Notes to Accounts of Corporation Bank [Merged]

Mar 31, 2019

A. DISCLOSURES REQUIRED IN TERMS OF GUIDELINES ISSUED BY RBI

1.0 CAPITAL

a) Bank has allotted 86,90,47,619 equity shares ofRs.2/- each at a premium ofRs.27.40 per share i.e. at an issue price ofRs.29.40 to Government of India on preferential basis on October 11, 2018 for a total consideration of Rs.2555.00 crore.

b) During the year, the Bank has allotted 5,40,40,570 equity shares of Rs.2/- each at a premium of Rs.17.61 per share i.e. at an issue price of Rs.19.61 per share to eligible employees of the Bank under Corporation Bank Employees Stock Purchase Scheme 2018 on March 8, 2019 for a total consideration of Rs.105.97 crore.

c) During the year, the Bank has allotted 340,55,47,226 equity shares of Rs.2/- each at a premium of Rs.24.68 per share i.e. at an issue price of Rs.26.68 per share to Government of India on preferential basis on March 29, 2019 for a total consideration of Rs.9086.00 crore.

d) The Bank’s Capital to Weighted Risk Assets Ratio (CRAR) has been worked out as per the RBI guidelines. These ratios are given below:

a) During the year, premium of Rs.78.94 crore (previous year Rs.98.36 crore) was amortized in respect of securities held under “Held to Maturity” category.

b) During the year, there was depreciation of Rs.0.01 crore (previous year nil) for securities held under the “Held for Trading” category.

c) During the year, there was reversal of provision for depreciation of Rs.58.96 crore (previous year Rs.202.91 crore was provided) for investments under the “Available for Sale” category.

d) RBI vide its circulars DBR.No.BP.BC.102/21.04.048/2017-18 dated April 2, 2018 and DBR.No.BP.BC.113/21.04.048/2017-18 dated June 15, 2018 had permitted banks to spread provisioning for mark to market (MTM) losses on investments held in AFS and HFT for the quarters ended 31st December, 2017, 31^st March, 2018 and 30th June, 2018 equally over up to four quarters commencing from the quarter in which the loss is incurred. The MTM losses incurred by the bank of Rs.414.88 crores, Rs.99.25 crores and Rs.209.15 crore respectively in these three quarters have been spread over. Accordingly, the bank made provision of Rs.232.25 cr, Rs.60.01 cr and Rs.60.01 cr in the quarters ended 31st March, 2018, 30th June, 2018 and 30th September, 2018 and there was unamortized balance of Rs.109.49 cr as on 31.12.2018. Since the Bond rate had eased and there was change in the portfolio composition, deferred provision was not required to be made and it resulted in retrieval of net provision of Rs.52.29 crore for the quarter ended 31st March, 2019.

e) During the year, the Bank had transferred securities of book value of Rs.8692.94 crore (Previous year Rs.2940.94 crore) from “Available for Sale” to “Held to Maturity” category by accounting depreciation of Rs.238.52 crores (previous year Rs.66.47 crores), transferred securities of book value of Rs.12390.91 crore (Previous year Rs.6186.89 crore) from “Held to Maturity” to “Available for Sale” category, transferred securities of book value of '' NIL crores (Previous year '' Nil crores) from “Held for Trading” to “Available for Sale category” and also transferred securities of book value of '' NIL crore (Previous year '' Nil crores) from “Held for Trading” to “Held to Maturity”.

f) During the current year, the value of sales/ transfers of securities to/ from HTM category [excluding portfolio transfer of securities (under one time/special window permitted by RBI) and sales to RBI under OMO auctions] had not exceeded the limit of 5% of the book value of the investment held in HTM category at the beginning of the year.

g) Government Securities amounting to Rs.661.85 cr (Previous Year Rs.1,130.43 cr) are pledged with CCIL/NSCCL/MCXCCL/ICCL for Settlement Guarantee Fund or Default Fund.

h) Investments include Government securities amounting to Rs.20,244.57 crores (Previous year Rs.36,020.53 crore) pledged for borrowing under LAF-Repo/TREPS/CROMS-Repo/CBLO (as applicable) out of which Rs.5084.32 crores (Previous year was 14,451.90 crores) are encumbered.

