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Notes to Accounts of UCO Bank

Mar 31, 2015

As on 31.3.2015 As on 31.3.2014

Claims Against the Bank not 20225.64 18994.49 Acknowledged as Debts

Liability for partly paid investments 528.50 767.50

Liability on account of outstanding 4644326.99 5249079.05 Forward Exchange Contracts

Guarantees Given on behalf of Constituents -

A) In India 1117757.85 888107.46

B) Outside India 7969.61 15938.05

Acceptances, Endorsements 1557331.53 1171870.02 and other Obligations

Other Items for which the bank is 134470.71 91055.19 contingently liable

TOTAL 7482610.83 7435811.76

1.1 Disclosures on risk exposure in derivatives a) Qualitative Disclosures

i) The Structure and organization for management of risk in derivatives trading:

The organization structure consists of Investment Wing at the Corporate level which report to the Executive Directors and Chairman & Managing Director and ultimately to the Board. Risk Management Department is informed of the transactions as and when they take place.

ii) The scope and nature of risk measurement, risk reporting and risk monitoring systems:

a) The Interest Rate Swap (IRS) transactions undertaken by the Bank are for hedging and trading purposes. Derivative as a product is also offered to the customer as per RBI norms. Such transactions are undertaken as per policies of the bank formulated based on RBI guidelines.

b) The risk is measured in the interest rate derivative transactions depending on the movement of benchmark interest rates for the remaining life of the interest rate swap contracts. All interest rate derivative transactions are included for the purpose of risk measurement. The risk is evaluated and reports are placed to the CMD/ED daily and Board periodically. Risk is monitored based on the mark to market position of the interest rate derivative transactions.

(iii) Policies for hedging and /or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/ mitigants:

IRS is undertaken on the actual interest bearing underlying assets or liabilities. The notional principal amount and maturity of the hedge does not exceed the value and maturity of underlying asset/liability. The risk is monitored on the mark to market basis of the outstanding interest rate swap contracts and accordingly the effectiveness of the hedge is determined.

Collateral required upon entering into IRS is Nil. Notional principal amount of IRS multiplied by the relevant conversion factor and the respective risk weight of the counter party has been taken into account for determining the capital requirements.

c) Other Disclosures for Interest Rate Swaps

The Bank has undertaken fixed to floating and floating to fixed interest rate swaps on underlying assets and liabilities. The loss of income on the above IRS will be Rs 2.35 Crore, in case counter-parties fail to fulfill their obligations. There is no concentration of credit risk arising from IRS transactions undertaken as the counter-parties are banks and the exposure is within the exposure limit permitted.

Based on the total assets of the Bank as on 31.03.2015, the provision requirement on account of Country Exposure is Rs Nil. The Bank has taken a stock of its exposure in countries other than the home country as on 31st March, 2015. The Bank's net funded exposure in each country is below 1% of its assets.

1.2 Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the bank.

A. Single Borrower Limit exceeded by the Bank:- Nil

1.3 Disclosure of penalties imposed by RBI.

Reserve Bank of India has not imposed any penalty on the Bank u/s 46(4) of the Banking regulation Act, 1949

2.0. Disclosures Requirement as per Accounting Standards:

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

There is no material "prior period item" included in Profit & Loss account required to be disclosed as per AS - 5 issued by ICAI read with RBI guidelines.

2.2 Revenue Recognition (AS-9):

Revenue is recognized as per Accounting Standard (AS-9) and Accounting policy No. 9 of Schedule -17.

2.3 AS - 15 -Employee Benefits (AS-15):

Provision for Employee Benefits viz. Pension, Gratuity, Leave Encashment, Sick Leave, LFC/LTC, medical benefits to retired and in service Directors and their family members etc. has been made as per Revised Accounting Standard (AS) -15.

During the financial year 2010-11, the Bank reopened the Pension option for such of its employees who had not opted for Pension scheme earlier. The Bank in result incurred an additional liability of Rs 507.84 Crore due to the same. In the same financial year too, the limit of Gratuity payable to the employees was enhanced pursuant to the amendment of Gratuity Act, 1972. As a result the liability of Bank was also increased by Rs 292.51 Crore. As per RBI guidelines as enumerated in circular no. DBOD. BP. BC.80.21.04 .018/ 2010-11 dated 09.02.2011, the Bank decided to amortize the entire expenditure Rs 800.35 Crore in five years beginning from financial year 2010-11. Accordingly a sum of Rs 160.07 Crore (160.07 Crore) is charged to Profit and Loss A/C in terms of the requirements of the above RBI Circular. Upon amortization of the liabilities over last five years, the balance unrecognized liability to be amortised towards Second Option Pension and Gratuity as on March 31,2015 is NIL.

In addition to Rs 160.07 Crore (160.07 Crore), an amount of Rs 729.30 Crore (793.55 Crore) which includes liability for the employees benefits, has been charged to Profit and Loss Account towards current year's liabilities.

2.4 Related Party Disclosures (AS-18): a) Key Management Personnel

i) Chairman and Managing Director (CMD) Shri Arun Kaul (From 01.09.2010)

ii) Executive Directors (ED) Shri J K Garg (From 05.08.2013) Shri Charan Singh (From 10.03.2015) Shri S. Chandrasekharan (Till 30.06.2014)

Transactions with Key Management Personnel

c) Associates

Regional Rural Banks (RRB) sponsored by the Bank are as under:

i) Bihar Gramin Bank

ii) Paschim Banga Gramin Bank

d) The transactions with RRB have not been disclosed in view of Para -9 of the AS-18, "Related Party Disclosure" which exempts State Controlled Enterprises from making any disclosures pertaining to their transactions with other related parties, which are also State Controlled Enterprises

2.5 As the Bank does not have Subsidiaries or controlling interest in Associates/Joint Ventures, AS 21 relating to Consolidated Financial Statements, AS 23 relating to Accounting for Investments in Associates in Consolidated Financial Statements and AS 27 relating to Financial Reporting of Interest in Joint Ventures issued by the ICAI are not applicable to the Bank.

