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Accounting Policies of UCO Bank Company

Mar 31, 2015

GENERAL

The financial statements are prepared under 'going concern' concept on historical cost basis, except as otherwise stated, and conform to Generally Accepted Accounting Principles (GAAP) in India, the prevailing practices and statutory provisions including directives of Reserve Bank of India (RBI).

2. EFFECT OF CHANGES IN FOREIGN EXCHANGE RATE

2.1 FOREIGN CURRENCY TRANSACTIONS

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 on the date of transaction.

ii) Foreign currency monetary items are reported using the Foreign Exchange Dealers Association of India (FEDAI) closing/spot rate.

iii) Foreign currency non-monetary items, which are carried in terms at historical cost, are reported using the exchange rate at the date of the transaction.

iv) Contingent Liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.

v) Exchange differences arising on settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.

vi) Outstanding foreign exchange contracts and bills are revalued as per FEDAI Rates and the resultant gain/loss is taken to revenue at the end of each month.

vii) The foreign exchange swaps which are not held for trading are not marked to market. The premium paid or received on such swaps are amortized as expense or accreted as income over the life of the swap.

2.2FOREIGN operations

Foreign Branches and representative offices of the Bank have been classified as Non-integral Operations.

Translation

i) Both monetary and non-monetary foreign currency assets and liabilities including contingent liabilities of non-integral foreign operations are translated at closing exchange rates notified by FEDAI at the balance sheet date.

ii) Income and expenditure of non-integral foreign operations are translated at quarterly average closing rates.

iii) Exchange differences arising on net investment in non-integral foreign operations are accumulated in Foreign Currency Translation Reserve until the disposal of the net investment.

3.INVESTMENTS

3.1 Investments are classified into three categories viz. Held to Maturity, Available for Sale and Held for Trading and are further classified into Investments in Government Securities, Other Approved Securities, Shares, Debentures & Bonds, Subsidiaries and Joint Ventures and Others.

3.2 (i) Investments classified as Held to Maturity are carried at cost. Wherever the cost is higher than the face value, the premium is amortised over the remaining period of maturity as per effective interest rate method. Profit on sale is initially taken to Profit and Loss Account and then appropriated to Capital Reserve Account net of taxes and amount required to be transferred to Statutory Reserve. Loss on sale is charged to the Profit and Loss Account.

(ii) Investments classified as Available for Sale, are marked to market. Scrip-wise appreciation/depreciation is aggregated for each classification. While net depreciation in respect of each classification is charged to Profit & Loss Account, net appreciation in respect of any classification is ignored. These investments are shown, net of depreciation, in the Balance Sheet.

(iii)Investments classified as Held for Trading are marked to market. Scrip-wise appreciation/depreciation is aggregated for each classification. While net depreciation in respect of each classification is charged to Profit & Loss Account, net appreciation in respect of any classification is ignored. These investments are shown, net of depreciation, in the Balance Sheet.

3.3 In respect of securities, included in any of the above three categories where interest/ principal is in arrears for more than 90 days, income is not recognized and appropriate provision on the value of such Investments is made as per prudential norms.

3.4 Investments in Regional Rural Banks, Commercial Papers and Treasury Bills are valued at carrying cost.

3.5 In respect of traded/quoted Investments, Market price is taken from the quotes available in the stock exchanges. Government securities are valued at Market price or price declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA).

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

3.7 Security receipts issued by securitisation / reconstruction company (SC/RC) in respect of financial assets sold by the Bank to the SC/RC are valued at the lower of the redemption value of the security receipt and the Net Book Value of the financial assets. The Investment is carried in the books at the price determined as above and the sale / realization if any, is reduced from Investment and the net book value is shown.

The value, classification and other norms applicable to investment in non-SLR Investments prescribed by RBI are applied to Bank's investment in Security Receipts issued by SC/RC.

4. sira n® /interest rate swaps

4.1 The Interest Rate Swap transactions undertaken for hedging are accounted for on accrual basis and transactions for trading are marked to market and net depreciation, if any, is provided for, whereas appreciation if any is ignored.

4.2 Gain or loss on terminated interest rate swap transactions undertaken for hedging is deferred and recognized over the shorter of the remaining contractual life of the swap or remaining life of the asset or liability.

4.3 Income and expenses relating to the trading swaps are recognized on the settlement date.

4.4 Gain or losses on the termination of the trading swaps are recorded as income or expense immediately.

5.FOREIGN EXCHANGE CONTRACTS

Outstanding forward exchange contracts are revalued every month as per month end FEDAI rates applicable based on maturity date of the forward contracts and the resultant gain/loss is taken to profit and loss at the end of the each month.

6.ADVANCES

6.1 Loans and advances are classified as performing and non-performing based on the guidelines issued by the RBI. Non-performing advances in India are ascertained as per the Prudential Norms and Provisions are made upon classifying the same into 'Sub- Standard', 'Doubtful', and 'Loss' assets after considering the claims Received / Receivable from ECGC and advances are stated after netting of provisions.

6.2 Provision on Non-performing advances of foreign branches is made on the basis of local requirements or RBI guidelines whichever is higher.

6.3 A general provision on Standard Assets is made on global portfolio basis.

6.4 The credit facilities backed by the guarantee of the Central Government though overdue may be treated as NPA only when Government repudiates its guarantee when invoked

6.5 In respect of Compromise and Settlement Proposals, write-off is done on complete realisation.

6.6 Partial prudential write-off of accounts is done upto unsecured portion level on a case to case basis on approval by the Competent Authority.

6.7 Sale of Financial asset to Securitised Company (SC) / Reconstruction Company (RC) is done on the basis of Board approved Policy in line with the RBI guidelines.

7.1 Fixed assets are stated at historical cost/revalued amount less accumulated depreciation. Surplus arising on revaluation is credited to Revaluation Reserve.

7.2 Advance payments/part payments made towards acquisition of fixed assets are included under other Assets.

7.3 The rates of depreciation and method of charging depreciation as considered appropriate by the management in respect of fixed assets situated in India are as below :-

7.4 Depreciation in respect of fixed assets situated outside India is provided on straight line/written down value method as per the local laws of respective country.

7.5 Additional depreciation arising out of revaluation is set off against Revaluation Reserve.

7.6 In respect of leasehold properties, the lease premium is amortized over the period of the lease.

7.7 Fixed Assets items of small value, costing of Rs 1000/- or less each, are charged off fully in the same quarter of purchase and items, costing Rs 1001/- to Rs 5000/- each, are depreciated at the rate of 100% in the same quarter of purchase.

7.8Depreciation is provided at full rate on additions made upto 30th September and at half the rate on additions made thereafter.

