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Notes to Accounts of UCO Bank

Mar 31, 2017

1. 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 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.

2. IMPAIRMENT OF ASSETS

Items of property, plant and equipment 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.

3. NON-BANKING ASSETS

Non-Banking Assets are stated at cost.

4. Et WETH/REVENUE RECOGNITION

Income from non-performing assets/investments is recognized on realization basis in terms of RBI guidelines.

Commission on Letters of Credit/ Bank Guarantees/ Government Business / Locker Rent, Interest on Refund of Taxes, Dividend, Income on Units of Mutual Funds, Rental Income, and Service Charges on various Deposit Accounts are recognized on realization basis.

Recoveries in Written off Advances / Investments are accounted for as ''Miscellaneous Income''.

5. ^IT/LEASE

In accordance with AS 19 - Leases, lease payments for assets taken on operating lease are recognized in the profit & loss account over the period of lease and in respect of assets taken on finance lease, the asset is recognized in the books taking the lease premium as the cost and the same is amortized over the period of the lease.

6. TAXES ON INCOME

7. Current Tax

Current tax is provided using applicable tax rates on the taxable income determined on the basis of applicable tax laws, judicial pronouncements / legal opinions and the past assessments.

8. e® / Deferred Tax

Deferred Tax is recognized subject to consideration of prudence, on timing difference, representing the difference between the taxable income and accounting income that originated in one period and are capable of reversal in one or more subsequent periods.

Deferred tax asset or liability is recognized using the tax rates that have been enacted or substantially enacted by the Balance Sheet date as per Accounting Standard 22 Accounting for Taxes on Income.

Deferred tax assets/liabilities are re-assessed at each reporting date, based upon management''s judgment as to whether their realization is considered as reasonably certain.

Deferred Tax Assets on carry forward of unabsorbed depreciation and tax losses are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future profits.

9. 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 Accounting Standard AS 29, "Provisions, Contingent Liabilities and Contingent Assets", 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 a reliable estimate of the amount of the obligation can be made. Contingent Assets are not recognized in the financial statements.

10. SEGMENT REPORTING

The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in compliance with the Accounting Standard 17 issued by ICAI.

During the year the Bank issued and allotted -

a) 22,54,64,190 (Twenty Two crore Fifty Four Lakh Sixty Four Thousand One Hundred Ninety) equity shares of face value of ''10/- each (Rupees Ten Only) for cash at an issue price of Rs,41.47 (Rupees Forty One and paise Forty Seven only) per equity share including premium of Rs,31.47 (Rupees Thirty One and Paise Forty Seven Only) per share determined in accordance with Regulation 76(1) of SEBI ICDR Regulations 2009, on preferential basis to Govt. of India on 10.05.2016 resulting capital infusion of Rs,935 Crore.

b) 18,69,72,255 (Eighteen crore Sixty nine lakh Seventy two thousand Two hundred fifty five only) equity shares of face value of Rs,10/- each (Rupees Ten only) for cash at an issue price of Rs,41.45 (Rupees Forty One and paise Forty five Only) per share per equity share including premium of Rs,31.45 (Rupees Thirty One and Paise Forty Five Only) per share determined in accordance with regulation 76(1) of SEBI ICDR Regulations 2009, on preferential basis to Govt. of India on 05.10.2016 resulting capital infusion of Rs.775 Crore.

c) 7,17,00,000 (Seven Crore Seventeen lakh only) equity shares of face value of Rs,10/- each (Rupees Ten Only) for cash at an issue price of Rs,37.74 (Rupees Thirty seven and paise Seventy four only) per equity share including premium of Rs, 27.74 (Rupees Twenty seven and paise Seventy four only) per share determined in accordance with Regulation 76(4) of SEBI ICDR Regulations 2009, on preferential basis to Life Insurance Corporations of India on 29.11.2016 resulting capital infusion of Rs,270.59 crore.

d) During the year Bank has raised Non-Convertible, Unsecured Subordinated Fully Paid up Basel III Complaint perpetual Debt Instruments eligible for inclusion in Additional Tier 1 Capital of Rs,750 Cr through private placement.

e) Bank has issued unsecured redeemable non-convertible fully paid up Basel III compliant of Rs,10 Lakhs each (“Bonds”) aggregating to Rs,1000 crores to LIC of India.

