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Accounting Policies of Syndicate Bank Company

Mar 31, 2017

SIGNIFICANT ACCOUNTING POLICIES:2016-2017 1. (A) BASIS OF ACCOUNTING

The financial statements of the Bank including foreign office have been prepared following the going concern concept under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprise statutory provisions, regulatory/Reserve Bank of India (RBI) guidelines, Accounting Standards/ Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI) and the practices prevalent in the banking industry in India. However, in respect of foreign office, statutory provisions and practices prevailing in respective foreign country are complied with.

(B) USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) as on date of the financial statements and the reported income and expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revision to the accounting estimate is recognized prospectively in the current and future periods unless otherwise stated.

(C) USE OF ACCOUNTING POLICY

Accounting Policy are consistently used unless change is required by statute or for compliance with Accounting Standard or the change would result in a more appropriate presentation of the financial statements.

2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

2.1 Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency. Following exchange rates are used for initial recognition:

a) For transactions involving foreign currency liabilities at branches (FCNR, EEFC, RFC) Weekly Average Rate (WAR) published by the Foreign Exchange Dealers'' Association of India (FEDAI).

b) For transactions involving foreign currency assets at branches and assets and liabilities at ''A'' designated branch (Treasury and International Banking Department) market rate on the date of transaction.

2.2 All the foreign currency monetary assets and liabilities are reported at closing exchange spot/forward rates notified by the FEDAI at the end of each quarter and the resultant gains or losses are recognized in the Profit and Loss A/c.

2.3 Contingent liabilities denominated in foreign currency are reported using the FEDAI closing spot rate.

2.4 Outstanding foreign exchange spot and forward for trading are revalued at the exchange rates notified by the FEDAI for specified maturities and at interpolated rates for contracts of "in between maturities". The resultant Marked to Market (MTM) gain/loss is discounted to arrive at present value MTM gain/loss by using CCIL- Zero Coupon Yield Curve (ZCYC) rates and the same is recognized in Profit and Loss A/c.

2.5 In the case of foreign exchange forward contacts which are not intended for trading, premium or discount arising at the inception is amortised as expenses or income over the life of the contract.

2.6 The Bank has a branch at London and the operations of the same is classified as "Non-Integral Operations" in accordance with Accounting Standard 11(AS-11) issued by the Institute of Chartered Accountants of India (ICAI).

a) All assets and liabilities of the foreign operations, both monetary and non-monetary as well as contingent liabilities are translated at closing spot rates notified by the FEDAI at end of each quarter.

b) Income and Expenditure are translated at Quarterly Average Rates (QAR) notified by the FEDAI at end of each quarter.

c) The resulting Exchange Difference arising from translation as per AS-11 is accumulated in a "Foreign Currency Translation Reserve" until disposal of net investment of the foreign branch.

d) The Assets and liabilities of the branch in foreign currency (other than local currency of the branch) are translated into local currency using applicable spot rate at the end of each quarter.

3. INVESTMENTS

The transactions in Securities are recorded on "Settlement Date".

3.1 Classification:

The Investment portfolio of the Bank is classified, in accordance with the Reserve Bank of India guidelines, into:

a) “Held to Maturity” (HTM) comprising Investments acquired with the intention to hold them till maturity. Investments in subsidiaries, joint ventures and associates are also categorised under Held to Maturity.

b) “Held for Trading” (HFT) comprising Investments acquired with the intention to trade by taking advantage of short term price/interest rate movements. These are intended to be traded within 90 days from the date of purchase.

c) “Available for Sale” (AFS) comprising Investments not covered by (a) and (b) above i.e. those investments which do not fall under in "Held to Maturity" or "Held for Trading" classification.

In the balance sheet, the investments are disclosed as per the following six classifications in accordance with the guidelines of the Reserve Bank of India:

(i) Government Securities

(ii) Other Approved Securities

(iii) Shares

(iv) Debentures and Bonds

(v) Subsidiaries and/or Associates

(vi) Others

Bank''s investments in units of VCS''s are classified under HTM category and are valued at cost. After period of three years from date of disbursement, it is shifted to AFS and marked-to-market as per RBI guidelines.

3.2 Acquisition Cost of Investment:

a) Brokerage, Commission, Securities Transaction Tax (STT) etc., paid in connection with acquisition of investments are expensed upfront and excluded from cost.

b) Broken period interest paid/received on debt instruments is treated as interest expense/income and is excluded from cost/sale consideration.

c) Cost of investments is determined at weighted average price method.

d) Incentive received on subscriptions is deducted from the cost of securities. Brokerage/Commission/ Stamp Duty paid in connection with acquisition of securities are treated as revenue expense.

3.3 Method of Valuation:

a) Investments classified as HTM are carried at weighted average acquisition cost unless it is more than the face value, in which case the premium is amortized over the period remaining to maturity, on constant yield basis. Such amortisation of premium is adjusted against income under the head "interest on investments".

b) Investments in subsidiaries and joint ventures are valued at acquisition cost less diminution, other than temporary in nature.

c) Transfer of securities from HFT/AFS category to HTM category is carried out at the lower of acquisition cost/book value/market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for. However, transfer of securities from HTM category to AFS category is carried out on acquisition price/book value. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.

d) Investments held under AFS and HFT are valued as under:

The above valuation in category of Available for Sale and Held for Trading is done scrip wise on quarterly basis and depreciation/appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for while net appreciation is ignored. On provision for depreciation, the book value of the individual security remains unchanged after marking to market. Depreciation on the instrument acquired by way of conversion, whether classified as standard or NPA, is not offset against the appreciation in any of other securities held under the AFS category.

3.4 Investments are classified as performing and nonperforming, based on the guidelines issued by the RBI in the case of domestic offices and respective regulators in the case of foreign offices. Investments of domestic offices become non-performing where:

- Interest/installment (including maturity proceeds) is due and remains unpaid for more than 90 days.

- In the case of equity shares, in the event the investment in the shares of any company is valued at '' 1 per company on account of no availability of the latest balance sheet, those equity shares will be reckoned as NPI.

- If any credit facility availed by an entity is NPA in the books of the Bank, investments in any of the securities issued by the same entity would also be treated as NPI and vice versa. The above would apply mutatis-mutandis to Preference Shares where the fixed dividend is not paid.

- The investments in debentures/bonds, which are deemed to be in the nature of advance, are also subjected to NPI norms as applicable to investments.

- In respect of non-performing securities, income is not recognized, and provision is made for depreciation for such securities as per RBI guidelines. Provision made on non-performing investments is not set off against the appreciation in respect of other performing investments.

3.5 In case of sale of NPA (financial asset) to securitization Company (SC)/Asset. Reconstruction Company (ARC) against issue of Security Receipts (SR), investment in SR is recognized at lower of (i) Net Book Value (NBV) (i.e.)., book value less provisions held of the financial asset: and (ii) Redemption value of SR. SRs issued by an SC/ARC are valued in accordance with the guidelines applicable to non SLR instruments. Accordingly, in cases where the SRs issued by the SC/ARC are limited to the actual realization of the financial assets assigned to the instruments in the concerned scheme, the Net Asset Value, obtained from the SC/ ARC, is reckoned for valuation of such investments.

3.6 Disposal of Investments

a) Profit/ loss on sale of Investments classified as HTM is recognized in the Profit and Loss Account based on the weighted average cost/book value of the related Investments and an amount equivalent of profit on sale of Investments in HTM classification is appropriated to Capital Reserve Account.

b) Profit / loss on sale of Investment in AFS/HFT category is recognized in Profit and Loss Account.

