponsored by Vijaya Bank and Cnikmagalur-Kodagu Grameena Bank sponsored by Corporation Bank, however the relative Equity Shares from Kaveri Grameena Bank are yet to be issued.

14. With regard to disclosures relating to Micro, Small & Medium Enterprises under the Micro, Small & Medium Enterprises Development Act, 2006, there have been no reported cases of delayed payments or of interest payments due to delay in such payments to Micro, Small & Medium Enterprises.

15. The figures of the previous years have been regrouped/re-arranged, wherever considered necessary.


Mar 31, 2012

1. The Bank operates gratuity and pension schemes which are defined benefit plans.

2. The Bank provides for gratuity to all eligible employees. The benefit is in the form of lump sum payments to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs upon completion of five years of service. The bank makes annual contributions to a fund administered by trustees for the deficit in plan assets based on an independent external actuarial valuation carried out annually.

3. The Bank provides for pension to all eligible employees. The benefit is in the form of monthly payments as per rules and regular payments are made to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs at different stages as per the rules. The pension liability is reckoned based on an independent actuarial valuation carried out annually.

4. The cost of providing defined benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains/ losses are recognized in the statement of Profit and Loss Account.

5.1.1 Defined Contribution Plan

The Bank operates a new pension scheme(NPS) for all officers/ employees joining the bank on or after 1st April, 2010, which is a defined contribution plan, such new joinees not being entitled to become members of the existing Pension Scheme. Pending finalization of the detailed scheme, the employees covered under the scheme contribute 10% of their basic pay plus dearness allowance to the scheme together with a matching contribution from the Bank. These contributions are retained as savings deposits in the Bank and earn interest at the same rate as that is applicable to other savings bank accounts. The Bank recognizes such annual contributions and interest as an expense in the year to which they relate.

5.1.2 0ther Long Term Employee benefits

All eligible employees of the Bank are entitled for leave encashment, sick leave, silver jubilee award, leave travel concession, resettlement expenses. The costs of such long term employee benefits are internally funded by the Bank. The cost of providing other long term benefits is determined using the projected unit credit method with actuarial valuations being carried out at each balance sheet date.

5.2 Consequent on the re-opening of Pension option to employees and enhancement in Gratuity Limit due to amendment in the Payment of Gratuity Act, the Bank has opted to amortize the incremental liability, as per RBI Circular, over a period of five years (subject to a minimum of 1 /5th every year) beginning with the financial year ending 31st March 2011.

6. TAXES ON INCOME

6.1 Income tax expense is the aggregate amount of current tax and deferred tax. Current taxes are determined in accordance with the provisions of tax laws prevailing in India. Deferred tax adjustments comprise of changes in the deferred tax assets or liabilities during the period and Deferred Tax is determined in terms of Accounting Standard-22 issued by ICAI

6.2 Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted prior to the balance sheet date. Deferred tax assets and liabilities are recognised on a prudent basis for future tax consequences of timing differences by adoption of Profit and Loss approach with their respective tax bases. The impact of changes in the deferred tax assets and liabilities is recognized in the profit and loss account.

6.3 Deferred tax assets are recognised at each reporting date, based upon management's judgement as to whether realisation is considered reasonably certain. Deferred tax assets are recognized on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax assets can be realised against future profits.

6.4 No withdrawal is made from the Special Reserve created and maintained under the provisions of section 36(1 ){viii) of the Income Tax Act 1961.

7. EARNING PER SHARE

7.1 The Bank reports basic and diluted earnings per share in accordance with AS 20 -'Earnings per Share' issued by the ICAI. Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding for the year.

7.2 Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at year end.

8. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

8.1 In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets", issued by the ICAI, the Bank recognises 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.

8.2 No provision is recognised for

i. 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

ii. any present obligation that arises from past events but is not recognised because

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

b. a reliable estimate of the amount of obligation cannot be made. Such obligations are recorded as Contingent Liabilities. These are assessed at regular intervals 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.

8.3 Contingent Assets are not recognised in the financial statements.

9. SHARE ISSUE EXPENSES

Share issue expenses are charged to the Share Premium Account.

10. NET PROFIT:

The net profit disclosed in the Profit and ; Loss Account is after:

(i) Provisions as per RBI guidelines for bad and doubtful Advances and Investments.

(ii) Transfer to/from contingency funds.

(iii) Provisions for taxes in accordance with the statutory requirements.

(iv) Other usual and necessary provisions.

1. INVESTMENTS

(i) The Bank's holding of total SLR securities in "Held to Maturity" Category (HTM) is 23.62% (previous year 22.66%) of DTL as on the last Friday of the second preceeding fortnight. The total investment in HTM category is equal to 89.51% (Previous year 86.90%) of its total investments and the excess of "Held to Maturity" category investments over 25% of total investments comprises of SLR securities. The Bank's holdings in Held to Maturity Category of investments are within the overall limits stipulated by RBI.

(ii) As per RBI guidelines, an amount of NIL (Previous year Rs4.47 Crores) being the balance amount of Profit on Sale of securities [net of applicable taxes and Statutory Reserve] in "Held to Maturity" category has been transferred to Capital Reserve.

2.2 Disclosure on risk exposure in derivatives

2.2.1 Qualitative Disclosures:

Forward Contracts are the only derivatives held in the books of the Bank. The Bank enters into forward contracts with the customers and covers the resultant position in the inter bank market. The Bank also trades in Inter Bank forward contracts on its own with a view to derive profits. The Bank does not have any unhedged foreign exchange exposure other than the open overnight position.

The Bank has put in place Board approved policy for monitoring various risks associated with the above mentioned transactions. The risks are managed by prescribing various limits and ensuring that the exposures are within the limits. Such limits are prescribed in the following areas.

a) Overnight Exposure Limits

b) Daylight exposure Limits

c) Aggregate and currency-wise gap Limits

d) Stop Loss Limits

e) VAR Limits

f) Limit on Proprietary Trading

g) Limit on Counter Party Bank

In terms of Board approved policy, the limits are monitored by Mid Office and discretionary power is vested with functionaries at various levels to ratify/ approve the breaches, if any.

2.2.1.1 Provision on Restructured Loan Assets

During the current year ended 31st March' 2012, provision for diminution in fair value of Restructured Accounts irrespective of amounts have been individually calculated at all the branches and provision thereof made at Head Office.

Prudential norm at 15% of the capital funds as on 31.03.2011 for a Single Borrower is Rs 701.92 Crores and 40% for Group borrowers is Rs 1871.79 crores.

Prudential norm of additional 5% (Rs 233.97crores) of the capital funds as on 31.03.2011 for Single borrower provided the additional credit exposure is on account of extension of credit to Infrastructure Projects.

Prudential norm of additional 10% (Rs 467.95crores) of the capital funds as on 31.03.2011 for Oil Companies who have been issued Oil bonds (which do not have SLR Status) by the Govt of India.

Prudential Norms for single NBFC is 10% of the bank's capital funds as on 31.03.2011 - Rs 467.95 crores.

