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Accounting Policies of Vijaya Bank Company

Mar 31, 2015

1) ACCOUNTING CONVENTION

The financial statements have been prepared by following the going concern concept on historical cost basis except as otherwise stated and in accordance with Companies (Accounting Standards) Rules, 2006 to the extent applicable read with guidelines issued by the Reserve Bank of India (RBI) and conform to the statutory provisions and practices prevailing within the banking industry in India.

The preparation of the financial statements, in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent liabilities in the financial statements. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in current and future periods.

2) FOREIGN EXCHANGE TRANSACTIONS

I. Transactions other than FCNR/EEFC/ RFC Accounts

a) Foreign Currency balances both under assets and liabilities and outstanding forward exchange contracts and swaps are evaluated at the year end rates as quoted by Foreign Exchange Dealers'' Association of India (FEDAI). The resultant profit/loss is included in Profit / Loss Account.

b) Income and expenditure items have been translated at the exchange rates ruling on the dates of the transactions.

c) Contingent liabilities on account of acceptances, endorsements and other obligations including guarantees and Letters of Credit issued in Foreign Currencies, shown in the Balance Sheet are valued at the exchange rates prevailing at the year end.

II. Transactions relating to FCNR/EEFC/ RFC accounts

Foreign Currency Deposits in FCNR/EEFC/ RFC accounts including interest accrued and also the corresponding assets are recorded at market related notional rates, which are periodically reviewed. Assets and Liabilities at the year end are revalued at rates quoted by Foreign Exchange Dealers'' Association of India. The resultant profit / loss is shown as income / loss.

3) INVESTMENTS

I. Investments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation and are regrouped, shown in balance sheet under the following six groups:

a) Government Securities

b) Other Approved Securities

c) Shares

d) Debentures and Bonds

e) Investments in Subsidiaries/Joint Ventures

f) Others (Commercial Paper, Units of Mutual Fund, NABARD- RIDF, Venture Capital Funds etc.)

II. The Investment portfolio of the Bank is classified into the following three categories:

a) Held to Maturity

b) Available for Sale

c) Held for Trading

Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Transfer of securities from one category to another is done at the least of the acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for and the book value of the security is accordingly changed.

III. Valuation

a) Held to Maturity

i) Investments classified under this category are valued at the year end at the acquisition cost, except where the acquisition cost is more than the face value, in which case the premium is amortized on constant yield method.

ii) In the case of investments in subsidiaries/joint ventures, any diminution in value, other than temporary, is recognized and provided for each investment individually. Investments in RRB and venture capital funds are valued at cost of acquisition.

iii) Profit on sale of investments in this category is first taken to Profit and Loss Account and there after appropriated to the "Capital Reserve Account". Loss on sale is recognised in the Profit and Loss Account.

The above valuation in category of Available for Sale and Held for Trading is done scrip wise and depreciation / appreciation is aggregated for classification. Net depreciation for each classification if any, is provided for while net appreciation is ignored.

Provisions on account of depreciation on net basis if found to be in excess, is first taken to Profit & Loss Account and thereafter appropriated to the "Investment Reserve Account" as per the extant RBI guidelines.

Profit/Loss on sale of investments in AFS/ HFT category is recognised in Profit and Loss Account.

IV. Prudential Norms

(a) i) Securities with guarantees of the Central Government are treated as performing investments, not with standing arrears of principal/ interest payments. However, interest if not realized for more than 90 days is recognized as income only on cash basis.

ii) Securities guaranteed by the State Government, where the principal/ interest is due but not paid for a period of more than 90 days, are treated as Non Performing Investments and provided for as per the RBI guidelines. Further, for securities guaranteed by the State Governments, where the principal/interest is due but not paid for a period of more than 90 days, interest is recognized as income only on cash basis.

(b) Securities not guaranteed by the Central Government/State Governments Preference Shares: Where the Principal/ Interest/Fixed Dividend is due but not paid for a period of more than 90 days are treated as Non Performing Investments and provided for as per the Reserve Bank of India guidelines.

(c) In the case of debentures/bonds where principal/ interest is in arrears, provision is made as in the case of advances.

(d) Ifanycreditfacilityavailedbytheissuerfrom the Bank is NPA, investments in any of the securities issued by the same issuer is also treated as Non Performing Investments.

(e) The depreciation/provision requirement in respect of non-performing investments is not set off against the appreciation in respect of other performing investments.

(f) In the case of Equity Shares, in the event the investment in the shares of any company is valued at Re.1 per company on account of the non availability of the quotation or latest balance sheet in accordance with the RBI guidelines, such equity shares would also be reckoned as Non Performing Investment on case to case basis.

(g) In case of preference shares, where preference dividends are in arrears, no credit is taken for accrued dividends and the value determined on YTM is discounted by at least 15% if arrears are for 1 year, and more if arrears are for more than one year. The depreciation/provision requirement arrived at in the above manner in respect of non-performing shares where dividends are in arrears is not set off against appreciation on other performing preference shares.

4) TRANSACTIONS RELATING TO DERIVATIVES

Derivative contracts are designated as hedging or trading and accounted for as follows:

a) Hedge Swaps: The interest rate swaps which hedges interest bearing assets and liabilities are accounted for on accrual basis except the swaps designated with an asset or liability that is carried at market value or lower of cost or market value in the financial statements. In such cases the swaps are marked to market with the resulting gain or loss recorded as an adjustment to the market value of designated asset or liability.

The gain or loss on the terminated swaps is deferred and recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability.

b) Re-designation of Hedge items: If a hedge is redesignated from one item of asset/ liability to another item of asset/liability, such redesignaion is accounted for as the termination of one hedge and acquisition of another. On the date of redesignation, the swap is marked to market and the mark to market value is amortized over the shorter period of the remaining life of the swap or remaining life of the asset/liability. The offsetting mark to market entry adjustments would be treated as premium received or paid for hedge on the newly designated item of asset/liability and this would be amortized over the life of the redesignated asset/liability or remaining term of the swap whichever is shorter.

c) Trading Swaps: The trading swaps are marked to market with the resulting gain or loss recorded in the income statement. Gain or loss on termination of the swap is recorded as immediate income or expense.

5) FIXED ASSETS/DEPRECIATION

I) Fixed Assets

a) Premises of the bank include free hold as well as lease hold properties. Land and buildings purchased or allotted have been capitalised based on agreements/letters of allotment and physical possession. Other Fixed Assets are capitalized on the date of put to use. Premises and other Fixed Assets are stated at their historical cost, except those which have been re-valued. Such Fixed Assets are stated on the revalued amount.

b) Advance payments made for acquisition of capital assets and deposits made in respect of properties taken on lease/rent are included under ''Other Assets''.

II) Depreciation / Amortization

a) Fixed Assets (other than computers and software) are depreciated at the rates prescribed under the ''Income Tax Rules'' on reducing balance method, including on the composite cost of certain properties, where it is not possible to segregate the land cost. Computers (including operating software) are depreciated on Straight Line Method at the rate of 33.33% per annum. Other software expenses, treated as intangible assets are amortized at 100% in the year of acquisition. Depreciation on additions to Fixed Asset during the financial year is provided at 100% of the rate of depreciation prescribed, if the asset is put to use for 180 days and above during the year and at 50% of the rate of depreciation prescribed, if the asset is put to use for less than 180 days during the year. No depreciation is provided in the year of sale/disposal of fixed assets.

b) Incremental depreciation on revalued amount in respect of premises is adjusted from Revaluation Reserve account.

6) LEASED OUT ASSETS

Accounting for leased assets is done as per Accounting Standard 19. Provision in respect of non-performing assets, is made by applying the asset classification norms prescribed by the RBI for advances.

7) NON BANKING ASSETS

Non-Banking assets are shown at cost.

8) ADVANCES

Advances are classified as per the RBI guidelines into standard, sub-standard, doubtful and loss assets after considering subsequent recoveries to date. Provision for non-performing assets is made in conformity with the RBI guidelines.

a) In terms of the guidelines of the Reserve Bank of India, advances are classified as "Performing" and "Non-Performing" assets based on recovery of principal/interest and advances are classified as "Non Performing Assets" with 90 days delinquency norms. In case of State Government Guaranteed advances, requirement of invocation of the Guarantee has been de-linked for classification of an account as NPA. Non Performing Advances (NPAs) are categorized as Sub-Standard, Doubtful and Loss Assets for the purpose of computing provision requirements.

Advances shown in the Balance Sheet are net of provisions [including floating provisions] in respect of non-performing advances, interest suspense and ECGC/ DICGC claims received.

b) Advances include the Bank''s participation

in/ contributions to Pass Through Certificates (PTCs) and /or to the asset- backed assignment of loan assets of other banks/financial institutions where the Bank has participated on risk-sharing basis.

c) Amounts recovered against bad debts written off in earlier years are recognised in the Profit and Loss account.

d) Provisions no longer considered necessary in context of the current status of the borrower as a performing asset, are written back to the Profit and Loss account to the extent such provisions were charged to the Profit and Loss account.

e) Provisions on Standard Advances are shown under "Other Liabilities and Provisions".

f) Provision on advances is made as per the RBI guidelines as under:

1. Standard Assets: 1% in respect of standard advances to Commercial Real Estate Sector, 0.25% in respect of the outstanding advances under direct agriculture & SME Sectors, 3.50% in respect of accounts under standard category as of 31.03.2014 and restructured prior to 01.06.2013, 5% in respect of accounts under standard category restructured after 31.05.2013 and 0.40% on all other outstanding standard advances.

2. Sub Standard Assets: 15% of the

outstanding advances. However, in case of sub standard assets which are identified ab-initio as "unsecured exposures" provision at 25% of the outstanding balance is made.

3. Doubtful assets: 25% to 100% as applicable on the secured portion of advances, depending upon the period for which the asset has remained doubtful and 100% of the unsecured portion of the outstanding advance after netting realized amount in respect of DICGC scheme and realized/realizable amount of guarantee cover under the ECGC/ CGSTI Schemes.

4. Loss Assets: 100% of the outstanding advances.

g) Restructured / rescheduled accounts:

In case of restructured / rescheduled accounts provision is made for the sacrifice against erosion/ diminution in fair value of restructured loans, in accordance with the general framework of restructuring of advances issued by RBI vide circular dated August 27, 2008 and Master Circular dated July 02, 2012.

The erosion in fair value of the advances is computed as the difference between fair value of the loan before and after restructuring.

Fair value of the loan before restructuring is computed as the present value of cash flows representing the interest at the existing rate charged on the advance before restructuring and the principal, discounted at a rate equal to the Bank''s Base Rate as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

Fair value of the loan after restructuring is computed as the present value of cash flows representing the interest at the rate charged on the advance on restructuring and the principal, discounted at a rate equal to Bank''s Base Rate as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

The diminution in the fair value is recomputed on each balance sheet date till satisfactory completion of all repayment obligations and full repayments of the outstanding, so as to capture the changes in the fair value on account of changes in base rate, term premium and credit category of the borrower.

The restructured accounts have been

classified in accordance with RBI guidelines, including special dispensation wherever allowed.