8.EMPLOYEE BENEFITS

8.1Short Term Employee Benefits

The short-term employee benefits, such as medical benefits, casual leave etc. which are paid/credited in exchange for the services rendered by employees are recognised during the 12 month period when the employee renders the service.

8.2 Long Term Employee Benefits Post Employment Benefits

Defined Contribution Plan

Contributions to Defined Contribution Schemes such as NPS, Provident Fund etc., are charged to the Profit & Loss Account as and when incurred. In respect of certain employees who have not opted for Pension Benefits, Provident Fund Contributions are made to a Trust administered by the Bank.

The employees joining the services of the bank on or after 1st April 2010 are covered by a defined contributory pension scheme where the employees contribute 10% of pay plus DA and the bank makes a matching contribution. The scheme is governed by the provisions of the contributory pension scheme introduced for the employees of central government w.e.f 1st January 2004 and modified from time to time.

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

The Bank provides for gratuity to all eligible employees. The benefit is in the form of lump sum/one time payment to vested employees on retirement, on death while in employment, or on termination of employment, for an amount equivalent to i) 15 days salary (Basic DA) payable for each completed year of service, subject to a maximum amount of Rs 10,00,000 or ii) 15 days salary (Basic only) for each completed year of service, whichever is higher. Vesting occurs upon completion of five years/ ten years (as applicable) of service. The Bank makes annual contributions to a fund administered by Trustees based on an independent external actuarial valuation carried out at regular intervals.

The Bank provides for pension to all eligible employees. The benefit is in the form of monthly payments as per rules and regular payments to vested employees on retirement, on death while in employment, or on termination of employment as provided under regulation. Vesting occurs at different stages as per rules. The Bank makes additional annual contributions to funds administered by trustees based on an independent external actuarial valuation carried out at regular intervals besides monthly contribution @ 10% of pay per month.

The cost of providing defined benefits is determined by actuarial valuation using the projected unit credit method which is normally carried out on quarterly basis. Net liabilities are immediately recognised in the statement of profit and loss and are not deferred.

All eligible employees of the bank are entitled to compensated absences; leave travel concession. The costs of such long term employee benefits are internally funded by the Bank.

The cost of providing these other long term benefits is determined by actuarial valuation using the projected unit credit method which is normally carried out on quarterly basis. Past service cost is immediately recognised in the statement of profit and loss and is not deferred.

Medical benefits are extended to full time Directors, after their retirement as post retirement medical benefits. The cost is ascertained and determined by actuarial valuation using the projected unit credit method and such valuation is carried out on quarterly basis for retired as well as in service full time Directors. The liability is immediately recognized in the statement of profit & loss and not deferred.

In accordance with the guidelines given by Reserve Bank of India vide its Circular No. DBOD.BP.BC.80/21.04.018/2010-11 dated 09.02.2011 on "Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment", Bank has decided to amortize the additional liability on account of -

Re-opening of pension option for existing employees who did not opt for pension earlier; and Payment of gratuity to existing employees as per the enhanced limit of Rs 10.00 lakh increased from Rs 3.50 lakh) pursuant to the amendment of the Payment of Gratuity Act, 1972, as an expense on a straight line basis over a period of five years from the financial year 2010 -11.

9. EFETE/REVENUE RECOGNITION

9.1 Items of Income and Expenditure are accounted for on accrual basis, except as otherwise stated.

9.2 Income for the following items are recognised on realization basis:

10.taxes on income

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made including Minimum Alternate Tax (MAT).

The deferred tax asset or liability is recognised using the tax rates that have been enacted or substantially enacted by the Balance Sheet date, in terms of notified Accounting Standard 22. Deferred Tax Assets/Liabilities are reviewed at each Balance Sheet date based on developments during the year.

11.IMPAIRMENT OF ASSETS

Fixed Assets are reviewed for impairment whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment, to be recognized, is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

12.EARNINGS PER SHARE

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

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.

13. SIEETE, ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets" issued in this regard 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.

Contingent Assets are not recognised in the financial statements as this may result in the recognition of income that may never be realized.

a) During the year, Bank allotted 6,08,82,550 equity Shares of Rs 10/- each to Life Insurance Corporation of India at an issue price of Rs 70.21 per Share and received Rs 4,27,45,63,836 against allotment of the above equity Shares. Out of this, Rs 60,88,25,500/- is transferred to Share Capital Account and Rs 366,57,38,336/- is transferred to Share Premium Account.


Mar 31, 2014

1. GENERAL

1.1 The financial statements are prepared under ''going concern'' concept on historical cost basis, except as otherwise stated, and conform to Generally Accepted Accounting Principles (GAAP) in India, the prevailing practices and statutory provisions including directives of Reserve Bank of India (RBI).

2. EFFECT OF CHANGES IN FOREIGN EXCHANGE RATE

2.1 FOREIGN CURRENCY TRANSACTIONS

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 on the date of transaction.

ii) Foreign currency monetary items are reported using the Foreign Exchange Dealers Association of India (FEDAI) closing/spot rate.

iii) Foreign currency non-monetary items, which are carried in terms at historical cost, are reported using the exchange rate at the date of the transaction.

iv) Contingent Liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.

v) Exchange differences arising on settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.

vi) Outstanding foreign exchange contracts and bills are revalued as per FEDAI Rates and the resultant gain/loss is taken to revenue at the end of each month.

vii) The foreign exchange swaps which are not held for trading are not marked to market. The premium paid or received on such swaps are amortized as expense or accreted as income over the life of the swap.

2.2. FOREIGN OPERATIONS

Foreign Branches and representative offices of the Bank have been classified as Non-integral Operations.

i) Both monetary and non-monetary foreign currency assets and liabilities including contingent liabilities of non-integral foreign operations are translated at closing exchange rates notified by FEDAI at the balance sheet date.

ii) Income and expenditure of non-integral foreign operations are translated at quarterly average closing rates.

iii) Exchange differences arising on net investment in non-integral foreign operations are accumulated in Foreign Currency Translation Reserve until the disposal of the net investment.

3. INVESTMENTS

3.1 Investments are classified into three categories viz. Held to Maturity, Available for Sale and Held for Trading and are further classified into Investments in Government Securities, Other Approved Securities, Shares, Debentures & Bonds, Subsidiaries and Joint Ventures and Others.

3.2 Investments classified as Held to Maturity are carried at cost. Wherever the cost is higher than the face value, the premium is amortised over the remaining period of maturity as per effective interest rate method. Profit on sale is initially taken to Profit and Loss Account and then appropriated to Capital Reserve Account net of taxes and amount required to be transferred to Statutory Reserve. Loss on sale is charged to the Profit and Loss Account.