2.6 Accounting for Taxes on Income (AS-22):

a) During the year net amount of Rs 154.82 Crore (Rs 9.92 Crore

Deferred Tax Liability) has been recognised as Deferred Tax Assets as per accounting standard AS-22.

Fixed Assets include computer software, which has been considered as intangible assets as per AS-26 issued by the ICAI. The movement in software asset is given below:

In view of the absence of the indication of material impairment within the meaning of clause 5 to clause 13 of Accounting Standard-28 "Impairment of Assets", no impairment of fixed assets is required in respect of current financial year.

2.7 Contingent Liabilities

a) Such liabilities as mentioned at Serial No. (I) of Schedule 12 of Balance Sheet are dependent upon the judgement of court, arbitration award, out of court settlement, disposal of appeals, the amount being called up, terms of contractual obligations, devolvement and raising of demand by concerned parties, respectively and necessary provision is made where claim against the Bank is tenable.

b) Based on various appellate decisions on identical issues / pending approval of Committee on Disputes for pursuing appeals, disputed demand of Income Tax, Penalty, Interest and Interest Tax amounting to Rs 10.66 Crore (Rs 10.66 Crore) has been shown in Schedule 12 under Contingent Liability. No provision has been considered necessary by the Management as the matters are pending for disposal before various competent Authorities. It is pertinent to mention that Interest Tax issue pending before Hon'ble High Court of Kolkata amounting to Rs 3.38 Crore has been decided in favour of the Bank. On receipt of order effect form Income Tax department, Bank shall be entitled to receive the entire amount along with interest. Bank has received no intimation/ notice regarding filing of appeal by Income Tax Department in any higher Forum/Supreme Court on this issue.

2.8 Floating Provisions Nil

2.8 Draw Down From Reserves

Pursuant to Reserve Bank of India (RBI) Circular No. DBR.No.BP.79/21.04.048/2014-15 dated 30th March 2015, Bank has utilized 50 % of its counter cyclical provisioning buffer held as at 31st March 2014. Accordingly, an amount of Rs 70.455 Crore out of counter cyclical provision of Rs 140.91 Crore held as on 31.03.2014 has been utilized towards specific provisions for non performing assets.

2.9 Disclosure of Letter of Comforts

The Bank issues Letter of Comforts on behalf of its various constituents against the credit limits sanctioned to them. In the opinion of Management, no significant financial impact and cumulative financial obligations have been assessed under LOCs issued by the Bank in the past, during the current year and still outstanding. Brief details of LOCs issued by the Bank are as follows:

2.10 Provisioning Coverage Ratio

The provision coverage as on 31.03.2015 works out to 52.65 % (57.02%).

2.11 Income from Bancassurance

Bank is a Corporate Agent of Life Insurance Corporation of India for Bancassurance Life and Reliance General Insurance Company Ltd for Bancassurance Non-Life business. Details of income from Bancassurance is given below:

2.12 Reconciliation:

Most of the inter branch transactions are reconciled automatically with implementation of Centralized Banking Solution (CBS). Very few entries under inter branch account & inter bank account requires reconciliation which is done on ongoing basis.

Reconciliation of entries outstanding has been drawn upto 31.03.2015 in case of Inter-Branch Accounts and in Inter- Bank Accounts. Elimination of entries outstanding in Inter- Bank Accounts including Reserve Bank of India, State Bank of India, NOSTRO Accounts etc. and in Inter-Branch Accounts viz. drafts, suspense, branch adjustment, clearing transactions, fund transfers, telegraphic transfers, balances pertaining to advances paid for acquisition of assets, sundry creditors etc. is in progress. In the opinion of the management, consequential effect of the above on the revenue/assets/liabilities will not be material.

2.13 Transfer to Depositor Education and Awareness Fund (DEAF)

(®tt%t / Amount in RsCrore)

2.14 Unhedged Foreign Currency Exposure:

In terms of RBI Guidelines, our Bank has framed a policy on 'Unhedged Foreign Exchange Exposure by borrowers including SMEs and Corporates duly approved by the Board. The policy inter-alia provides for:

- Monitoring and review of Unhedged Foreign Currency Exposure (UFCE) of all customers including SMEs.

- Incremental capital and provisioning requirements for exposures to entities with Unhedged Foreign Currency Exposure.

- Stipulation of UFCE Charge in order to provide protection and discourage entities having UFCE.

Based on the available data and financial statements and the declaration from borrowers, the bank has estimated the liability and made a provision of Rs 32.12 Lakh and allocated capital of Rs 0.74 Lacs as on 31.03.2015 on Unhedged Foreign Currency Exposure (UFCE) to their constituents in terms of RBI Circulars and our Board approved policy.

2.15 Liquidity Coverage Ratio (LCR):

Qualitative Assessment of LCR data and Result:

Driver of LCR:

The bank main driver of satisfactory level of LCR during the period have been

- High quality of Liquid Asset such as investment in Government securities

- Investment in short term assets resulting in quick inflows.

- Reliance on Stable liabilities.

High Quality liquid Assets (HQLA): Our HQLA comprises of following

- Level 1 Assets

1. Cash in hand including Cash Reserve in excess of CRR

2. Govt. Securities in Excess of Mandatory SLR

3. 7% of Net Demand and Time Liabilities in the form of SLR securities.

- Level 2 Assets (Not issued by Banks/Financial Institution)

1. Marketable securities representing claims on or claims guaranteed by Public Sector Entities (PSEs) having risk weight 20% under the Basel II

2. Common Equity Shares Included in NSE CNX Nifty index and/or S&P BSE Sensex index

Concentration of Funding Sources: Our Funding sources is well spread with diversified liabilities portfolio comprising mainly of

- Current Deposit and Saving Deposit, and

- Term Deposit

We do not have any group entities and liquidity at solo level is being managed centrally.

2.16 Fixed Assets

(i) Bank had revalued on few occasions in the past, its premises by independent qualified valuers and the excess of fair market value over the original cost was credited to revaluation reserve. As on date aggregate amount of revaluation reserve (net of revaluation relating to assets disposed of) is Rs 764.23 crore (Rs 737.08 crore) and depreciation on the revalued portion charged to above revaluation reserve (net of depreciation relating to assets disposed of) is Rs 154.50 Crore (Rs 149.68 crore).