9) REVENUE RECOGNITION

Income is accounted on accrual basis except in the following cases:

a) In the case of Non Performing Assets, income is recognized on cash basis, in terms of guidelines of the Reserve Bank of India. Where recovery is not adequate to upgrade the Non Performing Assets accounts by way of regularization, such recovery is being appropriated towards the principal/book balance in the first instance and towards interest dues thereafter. In respect of Non Performing Investments, the same accounting treatment as above is followed.

b) Income from Units of Mutual Funds, Commission on Insurance and Depositary Participant business, Merchant Banking transactions, General Insurance business, Money transferservices, Sale of Mutual Fund products, Locker Rent, Commission on Government business, etc. are accounted on cash/realisation basis.

c) Commission earned from Non-fund based business viz., Letter of Credits and Bank Guarantees is accounted on cash basis.

d) Interest on securities which is due and not paid for a period of more than 90 days is recognized on realisation basis as per RBI guidelines.

e) In the case of suit filed accounts, legal expenses are charged to the profit and loss account. Similarly, at the time of recovery of legal expenses in respect of such suit filed accounts, the amount recovered is accounted as income.

10) NET PROFIT

The net profit is arrived at after

a) Provisions for Income Tax & Wealth Tax in accordance with statutory requirements

b) Provision on advances/investments

c) Adjustments to the value of investments

d) Transfers to provisions and contingencies

e) Provision for Inter Branch accounts lying unadjusted for more than six months as per RBI norms

f) Other usual and necessary provisions 11) EMPLOYEE BENEFITS

a) Expenses arising out of claims in respect of employee matters under dispute/ negotiation are accounted during the year of final settlement/determination.

b) In respect of employees who have opted for Provident Fund scheme, matching contribution as applicable is made by the Bank to the recognised Provident Fund. For others who have opted for pension scheme, contribution to Pension Fund is made based on actuarial valuation, as per Accounting Standard 15.

c) Contribution to Gratuity Fund is made based on actuarial valuation, as per Accounting Standard 15.

d) Liability towards leave encashment, privilege leave is provided based on actuarial valuation, as per Accounting Standard 15.

Details are as under:

Long term employee benefits:

Long term employee benefits (benefits which are payable after the end of twelve months from the end of the period in which employees render service), and post employment benefits (benefits which are payable after completion of employment), are measured on a discounted basis by the projected Unit Credit Method, on the basis of annual third party actuarial valuations. The bank provides for the following long term employee benefits as per actuarial valuation:

1. Leave encashment: The Bank provides for liability accruing on account of deferred entitlement towards leave encashment in the year in which the employees concerned render their services based on third party actuarial valuation obtained as of each year end balance sheet date.

2. Pension: The Bank provides for liability accruing on account of the employees who have opted for pension based on the actuarial valuation obtained as of each year end balance sheet date.

3. Gratuity: The Bank provides for gratuity liability based on the actuarial valuation obtained as of each year end balance sheet date.

The pension and gratuity contributions are transferred to self-managed trusts.

12) PROVISION FOR TAXATION

Tax expenses comprise current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.

13) IMPAIRMENTS

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

14) SEGMENT REPORTING:

In accordance with the guidelines issued by RBI, Bank has adopted Segment Reporting as under:

1. Treasury includes all investment portfolio, profit/ loss on sale of investments, profit/ loss on foreign exchange transactions, equities, income from derivatives and money market operations. The expenses of this segment consist of interest expenses on funds borrowed from external sources as well as internal sources and depreciation / amortisation of premium on Held to Maturity category investments.

2. Corporate/ Wholesale Banking includes lending and deposits from corporate customers and identified earnings and expenses of the segment.

3. Retail Banking includes lending and deposits from retail customers and identified earnings and expenses of the segment.

4. Other Banking Operations includes all other operations not covered under Treasury, Wholesale Banking and Retail Banking.

15) EARNINGS PER SHARE:

Earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividend and attributable taxes thereto) by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding as at the end of the year.

16) CONTINGENT LIABILITIES AND PROVISIONS:

1. A provision is recognised when there is an obligation as a result of past event if it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

2. Transactions in Government securities and others which were pending for settlement on the balance sheet date are shown as off balance sheet items under contingent liabilities head.


Mar 31, 2014

1) ACCOUNTING CONVENTION

The financial statements have been prepared by following the going concern concept on historical cost basis except as otherwise stated and in accordance with Companies (Accounting Standards) Rules, 2006 to the extent applicable read with guidelines issued by the Reserve Bank of India (RBI) and conform to the statutory provisions and practices prevailing within the banking industry in India.

The preparation of the financial statements, in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent liabilities in the financial statements. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in current and future periods.

2) FOREIGN EXCHANGE TRANSACTIONS

I. Transactions other than FCNR/EEFC/RFC Accounts

a) Foreign Currency balances both under assets and liabilities and outstanding forward exchange contracts and swaps are evaluated at the year end rates as quoted by Foreign Exchange Dealers'' Association of India (FEDAI). The resultant profit/loss is included in Profit / Loss Account.

b) Income and expenditure items have been translated at the exchange rates ruling on the dates of the transactions.

c) Contingent liabilities on account of acceptances, endorsements and other obligations including guarantees and Letters of Credit issued in Foreign Currencies, shown in the Balance Sheet are valued at the exchange rates prevailing at the year end.

II. Transactions relating to FCNR/EEFC/RFC accounts

Foreign Currency Deposits in FCNR/EEFC/ RFC accounts including interest accrued and also the corresponding assets are recorded at market related notional rates, which are periodically reviewed. Assets and Liabilities at the year end are revalued at rates quoted by Foreign Exchange Dealers'' Association of India. The resultant profit / loss is shown as income / loss.

3) INVESTMENTS

I. Investments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation and are regrouped, shown in balance sheet under the following six groups:

a) Government Securities

b) Other Approved Securities

c) Shares

d) Debentures and Bonds

e) Investments in Subsidiaries/Joint Ventures

f) Others (Commercial Paper, Units of Mutual Fund, NABARD- RIDF, Venture Capital Funds etc.)

II. The Investment portfolio of the Bank is classified into the following three categories:

a) Held to Maturity

b) Available for Sale

c) Held for Trading

Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Transfer of securities from one category to another is done at the least of the acquisition cost/book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for and the book value of the security is accordingly changed.

III. Valuation

a) Held to Maturity

i) Investments classified under this category are valued at the year end at the acquisition cost, except where the acquisition cost is more than the face value, in which case the premium is amortized on constant yield method.

ii) In the case of investments in subsidiaries/joint ventures, any diminution in value, other than temporary, is recognized and provided for each investment individually. Investments in RRB and venture capital funds is valued at cost of acquisition.

iii) Profit on sale of investments in this category is first taken to Profit and Loss Account and there after appropriated to the "Capital Reserve Account". Loss on sale is recognised in the Profit and Loss Account.

The above valuation in category of Available for Sale and Held for Trading is done scrip wise and depreciation / appreciation is aggregated for classification. Net depreciation for each classification if any, is provided for while net appreciation is ignored.

Provisions on account of depreciation on net basis if found to be in excess, is first taken to Profit & Loss Account and thereafter appropriated to the "Investment Reserve Account" as per the extant RBI guidelines.

Profit/Loss on sale of investments in AFS/HFT category is recognised in Profit and Loss Account.

IV. Prudential Norms

(a) i) Securities with guarantees of

the Central Government are treated as performing investments, notwithstanding arrears of principal/ interest payments. However, interest if not realized for more than 90 days is recognized as income only on cash basis.

ii) Securities guaranteed by the State Government, where the principal/ interest is due but not paid for a period of more than 90 days, are treated as Non Performing Investments and provided for as per the RBI guidelines. Further, for securities guaranteed by the State Governments, where the principal/ interest is due but not paid for a period of more than 90 days, interest is recognized as income only on cash basis.

(b) Securities not guaranteed by the Central Government/State Governments/ Preference Shares: Where the Principal/ Interest/Fixed Dividend is due but not paid for a period of more than 90 days are treated as Non Performing Investments and provided for as per the Reserve Bank of India guidelines.

(c) In the case of debentures/bonds where principal/ interest is in arrears, provision is made as in the case of advances.

(d) If any credit facility availed by the issuer from the Bank is NPA, investments in any of the securities issued by the same issuer is also treated as Non Performing Investments.

(e) The depreciation/provision requirement in respect of non-performing investments is not set off against the appreciation in respect of other performing investments.

(f) In the case of Equity Shares, in the event the investment in the shares of any company is valued at Rs.1 per company on account of the non availability of the quotation or latest balance sheet in accordance with the RBI guidelines, such equity shares would also be reckoned as Non Performing Investment on case to case basis.

(g) In case of preference shares, where preference dividends are in arrears, no credit is taken for accrued dividends and the value determined on YTM is discounted by at least 15% if arrears are for 1 year, and more if arrears are for more than one year. The depreciation/provision requirement arrived at in the above manner in respect of non-performing shares where dividends are in arrears is not set off against appreciation on other performing preference shares.

4) TRANSACTIONS RELATING TO DERIVATIVES

Derivative contracts are designated as hedging or trading and accounted for as follows:

a) Hedge Swaps: The interest rate swaps which hedges interest bearing assets and liabilities are accounted for on accrual basis except the swaps designated with an asset or liability that is carried at market value or lower of cost or market value in the financial statements. In such cases the swaps are marked to market with the resulting gain or loss recorded as an adjustment to the market value of designated asset or liability.

The gain or loss on the terminated swaps is deferred and recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability.

b) Re-designation of Hedge items: If a hedge is redesignated from one item of asset/liability to another item of asset/liability, such redesignation is accounted for as the termination of one hedge and acquisition of another. On the date of redesignation, the swap is marked to market and the mark to market value is amortized over the shorter period of the remaining life of the swap or remaining life of the asset/liability. The offsetting mark to market entry adjustments would be treated as premium received or paid for hedge on the newly designated item of asset/liability and this would be amortized over the life of the redesignated asset/liability or remaining term of the swap whichever is shorter.

c) Trading Swaps: The trading swaps are marked to market with the resulting gain or loss recorded in the income statement. Gain or loss on termination of the swap is recorded as immediate income or expense.

5) FIXED ASSETS/DEPRECIATION

I) Fixed Assets

a) Premises of the bank include free hold as well as lease hold properties. Land and buildings purchased or allotted have been capitalised based on agreements/letters of allotment and physical possession. Other Fixed Assets are capitalized on the date of put to use. Premises and other Fixed Assets are stated at their historical cost, except those which have been re-valued. Such Fixed Assets are stated on the revalued amount.

b) Advance payments made for acquisition of capital assets and deposits made in respect of properties taken on lease/rent are included under ''Other Assets''.

II) Depreciation / Amortization

a) Fixed Assets (other than computers and software) are depreciated at the rates prescribed under the ''Income Tax Rules'' on reducing balance method, including on the composite cost of certain properties, where it is not possible to segregate the land cost. Computers (including operating software) are depreciated on Straight Line Method at the rate of 33.33% per annum. Other software expenses, treated as intangible assets are amortized at 100% in the year of acquisition. Depreciation on additions to Fixed Asset during the financial year is provided at 100% of the rate of depreciation prescribed, if the asset is put to use for 180 days and above during the year and at 50% of the rate of depreciation prescribed, if the asset is put to use for less than 180 days during the year. No depreciation is provided in the year of sale/disposal of fixed assets.

b) Incremental depreciation on revalued amount in respect of premises is adjusted from Revaluation Reserve account.

