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Notes to Accounts of Vijaya Bank

Mar 31, 2014

1) 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.

2) 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.

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

1. Reconciliation of entries outstanding as on 31.03.2014 in the inter-branch and other accounts has been drawn. Matching of entries outstanding in inter-branch and inter-bank accounts including balances in drafts accounts, suspense accounts, branch adjustment accounts, clearing transactions, funds transfers, balances pertaining to dividends / interest / refund orders paid / payable accounts, advances paid for acquisition of assets, etc. is complete upto 31.12.2013 and is under progress for the remaining period. In the opinion of the Bank, consequential effect of the above on the revenue / assets / liabilities is not material.

2. In respect of certain premises acquired by the Bank having written down value of Rs.5.43 crore, (previous year Rs.6.03 crore) documentation / registration are yet to be completed pending legal or other formalities.

3. In the case of un-audited branches, the returns / classification of advances as reported by the concerned branches have been adopted.

4. Claims pending and to be preferred with ECGCI Limited amounting to Rs.205.73 crore (previous year Rs.17.36 crore) have been considered as realisable for the purpose of computing provisions.

5. No provision other than those made, have been considered necessary by the Management in respect of disputed tax liabilities in view of the judgements in favour of the Bank. Further, certain deductions have been considered while working out tax provisions in respect of some claims under Income Tax Act based on the legal opinions obtained.

RBI circular DBOD.BP/BC.No. 41/21.04.141/2013-14 dated Aug 23, 2013 on "Investment Portfolio of Banks - Classification, Valuation and Provisioning" interalia provides Banks an option to distribute the net depreciation on the entire Available for Sale (AFS) and Held for Trading (HFT) portfolios on each of the valuation dates in the current financial year 2013-14, in equal instalments. The Bank has fully provided for the depreciation on the AFS and HFT portfolios as on 31.03.2014.

i) Disclosures on risk exposure in derivatives

a) Qualitative Disclosure

Bank has put in place a comprehensive derivative policy for undertaking derivative transactions for hedging, trading and servicing customers'' purpose as per RBI guidelines duly approved by the Board. The policy lays down the type, scope and usage with appropriate limits for derivative transactions. From the view point of operational efficiency and risk oversight the Derivatives desk is segregated into Front Office, Mid Office and Back Office with clear segregation of portfolio. The derivative hedges are continuously monitored for effective performance as per laid down policy and corrective measures are taken for mitigating the risk.

d) In respect of the advances restructured under the Prudential Guidelines of the Reserve Bank of India dated 27th August 2008 and the subsequent clarifications / guidelines issued from time to time in this respect, the Bank has provided a sum of Rs.84.42 Crores (previous year Rs. 81.36 Crores) during the year as diminution in the fair value of advances on account of such restructuring which in the Bank''s opinion is considered adequate on such restructured advances. The full implementation of the conditions laid down for restructuring in the said Circular are being complied with.

PRUDENTIAL EXPOSURE CEILING: 15% 5% [subject to compliance of Conditions required under "Exceptional circumstances"] ; [Rs.1019.59 crores Rs.339.86 crores i.e., Rs.1359.45 crores from April 2013 to November 2013 ; and Rs.1073.25 crores Rs.357.75 crores i.e, Rs.1431.00 crores from December 2013 to March 2014 ]

The Board of Directors has accorded approval under the guidelines on "Prudential Exposure Norms", upon compliance of conditions relating to "Exceptional Circumstances" vide Board Resolution No.02/2013 dated 01.03.2013. However, there has been no utilization of the limit from June 2013 to February 2014 and the utilization during April 2013, May 2013 and March 2014 is within the Prudential Exposure Norms.

ii) Overseas Assets, NPAs and Revenue : NIL

iii) Provision coverage ratio (PCR): Provision Coverage ratio as of 31.03.2014 is 64.05% (previous year 68.31%) as per RBI guidelines. However, the Bank has achieved the PCR as envisaged in RBI circular DBOD. No.BP.BC.87-21.048/2010-11 dt.21.04.2011.

iv) Unsecured advances: The Bank has no unsecured advances wherein intangible securities have been taken as collateral securities.