(ii) Consequent upon repeal of Schedule XIV of the Companies Act, 1956, the rates of depreciation prescribed in the erstwhile Schedule XIV have been adopted by the management for onward application. As there is no change in the rates, there is no impact on the financial statements of the Bank as regards depreciation due to shift from Schedule XIV rates to management prescribed rates.

2.17 Break up of provision held against non-performing advances into facility-wise, security-wise and sector-wise is not ascertained. The same is deducted on estimated basis from gross advances in the various categories to arrive at the balance of net advances as stated in Schedule 9 of the Balance Sheet.

2.18 Assets and liabilities have been suitably adjusted for events occurring after the balance sheet date that provide additional evidence to assist the estimation of amounts relating to conditions existing at the balance sheet date.

3. The Bank has complied with the findings of Annual Financial Inspection of RBI of 2014 with regard to divergent accounts except for 4 borrower accounts aggregating to Rs1120.76 Crores which have not been declared as Non-performing requiring a provision of Rs339.35 Crores wherein the bank is preferring further representations before appropriate authorities of RBI for review and dispensation and has reasonable ground to believe that such divergent issues will be settled in its favour. However, the Bank has made the required provision of Rs339.35 Crore in terms of AFI direction against these four borrower accounts.

4. The bracketed figures indicate previous year's figures. Previous year's figures have been re-grouped/ re-arranged/re-casted wherever considered necessary.


Mar 31, 2014

1. a) During the year, Bank allotted 2,59,10,091 equity Shares of Rs.10/- each to Government of India at an issue price of Rs.77.19 per Share and received Rs.199,99,99,924.29 against allotment of the above equity Shares. Out of this, Rs.25,91,00,910 is transferred to Share Capital Account and Rs.174,08,99,014.29 is transferred to Share Premium Account.

b) During the year, Bank allotted 23,61,70,488 equity shares of Rs.10/- each to Government of India at an issue price of Rs.77.19 per share on conversion of 182300 Perpetual Non Cumulative Preference Shares (PNCPS) of Rs.1,00,000 Lakh each aggregating to Rs.1823 Crore held by Government of India. Out of Rs.1823 Crore held under PNCPS account, an amount of Rs.236,17,04,880 is appropriated to Share Capital Account and balance amount of Rs. 1586,82,95,120 is appropriated to Share Premium Account.

During the financial year 2013-14 there was transfer of securities from ''Available for Sale'' (AFS) to Held to Maturity (HTM) category of Rs.6243.03 Crores (BV) under special provision with the approval of Board of Directors (BOD). Depreciation amounting to Rs.23.71 Crore on account of such transfer has been charged to Profit and Loss Account.

2. Disclosures on risk exposure in derivatives

a) Qualitative Disclosures

i) The Structure and organization for management of risk in derivatives trading:

The organization structure consists of Investment Wing at the Corporate level which report to the Executive Directors and Chairman & Managing Director and ultimately to the Board. Risk Management Department is informed of the transactions as and when they take place.

ii) The scope and nature of risk measurement, risk reporting and risk monitoring systems:

a) The Interest Rate Swap (IRS) transactions undertaken by the Bank are for hedging and trading purposes. Derivative as a product is also offered to the customer as per RBI norms. Such transactions are undertaken as per policies of the bank formulated based on RBI guidelines.

b) The risk is measured in the interest rate derivative transactions depending on the movement of benchmark interest rates for the remaining life of the interest rate swap contracts. All interest rate derivative transactions are included for the purpose of risk measurement. The risk is evaluated and reports are placed to the CMD/ED daily and Board periodically. Risk is monitored based on the mark to market position of the interest rate derivative transactions.

(iii) Policies for hedging and /or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/ mitigants:

IRS is undertaken on the actual interest bearing underlying assets or liabilities. The notional principal amount and maturity of the hedge does not exceed the value and maturity of underlying asset/liability. The risk is monitored on the mark to market basis of the outstanding interest rate swap contracts and accordingly the effectiveness of the hedge is determined.

Collateral required upon entering into IRS is Nil. Notional principal amount of IRS multiplied by the relevant conversion factor and the respective risk weight of the counter party has been taken into account for determining the capital requirements.

c) Other Disclosures for Interest Rate Swaps

The Bank has undertaken fixed to floating and floating to fixed interest rate swaps on underlying assets and liabilities. The loss of income on the above IRS will be Rs.6.70 Crore, in case counter-parties fail to fulfil their obligations. There is no concentration of credit risk arising from IRS transactions undertaken as the counter-parties are banks and the exposure is within the exposure limit permitted.

3. Disclosure of penalties imposed by RBI.

Reserve Bank of India has not imposed any penalty on the Bank u/s 46(4) of the Banking regulation Act, 1949

4. Disclosures Requirement as per Accounting Standards:

5. There is no material "prior period item" included in Profit & Loss account required to be disclosed as per AS – 5 issued by ICAI read with RBI guidelines.

6. Revenue Recognition

During the year Bank has changed its accounting practice to recognize commission earned on Letter of Credit, Guarantees issued and interest on since Bill on accrual basis instead of realization to comply with Accounting Standard (AS-9). The profits for the year 2013-14 would have been higher by Rs.142.88 crore if the practice of recognition of above said commission on realization basis continued for the financial year. The impact on account of transition to the new system pertaining to the transactions accounted for under the old system could not be ascertained and the exercise is currently going on. The necessary adjustment, if any, will be carried out as and when the impact is ascertained.

7. AS - 15 –Employee Benefits

Provision for Employee Benefits viz. Pension, Gratuity, Leave Encashment, Sick Leave, LFC/LTC, medical benefits to retired and in service Directors and their family members etc. has been made as per Revised Accounting Standard (AS) -15.