(ii) Investments classified as Available for Sale, are marked to market. Scrip-wise appreciation/depreciation is aggregated for each classification. While net depreciation in respect of each classification is charged to Profit & Loss Account, net appreciation in respect of any classification is ignored. These investments are shown, net of depreciation, in the Balance Sheet.

(iii) Investments classified as Held for Trading are marked to market. Scrip-wise appreciation/depreciation is aggregated for each classification. While net depreciation in respect of each classification is charged to Profit & Loss Account, net appreciation in respect of any classification is ignored. These investments are shown, net of depreciation, in the Balance Sheet.

3.3 In respect of securities, included in any of the above three categories where interest/ principal is in arrears for more than 90 days, income is not recognized and appropriate provision on the value of such Investments is made as per prudential norms.

3.4 Investments in Regional Rural Banks, Commercial Papers and Treasury Bills are valued at carrying cost.

3.5 In respect of traded/quoted Investments, Market price is taken from the quotes available in the stock exchanges. Government securities are valued at Market price or price declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA).

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

3.7 Security receipts issued by securitisation / reconstruction company (SC/RC) in respect of financial assets sold by the Bank to the SC/RC are valued at the lower of the redemption value of the security receipt and the Net Book Value of the financial assets. The Investment is carried in the books at the price determined as above and the sale / realization if any, is reduced from Investment and the net book value is shown.

The value, classification and other norms applicable to investment in non-SLR Investments prescribed by RBI are applied to Bank''s investment in Security Receipts issued by SC/RC.

4. INTEREST RATE SWAPS

4.1 The Interest Rate Swap transactions undertaken for hedging are accounted for on accrual basis and transactions for trading are marked to market and net depreciation, if any, is provided for, whereas appreciation if any is ignored.

4.2 Gain or loss on terminated interest rate swap transactions undertaken for hedging is deferred and recognized over the shorter of the remaining contractual life of the swap or remaining life of the asset or liability.

4.3 Income and expenses relating to the trading swaps are recognized on the settlement date.

4.4 Gain or losses on the termination of the trading swaps are recorded as income or expense immediately.

5. Outstanding forward exchange contracts are revalued every month as per month end FEDAI rates applicable based on maturity date of the forward contracts and the resultant gain/loss is taken to profit and loss at the end of the each month.

6. ADVANCES

6.1 Loans and advances are classified as performing and non-performing based on the guidelines issued by the RBI. Non-performing advances in India are ascertained as per the Prudential Norms and Provisions are made upon classifying the same into ''Sub- Standard'', ''Doubtful'', and ''Loss'' assets after considering the claims Received / Receivable from ECGC and advances are stated after netting of provisions.

6.2 Provision on Non-performing advances of foreign branches is made on the basis of local requirements or RBI guidelines whichever is higher.

6.3 A general provision on Standard Assets is made on global portfolio basis.

6.4 The credit facilities backed by the guarantee of the Central Government though overdue may be treated as NPA only when Government repudiates its guarantee when invoked

6.5 In respect of Compromise and Settlement Proposals, write-off is done on complete realisation.

6.6 Partial prudential write-off of accounts is done upto unsecured portion level on a case to case basis on approval by the Competent Authority.

6.7 Sale of Financial asset to Securitised Company (SC) / Reconstruction Company (RC) is done on the basis of Board approved Policy in line with the RBI guidelines. In case of financial assets sold to the SC/RC, if the sale is at a price below the Net Book Value (NBV), the shortfall amount is debited to the Profit & Loss Account. If the sale is for a value higher than the NBV, the excess provision is not reversed but is utilized to meet the shortfall/loss on account of sale of other non-performing financial assets. Additional considerations realized over and above the Security Receipt (SR) value in respect of accounts transferred earlier is recognized as profit and booked as income from investment.

7. FIXED ASSETS

7.1 Fixed assets are stated at historical cost/revalued amount less accumulated depreciation. Surplus arising on revaluation is credited to Revaluation Reserve.

7.2 Advance payments/part payments made towards acquisition of fixed assets are included under other Assets.

7.3 Depreciation on Premises (including cost of land wherever inseparable/not segregated) and other fixed assets (excepting computer including software and AC machine, Aqua guard, Refrigerator, Photo-copying machine, Fax machine, etc.) in India is provided o written down value method at the rates prescribed in Schedule XIV to the Companies Act, 1956. Depreciation on computer including software is provided at the rate of 33.33% on Straight Line Method in terms of RBI guidelines and on AC machine Aqua guard, Refrigerator, Photo-copying machine, Fax machine, etc. is provided at the rate of 20% on Written Down Value (WDV) Method. Depreciation is provided at full rate on additions made upto 30th September and at half the rate on addition made thereafter.

7.4 Depreciation in respect of fixed assets situated outside India is provided on straight line/written down value method as per the local laws of respective country.

7.5 Additional depreciation arising out of revaluation is set off against Revaluation Reserve.

7.6 In respect of leasehold properties, the lease premium is amortized over the period of the lease.

7.7 Fixed Assets items of small value, costing of Rs.1000/- or less each, are charged off fully in the same quarter of purchase and items, costing Rs.1001/- to Rs.5000/- each, are depreciated at the rate of 100% in the same quarter of purchase.

8. EMPLOYEE BENEFITS

8.1 Short Term Employee Benefits

The short-term employee benefits, such as medical benefits, casual leave etc. which are paid/credited in exchange for the services rendered by employees are recognised during the 12 month period when the employee renders the service.

8.2 Long Term Employee Benefits Post Employment Benefits

Contributions to Defined Contribution Schemes such as NPS, Provident Fund etc., are charged to the Profit & Loss Account as and when incurred. In respect of certain employees who have not opted for Pension Benefits, Provident Fund Contributions are made to a Trust administered by the Bank.

The employees joining the services of the bank on or after 1st April 2010 are covered by a defined contributory pension scheme where the employees contribute 10% of pay plus DA and the bank makes a matching contribution. The scheme is governed by the provisions of the contributory pension scheme introduced for the employees of central government w.e.f 1st January 2004 and modified from time to time.

B) Defined Benefit Plan

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

The Bank provides for gratuity to all eligible employees. The benefit is in the form of lump sum/one time payment to vested employees on retirement, on death while in employment, or on termination of employment, for an amount equivalent to i) 15 days salary (Basic DA) payable for each completed year of service, subject to a maximum amount of Rs.10,00,000 or ii) 15 days salary (Basic only) for each completed year of service, whichever is higher. Vesting occurs upon completion of five years/ ten years (as applicable) of service. The Bank makes annual contributions to a fund administered by Trustees based on an independent external actuarial valuation carried out at regular intervals.