v) During the year 2013 - 2014, the bank had issued 211 letters of comfort amounting to USD 13,07,85,850.77 covering import of goods into India. These letters of comfort have been issued after due assessment of its financial impact on the bank and with the approval of the competent authorities. As on the date of the balance sheet 81 letters of comfort amounting to USD 3,83,48,781.36 (approximately Rs.229.78 crores @ USD 1 = Rs.59.92) are outstanding which, in the opinion of the management, will not have any significant impact on the bank''s financial position.

vi) The Bank is revaluing foreign currency transactions consistently at the weekly average rate of the last week of the preceding month, prescribed by FEDAI, instead of the rate at the date of the transaction as per AS 11. The management is of the view that there is no material impact on the accounts for the year.

vii) During the year 2010-11, the Reserve Bank of India has issued a circular no.DBOD.BP.BC.80/21.04.018/ 2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment, dated 9th February, 2011. In accordance with the provisions of the said Circular, Rs.596 crores identified in the year 2010-11 is being amortised over a period of five years. Accordingly, Rs.119 crores (representing one-fifth ofRs.596 crores) has been charged to the Profit and Loss Account. In terms of the requirements of the aforesaid RBI circular, the balance amount carried forward is Rs.119 crores.

The above has resulted in decrease in the profit of the bank for the current year by Rs.119 crores and corresponding increase in accumulated profits of the Bank by Rs.119 crores with corresponding increase in the Current Assets of the Bank by the same amount.

viii) The Bank has identified the following as related party as per AS-18 on Related Party Disclosures

a) Key Management Personnel :

1) Shri H.S. Upendra Kamath, Chairman & Managing Director

2) Shri V Kannan, Chairman & Managing Director

3) Shri K.R. Shenoy, Executive Director

4) Shri B.S. Rama Rao, Executive Director

b) There has been no transaction with the relatives of the Key Management Personnel during the year.

ix) Leases (AS -19)

a) Lease rent paid for operating leases are recognized as an expense in the Profit & Loss Account in the year to which it relates.

b) Future Lease Rent Payable for operating lease :

c) Future lease rents and escalation in the rent are determined on the basis of agreed terms.

d) At the expiry of initial lease term, generally the Bank has an option to extend the lease for a further pre-determined period.

e) The Bank does not have any financial lease.

b) Pursuant to Reserve Bank of India''s (RBI''s) Circular No. DBOD No.BP.BC.77/21.04.018/2013-14 dated 20th December 2013, the Bank has created Deferred Tax Liability on the Special Reserve under section 36(1)(viii) of the Income-tax Act, 1961. As required by the said RBI Circular, the expenditure, amounting to Rs. 157. 62 crores due to the creation of DTL on Special Reserve as at March 31, 2013, not previously charged to the Profit and Loss Account, has now been adjusted directly from the accumulated profits as on 31.03.2013. Had this amount been charged to the Profit & Loss Account in accordance with the generally accepted accounting principles in India, the amount of Profit for year would have been lower to that extent.

ix) In the opinion of the Management, there is no material impairment of any of the Fixed Assets of the Bank as per Accounting Standard 28 - Impairment of Assets.

4. In Dec''13 the Bank has issued 5,89,34,464 equity shares of Rs.10 each to Government of India at a premium of Rs.32.42 per share on preferential basis. In the month of Feb''14, the Bank has converted the Perpetual Non- Cumulative Preference Share Capital ofRs.1200 crores held by Government of India into equity share capital at a premium of Rs. 29.39 Per share with face value ofRs.10/- each.

5. During the financial year 2013-14, bank has been subjected to a penalty of Rs.2 crore by RBI vide letter no. 735/ 27.01002/2013-14 dated 12th July 2013 issued under Section 46(4)(i) of the Banking Regulation Act 1949 for violation of its provision which was paid to RBI on 19.07.2013. Also penalty of Rs.2.26 crores was levied by RBI on account of shortage of cash in one of its currency chests which was paid on 11.03.2014.

6. The Bank noted excess interest charged in certain advance accounts. On prudential basis, the interest income has been reduced by Rs.7.00 crore.

