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Notes to Accounts of City Union Bank Ltd.

Mar 31, 2017

1. Sale and Transfer to / from HTM category

During the year ended 31st March, 2017, the Bank has sold Government Securities from Held to Maturity category exceeding 5% of the book value of investments held in HTM category at the beginning of the year. The profit booked out of sale of HTM securities has been transferred to Capital Reserve. The market value of investments under HTM category as on 31st March, 2017 was Rs.6,006.45 crore and as the market value was higher than the book value, the provision thereof is not required to be made.

2. Disclosures on risk exposure in derivatives

2.1 Qualitative Disclosure :

A. Structure and Organization for Management of risk in derivatives trading

Operations in the Treasury are segregated into three functional areas, namely Front office, Mid-office and Back-office, equipped with necessary infrastructure and trained officers, whose responsibilities are well defined. The Bank enters into plain vanilla Forward Contracts only to backup / cover customer transactions as also for proprietary trading purpose.

The Integrated Treasury Policy of the Bank clearly lays down the scope of usages, approval process as also the limits like the Open Position Limits, Deal Size Limits and Stop Loss Limits for trading.

The Mid Office is handled by Risk Management Department. Daily report is generated by Risk Management Department for appraisal of the risk profile to the Senior Management for Asset and Liability Management.

B. Scope and nature of Risk Measurement, Risk Reporting and Risk Monitoring Systems

Outstanding forward contracts are monitored by Risk Management Department against the limits (Counterparty, Stop Loss, Open Position, VaR, Aggregate Gap) fixed by the Board and approved by RBI (wherever applicable) and exceedings, if any, are reported to the Board for ratification.

C. Policies for hedging and / or mitigating and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants

The Bank''s policy lays down that the transactions with the corporate clients are to be undertaken only after the inherent credit exposures are quantified and approved for customer appropriateness and suitability and necessary documents like ISDA agreements etc., are duly executed. The Bank adopts Current Exposure Method for monitoring the credit exposures.

While sanctioning the limits, the competent authority stipulates condition of obtaining collaterals / margin as deemed appropriate. The derivative limits are reviewed periodically along with other credit limits.

D. Accounting policy for recording the hedge and non-hedge transactions, recognition of Income premiums and discounts, valuation of outstanding contracts, provisioning, collateral and credit risk mitigation

Valuation of outstanding Forward Contracts are done as per FEDAI guidelines in force. Marked to Market profit & loss are taken to Profit & Loss account. MTM profit & loss calculated as per Current Exposure Method are taken into account while sanctioning forward contract limits to customers and collaterals / cash margins are prescribed for credit and market risks.

The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other Banks. The credit exposure on account of forward contracts is also considered while arriving at the total exposure of each customer / borrower. The Bank also deals with other Banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under Current Exposure Method. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

3. Particulars of Accounts Restructured As per Annexure I.

Disclosures on the scheme for sustainable Structuring of Stressed Assets (S4A), as at 31st March, 2017

There were no accounts during the year where S4A has been applied.

Disclosures on Flexible Structuring of Existing Loans

There were no borrowers taken up for flexibility structuring during the year.

Disclosures on Strategic Debt Restructuring Sheme (accounts which are currently under the stand-still period)

There were no accounts during the year where SDR has been invoked.

Disclosures on change in Ownership outside SDR scheme (accounts which are currently under the stand-still period)

There were no accounts during the year where Bank has decided to effect change in ownership.

Disclosures on change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period)

There were no project loan accounts during the year where Bank has decided to effect change in ownership.

4. Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank

Single Borrower Limit / Group Borrower Limit has not been exceeded during the year.

5. Unsecured Advances - Advances secured by intangible securities such as Rights, licenses, authorizations, etc. - Nil

6. Penalties imposed by RBI

During the year, RBI has imposed penalty of Rs.69,000/- on discrepancies detected during Soiled Notes Remittance.

7. Disclosures as per Accounting Standards

The Bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI''s guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of Income / Expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

As mentioned in Accounting Policy (2) of Income / Expenditure of certain items recognized on cash basis.

iii) Employee Benefits-AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank and its employees contribute a defined sum every month to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

The summarized position of the employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard-15 (Revised) is as under - Leave Encashment:

vi). 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 rents and escalation in the rent are determined on the basis of agreed terms.

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

d) The Bank does not have any financial lease.

viii) Consolidated Financial Statements (CFS)-AS 21

The Bank has no subsidiaries.

x) Accounting for Investments in Associates in CFS - AS 23

The Bank has no Associates.

xi) Discontinuing Operations - AS 24

The Bank has not discontinued any operations.

xii) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xiii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 -"Impairment of Assets" applies.

xiv) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA''s and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

8. Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year.

9. Letters of Comfort

The Bank has not issued any letters of comfort to other Banks / Branches during the year. However, letter of undertaking aggregating to Rs.163.45 crore was outstanding as on 31st March, 2017. In the Bank''s assessment, no financial impact is likely to arise.