The Bank provides for pension to all eligible employees. The benefit is in the form of monthly payments as per rules and regular payments to vested employees on retirement, on death while in employment, or on termination of employment as provided under regulation. Vesting occurs at different stages as per rules. The Bank makes additional annual contributions to funds administered by trustees based on an independent external actuarial valuation carried out at regular intervals besides monthly contribution @ 10% of pay per month.

The cost of providing defined benefits is determined by actuarial valuation using the projected unit credit method which is normally carried out on quarterly basis. Net liabilities are immediately recognised in the statement of profit and loss and are not deferred.

Other Long Term Employee benefits

All eligible employees of the bank are entitled to compensated absences; leave travel concession. The costs of such long term employee benefits are internally funded by the Bank.

The cost of providing these other long term benefits is determined by actuarial valuation using the projected unit credit method which is normally carried out on quarterly basis. Past service cost is immediately recognised in the statement of profit and loss and is not deferred.

Medical benefits are extended to full time Directors, after their retirement as post retirement medical benefits. The cost is ascertained and determined by actuarial valuation using the projected unit credit method and such valuation is carried out on quarterly basis for retired as well as in service full time Directors. The liability is immediately recognized in the statement of profit & loss and not deferred.

In accordance with the guidelines given by Reserve Bank of India vide its Circular No. DBOD.BP.BC.80/21.04.018/2010-11 dated 09.02.2011 on "Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits – Prudential Regulatory Treatment", Bank has decided to amortize the additional liability on account of –

Re-opening of pension option for existing employees who did not opt for pension earlier; and

Payment of gratuity to existing employees as per the enhanced limit of Rs.10.00 lakh increased from Rs.3.50 lakh) pursuant to the amendment of the Payment of Gratuity Act, 1972, as an expense on a straight line basis over a period of five years from the financial year 2010 -11.

9. REVENUE RECOGNITION

9.1 Items of Income and Expenditure are accounted for on accrual basis, except as otherwise stated.

9.2 Income for the following items are recognised on realization basis:

10. TAXES ON INCOME

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made including Minimum Alternate Tax (MAT).

The deferred tax asset or liability is recognised using the tax rates that have been enacted or substantially enacted by the Balance Sheet date, in terms of notified Accounting Standard 22. Deferred Tax Assets/Liabilities are reviewed at each Balance Sheet date based on developments during the year.

11. MPAIRMENT OF ASSETS

Fixed Assets are reviewed for impairment whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment, to be recognized, is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

12. EARNINGS PER SHARE

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

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.

13. ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets" issued in this regard 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.

Contingent Assets are not recognised in the financial statements as this may result in the recognition of income that may never be realized.


Mar 31, 2013

1. GENERAL

The financial statements are prepared under ''going concern''concept on historical cost basis, except as otherwise stated, and conform to Generally Accepted Accounting Principles (GAAP) in India, the prevailing practices and statutory provisions including directives of Reserve Bank of India (RBI).

2. EFFECT OF CHANGES IN FOREIGN EXCHANGE RATE

2.1 FOREIGN CURRENCY TRANSACTIONS

i) 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 on the date of transaction.

Foreign currency monetary items are reported using the Foreign Exchange Dealers Association of India (FEDAI) closing spot rate.

iii) Foreign currency non-monetary items, which are carried in terms at historical cost, are reported using the exchange rate at the date of the transaction.

iv) Liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.

v) Exchange differences arising on settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.

vi) Outstanding foreign exchange contracts and bills are revalued as per FEDAI Rates and the resultant gain/loss is taken to revenue at the end of each month.

2.2. FOREIGN OPERATIONS

Foreign Branches and representative offices of the Bank have been classified as Non-integral Operations.

Translation

i) Both monetary and non-monetary foreign currency assets and liabilities including contingent liabilities of non-integral foreign operations are translated at closing exchange rates notified by FEDAI at the balance sheet date.

ii) Income and expenditure of non-integral foreign operations are translated at quarterly average closing rates.

iii) Exchange differences arising on net investment in non-integral foreign operations are accumulated in Foreign Currency Translation Reserve until the disposal of the net investment.

3. INVESTMENTS

3.1 Investments are classified into three categories viz. Held to Maturity, Available for Sale and Held for Trading and are further classified into Investments in Government Securities, Other Approved Securities, Shares, Debentures & Bonds, Subsidiaries and Joint Ventures and Others.

3.2 Investments classified as Held to Maturity are carried at cost. Wherever the cost is higher than the face value, the premium is amortised over the remaining period of maturity as per effective interest rate method. Profit on sale is initially taken to Profit and Loss Account and then appropriated to Capital Reserve Account net of taxes and amount required to be transferred to Statutory Reserve. Loss on sale is charged to the Profit and Loss Account.

(ii) investments classified as Available for Sale, are marked to market. Scrip-wise appreciation/depreciation is aggregated for each classification. While net depreciation in respect of each classification is charged to Profit & Loss Account, net appreciation in respect of any classification is ignored. These investments are shown, net of depreciation, in the Balance Sheet.

(iii) Investments classified as Held for Trading are marked to market. Scrip-wise appreciation/depreciation is aggregated for each classification. While net depreciation in respect of each classification is charged to Profit & Loss Account, net appreciation in respect of any classification is ignored. These investments are shown, net of depreciation, in the Balance Sheet.

3.3 In respect of securities, included in any of the above three categories where interest/ principal is in arrears for more than 90 days, income is not recognized and appropriate provision on the value of such Investments is made as per prudential norms.

3.4 Investments in Regional Rural Banks, Commercial Papers and Treasury Bills are valued at carrying cost.

3.5 In respect of traded/quoted Investments, Market price is taken from the quotes available in the stock exchanges. Government securities are valued at Market price or price declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA).

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

3.7 Security receipts issued by securitisation / reconstruction company (SC/RC) in respect of financial assets sold by the Bank to the SC/RC are valued at the lower of the redemption value of the security receipt and the Net Book Value of the financial assets. The Investment is carried in the books at the price determined as above and the sale / realization if any, is reduced from Investment and the net book value is shown. value, classification and other norms applicable to investment in non-SLR Investments prescribed by RBI are applied to Bank''s investment in Security Receipts issued by SC/RC.

4. INTEREST RATE SWAPS

4.1 The Interest Rate Swap transactions undertaken for hedging are accounted for on accrual basis and transactions for trading are marked to market and net depreciation, if any, is provided for, whereas appreciation if any is ignored.

4.2 Gain or loss on terminated interest rate swap transactions undertaken for hedging is deferred and recognized over the shorter of the remaining contractual life of the swap or remaining life of the asset or liability.