7. The Bank has drawn down a sum of Rs.Nil/- (Previous year Rs.5025/-) from General Reserve on account of payment of Lapsed Demand Drafts which were taken to general reserve earlier as per RBI approval.

8. Bank is not having adequate information in respect of Suppliers/Service providers covered under Micro, Small and Medium Enterprises Development Act, 2006. In view of this, information required to be disclosed u/s 22 of the said Act is not given.

9. Previous year''s figures have been re-grouped / re-classified / re-cast wherever necessary to conform to current year''s classification.


Mar 31, 2013

1. Reconciliation of entries outstanding ason 31.03.2013 in the inter-branch and other accounts has been drawn. Matching of entries outstanding in inter-branch and inter-bank accounts including balances in drafts accounts, suspense accounts, branch adjustment accounts, clearing transactions, funds transfers, telegraphic transfers, balances pertaining to dividends / interest / refund orders paid / payable accounts, advances paid for acquisition of assets, etc. is complete upto 31.12.2012 and is under progress for the remaining period. In the opinion ofthe Bank, consequential effect of the above on the revenue / assets / liabilities is not material.

2. In respect of certain premises acquired by the Bank having written down value ofRs.6.03 crore, (previous yearRs.6.70 crore) documentation / registration are yet to be completed pending legal or other formalities.

3. In the case of un-audited branches, the returns / classification of advances as reported by the concerned branches have been adopted.

4. Claims pending and to be preferred with ECGCI Limited amounting to f 17.36 crore (previous yearRs.14.05 crore) have been considered as realisable for the purpose of computing provisions.

5. No provision other than those made, have been considered necessary by the Management in respect of disputed tax liabilities in view of the judgements in favour of the Bank. Further, certain deductions have been considered while working out tax provisions in respect of some claims under Income Tax Act based on the legal opinions obtained.

i) Disclosures on risk exposure in derivatives a) Qualitative Disclosure

Bank has put in place a comprehensive derivative policy for undertaking derivative transactions for hedging, trading and servicing customers'' purpose as per RBI guidelines duly approved by the Board. The policy lays down the type, scope and usage with appropriate limits for derivative transactions. From the view point of operational efficiency and risk oversight the Derivatives desk is segregated into Front Office, Mid Office and Back Office with clear segregation of portfolio. The derivative hedges are continuously monitored for effective performance as per laid down policy and corrective measures are taken for mitigating the risk.

a) In respect of the advances restructured under the Prudential Guidelines of the Reserve Bank of India dated 27th----- August 2008 and the subsequent clarifications / guidelines issued from time to time in this respect, the Bank has provided a sum ofRs.128.10 Crores (previous yearRs.46.74 Crores) as diminution in the fair value of advances on account of such restructuring which in the Bank''s opinion is considered adequate in view of revision in rate of interest on such restructured advances. The full implementation of the conditions laid down for restructuring in the said Circular are being complied with.

PRUDENTIAL EXPOSURE CEILING: 20%; [f 1341.56 crores]

Note: The exposure falls under "Infrastructure Category”, where permissible exposure level is 20% of Capital Funds of the Bank, under PE Guidelines of RBI. Out of the Balance Outstanding ofRs.1291.95 crore,Rs.11.80 crore pertains to the monthly interest debited for the month of March 2013. Out of total approved loan off 1465.00 crores, f 55.00 crore sanctioned on 02.03.2013 vide HLCC-192/2013 has not been availed as on 31.03.2013. The Exposure excluding interest off 11.80 crore debited for March 2013 works out toRs.1335.15 crore. Hence, the exposure has not exceeded the permissible level.

ii) The Bank has not made any financing for margin trading and also not securitised any assets during the year.

iii) Overseas Assets, NPAs and Revenue : NIL

iv) Provision coverage ratio (PCR): Coverage ratio as of 31.03.2013 is 68.31% (previous year 62.40%) as per RBI guidelines. However, the Bank has achieved the PCR as envisaged in RBI circular DBOD. No.BP.BC.87-21.048/2010-11 dt.21.04.2011.

v) Unsecured advances: The Bank has no unsecured advances wherein intangible securities have been taken as collateral securities.