Prudential Norms for a single NBFC - AFC (Asset Financing Company) is 15% of the bank's capital funds as on 31.03.2011 Rs 701.92 crores.

Prudential norms on account of funds lent by NBFC - AFC to infrastructure sector are 20% of the Bank's capital funds as on 31.03.2011 - Rs 935.90 crores.

The above statement is exclusive of Food Credit, which is outside the purview of prudential norms.

2.2.2 The disputed Income tax demands as at 31st March, 2012 amount to Rs 238.42 crores (Previous Year - Rs 218.54 crores) out of which Rs223.03 crores ( Previous Year - Rs 218.33 crores) has been paid / adjusted by the Income Tax Dept against refund orders. Considering the various judicial pronouncements on similar issue in favour of the Bank and the appeals filed by the Bank for earlier Assessment Years and pending before various Appellate authorities, no provision is considered necessary.

2.2.3 The Bank during the preceding year (2010-11) determined tax liability amounting to Rs 232.68 crores as per the provisions of Section 115 JB (MAT), and after considering the eligible MAT credit of Rs 61.55 crores, Rs 171.13 crores was charged to Profit & Loss Account.

However, in view of the proposed amendment, as per the Finance Bill 2012, in section 115 JB of the Income Tax Act 1961 from the assessment year 2013-14, to take profit and loss account in accordance with the provisions of the Regulatory Act as a basis for computing the book profit, the management is of the view that provisions of Section 115 JB are not applicable to the Bank for the current financial year, as such MAT as per the provisions of Section 115 JB has not been computed and considered in the financial statements.

2.4 Penalties imposed by the Reserve Bank of India during the year 2011-12 -NIL- 3.10 RECONCILIATION:

I. Inter Branch:

1. Inter Branch Reconciliation is an ongoing process and is under progress.

In terms of RBI guidelines, the Banks are required to close inter-branch reconciliation within six months. The Inter Branch Reconciliation up to 30.09.2011 has been closed after reconciliation of all the debit entries.

2. A sum of Rs 157.15 lacs was transferred to Profit & Loss Account in 2005 - 06 being the net credit balance in the inter branch accounts upto 31st March 1999 pending reconciliation, in terms of RBI letter No. DBS/CO.SMC.No.8809/ 22.09.001/2005-06 dated 19.12.2005.

Out of this, a claim of Rs 2.36 lacs was preferred and debited during the earlier years, leaving a balance of Rs 154.79 lacs as on 31.03.2011. There was a claim in Inter Branch Drafts Ale for Rs 0.62 lacs during the year 2011-12, thus reducing the amount of unreconciled entries in Inter Branch account up to 31.03.1999 to Rs 154.17 lacs as on 31.03.2012.

3. The Bank has transferred all outstanding unreconciled credit entries from 01.04.1999 to 31.03.2005 to a blocked account as per RBI guidelines vide letter No BP.BC/73/21.04.018/98 dated 27.07.1998. The balance in Blocked accounts in respect of both BCG & Drafts as on 31st March, 2012 is Rs 18.87 crores.

4. The Core Inter Branch Account being maintained in CBS is reconciled automatically by the system as per yearly statement of affairs as on 31st March, 2012.

II. Inter-Bank: Reconciliation of Accounts under SBI Agency Clearing Scheme and Associate Bank Settlement of Transactions (ABSOT) Scheme is an on-going process and is under progress.

III Others: The reconciliation of various other accounts including National & Local Clearing Account, Branch System Suspense Account, FCNR Account, PCFC Account, Currency transactions accounts, ATM transactions and IBIT Account is an on going process and is under progress.

IV Impact of the above, if any, on the Profit & Loss Account and Balance Sheet, in the opinion of the management, is not material.

3.1 Income on Investments in Schedule 13 of Interest earned para II is net of amortization of premium on HTM Investments Rs 56.22 Crores (Previous Year Rs 54.92Crores).

3.2. REVALUATION OF FIXED ASSETS

The premises (Land & Building) of the Bank consisting of Land & Building were revalued on 01-04-2008 on the basis of reports of approved valuers and upward revision in value amounting to Rs 607.97 crores was credited to Revaluation Reserve Account. The depreciation for the year on incremental amount amounting to Rs 8.04 crores is withdrawn from Revaluation Reserve. There is thus, no impact on the profits for the year. The Revaluation Reserve as at 31st March 2012 stands at Rs 575.81 crores (Previous Year Rs 583.85 crores)

4. Disclosure requirements as per Accounting Standards

The Bank has generally complied with all the applicable Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI) read with the relevant guidelines of Reserve Bank of India. The following disclosures (not made elsewhere in the financial statements including Significant Accounting Policies and Notes on Accounts) are made hereunder in accordance with the provisions of the applicable mandatory Accounting Standards, issued by the Institute of Chartered Accountants of India.

4.1 Cash Flow Statements (AS 3 Revised)

In terms of Para 45 of the Standard, the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by it, are Rs Nil. (excluding balances required to be maintained for the purpose of Cash Reserve Ratio).

4.2 Net Profit or Loss for the period, prior period items and changes in Accounting Policies (AS - 5)

In terms of Accounting Standard 5 issued by the Institute of Chartered Accountants of India read with RBI guidelines, prior period items are

(i) Other Prior Period Items - Expenditure - Rs 0.01 Crores. Income - NIL.

4.3 Revenue Recognition (AS 9)

The revenue has been recognized in terms of AS 9 on Revenue recognition, the guidelines issued by Reserve Bank of India and the Accounting Policy of the Bank.

4.4 Employees' Benefits - Accounting Standards 15 (Revised)

4.4.1 During the year 2010-11, the Bank reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of the said option by 2947 employees, the Bank incurred a liability of Rs 58.49 crores in respect of the 2616 continuing employees. Further, during the year 2010-11, the limit of gratuity payable to the employees of the Banks was also enhanced pursuant to the amendment to the Payment of Gratuity Act, 1972, which resulted in increase in Gratuity liability of the Bank by Rs 74.69 crores.

In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs 133.18 crores was required to be charged to the Profit and Loss Account for the year 2010-11. However, the Reserve Bank of India has issued a circular No.DBOD.BP.BC.80/21.04, 018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits -Prudential Regulatory Treatment, dated 9th February 2011. In accordance with the guidelines of the Reserve Bank of India, the Bank opted to amortise an amount of Rs 133.18 crores over the period of five years. Accordingly, Rs 26.64 crores (representing one-fifth of Rs 133.18 crores) has been amortised and charged to the Profit & Loss Account for the year and the balance unamortised amount carried forward is Rs79.90 crores.

Had such circular not been issued by Reserve Bank of India, the profits of the Bank would have been higher by Rs 26.64 crores.

4.4.2 Contributions made to the Retired Employee Medical Benefit Scheme, being at the sole discretion of the Management, is not recognized by the Management as a Long Term Employee Benefit and therefore no provision has been considered necessary for this liability on actuarial basis.