4.3 Income and expenses relating to the trading swaps are recognized on the settlement date.

4.4 Gain or losses on the termination of the trading swaps are recorded as income or expense immediately.

5. FOREIGN EXCHANGE CONTRACTS

Outstanding forward exchange contracts are revalued every month as per month end FEDAI rates applicable based on maturity date of the forward contracts and the resultant gain/loss is taken to profit and loss at the end of the each month.

6. WADVANCES

6.1 Loans and advances are classified as performing and non-performing based on the guidelines issued by the RBI. Non-Performing advances in India are ascertained as per the Prudential Norms and provisions are made upon classifying the same into ''Sub- Standard'', ''Doubtful'' and ''Loss''assets after considering the claims Received/Receivable from ECGC and advances are stated after netting of provisions.

6.2 Provision on Non-performing advances of foreign branches is made on the basis of local requirements or RBI guidelines whichever is higher.

6.3 A general provision on Standard Assets is made on global portfolio basis.

6.4 In respect of Central Government Guarantees invoked and suit filed by the bank, wherever the Government does not repudiate, the dues are considered good.

6.5 In respect of Compromise and Settlement Proposals, write-off is done on complete realisation.

6.6 Partial prudential write off of accounts is done upto unsecured portion level on a case to case basis on approval by the Competent Authority.

7. FIXED ASSETS

7.1 Fixed assets are stated at historical cost/revalued amount less accumulated depreciation. Surplus arising on revaluation is credited to Revaluation Reserve.

7.2 Advance payments/part payments made towards acquisition of fixed assets are included under other Assets.

7.3 Depreciation on Premises (including cost of land wherever inseparable/not segregated) and other fixed assets (excepting computers including software and AC machine, Aquaguard, Refrigerator, Photo-copying machine, Fax machine, etc.) in India is provided on written down value method at the rates prescribed in Schedule XIV to the Companies Act, 1956. Depreciation on computers including software is provided at the rate of 33.33% on Straight Line Method in terms of RBI guidelines and on AC machine, Aquaguard, Refrigerator, Photo-copying machine, Fax machine, etc. is provided at the rate of 20% on Written Down Value (WDV) Method. Depreciation is provided at full rate on additions made upto 30th September and at half the rate on additions made thereafter.

7.5 Additional depreciation arising out of revaluation is set off against Revaluation Reserve.

7.6 In respect of leasehold properties, the lease premium is amortized over the period of the lease.

7.7 Fixed Assets items of small value, costing of Rs.1000/- or less each, are charged off fully in the same quarter of purchase and items, costing Rs.1001/- to Rs.5000/- each, are depreciated at the rate of 100% in the same quarter of purchase.

8. EMPLOYEE BENEFITS

8.1 The short-term employee benefits, such as medical benefits, casual leave etc. which are paid/credited in exchange for the services rendered by employees are recognised during the 12 month period when the employee renders the service.

8.2 Long Term Employee Benefits Post Employment Benefits

A) Defined Contribution Plan

Defined Contribution Plan Contribution to Defined Contribution Schemes such as Provident Fund etc., are charged to the Profit & Loss Account as and when incurred. In respect of certain employees who have not opted for Pension Benefits, Provident Fund Contributions are made to a Trust administered by the Bank.

B) Defined Benefit Plan

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

Bank provides for gratuity to all eligible employees. The benefit is in the form of lump sum/one time payment to vested employees on retirement, on death while in employment, or on termination of employment, for an amount equivalent to i) 15 days salary (Basic DA) payable for each completed year of service, subject to a maximum amount of Rs.10,00,000 or ii) 15 days salary (Basic only) for each completed year of service, whichever is higher. Vesting occurs upon completion of five years/ ten years (as applicable) of service. The Bank makes annual contributions to a fund administered by Trustees based on an independent external actuarial valuation carried out at regular intervals.

The Bank provides for pension to all eligible employees. The benefit is in the form of monthly payments as per rules and regular payments to vested employees on retirement, on death while in employment, or on termination of employment as provided under regulation. Vesting occurs at different stages as per rules. The Bank makes additional annual contributions to funds administered by trustees based on an independent external actuarial valuation carried out at regular intervals besides monthly contribution @ 10% of pay per month.

The cost of providing defined benefits is determined by actuarial valuation using the projected unit credit method which is normally carried out at each balance sheet date. Net liabilities are immediately recognised in the statement of profit and loss and are not deferred.

All eligible employees of the bank are entitled to compensated absences; leave travel concession. The costs of such long term employee benefits are internally funded by the Bank.

The cost of providing these other long term benefits is determined by actuarial valuation using the projected unit credit method which is normally carried out at each balance sheet date. Past service cost is immediately recognised in the statement of profit and loss and is not deferred.

Medical benefits are extended to full time Directors, after their retirement as post retirement medical benefits. The cost is ascertained and determined by actuarial valuation using the projected unit credit method and such valuation is carried out at balance sheet date for retired as well as in service full time Directors. The liability is immediately recognized in the statement of profit & loss and not deferred.

In accordance with the guidelines given by Reserve Bank of India vide its Circular No. DB0D.BP.BC.80/21.04.018/2010-11 dated 09.02.2011 on "Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment", Bank has decided to amortize the additional liability on account of -

Re-opening of pension option for existing employees who did not opt for pension earlier; and Payment of gratuity to existing employees as per the enhanced limit of Rs.10.00 lakh (increased from Rs. 3.50 lakh) pursuant to the amendment of the Payment of Gratuity Act, 1972, as an expense on a straight line basis over a period of five years from the financial year 2010 -11.

9. REVENUE RECOGNITION

9.1 Items of Income and Expenditure are accounted for on accrual basis, except as otherwise stated.

9.2 Income for the following items are recognised on realization basis:

a) Interest on usuance bill.

10. TAXES ON INCOME

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made including Minimum Alternate Tax (MAT).

The deferred tax asset or liability is recognised using the tax rates that have been enacted or substantially enacted by the Balance Sheet date, in terms of notified Accounting Standard 22. Deferred Tax Assets/Liabilities are reviewed at each Balance Sheet date based on developments during the year.

11. IMPAIRMENT OF ASSETS

Fixed Assets are reviewed for impairment whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognised is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

12. EARNINGS PER SHARE

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

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.

13. ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets" issued in this regard 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.

Assets are not recognised in the financial statements as this may result in the recognition of income that may never be realized.


Mar 31, 2012

1. GENERAL

1.1 The financial statements are prepared under going concern' concept on historical cost basis, except as otherwise stated, and conform to Generally Accepted Accounting Principles (GAAP) in India, the prevailing practices and statutory provisions including directives of Reserve Bank of India (RBI).