10. Provisioning Coverage Ratio (PCR)

The Provisioning Coverage Ratio (PCR) of the Bank as on 31st March, 2017 is 61%. (PY. 60%)

11. Bancassurance Business

Income from Bancassurance Business for the financial year 2016-17 is Rs. 6.24 cr. (PY. Rs.4.42 cr)

12. Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs. (Domestic / Overseas)

13. Unamortized Pension and Gratuity Liabilities - Nil.

14. Disclosures relating to Securitization

The outstanding amount of securitized assets as per books of the SPVs sponsored by the Bank and total amount of exposures retained by the bank as on 31stMarch, 2017 - Nil.

15. Unhedged Foreign Currency Exposure

a) In terms of RBI circular No. DBOD. NO. BP. BC. 85/21.06.200/2013-14 dated 15th January, 2014 with regard to Capital and Provisioning Requirements for exposures to entities with Unhedged Foreign Currency Exposure, the Bank has a policy approved by the Board of Directors.

b) The provision required for UFC exposure as on 31st March, 2017 is Rs.0.94 crore only against which a provision of Rs.1.96 crore has already been made.

c) The incremental capital requirement for the unhedged forex exposure as on 31st March, 2017 has been determined based on the additional risk weight value of Rs.0.37 crore for the UFC exposure.

16. Liquidity Coverage Ratio

17. Credit Default Swaps

The Bank has not entered into Credit Default Swaps during the Current Financial Year.

18. Intra-Group Exposures

Nil

19. Quality Disclosure around LCR

Liquidity Coverage Ratio has been prescribed by RBI based on LCR Standards published by BCBS. The LCR promotes short term resilience of Banks to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Assets (HQLAs) to survive an acute stress scenario in the immediate 30 days period.

LCR is defined as

Stock of High Quality Liquid Assets(HQLA) > 100 % Total net cash outflows over the next 30 calendar days

The LCR standard aims to ensure that a Bank maintains an adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for the next 30 days period under a significantly severe liquidity stress scenario specified by RBI w.e.f. 1stJanuary, 2015.

While the BCBS specifies a ratio of minimum 100% for all Banks, RBI has made a graduated increase from 60% to attain 100% by 2019 as given in the schedule below:

Composition of High Quality Liquid Assets (HQLA) :

- Cash in hand.

- Excess CRR balance as on that particular day.

- Excess Government Securities in excess of minimum SLR requirement.

- Government Securities within the mandatory SLR requirement to the extent allowed by RBI under MSF (Presently to the extent of 2% of NDTL as allowed for MSF).

- Facility to avail liquidity for liquidity coverage ratio at 5% of NDTL.

- Repo Borrowings should be deducted.

- AAA rated bonds and AA- & above bonds and adding marketable securities representing claims guaranteed by sovereigns having risk weights higher than 20% but not higher than 50%.

- Common equity shares not issued by the Bank and included in NSE CNX Nifty and / or S & P BSE Sensex indices.

As regards the concentration of funding sources, the term deposits from public is the major source for the Bank.

The currency mismatch in respect of Foreign Currency Assets and Liabilities is very minimal.

20. Income Tax

Provision for Income Tax in the current year is made as per Income Computation Disclosures Standards (ICDS) after considering various judicial decisions on certain disputed issues.

In the opinion of the management, no provision is considered necessary for earlier years towards disputed tax liability since for the tax claim of Rs.525 cr (under Appeal) (previous year Rs.409 crore), the bank has to its support, appellate orders decided in its favour on similar issues.

21. Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31st March, 2017. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

22. Employees Stock Option

The Bank has allotted 28,73,602 (PY. 16,23,479) equity shares during the year to its eligible employees who have exercised their options granted under ESOP of the Bank.

23. In accordance with the RBI circular DBOD. No. BPBC.2/21.06.201/2013-14 dated 1st July, 2013, Banks are required to make half yearly Pillar III disclosures under Basel III capital requirements with effect from 30thSeptember, 2013. The disclosures have been made available on the Bank''s web site.

24. There are no dues to Micro and Small Enterprises calling for disclosure as at 31st March, 2017 as per the records available.

25. Implementation of Ind AS:

The Ministry of Corporate Affairs (MCA) has notified Accounting Standard (Ind AS) as issued by The Institute of Chartered Accountants of India (ICAI) for implementation beginning from 1st April, 2018 onwards with comparative figures of 2017.

Accordingly, the Ind AS quarterly financials of FY.2017-18 should be published with comparison from June 2018 onwards.

As advised by RBI, the Bank has submitted proforma Ind AS financial statements to RBI for the half year ended 30th September, 2016 in prescribed format.

26. Priority Sector Lending Certificates (PSLC)

During the year, PSLC purchased (SF / MF) Rs.650 cr and PSLC sold Rs.3,845 cr (Micro Enterprises Rs.1,000 cr and General Rs.2,845 cr).

27. Previous year''s figures have been regrouped wherever necessary to conform to the current year classification.


Mar 31, 2015

1 CONTINGENT LIABILITIES

I. Claims against Bank not acknowledged as debts 3,58,95 2,97,92

II. Liability for partly paid Investments Nil Nil

III. Liability on account of outstanding Forward Exchange Contracts 5892,14,70 3661,48,27

IV. Guarantees given on behalf of Constituents

- In India 1196,55,24 968,53,55

- Outside India 29,73,96 8,77,92

V. Acceptances,endorsements and other obligations 407,75,32 470,93,36

VI. Other items for which the Bank is contingently liable 6,73,79 42,40

Total 7536,51,96 5113,13,42

2. Sale and Transfer to / from HTM category

The value of sales and transfer of securities from HTM category after considering the exemptions allowed by RBI, doesn''t exceed 5 percent of the book value of investments held in HTM category at the beginning of the year. Hence no disclosure is required.