During the financial year 2010-11, the Bank reopened the Pension option for such of its employees who had not opted for Pension scheme earlier. The Bank in result incurred an additional liability of Rs.507.84 Crore due to the same. In the same financial year too, the limit of Gratuity payable to the employees was enhanced pursuant to the amendment of Gratuity Act, 1972. As a result the liability of Bank was also increased by Rs.292.51 Crore. As per RBI guidelines as enumerated in circular no. DBOD.BP.BC.80.21.04.018/2010- 11 dated 09.02.2011, the Bank decided to amortize the entire expenditure Rs.800.35 Crore in five years beginning from financial year 2010-11. Accordingly a sum of Rs.160.07 Crore (160.07 Crore) is charged to Profit and Loss A/C in terms of the requirements of the above RBI Circular. The balance amount of Rs.160.07 Crore (320.14 Crore) is carried forward.

In addition to Rs.160.07 Crore (160.07 Crore), an amount of Rs.793.55 Crore (734.64 Crore) which includes liability for the employees benefits, has been charged to Profit and Loss Account towards current year''s liabilities.

8. Related Party Disclosures: a) Key Management Personnel

i) Chairman and Managing Director

Shri Arun Kaul (From 01.09.2010)

ii) Executive Directors

Shri S. Chandrasekharan (From 01.10.2011)

Shri J K Garg (From 05.08.2013)

Shri N.R. Badrinarayanan (Till 30.06.2013)

c) Associates

Regional Rural Banks sponsored by the Bank are as under:

i) Bihar Gramin Bank

ii) Paschim Banga Gramin Bank

d) The transactions with Associates have not been disclosed in view of Para -9 of the AS-18, "Related Party Disclosure" which exempts State Controlled Enterprises from making any disclosures pertaining to their transactions with other related parties, which are also State Controlled Enterprises

9. As the Bank does not have Subsidiaries or controlling interest in Associates/Joint Ventures, AS 21 relating to Consolidated Financial Statements, AS 23 relating to Accounting for Investments in Associates in Consolidated Financial Statements and AS 27 relating to Financial Reporting of Interest in Joint Ventures issued by the ICAI are not applicable to the Bank.

10. Taxes on Income

a) During the year net amount of Rs.9.92 Crore (Rs.6.00 Crore) has been recognised as Deferred Tax Liabilities as per accounting standard AS-22.

b) In accordance with the "Guidance Note on Accounting for credit available in respect of MAT under the Income Tax Act, 1961" issued by the ICAI, the MAT credit for the current year amounting to Rs.165.12 Crore (Rs.350.64 crore) has been credited to P&L Account under "Provisions and Contingencies" by debiting MAT credit entitlement Account since the management is of the opinion that the MAT credit can be set off during the specified period as per the Provisions of the Income Tax Act, 1961.

11. Intangible assets

Fixed Assets include computer software, which has been considered as intangible assets as per AS-26 issued by the ICAI. The movement in software asset is given below:

12. Impairment of Assets

In view of the absence of the indication of material impairment within the meaning of clause 5 to clause 13 of Accounting Standard-28 "Impairment of Assets", no impairment of fixed assets is required in respect of current financial year.

13. Additional disclosures:

14. Contingent Liabilities

a) Such liabilities as mentioned at Serial No. (I) of Schedule 12 of Balance Sheet are dependent upon the judgement of court, arbitration award, out of court settlement, disposal of appeals, the amount being called up, terms of contractual obligations, devolvement and raising of demand by concerned parties, respectively and necessary provision is made where claim against the Bank is tenable.

b) Based on various appellate decisions on identical issues / pending approval of Committee on Disputes for pursuing appeals, disputed demand of Income Tax, Penalty, Interest and Interest Tax amounting to Rs.10.66 Crore (Rs.90.91 Crore) has been shown in Schedule 12 under Contingent Liability. No provision has been considered necessary by the Management as the matters are pending for disposal before various competent Authorities. It is pertinent to mention that Interest Tax issue pending before Hon''ble High Court of Kolkata amounting to Rs.3.38 Crore has been decided in favor of the Bank. On receipt of order effect form Income Tax department, Bank shall be entitled to receive the entire amount along with interest. Bank has received no intimation/ notice regarding filing of appeal by Income Tax Department in any higher Forum/Supreme Court on this issue.

15. Floating Provisions Nil

16. Draw Down From Reserves

Pursuant to Reserve Bank of India (RBI) Circular No. DBOD.No.BP.95/21.04.048/2013-14 dated 7th February 2014, Bank has utilised 33 % of its counter cyclical provisioning buffer held as at 31st March 2013. Accordingly, an amount of Rs.69.41 Crore out of counter cyclical provision of Rs.210.32 Crore held as on 31.03.2013 has been utilized towards specific provisions for non performing assets.

17. Provisioning Coverage Ratio

The provision coverage as on 31.03.2014 works out to 57.02 % (52.08%).

18. Reconciliation:

Most of the inter branch transactions are reconciled automatically with implementation of Centralized Banking Solution (CBS). Very few entries under inter branch account & inter bank account requires reconciliation which is done on ongoing basis.

Reconciliation of entries outstanding has been drawn upto 31.03.2014 in case of Inter-Branch Accounts and in Inter- Bank Accounts. Elimination of entries outstanding in Inter- Bank Accounts including Reserve Bank of India, State Bank of India, NOSTRO Accounts etc. and in Inter-Branch Accounts viz. drafts, suspense, branch adjustment, clearing transactions, fund transfers, telegraphic transfers, balances pertaining to advances paid for acquisition of assets, sundry creditors etc. is in progress. In the opinion of the management, consequential effect of the above on the revenue/assets/liabilities will not be material.

19. Fixed Assets

A) Bank had revalued on few occasions in the past, its premises by independent qualified values and the excess of fair market value over the original cost was credited to revaluation reserve. As on date aggregate amount of revaluation reserve (net of revaluation relating to assets disposed of) is Rs.737.08 crore (Rs.689.11 crore) and depreciation on the revalued portion charged to above revaluation reserve (net of depreciation relating to assets disposed of) is Rs.149.68 crore (Rs.144.41 crore)

B) Premises including Assets with Written Down Value of Rs.2.12 crores (Rs.2.23 crores), which were revalued at Rs.23.03 crores in respect of, which documentation/ registration is pending.