2.1 Disclosure on Risk Exposure in Derivatives

(i) Qualitative Disclosure:

a) The Bank’s Derivative Policy as approved by the Board permits Bank to undertake deals in over-the-counter (OTC) as well as exchange traded (ET) interest rate and currency derivatives. The policy permits the offering of the products to the customer to manage their foreign currency exposures, which are to be covered on Back-to-Back basis in the interbank market. Derivatives can also be used by the Bank both for trading as well as hedging on-balance sheet items. In the current financial year, Bank has entered into derivative deals involving forwards and currency futures.

b) The Asset Liability Management Committee (ALCO) ofthe Bank overseas management ofthese risks. The Bank’s Integrated Risk Management Department (IRMD), independently identifies, measures and monitors market risk associated with derivative transactions, assists ALCO in controlling and managing these risks and reports compliance with policy prescriptions to the Risk Management Committee of the Board (RMCB) at regular intervals.

c) Derivative transactions carry market risk i.e. the probable loss the Bank may incur as a result of adverse movements in interest rates / exchange rates and credit risk i.e. the probable loss the Bank may incur if the counterparties fail to meet their obligations. The Bank’s “Derivative Policy” approved by the Board prescribes the market risk parameters as well as Customer Appropriateness policy for entering into derivative transactions. Credit risk is controlled by entering into derivative transactions only with counterparties in respect of whom appropriate credit limits are sanctioned taking into account their ability to honour obligations. The Bank enters into International Swap Dealers Association (IS DA) agreements with each counter party.

d) The accounting policy for derivatives as stated in Significant Accounting Policies, has been drawn-up in accordance with RBI guidelines and revenues are recognized accordingly.

3. ASSET QUALITY

3.1 ADVANCES

a) In the case of unaudited branches, the classification of advances, as certified by the Branch Managers has been incorporated.

b) During the year the Bank has made provision for NPA of Rs.12,002.72 crores (Previous Year Rs.11,111.90 crores). The Bank has made required provision cumulative for Non Performing Advances as at 31st March 2019 Rs.13,525.38 crores (Previous Year Rs.7,929.68 crores) in the line with RBI guidelines.

3.2 Non-Performing Assets

3.3 Divergence in Asset Classification and Provisioning for NPAs:

Pursuant to RBI Circular no. RBI/2018-19/157 DBR. BP.BC.NO.32/21.04.018/2018-19 dated April 1, 2019 “Divergence in the asset Classification and Provisioning”, the Bank has incorporated the disclosure prescribed as under:

3.4 In terms of RBI communication DBR No. BP.8756/21.04.048/2017-18 dated 2nd April, 2018, Rs.1011.99 crore has been additionally provided in respect of eligible NCLT (List 1 & List 2) accounts as on 31st March 2019. Total actual provision made as on 31st March 2019 for the eligible NCLT (List 1 & List 2) accounts is Rs.9079.56 crore, which represents 100% of provision of the outstanding value as on March 31, 2019, instead of Rs.8067.57 crore as per IRAC norms. With regard to the other 22 NCLT accounts an amount of Rs.610.40 crore further provided as on 31st March, 2019. Total actual provision made as on 31st March, 2019 is Rs.1547.69 crore instead of Rs.937.29 crore.

An additional, adequate and necessary, provision of Rs.1280.55 crore has been provided in 29 NPA accounts.

The bank has downgraded for 4 borrowal accounts from standard to NPA category and accordingly made a provision of Rs.123.70 crore as per prudential norms.