4.5 Segmental Reporting - (AS-17):

The following segments have been identified:

I. Primary Segment (Business Segment):

Treasury Operations Corporate/Wholesale Banking Retail Banking

II- The Geographic segment consists of only the Domestic segment as the Bank does not have any foreign branches.

1. The Bank has got two main business segments namely Treasury Operations and Banking Operations. Banking Operations are further segmented to Corporate/Wholesale Banking and Retail Banking and there is no 'Other Banking Operations'

2. PRICING OF INTER-SEGMENTAL TRANSFERS:

Corporate/Wholesale banking and Retail Banking Operations Segment are the primary resource mobilising units. The Treasury segment is a recipient of funds from these operatons apart from resource ' mobilized by treasury segment from REPO, CBLO, Call Money, IBTM and Export credit refinance. The cost of funds mobilized by treasury from corporate/ wholesale banking and retail banking is computed at the cost of deposits of Corporate/Wholesale Banking and Retail banking. Pricing of Inter Segmental transfer in Treasury is reduced from the operating profit of Treasury Segment and added to the Operating Profit of Corporate/Wholesale banking in the ratio of deposits allocated to these segments.

3. REVENUE :

All income relating to Treasury Operations are considered under Treasury operations segment. All interest as furnished by ITS Department and as certified by the Management for all borrowal accounts with exposures above Rs5crores are classified as Corporate/Wholesale Banking segment. The balance interest is treated as relating to retail banking segment. The other interest income/other income is allocated under Corporate/Wholesale and Retail Banking segments in the ratio of total income of these segments (excluding other interest income/other income and interest segment revenue).

4. ALLOCATION OF EXPENSES:

Expenses incurred at Corporate Centre establishment directly attributable to Treasury Operations are allocated accordingly. As regards Corporate/ Wholesale and retail banking segment interest paid on deposits is segregated to these segments in the ratio of deposits to these segments (deposits are allocated on the basis of outstanding advances pertaining to these segments). Employees' expenses are allocated to the Treasury segment in proportion to the number of Employees of that segment to the total employees of the Bank. Other interest paid, provisions relating to employees and other operative expenditure for Corporate/Wholesale and Retail Banking segment are allocated based on the income earned by these segments(excluding inter segmental revenue). Interest paid on Tier I/Tier 11/ Subordinated bonds are classified as 'Unallocated'.

5. SEGMENT ASSETS:

All assets which are directly attributable to treasury operations are considered for Treasury Operations Segment. All outstandings in advance accounts for borrowers with exposures above Rs 5 crores as furnished by ITS Department and as certified by the Management is considered as assets pertaining to Corporate/Wholesale Banking segment. Other outstandings in advances segments is shown as pertaining to Retail Banking Segment. All other assets are segregated and added to the segment advances pertaining to Corporate/ Wholesale and Retail Banking segment in the ratio of outstanding balances of advances in these segments.

6. SEGMENT LIABILITIES:

All liabilities which are directly attributable to Treasury Operations segment are allocated accordingly. Other deposits are allocated and segregated for Corporate/ Wholesale segment in the ratio of outstanding balances of advances for the respective segments. With regard to other liabilities, provisions and contingencies, the allocation to Corporate/Wholesale and Retail Banking segments are made on the basis of the outstanding balances of advances under these segments. Tier I/Tier 11/ Subordinated bonds are classified as 'Unallocated'.

4.6 Related party transactions (AS 18)

4.6.1 In accordance with AS 18 issued by the ICAI and the RBI guidelines, details relating to Related Party transactions are disclosed hereunder:

(iii) The credit exposure to the above key managerial personnel and their relatives during the year is NIL.

4.6.2 All the other related parties are State Controlled enterprises as defined in AS 18 issued by the Institute of Chartered Accountants of India as such Transactions with them are not required to be disclosed.

4.7 Leases (AS 19)

(i) 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.

(ii) No financial lease has been executed after April 1, 2001.

4.8 Accounting for Taxes on income (AS 22)

In compliance with AS 22 "Accounting for taxes on income" issued by the Institute of Chartered Accountants of India, the Bank has recognised deferred tax assets and liabilities on the basis of timing difference by adoption of Profit and Loss Approach. Deferred Tax Asset (net of liabilities) of Rs 129.31 Crores (Previous Year - Rs 15.79 Crores) has been recognised as at March 31, 2012, the major components of which are as under:

4.9 : INTANGIBLE ASSETS AS-26

There are no intangible asset other than application and operating software, which are depreciated as per Accounting Policy of the Bank (i.e., Application Software at 100% and Operating Software at 33.33%).

4.10 IMPAIRMENT OF ASSETS AS-28

(I) During the current year, the Bank's policy on Impairment of Fixed assets is put in place for the first time. Total amount of fixed assets got impaired during the year is Rs 27,32,566 against which the claim settled during the year is Rs 2,16,964. Rest of the claim filed with the insurance company is being pursued for early settlement. All these assets have been restored to normalcy before the year end. Total expenditure incurred on restoration of impaired assets to normal usable condition has been charged to Expenditure Account. There are no impaired fixed assets as at 31.3.2012. (Previous year NIL).

(ii) In the opinion of the Management, there is no impairment in any of the other assets of the Bank.

* Provision for depreciation, impairment of assets and doubtful debts are adjusted to carrying amount of assets and these have not been included above in terms of para 7 of the Accounting Standard(AS 29). Provision against standard assets has already been disclosed in para 3.4.5 above.

b) CONTINGENT LIABILITIES

(Rs in Crores)

2010-11 Particulars 2011-12

Claims not acknowledged as debt :

Counter Suits filed by the Borrowers against whom Bank has initiated legal 0.01 action 0.01

Cases filed in Consumer/Civil Courts 1.30 for deficiency in services 1.30



221.10 Any other claims against the Bank not acknowledged as debts 238.78

1816.72 Guarantees issued on behalf of constituents 2131.18

Acceptances, endorsements and other obligations* 4309.86

11294.63 Other items, for which the bank is contingently liable 11288.68

16966.51 Total 17969.81



Includes Letters of Comfort amounting to Rs 853.47 Crores (Previous Year Rs 557.27 Crores) (detail furnished in para 8 below)

Note : The above provision has been deducted from 'Loans and Advances' as per RBI guidelines.

8. Disclosure of Letters of Comforts (LOCs) issued by the Bank The position of Letters of Comfort issued by the bank during the year and outstanding Letters of Comfort as at the end of the year is given hereunder: Out of the above, Letters of Comfort issued in respect of financing arrangements from overseas Banks for availment of Trade Credits (Buyers Credit) and their Currency wise outstanding, is as under:

9. PROVISION COVERAGE RATIO:

The Provision to Gross NPA of the Bank as on 31st March 2012 is 65.22% (Previous Year - 67.60%)

10. SHARE HOLDING:

10.1 The shareholding of State Bank of India in the Bank's Paid up Capital as at 31st March 2012 is 92.33 % (Previous year 92.33%).