1 Investments

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

13 Sale and transfers to/from HTM Category :

The value of sales and transfers of securities to/from HTM category, excluding the one time transfer of securities undertaken by the bank with the approval of Board of Directors, has not exceeded 5% of the book value of investments held in HTM category at the beginning of the year.

14 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, Managing Director & CEO 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 MD & CEO/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,0.90 Crores, 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.

15 Divergence in Asset Classification and Provisioning for NPAs as per RBS 2015-16

In terms of RBI Circular RBI/2016-17/283.BBR.BP.BC No.63/ 21.04.018/2016-17 dated 18.04.2017, wherever there is instances of material divergence from RBI norms, observed by RBI as a part of its supervisory process, in Bank''s Asset Classification and Provisioning Norms, a disclosure shall be made in notes to Accounts to Financial Statements. For the reference year 2015-16, there is no material divergence in gross NPAs observed by RBI.

* FITL balance is Rs,117.08 crores for Mar''17 sale.

# An amount of Rs,51.67 crores is outstanding as on 31/03/2017 for deferred loss on sale of NPA to SC/RC and the same amount has been debited to General reserve and credited to specific Provision.

Provision of an amount of Rs,34.10 Crore has been made during the year to meet the shortfall in sale of NPAs to SCs/RCs.

E sfT®/Details of Non performing financial assets purchased/sold ''Details of Non performing financial assets purchased:

Based on the total assets of the Bank as on 31.03.2017 the provision requirement on account of Country Exposure is Rs,13.78 Cr. The Bank has taken a stock of its exposure in countries other than the home country as on 31st March 2017.

16Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the bank.

17 Disclosure of penalties imposed by RBI.

During the financial year 2016-17 RBI has imposed two number of penalties amounting Rs,3.00 Crores under the provision of Section 46(4) of the Banking Regulation Act 1949.

18. Disclosures Requirement as per Accounting Standards:

19. 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.

20 Revenue Recognition (AS-9):

Revenue is recognized as per Accounting Standard (AS-9) and Accounting policy No. 10 of Schedule -17.

21 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.

A sum of Rs,894.98 Crore has been charged to Profit and Loss Account towards current year''s liabilities.

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

22 As the Bank does not have Subsidiaries or controlling interest in Associates/Joint Ventures, AS 21- Consolidated Financial Statements, AS 23 - Accounting for Investments in Associates in Consolidated Financial Statements, AS-24 - Discontinuing Operations, AS-25 - Interim Financial Reporting and AS 27 -Financial Reporting of Interest in Joint Ventures issued by the ICAI are not applicable to the Bank.

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

a) During the year net amount of Rs,850.40 Crore (Rs,1680.94 Crore) has been recognized as Deferred Tax Assets as per accounting standard AS-22.

24Impairment of Assets (AS-28):

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.

25 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) Disputed demand as per orders passed by Income Tax Department and demand displayed at TRACES (Income Tax Website) on account of Income Tax, TDS, Penalty, Interest and Interest Tax amounting to Rs,681.61 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.

26 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:

Reconciliation of entries outstanding has been drawn up to 31.03.2017 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. branch adjustment 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.

27 Transfer to Depositor Education and Awareness Fund (DEAF)

28 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 of Rs,56.37 lacs as on 31.03.2017 on Unhedged Foreign Currency Exposure (UFCE) to their constituents in terms of RBI Circulars and our Board approved policy and provision for the same has been provided in the books.

29Liquidity Coverage Ratio (LCR): Qualitative Assessment of LCR data and Result:

The Liquidity Coverage Ratio (LCR) promotes short term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Assets (HQLA) that can be converted into cash to meet their liquidity needs under a significantly severe stress scenario lasting for 30 days. The LCR is calculated as the ratio of High Quality Liquid Assets (HQLA) to Net Cash Outflows under stressed conditions over the next 30 calendar days.

Drivers of a Comfortable LCR:

The Bank has been maintaining the LCR well above the regulatory requirement on an ongoing basis on solo as well as consolidated basis the main drivers of which are as under:

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. Marginal standing Facility up to 2% of Net Demand and Time Liabilities in the form of SLR securities.

4. Facility to Avail Liquidity for liquidity Coverage Ratio up to 9% of Net Demand and Time Liabilities in the form of SLR securities.