During the year 2012 - 2013, the bank had issued 168 letters of comfort amounting to USD 7,50,23,952.53 covering import of goods into India. These letters of comfort have been issued after due assessment of its financial impact on the bank and with the approval of the competent authority. As on the date of the balance sheet 61 letters of comfort amounting to USD 2,41,62,535 (approximatelyRs.131.17 crores @ USD 1 = f 54.2850) are outstanding which, in the opinion ofthe management, will not have any significant impact on the bank''s financial position.

6. Compliance with information to be disclosed under Accounting Standards notified by the Ministry of Corporate Affairs under Companies(Accounting Standards) Rules, 2006:

i) There were no material prior period income/ expenditure required to be disclosed as per AS -5.

ii) In terms of accounting policy No.9 ofthe Bank, some items are recognised on cash basis. However, the management is of the view that since the amount involved is not material, it does not require any disclosure under AS-9.

iii) The Bank is revaluing foreign currency transactions consistently at the weekly average rate of the last week of the preceding month, prescribed by FEDAI, instead of the rate at the date of the transaction as per AS 11. The management is of the view that there is no material impact on the accounts for the year.

During the year 2010-11, the Reserve Bank of India has issued a circular no.DBOD.BP.BC.80/21.04.018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment, dated 9th February, 2011. In accordance with the provisions ofthe said Circular, Rs. 596 crores identified in the year 2010-11 is being amortised over a period of five years. Accordingly, Rs. 119 crores (representing one-fifth of Rs. 596 crores) has been charged to the Profit and Loss Account. In terms of the requirements of the aforesaid RBI circular, the balance amount carried forward is Rs. 238 crores.

The above has resulted in decrease in the profit of the bank for the current year by Rs. 119 crores and corresponding increase in accumulated profits ofthe Bank by Rs. 238 crores with corresponding increase in the Current Assets ofthe Bank by the same amount.

# For the purpose of segment reporting in terms of AS-17 and as prescribed in RBI guidelines, the business of the Bank has been classified into four segments i.e., a) Treasury Operations (b) Corporate/Wholesale Banking, (c) Retail Banking and (d)Other Banking Operations

# Since the Bank does not have any Overseas branch, reporting under geographic segment is not applicable.

# Expenses wherever directly related to segments have been accordingly allocated to segments and wherever not directly related have been allocated on the basis of segment revenue.

# Assets/liabilities wherever directly related to segments have been accordingly allocated to segments and wherever not directly related have been allocated on the basis of segment revenue/segments assets ratio.

The above information has been compiled based on data available at Head Office.

vii) The Bank has identified the following as related party as per AS-18 on Related Party Disclosures

a) Key Management Personnel :

1) Shri H.S. Upendra Kamath, Chairman & Managing Director

2) Smt Shubhalakshmi Panse, Executive Director

3) Shri K.R. Shenoy, Executive Director

ix) Accounting for Taxes on Income (AS-22)

The Bank has accounted for Taxes on Income in compliance with Accounting Standard 22 - "Accounting for Taxes on Income” issued by the ICAI. Accordingly, deferred tax assets and liabilities are recognised.

7. During the financial year2012-13, bank has not been subjected to any penalty for contravention or non- compliance with any requirement of the Banking Regulation Act, 1949, or any rules or conditions specified by the Reserve Bank of India in accordance with the said Act, except one instance during the financial year a penalty ofRs.50,000.00 was paid to RBI for SGL bouncing on 09.11.2012 on account of lending securities under Non-Standard repo.

8. Sale of Securities under HTM Category:

The Bank has sold and transferred securities to or from HTM category exceeding 5% of the book value of investment held in HTM category at the beginning of the year. As per the prudential guidelines of RBI, the 5% threshold referred above did not include onetime transfer of securities to/from HTM category and sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI.

The total Book Value and the Market Value of SLR securities held under HTM category as on 31.03.2013 is Rs. 20,199.27 Cr and Rs. 19,878.86 Cr respectively. The excess of book value over market value of SLR securities under HTM category forwhich provision is not made is Rs. 320.41 Cr as on Mar 31, 2013.