6) LEASED OUT ASSETS

Accounting for leased assets is done as per Accounting Standard 19. Provision in respect of non-performing assets, is made by applying the asset classification norms prescribed by the RBI for advances.

7) NON BANKING ASSETS

Non-Banking assets are shown at cost.

8) ADVANCES

Advances are classified as per the RBI guidelines into standard, sub-standard, doubtful and loss assets after considering subsequent recoveries to date. Provision for non-performing assets is made in conformity with the RBI guidelines.

a) In terms of the guidelines of the Reserve Bank of India, advances are classified as "Performing" and "Non-Performing" assets based on recovery of principal/interest and advances are classified as "Non Performing Assets" with 90 days delinquency norms. In case of State Government Guaranteed advances, requirement of invocation of the Guarantee has been de-linked for classification of an account as NPA. Non Performing Advances (NPAs) are categorized as Sub- Standard, Doubtful and Loss Assets for the purpose of computing provision requirements.

Advances shown in the Balance Sheet are net of provisions [including floating provisions] in respect of non-performing advances, interest suspense and ECGC/DICGC claims received.

b) Advances include the Bank''s participation in/ contributions to Pass Through Certificates (PTCs) and /or to the asset-backed assignment of loan assets of other banks/ financial institutions where the Bank has participated on risk-sharing basis.

c) Amounts recovered against bad debts written off in earlier years are recognised in the Profit and Loss account.

d) Provisions no longer considered necessary in context of the current status of the borrower as a performing asset, are written back to the Profit and Loss account to the extent such provisions were charged to the Profit and Loss account.

e) Provisions on Standard Advances are shown under "Other Liabilities and Provisions".

f) Provision on advances is made as per the RBI guidelines as under:

1. Standard Assets: 1% in respect of standard advances to Commercial Real Estate Sector, 0.25% in respect of the outstanding advances under direct agricultures & SME sectors, 3.50% in respect of accounts under standard category as of 31.03.2014 and restructured prior to 01.06.2013, 5% in respect accounts under standard category restructured after 31.05.2013 and 0.40% on all other outstanding standard advances.

2. Sub Standard Assets: 15% of the

outstanding advances. However, in case of sub standard assets which are identified ab-initio as "unsecured exposures" provision at 25% of the outstanding balance is made.

3. Doubtful assets: 25% to 100% as applicable on the secured portion of advances, depending upon the period for which the asset has remained doubtful and 100% of the unsecured portion of the outstanding advance after netting realized amount in respect of DICGC scheme and realized/realizable amount of guarantee cover under the ECGC/CGSTI Schemes.

4. Loss Assets: 100% of the outstanding advances.

g) Restructured / rescheduled accounts:

In case of restructured / rescheduled accounts provision is made for the sacrifice against erosion/ diminution in fair value of restructured loans, in accordance with the general framework of restructuring of advances issued by RBI vide circular dated August 27, 2008 and Master Circular dated July 02, 2012.

The erosion in fair value of the advances is computed as the difference between fair value of the loan before and after restructuring.

Fair value of the loan before restructuring is computed as the present value of cash flows representing the interest at the existing rate charged on the advance before restructuring and the principal, discounted at a rate equal to the Bank''s Base Rate as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

Fair value of the loan after restructuring is computed as the present value of cash flows representing the interest at the rate charged on the advance on restructuring and the principal, discounted at a rate equal to Bank''s Base Rate as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

The diminution in the fair value is recomputed on each balance sheet date till satisfactory completion of all repayment obligations and full repayments of the outstanding, so as to capture the changes in the fair value on account of changes in base rate, term premium and credit category of the borrower.

The restructured accounts have been classified in accordance with RBI guidelines, including special dispensation wherever allowed.

9) REVENUE RECOGNITION

Income is accounted on accrual basis except in the following cases:

a) In the case of Non Performing Assets, income is recognized on cash basis, in terms of guidelines of the Reserve Bank of India. Where recovery is not adequate to upgrade the Non Performing Assets accounts by way of regularization, such recovery is being appropriated towards the principal/book balance in the first instance and towards interest dues thereafter. In respect of Non Performing Investments, the same accounting treatment as above is followed.

b) Income from Units of Mutual Funds, Commission on Insurance and Depositary Participant business, Merchant Banking transactions, General Insurance business, Money transfer services, Sale of Mutual Fund products, Locker Rent, Commission on Government business, etc. are accounted on cash/realisation basis.

c) Commission earned from Non-fund based business viz., Letter of Credits and Bank Guarantees is accounted on cash basis.

d) Interest on securities which is due and not paid for a period of more than 90 days is recognized on realisation basis as per RBI guidelines.

e) In the case of suit filed accounts, legal expenses are charged to the profit and loss account. Similarly, at the time of recovery of legal expenses in respect of such suit filed accounts, the amount recovered is accounted as income.

10) NET PROFIT

The net profit is arrived at after

a) Provisions for Income Tax & Wealth Tax in accordance with statutory requirements

b) Provision on advances/investments

c) Adjustments to the value of investments

d) Transfers to provisions and contingencies

e) Provision for Inter Branch accounts lying unadjusted for more than six months as per RBI norms

f) Other usual and necessary provisions

11) EMPLOYEE BENEFITS

a) Expenses arising out of claims in respect of employee matters under dispute/negotiation are accounted during the year of final settlement/determination.

b) In respect of employees who have opted for Provident Fund scheme, matching contribution as applicable is made by the Bank to the recognised Provident Fund. For others who have opted for pension scheme, contribution to Pension Fund is made based on actuarial valuation, as per Accounting Standard 15.

c) Contribution to Gratuity Fund is made based on actuarial valuation, as per Accounting Standard 15.

d) Liability towards leave encashment, privilege leave is provided based on actuarial valuation, as per Accounting Standard 15.

Details are as under:

Long term employee benefits:

Long term employee benefits (benefits which are payable after the end of twelve months from the end of the period in which employees render service), and post employment benefits (benefits which are payable after completion of employment), are measured on a discounted basis by the projected Unit Credit Method, on the basis of annual third party actuarial valuations. The bank provides for the following long term employee benefits as per actuarial valuation:

1. Leave encashment: The Bank provides for liability accruing on account of deferred entitlement towards leave encashment in the year in which the employees concerned render their services based on third party actuarial valuation obtained as of each year end balance sheet date.

2. Pension: The Bank provides for liability accruing on account of the employees who have opted for pension based on the actuarial valuation obtained as of each year end balance sheet date.

3. Gratuity: The Bank provides for gratuity liability based on the actuarial valuation obtained as of each year end balance sheet date.

The pension and gratuity contributions are transferred to self-managed trusts.

12) PROVISION FOR TAXATION

Tax expenses comprise current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.

13) IMPAIRMENTS

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

14) SEGMENT REPORTING:

In accordance with the guidelines issued by RBI, Bank has adopted Segment Reporting as under:

1. Treasury includes all investment portfolio, profit/ loss on sale of investments, profit/loss on foreign exchange transactions, equities, income from derivatives and money market operations. The expenses of this segment consist of interest expenses on funds borrowed from external sources as well as internal sources and depreciation / amortisation of premium on Held to Maturity category investments.

2. Corporate/ Wholesale Banking includes lending and deposits from corporate customers and identified earnings and expenses of the segment.

3. Retail Banking includes lending and deposits from retail customers and identified earnings and expenses of the segment.

4. Other Banking Operations includes all other operations not covered under Treasury, Wholesale Banking and Retail Banking.

15) EARNINGS PER SHARE:

Earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividend and attributable taxes thereto) by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding as at the end of the year.


Mar 31, 2013

1) ACCOUNTING CONVENTION

The financial statements have been prepared by following the going concern concept on historical cost basis except as otherwise stated and in accordance with Companies (Accounting Standards) Rules, 2006 to the extent applicable read with guidelines issued by the Reserve Bank of India (RBI) and conform to the statutory provisions and practices prevailing within the banking industry in India.

The preparation ofthe financial statements, in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent liabilities in the financial statements. Management believes that the estimates used in the preparation ofthe financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in current and future periods.

2) FOREIGN EXCHANGE TRANSACTIONS

I. Transactions other than FCNR/EEFC/RFC Accounts

a) Foreign Currency balances both under assets and liabilities and outstanding forward exchange contracts and swaps are evaluated at the year end rates as quoted by Foreign Exchange Dealers'' Association of India (FEDAI). The resultant profit/loss is included in Profit / Loss Account.

b) Income and expenditure items have been translated at the exchange rates ruling on the dates of the transactions.

c) Contingent liabilities on account of acceptances, endorsements and other obligations including guarantees and Letters of Credit issued in Foreign Currencies, shown in the Balance Sheet are valued at the exchange rates prevailing at the year end.

II. Transactions relating to FCNR/EEFC/RFC accounts

Foreign Currency Deposits in FCNR/EEFC/RFC accounts including interest accrued and also the - corresponding assets are recorded at market related notional rates, which are periodically reviewed. Assets and Liabilities at the year end are revalued at rates quoted by Foreign Exchange Dealers'' Association of India. The resultant profit / loss is shown as income / loss.

3) INVESTMENTS

I. Investments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation and are regrouped, shown in balance sheet under the following six groups:

a) Government Securities

b) Other Approved Securities

c) Shares

d) Debentures and Bonds

e) Investments in Subsidiaries/Joint Ventures

f) Others (Commercial Paper, Units of Mutual Fund, NABARD- RIDF, Venture Capital Funds etc.)

II. The Investment portfolio of the Bank is classified into the following three categories:

a) Held to Maturity

b) Available for Sale

c) HeldforTrading

Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Transfer of securities from one category to another is done at the least ofthe acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for and the book value of the security is accordingly changed.

III. Valuation

a) Held to Maturity

i) Investments classified under this category are valued at the year end at the acquisition cost, except where the acquisition cost is more than the face value, in which case the premium is amortized on constant yield method.

ii) In the case of investments in subsidiaries/ joint ventures, any diminution in value, other than temporary, is recognized and provided for each investment individually. Investments in RRB and venture capital funds is valued at cost of acquisition.

iii) Profit on sale of investments in this category is first taken to Profit and Loss Account and there after appropriated to the "Capital Reserve Account”. Loss on sale is recognised in the Profit and Loss Account.

The above valuation in category of Available for Sale and Held for Trading is done scrip wise and depreciation / appreciation is aggregated for classification. Net depreciation for each classification ifany, is provided forwhile net appreciation is ignored.

Provisions on account of depreciation on net basis if found to be in excess, is first taken to Profit & Loss Account and thereafter appropriated to the "Investment Reserve Account” as per the extant RBI guidelines.

Profit/Loss on sale of investments in AFS/HFT category is recognised in Profit and Loss Account.

IV. Prudential Norms

(a) (i) Securities with guarantees of the Central

Government are treated as performing investments, notwithstanding arrears of principal/interest payments. However, interest if not realized for more than 90 days is recognized as income only on cash basis.

ii) Securities guaranteed by the State Government, where the principal/interest is due but not paid for a period of more than 90 days, are treated as Non Performing Investments and provided for as per the RBI guidelines. Further, for securities guaranteed by the State Governments, where the principal/ interest is due but not paid for a period of more than 90 days, interest is recognized as income only on cash basis.

(b) Securities not guaranteed by the Central Government/State Governments/Preference Shares: Where the Principal/Interest/Fixed Dividend is due but not paid for a period of more than 90 days are treated as Non Performing---

Investments and provided for as per the Reserve Bank of India guidelines.