3.7 Floating/Fixed Rate Note and Credit Linked Note, Investments at Foreign Branch are classified as ''Available for Sale'' category and are valued at nominal value or market value, whichever is lower. These Investments are marked to market at quarterly intervals and where the value of these Investments is lower than the nominal value, provision for depreciation is created in the Balance Sheet and a corresponding charge is recognized in the Profit and Loss Account.

3.8 The securities sold and purchased under Repo/ Reverse repo are accounted as Collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of securities is reflected using the Repo/Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity. Costs and revenues are accounted as interest expenditure/income, as the case may be. Balance in Repo Account is classified as Borrowings and balance in Reverse Repo account is classified as Balance with Banks and Money at Call & Short Notice.

3.9 Foreign Branch’s Investment

a) Floating and Fixed Rate Note investments at Foreign Branch are classified as Available for Sale category and are valued at nominal value or market value, whichever is lower.

b) Premium at time of purchase if any shall be amortized over the residual period of the instrument while any discount on purchase is ignored.

c) These investments are marked to market at quarterly intervals and where the value of these investments is lower than the nominal value, a provision for depreciation is created in the Balance Sheet and a corresponding charge is recognized in the Profit & Loss A/c.

4. DERIVATIVES

4.1 The Bank enters into derivative contracts, such as Foreign Exchange Forward contracts, Interest Rate Swaps, Currency Swaps, and Cross Currency Interest Rate Swaps and Forward Rate agreements in order to hedge on-balance sheet/off-balance sheet assets and liabilities or for trading purposes. The Swap contracts entered to hedge on-balance sheet assets and liabilities are structured in such a way that they bear an opposite and offsetting impact with the underlying on-balance sheet items.

4.2 All Forward Contracts are marked to market as per the generally accepted accounting practices prevalent in the industry.

4.3 Bank is undertaking the Exchange Trade Derivatives in form of Currency Futures with recognized Stock Exchanges. Currency Futures are marked to market on daily basis.

4.4 The credit exposures for derivative transactions are calculated in accordance with the guidelines issued by RBI monitored on Current Credit Exposure method.

4.5 The naked hedging transactions are considered as a trading transaction and allowed to run till maturity.

5. ADVANCES

5.1 Advances are classified into Performing and Non Performing Assets and provisions for losses on such advances are made as per-prudential norms issued by Reserve Bank of India from time to time. In respect of foreign branch, asset classification and provisioning for loan losses are made as per local requirements or as per RBI prudential norms, whichever are more stringent.

5.2 Advances are stated net of provisions made for Non-Performing Assets except general provisions for Standard Advances.

5.3 In case of sale of financial assets to the Asset Reconstruction Company (ARC) / Securitization Company (SC) / Banks / FIs / NBFCs at a price below the Net Book Value (NBV), i.e. Book Value less Provision held, the shortfall is debited to the Profit and Loss Account and in case of sale at a value higher than the NBV, the excess provision is reversed to Profit and Loss Account in the year in which the amounts are received.

6.1 Premises and other fixed assets are stated at historical cost and/or revalued value less accumulated depreciation. The premises are revalued every three years at value determined based on the appraisal by approved values. Surplus arising at such revaluation is credited to Revaluation Reserve.

6.2 Depreciation on premises has been provided on composite cost wherever cost of land cannot be segregated.

6.3 Depreciation in respect of fixed assets is calculated on with reference to cost or revalued amount, in case of assets revalued and the same is charged to Profit and Loss account. In the case of Revalued assets, the additional depreciation consequent to revaluation is transferred from Revaluation reserve to Free Reserve in the Balance Sheet.

6.5 Depreciation on any additions to fixed assets is

provided on a pro rata basis from the date of such

addition.

7. EMPLOYEE BENEFITS

7.1 Short Term Employee Benefits:

a. Employee benefits payable wholly within twelve months of rendering the service is classified as short term employee benefits and are recognized in the period in which the employee renders the related service.

7.2 Long term Employee Benefits:

a. Employee Benefits in the form of Provident Fund is a Defined Contribution Scheme and the contributions are charged to Profit & Loss Account in the year in which the contributions are due in respect of employees who have opted for Provident Fund.

b. i. In respect of employees who have opted for

Pension Scheme, Pension Benefit is a Defined Benefit Obligation and is provided for on the basis of actuarial valuation made at the end of the Financial Year for the employees who have joined the Bank up to 31st March, 2010. The Pension liability is funded by the Bank to the Pension Fund Trust of the Bank.

ii. New Pension Scheme which is applicable to employees who joined the Bank on or after 1st April, 2010 is a Defined Contribution Scheme at pre-determined rate and the obligation the Bank is limited to such contribution. The Contribution is charged to Profit & Loss Account.

c. Gratuity liability is a Defined Benefit Plan and is provided for on the basis of actuarial valuation made at the end of the Financial Year. The gratuity liability is funded to the Gratuity Fund Trust of the Bank.

d. Accumulated Compensated absences such as Leave Encashment are provided for based on actuarial valuation.

8. RECOGNITION OF REVENUE/EXPENSES

a) Revenue and expenses are generally accounted for on accrual basis except in respect of fees/ commission on transactions with Mutual Funds, income from non-banking assets, locker rent, interest on overdue bills/tax refunds, income from non-performing assets, SDR/S4A accounts and legal expenses on suit filed accounts which are accounted for on cash basis.

b) Income from dividend on shares is accounted for on accrual basis when the same is declared and the right to receive the dividend is established.

c) The broken period interest on sale or purchase of securities is treated as revenue item as per RBI guidelines.

d) Income from consignment sale of imported gold coins is accounted for as other income after the sale is completed.

e) The Interest Income and Expenditure on Derivatives Transactions entered for hedging is accounted on accrual basis.

f) Lease payments including cost escalation for assets taken on operating lease are recognised in the Profit and Loss Account over the lease term in accordance with the AS-19 (Leases) issued by ICAI.

9. TAXES ON INCOME

9.1 Current tax is determined as per the provisions of the Income tax Act, 1961.

9.2 Deferred Tax Assets and Liabilities arising on account of timing differences between taxable and accounting income, is recognized keeping in view, the consideration of prudence in respect of Deferred Tax Assets in accordance with the Accounting Standard 22 issued by ICAI.

10. COUNTRY RISK MANAGEMENT

The Bank has adopted the Country Risk Management policy in accordance with the RBI guidelines. Export Credit Guarantee Corporation (ECGC) publishes the Seven Country Risk Category classification, namely, Insignificant, Low, Moderate, High, Very High, Restricted and Off-credit. Provision for country risk exposure is made as per extant RBI Guidelines. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is required on such country exposures. The Country Risk Provision (if required) is reflected in Schedule 5 of the Balance Sheet under "Other Liabilities and Provisions".

11. UNHEDGED FOREIGN CURRENCY EXPOSURE

The Bank has framed and approved a policy for administration of credit risk rising out of Unhedged foreign currency exposures in accordance with extant RBI guidelines.

12. IMPAIRMENT OF ASSETS

The carrying amount of assets is reviewed at each Balance Sheet date for any indication of impairment based on internal/external factor. An impairment loss is recognized whenever the carrying amount of an asset exceeds its estimated recoverable amount.

13. NET PROFIT

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

- Provision for Income Tax and Wealth Tax

- Provision/Write off of Non-Performing Advances and Investments

- Provision on Standard Assets

- Adjustment for appreciation/depreciation on Investments

- Transfer to Contingencies

- Other usual and necessary provisions.

14. EARNINGS PER SHARE

Earnings per Share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding as at the end of the year.

15. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

As per AS 29 (Provisions, Contingent Liabilities and Contingent Assets) issued by the ICAI, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefit is remote. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

(iii) Sale and transfers to / from HTM category

The value of sales and transfers of securities to / from HTM category does not exceed 5 percent of the book value of investments held in HTM category at the beginning of the year as per RBI guidelines.