3. Disclosures on risk exposure in derivatives

Qualitative Disclosure:

A. Structure and Organisation for Management of risk in derivatives trading

Operations in the Treasury are segregated into three functional areas, namely Front office, Mid-office and Back-office, equipped with necessary infrastructure and trained officers, whose responsibilities are well defined. The Bank enters into plain vanilla forward contracts only to backup / cover customer transactions as also for proprietary trading purpose.

The Integrated Treasury policy of the Bank clearly lays down the scope of usages, approval process as also the limits like the open position limits, deal size limits and stop loss limits for trading.

The Mid-Office is handled by Risk Management Department. Daily report is generated by Risk Management department for appraisal of the risk profile to the senior management for Asset and Liability Management.

B. Scope and nature of risk measurement, risk reporting and risk monitoring systems

Outstanding forward contracts are monitored by Risk Management Department against the limits (Counterparty, Stop loss, Open Position, VaR, Aggregate Gap) fixed by the Board and approved by RBI (wherever applicable) and exceedings, if any, are reported to the Board for ratification.

C. Policies for hedging and / or mitigating and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants

The Bank''s policy lays down that the transactions with the corporate clients are to be undertaken only after the inherent credit exposures are quantified and approved for customer appropriateness and suitability and necessary documents like ISDA agreements etc. are duly executed. The Bank adopts Current Exposure Method for monitoring the credit exposures.

While sanctioning the limits, the competent authority stipulates condition of obtaining collaterals / margin as deemed appropriate. The derivative limits are reviewed periodically along with other credit limits.

D. Accounting policy for recording the hedge and non-hedge transactions, recognition of Income premiums and discounts, valuation of outstanding contracts, provisioning, collateral and credit risk mitigation

Valuation of outstanding forward contracts are done as per FEDAI guidelines in force. Marked to market profit & loss are taken to Profit & Loss account. MTM profit & loss calculated as per Current Exposure method are taken into account while sanctioning forward contract limits to customers and collaterals / cash margins are prescribed for credit and market risks.

The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other banks. The credit exposure on account of forward contracts is also considered while arriving at the total exposure of each customer / borrower. The Bank also deals with other banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid-office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under current exposure method. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

4. Particulars of Accounts Restructured

As per Annexure I.

5. Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank

Single Borrower Limit / Group Borrower Limit has not been exceeded during the year.

6. Unsecured Advances - Advances secured by intangible securities such as Rights, licences, authorisations, etc. - Nil

7. PENALTIES IMPOSED BY RBI

No penalty was imposed on the bank by the Reserve Bank of India during the year.

8. DISCLOSURES AS PER ACCOUNTING STANDARDS

The Bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI''s guidelines.

i) Prior Period Items - AS 5

For the preparation of these financial results, the Bank has followed the same accounting policies and generally accepted practices adopted for the preparation of audited financial statements for the year ended 31stMarch, 2015, except for accounting of depreciation on fixed assets.

Disclosure regarding Depreciation Policy: In the current year, effective from 1st April, 2014 the Bank has changed the accounting policy of charging depreciation having regard to change in the estimated useful life of the assets, from Written down value method (WDV), to Straight line method (SLM) in respect of all fixed assets .The management believes that the aforesaid changes better reflect the actual use of assets acquired and is in conformity with the Companies Act,2013.

On account of this change in accounting policy, the bank has in the fourth quarter, reversed an amount of Rs. 1088.93 lakhs representing the excess depreciation charge for the period upto 31st March, 2014 and disclosed the same as an exceptional item. As a result of this change, the net profit for the current year and fourth quarter is higher by Rs. 1088.93 lakhs and the basic and diluted earnings per share is higher by Rs. 0.19 &Rs. 0.18 per share.

ii) Revenue Recognition - AS 9

As mentioned in Accounting Policy (2) of Income / Expenditure of certain items recognised on cash basis.

iii) Employee Benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank and its employees contribute a defined sum every month to City Union Bank Employees'' Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post-retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

The summarized position of the employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard 15 (Revised) is as under.

v) Related Party disclosures - AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates / JV - Nil

Key Management Personnel - Dr. N. Kamakodi

(ii) Related Party Transactions:

a) as Remuneration - Rs. 44,15,000/-

b) as Loan availed - Outstanding as on 31st March, 2015 : Rs. 43,15,301/-

ix) Accounting for Investments in Associates in CFS - AS 23

The Bank has no Associates.

x) Discontinuing Operations - AS 24

The Bank has not discontinued any operations.

xi) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 - "Impairment of Assets" applies.

xiii) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA''s and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

9. Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year.

Letters of Comfort issued during the financial year 2014-15 : Nil

10. Provision Coverage Ratio (PCR)

The Provision Coverage Ratio (PCR) of the Bank as on 31st March, 2015 is 57.54%.