(c) In the case of debentures/bonds where principal/ interest is in arrears, provision is made as in the case of advances.

(d) If any credit facility availed by the issuer from the Bank is NPA, investments in any ofthe securities issued by the same issuer is also treated as Non Performing Investments.

(e) The depreciation/provision requirement in respect of non-performing investments is not set off against the appreciation in respect of other performing investments.

(f) In the case of Equity Shares, in the event the investment in the shares of any company is valued at Re.1 per company on account of the non availability of the quotation or latest balance sheet in accordance with the RBI guidelines, such equity shares would also be reckoned as Non Performing Investment on case to case basis.

(g) In case of preference shares, where preference dividends are in arrears, no credit is taken for accrued dividends and the value determined on YTM is discounted by at least 15% if arrears are for 1 year, and more if arrears are for more than one year. The depreciation/provision requirement arrived at in the above manner in respect of non-performing shares where dividends are in arrears is not set off against appreciation on other performing preference shares.

4) TRANSACTIONS RELATING TO DERIVATIVES

Derivative contracts are designated as hedging or trading and accounted for as follows:

a) Hedge Swaps: The interest rate swaps which hedges interest bearing assets and liabilities are accounted for on accrual basis except the swaps designated with an asset or liability that is carried at market value or lower of cost or market value in the financial statements. In such cases the swaps are marked to market with the resulting gain or loss recorded as an adjustment to the market value of designated asset or liability.

The gain or loss on the terminated swaps is deferred and recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability.

b) Re-designation of Hedge items: If a hedge is redesignated from one item of asset/liability to another item of asset/liability, such redesignation is accounted for as the termination of one hedge and acquisition of another. On the date of redesignation, the swap is marked to market and the mark to market value is amortized over the shorter period of the remaining life ofthe swap or remaining life ofthe asset/liability. The offsetting mark to market entry adjustments would be treated as premium received or paid for hedge on the newly designated item of asset/liability and this would be amortized over the life of the redesignated asset/liability or remaining term of the swap whichever is shorter.

c) Trading Swaps: The trading swaps are marked to market with the resulting gain or loss recorded in the income statement. Gain or loss on termination of the swap is recorded as immediate income or expense.

5) FIXED ASSETS/DEPRECIATION

(I) Fixed Assets

(a) Premises of the bank include free hold as well as lease hold properties. Land and buildings purchased or allotted have been capitalised based on agreements/letters of allotment and physical possession. Other Fixed Assets are capitalized on the date of put to use. Premises and other Fixed Assets are stated at their historical cost, except those which have been re-valued. Such Fixed Assets are stated on the revalued amount.

b) Advance payments made for acquisition of capital assets and deposits made in respect of properties taken on lease/rent are included under ‘Other Assets''.

(II) Depreciation / Amortization

a) Fixed Assets (other than computers and software) are depreciated at the rates prescribed under the ‘Income Tax Rules'' on reducing balance method, including on the composite cost of certain properties, where it is not possible to segregate the land cost. Computers (including operating software) are depreciated on Straight Line Method at the rate of 33.33% per annum. Other software expenses, treated as intangible assets are amortized at 100% in the year of acquisition.

Depreciation on additions to Fixed Asset during the financial year is provided at 100% of the rate of depreciation prescribed, if the asset is put to use for 180 days and above during the year and at 50% of the rate of depreciation prescribed, if the asset is put to use for less than 180 days during the year. No depreciation is provided in the year of sale/disposal of fixed assets.

b) Incremental depreciation on revalued amount in respect of premises is adjusted from Revaluation Reserve account.

6) LEASED OUT ASSETS

Accounting for leased assets is done as per Accounting Standard 19. Provision in respect of non-performing assets, is made by applying the asset classification norms prescribed by the RBI for advances.

7) NON BANKING ASSETS

Non-Banking assets are shown at cost.

8) ADVANCES

Advances are classified as per the RBI guidelines into standard, sub-standard, doubtful and loss assets after considering subsequent recoveries to date. Provision for non-performing assets is made in conformity with the RBI guidelines.

a) In terms of the guidelines of the Reserve Bank of India, advances are classified as "Performing” and "Non-Performing” assets based on recovery of principal/interest and advances are classified as "Non Performing Assets” with 90 days delinquency norms. In case of State Government Guaranteed advances, requirement of invocation of the Guarantee has been de-linked for classification of an account as NPA. Non Performing Advances (NPAs) are categorized as Sub-Standard, Doubtful and Loss Assets for the purpose of computing provision requirements.

Advances shown in the Balance Sheet are net of provisions [including floating provisions] in respect of non-performing advances, interest suspense and ECGC/DICGC claims received.

b) Advances include the Bank''s participation in/ contributions to Pass Through Certificates (PTCs) and /or to the asset-backed assignment of loan assets of other banks / financial institutions where the Bank has participated on risk-sharing basis.

c) Amounts recovered against bad debts written off in''- earlier years are recognised in the Profit and Loss account.

d) Provisions no longer considered necessary in context of the current status of the borrower as a performing asset, are written back to the Profit and Loss account to the extent such provisions were charged to the Profit and Loss account.

e) Provisions on Standard Advances are shown under "Other Liabilities and Provisions”.

f) Provision on advances is made as per the RBI guidelines as under:

1. Standard Assets: 1% of standard advances to Commercial Real Estate Sector, 0.25% of the outstanding advances under direct agriculture & SME Sectors, 2.75% on standard restructured advances and 0.40% on all other outstanding advances.

2. Sub Standard Assets: 15% of the outstanding advances. However, in case of sub standard assets which are identified ab-initio as "unsecured exposures” provision at 25% of the outstanding balance is made.

3. Doubtful assets: 25% to 100% as applicable on the secured portion of advances, depending upon the period for which the asset has remained doubtful and 100% of the unsecured portion of the outstanding advance after netting realized amount in respect of DICGC scheme and realized/realizable amount of guarantee cover under the ECGC/CGSTI Schemes.

4. Loss Assets: 100% of the outstanding advances.

g) Restructured / rescheduled accounts:

In case of restructured / rescheduled accounts provision is made for the sacrifice against erosion/ diminution in fair value of restructured loans, in accordance with the general framework of restructuring of advances issued by RBI vide circular dated August 27, 2008 and Master Circular datedJuly 02, 2012.

The erosion in fair value of the advances is computed as the difference between fair value of the loan before and after restructuring.

Fair value of the loan before restructuring is computed as the present value of cash flows representing the interest at the existing rate charged on the advance before restructuring and the principal, discounted at a rate equal to the Bank''s Base Rate as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

Fair value ofthe loan after restructuring is computed as the present value of cash flows representing the interest at the rate charged on the advance on restructuring and the principal, discounted at a rate equal to Bank''s Base Rate as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

The diminution in the fair value is recomputed on each balance sheet date till satisfactory completion of all repayment obligations and full repayments of the outstanding, so as to capture the changes in the fair value on account of changes in base rate, term premium and credit category of the borrower.

The restructured accounts have been classified in accordance with RBI guidelines, including special dispensation wherever allowed.

9) REVENUERECOGNITION

Income is accounted on accrual basis except in the following cases:

a) In the case of Non Performing Assets, income is recognized on cash basis, in terms of guidelines of the Reserve Bank of India. Where recovery is not adequate to upgrade the Non Performing Assets accounts by way of regularization, such recovery is being appropriated towards the principal/book balance in the first instance and towards interest dues thereafter. In respect of Non Performing Investments, the same accounting treatment as above is followed.

b) Income from Units of Mutual Funds, Commission on Insurance and Depositary Participant business, Merchant Banking transactions, General Insurance business, Money transfer services, Sale of Mutual Fund products, Locker Rent, Commission on Government business, etc. are accounted on cash/ realisation basis.

c) Commission earned from Non-fund based business viz., Letter of Credits and Bank Guarantees is accounted on cash basis.

d) Interest on securities which is due and not paid for a period of more than 90 days is recognized on realisation basis as per RBI guidelines.

e) In the case of suit filed accounts, legal expenses are charged to the profit and loss account. Similarly, at the time of recovery of legal expenses in respect of such suit filed accounts, the amount recovered is accounted as income.

10) NET PROFIT

The net profit is arrived at after

a) Provisions for Income Tax & Wealth Tax in accordance with statutory requirements

b) Provision on advances/investments

c) Adjustments to the value of investments

d) Transfers to provisions and contingencies

e) Provision for Inter Branch accounts lying unadjusted for more than six months as per RBI norms

f) Other usual and necessary provisions.

11) EMPLOYEEBENEFITS

a) Expenses arising out of claims in respect of employee matters under dispute/negotiation are accounted during the year of final settlement/ determination.

b) In respect of employees who have opted for Provident Fund scheme, matching contribution as applicable is made by the Bank to the recognised Provident Fund. For others who have opted for pension scheme, contribution to Pension Fund is made based on actuarial valuation, as per Accounting Standard 15.

c) Contribution to Gratuity Fund is made based on actuarial valuation, as per Accounting Standard 15.

d) Liability towards leave encashment, privilege leave and sick leave is provided based on actuarial valuation, as per Accounting Standard 15.

Details are as under:

Short term employee benefits:

Short term employee benefits (benefits which are payable within twelve months after the end of the period in which the employees render service) ie., sick leave is measured as per the actuarial valuation report obtained as of each year end balance sheet date.

Long term employee benefits:

Long term employee benefits (benefits which are payable after the end of twelve months from the end of the period in which employees render service), and post employment benefits (benefits which are payable after completion of employment), are measured on a discounted basis by the projected Unit Credit Method, on the basis of annual third party actuarial valuations. The bank provides for the following long term employee benefits as per actuarial valuation:

1. Leave encashment: The Bank provides for liability accruing on account of deferred entitlement towards leave encashment in the year in which the employees concerned render their services based on third party actuarial valuation obtained as of each year end balance sheet date.

2. Pension: The Bank provides for liability accruing on account of the employees who have opted for pension based on the actuarial valuation obtained as of each year end balance sheet date.

3. Gratuity: The Bank provides for gratuity liability based on the actuarial valuation obtained as of each year end balance sheet date.

The pension and gratuity contributions are transferred to self managed trust.

12) PROVISION FOR TAXATION

Tax expenses comprise current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.

13) IMPAIRMENTS:

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

14) SEGMENTREPORTING:

In accordance with the guidelines issued by RBI, Bank has adopted Segment Reporting as under:

1. Treasury includes all investment portfolio, profit/ loss on sale of investments, profit/loss on foreign exchange transactions, equities, income from derivatives and money market operations. The expenses of this segment consist of interest expenses on funds borrowed from external sources as well as internal sources and depreciation / amortisation of premium on Held to Maturity category investments.

2. Corporate/ Wholesale Banking includes lending and deposits from corporate customers and identified earnings and expenses of the segment.

3. Retail Banking includes lending and deposits from retail customers and identified earnings and expenses of the segment.

4. Other Banking Operations includes all other operations not covered under Treasury, Wholesale Banking and Retail Banking.

15) EARNINGS PERSHARE:

Earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividend and attributable taxes thereto) by the weighted average number of equity shares outstanding during the period.

Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding as at the end of the year.

16) CONTINGENT LIABILITIES AND PROVISIONS:

1. A provision is recognised when there is an obligation as a result of past event if it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

2. Transactions in Government securities and others which were pending for settlement on the balance sheet date are shown as off balance sheet items under contingent assets and liabilities head.