3.5 Details of financial assets sold to Securitization/ Reconstruction Company for Asset Reconstruction:

With a view to incentivizing banks to recover appropriate value in respect of their NPAs promptly, banks can reverse the excess provision on sale of NPA if the sale is for a value higher than the net book value (NBV) to its profit and loss account in the year the amounts received. The quantum of excess provision reversed to the profit and loss account on account of sale of NPAs should be disclosed in the financial statements of the bank under “Notes to Accounts”.

As on incentive for early sale of NPAs, bank can spread over any shortfall, if the sale value is lower than the NBV, over a period of two years. This facility of spreading over the shortfall would however be available for NPAs as per the Master Circular on Prudential norms on Income Recognition, Assets Classification and Provision pertaining to advances, in respect of NPA sold before 31st March, 2016, and will be subject to necessary disclosures in the “Notes to Account”.

B) Details of Book value of Investments in Security Receipts:

4.1 Risk Category wise Country Exposure

The following are the bank’s country wise net risk exposure based on the Country risk classification provided by the Export Credit Guarantee Corporation (ECGC).

4.2 Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the Bank

During the year ended March 31, 2019, the Bank has exceeded the exposure ceiling fixed by RBI to Individual borrower/Group in the following cases, which have been approved by the Board.

5.0 Disclosure of Penalties Imposed by RBI

During the year 2018-19, Reserve Bank of India (“RBI”) has imposed following Penalties:

A. i) As per the provisions of RBI Master Circular DCM (CC) No. G-4/03.044.01/2018-19 dated 03.07.2018 on “Scheme of Incentive and penalties for Bank branches based on performance in rendering customer service to the members of public”, an aggregate amount of Rs.0.31 crores has been imposed as penalties for discrepancies detected while a) processing the soiled notes remittances received from the Bank’s Currency Chests and b) Inspection of Currency Chests.

ii) Rs.2.00 crores penalty levied by RBI vide communication ref No. EFD.CO.S0/537/02.01.013/2018-19 dated 01.02.2019 under Section 35, 35A, 46 and 47A of Banking Regulation Act, 1949 for violation of regulatory guidelines.

iii) Rs.1.00 crore penalty levied by RBI vide communication ref No. EFD.CO.SO/616/02.01.008/2018-19 dated 25.02.2019 under Section 35, 35A, 46 and 47A of Banking Regulation Act, 1949 for violation of regulatory directions on time bound implementation & strengthening of SWIFT related operational controls.

iv) Penalty levied during Incognito Visit of RBI Rs.0.001 crore.

B. Disclosure requirements as per accounting standards where RBI has issued guidelines in respect of disclosure items for notes to the accounts

1.0 PRIOR PERIOD ITEMS

Prior Period Expenses (net of Income) during the year Rs.3.29 crores [Previous year Rs.0.44 crores (Prior Period Income (net of Expenses)] to the extent identified.

2.0 FIXED ASSETS

1. Premises include properties costing Rs.12.23 crores (previous year Rs.12.47 crores) for which registration formalities are pending.

2. Fixed Assets include Rs.4.40 crores (Previous Year Rs.1.50 crores) in respect of Capital Work in Progress.-Premises.

3. During the year 2018-19, cost of software acquired is Rs.37.04 crores (Previous Year Rs.37.48 crores) and the amount amortized during the year is Rs.38.56 crores (Previous Year Rs.28.61 crores).

4. Contracts pending execution on Capital account and not provided for is Rs.105.06 crores (Previous Year Rs.578.59 crores).

5. During the year, the Bank has reversed Rs.19.26 crores from the revaluation reserve towards the General Reserve (previous year Rs.16.46 crores).

6. As per RBI guidelines, Bank has carried out Revaluation of Bank owned properties, the value of which is Rs.962.62 crores as gainst the previous value of Rs.687.99 crores.

7. During the year 2018-19, an amount of Rs.4.19 crores has been reduced from the cost of Fixed Assets on account of Goods and Services Tax (GST) for utilizing the same as input credit against GST liability (previous year Rs.2.33 crores)

3.0 EMPLOYEE BENFITS

3.1 The Bank has accounted for Employee Benefits as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

DEFINED BENEFITS

3.2 a) Changes in the present value of the defined benefit obligations:

Part B : Geographic Segment

The Geographic segment consists of only domestic segment as the Bank does not have any foreign branch.