C) Estimated amount of contracts (net of advance) remaining to be executed on capital account and not provided for Rs.13.52 Crore (Rs.52.55 crore)

D) Land & Building situated at Ahmedabad (Bhadra Branch - 0007) compulsory required by MCA for heritage complex for consideration of Rs.1.87 Crore kept in sundry creditors pending ascertainment of WDV of the said premises which was acquired by the bank in 1962.

20. Break up of provision held against non-performing advances into facility-wise, security-wise and sector-wise is not ascertained. The same is deducted on estimated basis from gross advances in the various categories to arrive at the balance of net advances as stated in Schedule 9 of the Balance Sheet.

21. The bracketed figures indicate previous year''s figures. Previous year''s figures have been re-grouped /re- arranged/re-casted wherever considered necessary.


Mar 31, 2013

A) During the year, Bank allotted 8,79,16,343 equity Shares to Government of India at an issue price of Rs. 77.46 per Share and received Rs. 680,99,99,928.78 against allotment of the above equity Shares. Out of this, Rs. 87,91,63,430 is transferred to Share Capital Account and Rs. 593,08,36,498.78 towards Share Premium Account.

b) During the year, Bank has mobilized 9 % Unsecured Redeemable Non Convertible Subordinated Lower Tier II Bonds having face value of Rs. 10 lakh aggregating to Rs. 1000 Crore.

1.0 Investments

1.1 The Details of investments and the movement of provisions held towards depreciation on the investments/ Non Performing Investments of the Bank is given below:

1.2 Sale and transfers to/from HTM Category

The value of sales and transfers of securities to/from HTM category has not exceeded 5% of the book value of investments held in HTM category at the beginning of the year.

During the financial year 2012-13 there was transfer of securities from ''Available for Sale'' (AFS) to Held to Maturity (HTM) category of Rs. 3211.64 Crores (FV) with the approval of Board of Directors (BOD) at the beginning of the year. Depreciation amounting to Rs. 28.30 Crore on account of such transfer has been charged to Profit and Loss Account.

2.1 Disclosures on risk exposure in derivatives

a) Qualitative Disclosures

i) The Structure and organization for management of risk in derivatives trading:

The organization structure consists of Investment Wing at the Corporate level which report to the Executive Directors and Chairman & Managing Director and ultimately to the Board. Risk Management Department is informed of the transactions as and when they take place.

ii) The scope and nature of risk measurement, risk reporting and risk monitoring systems:

a) The Interest Rate Swap (IRS) transactions undertaken by the Bank are for hedging and trading purposes. Derivative as a product is also offered to the customer as per RBI norms. Such transactions are undertaken as per policies of the bank formulated based on RBI guidelines.

b) The risk is measured in the interest rate derivative transactions depending on the movement of benchmark interest rates for the remaining life of the interest rate swap contracts. All interest rate derivative transactions are included for the purpose of risk measurement. The risk is evaluated and reports are placed to the CMD/ ED daily and Board periodically. Risk is monitored based on the mark to market position of the interest rate derivative transactions.

(iii) Policies for hedging and /or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/ mitigants:

IRS is undertaken on the actual interest bearing underlying assets or liabilities. The notional principal amount and maturity of the hedge does not exceed the value and maturity of underlying asset/liability. The risk is monitored on the mark to market basis of the outstanding interest rate swap contracts and accordingly the effectiveness of the hedge is determined.

Collateral required upon entering into IRS is Nil. Notional principal amount of IRS multiplied by the relevant conversion factor and the respective risk weight of the counter party has been taken into account for determining the capital requirements.

c) Other Disclosures for Interest Rate Swaps

The Bank has undertaken fixed to floating and floating to fixed interest rate swaps on underlying assets and liabilities. The loss of income on the above IRS will be Rs. 2.03 Crore, in case counter-parties fail to fulfill their obligations. There is no concentration of credit risk arising from IRS transactions undertaken as the counter-parties are banks and the exposure is within the exposure limit permitted.

Based on the total assets of the Bank as on 31.03.2013, the provision requirement on account of Country Exposure is Rs. Nil. The Bank has taken a stock of its exposure in countries other than the home country as on 31st March, 2013. The Bank''s net funded exposure in each country is below 1% of its assets.

3.1. Disclosure of penalties imposed by RBI.

Reserve Bank of India has not imposed any penalty on the Bank u/s 46(4) of the Banking Regulation Act, 1949

4.0. Disclosures Requirement as per Accounting Standards:

4.1 There is no material "prior period item" included in Profit & Loss account required to be disclosed as per AS - 5 issued by ICAI read with RBI guidelines.

4.2 Revenue Recognition

Commission earned on Letter of Credit, Guarantees issued and interest on usuance Bill are recognised on realization basis as per Bank''s accounting policy which is not in accordance with AS-9.

4.3 AS-15 - Employee Benefits

Provision for Employee Benefits viz. Pension, Gratuity, Leave Encashment, Sick Leave, LFC/LTC, medical benefits to retired and in service Directors and their family members etc. has been made as per Accounting Standard (AS) -15 (Revised) .

During the financial year 2010-11, the Bank reopened the Pension option for such of its employees who had not opted for Pension scheme earlier. The Bank in result incurred an additional liability of Rs. 507.84 Crore due to the same. In the same financial year too, the limit of Gratuity payable to the employees was enhanced in pursuance to the amendment of Gratuity Act, 1972. As a result the liability of Bank was also increased by Rs. 292.51 Crore. As per RBI guidelines as enumerated in circular no. DBOD.BP.BC.80.21.04.018/ 2010-11 dated 09.02.2011, the Bank decided to amortise the entire expenditure of Rs. 800.35 Crore in five years beginning from financial year 2010-11. Accordingly a sum of Rs.160.07 Crore (160.07 Crore) is charged to Profit and Loss A/C in terms of the requirements of the above RBI Circular. The balance amount of Rs. 320.14 Crore (480.21Crore) is carried forward.