(iv) SGL Bouncing

There was no instance of SGL bouncing during the financial year 2016-17.

2.3 Profit on account of sale of securities from HTM category amounting to Rs,196,49,66,264 (Previous Year Rs, 73,63,68,167) has been taken to Profit and Loss Account and thereafter appropriated towards Capital Reserve Account (net of taxes and transfer to Statutory Reserve).

2.4 The amortization charges of Rs, 130,33,21,707 (Previous Year Rs,96,94,09,766.59) on the HTM category of securities is debited to Profit and Loss Account and reflected in Schedule - 13, Interest Earned: Item II - Income on Investments as a deduction as per RBI Master Circular


Mar 31, 2015

1. (A) ACCOUNTING CONVENTIONS

The financial statements of the Bank including foreign office have been prepared following the going concern concept under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprise statutory provisions, regulatory/Reserve Bank of India (RBI) guidelines, Accounting Standards/Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI) and the practices prevalent in the banking industry in India. However, in respect of foreign office, statutory provisions and practices prevailing in respective foreign country are complied with.

(B) USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) as on date of the financial statements and the reported income and expense for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revision to the accounting estimate is recognized prospectively in the current and future periods unless otherwise stated.

2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

2.1 Exchange Rates as notified by Foreign Exchange Dealers'' Association of India (FEDAI) are adopted.

2.2 All foreign currency transactions involving forex liabilities are recorded by applying weekly average rate (WAR), whereas all forex assets are recorded at ongoing market rates.

2.3 All the monetary assets and liabilities are reported at the end of the year at closing exchange rate and the resultant profit/loss is taken to revenue.

2.4 Outstanding Forward Exchange Contracts are reported at the exchange rates notified for specified maturities and at interpolated rates for contracts of "in between maturities". The resultant Marked to Market (MTM) is discounted to arrive at present value MTM by using CCIL- Zero Coupon Yield Curve (ZCYC) rates.

2.5 Contingent liabilities on account of Guarantees, Forward Contracts, Letters of Credit, Acceptances, Endorsements and other obligations are translated at the closing exchange rates.

2.6 Foreign Branch of the Bank is classified as "Non- Integral Foreign Operation"

a) All assets and liabilities of the foreign operations, both monetary and non-monetary as well as contingent liabilities are translated at closing exchange rates.

b) Income and Expenditure are translated at quarterly average exchange rates.

c) The resulting Exchange Difference arising from translation as per AS-11 is accumulated in a "Foreign Currency Translation Reserve" until disposal of net investment of the foreign branch.

3. INVESTMENTS

3.1 In accordance with RBI guidelines, investments in India are classified into:

I. Held to Maturity

II. Available for Sale

III. Held for Trading

Each category is further classified into:

a) Government Securities

b) Other Approved Securities

c) Shares

d) Debentures and Bonds

e) Subsidiaries/Associates

f) Others

3.2 Investments are valued in accordance with RBI guidelines.

3.2.1 Investments under ''Held to Maturity'' are valued at cost of acquisition, except where it is acquired at a premium in which case the premium is amortised over the remaining period of maturity using Straight Line Method.

3.2.2 Investments held under ''Available for Sale'' and ''Held for Trading'' categories are valued at cost or market value, whichever is lower. Individual scrips are valued and depreciation/appreciation is aggregated category-wise as per the classification of investments in the Balance Sheet. Net depreciation is provided for and net appreciation, if any, is ignored.

3.2.3 For the purpose of valuation –

I. Cost refers to actual cost of acquisition/carrying cost, wherever applicable.

II. Market value refers to latest available price from the trades/quotes on the stock exchanges, SGL account transactions, price list of RBI/FIMMDA/ PDAI; and accordingly:

a) Government Securities and Other Approved Securities are valued on the basis of prices/ Yield to Maturity (YTM) rates of FIMMDA/PDAI with appropriate spreads as prescribed by RBI.

b) Debentures/Bonds are valued at Market price if quoted, otherwise on YTM basis with appropriate spreads as prescribed by PDAI/ FIMMDA.

c) Treasury Bills, Rural Infrastructure Development Fund (RIDF), Commercial Papers and Certificate of Deposits are valued at carrying cost.

d) Preference Shares are valued on YTM basis and not exceeding redemption value as per RBI/FIMMDA guidelines.

e) Equity Shares are valued at last traded prices if quoted; unquoted shares are valued at breakup value (without considering ''revaluation reserves'', if any) as per the latest available balance sheet or at Rs.1 per company, where latest balance sheet is not available.

f) Investment in RRBs is valued at carrying cost (i.e. book value).

g) Investment in Subsidiaries/ Joint ventures is valued at carrying cost.

h) Security Receipts issued by Securitisation Companies (SC)/Reconstruction Company (RC) are valued/classified as per the norms applicable to investment in Non SLR instruments as prescribed by RBI from time to time.

i) Units of Venture Capital Funds (VCF) are valued at NAV shown by the VCF in its financial statements not older than 18 months.

j) Units of mutual funds are valued as per stock exchange quotations, if quoted; at Repurchase Price/Net Asset Value, if unquoted.

3.2.4 Investments are also categorized based on their performance and provisions are made as per IRAC norms applicable to advances as per RBI guidelines. Provision made on non-performing investments is not set off against the appreciation in respect of other performing investments.

3.3 Gain, if any, on sale/disposal of securities in the Held to Maturity category is appropriated to Capital Reserve through the Profit and Loss Account (Net of taxes and amount required to be transferred to Statutory Reserve).

3.4 Transfer of securities from one category to another is carried out at lowest of acquisition cost/book value/market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

3.5 Floating/Fixed Rate Note and Credit Linked Note, Investments at Foreign Branch are classified as ''Available For Sale'' category and are valued at nominal value or market value, whichever is lower. These Investments are marked to market at quarterly intervals and where the value of these Investments is lower than the nominal value, provision for depreciation is created in the Balance Sheet and a corresponding charge is recognized in the Profit and Loss Account.

3.6 Incentive received on subscriptions is deducted from the cost of securities. Brokerage/Commission/Stamp Duty paid in connection with acquisition of securities is treated as revenue expense.

3.7 Availment of funds from RBI under Repo and deployment of funds under Reverse Repo are accounted as borrowing and lending respectively.

4. DERIVATIVES

4.1 The credit exposures for derivative transactions are monitored on Current Credit Exposure method.

4.2 The naked hedging transactions are considered as a trading transaction and allowed to run till maturity.

4.3 Derivative transactions are classified into hedge and non-hedge and measured at fair value.

4.4 The transactions covered on back-to-back basis and the transactions undertaken to hedge the risk on assets and liabilities are valued and accounted for on interest accrual basis.

4.5 Market making transactions are accounted on marked-to-market basis at monthly intervals, while hedging transactions are accounted for on accrual basis.

4.6 Premium at the time of purchase, if any, is amortized over the residual period of the transactions and profit is recognised on maturity. Discount is held in Income Received in Advance account and appropriated to Profit and Loss account on maturity.

5. ADVANCES

5.1 Advances are classified into Performing and Non Performing Assets and provisions for losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In respect of foreign branch, asset classification and provisioning for loan losses are made as per local requirements or as per RBI prudential norms, whichever are more stringent.

5.2 Advances are stated net of provisions made for Non Performing Assets except general provisions for Standard Advances.