Notes on Segment Reporting:

1 As per guidelines of RBI on compliance with Accounting Standards, the Bank has adopted “Treasury Operations”, “Wholesale”, “Retail” and “Other Banking Operations” as Primary segments under “Domestic Segment” for the purpose of compliance with AS-17 on “Segment Reporting” issued by ICAI.

2 Segment Liabilities are distributed in the ratio of their respective Segment Assets.

3 Figures of the previous period / year have been regrouped / reclassified based on current quarter / period’s presentation.

4.0 RELATED PARTY DISCLOSURE

In compliance with Accounting Standard 18 - Related Party Disclosures, issued by the Institute of Chartered Accountants of India read along with the Reserve Bank of India guidelines, the details pertaining to Related Party transactions are disclosed as under:

a) Name of the Related Party and relationship:

The transactions with the subsidiary are not disclosed in view of para 9 of AS-18 “ Related Party Disclosure”, which exempts state controlled enterprises from making any disclosures pertaining to their transactions with other related parties,which are also state controlled.

Transactions in the nature of banker-customer relationship including those with KMP and relatives of KMP have been disclosed in terms of Para 5 of AS-18.

5.0 LEASES

The Bank has entered into various operating lease for offices, guest house and residential premises for employees that are renewable on a periodical basis and cancelable at the bank’s option. Rental expenses for such operating leases included in financial statements for the year 2018-19 are Rs.287.70 crores (previous year Rs.274.57 crores).

6.0 EARNINGS PER SHARE

Basic and diluted earnings per share has been computed in accordance with Accounting Standard - 20 (Earnings Per Share):

Diluted: Not applicable as there are no dilutive potential equity shares.

7.0 ACCOUNTING FOR TAXES ON INCOME

a) The bank has reckoned the Income Computation and Disclosure Standards (ICDS) as per Notification by Central Board of Direct Taxes (CBDT) Dt. 29.09.2016, read with Circular of CBDT Dt 23.03.2017 in this regard which are applicable for the Assessment Year 2018-19 and subsequent Assessment Years.

b) The Bank has recognized deferred tax assets and liabilities as per Accounting Standard No. 22 issued by The Institute of Chartered Accountants of India (ICAI). The components are as under:

Note: The DTA on Taxable Income (Loss) & DTL on Income from Long Term Finance created during the year FY 201819 was only on account of increase of tax rate (including cess and surcharge) from 34.608% to 34.944%. The DTA was not created on the tax loss incurred during the FY 2018-19.

c) The Bank has been recognising deferred tax assets and liabilities as per Accounting Standard 22 issued by the Institute of Chartered Accountants of India (ICAI), however during the current year deferred tax assets on timing differences other than tax losses to the tune of Rs.1740.09 crore has been recognised. Considering the quantum of loss and prudence the current year deferred tax ofRs.1240.13 crore on tax loss has not been recognised. The bank carries deferred tax asset of Rs.1557.96 crore on tax losses upto March 31, 2018.

d) Income Tax

i) Break-up of provision made for Income Tax during the year :

ii) Assessments for Income Tax have been completed up to the financial year 2015-16 (AY 2016-17).

The following appeals by the Bank/Income Tax Department are pending before various appellate authorities/courts :

iii) Advance Taxes paid, Taxes Paid under Disputes, Input Tax Credit availed and TDS deducted on Income to the Bank are appearing under “Other Assets--Tax Paid in Advance / Tax Deducted at Source”. With regard to the Taxes paid under dispute the Bank has filed appeals before Appellate Authorities and no additional provision is considered necessary in view of favourable judicial pronouncements in similar cases.

8.0 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

a) Provisions:

* includes provision for claims against the Bank not acknowledged as debt, provision towards fraudulent transactions and other miscellaneous transactions.