All SLR securities held under HTM have been valued based on the FIMMDA published prices as on Mar 31, 2013.

9. The bank has drawn down a sum of Rs. 5025/- (Previous year Rs. 249752/-) from General Reserve on account of payment of Lapsed Demand Drafts which were taken to general reserve earlier as per RBI approval.

10. Bank is not having adequate information in respect of Suppliers/Service providers covered under Micro, Small and- Medium Enterprises Development Act, 2006. In view of this, information required to be disclosed u/s 22 of the said Act is not given.

11. Previous year''s figures have been re-grouped / re-classified / re-cast wherever necessary to conform to current year''s classification.


Mar 31, 2012

1. Reconciliation of entries outstanding as on 31.03.2012 in the inter-branch and other accounts has been drawn. Matching of entries outstanding in inter-branch and inter-bank accounts including balances in drafts accounts, suspense accounts, branch adjustment accounts, clearing transactions, funds transfers, telegraphic transfers, balances pertaining to dividends / interest/ refund orders paid / payable accounts, advances paid for acquisition of assets, etc. is complete upto 31.12.2011 and is under progress for the remaining period. In the opinion of the Bank, consequential effect of the above on the revenue / assets / liabilities is not material.

2. In respect of certain premises acquired by the Bank having written down value of Rs 6.70 crore, (previous year Rs 7.44 crore) documentation / registration are yet to be completed pending legal or other formalities.

3. In the case of un-audited branches, the returns / classification of advances as reported by the concerned branches have been adopted.

4. Claims pending and to be preferred with ECGCI Limited amounting to Rs 14.05 crore (previous year Rs 53.78 crore) have been considered as realisable for the purpose of computing provisions.

5. No provision other than those made, have been considered necessary by the Management in respect of disputed tax liabilities in view of the judgements in favour of the Bank. Further, certain deductions have been considered while working out tax provisions in respect of some claims under Income Tax Act based on the legal opinions obtained.

Note: (1) *Total under column 3 should tally with the total of Investments included under the following categories in Schedule 8 to the balance sheet:

a. Shares

b. Debentures & Bonds

c. Subsidiaries/joint ventures

d. Others

(2) Amounts reported under columns 4, 5, 6 and 7 above may not be mutually exclusive.

** Includes the investment under RIDF of f 2477.70 Cr.

Note: (1) *Total under column 3 should tally with the total of Investments included under the following categories in Schedule 8 to the balance sheet:

a. Shares

b. Debentures & Bonds

c. Subsidiaries/joint ventures

d. Others

(2) Amounts reported under columns 4, 5, 6 and 7 above may not be mutually exclusive.

** Includes the investment under RIDF off 2141.01 Cr.

1) Interest Rate Swaps were undertaken for the purpose of hedging interest rate risk on assets/liabilities and for trading purpose.

2. The terms of swaps are to receive fixed interest rate against floating interest rate or vice versa.

3. The counterparties for the swaps are banks and the exposure with each bank is within the approved credit exposure limits.

i) Disclosures on risk exposure in derivatives a) Qualitative Disclosure

Bank has put in place a comprehensive derivative policy for undertaking derivative transactions for hedging, trading and servicing customers' purpose as per RBI guidelines duly approved by the Board. The policy lays down the type, scope and usage with appropriate limits for derivative transactions. From the view point of operational efficiency and risk oversight the Derivatives desk is segregated into Front Office, Mid Office and Back Office with clear segregation of portfolio. The derivative hedges are continuously monitored for effective performance as per laid down policy and corrective measures are taken for mitigating the risk.

a) In respect of the advances restructured under the Prudential Guidelines of the Reserve Bank of India dated 27th August 2008 and the subsequent clarifications / guidelines issued from time to time in this respect, the Bank has provided a sum of Rs 46.74 Crores (previous year Rs 7.31 Crores) as diminution in the fair value of advances on account of such restructuring which in the Bank's opinion is considered adequate in view of revision in rate of interest on such restructured advances. The full implementation of the conditions laid down for restructuring in the said Circular are being complied with.