In addition to Rs.160.07 Crore (160.07 Crore), an amount of Rs. 734.64. Crore (Rs. 584.17 Crore) which includes liability for the employees benefits, has been charged to Profit and Loss Account towards current year''s liabilities.

4.5 Related Party Disclosures:

a) Key Management Personnel

i) Chairman and Managing Director Shri Arun Kaul (From 01.09.2010)

ii) Executive Directors

Shri N.R. Badrinarayanan (From 01.09.2010) Shri S. Chandrasekharan (From 01.10.2011)

c) Associates

Regional Rural Banks sponsored by the Bank are as under:

i) Bihar Gramin Bank

ii) Paschim Banga Gramin Bank

d) The transactions with Associates have not been disclosed in view of Para-9 of the AS-18, "Related Party Disclosure" which exempts State Controlled Enterprises from making any disclosures pertaining to their transactions with other related parties, which are also State Controlled Enterprises

4.6 As the Bank does not have Subsidiaries or controlling interest in Associates/Joint Ventures, AS 21 relating to Consolidated Financial Statements, AS 23 relating to Accounting for Investments in Associates in Consolidated Financial Statements and AS 27 relating to Financial Reporting of Interest in Joint Ventures issued by the ICAI are not applicable to the Bank.

4.7 Taxes on Income

a) During the year net amount of Rs. 6.00 Crore (Rs. 78.93 Crore as Deferred Tax Assets) has been recognised as Deferred Tax Liabilities as per accounting standard AS-22.

b) In accordance with the "Guidance Note on Accounting for credit available in respect of MAT under the Income Tax Act, 1961" issued by the ICAI, the MAT credit for the current year amounting to Rs. 350.64 Crore (Rs. 292.26 crore) has been credited to P&L Account under "Provisions and Contingencies" by debiting MAT credit entitlement Account since the management is of the opinion that the MAT credit can be set off during the specified period as per the Provisions of the Income Tax Act, 1961.

4.8 Intangible assets

Fixed Assets include computer software, which has been considered as intangible assets as per AS-26 issued by the ICAI. The movement in software asset is given below:

4.9 Impairment of Assets

In view of the absence of the indication of material impairment within the meaning of clause 5 to clause 13 of Accounting Standard-28 "Impairment of Assets", no impairment of fixed assets is required in respect of current financial year.

5.0 Additional disclosures:

5.1 Provisions & Contingencies

5.2 Contingent Liabilities

a) Such liabilities as mentioned at Serial No. (I) of Schedule 12 of Balance Sheet are dependent upon the judgement of court, arbitration award, out of court settlement, disposal of appeals, the amount being called up, terms of contractual obligations, devolvement and raising of demand by concerned parties, respectively and necessary provision is made where claim against the Bank is tenable.

b) Based on various appellate decisions on identical issues / pending approval of Committee on Disputes for pursuing appeals, disputed demand of Income Tax, Penalty, Interest and Interest Tax amounting to Rs. 90.91 Crore (Rs. 90.91 Crore) has been shown in Schedule 12 under Contingent Liability. No provision has been considered necessary by the Management as the matters are pending for disposal before various competent Authorities and payments/ adjustment of Rs. 35.65 Crore (Rs.. 35.65 crore) has been included in Other Assets in Schedule 11.

5.3 Floating Provisions

Nil

5.4 Draw Down From Reserves

There is no draw down from Reserves.

5.5 Disclosure of Letter of Comforts

The Bank issues Letter of Comforts on behalf of its various constituents against the credit limits sanctioned to them. In the opinion of Management, no significant financial impact and cumulative financial obligations have been assessed under LOCs issued by the Bank in the past, during the current year and still outstanding. Brief details of LOCs issued by the Bank are as follows:

5.6 Provisioning Coverage Ratio

The provision coverage as on 31.03.2013 works out to 52.08 % (54.39%).

5.7 Reconciliation:

Most of the inter branch transactions are reconciled automatically with implementation of Centralized Banking Solution (CBS). Very few entries under inter branch account & inter bank account require reconciliation which is done on ongoing basis.

Reconciliation of entries outstanding has been drawn upto

31.03.2013 in case of Inter-Branch Accounts and in Inter- Bank Accounts. Elimination of entries outstanding in Inter- Bank Accounts including Reserve Bank of India, State Bank of India, NOSTRO Accounts etc. and in Inter-Branch Accounts viz. drafts, suspense, branch adjustment, clearing transactions, fund transfers, telegraphic transfers, balances pertaining to advances paid for acquisition of assets, sundry creditors etc. is in progress. In the opinion of the management, consequential effect of the above on the revenue/assets/liabilities will not be material.

5.8 Fixed Assets

a) Bank had revalued on few occasions in the past, its premises by independent qualified valuers and the excess of fair market value over the original cost was credited to revaluation reserve. As on date aggregate amount of revaluation reserve (net of revaluation relating to assets disposed off) is Rs. 689.12 Crore (Rs. 633.21 Crore) and depreciation on the revalued portion charged to the above revaluation reserve (net of depreciation relating to assets disposed off) is Rs. 144.41 Crore (Rs. 139.09 Crore).

b) Premises include revalued Assets with written down value of Rs. 2.32 Crores (Rs. 2.44 Crores ) which were revalued at Rs. 23.03 Crore in respect of which documentation/ registration is pending.

c) Estimated amount of contracts (net of advance) remaining to be executed on capital account and not provided for Rs. 30.65 Crore (Rs. 7.50 Crore)

5.9 Break up of provision held against non-performing advances into facility-wise, security-wise and sector-wise is not ascertained. The same is deducted on estimated basis from gross advances in the various categories to arrive at the balance of net advances as stated in Schedule 9 of the Balance Sheet.

5.10 The bracketed figures indicate previous year''s figures. Previous year''s figures have been re-grouped /re- arranged/re-casted wherever considered necessary.