17) Cash and cash equivalents in the cash flow statement comprise cash and balances with RBI and balances with banks and money at call and short notice.

18) The Bank has followed the same accounting policies as in the previous year''s subject to regulatory Changes, if any.


Mar 31, 2012

1) ACCOUNTING CONVENTION

The financial statements have been prepared by following the going concern concept on historical cost basis except as otherwise stated and in accordance with Companies (Accounting Standard) Rules, 2006 to the extent applicable read with guidelines issued by the Reserve Bank of India (RBI) and conform to the statutory provisions and practices prevailing within the banking industry in India.

The preparation of the financial statements, in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent liabilities in the financial statements. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in current and future periods.

2) FOREIGN EXCHANGE TRANSACTIONS

I. Transactions other than FCNR/EEFC/RFC Accounts

a) Foreign Currency balances both under assets and liabilities and outstanding forward exchange contracts and swaps are evaluated at the year end rates as quoted by Foreign Exchange Dealers' Association of India (FEDAI). The resultant profit/loss is included in Profit / Loss Account.

b) Income and expenditure items have been translated at the exchange rates ruling on the dates of the transactions.

c) Contingent liabilities on account of acceptances, endorsements and other obligations including guarantees and Letters of Credit issued in Foreign Currencies, shown in the Balance Sheet are valued at the exchange rates prevailing at the year end.

II. Transactions relating to FCNR/EEFC/RFC accounts

Foreign Currency Deposits in FCNR/EEFC/RFC accounts including interest accrued and also the corresponding assets are recorded at market related notional rates, which are periodically reviewed. Assets and Liabilities at the year end are revalued at rates quoted by Foreign Exchange Dealers' Association of India. The resultant profit / loss is shown as income / loss.

3) INVESTMENTS

I. Investments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation and are regrouped, shown in balance sheet under the following six groups:

a) Government Securities

b) Other Approved Securities

c) Shares

d) Debentures and Bonds

e) Investments in Subsidiaries/Joint Ventures

f) Others (Commercial Paper, Units of Mutual Fund, NABARD-RIDF, Venture Capital Funds etc.)

II. The Investment portfolio of the Bank is classified into the following three categories:

a) Held to Maturity

b) Available for Sale

c) Held for Trading

Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Transfer of securities from one category to another is done at the least of the acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for and the book value of the security is accordingly altered.

III. Valuation

a) Held to Maturity

i) Investments classified under this category are valued at the year end at the acquisition cost, except where the acquisition cost is more than the face value, in which case the premium is amortized on constant yield method over the remaining maturity period.

ii) In the case of investments in subsidiaries/ joint ventures, any diminution in value, other than temporary, is recognized and provided for each investment individually. Investment in RRB and venture capital fund is valued at carrying cost.

iii) Profit on sale of investments in this category is first taken to Profit and Loss Account and thereafter appropriated to the "Capital Reserve Account". Loss on sale of investment is recognised in the Profit and Loss Account.

The above valuation in category of Available for Sale and Held for Trading is done scrip wise and depreciation/ appreciation is aggregated for classification. Net depreciation for each classification if any, is provided for, while net appreciation is ignored.

Provisions on account of depreciation on net basis, if found to be in excess, is first taken to Profit & Loss Account and thereafter appropriated to the "Investment Reserve Account" as per the extant RBI guidelines.

IV. Prudential Norms

(a) (i) Securities with guarantees of the Central

Government are treated as performing investments, notwithstanding arrears of principal/interest payments. However, interest if not realized for more than 90 days, is recognized as income only on cash basis.

ii) Securities guaranteed by the State Government, where the principal/interest is due but not paid for a period of more than 90 days, are treated as Non Performing Investments and provided for as per the RBI guidelines. Further, for securities guaranteed by the State Governments, where the principal/ interest is due but not paid for a period of more than 90 days, interest is recognized as income only on cash basis.

(b) Securities not guaranteed by the Central Government/State Governments/Preference shares where the Principal/Interest /Fixed Dividend is due but not paid for a period of more than 90 days, are treated as Non Performing Investments and provided for as per the Reserve Bank of India guidelines.

(c) In the case of debentures/bonds where principal/ interest is in arrears, provision is made as in the case of advances.

(d) If any credit facility availed by the issuer from the Bank is NPA, investments in any of the securities issued by the same issuer is also treated as Non Performing Investments.

(e) The depreciation/provision requirement in respect of non-performing investments is not set off against the appreciation in respect of other performing investments.

(f) In the case of Equity Shares, in the event the investment in the shares of any company is valued at Re. 1 per company on account of the non-availability of the quotation or latest balance sheet in accordance with the guidelines, such equity shares would also be reckoned as Non Performing Investment on case to case basis.

(g) In case of preference shares, where preference dividends are in arrears, no credit is taken for accrued dividends and the value determined on YTM is discounted by atleast 15% if arrears are for 1 year, and more (if arrears are for more than one year). The depreciation/ provision requirement arrived at in the above manner in respect of non- performing shares where dividends are in arrears is not set-off against appreciation on other performing preference shares.

4) TRANSACTIONS RELATING TO DERIVATIVES

Derivative contracts are designated as hedging or trading and accounted for as follows:

a) Hedge Swaps: The interest rate swaps which hedges interest bearing assets and liabilities are accounted for on accrual basis except the swaps designated with an asset or liability that is carried at market value or lower of cost or market value in the financial statements. In such cases the swaps are marked to market with the resulting gain or loss recorded as an adjustment to the market value of designated asset or liability.

The gain or loss on the terminated swaps is deferred and recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability.

b) Re-designation of Hedge items: If a hedge is redesignated from one item of asset/liability to another item of asset/liability, such re-designation is accounted for as the termination of one hedge and acquisition of another. On the date of redesignation, the swap is marked to market and the mark to market value is amortized over the shorter period of the remaining life of the swap or remaining life of the asset/liability. The offsetting mark to market entry adjustments would be treated as premium received or paid for hedge on the newly designated item of asset/liability and this would be amortized over the life of the redesignated asset/liability or remaining term of the swap whichever is shorter

c) Trading Swaps: The trading swaps are marked to market with the resulting gain or loss recorded in the income statement. Gain or loss on termination of the swap is recorded as immediate income or expense.

5) FIXED ASSETS/DEPRECIATION

(I) Fixed Assets

(a) Premises of the bank include free hold as well as lease hold properties. Land and buildings purchased or allotted have been capitalised based on agreements/letters of allotment and physical possession. Other Fixed Assets are capitalized on the date of put to use. Premises and other Fixed Assets are stated at their historical cost, except those which have been re-valued. Such Fixed Assets are stated on the revalued amount.

b) Advance payments made for acquisition of capital assets and deposits made in respect of properties taken on lease/rent are included under 'Other Assets'.

(II) Depreciation

a) Fixed Assets (other than computers and software) are depreciated at the rates prescribed under the 'Income Tax Rules' on reducing balance method, including on the composite cost of certain properties, where it is not possible to segregate the land cost. Computers (including operating software) are depreciated on Straight Line Method at the rate of 33.33% per annum. Other software expenses, treated as intangible assets are amortized at 100% in the year of acquisition. Depreciation on additions to Fixed Asset during the financial year is provided at 100% of the rate of depreciation prescribed, if the asset is put to use for 180 days and above during the year and at 50% of the rate of depreciation prescribed, if the asset is put to use for less than 180 days during the year. No depreciation is provided in the year of sale/disposal of fixed assets.

b) Incremental depreciation on revalued amount in respect of premises is adjusted from Revaluation Reserve account.

6) LEASED OUT ASSETS

Accounting for leased assets is done as per Accounting Standard 19. Provision in respect of non-performing assets, is made by applying the asset classification norms prescribed by the RBI for advances.

7) NON BANKING ASSETS Non-Banking assets are shown at cost.

8) ADVANCES

Advances are classified as per the RBI guidelines into standard, sub-standard, doubtful and loss assets after considering subsequent recoveries to date. Provision for non-performing assets is made in conformity with the RBI guidelines.

a) In terms of the guidelines of the Reserve Bank of India, advances are classified as "Performing" and "Non-Performing" assets based on recovery of principal/interest and advances are classified as "Non Performing Assets" with 90 days delinquency norms. In case of State Government Guaranteed advances, requirement of invocation of the Guarantee has been de-linked for classification of an account as NPA. Non Performing Advances (NPAs) are categorized as Sub-Standard, Doubtful and Loss Assets for the purpose of computing provision requirements.

Advances shown in the Balance Sheet are net of provisions [including floating provisions] in respect of non-performing advances, interest suspense and ECGC/DICGC claims received.

b) Advances include the Bank's participation in/ contributions to Pass Through Certificates (PTCs) and /or to the asset-backed assignment of loan assets of other banks / financial institutions where the Bank has participated on risk-sharing basis.

c) Amounts recovered against bad debts written off in earlier years are recognised in the Profit and Loss account.

d) Provisions no longer considered necessary in context of the current status of the borrower as a performing asset, are written back to the Profit and Loss account to the extent such provisions were charged to the Profit and Loss account.

e) Provisions on Standard Advances are shown under "Other Liabilities and Provisions".

f) Provision on advances is made as per the RBI guidelines as under:

1. Standard Assets: 1% of standard advances to Commercial Real Estate Sector, 0.25% of the outstanding advances under direct agriculture & SME Sectors, 2% on standard restructured advances and 0.40% on all other outstanding advances.

2. Sub Standard Assets: 15% of the outstanding advances. However, in case of sub standard assets which are identified ab-initio as "unsecured exposures" provision at 25% of the outstanding balance is made.

3. Doubtful assets: 25% to 100% as applicable on the secured portion of advances, depending upon the period for which the asset has remained doubtful and 100% of the unsecured portion of the outstanding advance after netting realized amount in respect of DICGC scheme and realized/realizable amount of guarantee cover under the ECGC/CGSTI Schemes.

4. Loss Assets: 100% of the outstanding advances

g) Restructured / rescheduled accounts:

In case of restructured / rescheduled accounts provision is made for the sacrifice against erosion/ diminution in fair value of restructured loans, in accordance with the general framework of restructuring of advances issued by RBI vide circular dated August 27, 2008 and Master Circular dated July 01, 2010.

The erosion in fair value of the advances is computed as the difference between fair value of the loan before and after restructuring.

Fair value of the loan before restructuring is computed as the present value of cash flows representing the interest at the existing rate charged on the advance before restructuring and the principal, discounted at a rate equal to the Bank's BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

Fair value of the loan after restructuring is computed as the present value of cash flows representing the interest at the rate charged on the advance on restructuring and the principal, discounted at a rate equal to Bank's BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

The restructured accounts have been classified in accordance with RBI guidelines, including special dispensation wherever allowed.