Bancassurance Business

Income from Bancassurance Business for the financial year 2014-15 is Rs. 4.24 crore.

Concentration of Deposits, Advances, Exposures and NPAs

Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs. (Domestic / Overseas)

Unamortized Pension and Gratuity Liabilities - Nil.

Disclosures relating to Securitisation

The outstanding amount of securitised assets as per books of the SPVs sponsored by the Bank and total amount of exposures retained by the bank as on 31stMarch, 2015 - Nil.

Credit Default Swaps

The bank has not entered into Credit Default Swaps during the Current Financial Year.

Intra-Group Exposures - Nil

11. Unhedged Foreign Currency Exposure

a) In terms of RBI circular No. DBOD. NO. BP. BC. 85/21.06.200/2013-14 dated 15th January, 2014 with regard to Capital and Provisioning Requirements for exposures to entities with Unhedged Foreign Currency Exposure, the Bank has a policy approved by the Board of Directors.

b) The provision required for UFC exposure as on 31stMarch, 2015 is Rs. 1.13 crore has been made.

c) The incremental capital requirement for the unhedged forex exposure as on 31st March, 2015 has been determined based on the additional risk weight value of Rs. 743.88 lakhs for the UFC exposure.

12. Quality disclosure around LCR

Liquidity Coverage Ratio has been prescribed by RBI based on LCR Standards published by BCBS.The LCR promotes short term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario in the immediate 30 days period.

LCR is defined as :

Stock of High Quality Liquid Assets(HQLA) > 100 %

Total net cash outflows over the next 30 calendar days

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for the next 30 days period under a significantly severe liquidity stress scenario specified by RBI w.e.f 1st January, 2015.

While The BCBS specifies a ratio of minimum 100 % for all banks, RBI has made a graduated increase from 60 % to attain 100 % by 2019 as given in the schedule below :

Composition of High Quality Liquid Assets(HQLA):

* Cash in hand

* Excess CRR balance as on that particular day

* Excess Government Securities in excess of minimum SLR requirement

* Government Securities within the mandatory SLR requirement to the extent allowed by RBI under MSF (presently to the extent of 2% of NDTL as allowed for MSF)

* Facility to avail liquidity for liquidity coverage ratio at 5% of NDTL

* Repo borrowings should be deducted

* AAA rated bonds and AA- & above rated bonds and adding marketable securities representing claims guaranteed by sovereigns having risk weights higher than 20% but not higher than 50%

* Common equity shares not issued by the bank and included in NSE CNX Nifty and / or S & P BSE Sensex indices.

As regards the concentration of funding sources, the term "deposits from public" is the major source for the bank.

The currency mismatch in respect of foreign currency assets and liabilities is very minimal.

13. Income Tax

Provision for income tax in the current year is consistent with earlier years after considering various judicial decisions on certain disputed issues.

No provision is considered necessary for earlier years towards disputed tax liability since for the tax claim of Rs. 323 crore (under Appeal) {previous year - Rs. 249 crore}, the Bank has to its support, appellate orders decided in its favour on similar issues.

14. Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31st March, 2015. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

15. Employees Stock Option

The bank has allotted 71,91,961 shares during the year to its eligible employees who have exercised their options granted under ESOS of the Bank.

16. The Bank issued 4,66,35,576 shares having face value of Rs.1/- each at a premium of Rs. 74.05 as qualified institutions placement and the expenses of Rs. 8.77 crore were amortized against the share premium received.

17. In accordance with the RBI circular DBOD. No. BPBC.2/21.06.201/2013-14 dated 1st July, 2013, banks are required to make half yearly Pillar III disclosures under Basel III capital requirements with effect from 30th September, 2013.The disclosures have been made available on the Bank''s web site.

18. The Bank has earmarked Rs. 6.32 crore towards CSR during the year 2014-15. Out of which Rs. 3.54 crore has been spent (accounted under Schedule - 16 : Operating Expenses - XII Other Expenditure) and the balance will be disbursed based on the works completed.

19. There are no dues to Micro and Small Enterprises calling for disclosure as at 31st March, 2015 as per the records available.

20. Previous year''s figures have been regrouped wherever necessary to conform to the current year classification.


Mar 31, 2014

1.1 Sale and Transfer to / from HTM category:

The value of sales and transfer of securities to / from HTM category doesn''t exceeds 5 percent of the book value of investments held in HTM category at the beginning of the year. Hence no disclosure required.

The Bank in terms of RBI circular DBOD. BP. BC. No. 41/21.04.141/2013-14 dated August 23, 2013 has transferred SLR securities of Rs. 541 crore from AFS to HTM category and booked a loss of Rs. 0.26 crore on the transfer of such securities.

1.2 Disclosures on risk exposure in derivatives:

1.2.1 - Qualitative Disclosure:

A. Structure and Organisation for Management of risk in derivatives trading

Operations in the Treasury are segregated into three functional areas, namely Front office, Mid-office and Back-office, equipped with necessary infrastructure and trained officers, whose responsibilities are well defined. The Bank enters into plain vanilla forward contracts only to backup/cover customer transactions as also for proprietary trading purpose.