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

- Under Level 2A assets

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

2. Corporate Bonds and Commercial Papers having minimum rating of AA-

- Under Level 2B assets

1. Securities issued or guaranteed by sovereigns having risk weight higher than 20% but not higher than 50% (i.e. Bonds with Rating AA & A)

2. Corporate Debt Securities (including Commercial Paper) having external rating between A and BBB-

3. 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 ( normal and Bulk)

The bank is monitoring the funding sources on regular interval with the objective to monitor / reduce the concentration of funds having lower stability. The bank has reduced the bulk deposits and focused on accretion of current and Savings deposits. The bank also monitors the concentration of top 20 depositors on regular intervals.

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

30 Fixed Assets

(i) Bank has adopted Revaluation Model for Land and Building and Cost Model for other Fixed Assets.

(ii) Bank has revalued its premises last on 31.03.2016 by independent qualified valuers. The excess of fair market value over the book value is credited to revaluation reserve. As on date aggregate amount of revaluation reserve (net of revaluation relating to assets disposed of) is Rs,2507.31 crore (Rs,2524.82 crore) and depreciation on the revalued portion charged is Rs,199.16 crore (Rs,159.16 crore). As per revised AS

10, Revaluation Reserve equal to the additional depreciation on account of Revaluation of the Building amounting to Rs,22.93 Crore (Previous year NIL) has been transferred to Revenue Reserve.

(iii) The valuer has valued the properties on the following methods :

Land: On market rates by enquiry from the locality based on the latest transactions and wherever this information is not available, Govt. approved rate is taken as reference rate.

Building: On PWD plinth rate as per latest schedule on the basis of type of construction and applying depreciation factor depending on age of the Building.

Other Disclosures :

a) In respect of six(6) lease hold properties, renewal lease is due for more than one year, Bank has applied for renewal of lease in these cases and will be completed in due course.

b) Existence and amount of restriction on title, property, Plant & Equipment pledged as security for liabilities - NIL

c) Contractual commitments for the acquisition of the property, plant & equipment as on 31.03.2017 - Rs,33.18 Crore.

d) Expenditure recognized in the carrying amount of an item of plant equipment and property in the course of construction is Rs,6.08 crore.

e) Amount of assets retired from active use and held for disposal - NIL

31 Breakup 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.

32 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.

33) Disclosure on IND AS Background:

The Ministry of corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Rules 2015 and vide Notification dated March 30,2016 it has also notified the Roadmap for implementation of Indian Accounting Standards (IND AS) for scheduled Commercial Banks, Insurance Companies and NBFC''s from 1st April,2018 onwards and also amendments to IND AS in line with the amendments made in IFRS/IAS vide companies (Indian Accounting Standards) amendment rules,2016.

RBI vide Circular dated June 23rd ,2016 directed banks to submit IND AS preformed financial statements for the half year ended September 30,2016 by 30th November 2016.

Strategy of IND AS Implementation:

Bank has constituted IND AS steering committee headed by Executive Director to plan the IND AS technical requirements, System & Process Changes, Business Impact, evaluation of Resources and project management.

Bank has also constituted IND AS working group within the bank who will be working on IND AS implantation project which comprises of officers from cross functional department.

Bank has also appointed M/s Deloitte Haskins & Sells LLP as IND AS consultant to assist the bank in implementation of Indian Accounting Standard (IND AS) as per RBI/MCA guidelines.

Progress on IND AS implementation:

Bank has submitted the Proforma IND AS Financial statements to Reserve Bank of India on 30th November 2016 with reconciliation of change in Equity & profit as on 30th September 16 compared with the previous GAAP figures.

Initial IND AS Impact assessment on the financials of Bank has been completed during preparation of proforma IND AS financial statements. IND AS Accounting Policies were also drafted along with the IND AS proforma financials.

IT changes required have been identified and Bank is in the process of required changes in the IT system.

Bank is also in the process of developing Expected Credit Loss (ECL) Model in line with the requirements of IND AS 109 and preparing the Opening IND AS Financial Statements as on 1st April 2017.

34) 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, 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.