9) REVENUERECOGNITION

Income is accounted on accrual basis except in the following cases:

a) In the case of Non Performing Assets, income is recognized on cash basis, in terms of guidelines of the Reserve Bank of India. Where recovery is not adequate to upgrade the Non Performing Assets accounts by way of regularization, such recovery is being appropriated towards the principal/book balance in the first instance and towards interest dues thereafter. In respect of Non Performing Investments, the same accounting treatment as above is followed.

b) Income from Units of Mutual Funds, Commission on Insurance and Depositary Participant business, Merchant Banking transactions, General Insurance business, Money transfer services, Sale of Mutual Fund products, Locker Rent, Commission on Government business, etc. are accounted on cash/ realisation basis.

c) Commission earned from Non-fund based business viz., Letter of Credits and Bank Guarantees is accounted on cash basis.

d) Interest on securities which is due and not paid for a period of more than 90 days is recognized on realisation basis as per RBI guidelines.

e) In the case of suit filed accounts, legal expenses are charged to the profit and loss account. Similarly, at the time of recovery of legal expenses in respect of such suit filed accounts, the amount recovered is accounted as income.

10) NETPROFIT

The net profit is arrived at after

a) Provisions for Income Tax & Wealth Tax in accordance with statutory requirements

b) Provision on advances/investments

c) Adjustments to the value of investments

d) Transfers to provisions and contingencies

e) Provision for Inter Branch accounts lying unadjusted for more than six months as per RBI norms

f) Other usual and necessary provisions

11) EMPLOYEEBENEFITS

a) Expenses arising out of claims in respect of employee matters under dispute/negotiation are accounted during the year of final settlement/ determination.

b) In respect of employees who have opted for Provident Fund scheme, matching contribution as applicable is made by the Bank to the recognised Provident Fund. For others who have opted for pension scheme, contribution to Pension Fund is made based on actuarial valuation, as per Accounting Standard 15.

c) Contribution to Gratuity Fund is made based on actuarial valuation, as per Accounting Standard 15.

d) Liability towards leave encashment, privilege leave and sick leave is provided based on actuarial valuation, as per Accounting Standard 15.

Details are as under:

Short term employee benefits:

Short term employee benefits (benefits which are payable within twelve months after the end of the period in which the employees render service) ie., sick leave is measured as per the actuarial valuation report obtained as of each year end balance sheet date.

Long term employee benefits:

Long term employee benefits (benefits which are payable after the end of twelve months from the end of the period in which employees render service), and post employment benefits (benefits which are payable after completion of employment), are measured on a discounted basis by the projected Unit Credit Method, on the basis of annual third party actuarial valuations. The bank provides for the following long term employee benefits as per actuarial valuation:

1. Leave encashment: The Bank provides for liability accruing on account of deferred entitlement towards leave encashment in the year in which the employees concerned render their services based on third party actuarial valuation obtained as of each year end balance sheet date.

2. Pension: The Bank provides for liability accruing on account of the employees who have opted for pension based on the actuarial valuation obtained as of each year end balance sheet date.

3. Gratuity: The Bank provides for gratuity liability based on the actuarial valuation obtained as of each year end balance sheet date.

4. The pension and gratuity contributions are transferred to self managed trust.

12) PROVISIONFORTAXATION

Tax expenses comprise current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.

13) IMPAIRMENTS:

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

14) SEGMENTREPORTING:

In accordance with the guidelines issued by RBI, Bank has adopted Segment Reporting as under:

1. Treasury includes all investment portfolio, profit/ loss on sale of investments, profit/loss on foreign exchange transactions, equities, income from derivatives and money market operations. The expenses of this segment consist of interest expenses on funds borrowed from external sources as well as internal sources and depreciation / amortisation of premium on Held to Maturity category investments.

2. Corporate/ Wholesale Banking includes lending and deposits from corporate customers and identified earnings and expenses of the segment.

3. Retail Banking includes lending and deposits from retail customers and identified earnings and expenses of the segment.

4. Other Banking Operations includes all other operations not covered under Treasury, Wholesale Banking and Retail Banking.

15) EARNINGSPERSHARE:

Earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividend and attributable taxes thereto) by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding as at the end of the year.

16) CONTINGENT LIABILITIES AND PROVISIONS:

1. A provision is recognised when there is an obligation as a result of past event if it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

2. Transactions in Government securities and others which were pending for settlement on the balance sheet date are shown under contingent assets and liabilities head.

17) OTHERS:

Cash and cash equivalents in the cash flow statement comprise cash and balances with RBI (Schedule 6) and balances with banks and money at call and short notice (Schedule 7).

18) The Bank has followed the same accounting policies as in the previous year's subject to regulatory changes, if any.


Mar 31, 2011

1) ACCOUNTING CONVENTION

The financial statements have been prepared by following the going concern concept on historical cost basis except as otherwise stated and in accordance with Company(Accounting Standard) Rules, 2006 to the extent applicable read with guidelines issued by the Reserve Bank of India (RBI) and conform to the statutory provisions and practices prevailing within the banking industry in India.

The preparation of the financial statements, in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent liabilities in the financial statements. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in current and future periods.

2) FOREIGN EXCHANGE TRANSACTIONS

I. Transactions other than FCNR/EEFC/RFC Accounts

a) Foreign Currency balances both under assets and liabilities and outstanding forward exchange contracts and swaps are evaluated at the year end rates as quoted by Foreign Exchange Dealers Association of India (FEDAI). The resultant profit/loss are included in Profit / Loss Account.

b) Income and expenditure items have been translated at the exchange rates ruling on the dates of the transactions.

c) Contingent liabilities on account of acceptances, endorsements and other obligations including guarantees and Letters of Credit issued in Foreign Currencies, shown in the Balance Sheet are valued at the exchange rates prevailing at the year end.

II. Transactions relating to FCNR/EEFC/RFC accounts

Foreign Currency Deposits in FCNR/EEFC/RFC accounts including interest accrued and also the corresponding assets are recorded at market related notional rates, which are periodically reviewed. Assets and Liabilities at the year end are revalued at rates quoted by Foreign Exchange Dealers Association of India. The resultant profit / loss is shown as income . toss.

3) INVESTMENTS

I. Investments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation and are regrouped, shown in balance sheet under the following six groups:

a) Government Securities

b) Other Approved Securities

c) Shares

d) Debentures and Bonds

e) Investments in Subsidiaries/Joint Ventures

f) Others (Commercial Paper, Units of Mutual Fund, NABARD-RIDF, Venture Capital Funds etc.)

II. The Investment portfolio of the Bank is classified into the following three categories:

a) Held to Maturity

b) Available for Sale

c) Held for Trading

Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Transfer of securities from one category to another is done at the least of the acquisition cost/book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for and the book value of the security is changed.

III. Valuation

a) Held to Maturity

i) Investments classified under this category are valued at the year end at the acquisition cost, except where the acquisition cost is more than the face value, in which case the premium is amortized on constant yield method.

ii) In the case of investments in subsidiaries/ joint ventures, any diminution in value, other than temporary, is recognized and provided for each investment individually. Investment in RRB and venture capital fund is valued at carrying cost.

iii) Profit on sale of investments in this category is first taken to Profit and Loss Account and thereafter appropriated to the "Capital Reserve Account". Loss on sale is recognised in the Profit and Loss Account.

Provisions on account of depreciation on net basis if found to be in excess, is first taken to Profit & Loss Account and thereafter appropriated to the "Investment Reserve Account" as per the extant RBI guidelines.

IV. Prudential Norms

(a) (i) Securities with guarantees of the Central

Government are treated as performing investments, notwithstanding arrears of principal/interest payments. However, interest if not realized for more than 90 days is recognized as income only on cash basis.

(ii) Securities guaranteed by the State Government, where the principal/interest is due but not paid for a period of more than 90 days as on 31.03.2011, are treated as Non Performing Investments and provided for as per the RBI guidelines. Further, for securities guaranteed by the State Governments, where the principal/interest is due but not paid for a period of more than 90 days, interest is recognized as income only on cash basis.

(b) Securities not guaranteed by the Central Government/State Governments/Preference shares: Where the Principal/lnterest/Fixed Dividend is due but not paid for a period of more than 90 days as on 31.03.2011 are treated as Non Performing Investments and provided for as per the Reserve Bank of India guidelines.

(c) In the case of debentures/bonds where principal/ interest is in arrears, provision is made as in the case of advances.

(d) If any credit facility availed by the issuer from the Bank is NPA, investments in any of the securities issued by the same issuer is also treated as Non Performing Investments.

(e) The depreciation/provision requirement in respect of non-performing investments is not set off against the appreciation in respect of other performing investments.

(f) The equity shares in the Banks portfolio has been marked to market on periodical basis. Equity shares for which current quotations are not available or where the shares are not quoted on the stock exchanges, are valued at break-up value (without considering revaluation reserves if any) which is ascertained from the Companys latest balance sheet (Not more than one year prior to the date of valuation). In case the latest balance sheet is not available the shares are valued at Rs. 1 per company.

(g) In the case of Equity Shares, in the event the investment in the shares of any company is valued at Re.1 per company on account of the non availability of the quotation or latest balance sheet in accordance with the RBI guidelines, those equity shares would also be reckoned as Non Performing Investment on case to case basis.

4) TRANSACTIONS RELATING TO DERIVATIVES

Derivative contracts are designated as hedging or trading and accounted for as follows:

a) Hedge Swaps: The interest rate swaps which hedges interest bearing assets and liabilities are accounted for on accrual basis except the swaps designated with an asset or liability that is carried at market value or lower of cost or market value in the financial statements. In that case the swaps are marked to market with the resulting gain or loss recorded as an adjustment to the market value of designated asset or liability.

The gain or loss on the terminated swaps is deferred and recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability.

b) Re-designation of Hedge items: If a hedge is redesignated from one item of asset/liability to another item of asset/liability, such redesignaion is accounted for as the termination of one hedge and acquisition of another. On the date of redesignation, the swap is marked to market and the mark to market value is amortized over the shorter period of the remaining life of the swap or remaining life of the asset/liability. The offsetting mark to market entry adjustments would be treated as premium received or paid for hedge on the newly designated item of asset/liability and this would be amortized over the life of the redesignated asset/liability or remaining term of the swap whichever is shorter.

c) Trading Swaps: The trading swaps are marked to market with the resulting gain or loss recorded in the income statement. Gain or loss on termination of the swap is recorded as immediate income or expense.

5) FIXED ASSETS/DEPRECIATION

(I) Fixed Assets

(a) Premises of the bank include free hold as well as lease hold properties. Land and buildings purchased or allotted have been capitalised based on agreements/letters of allotment and physical possession. Other Fixed Assets are capitalized on the date put to use. Premises and other Fixed Assets are stated at their historical cost except those which were revalued. Such Fixed Assets are stated on the revalued amount.

b) Advance payments made for acquisition of capital assets and deposits made in respect of properties taken on lease/rent are included under Other Assets.

(II) Depreciation

a) Fixed Assets (other than Computers including software) are depreciated at the rates prescribed under the Income Tax Rules on reducing balance method including on the composite cost of certain properties where it is not possible to segregate the land cost. Computers (including operating software) are depreciated on Straight Line Method at the rate of 33.33% per annum. Other software expenses treated as intangible assets are amortized at 100% in the current year. Depreciation on additions to Fixed Asset during the financial year is provided at 100% of the rate of depreciation prescribed, if the asset is put to use for 180 days and above during the year and at 50% of the rate of depreciation prescribed, if the asset is put to use for less than 180 days during the year. No depreciation is provided in the year of sale/disposal of fixed assets.

b) Incremental depreciation on revalued amount in respect of premises is adjusted from Revaluation Reserve account.