The Integrated Treasury policy of the Bank clearly lays down the scope of usages, approval process as also the limits like the open position limits, deal size limits and stop loss limits for trading.

The Mid-Office is handled by Risk Management Department. Daily report is generated by Risk Management department for appraisal of the risk profile to the senior management for Asset and Liability Management.

B. Scope and nature of risk measurement, risk reporting and risk monitoring systems

Outstanding forward contracts are monitored by Risk Management Department against the limits (counterparty, stop loss, Open Position, VaR, Aggregate Gap) fixed by the Board and approved by RBI (wherever applicable) and exceedings, if any, are reported to the Board for ratification.

C. Policies for hedging and/or mitigating and strategies and processes for monitoring the continuing effectiveness of hedges/mitigants

The Bank''s policy lays down that the transactions with the corporate clients are to be undertaken only after the inherent credit exposures are quantified and approved for customer appropriateness and suitability and necessary documents like ISDA agreements etc. are duly executed. The Bank adopts Current Exposure Method for monitoring the credit exposures.

While sanctioning the limits, the competent authority stipulates condition of obtaining collaterals/margin as deemed appropriate. The derivative limits are reviewed periodically along with other credit limits.

D. Accounting policy for recording the hedge and non-hedge transactions, recognition of Income premiums and discounts, valuation of outstanding contracts, provisioning, collateral and credit risk mitigation

Valuation of outstanding forward contracts are done as per FEDAI guidelines in force. Marked to market profit & loss are taken to Profit & Loss account. MTM profit & loss calculated as per Current Exposure method are taken into account while sanctioning forward contract limits to customers and collaterals/cash margins are prescribed for credit and market risks.

The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other banks. The credit exposure on account of forward contracts is also considered while arriving at the total exposure of each customer/borrower. The Bank also deals with other banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid-office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under current exposure method. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

1.3 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank Single Borrower Limit / Group Borrower Limit has not exceeded during the year.

1.4 Unsecured Advances - Advances secured by intangible securities such as Rights, licences, authorisations, etc. - NIL

2. PENALTIES IMPOSED BY RBI

No penalty was imposed on the bank by the Reserve Bank of India during the year.

3. DISCLOSURES AS PER ACCOUNTING STANDARDS

The bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI''s guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of Income / Expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

As mentioned in Accounting Policy (2) of Income / Expenditure of certain items recognised on cash basis.

iii) Employee Benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank and its employees contribute a defined sum every month to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

v) Related Party disclosures - AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates / JV - NIL

Key Management Personnel - Dr. N. Kamakodi

(ii) Related Party Transactions:

a) as Remuneration : Rs. 24,90,000/- b) as Loan availed - Outstanding as on 31.03.2014 : Rs. 43,08,112/-

vii) Consolidated Financial Statements (CFS) - AS 21

The bank has no subsidiaries.

ix) Accounting for Investments in Associates in CFS - AS 23

The bank has no Associates.

x) Discontinuing Operations - AS 24

The bank has not discontinued any operations.

xi) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 - "Impairment of Assets" applies.

xiii) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA''s and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

4.1 Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year, except for providing Deferred Tax Liability on Special Reserve under Section 36 (1) (viii) of the Income tax Act, 1961 as mentioned in para 9 (viii).

4.2 Letters of Comfort issued in during financial year 2013-14 : NIL

4.3 Provision Coverage Ratio (PCR)

The Provision Coverage Ratio (PCR) of the bank as on 31.03.2014 is 61.74%.

4.4 Bancassurance Business

Income from Bancassurance Business for the financial year 2013-14 : Rs. 3.97 crore.

4.5 Concentration of Deposits, Advances, Exposures and NPAs

4.6 Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs. (Domestic / Overseas)

4.7 Unamortized Pension and Gratuity Liabilities – NIL

4.8 Disclosures on remuneration Qualitative Disclosures :

(a) Information relating to the composition and mandate of the Remuneration Committee.

Compensation Committee comprising of three members constituted to oversee the framing, review and implementation of Compensation Policy.

(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

Key Features:

i) Board oversees the design of the compensation package and operations.

ii) Compensation commensurate with the responsibility and accountability.

Objectives:

a) Alignment of compensation with prudent risk taking.

b) Effective Supervisory oversight.

c) Sound Compensation Practices.

(c) Description of the ways in which current and future risks are taken in to account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks.

Compensation related to the types of risks and symmetric with risk outcomes.

(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration.

Qualitative features such as skills, knowledge and abilities are factored in.

(e) A discussion of the bank''s policy on deferral and vesting of variable remuneration and a discussion of the bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

i) ESOP and Reservation in Rights Issue to be the components of share based payment

ii) Ex-gratia payment to be denied only in extreme cases of indiscipline, misuse of trust etc.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms.

Financial incentives, Ex-gratia and ESOPs form part of variable remuneration components.

4.9 Income Tax

Provision for income tax in the current year is consistent with earlier years after considering various judicial decisions on certain disputed issues.

No provision is considered necessary for earlier years towards disputed tax liability since for the tax claim of Rs. 249 crore (under Appeal), the bank has to its support appellate orders decided in its favour on similar issues.