10.2 EMPLOYEE STOCK OPTION: Nil

11. PROVISIONS AND CONTINGENCIES

11.1 In terms of the Reserve Bank of India guidelines, the following additional disclosures have been made and the data as computed by the management are relied upon by the auditors:

Notes: Provision for income tax for the year is arrived at after consideration of past assessments, decisions of the appellate authorities and advice of counsels. In the opinion of the management, no provision is required in respect of the earlier years.

12. The Bank during the year has changed the following Accounting Policies, in order to align the same with the Accounting Policies of State Bank of India :

12.1 Accounting of Zero Coupon securities on constant yield method instead of straight line method resulting in decrease in profit for the year of the Bank to the extent of Rs 34.87 lakhs (refer Accounting Policy no.1.4 Schedule 17)

12.2 Accounting of dividend on investment in shares on accrual basis where the right to receive is established instead of on receipt basis, resulting increase in profit for the year of the Bank to the extent of Rs 12.38 lakhs, (refer Accounting Policy no.1.5 Schedule 17),

12.3 Advances shown in the Balance Sheet are net of provision for diminution in fair value, as such advances shown are less to the extent of Rs 83.34 crores (Refer Accounting Policy No 3.6 Schedule 17).

12.4 The Bank has not undertaken any sale of investments held under Held To Maturity category which needs disclosure in terms of RBI circular No.DBOP.BP.BC 34/21.04.141/2010-11 dated 6th April 2010 wherein the Bank has to disclose the excess of book value over the market value for which provision is not made, excluding onetime transfer of security to/from HTM and pre- announced OMO auctions.

13. Reserve Bank of India vide their letter no.DBOD.No.BC.87/21.04.048/ 2010-11 dated 21.04.2011 advised that Banks have to maintain a Provision Coverage Ratio (PCR) of 70% latest by 30th September 2011 with reference to Gross NPA Position as on 30.09.2010. The Bank during the year provided Rs 65 crores by way of Counter Cyclical Provisioning Buffer to cover the gap between the specific loan loss provisions, other provisions like Floating Provision etc., and the PCR.

14. During the year, the Bank has written back provision of Deferred Tax Liability to the extent of Rs 60.04 crores as the Bank has decided not to withdraw any amount created and maintained as a Special Reserve under the provisions of Section 36 (1) (viii) of Income Tax Act. This has resulted in increase in profit of the Bank for the year to that extent.

15. The figures of the previous years have been regrouped/re-arranged, wherever considered necessary.


Mar 31, 2011

1. INVESTMENTS

(i) The Banks holding of total SLR securities in "Held to Maturity" Category (HTM) is 22.66% (previous year 22.56%) of DTL as on the last Friday of the second preceeding fortnight. The total investment in HTM category is equal to 86.90% (Previous year 86.56%) of its total investments and the excess of "Held to Maturity" category investments over 25% of total investments comprises of SLR securities. The Banks holdings in Held to Maturity Category of investments are within the overall limits stipulated by RBI.

(ii) As per RBI guidelines, an amount of Rs.4.47 Crores (Previous year Rs. 13.11 Crores) being the balance amount of Profit on Sale of securities [net of applicable taxes and Statutory Reserve] in "Held to Maturity" category has been transferred to Capital Reserve.

2.0 Disclosure on risk exposure in derivatives

2.1.1 Qualitative Disclosures:

Forward Contracts are the only derivatives held in the books of the Bank. The Bank enters into forward contracts with the customers and covers the resultant position in the inter bank market. The Bank also trades in Inter Bank forward contracts on its own with a view to derive profits. The Bank does not have any unhedged foreign exchange exposure other than the open overnight position.

The Bank has put in place Board approved policy for monitoring various risks associated with the above mentioned transactions. The risks are managed by prescribing various limits and ensuring that the exposures are within the limits. Such limits are prescribed in the following areas.

a) Overnight Exposure Limits

b) Daylight exposure Limits

c) Aggregate and currency-wise gap Limits

d) Stop Loss Limits

e) VaR Limits

f) Limit on Proprietary Trading

g) Limit on Counter Party Bank

In terms of Board approved policy, the limits are monitored by Mid Office and discretionary power is vested with functionaries at various levels to ratify/ approve the breaches, if any.

3.4.2.1 Provision on Small Restructured Loan Assets

Considering the difficulties in computing the diminution in fair value of Restructured Accounts below Rs.1 Crore individually, the Bank, in terms of RBI circular no.DBOD.No. BP.BC.No. 37/ 21.04.132/2008-09 dated the 271" August, 2008, had opted to provide 5% of these advances, as provision for diminution in fair value of receivables, in all branches, other than top 20 branches audited by Statutory Central Auditors till the year ended 31st March2010. During the current year ended 31s1 March2011, provision for diminution in fair value of Restructured Accounts irrespective of amounts have been individually calculated at all the branches.

Prudential norm at 15% of the capital funds as on 31.03.2010 for a Single Borrower is Rs. 546.54crores and 40% for Group borrowers is Rs. 1457.45crores.

Prudential norm of additional 5% (Rs.182.18crores) of the capital funds as on 31.03.2010 for Single borrower provided the additional credit exposure is on account of extension of credit to Infrastructure Projects.

Prudential norm of additional 10% (Rs. 364.36crores) of the capital funds as on 31.03.2010 for Group borrowers provided the additional credit exposure is on account of extension of credit to Infrastructure Projects.

Prudential norm of additional 10% (Rs. 364.36crores) of the capital funds as on 31.03.2010 for Oil Companies who have been issued Oil bonds (which do not have SLR Status) by the Govt of India.

Prudential Norms for single NBFC is 10% of the banks capital funds as on 31.03.2010 - Rs.364.36crores.

Prudential Norms for a single NBFC - AFC (Asset Financing Company) is 15% of the banks capital funds as on 31.03.2010 - Rs.546.54crores.

Prudential norms on account of funds lent by NBFC - AFC to infrastructure sector are 20% of the Banks capital funds as on 31.03.2010 - Rs.728.72crores.

The above statement is exclusive of Food Credit, which is outside the purview of prudential norms.

3.8.2 The disputed Income tax demands as at 31st March, 2011 amount to Rs. 218.33 crores (Previous Year - Rs. 182.12crores) out of which Rs. 218.33crores (Previous Year - Rs. 182.12crores) has been paid / adjusted by the Income Tax Dept against refund orders. Considering the various judicial pronouncements on similar issue in favour of the Bank and the appeals filed by the Bank for earlier Assessment Years and pending before various Appellate authorities, no provision is considered necessary.

3.8.3 The Tax liability on- Book Profits under the provisions of Section 115 JB of the Income Tax Act, 1961 amounts to Rs. 232.68 Crores. The Bank has recognised eligible MAT credit as an asset in the current year amounting to Rs. 61.55crores available for future set off under section 115JAA of Income Tax Act and accordingly Rs 171.13 crores has been charged to Profit & Loss account.