2. ET IPTR / EFFECT OF CHANGES IN FOREIGN EXCHANGE RAT

FOREIGN CURRENCY TRANSACTIONS

i) 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 on the date of transaction.

ii) Foreign currency non-monetary items, which are carried in terms at historical cost, are reported using the exchange rate at the date of the transaction.

iii) Foreign currency non-monetary items, which are carried in items at historical cost, are reported using the exchange rate at the date of the transaction.

iv) Contingent Liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.

v) Exchange differences arising on settlement of monetary items at rates different from those at which they were initially recorded are recognized as income or as expense in the period in which they arise.

vi) Outstanding foreign exchange contracts and bills are revalued as per FEDAI Rates and the resultant gain/loss is taken to revenue at the end of each month.

2.1.FOREIGN OPERATIONS

Foreign Branches and representative offices of the Bank have been classified as Non-integral Operations.

Translation

i)Both monetary and non-monetary foreign currency assets and liabilities including contingent liabilities of non-integral foreign operations are translated at closing exchange rates notified by FEDAI at the balance sheet date.

ii) Income and expenditure of non-integral foreign operations are translated at quarterly average closing rates.

iii) Exchange differences arising on net investment in non-integral foreign operations are accumulated in Foreign Currency Translation Reserve until the disposal of the net investment.

3.INVESTMENTS

3.1 Investments are classified into three categories viz. Held to Maturity, Available for Sale and Held for Trading and are further classified into Investments in Government Securities, Other Approved Securities, Shares, Debentures & Bonds, Subsidiaries and Joint Ventures and Others.

3.2 (i) Investments classified as Held to Maturity are carried at cost. Wherever the cost is higher than the face value, the premium is amortized over the remaining period of maturity as per effective interest rate method. Profit on sale is initially taken to Profit and Loss Account and then appropriated to Capital Reserve Account net of taxes. Loss on sale is charged to the Profit and Loss Account.

(iii) Investments classified as Available for Sale, are marked to market. Scrip-wise appreciation/depreciation is aggregated for each classification. While net depreciation in respect of each classification is charged to Profit & Loss Account, net appreciation in respect of any classification is ignored. These investments are shown, net of depreciation, in the Balance Sheet.

(iii) Investments classified as Held for Trading are marked to market. Scrip-wise appreciation/depreciation is aggregated for each classification. While net depreciation in respect of each classification is charged to Profit & Loss Account, net appreciation in respect of any classification is ignored. These investments are shown, net of depreciation, in the Balance Sheet.

3.3 In respect of securities, included in any of the above three categories where interest/ principal is in arrears for more than 90 days, income is not recognized and appropriate provision on the value of such Investments is made as per prudential norms.

3.4 Investments in Regional Rural Banks, Commercial Papers and Treasury Bills are valued at carrying cost.

3.5 In respect of traded/quoted Investments, Market price is taken from the quotes available in the stock exchanges. Government securities are valued at Market price or price declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA).

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

3.7 Security receipts issued by securitization / reconstruction company (SC/RC) in respect of financial assets sold by the Bank to the SC/RC are valued at the lower of the redemption value of the security receipt and the Net Book Value of the financial assets. The Investment is carried in the books at the price determined as above and the sale / realization if any, is reduced from Investment and the net book value is shown.

The value, classification and other norms applicable to investment in non-SLR Investments prescribed by RBI are applied to Bank's investment in Security Receipts issued by SC/RC.

4.INTEREST RATE SWAPS

4.1 The Interest Rate Swap transactions undertaken for hedging are accounted for on accrual basis and transactions for trading are marked to market and net depreciation, if any, is provided for, whereas appreciation if any is ignored.

4.2 Gain or loss on terminated interest rate swap transactions undertaken for hedging is deferred and recognized over the shorter of the remaining contractual life of the swap or remaining life of the asset or liability.

4.3 Income and expenses relating to the trading swaps are recognized on the settlement date.

4.4 Gain or losses on the termination of the trading swaps are recorded as income or expense immediately.

5. FOREIGN EXCHANGE CONTRACTS

Outstanding forward exchange contracts are revalued every month as per month end FEDAI rates applicable based on maturity date of the forward contracts and the resultant gain/loss is taken to profit and loss at the end of the each month.

6. WADVANCES

6.1 Loans and advances are classified as performing and non-performing based on the guidelines issued by the RBI. Non-Per- forming advances in India are ascertained as per the Prudential Norms and provisions are made upon classifying the same into Sub-Standard', Doubtful' and Loss' assets after considering the claims Received/Receivable from ECGC and advances are stated after netting of provisions.

6.2 Provision on Non-performing advances of foreign branches is made on the basis of local requirements or RBI guidelines whichever is higher.

6.3 A general provision on Standard Assets is made on global portfolio basis.

6.4 In respect of Central Government Guarantees invoked and suit filed by the bank, wherever the Government does not repudiate, the dues are considered good.

6.5 In respect of Compromise and Settlement Proposals, write-off is done on complete realization.

6.6 Partial prudential write off of accounts is done up to unsecured portion level on a case to case basis on approval by the Competent Authority.

7. FIXED ASSETS

7.1 Fixed assets are stated at historical cost/revalued amount less accumulated depreciation. Surplus arising on revaluation is credited to Revaluation Reserve.

7.2 Advance payments/part payments made towards acquisition of fixed assets are included under other Assets.

7.3 Depreciation on Premises (including cost of land wherever inseparable/not segregated) and other fixed assets (excluding computers) in India is provided on written down value method at the rates prescribed in Schedule XIV to the Companies Act, 1956. Depreciation on computers is provided at the rate of 33.33% on Straight Line Method in terms of RBI guidelines. Depreciation is provided at full rate on additions made up to 30th September and at half the rate on additions made thereafter.

7.4 Depreciation in respect of fixed assets situated outside India is provided on straight line/written down value method as per the local laws of respective country.

7.5 Additional depreciation arising out of revaluation is set off against Revaluation Reserve.

7.6 In respect of leasehold properties, the lease premium is amortized over the period of the lease.

8. EMPLOYEE BENEFITS

8.1 Short Term Employee Benefits

The short-term employee benefits, such as medical benefits, casual leave etc. which are paid/credited in exchange for the services rendered by employees are recognized during the 12 month period when the employee renders the service.

8.2 Long Term Employee Benefits

Post Employment Benefits

Defined Contribution Plan

Contribution to Defined Contribution Schemes such as Provident Fund etc., are charged to the Profit & Loss Account as and when incurred. In respect of certain employees who have not opted for Pension Benefits, Provident Fund Contributions are made to a Trust administered by the Bank.