4.10 Inter - Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31.03.2014. Adjustment of outstanding entries in Inter - Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

4.11 Employees Stock Option

The bank has allotted 38,00,405 shares during the year to its eligible employees who have exercised their options granted under ESOS of the Bank.

4.12 Credit Default Swaps

The bank has not entered into Credit Default Swaps during the Current Financial Year.

4.13 In the absence of notification under Sec 441 A of the Companies Act, 1956 on the cess leviable for the purpose of rehabilitation / revival / protection of assets of Sick Industrial Company, no provision has been made for the same during the year.

4.14 There are no dues to Micro and Small Enterprises calling for disclosure as at 31st March 2014 as per the records available.

4.15 Previous year''s figures have been regrouped wherever necessary to conform to the current year classification.


Mar 31, 2013

1.1 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank Single Borrower Limit / Group Borrower Limit has not exceeded during the year.

1.2 Unsecured Advances - Advances secured by intangible securities such as Rights, licences, authorisations, etc. - NIL

2. Penalties imposed by RBI

No penalty was imposed on the bank by the Reserve Bank of India during the year.

3. DISCLOSURES AS PER ACCOUNTING STANDARDS

The bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI''s guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of income / expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

Income / Expenditure of certain items recognised on cash basis (AS 9) are not considered to be material.

iii) Employee Benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank and its employees contribute a defined sum every month to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

v) Related Party disclosures - AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates / JV - NIL

Key Management Personnel - Dr. N. Kamakodi

(ii) Related Party Transactions:

a) as Remuneration : Rs. 24,90,000/- b) as Loan availed - outstanding as on 31.03.2013 : Rs. 41,43,378/-

The bank issued Rights shares during the year at the rate of 1 equity share for every four equity shares held at an issue price of Rs. 20 per equity share including a premium of Rs. 19 per share. The earnings per share (EPS) has been arrived at after considering the right adjustment factor as provided in AS 20. Consequently, the weighted number of shares outstanding prior to the issue has been increased by 0.19 times (right adjustment factor) for this year as well as for the previous year ended 31.03.2012, as per the prescription of the Accounting Standards.

vii) Consolidated Financial Statements (CFS) - AS 21

The bank has no subsidiaries.

viii) Accounting for Taxes on Income - AS 22

The major components of the Deferred Tax Asset and Liabilities as at 31st March 2013 are as follows:

ix) Accounting for Investments in Associates in CFS - AS 23

The bank has no Associates.

x) Discontinuing Operations - AS 24

The bank has not discontinued any operations.

xi) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 - "Impairment of Assets" applies.

xiii) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA''s and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

4.1 Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year.

4.2 Letters of Comfort issued in respect of Subsidiaries during financial year 2012-13 : NIL

4.3 Provision Coverage Ratio (PCR)

The Provision Coverage Ratio (PCR) of the bank as on 31.03.2013 is 70.56%.

4.4 Bancassurance Business

Income from Bancassurance Business for the financial year 2012-13 : Rs. 4.97 crore.

4.5 Concentration of Deposits, Advances, Exposures and NPAs

4.6 Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs.

4.7 Unamortized Pension and Gratuity Liabilities – NIL

4.8 Income Tax

Provision for income tax in the current year has been arrived at consistent with earlier years after considering various judicial decisions on certain disputed issues.

No provision is considered necessary for earlier years towards disputed tax liability since for the tax claim of Rs. 213.30 cr (under Appeal by the Bank), the bank has to its support appellate orders decided in its favour on similar issues.

4.9 Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31.03.2013. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

4.10 Employees Stock Option

The bank has allotted 17,39,237 shares during the year to its eligible employees who have exercised their options granted under ESOS of the Bank.

4.11 Rights Issue

During the year, the bank allotted 10,43,34,379 equity shares to existing shareholders and 2,46,53,593 Equity Shares to employees under "Employee Reservation Portion" at an issue price of Rs. 20/- per equity share (including premium of Rs. 19/-) by way of Rights Issue of which Rs. 10/- per equity share has been received as application money and the balance of Rs. 10/- per equity share is receivable as call money in the first quarter of FY 2013-14.

4.12 In the absence of notification under Sec 441 A of the Companies Act, 1956 on the cess leviable for the purpose of rehabilitation / revival / protection of assets of Sick Industrial Company, no provision has been made for the same during the year.

4.13 There are no dues to Micro and Small Enterprises calling for disclosure as at 31st March 2013 as per the records available.

4.14 Previous year''s figures have been regrouped wherever necessary to conform to the current year classification.


Mar 31, 2012

SCHEDULE - 1 CONTINGENT LIABILITIES

I Claims against Bank not acknowledged as debts 1,36,12 1,17,92

II Liability for partly paid Investments Nil 1,99,08

III Liability on account of outstanding Forward Exchange Contracts 8283,18,84 3356,24,43

IV Guarantees given on behalf of constituents - In India 797,71,80 492,75,93

- Outside India 9,42,47 Nil

V Acceptances,endorsements and other obligations 610,00,38 310,04,63

VI Other items for which the Bank is contingently liable Nil Nil

Total 9701,69,61 4162,21,99

2.1 Disclosures on risk exposure in derivatives:

2.1.1 - Qualitative Disclosure:

The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other banks. The credit exposure on account of forward contracts are also considered while arriving at the total exposure of each customer / borrower. The bank also deals with other banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under current exposure method. The Bank's treasury department operates under three functional areas namely Front Office, Mid Office and Back Office. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

3.1 Details of financial assets sold to Securitisation / Reconstruction company for Asset Reconstruction:

The bank has not sold any financial assets to Securitisation / Reconstruction Company for Asset Reconstruction. (Previous year - Nil).