5.3 In case of sale of financial assets to the Asset Recon- struction Company (ARC)/Securitization Company (SC)/Banks/FIs/NBFCs at a price below the Net Book Value (NBV), i.e Book Value less Provision held, the shortfall is debited to the Profit and Loss Account and in case of sale at a value higher than the NBV, the excess provision is reversed to Profit and Loss Account in the year in which the amounts are received.

6. PREMISES AND OTHER FIXED ASSETS

6.1 Premises and other fixed assets are stated at historical cost and/or revaluation value less accumulated depreciation. The premises are revalued every five years at value determined based on the appraisal by approved valuers. Surplus arising at such revaluation is credited to Revaluation Reserve.

6.2 Depreciation on premises has been provided on composite cost wherever cost of land cannot be segregated. Additional depreciation on revalued amount is adjusted to the Revaluation Reserve.

6.3 Depreciation on other fixed assets, including additions, is provided for on the basis of written down value, except as otherwise stated, at the following rates:

and operating software, which is provided on pro- rata basis. No depreciation is provided on the assets in the year of their disposal.

7. RETIREMENT BENEFITS

7.1 Statutory contribution is made to Provident Fund Trust in respect of employees who have opted for Provident Fund. For others who have opted for pension scheme, contribution to Pension Fund Trust is made based on actuarial valuation.

7.2 Contribution to Gratuity Fund Trust is based on actuarial valuation.

7.3 Liability towards leave encashment is accounted for on Cash Basis.

8. REVENUE RECOGNITION

a) Revenue and expenses are generally accounted for on accrual basis except in respect of fees/ commission on transactions with Mutual Funds, income from non-banking assets, locker rent, interest on overdue bills/tax refunds, income from non-performing assets and legal expenses on suit filed accounts which are accounted for on cash basis.

b) Income from dividend on shares is accounted for on accrual basis when the same is declared and the right to receive the dividend is established.

c) Interest on matured deposits is accounted for at the time of renewal. However provision for interest on matured deposits is made at the Corporate Office as per the RBI guidelines.

d) The broken period interest on sale or purchase of securities is treated as revenue as per RBI guidelines.

e) Expenditure in respect of application software, bonds issue, franchises of credit card and insurance products are charged off to revenue.

f) Income from consignment sale of imported gold coins is accounted for as other income after the sale is completed.

9. TAXES ON INCOME

9.1 Current tax is determined as per the provisions of the Income Tax Act, 1961.

9.2 Deferred Tax Assets and Liabilities arising on account of timing differences between taxable and accounting income, is recognized keeping in view, the consideration of prudence in respect of Deferred Tax Assets/Liabilities in accordance with the Accounting Standard 22 issued by ICAI.

10. COUNTRY RISK MANAGEMENT

The Bank has adopted the Country Risk Management policy in accordance with the RBI guidelines and following the Country Risk Category classification published by Export Credit Guarantee Corporation (ECGC).

11. UNHEDGED FOREIGN CURRENCY EXPOSURE

The Bank has framed and approved a policy for administration of credit risk rising out of Unhedged foreign currency exposures in accordance with extant RBI guidelines.

12. IMPAIRMENT OF ASSETS

The carrying amount of assets is reviewed at each Balance Sheet date for any indication of impairment based on internal/external factor. An impairment loss is recognized whenever the carrying amount of an asset exceeds its estimated recoverable amount.

13. NET PROFIT

Net Profit is arrived at after accounting for the following under "Provisions and Contingencies": – Provision for Income Tax and Wealth Tax – Provision/Write off of Non-Performing Advances and Investments – Provision on Standard Assets – Adjustment for appreciation/depreciation on Investments – Transfer to Contingencies – Other usual and necessary provisions.

14. EARNINGS PER SHARE

Earnings per Share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding as at the end of the year.

Note: *Appreciation / Reduction in rupee valuation of Investments include fluctuation in currency rates / INR rates.

iii) Sale and transfers to / from HTM category

The value of sales and transfers of securities to/from HTM category does not exceed 5 percent of the book value of investments held in HTM category at the beginning of the year as per RBI guidelines.

iv) SGL Bouncing

There was no instance of SGL bouncing during the financial year 2014-15.


Mar 31, 2013

1. ACCOUNTING CONVENTIONS

The accompanying financial statements are prepared following the ''Going Concern'' concept on historical cost basis and conform to the statutory provisions including the RBI guidelines and the applicable accounting standards and prevailing practices of the countries concerned, except wherever otherwise stated.

2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

2.1 Exchange rates as notified by Foreign Exchange Dealers'' Association of India (FEDAI) are adopted.

2.2 All foreign currency transactions involving forex liabilities are recorded by applying weekly average rate (WAR), whereas all forex assets are recorded at on going market rates.

2.3 All the monetary assets and liabilities are reported at the end of the year at closing exchange rate and the resultant profit / loss is taken to revenue.

2.4 Outstanding Forward Exchange Contracts are reported at the exchange rates notified for specified maturities and at interpolated rates for contracts of "in between maturities".

2.5 Contingent liabilities on account of Guarantees, Forward Contracts, Letters of Credit, Acceptances, Endorsements and other obligations are translated at the closing exchange rates.

2.6 Foreign Branch of the Bank is classified as "Non- Integral Foreign Operation"

a) All assets and liabilities of the foreign operations, both monetary and non-monetary as well as contingent liabilities are translated at closing exchange rates.

b) Income and Expenditure are translated at quarterly average exchange rates.

c) The resulting Exchange Difference arising from translation as per AS-11 is accumulated in a "Foreign Currency Translation Reserve" until disposal of net investment of the foreign operation.

3. INVESTMENTS

3.1 In accordance with RBI guidelines, investments in India are classified into:

I. Held to Maturity

II. Available for Sale

III. Held for Trading

Each category is further classified into:

a) Government Securities b) Other Approved

c) Shares Securities

d) Debentures and Bonds e) Subsidiaries

f) Others

3.2 Investments are valued in accordance with RBI guidelines.

3.2.1 Investments under ''Held to Maturity'' are valued at cost of acquisition, except where it is acquired at premium in which case the premium is amortised over the remaining period of maturity using Straight Line Method.

3.2.2 Investments held under ''Available for Sale'' and ''Held for Trading'' categories are valued at cost or market value, whichever is lower. Individual scripts are valued and depreciation/appreciation is aggregated category-wise as per the classification of investments in the Balance Sheet. Net depreciation is provided for and net appreciation, if any, is ignored.

3.2.3 For the purpose of valuation -

I. Cost refers to actual cost of acquisition / carrying cost, wherever applicable.

II. Market value refers to latest available price from the trades / quotes on the stock exchanges, SGL account transactions, price list of RBI / FIMMDA / PDAI; and accordingly:

a) Government Securities and Other Approved Securities are valued on the basis of prices / Yield to Maturity (YTM) rates of FIMMDA / PDAI with appropriate spreads as prescribed by RBI.

b) Debentures / Bonds are valued on YTM basis with appropriate spreads as prescribed by PDAI / FIMMDA.

c) Treasury Bills, Rural Infrastructure Development Fund (RIDF), Commercial Papers and Certificate of Deposits are valued at cost.

d) Preference Shares are valued on YTM basis.

e) Equity Shares are valued at last traded prices and where the shares are not quoted on stock exchanges, the unquoted shares are valued at breakup value (without considering ''revaluation reserves'', if any) as per the latest available balance sheet or at Rs. 1 per company, where latest balance sheet is not available.

f) Investment in RRBs is valued at carrying cost ( i.e. book value).

g) Security Receipts issued by Securitisation Companies (SC) / Reconstruction Company (RC) are valued / classified as per the norms applicable to investment in Non SLR instruments as prescribed by RBI from time to time.

h) Units of Venture Capital Funds (VCF) are valued at NAV shown by the VCF in its financial statements not older than 18 months.

i) Units in mutual fund are valued at repurchase price or Net Asset Value, whichever is lower.