6) LEASED OUT ASSETS

Accounting for leased assets is done as per the Guidance Note of the Institute of Chartered Accountants of India and the Accounting Standard 19 as applicable for the respective period. Provision in respect of non- performing assets, is made by applying the asset classification norms prescribed by the RBI for advances.

7) NON BANKING ASSETS

Non-Banking assets are shown at cost.

8) ADVANCES

Advances are classified as per the RBI guidelines into standard, sub-standard, doubtful and loss assets after considering subsequent recoveries to date. Provision for non-performing assets is made in conformity with the RBI guidelines.

a) In terms of the guidelines of the Reserve Bank of India, advances are classified as "Performing" and "Non-Performing" assets based on recovery of principal/interest and advances are classified as "Non Performing Assets" with 90 days delinquency norms. In case of State Government Guaranteed advances, requirement of invocation of the Guarantee has been de-linked for classification of an account as NPA. Non Performing Advances (NPAs) are categorized as Sub-Standard, Doubtful and Loss Assets for the purpose of computing provision requirements.

Advances shown in the Balance Sheet are net of provisions [including floating provisions] in respect of non-performing advances, interest suspense and ECGC/DICGC claims received.

b) Advances include the Banks participation in/ contributions to Pass Through Certificates (PTCs) and /or to the asset-backed assignment of loan assets of other banks / financial institutions where the Bank has participated on risk-sharing basis.

c) Amounts recovered against bad debts written off in earlier years are recognised to the Profit and Loss account.

d) Provisions no longer considered necessary in context of the current status of the borrower as a performing asset, are written back to the Profit and Loss account to the extent such provisions were charged to the Profit and Loss account.

e) Provisions on Standard Advances are shown under "Other Liabilities and Provisions".

f) Provision on advances is made as per the RBI guidelines as under:

1. Standard Assets: 1 % of standard advances to Commercial Real Estate Sector, 0.25% of the outstanding advances under direct agriculture & SME Sectors and 0.40% on all other outstanding advances.

2. Sub Standard Assets: 10% of the outstanding advances. However, in case of sub standard assets which are identified ab-initio as "unsecured exposures" provision at 20% of the outstanding balance is made.

3. Doubtful assets: 20% to 100% as applicable on the secured portion of advances, depending upon the period for which the asset has remained doubtful and 100% of the unsecured portion of the outstanding advance after netting realized amount in respect of DICGC scheme and realized/realizable amount of guarantee cover under the ECGC/CGSTI Schemes.

4. Loss Assets: 100% of the outstanding advances.

g) Restructured / rescheduled accounts:

In case of restructured / rescheduled accounts provision is made for the sacrifice against erosion/ diminution in fair value of restructured loans, in accordance with the general framework of restructuring of advances issued by RBI vide circular dated August 27, 2008 and Master Circular dated July 01, 2010.

The erosion in fair value of the advances is computed as the difference between fair value of the loan before and after restructuring.

Fair value of the loan before restructuring is computed as the present value of cash flows representing the interest at the existing rate charged on the advance before restructuring and the principal, discounted at a rate equal to the Banks BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

Fair value of the loan after restructuring is computed as the present value of cash flows representing the interest at the rate charged on the advance on restructuring and the principal, discounted at a rate equal to Banks BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

The restructured accounts have been classified in accordance with RBI guidelines, including special dispensation wherever allowed.

9) REVENUE RECOGNITION

Income/Expenditure is accounted on accrual basis except in the following cases:

a) In the case of Non Performing Assets, income is recognized on cash basis, in terms of guidelines of the Reserve Bank of India. Where recovery is not adequate to upgrade the Non Performing Assets accounts by way of regularization, such recovery is being appropriated towards the principal/book balance in the first instance and towards interest dues thereafter. In respect of Non Performing Investments, the same accounting treatment as above is followed except on mutually agreed terms.

b) In the case of advances guaranteed by the Central/ State Governments, income is recognized on cash basis if the interest is not realized for more than 90 days.

c) Income from Units of Mutual Funds, Commission on insurance and depositary participants business, Merchant Banking transactions, General Insurance business, Money transfer services, sale of mutual fund products, locker rent, commission on Government business, etc. are accounted on cash/ realisation basis.

d) Commission earned from Non-fund based business viz., Letter of Credits and Bank Guarantees is accounted on cash basis.

e) Interest on securities which is due and not paid for a period of more than 90 days is recognized on realisation basis as per RBI guidelines.

f) Pursuant to revised guidelines issued by the Reserve Bank of India, Savings Bank Deposit Rate of Interest is provided for on Matured Term Deposits and Inoperative Savings Deposits.

g) Expenses arising out of claims in respect of employee matters under dispute/negotiation are accounted during the year of final settlement/ determination.

h) In the case of suit filed accounts, legal expenses are charged to the profit and loss account. Similarly, at the time of recovery of legal expenses in respect of such suit filed accounts, the amount recovered is accounted as income.

i) Premium on insurance policies taken by the Bank in respect of V-Housing Loans is charged in the year of payment.

10) NET PROFIT

The net profit is arrived at after

a) Provisions for Income Tax & Wealth Tax in accordance with statutory requirements

b) Provision on advances/investments

c) Adjustments to the value of investments

d) Transfers to provisions and contingencies

e) Provision for Inter Branch accounts lying unadjusted for more than six months as per RBI norms

f) Other usual and necessary provisions

11} EMPLOYEESBENEFITS

a) In respect of employees who have opted for Provident Fund scheme, matching contribution as applicable is made by the Bank to the recognised Provident Fund. For others who have opted for pension scheme, contribution to Pension Fund is made based on actuarial valuation, as per Accounting Standard 15 (revised).

b) Contribution to Gratuity Fund is made based on actuarial valuation, as per Accounting Standard 15 (revised).

c) Liability towards leave encashment, privilege leave and sick leave is provided based on actuarial valuation, as per Accounting Standard 15 (revised).

Details are as under:

Short term employee benefits:

Short term employee benefits (benefits which are payable within twelve months after the end of the period in which the employees render service) ie., sick leave is measured as per the actuarial valuation report obtained as of each year end balance sheet date.

Long term employee benefits:

Long term employee benefits (benefits which are payable after the end of twelve months from the end of the period in which employees render service), and post employment benefits (benefits which are payable after completion of employment), are measured on a discounted basis by the projected Unit Credit Method, on the basis of annual third party actuarial valuations. The bank provides for

the following long term employee benefits as per actuarial valuation:

1. Leave encashment: The Bank provides for liability accruing on account of deferred entitlement towards leave encashment in the year in which the employees concerned render their services based on third party actuarial valuation obtained as of each year end balance sheet date.

2. Pension: The Bank provides for liability accruing on account of the employees who have opted for pension based on the actuarial valuation obtained as of each year end balance sheet date. As per IX Bipartite settlement, pension option was re-opened for the employees who were in the service of the Bank as on 27.04.2007. Consequent to this, there was requirement for providing additional contribution to the pension fund. While Reserve Bank of India has permitted amortization of the additional liability due to the existing employees opting for 2nd pension option over of a period of five years, this relaxation was not extended in respect of the additional liability arising out of the retired employees exercising 2nd pension option. The Bank has obtained third party actuarial valuation report as of 31.03.2011 and accordingly made the additional contribution required for the pension fund.

3. Gratuity: The Bank provides for gratuity liability based on the actuarial valuation obtained as of each year end balance sheet date. Maximum amount of Gratuity payable to the employees has been increased from Rs. 3.50 lacs to Rs. 10.00 lacs wef 24.05.2010 by amendment to the Payment of Gratuity Act of 1972. Reserve Bank of India has permitted amortization of the additional burden arising due to increase in the ceiling over a period of five years. The Bank has obtained third party actuarial valuation report as of 31.03.2011 and accordingly made the additional contribution required for the pension fund.

The pension and gratuity contributions are transferred to self-managed trusts.

12) PROVISION FOR TAXATION

Tax expenses comprise current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.

13) IMPAIRMENTS:

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

14) SEGMENT REPORTING:

In accordance with the guidelines issued by RBI, Bank has adopted Segment Reporting as under:

1. Treasury includes all investment portfolio, profit / loss on sale of investments, profit/loss on foreign exchange transactions, equities, income from derivatives and money market operations. The expenses of this segment consist of interest expenses on funds borrowed from external sources as well as internal sources and depreciation / amortisation of premium on Held to Maturity category investments.

2. Corporate/ Wholesale Banking includes lending and deposits from corporate customers and identified earnings and expenses of the segment.

3. Retail Banking includes lending and deposits from retail customers and identified earnings and expenses of the segment.

4. Other Banking Operations includes all other operations not covered under Treasury, Wholesale Banking and Retail Banking.

15) EARNINGS PER SHARE:

Earnings per share are calculated by dividing the net profit or loss for the period attributable to equity

shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding as at end of the year.

16) CONTINGENT LIABILITIES AND PROVISIONS:

A provision is recognised when there is an obligation as a result of past event if it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

17) OTHERS:

Cash and cash equivalents in the cash flow statement comprise cash and balances with RBI (Schedule 6) and balances with banks and money at call and short notice (Schedule 7).

18) The Bank has followed the same accounting policies as in the previous years subject to regulatory changes, if any.


Mar 31, 2010

1) ACCOUNTING CONVENTION

The financial statements have been prepared by following the going concern concept on historical cost basis except as otherwise stated and in accordance with the applicable accounting standards read with guidelines issued by the Reserve Bank of India (RBI) and conform to the statutory provisions and practices prevailing within the banking industry in India.

The preparation of the financial statements, in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent liabilities in the financial statements. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in current and future periods.

2) FOREIGN EXCHANGE TRANSACTIONS

I. Transactions other than FCNR/EEFC/RFC Accounts

a) Foreign Currency balances both under assets and liabilities and outstanding forward exchange contracts and swaps are evaluated at the year end rates as quoted by Foreign Exchange Dealers Association of India (FEDAI). The resultant profit/loss is shown as income/loss.

b) Income and expenditure items have been translated at the exchange rates ruling on the dates of the transactions.

c) Contingent liabilities on account of acceptances, endorsements and other obligations including guarantees and Letters of Credit issued in Foreign Currencies, shown in the Balance Sheet are valued at FEDAI notified exchange rates prevailing at the year end.

II. Transactions relating to FCNR/EEFC/RFC accounts

Foreign Currency Deposits in FCNR/EEFC/RFC accounts including interest accrued and also the corresponding assets are recorded at market related notional rates, which are periodically reviewed. Assets and Liabilities at the year end are revalued at rates quoted by Foreign Exchange Dealers* Association of India. The resultant difference is recognised in the statement of profit and loss as income/loss.

3) INVESTMENTS

I. Investments are grouped and shown in Balance Sheet under the following six groups:

a) Government Sacuritiss

b) Other Approved Ssc..;Jtfes

c) Shares

d) Debentures 2nd Bonds

e) Investments in Subsidiaries/Joint Ventures/ Associates

f) Others (Commercial Paper, Units of Mutual Fund, NABARD-RIDF, Preference Shares, Venture Capital Funds etc.)

II. The Investment portfolio of the Bank is classified into the following three categories:

a) Held to Maturity

b) Available for Sale

c) Held for Trading

Bank decides the category of each investment at the time of acquisition and classifies the same accordingly. Transfer of securities from one category to another is done at the least of the acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, or. such transfer is fully provided for and the book valise of the security is changed.