5.11 Notes on revised Balance Sheet.

The financial Statements were approved by the Board of Directors on 7th May 2013 proposing a dividend at the rate of Rs. 1/- per equity share. Subsequently, the Board considered the proposal to pay dividend at the rate of Rs.1.60 per equity share and the financial statements as on 31st March 2013 have been revised to include an amount of Rs. 140.89 Crore (inclusive of Dividend Tax of Rs. 20.47 Crore) which have been duly approved by the Board of Directors in its meeting held on 24th May 2013 at New Delhi.


Mar 31, 2012

A) During the year, Bank allotted 58,18,887 equity Shares to Government of India at an issue price of Rs 82.49 per Share and received Rs 47,99,99,988.63 against allotment of the above equity Shares. Out of this, Rs 5,81,88,870 is transferred to Share Capital Account and Rs 42,18,11,118.63 towards Share Premium Account.

b) During the year, Bank also allotted 3,13,75,874 equity Shares to LIC of India at an issue price of Rs 82.49 per share and received Rs 258,81,95,846.26 against allotment of the above equity Shares. Out of this, Rs 31,37,58,740 is transferred to Share Capital Account and Rs 227,44,37,106.26 towards Share Premium Account.

1.0 Investments

1.1 The Details of investments and the movement of provisions held towards depreciation on the investments/ Non Performing Investments of the Bank is given below:

1.2 Sale and transfers to/from HTM Category

The value of sales and transfers of securities to/from HTM category has not exceeded 5% of the book value of investments held in HTM category at the beginning of the year.

During the financial year 2011-12 there was transfer of securities from 'Available for Sale' (AFS) to Held to Maturity (HTM) category of Rs 3529.69 Crores with the approval of Board of Directors (BOD) at the beginning of the year. Depreciation amounting to Rs 45.14 Crore on account of such transfer has been charged to Profit and Loss Account.

2.1 Disclosures on risk exposure in derivatives

a) Qualitative Disclosures

i) The Structure and organization for management of risk in derivatives trading:

The organization structure consists of Investment Wing at the Corporate level which report to the Executive Directors and Chairman & Managing Director and ultimately to the Board. Risk Management Department is informed of the transactions as and when they take place.

ii) The scope and nature of risk measurement, risk reporting and risk monitoring systems:

a) The Interest Rate Swap (IRS) transactions undertaken by the Bank are for hedging and trading purposes. Derivative as a product is also offered to the customer as per RBI norms. Such transactions are undertaken as per policies of the bank formulated based on RBI guidelines.

b) The risk is measured in the interest rate derivative transactions depending on the movement of benchmark interest rates for the remaining life of the interest rate swap contracts. All interest rate derivative transactions are included for the purpose of risk measurement. The risk is evaluated and reports are placed to the CMD/ ED daily and Board periodically. Risk is monitored based on the mark to market position of the interest rate derivative transactions.

(iii) Policies for hedging and /or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/ mitigates:

IRS is undertaken on the actual interest bearing underlying assets or liabilities. The notional principal amount and maturity of the hedge does not exceed the value and maturity of underlying asset/liability. The risk is monitored on the mark to market basis of the outstanding interest rate swap contracts and accordingly the effectiveness of the hedge is determined.

Collateral required upon entering into IRS is Nil. Notional principal amount of IRS multiplied by the relevant conversion factor and the respective risk weight of the counter party has been taken into account for determining the capital requirements.

c) Other Disclosures for Interest Rate Swaps

The Bank has undertaken fixed to floating and floating to fixed interest rate swaps on underlying assets and liabilities. The loss of income on the above IRS will be Rs 16.54 Crore (Rs 10.51 Crore), in case counter-parties fail to fulfill their obligations. There is no concentration of credit risk arising from IRS transactions undertaken as the counter-parties are banks and the exposure is within the exposure limit permitted.

Based on the total assets of the Bank as on 31.03.2012, the provision requirement on account of Country Exposure is Rs. Nil. The Bank has taken a stock of its exposure in countries other than the home country as on 31st March, 2012. The Bank's net funded exposure in each country is below 1% of its assets.

3.1 Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the bank.

4.1. Disclosure of penalties imposed by RBI.

Reserve Bank of India has not imposed any penalty on the Bank u/s 46(4) of the Banking regulation Act, 1949

5.0. Disclosures Requirement as per Accounting Standards:

5.1 There is no material "prior period item" included in Profit & Loss account required to be disclosed as per AS - 5 issued by ICAI read with RBI guidelines.

5.2 Revenue Recognition

Commission earned on Letter of Credit and Guarantees issued are recognized on realization basis as per Bank's accounting policy which is not in accordance with AS-9. However, the amount is insignificant.

5.3 AS - 15 -Employee Benefits

Provision for Employee Benefits viz. Pension, Gratuity, Leave Encashment, Sick Leave, LFC/LTC, medical benefits to retired and in service Directors and their family members etc. has been made as per Revised Accounting Standard (AS) -15. In terms of Limited Revision to AS-15 Employee Benefits (Revised 2005) and guidelines notes thereon, the Bank has decided to recognize 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 as an expense on a straight-line basis over 5 years from financial year 2007-08. Accordingly, Rs 88.69 Crore has been charged to Profit and Loss Account towards amortization of the increase in liability. There is no unamortized portion as at the end of the financial year 2011-2012 in this regard.

During the last financial year, the Bank reopened the Pension option for such of its employees who had not opted for Pension scheme earlier. The Bank in result incurred an additional liability of Rs 507.84 Crore due to the same. In the last financial year too, the limit of Gratuity payable to the employees was enhanced to pursuant to the amendment of Gratuity Act, 1972. As a result the liability of Bank was also increased by Rs 292.51 Crore. As per RBI guidelines as enumerated in circular no. DBOD. BP.BC. 80.21.04. 018/ 2010-11 dated 09.02.2011, the Bank decided to amortize the entire expenditure Rs 800.35 Crore in five years beginning from financial year 2010-11. Accordingly a sum of Rs 160.07 Crore (Rs 160.07 Crore) is charged to Profit and Loss A/C in terms of the requirements of the above RBI Circular. The balance amount of Rs 480.21 Crore C 640.28 Crore) is carried forward.