Mar 31, 2011

1 Capital

1.1 Capital Adequacy Ratio

a) During the year the Bank allotted 67,300 PNCPS of Rs. 1,00,000 each on receipt of subscription aggregating to Rs. 673 Crores from Government of India. As on 31.03.2011 Government of India holds 1,82,300 PNCPS of Rs. 1,00,000 each aggregating to Rs. 1823 Crores. These PNCPS carry an annual floating coupon to be benchmarked to Repo Rate with a spread of 100 basis points to be reset annually based on the prevailing Repo rate on the relevant date. These PNCPS are part of Tier I Capital.

b) During the year, Bank received contribution of Rs. 940 Crores towards equity share capital from Government of India and allotted 7,81,57,479 equity shares of Rs. 10/- each at issue price of Rs. 120.27. Out of Rs. 940 crore, Rs. 78.16 crore is transferred to Share Capital Account and Rs. 861.84 crore towards Share Premium Account.

2.3 Non-SLR Investment Portfolio

* An amount of Rs. 9.77 crores of Central Government Non SLR Bond is included in Govt Securities in Schedule 8.

During the financial year 2010-11 there was transfer of securities from Available for Sale (AFS) to Held to Maturity (HTM) category of Rs. 3116.95 Crores. Depreciation amounting to Rs. 172.28 crores on account of such transfer has been charged to profit and loss account.

3.3 Disclosures on risk exposure in derivatives

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. 10.51 Crore (Rs. 97.68 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.

8.2 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

9.0. Disclosures Requirement as per Accounting Standards:

9.1 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.

9.2 Revenue Recognition

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

9.3 AS - 15 –Employee Benefits

Provision for Employee Benefits viz. Pension, Gratuity, Leave Encashment, Sick Leave, LFC/LTC, medical benefits to self and family members of retired Directors and Directors in service 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 recognised the increase in transitional liability over the liability that could have been recognised as per the Pre Revised AS-15 as on 31.03.2007 as an expense over 5 years from financial year 2007-08. Accordingly, Rs. 88.68 crores (Rs. 88.68 crores) has been charged to Profit & Loss Account towards amortisation of the increase in transitional liability. The un-amortised portion of the increase in transitional liability on account of Revised AS-15 is Rs. 88.69 crore (Rs. 177.37 crore) as on 31.03.2011.

During the year, the Bank reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of which by 10563 number of employees, the Bank has incurred a pension liability of Rs. 507.84 crore (Rs. Nil). Further, during the year, the limit of gratuity payable to the employees of the Bank was also enhanced pursuant to the amendment to the Payment

of Gratuity Act, 1972. As a result, the gratuity liability of the Bank has increased by Rs. 292.51 crore (Rs. Nil).

In terms of the requirements of the Revised Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs. 800.35 crores (ie. Rs. 507.84 crores + Rs. 292.51 crores) is required to be charged to the Profit and Loss Account. However, Reserve Bank of India has issued a circular no. DBOD.BP.BC.80.21.04.018/ 2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits – Prudential Regulatory Treatment, dated 9th February 2011. In accordance with the provisions of the said circular, the Bank would amortise the amount of Rs. 800.35 over a period of five years. Accordingly, Rs. 160.07 crore (representing one-fifth of Rs. 800.35 crore) has been charged to the Profit and Loss Account. In terms of the requirements of the aforesaid RBI circular, the balance amount carried forward, i.e., Rs. 640.28 crore (Rs. 800.35 crore – Rs.160.07 crore) does not include any amount relating to separated / retired employees.

Had such a circular not been issued by the RBI, the profit of the Bank would have been lower by Rs. 640.28 crore pursuant to application of the requirements of Revised AS 15.

In addition to Rs. 160.07 crore (Rs. Nil), an amount of Rs. 461.84 crore (Rs. 265.06 crore), which includes full liability for the retired / separated employees towards second option for pension and liability for other employee benefits, has been charged to Profit & Loss Account towards current years liability.

Investment Details:

a) Investment with LIC of India for Gratuity Fund – 100%

b) Major Categories of Plan assets as percentage of Fair Value in respect of Pension Fund

9.5 Related Party Disclosures:

a) Key Management Personnel

i) Chairman and Managing Director

Shri S.K. Goel (Till 30.06.2010)

Shri Arun Kaul (From 01.09.2010)

ii) Executive Directors

Shri V.K. Dhingra (Till 30.4.2010)

Shri Ajai Kumar (From 07.12.2009)

Shri N.R. Badrinarayanan (From 01.9.2010)

b) Transactions with Key Management Personnel

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

9.6 . EARNINGS PER SHARE (EPS):

Basic & Diluted EPS after Extra-ordinary item: Rs. 14.29 per share

9.7 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.