3.9 Penalties imposed by the Reserve Bank of India during the year 2010-11

- NIL-

3.10 RECONCILIATION: I. Inter Branch:

1. Inter Branch Reconciliation is an ongoing process and is under progress. In terms of RBI guidelines, the Banks are required to close inter-branch reconciliation within six months. The Inter Branch Reconciliation upto 31.12.2010 has been closed after reconciliation of all the debit entries.

2. A sum of Rs. 157.15 lacs was transferred to Profit & Loss Account in 2005 - 06 being the net credit balance in the inter branch accounts upto 31st March 1999 pending reconciliation, in terms of RBI letter No. DBS/ CO.SMC.No.8809/22.09.001/2005-06 dated 19.12.2005. Out of this,a claim of Rs. 2.36 lacs was preferred and debited during the earlier years There was no claim during the year 2010-11 and the amount of unreconciled entries of Inter Branch Accounts stands at Rs. 154.79 lacs as on 31st March2011.

3. The Bank has transferred all outstanding unreconciled credit entries from 01.04.1999 to 31.03.2005 to a blocked account as per RBI guidelines vide letter No BP.BC/73/21.04.018/98 dated 27.07.1998. The balance in Blocked accounts in respect of both BCG & Drafts as on 31st March, 2011 is Rs. 18.87 Crores.

4. The Core Inter Branch Account being maintained in CBS is reconciled automatically by the system as per yearly statement of affairs as on 31st March, 2011.

II. Inter-Bank: Reconciliation of Accounts under SBI Agency Clearing Scheme and Associate Bank Settlement of Transactions (ABSOT) Scheme is an on-going process and is under progress.

Ill Others: The reconciliation of various other accounts including National & Local Clearing Account, Branch System Suspense Account, Forex Clearing

Account, ATM transactions and IBIT Account is an on going process and is under progress.

IV Impact of the above, if any, on the Profit & Loss Account and Balance Sheet, in the opinion of the management, is not material.

3.11 Income on Investments in Schedule 13 of Interest earned para II is net of amortization of premium on HTM Investments Rs. 54.92 Crores (Previous Year Rs. 63.22Crores).

3.12 Other Fixed assets include assets jointly owned by the Bank, State Bank of India and Other Associate Banks.

3.13. REVALUATION OF FIXED ASSETS

The premises (Land & Building) of the Bank consisting of Land and Building were revalued on 01.04.2008 on the basis of reports of approved valuers and upward revision in value amounting to Rs. 609.97 Crores was credited to Revaluation Reserve Account. The depreciation for the year on incremental amount amounting to Rs. 8.04 Crores is withdrawn from Revaluation Reserve. There is thus, no impact on the profits for the year. The Revaluation Reserve as at 31st March 2011 stands at Rs. 583.85 Crores.

4. Disclosure requirements as per Accounting Standards

The Bank has generally complied with all . the applicable Accounting Standards issued by the Institute of Chartered Accountants of India(ICAI) read with the relevant guidelines of Reserve Bank of India. The following disclosures (not made elsewhere in the financial statements including Significant Accounting Policies and Notes on Accounts) are made hereunder in accordance with the provisions of the applicable mandatory Accounting Standards, issued by the Institute of Chartered Accountants of India.

4.1 Cash Flow Statements (AS 3 Revised):

In terms of para 45 of the Standard, the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by it, are Rs. Nil (excluding balances required to be maintained for the purpose of Cash Reserve Ratio).

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

In terms of Accounting Standard 5 issued by the Institute of Chartered Accountants of India read with RBI guidelines, prior period items are

(i) Other Prior Period Items - expenditure - Rs. 21.56 Crores and income - Rs 0.70 Crores.

4.3 Revenue Recognition (AS 9)

The revenue has been recognized in terms of AS 9 on Revenue recognition, the guidelines issued by Reserve Bank of India and the Accounting Policy of the Bank.

4.4 Employees Benefits- Accounting Standards -15 (Revised):

4.4.1 During the year, the Bank reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of the said option by 2947 employees, the Bank has incurred a liability of Rs 58.49 Crores in respect of the 2616 continuing employees. Further, during the year, the limit of gratuity payable to the employees of the Banks was also enhanced pursuant to the amendment to the Payment of Gratuity Act,1972 which resulted in increase in gratuity liability of the Bank by Rs.74.69 Crores.

In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs133.18 Crores is required to be charged to the Profit and Loss Account for the year. However the Reserve Bank of India has issued a circular no. DBOD.BP.BC.80/21.04.018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits- Prudential Regulatory Treatment, dated 9th February 2011. In accordance with the guidelines of the Reserve Bank of India, the Bank has opted to amortise an amount of Rs.133.18 Crores over the period of five years. Accordingly, Rs. 26.64 Crores (representing one-fifth of Rs. 133.18 Crores) has been charged to the Profit and Loss Account. In compliance of the aforesaid RBI guidelines, the balance amount carried forward i.e., Rs. 106.54 Crores does not include any amount relating to separated/retired employees.

Had such a circular not been issued by the Reserve Bank of India, the Profits of the Bank would have been lower by Rs106.54 Crores pursuant to application of the requirements of AS 15.

4.4.2 In terms of AS 15 (revised), Bank has made provision for the following Long Term Employee benefits for the year 2010-11.

4.4.3 Contributions made to the Retired Employee Medical Benefit Scheme, being at the sole discretion of the Management, is not recognized by the Management as a Long Term Employee Benefit and therefore no provision has been considered necessary for this liability on actuarial basis.

4.5 Segmental Reporting - (AS-17):

The following segments have been identified:

i. Primary Segment (Business Segment):

Treasury Operations

Corporate/Wholesale Banking

Retail Banking

II. The Geographic segment consists of only the Domestic segment as the Bank does not have any foreign branches.

1. The Bank has got two main business segments namely Treasury Operations and Banking Operations. Banking Operations are further segmented to Corporate/Wholesale Banking and Retail Banking and there is no Other Banking Operations

2. PRICING OF INTER-SEGMENTAL TRANSFERS:

Corporate/Wholesale banking and Retail Banking Operations Segment are the primary resource mobilising units. The Treasury segment is a recipient of funds from these operatons apart from resource mobilized by treasury segment from REPO, CBLO, Call Money, IBTM and Export credit refinance. The cost of funds mobilized by treasury from corporate/ wholesale banking and retail banking is computed at the cost of deposits of Corporate/Wholesale Banking and Retail banking. Pricing of Inter Segmental transfer in Treasury is reduced from the operating profit of Treasury Segment and added to the Operating Profit of Corporate/Wholesale banking in the ratio of deposits allocated to these segments.

3. REVENUE :

All income relating to Treasury Operations are considered for the said segment. All interest as furnished by ITS Department and as certified by the Management for all borrowal accounts with exposures above Rs.5 crores are classified as Corporate/Wholesale Banking segment. The balance interest is treated as relating to retail banking segment. The other interest income/other income is allocated under Corporate/Wholesale and Retail Banking segments in the ratio of total income of these segments(excluding other interest income/other income and interest segment revenue).