Assets and Liabilities are classified as per the guidelines issued by the Reserve Bank of India, compiled by the management and relied upon by the auditors.

* Figures are broadly net of provision ** Borrowings in India

The net funded exposure of the Bank in respect of foreign exchange transactions with each country is within 1% of the total assets of the Bank and hence no provision is required to be made as per the Reserve Bank of India Circular DBOD. BP.BC.71/21.04.103/2002-03 dated 19.02.2003 read with DBOD.BP.BC.96/21.04.103/2003-04 dated 17.06.2004.

PRUDENTIAL EXPOSURE CEILING: 15% 5% [subject to compliance of Conditions required under "Exceptional circumstances"]; [Rs 939.50 Crores 313.17 crores; i.e., Rs 1252.67 crores]

The Board of Directors has accorded approval under the guidelines on "Prudential Exposure Norms", upon compliance of conditions relating to "Exceptional Circumstances".

Note: Out of total limit approved of Rs 1260.00 crores, some of the term loans to KPTCL are approved for laying new transmission lines, falling under "Infrastructure Category", where permissible exposure level is 20% of Capital Funds of the Bank, under PE Guidelines of RBI. However, as, not all the exposure to KPTCL is eligible to be classified under "Infrastructure Category", the same are reported as the guidelines of RBI on disclosure requirements

ii) The Bank has not made any financing for margin trading and also not securitised any assets during the year.

iii) Provision coverage ratio: Coverage ratio as of 31.03.2012 is 62.40% (previous year 63.69%) as per RBI guidelines. However, the Bank has achieved the PCR as envisaged in RBI circular DBOD. No.BP.BC.87-21.048/2010-11 dt.21.04.2011.

iv) Unsecured advances : The Bank has no unsecured advances wherein intangible securities have been taken as collateral securities.

During the year 2011 - 2012, the bank had issued 139 letters of comfort amounting to USD 91,527,882.65 covering import of goods into India. These letters of comfort have been issued after due assessment of its financial impact on the bank and with the approval of the competent authority. As on the date of the balance sheet 74 letters of comfort amounting to USD 51.02 million (approximately Rs 259.56 crores @ USD 1 = Rs 50.875) are outstanding which, in the opinion of the management, will not have any significant impact on the bank's financial position.

6. Compliance with information to be disclosed under Accounting Standards notified by the Ministry of Corporate Affairs under Companies(Accounting Standards) Rules, 2006:

i) There were no material prior period income/ expenditure required to be disclosed as per AS -5.

ii) In terms of accounting policy No.9 of the Bank, some items are recognised on cash basis. However, the management is of the view that since the amount involved is not material, it does not require any disclosure under AS-9.

iii) The Bank is revaluing foreign currency transactions consistently at the weekly average rate of the last week of the preceding month, prescribed by FEDAI, instead of the rate at the date of the transaction as per AS 11. The management is of the view that there is no material impact on the accounts for the year.

iv) The following information is disclosed under AS-15.

During the year 2010-11, the Reserve Bank of India has issued a circular no.DBOD.BP.BC.80/21.04.018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment, dated 9th February, 2011. In accordance with the provisions of the said Circular, Rs.596 crores identified in the year 2010-11 is being amortised over a period of five years. Accordingly, Rs 119 crores (representing one-fifth of Rs 596 crores) has been charged to the Profit and Loss Account. In terms of the requirements of the aforesaid RBI circular, the balance amount carried forward is Rs 357 crores.

The above has resulted in decrease in the profit of the bank for the current year by Rs 119 crores and corresponding increase in accumulated profits of the Bank by Rs 357 crores with corresponding increase in the Current Assets of the Bank by the same amount.

# For the purpose of segment reporting in terms of AS-17 and as prescribed in RBI guidelines, the business of the Bank has been classified into four segments i.e., a) Treasury Operations (b) Corporate/Wholesale Banking, (c) Retail Banking and (d)Other Banking Operations

# Since the Bank does not have any Overseas branch, reporting under geographic segment is not applicable.

# Expenses wherever directly related to segments have been accordingly allocated to segments and wherever not directly related have been allocated on the basis of segment revenue.