3.2.4 Investments are also categorised based on their performance and provisions are made as per IRAC norms applicable to advances as per RBI guidelines. Provision made on non-performing investments is not set off against the appreciation in respect of other performing investments.

3.3. Gain, if any, on sale / disposal of securities in the Held to Maturity category is taken to Capital Reserve through the Profit and Loss Account (Net of taxes and amount required to be transferred to Statutory Reserve).

3.4. Transfer of securities from one category to another is effected after providing for depreciation, if any, on the securities so transferred.

3.5 Floating / Fixed Rate Note and Credit Linked Note, investments at Foreign Branch are classified as ''Available For Sale'' category and are valued at nominal value or market value, whichever is lower. These investments are marked to market at quarterly intervals and where the value of these investments is lower than the nominal value, a provision for depreciation is created in the Balance Sheet and a corresponding charge is recognized in the Profit and Loss Account.

3.6 Incentive received on subscriptions is deducted from the cost of securities. Brokerage / commission / stamp duty paid in connection with acquisition of securities is treated as revenue expense.

3.7 Availment of funds from RBI under Repo and deployment of funds under Reverse Repo are accounted as borrowing and lending respectively.

4. DERIVATIVES

4.1 The credit exposures for derivative transactions are monitored on Current Credit Exposure method.

4.2 The naked hedging transactions are considered as a trading transaction and allowed to run till maturity.

4.3 Derivative transactions are classified into hedge and non-hedge and measured at fair value.

4.4 The transactions covered on back-to-back basis and the transactions undertaken to hedge the risk on assets and liabilities are valued and accounted on interest accrual basis.

4.5 Market making transactions are accounted on marked-to-market basis at fortnightly intervals, while hedging transactions are accounted for on accrual basis.

4.6 Premium at the time of purchase, if any, is amortized over the residual period of the transactions and profit is recognised on maturity. Discount is held in Income Received in Advance account and appropriated to Profit and Loss account on maturity.

5. ADVANCES

5.1 Advances are classified into Performing and Non Performing Assets and provisions for loan losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In respect of foreign branch, asset classification and provisioning for loan losses are made as per local requirements or as per RBI prudential norms, whichever is more stringent.

5.2 Advances are stated net of provisions made for Non Performing Assets except general provisions for Standard Advances. Provision held for assets sold to ''Assets Recovery Company (ies)'' have been included in ''Other Liabilities and Provisions''.

6. PREMISES AND OTHER FIXED ASSETS

6.1 Premises and other fixed assets are stated at historical cost and / or revaluation value less accumulated depreciation. The premises are revalued every five years at value determined based on the appraisal by approved valuers. Surplus arising at such revaluation is credited to Revaluation Reserve.

6.2 Depreciation on premises has been provided on composite cost wherever cost of land cannot be segregated. Additional depreciation on revalued amount is adjusted to the Revaluation Reserve.

6.3 Depreciation on other fixed assets, including additions, is provided for on the basis of written down value, except as otherwise stated, at the following rates:

6.4 Depreciation on additions to fixed assets is provided for the whole year except on additions to computers and operating software, which is on pro-rata basis. No depreciation is provided on the assets in the year of their disposal.

7. RETIREMENT BENEFITS

7.1 Statutory contribution is made to Provident Fund Trust in respect of employees who have opted for Provident Fund. For others who have opted for pension scheme, contribution to Pension Fund Trust is made based on actuarial valuation.

7.2 Contribution to Gratuity Fund Trust is based on actuarial valuation.

7.3 Liability towards leave encashment is provided for on accrual basis as per actuarial valuation.

8. REVENUE RECOGNITION

a) Revenue and expenses are generally accounted for on accrual basis except in respect of fees / commission on transactions with Mutual Funds, income on non-banking assets, locker rent, interest on overdue bills / tax refunds, income from non-performing assets and legal expenses on suit filed accounts which are accounted for on cash basis.

b) Income from dividend on shares is accounted on accrual basis when the same is declared and the right to receive the dividend is established.

c) Interest on matured deposits is accounted for at the time of renewal. However provision for interest on matured deposits is made at Corporate Office as per the RBI guidelines.

d) The broken period interest on sale or purchase of securities is treated as revenue as per RBI guidelines.

e) Expenditure in respect of application software, bonds issue, franchises of credit card and insurance products are charged off to revenue.

f) Income from consignment sale of imported gold coins is accounted for as other income after the sale is completed.

9. TAXES ON INCOME

9.1 Current tax is determined as per the provisions of the Income Tax Act, 1961.

9.2 Deferred Tax Assets and Liabilities arising on account of timing differences between taxable and accounting income, is recognized keeping in view, the consideration of prudence in respect of Deferred Tax Assets / Liabilities in accordance with the Accounting Standard 22 issued by ICAI.

10. COUNTRY RISK MANAGEMENT

The Bank has adopted the Country Risk Management policy in accordance with the RBI guidelines.

11. VALUATION OF GOLD COINS

Stock of imported gold coins, if any, is valued at cost or market price, whichever is lower.

However, there was no Purchase and Sale of gold coins during the financial year 2012 - 13. As a result, there was no stock of gold coins as on 31-03-2013.

12. IMPAIRMENT OF ASSETS

The carrying amount of assets are reviewed at each Balance Sheet date for any indication of impairment based on internal / external factor. An impairment loss is recognized whenever the carrying amount of an asset exceeds its estimated recoverable amount.

13. NET PROFIT

Net Profit is arrived at after accounting for the following under "Provisions & Contingencies":

- Provision for Income Tax and Wealth Tax

- Provision / Write off of Non-Performing Advances and Investments

- Provision on Standard Assets

- Adjustment for appreciation / depreciation on Investments

- Transfer to Contingencies

- Other usual and necessary provisions.

14. EARNINGS PER SHARE

Earnings Per Share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding as at the end of the year.


Mar 31, 2012

1. ACCOUNTING CONVENTIONS

The accompanying financial statements are prepared following the 'Going Concern' concept on historical cost basis and conform to the statutory provisions including the RBI guidelines and the applicable accounting standards and prevailing practices of the countries concerned, except wherever otherwise stated.

2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

2.1 Exchange rates as notified by Foreign Exchange Dealers' Association of India (FEDAI) are adopted.

2.2 All foreign currency transactions involving forex liabilities are recorded by applying weekly average rate (WAR) published by FEDAI, whereas all forex assets are recorded at on going market rates.

2.3 All the monetary assets & liabilities are reported at the end of the year at FEDAI closing exchange rate and the resultant profit / loss is taken to revenue.

2.4 Outstanding Forward Exchange Contracts are reported at the exchange rates notified for specified maturities and at interpolated rates for contracts of "in between maturities".

2.5 Contingent liabilities on account of Guarantees, Letters of Credit, Acceptances, Endorsements and other obligations are translated at the closing exchange rates.

2.6 Foreign Branch of the Bank is classified as "Non-Integral Foreign Operation"

a) All assets & liabilities of the foreign operations, both monetary and non-monetary as well as contingent liabilities are translated at closing exchange rates.

b) Income and Expenditure are translated at quarterly average exchange rates.

c) The resulting exchange difference arising from translation as per AS-11 is accumulated in a "Foreign Currency Translation Reserve" until disposal of net investment of the foreign operation.