Defined Benefit Plan

a. The bank operates gratuity and pension schemes which are defined benefit plans.

b. The Bank provides for gratuity to all eligible employees. The benefit is in the form of lump sum/one time payment to vested employees on retirement, on death while in employment, or on termination of employment, for an amount equivalent to i) 15 days salary (Basic DA) payable for each completed year of service, subject to a maximum amount of Rs.10,00,000 or ii) 15 days salary (Basic only) for each completed year of service ,whichever is higher. Vesting occurs upon completion of five years/ ten years (as applicable) of service. The Bank makes annual contributions to a fund administered by Trustees based on an independent external actuarial valuation carried out at regular intervals.

c. The Bank provides for pension to all eligible employees. The benefit is in the form of monthly payments as per rules and regular payments to vested employees on retirement, on death while in employment, or on termination of employment as provided under regulation. Vesting occurs at different stages as per rules. The Bank makes additional annual contributions to funds administered by trustees based on an independent external actuarial valuation carried out at regular intervals besides monthly contribution @ 10% of pay per month.

d. The cost of providing defined benefits is determined by actuarial valuation using the projected unit credit method which is normally carried out at each balance sheet date. Net liabilities are immediately recognized in the statement of profit and loss and are not deferred.

(C) All eligible employees of the bank are entitled to compensated absences; leave travel concession. The costs of such long term employee benefits are internally funded by the Bank.

The cost of providing these other long term benefits is determined by actuarial valuation using the projected unit credit method which is normally carried out at each balance sheet date. Past service cost is immediately recognized in the statement of profit and loss and is not deferred.

Medical benefits are extended to full time Directors, after their retirement as post retirement medical benefits. The cost is ascertained and determined by actuarial valuation using the projected unit credit method and such valuation is carried out at balance sheet date for retired as well as in service full time Directors. The liability is immediately recognized in the statement of profit & loss and not deferred

In terms of Limited Revision to AS-15 Employee Benefits (Revised 2005) and guidance note thereon, the Bank has decided to amortize the increase in transitional liability over the liability that could have been recognized as per the pre revised AS-15 as on 31.03.2007 in respect of long term employee benefits like Pension, Gratuity, Leave Encashment, Sick Leave, LFC/LTC, etc., as an expense on a straight-line basis over 5 years from financial year 2007-08.

In accordance with the guidelines given by Reserve Bank of India vide its Circular No. DBOD.BP.BC.80/21.04.018/2010-11 dated 09.02.2011 on "Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment, Bank has decided to amortize the additional liability on account of -

Re-opening of pension option for existing employees who did not opt for pension earlier; and Payment of gratuity to existing employees as per the enhanced limit of Rs 10.00 lakhs (increased from Rs 3.50 lakhs) pursuant to the amendment of the Payment of Gratuity Act, 1972, as an expense on a straight line basis over a period of five years from the financial year 2010 -11.

9. REVENUE RECOGNITION

9.1 Items of Income and Expenditure are accounted for on accrual basis, except as otherwise stated.

9.2 Income for the following items are recognized on realization basis:

Income from non-performing assets in terms of RBI guidelines. Commission earned on Letter of Credit and Guarantees issued.

10.TAXES ON INCOME

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made including Minimum Alternate Tax (MAT).

The deferred tax asset or liability is recognized using the tax rates that have been enacted or substantially enacted by the Balance Sheet date, in terms of notified Accounting Standard 22. Deferred Tax Assets/Liabilities are reviewed at each Balance Sheet date based on developments during the year.

11.IMPAIRMENT OF ASSETANCE

Fixed Assets are reviewed for impairment whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such assts are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

11 EARNINGS PER SHARE

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

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.

12. ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In conformity with AS 29, Provisions, Contingent Liabilities and Contingent Assets issued in this regard 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 Assets are not recognized in the financial statements as this may result in the recognition of income that may never be realized.


Mar 31, 2010

GENERAL

The financial statements are prepared under going concern concept on historical cost basis, except as otherwise stated, and conform to Generally Accepted Accounting Principles (GAAP) in India, the prevailing practices and statutory provisions including prevailing Practices and statutory provision including directives of Reserve Bank of India (RBI).

EFFECT OF CHANGES IN FOREIGN EXCHANGE RATE FOREIGN CURRENCY TRANSACTIONS

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 on the date of transaction.

Foreign currency monetary items are reported using the Foreign Exchange Dealers Association of India (FEDAI) closing spot rate.

Foreign currency non-monetary items, which are carried in terms at historical cost, are reported using the exchange rate at the date of the transaction.

Contingent Liabilities denominated in foreign currency are reported using the FEDAI closing spot rates.

Exchange differences arising on settlement of monetary items at rates different from those at which they were initially recorded are recognised as income or as expense in the period in which they arise.

Outstanding foreign exchange contracts and bills are revalued as per FEDAI Rates and the resultant gain/loss is taken to revenue



FOREIGN OPERATIONS

Foreign Branches and representative offices of the Bank have been classified as Non-integral Operations. Translation

Both monetary and non-monetary foreign currency assets and liabilities including contingent liabilities of non-integral foreign operations are translated at closing exchange rates notified by FEDAI at the balance sheet date.

Income and expenditure of non-integral foreign operations are translated at quarterly average closing rates.

Exchange differences arising on net investment in non-integral foreign operations are accumulated in Foreign Currency Translation Reserve until the disposal of the net investment.

INVESTMENTS

Investments are classified into three categories viz. Held to Maturity, Available for Sale and Held for Trading and are further grouped into Investments in Government Securities, Other Approved Securities, Shares, Debentures & Bonds, Subsidiaries and Joint Ventures and Others.

Investments classified as Held to Maturity are carried at cost. Wherever the cost is higher than the face value, the premium is amortised over the remaining period of maturity as per effective interest rate method. Profit on sale is initially taken to Profit & Loss Account and then appropriated to Capital Reserve Account. Loss on sale is charged to the Profit & Loss Account.

Investments classified as Available for Sale, are marked to market. Scrip-wise appreciation/depreciation is aggregated for each classification. While net depreciation in respect of each classification is charged to Profit & Loss Account, net appreciation in respect of any classification is ignored. These instruments are shown, net of depreciation, in the Balance Sheet.

Investments classified as Held for Trading are marked to market. Scrip-wise appreciation/depreciation is aggregated for each classification. While net depreciation in respect of each classification is charged to Profit & Loss Account, net appreciation in respect of any classification is ignored. These instruments are shown, net of depreciation, in the Balance Sheet.