4. ALLOCATION OF EXPENSES:

Expenses incurred at Corporate Centre establishment directly attributable to Treasury Operations are allocated accordingly. As regards Corporate/ Wholesale and retail banking segment interest paid on deposits is segregated to these segments in the ratio of deposits to these segments (deposits are allocated on the basis of outstanding advances pertaining to these segments). Employees expenses are allocated to the Treasury segment in proportion to the number of Employees of that segment to the total employees of the Bank. Other interest paid, provisions relating to employees and other operative expenditure for Corporate/Wholesale and Retail Banking segment are allocated based on the income earned by these segments(excluding inter segmental revenue). Interest paid on Tier I/Tier 11/ Subordinated bonds are classified as Unallocated.

5. SEGMENTAL ASSETS:

All assets which are directly attributable to treasury operations are considered for Treasury Operations Segment. All outstandings in advance accounts for borrowers with exposures above Rs.5 crores as furnished by ITS Department and as certified by the Management is considered as assets pertaining to Corporate/Wholesale Banking segment. Other outstandings in advances segments is shown as pertaining to Retail Banking .Segment. All other assets are segregated and added to the segment advances pertaining to Corporate/ Wholesale and Retail Banking segment in the ratio of outstanding balances of advances in these segments.

6. SEGMENTAL LIABILITIES:

All liabilities which are directly attributable to Treasury Operations segment are allocated accordingly. Other deposits are allocated and segregated for Corporate/ Wholesale segment in the ratio of outstanding balances of advances for the respective segments. With regard to other liabilities, provisions and contingencies, the allocation to Corporate/Wholesale and Retail Banking segments are made on the basis of the outstanding balances of advances under these segments. Tier I/Tier 11/

Subordinated bonds are classified as Unallocated.

4.6 Related party transactions (AS 18)

4.6.1 In accordance with AS 18 issued by the ICAI and the RBI guidelines, details relating to Related Party transactions are disclosed hereunder:

4.6.2 All the other related parties are State Controlled enterprises as defined in AS 18 issued by the Institute of Chartered Accountants of India as such Transactions with them are not required to be disclosed.

4.7 Leases (AS 19)

(i) 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.

(ii) No financial lease has been executed after April 1, 2001.

4.10 INTANGIBLE ASSETS (AS-26)

The present practice of depreciating software which forms integral part of hardware @ 33.33% (on straight line method) and depreciating other software @ 100% irrespective of date of purchase is consistently followed by the bank in line with AS 26 issued by ICAI.

4.11 IMPAIRMENT OF ASSETS (AS-28)

In the opinion of the management, there is no impairment of any of the fixed assets of the Bank.

4.12 Provisions, Contingent Liabilities & Contingent Assets (AS-29)

Rs. in Crores)

Particulars Provisions Remarks as Additions Amount Unused Provision at the during used as at the beginning the year amounts close of reversed of the year the year during the year

Other Provisions including adhoc provision

Provision for Wage Arrears 165.11 0.00 113.4 51.27 Nil Nil

Provision for Interest sacrifice on restructured standard advances 80.61 0.00 0.00 2.50 78.11 Nil

Provision for Frauds 11.40 5.39 0.00 0.00 16.79 Nil

* Provision for depreciation, impairment of assets and doubtful debts are adjusted to carrying amount of assets and these have not been included above in terms of para 7 of the Accounting standards. Provision against standard assets has already been disclosed in para 3.4.5 above.

b) CONTINGENT LIABILITIES

(Rs. in Crores)

2009-10 Particulars 2010-11

Claims not acknowledged as debt :

0.01 Counter Suits filed by the Borrowers against whom Bank has initiated legal action 0.01

1.02 Cases filed in Consumer/Civil Courts for deficiency in services 1.30

184.37 Any other claims against the Bank not acknowledged as debts 221.10

1610.22 Guarantees issued on behalf of constituents 1816.72

2884.45 Acceptances, endorsements and other obligations* 3632.75

15377.39 Other items, for which the bank is contingently liable 11294.63

20057.46 Total 16966.51

6. DRAW DOWN FROM RESERVES

In the year 2009-10, an amount of Rs. 18.23 Crores (net of applicable tax and statutory reserve) being excess in the provision for depreciation arising as a result of valuation of AFS Category was transferred to Investment Reserve. Out of the above, Rs. 4.68 Crores (net of applicable tax and Statutory Reserve) has been utilized to the extent of the depreciation in the value of investments held in AFS Category during the year.

9. PROVISION COVERAGE RATIO:

The Provision to Gross NPA of the Bank as on 31st March 2011 is 67.60% (Previous Year - 66.93%)

10. BANCASSURANCE BUSINESS :

During the financial year 2010 -11, the Bank has earned a sum of Rs. 11.85 Crores (Previous Year- Rs. 6.51 Crores as fees and remuneration from Bancassurance business. The details of the fees / remuneration earned are as under:

1. Income from SBI life business

Rs. 9.29 Crores (Previous Year

- Rs. 5.49 Crores)

2. Income from General Insurance business

Rs. 1.77 Crores (Previous Year

- Rs. 1.02 Crores)

3. Others (SBI Cards, SBI Mutual Funds)

Rs. 0.79crores (Previous Year - Nil)

11. SHARE HOLDING:

11.1 The shareholding of State Bank of India in the Banks Paid up Capital as at 31st March 2011 is 92.33 % (Previous year 92.33%).

11.2 The Bank has issued 1,07,99,790 Rights Equity Shares of Rs 10/- each at a premium of Rs 530/- per share aggregating Rs 583,18,86,600 to its existing shareholders on 9th October 2010 thus increasing the Equity Share Capital to Rs 46,79,97,900.

11.3 EMPLOYEE STOCK OPTION: Nil

12. PROVISIONS AND CONTINGENCIES

12.1 In terms of the Reserve Bank of India guidelines, the following additional disclosures have been made and the data as computed by the management are relied upon by the auditors:

Exposures computed based on credit and investment exposure as prescribed in RBI Master Circular on Exposure Norms DBOD.No.Dir.BC. 14/13.03.00/2010-11 dated July 1, 2010.

14. In terms of the Reserve Bank of India guidelines, the Bank has reversed unrealized income represented by Funded Interest Term Loan on Restructured Accounts. Accordingly, the Bank has reversed unrealized interest amounting to Rs. 46.54 Crores (which includes Rs. 21.51 Crores pertaining to earlier years) by debit to the Interest Income of the current year. Interest pertaining to earlier years has been shown under Prior Period Items in Note No 4.2.

15. During the year the Bank has evolved a policy of Prudential/ Technical write off of Non-Performing Advances (NPAs) at the Head Office level while retaining the NPA status of these advances at the branches. In terms of the said policy, the Bank has technically written off NPAs amounting to Rs.229.14 Crores during the Financial Year 2010- 11 and made an additional provision of Rs. 16.34 Crores in respect of these advances to cover 100% outstanding.