3. INVESTMENTS

3.1 In accordance with RBI guidelines, investments in India are classified into:

I. Held to Maturity

II. Available for Sale

III. Held for Trading

Each category is further classified into:

a) Government Securities b) Other Approved Securities

c) Shares d) Debentures & Bonds

e) Subsidiaries f) Others

3.2 Investments are valued in accordance with RBI guidelines.

3.2.1 Investments under Held to Maturity are valued at cost of acquisition, except where it is acquired at premium in which case the premium is amortised over the remaining period of maturity using Straight Line Method.

3.2.2 Investments held under Available for Sale and Held for Trading category are valued at cost or market value, whichever is lower. Individual scripts are valued and depreciation / appreciation is aggregated category- wise as per the classification of investments in the Balance Sheet. Net depreciation is provided for and net appreciation, if any, is ignored.

3.2.3 For the purpose of valuation -

I. Cost refers to actual cost of acquisition / carrying cost, wherever applicable.

II. Market value refers to latest available price from the trades / quotes on the stock exchanges, SGL account transactions, price list of RBI / FIMMDA / PDAI and accordingly:

a) Government Securities and Other Approved Securities are valued on the basis of prices / Yield to Maturity (YTM) rates of FIMMDA / PDAI with appropriate spreads as prescribed by RBI.

b) Debentures / Bonds are valued on YTM basis with appropriate spreads as prescribed by PDAI / FIMMDA.

c) Treasury Bills, Rural Infrastructure Development Fund (RIDF), Commercial Papers and Certificate of Deposits are valued at cost.

d) Preference Shares are valued on YTM basis.

e) Equity Shares are valued at last traded prices and where the shares are not quoted on stock exchanges, the unquoted shares are valued at breakup value (without considering 'revaluation reserves', if any) as per the latest available balance sheet or atRs 1 per company, where latest balance sheet is not available.

f) Investment in RRBs is valued at carrying cost ( i.e. book value).

g) Security Receipts issued by Securitisation Companies (SC)/Reconstruction Company (RC) are valued/classified as per the norms applicable to investment in Non SLR instruments as prescribed by RBI from time to time.

h) Units of Venture Capital Funds (VCF) are valued at NAV shown by the VCF in its financial statements not older than 18 months.

i) Units in mutual fund are valued at repurchase price or Net Asset Value, whichever is lower.

3.2.4 Investments are also categorised based on their performance and provisions are made as per IRAC norms applicable to advances as per RBI guidelines. Provision made on non-performing investments is not set off against the appreciation in respect of other performing investments.

3.3. Gain, if any, on sale / disposal of securities in the Held to Maturity category is taken to Capital Reserve through the Profit and Loss Account (Net of taxes and amount required to be transferred to Statutory Reserve).

3.4. Transfer of securities from one category to another is effected after providing for depreciation, if any, on the securities so transferred.

3.5 Floating Rate Note and Credit Linked Note investments at Foreign Branch are classified as Available For Sale category and are valued at nominal value or market value, whichever is lower. These investments are marked to market at quarterly intervals and where the value of these investments is lower than the nominal value, a provision for depreciation is created in the Balance Sheet and a corresponding charge is recognized in the Profit and Loss Account.

3.6 Incentive received on subscriptions is deducted from the cost of securities. Brokerage/commission/stamp duty paid in connection with acquisition of securities is treated as revenue expenses.

3.7 Availment of funds from RBI under Repo and deployment of funds under Reverse Repo are accounted as borrowing and lending respectively.

4. DERIVATIVES

4.1 The credit exposures for derivative transactions are monitored on Current Credit Exposure method.

4.2 The naked hedging transactions are considered as a trading transaction and allowed to run till maturity.

4.3 Derivative transactions are classified into hedge and non- hedge and measured at fair value.

4.4 The transactions covered on back-to-back basis and the transactions undertaken to hedge the risk on assets and liabilities are valued and accounted on interest accrual basis.

4.5 Market making transactions are accounted on marked- to-market basis at fortnightly intervals, while hedging transactions are accounted for on accrual basis.

4.6 Premium at the time of purchase if any is amortized over the residual period of the transactions and profit is booked on maturity. Discount is held in Income Received in Advance account and appropriated to Profit and Loss account on maturity.

5. ADVANCES

5.1 Advances are classified into Performing and Non Performing Assets and provisions for loan losses on such advances are made as per prudential norms issued by Reserve Bank of India from time to time. In respect of foreign branch, asset classification and provisioning for loan losses are made as per local requirements or as per RBI prudential norms, whichever is more stringent.

5.2 Advances are stated net of provisions made for Non Performing Assets except general provisions for Standard Advances, Provision held for sold assets have been included in 'Other Liabilities and Provisions'.

6. PREMISES AND OTHER FIXED ASSETS

6.1 Premises and other fixed assets are stated at historical cost and/or revaluation value less accumulated depreciation. The premises are revalued every five years at value determined based on the appraisal by approved valuers. Surplus arising at such revaluation is credited to Revaluation Reserve.

6.2 Depreciation on premises has been provided on composite cost wherever cost of land cannot be segregated. Additional depreciation on revalued amount is adjusted to the Revaluation Reserve.

6.4 Depreciation on additions to fixed assets is provided for the whole year except on additions to computers and operating software, which is on pro-rata basis. No depreciation is provided on the assets in the year of their disposal.

7. RETIREMENT BENEFITS

7.1 Statutory contribution is made to Provident Fund Trust in respect of employees who have opted for Provident Fund. For others who have opted for pension scheme, contribution to Pension Fund Trust is made based on actuarial valuation.

7.2 Contribution to Gratuity Fund Trust is based on actuarial valuation.

7. 3 Liability towards leave encashment is provided on accrual basis as per actuarial valuation.

8. REVENUE RECOGNITION

a) Revenue and expenses are generally accounted for on accrual basisexceptin respect offees/commission on transactions with Mutual Funds, income on non- banking assets, locker rent, interest on overdue bills/ tax refunds, income from non-performing assets and legal expenses on suit filed accounts which are accounted on cash basis.

b) Income from dividend on shares is accounted on accrual basis when the same is declared and the right to receive the dividend is established.

c) Interest on matured deposits is accounted for at the time of renewal. However provision for interest on matured deposits has been made at corporate office as per the RBI guidelines.

d) The broken period interest on sale or purchase of securities is treated as revenue as per RBI guidelines.

e) Expenditure in respect of application software, bonds issue, franchises of credit card and insurance products are charged off to revenue.

f) Income from consignment sale of imported gold coins is accounted for as other income after the sale is complete.

9. TAXES ON INCOME

9.1 Current tax is determined as per the provisions of the Income tax Act, 1961.

9.2 Deferred tax assets and liabilities arising on account of timing differences between taxable and accounting income, is recognized keeping in view, the consideration of prudence in respect of deferred tax assets/liabilities in accordance with the Accounting Standard 22 issued by ICAI.

10. COUNTRY RISK MANAGEMENT

The bank has adopted the Country Risk Management policy in accordance with the RBI guidelines.

11. GOLD COINS

Stock of imported gold coins is valued at cost or market price, whichever is lower.

12. NET PROFIT

Net Profit is arrived at after accounting for the following under "Provisions & Contingencies":

- Provision for Income tax and Wealth tax

- Provision/Write off of Non-Performing Advances and Investments

- Provision on Standard Assets

- Adjustment for appreciation/depreciation on Investments

- Transfer to Contingencies

- Other usual and necessary provisions.


Mar 31, 2011

1.0 ACCOUNTING CONVENTIONS

The accompanying financial statements are prepared following the Going Concern concept on historical cost basis and conform to the statutory provisions including the RBI guidelines and the applicable accounting standards and prevailing practices of the countries concerned, except wherever otherwise stated.