# Assets/liabilities wherever directly related to segments have been accordingly allocated to segments and wherever not directly related have been allocated on the basis of segment revenue/segments assets ratio. The above information has been compiled based on data available at Head Office.

vii) The Bank has identified the following as related party as per AS-18 on Related Party

a) Key Management Personnel :

1) Shri H.S. Upendra Kamath, Chairman & Managing Director

2) Smt Shubhalakshmi Panse, Executive Director

viii) Earning Per Share(AS-20)

The Bank reports basic earnings per equity share in accordance with Accounting Standard 20 on "Earnings per Share". Basic earnings per share for the period is computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the year.

ix) Accounting for Taxes on Income (AS-22)

The Bank has accounted for Taxes on Income in compliance with Accounting Standard 22 - "Accounting for Taxes on Income" issued by the ICAI. Accordingly, deferred tax assets and liabilities are recognised.

x) In the opinion of the Management, there is no material impairment of any of the Fixed Assets of the Bank as per Accounting Standard 28 - Impairment of Assets.

7. Reserve Bank of India has not imposed any penalty during the year.

Note: Floating provision has been utilised for reckoning the provision required in respect of substandard advances.

8. The bank has drawn down a sum of Rs 0.02 Crore from General Reserve on account of Lapsed Demand Drafts

9. Bank is not having adequate information in respect of Suppliers/Service providers covered under Micro, Small Medium Enterprises Development Act, 2006. In view of this, information required to be disclosed u/s 22 of the said Act is not given.

10. Previous year's figures have been re-grouped / re-classified / re-cast wherever necessary to conform to current year's classification.


Mar 31, 2011

1. Reconciliation of entries outstanding as on 31.03.2011 in the inter-branch and other accounts has been drawn. Matching of entries outstanding in inter-branch and inter-bank accounts including balances with foreign banks and Reserve Bank of India, drafts accounts, suspense accounts, branch adjustment accounts, clearing transactions, funds transfers, telegraphic transfers, balances pertaining to dividends / interest / refund orders paid / payable accounts, advances paid for acquisition of assets, etc. is complete upto 31.12.2010 and is under progress for the remaining period. In the opinion of the Bank, consequential effect of the above on the revenue / assets / liabilities is not material.

2. In respect of certain premises acquired by the Bank having written down value of Rs. 7.44 crore, (previous year Rs. 8.27 crore) documentation / registration are yet to be completed pending legal or other formalities.

3. In the case of un-audited branches, the returns / classification of advances as reported by the concerned branches have been adopted.

4. Claims pending and to be preferred with ECGCI Limited amounting to Rs. 53.78 crore (previous year Rs. 4.14 crore) have been considered as realisable for the purpose of computing provisions.

5. No provision has been considered necessary by the Management in respect of disputed tax liabilities in view of the judgements in favour of the Bank. Further, certain deductions have been considered while working out tax provisions in respect of some claims under Income Tax Act based on the legal opinions obtained.

vii) Disclosures on risk exposure in derivatives

a) Qualitative Disclosure

Bank has put in place a comprehensive derivative policy for undertaking derivative transactions for hedging, trading and servicing customers purpose as per RBI guidelines duly approved by the Board. The policy lays down the type, scope and usage with appropriate limits for derivative transactions. From the view point of operational efficiency and risk oversight the Derivatives desk is segregated into Front Office, Mid Office and Back Office with clear segregation of portfolio. The derivative hedges are continuously monitored for effective performance as per laid down policy and corrective measures are taken for mitigating the risk.

d) In respect of the advances restructured under the Prudential Guidelines of the Reserve Bank of India dated 27th August 2008 and the subsequent clarifications / guidelines issued from time to time in this respect, the Bank ha; provided a sum of Rs. 7.31 crore (previous year Rs. 13.65 crore) as diminution in the fair value of advances on account o such restructuring which in the Banks opinion is considered adequate in view of upward revision in rate of interest oi such restructured advances. The full implementation of the conditions laid down for restructuring in the said Circula are being complied with.

xiii) The Bank has not made any financing for margin trading and also not securitised any assets during the year.

xvii) Overseas Assets, NPAs and Revenue : NIL

xix) Provision coverage ratio: Coverage ratio as of 31.03.02011 is 63.69% (previous year 64.24%) as per RBI guidelines. However, the Bank has achieved the PCR as envisaged in RBI circular DBOD. No.BP.BC.87-21.048/2010-11 dt.21.04.2011

xx) Unsecured advances : The Bank has no unsecured advances wherein intangible securities have been taken as collateral securities.