In addition to Rs 160.07 Crore (Rs 160.07 Crore), an amount of Rs 584.17 Crore (Rs 461.84 Crore) which includes liability for the employees benefits, has been charged to Profit and Loss Account towards current year's liabilities.

5.4 Related Party Disclosures:

a) Key Management Personnel

i) Chairman and Managing Director Shri Arun Kaul (From 01.09.2010)

ii) Executive Directors

Shri Ajai Kumar ( Till 30.09.2011)

Shri N.R. Badrinarayanan (From1-9-2010) Shri S. Chandrasekharan (From 01.10.2011)

c) Associates

Regional Rural Banks sponsored by the Bank are as under:

i) Jaipur Thar Gramin Bank

ii) Kalinga Gramya Bank

iii) Bihar Kshetriya Gramin Bank

iv) Mahakaushal Gramin Bank

v) Paschim Banga Gramin Bank

d) The transactions with Associates have not been disclosed in view of Para -9 of the AS-18, "Related Party Disclosure" which exempts State Controlled Enterprises from making any disclosures pertaining to their transactions with other related parties, which are also State Controlled Enterprises

5.6 As the Bank does not have Subsidiaries or controlling interest in Associates/Joint Ventures, AS 21 relating to Consolidated Financial Statements, AS 23 relating to Accounting for Investments in Associates in Consolidated Financial Statements and AS 27 relating to Financial Reporting of Interest in Joint Ventures issued by the ICAI are not applicable to the Bank.

5.7 Taxes on Income

a) During the year net amount of Rs 78.93 Crore (Rs 30.51 Crore) has been recognised as Deferred Tax Asset as per accounting standard AS-22. However, DTA on carried forward loss as per return to the extent of Rs 120.51 Crore (Rs 371.27 Crore) has gone for appeal, has not been recognized on account of prudence.

b) In accordance with the "Guidance Note on Accounting for credit available in respect of MAT under the Income Tax Act, 1961" issued by the ICAI, the MAT credit for the current year amounting to Rs 292.26 Crore (Rs 286.10 crore) has been credited to P&L Account under "Provisions and Contingencies" by debiting MAT credit entitlement Account since the management is of the opinion that the MAT credit can be set off during the specified period as per the Provisions of the Income Tax Act, 1961.

5.8 Intangible assets

Fixed Assets include computer software, which has been considered as intangible assets as per AS-26 issued by the ICAI. The movement in software asset is given below:

5.9 Impairment of Assets

In view of the absence of the indication of material impairment within the meaning of clause 5 to clause 13 of Accounting Standard-28 "Impairment of Assets", no impairment of fixed assets is required in respect of current financial year.

6.1 Contingent Liabilities

a) Such liabilities as mentioned at Serial No. (I) of Schedule 12 of Balance Sheet are dependent upon the judgment of court, arbitration award, out of court settlement, disposal of appeals, the amount being called up, terms of contractual obligations, devolvement and raising of demand by concerned parties, respectively and necessary provision is made where claim against the Bank is tenable.

b) Based on various appellate decisions on identical issues / pending approval of Committee on Disputes for pursuing appeals, disputed demand of Income Tax, Penalty, Interest and Interest Tax amounting to Rs 90.91 Crore (Rs 10.66 Crore) has been shown in Schedule 12 under Contingent Liability. No provision has been considered necessary by the

Management as the matters are pending for appeal before various competent Authorities and payments/adjustment of Rs35.65 Crore (Rs 10.65 crore) has been included in Other Assets in Schedule 11.

6.2 Floating Provisions

Nil

6.3 Draw Down From Reserves

There is no draw down from Reserves.

6.4 Disclosure of Letter of Comforts

The Bank issues Letter of Comforts on behalf of its various constituents against the credit limits sanctioned to them. In the opinion of Management, no significant financial impact and cumulative financial obligations have been assessed under LOCs issued by the Bank in the past, during the current year and still outstanding. Brief details of LOCs issued by the Bank are as follows:

6.5 Provisioning Coverage Ratio

The provision coverage as on 31.03.2012 works out to 54.39 % (51.60%).

6.6 Income from Banc assurance

Bank is a Corporate Agent of Life Insurance Corporation of India for Banc assurance Life and Reliance General Insurance Company Ltd for Banc assurance Non-Life business. Details of income from Banc assurance is given below:

6.7 Reconciliation:

Reconciliation of entries outstanding has been drawn upto 31.03.2012 in case of Inter-Branch Accounts and in Inter-Bank Accounts. Elimination of entries outstanding in Inter-Bank Accounts including Reserve Bank of India, State Bank of India, NOSTRO Accounts etc. and in Inter-Branch Accounts viz. drafts, suspense, branch adjustment, clearing transactions, fund transfers, telegraphic transfers, balances pertaining to advances paid for acquisition of assets, sundry creditors etc. is in progress. In the opinion of the management, consequential effect of the above on the revenue/assets/liabilities will not be material.

6.8 Fixed Assets

a) Bank had revalued on few occasions in the past, its premises by independent qualified values and the excess of fair market value over the original cost was credited to revaluation reserve. As on date aggregate amount of revaluation reserve (net of revaluation relating to assets disposed of) is Rs 633.21 Crore (Rs 584.09 Crore) and depreciation on the revalued portion charged to the above revaluation reserve (net of depreciation relating to assets disposed of) is Rs 139.09 Crore (Rs 133.32 Crore).

b) Premises include revalued Assets with written down value of Rs 2.44 Crores (Rs 2.58 Crores ) in respect of which documentation/ registration is pending.

c) Estimated amount of contracts (net of advance) remaining to be executed on capital account and not provided for Rs 11.90 Crore (Rs 6.36 Crore)

6.9 Break up of provision held against non-performing advances into facility-wise, security-wise and sector-wise is not ascertained. The same is deducted on estimated basis from gross advances in the various categories to arrive at the balance of net advances as stated in Schedule 9 of the Balance Sheet.

6.10 The bracketed figures indicate previous year's figures. Previous year's figures have been re-grouped / re-arranged / re-casted wherever considered necessary.

 
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