2.0 TRANSACTIONS INVOLVING FOREIGN EXCHANGE

2.1 Exchange rates as notified by Foreign Exchange Dealers Association of India (FEDAI) are adopted.

2.2 All foreign currency transactions involving forex liabilities are recorded by applying weekly average rate (WAR) published by FEDAI whereas all forex assets are recorded at on going market rates.

2.3 All the monetary assets & liabilities are reported at the end of the year at FEDAI closing exchange rate and the resultant profit / loss is taken to revenue.

2.4 Outstanding Forward Exchange Contracts are reported at the exchange rates notified for specified maturities and at interpolated rates for contracts of "in between maturities".

2.5 Contingent liabilities on account of Guarantees, Letters of Credit, Acceptances, Endorsements and other obligations are translated at closing exchange rates.

2.6 Foreign Branch of the Bank is classified as "Non- Integral Foreign Operation"

a) All assets & liabilities of the foreign operations, both monetary and non-monetary as well as contingent liabilities are translated at closing exchange rates.

b) Income and Expenditure are translated at quarterly average exchange rates.

c) The resulting exchange difference arising from translation as per AS-11 is accumulated in a "Foreign Currency Translation Reserve" until disposal of net investment of the foreign operation.

3.0 INVESTMENTS

3.1 In accordance with guidelines of RBI, investments in India are classified into:

I. Held to Maturity

II. Available for Sale

III. Held for Trading

Each category is further classified into: a) Government Securities b) Other Approved Securities c) Shares d) Debentures & Bonds

e) Subsidiaries f) Others,

3.2 Investments are valued in accordance with RBI guidelines.

3.2.1 Investments under Held to Maturity are valued at cost of acquisition, except where it is acquired at premium in which case the premium is amortised over the remaining period of maturity using Straight Line Method.

3.2.2 Investments held under Available for Sale category are valued at cost or market value, whichever is lower. Individual scripts are valued and depreciation / appreciation is aggregated category-wise as per the classification of investments in the Balance Sheet. Net depreciation is provided for and net appreciation, if any, is ignored.

3.2.3 Investments under Held for Trading category are marked to market and the resultant appreciation/ depreciation is aggregated category-wise as per Balance Sheet classification. Net depreciation is provided for and net appreciation, if any, is ignored.

3.2.4 For the purpose of valuation -

I. Cost refers to actual cost of acquisition / carrying cost, wherever applicable.

II. Market value refers to latest available price from the trades / quotes on the stock exchanges, SGL account transactions, price list of RBI / FIMMDA / PDAI as such:

a) Government Securities and Other Approved Securities are valued on the basis of Prices / Yield to Maturity (YTM) rates of FIMMDA / PDAI with appropriate spreads as prescribed by RBI.

b) Debentures / Bonds are valued on YTM basis with appropriate spreads as prescribed by PDAI / FIMMDA.

c) Treasury Bills, RIDF, Commercial Papers and Certificate of Deposits are valued at cost.

d) Preference Shares are valued on YTM basis.

e) Equity Shares are valued at last traded prices and where the shares are not quoted on stock exchanges, the unquoted shares are valued at breakup value (without considering revaluation reserves, if any) as per the latest available balance sheet.

f) Investment in RRBs is valued at carrying cost (i.e. book value).

g) Security Receipts issued by Securitisation Companies (SC)/Reconstruction Company (RC) are valued/classified as per the norms applicable to investment in Non- SLR instruments as prescribed by RBI from time-to-time.

h) Units of Venture Capital Funds (VCF) are valued at NAV shown by the VCF in its financial statements not older than 18 months.

i) Units in mutual fund are valued at repurchase price or Net Asset Value, whichever is lower.

3.2.5 Investments are also categorised based on their performance and provisions are made as per IRAC norms applicable to advances as per RBI guidelines. Provision made on non-performing investments is not set off against the appreciation in respect of other performing investments.

3.3. Gain, if any, on sale / disposal of securities in the Held to Maturity category is taken to Capital Reserve through the Profit and Loss Account.

3.4. Transfer of securities from one category to another is effected after providing for depreciation, if any, on the securities so transferred.

3.5 Floating Rate Note and Credit Linked Note investments at Foreign Branch are classified as Available For Sale and are valued at nominal value or market value, whichever is lower. These investments are marked to market at quarterly intervals and where the value of these investments is lower than the nominal value, a provision for depreciation is created in the Balance Sheet and a charge is recognized in the Profit and Loss Account.

3.6 Incentive received on subscriptions is deducted from the cost of securities. Brokerage/commission/stamp duty paid in connection with acquisition of securities is treated as revenue expenses.

4.0 DERIVATIVES

4.1 The credit exposures for derivative transactions are monitored on Current Credit Exposure method.

4.2 The naked hedging transactions are considered as a trading transaction and allowed to run till maturity.

4.3 Derivative transactions are classified into hedge and non-hedge and measured at fair value.

4.4 The transactions covered on back-to-back basis and the transactions undertaken to hedge the risk on assets and liabilities are valued and accounted on interest accrual basis.

4.5 Market making transactions are accounted on marked-to-market basis at fortnightly intervals, while hedging transactions are accounted for on accrual basis.

4.6 Premium at the time of purchase if any is amortized over the residual period of the transactions and profit is booked on maturity. Discount is held in Income Received in Advance account and appropriated to P&L account on maturity.

5.0 ADVANCES

5.1 Advances are classified into Performing and Non- Performing Assets and provisions for loan losses on such advances are made as per prudential norms issued by Reserve Bank of India from time-to-time. In respect of foreign branch, asset classification and provisioning for loan losses are made as per local requirements or as per RBI prudential norms, whichever is more stringent.

5.2 Advances are stated net of provisions made for Non-Performing Assets except general provisions for Standard Advances, Provision held for sold assets which have been included in Other Liabilities and Provisions.

6.0 PREMISES AND OTHER FIXED ASSETS

6.1 Premises and other fixed assets are stated at historical cost and/or revaluation value less accumulated depreciation. The premises are revalued every five years at value determined based on the appraisal by approved valuers. Surplus arising at such revaluation is credited to Revaluation Reserve.

6.2 Depreciation on premises has been provided on composite cost wherever cost of land cannot be segregated. Additional depreciation on revalued amount is adjusted to the Revaluation Reserve.

6.3 Depreciation on other fixed assets, including additions, is provided for on the basis of written down value, except as otherwise stated, at the following rates:

6.4 Depreciation on additions to fixed assets is provided for the whole year except on additions to computers and operating software, which is on pro-rata basis. No depreciation is provided on the assets in the year of their disposal.


Mar 31, 2010

1.0 ACCOUNTING CONVENTIONS

The accompanying financial statements are prepared following the ‘Going Concern’ concept on historical cost basis and conform to the statutory provisions and prevailing practices of the countries concerned, except wherever otherwise stated.

2.0 TRANSACTIONS INVOLVING FOREIGN EXCHANGE

2.1 Exchange rates as notified by Foreign Exchange Dealers’ Association of India (FEDAI) are adopted.

2.2 All foreign currency transactions involving forex liabilities are recorded by applying weekly Average rate (wAr) published by FEDAI whereas all forex assets are recorded at on going market rates.

2.3 All the monetary assets & liabilities are reported at the end of the year at FEDAI closing exchange rate and the resultant profit / loss is taken to revenue.

2.4 Outstanding Forward Exchange Contracts are reported at the exchange rates notified for specified maturities and at interpolated rates for contracts of “in between maturities”.

2.5 Contingent liabilities on account of Guarantees, Letters of Credit, Acceptances, Endorsements and other obligations are translated at closing exchange rates.