During the year 2010 - 2011, the bank had issued 74 letters of comfort amounting to USD 2,220,619,739.72 covering import of goods into india. These letters of comfort have been issued after due assessment of its financial impact on the bank and with the approval of the competent authority. As on the date of the balance sheet 34 letters of comfort amounting to USD 24.06 million (approximately Rs. 108.39 crore @ USD 1 = Rs. 45.01) are outstanding which, in the opinion of the management, will not have any significant impact on the banks financial position

6. Compliance with Accounting Standards

i) There were no material prior period income/ expenditure required to be disclosed as per "AS -5".

ii) In terms of accounting policy No.9 of the bank, some items are recognised on cash basis. However, the management is of the view that since the amount involved is not material, it does not require any disclosure under "AS-9".

iii) The Bank is revaluing foreign currency transactions consistently at the weekly average rate of the last week of the preceding month, prescribed by FEDAI, instead of the rate at the date of the transaction as per AS 11. The management is of the view that there is no material impact on the accounts for the year.

iv) The following information is disclosed in terms of Accounting Standards notified by Ministry of Corporate Affairs under the Companies (Accounting Standards) Rules, 2006.

During the year, the Bank reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of which in respect of 5559 number of employees in service, the Bank has incurred a liability of Rs. 473 crore.

Further, during the year, the limit of gratuity payable to the employees of the banks was also enhanced pursuant to the amendment to the Payment of Gratuity Act, 1972. As a result, the gratuity liability of the Bank has increased by Rs. 123 crore.

In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs. 596 crore is required to be charged to the Profit and Loss Account.

However, the Reserve Bank of India has issued a circular no.DBOD.BP.BC.80/21.04.018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory

Treatment, dated 9th February, 2011. In accordance with the provisions of the said Circular, the Bank would amortize the amount of Rs. 596 over a period of five years. Accordingly, Rs. 119 crore (representing one-fifth of Rs. 596 crore) has been charged to the Profit and Loss Account. In terms of the requirements of the aforesaid RBI circular, the balance amount carried forward ie., Rs.477 crore include any employees relating to separated / retired employees.

Had such a circular not been issued by RBI, the profit of the Bank would have been lower by Rs.477 crore pursuant to application of the requirement of AS-15

vii) The Bank has identified the following as related party as per AS-18 on Related Party Disclosures :

a) Key Management Personnel :

1) Shri Albert Tauro, Chairman & Managing Director

2) Smt Shubhalakshmi Panse, Executive Director

viii) Earning Per Share

The Bank reports basic earnings per equity share in accordance with Accounting Standard 20 on "Earnings per Share". Basic earnings per share for the period is computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the year.

ix) Accounting for Taxes on Income

The Bank has accounted for Taxes on Income in compliance with Accounting Standard 22 - "Accounting for Taxes on Income" issued by the ICAI. Accordingly, deferred tax assets and liabilities are recognised.

x) In the opinion of the Management, there is no material impairment of any of the Fixed Assets of the Bank as per Accounting Standard 28 - Impairment of Assets.

7. Reserve Bank of India has not imposed any penalty during the year

8. The bank has draw down a sum of Rs. 0.003 crore from General Reserve on account of Lapsed Demand Drafts.

9. Bank is not having adequate information in respect of Suppliers/Service providers covered under Micro, Small Medium Enterprises Development Act, 2006. In view of this, information required to be disclosed u/s 22 of the said Act is not given.

10. Previous years figures have been re-grouped / re-classified / re-cast wherever necessary to conform to current years classification.

 
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