3.2 Details of Non-performing financial assets purchased / sold:

The bank has not purchased / sold any financial assets from / to any Banks (Previous Year - NIL).

* The net funded exposure of the bank in respect of foreign exchange transactions with any country is within 1 % of the total assets of the Bank and hence no provision is required in terms of RBI guidelines.

4.1 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank Single Borrower Limit / Group Borrower Limit has not exceeded during the year.

4.2 Unsecured Advances - Advances secured by intangible securities such as Rights, licences authorisations, etc. - NIL

5.1 Penalties imposed by RBI

No penalty was imposed on the bank by the Reserve Bank of India during the year.

6. DISCLOSURES AS PER ACCOUNTING STANDARDS

The bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI's guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of income / expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

Income / Expenditure of certain items recognised on cash basis (AS 9) are not considered to be material.

iii) Employee benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank and its employees contribute a defined sum every month to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

a) The summarized position of the employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard-15 (Revised) is as under:

Part B - Geographic Segment:

The bank operates only in India.

vi) Related Party disclosures - AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates / JV - NIL

Key Management Personnel - Shri S. Balasubramanian (upto 30.04.2011)

- Dr. N. Kamakodi (from 01.05.2011)

(ii) Related Party Transactions:

Substituted by: a) as Remuneration : Rs. 24,87,500/-

b) as Loan availed - outstanding as on 31.03.2012 : Rs. 42,31,424/-

viii) Consolidated Financial Statements (CFS) - AS 21

The bank has no subsidiaries.

x) Accounting for Investments in Associates in CFS - AS 23

The bank has no Associates.

xi) Discontinuing Operations - AS 24

The bank has not discontinued any operations.

xii) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xiii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 - "Impairment of Assets" applies.

xiv) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA's and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

7.1 Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year.

7.2 Letters of Comfort issued in respect of Subsidiaries during financial year 2011-12 : NIL

7.3 Provision Coverage Ratio (PCR)

The Provision Coverage Ratio (PCR) of the bank as on 31.03.2012 is 76.81%.

7.4 Bancassurance Business

Income from Bancassurance Business for the financial year 2011-12 : Rs. 3.25 crore.

7.5 Concentration of Deposits, Advances, Exposures and NPAs

7.6 Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs.

7.7 Unamortized Pension and Gratuity Liabilities - NIL

7.8 Income Tax

Provision for income tax in the current year has been arrived at consistent with earlier years after considering various judicial decisions on certain disputed issues.

No provision is considered for disputed taxes based on the orders received by the bank and similar decisions at various stages of the Tribunal and Higher judicial Forums.

7.9 Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31.03.2012. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

7.10 Employees Stock Option

The bank has allotted 31,81,646 shares during the year to its eligible employees who have exercised their options granted under ESOS of the Bank.

7.11 In the absence of notification under Sec 441 A of the Companies Act, 1956 on the cess leviable for the purpose of rehabilitation / revival / protection of assets of Sick Industrial Company, no provision has been made for the same during the year.

7.12 There are no dues to Micro and Small Enterprises calling for disclosure as at 31st March 2012 as per the records available.

7.13 Previous year's figures have been regrouped wherever necessary to conform to the current year classification.


Mar 31, 2011

1.1.1 - Qualitative Disclosure:

The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other banks. The bank also deals with other banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under current exposure method. The Bank's treasury department operates under three functional areas namely Front Office, Mid Office and Back Office. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

2. ASSET QUALITY

a) Non Performing Loan Provisioning Coverage Ratio is 76.69% (Previous Year 70.27%).

b) The Bank has made provisions for Non Performing Assets at enhanced rates as advised in Reserve Bank of India's Circular DBOD.No.BP.BC 94/21.04.048/2011-12 dated 18.05.2011.

2.1 Details of financial assets sold to Securitisation / Reconstruction company for Asset Reconstruction:

The bank has not sold any financial assets to Securitisation / Reconstruction Company for Asset Reconstruction and hence no disclosure is given. (Previous year - Nil).

2.2 Details of Non-performing financial assets purchased / sold:

The bank has not purchased/sold any financial assets from/to Banks (Previous Year - NIL).

2.3 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank Single Borrower Limit / Group Borrower Limit has not been exceeded during the year.

2.4 Unsecured Advances - Advances secured by intangible securities such as Rights, licences authorisations, etc. - NIL

3. MISCELLANEOUS

3.1 Penalties imposed by RBI

No penalty was imposed on the bank by the Reserve Bank of India during the year.