In respect of securities, included in any of the above three categories where interest/ principal is in arrears for more than 90 days, income is not recognized and appropriate provision on the value of such Investments is made as per prudential norms.

In respect of traded/quoted Investments, Market price is taken from the quotes available in the stock exchanges. Government securities are valued at Market price or price declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA).

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

Security receipts issued by securitisation / reconstruction company (SC/RC) in respect of financial assets sold by the Bank to the SC/ RC are valued at the lower of the redemption value of the security receipt and the Net Book Value of the financial assets. The Investment is carried in the books at the price determined as above and the sale / realization if any, is reduced from Investment and the net book value is shown.

The value, classification and other norms applicable to investment in non-SLR Investments prescribed by RBI are applied to Banks investment in Security Receipts issued by SC/RC.

INTEREST RATE SWAPS

The Interest Rate Swap transactions undertaken for hedging are accounted for on accrual basis and transactions for trading are marked to market and net depreciation, if any, is provided for, whereas appreciation if any is ignored.

Gain or loss on terminated interest rate swap transactions undertaken for hedging is deferred and recognized over the shorter of the remaining contractual life of the swap or remaining life of the asset or liability.

Income and expenses relating to the trading swaps are recognized on the settlement date.

Gain or losses on the termination of the trading swaps are recorded as income or expense immediately.

FOREIGN EXCHANGE CONTRACTS

Outstanding foreign exchange contracts are revalued as per FEDAI rates and the resultant gain/loss is taken to revenue .at the end of each month.

ADVANCES

Loans and advances are classified as performing and non-performing based on the guidelines issued by the RBI. Non-Performing advances in India are ascertained as per the Prudential Norms and provisions are made upon classifying the same into Sub- Standard, Doubtful and Loss assets after considering the claims Received/Receivable from ECGC and advances are stated after netting of provisions.

Provision on Non-performing advances of foreign branches is made on the basis of local requirements or RBI guidelines whichever is higher.

A general provision on Standard Assets is made on global portfolio basis.

In respect of Central Government Guarantees invoked and suit filed by the bank, wherever the Government does not repudiate, the dues are considered good.

In respect of Compromise and Settlement Proposals, write-off is done on complete realisation.

Partial prudential write off of accounts is done upto unsecured portion level on a case to case basis on approval by the Competent Authority.

FIXED ASSETS

Fixed assets are stated at historical cost/revalued amount less accumulated depreciation. Surplus arising on revaluation is credited to Revaluation Reserve.

Advance payments/part payments made towards acquisition of fixed assets are included under other Assets.

Depreciation on Premises (including cost of land wherever inseparable/not segregated) and other fixed assets (excluding computers) in India is provided on written down value method at the rates prescribed in Schedule XIV to the Companies Act, 1 956. Depreciation on computers is provided at the rate of 33.33% on Straight Line Method in terms of RBI guidelines. Depreciation is provided at full rate on additions made upto 30th September and at half the rate on additions made thereafter.

Depreciation in respect of fixed assets situated outside India is provided on straight line/written down value method as per the local laws of respective country.

Additional depreciation arising out of revaluation is set off against Revaluation Reserve.

In respect of leasehold properties, the lease premium is amortized over the period of the lease.

The short-term employee benefits, such as medical benefits, casual leave etc. which are paid/credited in exchange for the services rendered by employees are recognised during the 1 2 month period when the employee renders the service.

Defined Contribution Plan

Contribution to Defined Contribution Schemes such as Provident Fund etc., are charged to the Profit & Loss Account as and when incurred. In respect of certain employees who have not opted for Pension Benefits, Provident Fund Contributions are made to a Trust administered bv the Bank.

Defined Benefit Plan

a. The bank operates gratuity and pension schemes which are defined benefit plans.

b. The Bank provides for gratuity to all eligible employees. The benefit is in the form of lump sum/one time payment to vested employees on retirement, on death while in employment, or on termination of employment, for an amount equivalent to i) 15 days salary (Basic + DA) payable for each completed year of service, subject to a maximum amount of Rs.3,50,000 or ii) 1 5 days

salary (Basic only) for each completed year of service ,whichever is higher. Vesting occurs upon completion of five years/ ten years (as applicable) of service. The Bank makes annual contributions to a fund administered by Trustees based on an independent external actuarial valuation carried out at regular intervals.

c. The Bank provides for pension to all eligible employees. The benefit is in the form of monthly payments as per rules and regular payments to vested employees on retirement, on death while in employment, or on termination of employment as provided under regulation. Vesting occurs at different stages as per rules. The Bank makes additional annual contributions to funds administered by trustees based on an independent external actuarial valuation carried out at regular intervals besides monthly contribution @ 1 0% of pay per month.

d. The cost of providing defined benefits is determined by actuarial valuation using the projected unit credit method which is normally carried out at each balance sheet date. Net liabilities are immediately recognised in the statement of profit and loss and are not deferred.

All eligible employees of the bank are entitled to compensated absences; leave travel concession. The costs of such long term employee benefits are internally funded by the Bank.

The cost of providing these other long term benefits is determined by actuarial valuation using the projected unit credit method which is normally carried out at each balance sheet date. Past service cost is immediately recognised in the statement of profit and loss and is not deferred.

Medical benefits are extended to full time Directors, after their retirement as post retirement medical benefits. The cost is ascertained and determined by actuarial valuation using the projected unit credit method and such valuation is carried out at balance sheet date for retired as well as in service full time Directors. The liability is immediately recognized in the statement of profit & loss and not deferred.

In terms of Limited Revision to AS-15 Employee Benefits (Revised 2005) and guidance note thereon, the Bank has decided to amortise the increase in transitional liability over the liability that could have been recognised as per the pre revised AS-1 5 as on 31.03.2007 in respect of long term employee benefits like Pension, Gratuity, Leave Encashment, Sick Leave, LFC/LTC, etc., as an expense on a straight-line basis over 5 years from financial year 2007-08.

REVENUE RECOGNITION

Items of Income and Expenditure are accounted for on accrual basis, except as otherwise stated.

Income for the following items are recognised on realisation basis:

TAXES ON INCOME

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made including Minimum Alternate Tax (MAT).

The deferred tax asset or liability is recognised using the tax rates that have been enacted or substantially enacted by the Balance Sheet date, in terms of notified Accounting Standard 22. Deferred Tax Assets/Liabilities are reviewed at each Balance Sheet date based on developments during the year.

IMPAIRMENT OF ASSETS

Fixed Assets are reviewed for impairment whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognised is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

EARNINGS PER SHARE

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

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.

ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets", 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.

Contingent Assets are not recognised in the financial statements as this may result in therecognition of income that may never be realised.

 
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