III. Valuation

a) Held to Maturity

i) Investments classified under this category are valued at the year end at the acquisition cost, except where the acquisition cost is more than the face value, in which case the premium is amortized on constant yield method.

ii) In the case of investments in subsidiaries/ joint ventures, any diminution in value, other than temporary, is recognized and provided for each investment individually. Investment in RRB is valued at carrying cost.

iii) Profit on sale of investments in this category is first taker, to Profit and Loss Account and thereafter appropriated to the "Capital Reserve Account". Loss on sale is recognised in the Profit and Loss Account.

b) Available for Sale

(i) The individual scrips in this category are valued at the market rates available on the Balance Sheet date from trades/quotes on the Stock Exchanges, SGL account transactions, price declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA). Un-quoted securities are valued as per the Reserve Bank of Indiam guidelines.

(ii) The net depreciation under each group referred to in item 3(1) above is recognised and fully provided for. The net appreciation under each group is ignored. The net depreciation required to be provided for in any one group is not reduced on account of net appreciation in any other group.

(iii) The book value of the securities is not changed after revaluation, except as required by the Reserve Bank of India guidelines.

(iv) Profit or loss on sale of investments in this category is accounted for in the Profit and Loss account.

c) Held for Trading

(i) The individual scrips are valued and the appreciation if any is ignored and depreciation is recognized in the Profit & Loss account. For valuation, the market rates available on the Balance sheet date from trades/quotes on the Stock Exchanges, SGL account transactions, price declared by the Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA) are adopted. Unquoted securities are valued as per the Reserve Bank of India guidelines.

(ii) The book value of the individual scrip is not changed after each revaluation, wherever depreciation is effected, except as required by the Reserve Bank of India guidelines.

(iii) Profit or loss on sale of investments in this category is accounted in the Profit and Loss account.

IV. Prudential Norms

(a) (i) Securities with guarantees of the Central Government are treated as performing investments, notwithstanding arrears of principal/interest payments. However, interest if not realized for more than 90 days is recognized as income only on cash basis.

(ii) Securities guaranteed by the State Government, where the principal/interest is due but not paid for a period of more than 90 days as on 31.03.2010, are treated as Non Performing Investments and provided for as per the RBI guidelines. Further, for securities guaranteed by the State Governments, where the principal/interest is due but not paid for a period of more than 90 days, interest is recognized as income only on cash basis.

(b) Securities not guaranteed by the Central Government/State Governments/Preference shares: Where the Principal/Interest/Fixed Dividend is due but not paid for a period of more than 90 days at the year end are treated as Non Performing Investments and provided for as per the Reserve Bank of India guidelines.

(c) In the case of debentures/bonds where principal/ interest is in arrears, provision is made as in the case of advances.

(d) If any credit facility availed by the issuer from the Bank is NPA, investments in any of the securities issued by the same issuer is also treated as Non Performing Investments.

(e) The depreciation/provision requirement in respect of non-performing investments is not set off against the appreciation in respect of other performing investments.

(f) The equity shares in the Banks portfolio has been marked to market on periodical basis. Equity shares for which current quotations are not available or where the shares are not quoted on the stock exchanges, are valued at break-up value (without considering revaluation reserves if any) which is ascertained from the Companys latest balance sheet (Not more than one year prior to the date of valuation). In case the latest balance sheet is not available the shares are valued at Rs.1 per company.

(g) In the case of Equity Shares, in the event the investment in the shares of any company is valued at Re.1 per company on account of the non availability of the quotation or latest balance sheet in accordance with the RBI guidelines, those equity shares would also be reckoned as Non Performing Investment.

4) TRANSACTIONS RELATING TO DERIVATIVES

Derivative contracts are designated as hedging or trading and accounted for as follows:

a) Hedge Swaps: The interest rate swaps which hedges interest bearing assets and liabilities are accounted for on accrual basis except the swaps designated with an asset or liability that is carried at market value or lower of cost or market value in the financial statements. In that case the swaps are marked to market with the resulting gain or loss recorded as an adjustment to the market value of designated asset or liability.

The gain or loss on the terminated swaps is deferred and recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability.

b) Re-designation of Hedge items: If a hedge is redesignated from one item of asset/liability to another item of asset/liability, such redesignation is accounted for as the termination of one hedge and acquisition of another. On the date of redesignation, the swap is marked to market and the mark to market value is amortized over the shorter period of the remaining life of the swap or remaining life of the asset/liability. The offsetting mark to market entry adjustments would be treated as premium received or paid for hedge on the newly designated item of asset/liability and this would be amortized over the life of the redesignated asset/ liability or remaining term of the swap whichever is shorter.

c) Trading Swaps: The trading swaps are marked to market with the resulting gain or loss recorded in the income statement. Gain or loss on termination of the swap is recorded as immediate income or expense.

5) FIXED ASSETS/DEPRECIATION

(I) Fixed Assets

(a) Premises of the bank include free hold as well as lease hold properties. Land and buildings purchased or allotted have been capitalised based on agreements/letters of allotment and physical possession. Other Fixed Assets are capitalized on the date put to use. Premises and other Fixed Assets are stated at their historical cost except those which were revalued. Such Fixed Assets are stated on the revalued amount.

b) Advance payments made to: acquisition of capital assets and deposits made in respect of properties taken on lease/rent are included under Other Assets.

(II) Depreciation

a) Fixed Assets (other than Computers including software) are depreciated at the rates prescribed under the Income Tax Rules on reducing balance method including on the composite cost of certain properties where it is not possible to segregate the land cost. Computers (including operating software) are depreciated on Straight Line Method at the rate of 33.33% per annum. Other software expenses treated as intangible assets are amortized at 100% in the current year. Depreciation on additions to Fixed Asset during the financial year is provided at 100% of the rate of depreciation prescribed, if the asset is put to use for 180 days and above during the year and at 50% of the rate of depreciation prescribed, if the asset is put to use for less than 180 days during the year. No depreciation is provided in the year of sale/disposal of fixed assets.

b) Incremental depreciation on revalued amount in respect of premises is adjusted from Revaluation Reserve account.

6) LEASED OUT ASSETS

Accounting for leased assets is done as per the Guidance Note of the Institute of Chartered Accountants of India and the Accounting Standard 19 as applicable for the respective period. Provision in respect of non-performing assets, is made by applying the asset classification norms prescribed by the RBI for advances.

7) NON BANKING ASSETS

Non-Banking assets are shown at cost.

8) ADVANCES

Advances are classified as per the RBI guidelines into standard, sub-standard, doubtful and loss assets after considering subsequent recoveries to date. Provision for non-performing assets is made in conformity with the RBI guidelines.

a) In terms of the guidelines of the Reserve Bank of India, advances are classified as "Performing" and "Non-Performing" assets based on recovery of principal/interest and advances are classified as "Non Performing Assets" with 90 days delinquency norms. In case of State Government Guaranteed advances, requirement of invocation of the Guarantee has been de-linked for classification of an account as NPA. Non Performing Advances (NPAs) are categorized as Sub-Standard, Doubtful and Loss Assets for the purpose of computing provision requirements.

Advances shown in the Balance Sheet are net of provisions [including floating provisions] in respect of non-performing advances, interest suspense and ECGC/DICGC claims received.

b) Advances include the Banks participation in/ contributions to Pass Through Certificates (PTCs) and /or to the asset-backed assignment of loan assets of other banks / financial institutions where the Bank has participated on risk-sharing basis.

c) Amounts recovered against bad debts written off in earlier years are recognised to the Profit and Loss account.

d) Provisions no longer considered necessary in context of the current status of the borrower as a performing asset, are written back to the Profit and Loss account to the extent such provisions were charged to the Profit and Loss account.

e) Provisions on Standard Advances are shown under "Other Liabilities and Provisions".

f) Provision on advances is made as per the RBI guidelines as under:

1. Standard Assets: 1 % of standard advances to Commercial Real Estate Sector, 0.25% of the outstanding advances under direct agriculture & SME Sectors and 0.40% on all other outstanding advances.

2. Sub Standard Assets: 10% of the outstanding advances. However, in case of sub standard assets which are identified ab-initio as "unsecured exposures" provision at 20% of the outstanding balance is made.

3. Doubtful assets: 20% to 100% as applicable on the secured portion of advances, depending upon the period for which the asset has remained doubtful and 100% of the unsecured

portion of the outstanding advance after netting realized amount in respect of DICGC scheme and realized/realizable amount of guarantee cover under the ECGC/CGSTI Schemes.

4. Loss Assets: 100% of the outstanding advances.

g) Restructured / rescheduled accounts:

In case of restructured / rescheduled accounts provision is made for the sacrifice against erosion/ diminution in fair value of restructured loans, in accordance with the general framework of restructuring of advances issued by RBI vide circular dated August 27, 2008 and Master Circular dated July 07, 2009.

The erosion in fair value of the advances is computed as the difference between fair value of the loan before and after restructuring.

Fair value of the loan before restructuring is computed as the present value of cash flows representing the interest at the existing rate charged on the advance before restructuring and the principal, discounted at a rate equal to the Banks BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

Fair value of the loan after restructuring is computed as the present value of cash flows representing the interest at the rate charged on the advance on restructuring and the principal, discounted at a rate equal to Banks BPLR as on the date of restructuring plus the appropriate term premium and credit risk premium for the borrower category on the date of restructuring.

The restructured accounts have been classified in accordance with RBI guidelines, including special dispensation wherever allowed.

9) REVENUE RECOGNITION

Income/Expenditure is accounted on accrual basis except in the following cases:

a) In the case of Non Performing Assets, income is recognized on cash basis, in terms of guidelines of the Reserve Bank of India. Where recovery is not adequate to upgrade the Non Performing Assets accounts by way of regularization, such recovery is being appropriated towards the principal/book balance in the first instance and towards interest dues thereafter. In respect of Non Performing

Investments, the same accounting treatment as above is followed except on mutually agreed terms.

b) In the case of advances guaranteed by the Central/ State Governments, income is recognized on cash basis if the interest is not realized for more than 90 days.

c) Income from Units of Mutual Funds, Commission on insurance and depositary participants business, Merchant Banking transactions, General Insurance business, Money transfer services, sale of mutual fund products, locker rent, commission on Government business, etc. are accounted on cash/ realisation basis.

d) Commission earned from Non-fund based business viz., Letter of Credits and Bank Guarantees is accounted on cash basis.

e) Interest on securities which is due and not paid for a period of more than 90 days is recognized on realisation basis as per RBI guidelines.

f) Pursuant to revised guidelines issued by the Reserve Bank of India, Savings Bank Deposit Rate of Interest is provided for, on Matured Term Deposits and Inoperative Savings Deposits.

g) Expenses arising out of claims in respect of employee matters under dispute/negotiation are accounted during the year of final settlement/ determination.

h) In the case of suit filed accounts, legal expenses are charged to the profit and loss account. Similarly, at the time of recovery of legal expenses in respect of such suit filed accounts, the amount recovered is accounted as income.

i) Premium on insurance policies taken by the Bank in respect of V-Housing Loans is charged in the year of payment.

10) NET PROFIT

The net profit is arrived at after

a) Provisions for Income Tax & Wealth Tax in accordance with statutory requirements

b) Provision on advances/investments

c) Adjustments to the value of investments

d) Transfers to provisions and contingencies

e) Provision for Inter Branch accounts lying unadjusted for more than six months as per RBI norms

f) Other usual and necessary provisions

 
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