16. During the year the Bank has changed its accounting procedure regarding recording of interest already charged and not collected on Advances turning NPA. The uncollected interest has earlier been kept in separate accounts i.e. Interest not collected Account (INCA)^/ Unrealised Interest of earlier years (URIPY) and reversed to the respective Advance accounts. This change of procedure, however will not have any impact on the Profits of the Bank for the year.

17. Other Assets include Rs. 22.07 Crores recoverable from Govt of India towards claims under Agriculture Debt Waiver and Debt Relief Scheme 2008 for its extended period. The Bank is under the process of submitting the said claims with the Govt of India. Further, the provision of Rs. 11.17 Crores made during the previous years towards diminution in the present value of the receivables is continued till the final settlement of the claims by the Govt of India.

18. The figures of the previous years have been regrouped/re-arranged, wherever considered necessary.


Mar 31, 2010

1. INVESTMENTS

(i) The Banks holding of total SLR securities in "Held to Maturity" Category (HTM) is 22.56% (previous year 21.87%) of DTL as on the last Friday of the second preceeding fortnight. The total investment in HTM category is equal to 86.56% (Previous year 69.98%) of its total investments and the excess of "Held to Maturity" category investments over 25% of total investments comprises of SLR securities. The Banks holdings in "Held to Maturity" Category of investments are within the overall limits stipulated by RBI.

(ii) As per RBI guidelines, an amount of Rs.13.11 Crores (Previous year Rs. 65.33 crores) being the balance amount of Profit on Sale of securities [net of taxes and transfer to Statutory Reserve] in "Held to Maturity" category has been transferred to Capital Reserve.

2.1 Disclosure on Risk exposure in derivatives

2.1.1 Qualitative Disclosures:

Forward Contracts are the only derivatives held in the books of the Bank. The Bank enters into forward contracts with the customers and covers the resultant position in the inter bank market. The Bank also trades in Inter Bank forward contracts on its own with a view to deriving profits. The Bank does not have any unhedged foreign exchange exposure other than the open overnight position.

The Bank has put in place Board approved policy for monitoring the various risks associated with the above mentioned transactions. The risks are managed by prescribing various limits and ensuring that the exposures are within the limits. Such limits are prescribed in the following areas.

a) Overnight Exposure Limits

b) Daylight exposure Limits

c) Aggregate and currency-wise gap Limits

d) Stop Loss Limits

e) VaR Limits

f) Limit on Proprietary Trading

g) Limit on Counter Party Bank

In terms of Board approved policy, the limits are monitored by Mid Office and discretionary power is vested with functionaries at various levels to ratify/ approve the breaches, if any.

2.1.1.1 Provision on Small Restructured Loan Assests

Considering the difficulty in computing the diminution in fair value of Restructured Accounts below Rs. 1 Crore individually, the Bank, in terms of RBI circular No. DBOD. BP.BC. No. 37/21.04.132/2008- 09 dated the 27th August, 2008, has opted to provide a sum of Rs. 17.92 Crores, being 5% of the exposure in such advances, as provision for diminution in fair value of receivables, in all branches, other than top 20 branches audited by Satutory Central Auditors.

3. Disclosure requirements as per Accounting Standards

The Bank has generally complied with all the applicable Accounting Standards issued by the Institute of Chartered Accountants of India(ICAI) read with the relevant guidelines of Reserve Bank of India. The following disclosures (not made elsewhere in the financial statements including Significant Accounting Policies and Notes on Accounts) are made hereunder in accordance with the provisions of the applicable mandatory Accounting Standards issued by the Institute of Chartered Accountants of India.

4.1 Cash Flow Statements (AS 3 Revised):

In terms of para 45 of the Standard, the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by it, are Rs. Nil (excluding balances required to be maintained for the purpose of Cash Reserve Ratio).

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

In terms of Accounting Standard 5 issued by the Institute of Chartered Accountants of India read with RBI guidelines, prior period items are

(i) Other Prior Period Items - expenditure - Rs. 0.73 Crores and income - Rs 0.64 Crores.

4.3 Revenue Recognition (AS 9)

The revenue has been recognized in terms of AS 9 on Revenue recognition, the guidelines issued by Reserve Bank of India and the Accounting Policy of the Bank.

4.4 Employees Benefits- Accounting Standards -15 (Revised):

In terms of AS 15 (revised), Bank has made provision for the following Long Term Employee benefits for the year 2009-10.

Contributions made to the Retired Employee Medical Benefit Scheme, being at the sole discretion of the Management, is not recognized by the Management as a Long Term Employee Benefit and therefore no provision has been considered necessary for this liability on actuarial basis.

(e) Segmental Reporting - (AS-17):

The following segments have been identified:

I. Primary Segment (Business Segment):

Treasury Operations

Corporate/Wholesale Banking

Retail Banking

II. The Geographic segment consists of only the Domestic segment as the Bank does not have any foreign branches.

1. The Bank has got two main business segments namely Treasury Operations and Banking Operations. Banking Operations are further segmented to Corporate/Wholesale Banking and Retail Banking.

2. PRICING OF INTER-SEGMENTAL TRANSFERS:

Corporate/Wholesale banking and Retail Banking Operations Segment are the primary resource mobilising units. The Treasury segment is a recipient of funds from these operatons apart from resource mobilized by treasury segment from REPO, CBLO, Call Money, IBTM and Export credit refinance. The cost of funds mobilized by treasury from corporate/ wholesale banking and retail banking is computed at the cost of deposits of Corporate/WholesaleBanking and Retail banking. Pricing of Inter Segmental transfer in Treasury is reduced from the operating profit of Treasury Segment and added to the Operating Profit of Corporate/Wholesale banking in the ratio of deposits allocated to these segments.

3. REVENUE :

All income relating to Treasury Operations are considered for the said segment. All interest as furnished by ITS Department and as certified by the Management for all borrowal accounts with exposures above Rs.5 crores are classified as Corporate/Wholesale Banking segment. The balance interest is treated as relating to retail banking segment. The other interest income/other income is allocated under Corporate/Wholesale and Retail Banking segments in the ratio of total income of these segments(excluding other interest income/other income and inter segment revenue).

4. ALLOCATION OF EXPENSES:

Expenses incurred at Corporate Centre establishment directly attributable to Treasury Operations are allocated accordingly. As regards Corporate/ Wholesale and retail banking segment interest paid on deposits is segregated to these segments in the ratio of deposits to these segments (deposits are allocated on the basis of outstanding advances pertaining to these segments). Employees expenses are allocated to the Treasury segment in proportion to the number of Employees of that segment to the total employees of the Bank. Other interest paid, provisions relating to employees and other operative expenditure for Corporate/Wholesale and Retail Banking segment are allocated based on the income earned by these segments(excluding inter segmental revenue). Interest paid on Tier I/Tier 11/ Subordinated bonds are classified as Unallocated.

5. SEGMENTAL ASSETS:

All assets which are directly attributable to treasury operations are considered for Treasury Operations Segment. All outstandings in advance accounts for borrowers with exposures above Rs.5 crores as furnished by ITS Department and as certified by the Management is considered as assets pertaining to Corporate/Wholesale Banking segment. Other outstandings in advances segments is shown as pertaining to Retail Banking Segment. All other assets are segregated and added to the segment advances pertaining to Corporate/ Wholesale and Retail Banking segment in the ratio of outstanding balances of advances in these segments.