9.8 Taxes on Income

a) During the year net amount of Rs. 30.51 crore (Rs. 77.60 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. 371.27 Crore (Rs. 202.27 Crore) has gone for appeal, has not been recognised 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. 286.10 crore (Rs.160.64 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.

9.9 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:

9.10 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.

10.0 Additional disclosures:

10.2 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. 10.66 crore (Rs.96.39 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 Rs. 10.65 crore (Rs. 40.65 crore) has been included in Other Assets in Schedule 11.

10.3 Floating Provisions Nil

10.4 Draw Down From Reserves

There is no draw down from Reserves.

10.7 Provisioning Coverage Ratio

The provision coverage Ratio of the Bank with reference to Gross NPA position as on 30.09.2010 is 70%. As per RBI Circular No. DBOD.No.BPBC.87/21.04.048/2010-11 dated 21.04.2011 an amount of Rs. 210.32 Crore has been kept under an account styled as counter cyclical provisioning buffer representing a surplus of provision under PCR vis a vis as required under prudential norms. The provision coverage as on 31.03.2011 works out to 51.60%

10.14 Off-balance Sheet SPVs sponsored

Bank has not sponsored any SPVs.

10.15 Agricultural Debt Waiver & Debt Relief Scheme-2008 (ADWDR- 2008)

1. Under Agricultural Debt Waiver and Debt Relief Scheme (ADWDRS)-2008, last date of payment of 75% of the overdue amount in default by the Others Farmers has expired on 30.06.2010.

2. In terms of RBI guidelines, 7333 accounts of other farmers amounting to Rs. 141.63 crore were classified as NPA as on

30.09.2010 with 100% provision. Bank has received full reimbursement of claim of Rs. 536.33 crore against Debt Waiver and Rs. 42.46 crore against Debt Relief submitted up to the period 31.03.2010.

3. During, 01.10.2010 to 31.03.2011, the Bank has recovered Rs. 23.54 crore from 1951 Nos. of Other Farmers relating to ADWDRS-2008. With a view to recover from these NPA accounts, a special OTS scheme has been introduced by the Bank where all ADWDRS accounts declared as NPA up to 30.09.2010 will be covered. As per provision of this OTS scheme Bank has a provision for fresh lending to such Borrowers after One Time Settlement.

4. As on 31.03.2011 Bank has submitted claim duly audited by the Statutory Central Auditors as below:- a) Debt Waiver – Rs. 1.38 Crore against Small and Marginal Farmers b) Debt Relief – Rs. 9.00 Crore against 5079 Other Farmers.

10.16 Reconciliation:

Reconciliation of entries outstanding has been drawn upto 31.03.2011 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.

10.17 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 of) is Rs. 584.06 Crore (Rs. 576.80 Crore) and depreciation on the revalued portion charged to the above revaluation reserve (net of depreciation relating to assets disposed of) is Rs.149.12 Crore(Rs.173.98 crore).

b) Premises include Assets with written down value of Rs. 2.58 Crores (Rs. 2.58 Crore ) which were revalued at Rs. 23.03 Crore (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. 6.36 Crore (Rs. 15.22 Crore)

10.18. 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.

10.19. In the light of RBIs clarification dated 17th September 2010, Credit Linked Notes (CLNs) amounting to Rs. 415.10 crore has been classified under Investment Category, which were hitherto grouped under Loans and Advances resulting in Marked to Market (MTM) loss of Rs. 9.03 crore which has been provided in the Profit & loss Account for the year ended 31st March, 2011. On the same analogy, the MTM loss of Rs. 4.23 crore on Credit Default Swaps of Rs. 89.19 crore has been provided in the Profit & loss Account for the year ended 31st March, 2011.

10.20 Note on Revised Balance Sheet.

The Financial Statements were approved by the Board of Directors on 29.04.2011 proposing a dividend at the rate of Rs. 2/- per equity share. Subsequently, on receiving directives from GOI reiterating to pay a minimum dividend of 20% on equity or 20% of post tax profit whichever is higher, the Dividend on equity shares has been proposed at Rs. 3/- per share and the Financial Statements as on 31.03.2011 have been revised to include an amount of Rs. 219.52 crores towards proposed Dividend of Rs. 3/- per equity share and tax thereon which have been duly approved by the Board of Directors at its meeting held on 17.05.2011.

10.21. The bracketed figures indicate previous years figures. Previous years figures have been re-grouped / re-arranged/re-casted wherever considered necessary.

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