4. DISCLOSURES AS PER ACCOUNTING STANDARDS

The bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI's guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of income / expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

Income / Expenditure of certain items recognised on cash basis (AS 9) are not considered to be material.

iii) Employee benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank along with its employees contributes a defined sum to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

vi) Related Party disclosures - AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates/JV - NIL

Key Management Personnel - Sri S. Balasubramanian, MD & CEO

(ii) Related Party Transactions:

Remuneration (cost to the bank) - Rs.27,00,000/-

viii) Consolidated Financial Statements (CFS) - AS 21

The bank has no subsidiaries.

ix) Accounting for Taxes on Income - AS 22

The Bank has complied with the provisions of Accounting Standard 22 on accounting for taxes on income issued by the Institute of Chartered Accountants of India.

x) Accounting for Investments in Associates in CFS - AS 23

The bank has no Associates.

xi) Discontinuing Operations - AS 24

The bank has not discontinued any operations.

xii) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xiii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 - "Impairment of Assets" applies.

xiv) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA's and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

5.0 Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year.

5.1 Letters of Comfort issued in respect of Subsidiaries during financial year 2010-11 - NIL (Disclosure as per RBI's Mail Box instruction dated 11-Feb-2009)

5.2 Provision Coverage Ratio (PCR)

The Provision Coverage Ratio (PCR) of the bank as on 31.03.2011 is 76.69%.

5.3 Overseas Assets, NPAs and Revenue

No SPV either Domestic or Overseas has been sponsored by the bank.

5.4 Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs.

5.5 Income Tax

Provision for income tax in the current year has been arrived at consistent with earlier years after considering various judicial decisions on certain disputed issues.

Of the disputed income tax of earlier years amounting to Rs.174.05 cr the bank has appellate orders in its favour for Rs.122.60 cr. No provision is considered for the entire disputed taxes based on the orders received by the bank and similar decisions at various stages of the Tribunal and Higher judicial Forums.

5.6 Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31.03.2011. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

5.7 Employees Stock Option

The bank has allotted 50,31,003 shares during the year to its eligible employees who have exercised their options granted under ESOS of the Bank.

5.8 In the absence of notification under Sec 441 A of the Companies Act, 1956 on the cess leviable for the purpose of rehabilitation / revival / protection of assets of Sick Industrial Company, no provision has been made for the same during the year.

5.9 Previous year's figures have been regrouped wherever necessary to conform to the current year classification.


Mar 31, 2010

1. DISCLOSURES AS PER ACCOUNTING STANDARDS

The bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBIs guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of income / expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

Income / Expenditure of certain items recognised on cash basis (AS 9) are not considered to be material.

iii) Employee Benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The bank alongwith its employees subscribes to City Union Bank Employees Pension Fund Superan nuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employee.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

The summarized position of the employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard-15 (Revised) are as under:

v) Related Party disclosures - AS 18

Key Management Personnel

S. Balasubramanian, MD & CEO - Remuneration paid - Rs.24,60,000/- p.a.

The bank has issued Right share during the year at the rate of one equity share for every four equity shares held at an issue price of Rs.6/- per equity share including the premium of Rs.5/- per share. As a result of this, the earnings per share (EPS) has been arrived at after considering the right adjustment factor as provided in AS 20. Consequently, the weighted number of shares outstanding prior to the issue has been increased by 0.18 times (right adjustment factor) for this year as well as for the previous year ended 31.03.2009, as per the prescription of the Accounting Standards.

vii) Accounting for Taxes on Income - AS 22

The Bank has complied with the provisions of Accounting Standard 22 on accounting for taxes on income issued by the Institute of Chartered Accountants of India.

2 Income Tax

Provision for income tax in the current year has been arrived at in consistence with earlier years after considering various judicial decisions on certain disputed issues.

With regard to taxes on issues under dispute for the earlier years aggregating to Rs.146.97 cr which are pending before the Tax authorities, no provision is considered necessary based on the decisions of the appellate authorities in favour of the bank.

3 Agricultural Debt Waiver Scheme

In terms of Agricultural Debt Waiver and Relief Scheme, 2008, advances of eligible farmers have been considered as standard. Adequate provisions for loss in NPV terms and provisions for Non Performing Assets have been made as per RBI guidelines.

4 Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31.03.2010. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, consequential impact on the above is not material.

5 Employees Stock Option

The Exercise period in respect of 15% of the 20250000 equity stock options granted in 2008 commenced on 06.12.2009 and shall be open for 3 years there from. The process of exercising the vested options by the employees has not yet started. Consequent upon the rights issue, the exercise price got reduced from Rs.13/- to Rs.11.60 per option and accordingly the number of options was increased to 22781250.

6 Right Issue

During the year, the bank issued 8,00,00,000 equity shares in rights to the existing shareholders at the rate of one equity share for every four equity shares held at a price of Rs.6/- per equity share including a premium of Rs.5/- per equity share. Accordingly the issued capital of the bank increased from Rs 32 crores to Rs 40 crores. The rights issue expenses of Rs.82.12 lakhs has been netted against Share Premium of the issue. An application is being made to the Reserve Bank of India, seeking necessary approval for the expense incurred.

7 Previous years figures have been regrouped wherever necessary to conform to the current year classification.

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