6. SEGMENT LIABILITIES:

All liabilities which are directly attributable to Treasury Operations segment are allocated accordingly. Other deposits are allocated and segregated for Corporate/ Wholesale segment in the ratio of outstanding balances of advances for the respective segments. With regard to other liabilities, provisions and contingencies, the allocation to Corporate/Wholesale and Retail Banking segments are made on the basis of the outstanding balances of advances under these segments. Tier I/Tier 11/

Subordinated bonds are classified as Unallocated.

4.6 Related party transactions (AS 18)

In accordance with AS 18 issued by the ICAI and the RBI guidelines, details relating to Related Party transactions are disclosed hereunder: This Bank is Subsidiary of State Bank of India.

4.7 Leases (AS 19)

(i) 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.

(ii) No financial lease has been executed after April 1, 2001.

4.9 Accounting for Taxes on income (AS 22)

In compliance with AS 22 "Accounting for taxes on income" issued by the Institute of Chartered Accountants of India, the Bank has recognised deferred tax assets and liabilities. Deferred tax assets (net of liabilities) of Rs.85.05 crores has been recognised as on March 31, 2010, the major components of which are as under:

4.10 INTANGIBLE ASSETS (AS-26)

The present practice of depreciating software which forms integral part of hardware @ 33.33% (on straight line method) and depreciating other software @ 100% irrespective of date of purchase is consistently followed by the bank in line with As 26 issued by ICAI.

4.11 IMPAIRMENT OF ASSETS (AS-28)

In the opinion of the management there is no impairment of any of the fixed assets of the Bank.

4.12 Provisions, Contingent Liabilities & Contingent Assets (AS-29)

b) CONTINGENT LIABILITIES

Rs. in Crores)

Previous Year As at 31.03.2009 Particulars Current Year as at 31.03.2010

1. Claims not acknowledged as debts:

0.16 (a) Counter Suits filed by the Borrowers against whom Bank has initiated legal action 0.01

1.02 Cases filed in Consumer/Civil Courts for deficiency in services 1.02

Suit filed against the Bank for non-sanction of the limits and 0.01 non-extention of guarantee/disputes relating to guarantees 0

171.74 Any other claims against the Bank not acknowledged as debts 184.37

1304.39 2. Guarantees issued on behalf of constituents 1610.22

2040.38 3. Acceptances, endorsements and other obligations* 2884.45

15596.70 4. Other items, for which the bank is contingently liable 15377.39

19114.40 Total 20057.46



7. SHARE HOLDING:

The shareholding of State Bank of India in the Banks Paid up capital as at 31st March 2010 is 92.33 % (Previous year 92.33%)

8. EMPLOYEE STOCK OPTION: NIL

9. MISCELLANEOUS

9.1 In terms of the Reserve Bank of India guidelines, the following additional disclosures have been made and the data as computed by the management are relied upon by the auditors:

9.2 RECONCILIATION

I. Inter Branch:

In terms of RBI guidelines, the Banks are required to close inter-branch reconciliation within six months. The Inter Branch Reconciliation upto 30.09.2009 has been closed after reaching reconciliation of 99.99% of total value of transactions. The Bank has transferred the credit entries outstanding for a period of more than 5 (five) years to a blocked account as per RBI guidelines.

The Bank has transferred a sum of Rs.157.15 Lacs to Profit & Loss Account in 2005 - 06 being the net credit balance in the inter branch accounts upto 31st March 1999 pending reconciliation, in terms of RBI letter No. DBS/ CO.SMC.No.8809/22.09.001/2005-06 dated 19.12.2005. Out of this, Rs 0.57 Lacs was debited during the earlier years and the resultant balance as at the beginning of the year was Rs. 156.58 lacs. The Bank, however , during the financial year 2009 - 10, has made payment of claims amounting to Rs.1.79 lacs to the debit of Profit and loss account thus reducing the amount of unreconciled entries of Inter Branch Accounts to Rs.154.79 lacs.

The Core Inter Branch Account being maintained in CBS is reconciled automatically by the system. The account is reconciled as on 31.03.2010.

II. Inter-Bank:

Reconciliation of Accounts under SBI Agency Clearing Scheme and Associate Bank Settlement of Transactions (ABSOT) Scheme is an on going process and is under progress.

III Others:

The reconciliation of various other accounts including National & Local Clearing Account, Branch System Suspense Account, Forex Clearing General Account, FCNR Account, PCFC Account, ATM Cash Balances and IBIT Account is an on going process and is under progress.

IV Impact of the above, if any, on the Profit & Loss Account and Balance Sheet, in the opinion of the management, is not material.

9.3 Income on Investments in Schedule 13 of Interest Earned para II is net of amortization of premium on HTM Investments Rs. 63.22 Crores (Previous Year Rs. 37.94 Crores).

9.5 REVALUATION OF FIXED ASSETS

The premises (Land & Building) of the bank consisting of Land and Building were revalued on 01.04.2008 (i.e. previous year) on the basis of reports of approved valuers and upward revision in value amounting to Rs. 607.97 Crores was credited to Revaluation Reserve Account. The depreciation on incremental amount amounting to Rs.8.04 Crores has been adjusted to Revaluation Reserve during the year. There is thus, no impact on the profit and loss during the year.

11. AGRICULTURAL DEBT WAIVER AND DEBT RELIEF SCHEME 2008

As regards Agricultural Debt Waiver and Debt Relief Scheme, 2008 formulated by the Government of India (GOI) and various circulars issued by Reserve Bank of India from time to time, the Bank has, out of the amount identified as Relief for Other Farmers under Agriculture Debt Relief Scheme 2008, a sum of Rs. 61.21 Crores as Receivable from GOI. The amount yet to be recovered from farmers on account of this scheme is Rs. 168.03 Crores. Provision of Rs. 11.17 Crores is also held for diminution in present value of these receivables. These figures are subject to review and final certification by the Statutory Central Auditors.

12. The Bank, during the year 2009 -10, in terms of RBI guidelines contained in circular no. DBOD.BP. BC.NO.133/ 21.04.018/2008-09 dated 11th May 2009, has transferred a sum of Rs. 6.05 Crores, being outstanding unreconciled credit entries (unclaimed deposit) of value less than US $ 2500/- or equivalent, originated upto 31.03.2002, to Profit & Loss Account..

13. The bank, during the year 2009 -10, has credited an amount of Rs. 9.65 Crores to the Profit and Loss account under the head "Other Income" by Writing Back from "Contingent General" under the head "Other Liabilities and Provisions".

14. An amount of Rs. 39.06 Lacs expended on issue of Right Shares has been charged off, by the bank, to revenue as the same was considered not material.

15. The figures of the previous years have been regrouped/re-arranged, wherever considered necessary.



 
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