2.6 Foreign Branch of the Bank is classified as “Non- Integral Foreign Operation”.

a) All assets & liabilities of the foreign operations, both monetary and non-monetary as well as contingent liabilities are translated at closing exchange rates.

b) Income and Expenditure are translated at quarterly average exchange rates.

c) The resulting exchange difference arising from translation as per AS-11 is accumulated in a “Foreign Currency Translation reserve” until disposal of net investment of the foreign operation.

3.0 INVESTMENTS

3.1 In accordance with guidelines of rBI, investments in India are classified into:

I. Held to Maturity

II. Available for Sale

III. Held for Trading

Each category is further classified into: a) Government Securities b) Other Approved Securities c) Shares d) Debentures & Bonds

e) Subsidiaries f) Others.

3.2 Investments are valued in accordance with rBI guidelines.

3.2.1 Investments under Held to Maturity are valued at cost of acquisition, except where it is acquired at premium in which case the premium is amortised over the remaining period of maturity using Straight Line Method.

3.2.2 Investments held under Available for Sale category are valued at cost or market value, whichever is lower. Individual scriptsare valued and depreciation/ appreciation is aggregated category-wise as per the classification of investments in the Balance Sheet. Net depreciation is provided for and net appreciation, if any, is ignored.

3.2.3 Investments under Held for Trading category are marked to market and the resultant appreciation/ depreciation is aggregated category-wise as per Balance Sheet classification. Net depreciation is provided for and net appreciation, if any, is ignored.

3.2.4 For the purpose of valuation –

I. Cost refers to actual cost of acquisition/carrying cost, wherever applicable.

II. Market value refers to latest available price from the trades / quotes on the stock exchanges, SGL account transactions, price list of rBI / FIMMDA/ PDAI as such:

a) Government Securities and Other Approved Securities are valued on the basis of prices / Yield to Maturity (YTM) rates of FIMMDA/ PDAI with appropriate spreads as prescribed by rBI.

b) Debentures / Bonds are valued on YTM basis with appropriate spreads as prescribed by PDAI / FIMMDA.

c) Treasury Bills, rIDF, Commercial Papers and Certificate of Deposits are valued at cost.

d) Preference Shares are valued on YTM basis.

e) Equity Shares are valued at last traded prices and where the shares are not quoted on stock exchanges, the unquoted shares are valued at breakup value (without considering ‘revaluation reserves’, if any) as per the latest available balance sheet.

f) Investment in rrBs is valued at carrying cost( i.e. book value).

g) Security receipts issued by Securitisation Companies (SC)/reconstruction Company (rC) are valued/classified as per the norms applicable to investment in Non SLr instruments as prescribed by rBI from time to time.

h) Units of Venture Capital Funds (VCF) are valued at NAV shown by the VCF in its financial statements not older than 18 months.

i) Units in mutual fund are valued at repurchase price or Net Asset Value, whichever is lower.

3.2.5 Investments are also categorised based on their performance and provisions are made as per IRAC norms applicable to advances as per RBI guidelines. Provision made on non-performing investments is not set off against the appreciation in respect of other performing investments.

3.3 Gain, if any, on sale / disposal of securities in the Held to Maturity category is taken to Capital reserve through the Profit and Loss Account.

3.4 Transfer of securities from one category to another is effected after providing for depreciation, if any, on the securities so transferred.

3.5 Floating rate Note and Credit Linked Note investments at Foreign Branch are classified as Available For Sale and are valued at nominal value or market value, whichever is lower. These investments are marked to market at quarterly intervals and where the value of these investments is lower than the nominal value, a provision for depreciation is created in the Balance Sheet and a charge is recognized in the Profit and Loss Account.

3.6 Incentive received on subscriptions is deducted from the cost of securities. Brokerage/commission/ stamp duty paid in connection with acquisition of securities is treated as revenue expenses.

4.0 DERIVATIVES

4.1 The credit exposures for derivative transactions are monitored on Current Credit Exposure method.

4.2 The naked hedging transactions are considered as a trading transaction and allowed to run till maturity.

4.3 Derivative transactions are classified into hedge and non-hedge and measured at fair value.

4.4 The transactions covered on back-to-back basis and the transactions undertaken to hedge the risk on assets and liabilities are valued and accounted on interest accrual basis.

4.5 Market making transactions are accounted on marked-to-market basis at fortnightly intervals, while hedging transactions are accounted for on accrual basis.

4.6 Premium at the time of purchase if any is amortized over the residual period of the transactions and profit is booked on maturity. Discount is held in Income received in Advance account and appropriated to P&L account on maturity.

5.0 ADVANCES

5.1 Advances are classified into Performing and Non- Performing Assets and provisions for loan losses on such advances are made as per prudential norms issued by reserve Bank of India from time to time. In respect of foreign branch, asset classification and provisioning for loan losses are made as per local requirements or as per rBI prudential norms, whichever is more stringent. 5.2 Advances are stated net of provisions made for Non-Performing Assets except general provisions for Standard Advances, Provision held for sold assets which have been included in ‘Other Liabilities and Provisions’.

6.0 PREMISES AND OTHER FIXED ASSETS

6.1 Premisesandotherfixedassetsarestatedathistorical cost and/or revaluation value less accumulated depreciation. The premises are revalued every five years at value determined based on the appraisal by approved valuers. Surplus arising at such revaluation is credited to revaluation reserve.

6.2 Depreciation on premises has been provided on composite cost wherever cost of land cannot be segregated. Additional depreciation on revalued amount is adjusted to the revaluation reserve.

6.4 Depreciation on additions to fixed assets is provided for the whole year except on additions to computers and operating software, which is on pro-rata basis. No depreciation is provided on the assets in the year of their disposal.

7.0 RETIREMENT BENEFITS

7.1 Statutory contribution is made to Provident Fund Trust in respect of employees who have opted for Provident Fund. For others who have opted for pension scheme, contribution to Pension Fund Trust is made based on actuarial valuation.

7.2 Contribution to Gratuity Fund Trust is based on actuarial valuation.

7.3 Liability towards leave encashment is provided on accrual basis as per actuarial valuation.

8.0 REVENUE RECOGNITION

a) revenue and expenses are generally accounted for on accrual basis except in respect of fees/commission on transactions with Mutual Funds, income on non-banking assets, locker rent, interest on overdue bills/tax refunds, income from non-performing assets and legal expenses on suit filed accounts which are accounted on cash basis.

b) Income from dividend on shares is accounted on accrual basis when the same is declared and the right to receive the dividend is established.

c) Interest on overdue deposits is accounted for at the time of renewal. In respect of matured deposits provision has been made as per the rBI guidelines.

d) The broken period interest on sale or purchase of securities is treated as revenue as per rBI guidelines.

e) Expenditure in respect of application software, bonds issue, franchises of credit card and insurance products are charged off to revenue.

f) Income from consignment sale of imported gold coins is accounted for as other income after the sale is complete.

9.0 TAXES ON INCOME

9.1 Current tax is determined as per the provisions of the Income Tax Act, 1961.

9.2 Deferred tax assets and liabilities arising on account of timing differences between taxable and accounting income, is recognized keeping in view, the consideration of prudence in respect of deferred tax assets in accordance with the Accounting Standard 22 issued by ICAI.

10.0 COUNTRY RISK MANAGEMENT

The bank has adopted the Country risk Management policy in accordance with the rBI guidelines.

11.0 GOLD COINS

Stock of imported gold coins is valued at cost or market price, whichever is lower.

12.0 NET PROFIT

Net Profit is arrived at after accounting for the following under “Provisions & Contingencies”: – Provision for Income tax and wealth tax – Provision/write off of Non-Performing Advances and Investments

- Provision on Standard Assets

- Adjustment for appreciation/depreciation on Investments

- Transfer to Contingencies

- Other usual and necessary provisions.

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