Figures in brackets represent previous year figures.

b) Contingent Liability:

i) Claims against the Bank not acknowledged as debts:

C. ADDITIONAL DISCLOSURES

1. PROVISIONS AND CONTINGENCIES

a) In terms of RBI communication DBR No. BP.8756/21.04.048/2017-18 dated 2nd April, 2018, Rs.1011.99 crores has been additionally provided in respect of eligible NCLT (List 1 & List 2) accounts as on 31st March 2019. Total actual provision made as on 31st March 2019 for the eligible NCLT (List 1 & List 2) accounts is Rs.9079.56 crores, which represents 100% of provision of the outstanding value as on March 31, 2019, instead of Rs.8067.57 crores as per IRAC norms.

b) With regard to the other 22 NCLT accounts an amount of Rs.610.40 crores further provided as on 31st March, 2019. Total actual provision made as on 31st March 2019 is Rs.1547.69 crores instead of Rs.937.29 crores.

c) In respect of 29 accounts under NPA category, in view of uncertainty of recovery, total provision made as on March 31, 2019 is Rs.2767.22 crores instead of Rs.1486.67 crores as per IRAC Norms.

d) The Bank has classified 4 borrowal accounts whose outstanding as on March 31, 2019 is Rs.627.63 crores, from standard to NPA category and accordingly made a provision of Rs.123.70 crores as per prudential norms.

3. Draw Down from Reserves : During the year 2018-19 was NIL (previously Rs.106.82 crores) from Investment Reserve Account as per RBI guidelines

4. Complaints / unimplemented awards of Banking Ombudsman

5a. Letter of Comforts (LOC) including Buyer’s Credit:

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

b. Bank has not entered into any credit default swap during the year.

6. Provisioning coverage ratio of the Bank as on March 31, 2019 is 83.30 % as against 63.65% as on March 31, 2018.

7. During the year, the Bank has received fee/remuneration of Rs.10.00 crores from Bank assurance business (Previous year Rs.13.43 crores).

*Banks may also disclose in the format above, sub sectors where the outstanding advances exceeds 10 percent of the outstanding total advances to that sector. For instance, if a bank’s outstanding advances to the mining industry exceed 10 percent of the outstanding total advances to ‘Industry’ sector it should disclose details of its outstanding advances to mining separately in the format above under the ‘Industry’ sector.

[1] Gross NPAs as per item 2 of Annex to DBOD Circular DBOD.BP.BC.No.46/21.04.048/2009-10 dated September 24, 2009 which specified a uniform method to compute Gross Advances, Net Advances, Gross NPAs and Net NPAs.

[2] Technical or prudential write-off is the amount of nonperforming loans which are outstanding in the books of the branches, but have been written-off (fully or partially) at Head Office level. Amount of Technical write-off should be certified by statutory auditors. (Defined in our circular reference DBOD.No.BP.BC.64/21.04.048/2009-10 dated December 1, 2009 on Provisioning Coverage for Advances)

Further, Banks should disclose the stock of technical write offs and the recoveries made thereon as per the format below:

8. During the year 2018-19, 162 cases of fraud, involving Rs.1951.10 crores, with outstanding balance of Rs.1761.08 crores were reported to RBI. Total provision made against these cases is Rs.1686.92 crores.

During the previous year 2017-18, 99 cases of fraud, involving Rs.1296.23 crores, with outstanding balance of Rs.1381.78 crores were reported to RBI. Total provision made against these cases is Rs.1348.37 crores.

9. Off-Balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms)

10. Securitisation as Originating Bank

Information under Securitisation transaction of the Bank as a Originating Bank is given below :

11. Unhedged Foreign Currency Exposure

The Bank has in place a policy on managing credit risk arising out of unhedged foreign currency exposures of its borrowers. The objective of this policy is to maximize the hedging on foreign currency exposures of borrowers by reviewing their foreign currency product portfolio and encouraging them to hedge the unhedged portion.

In line with the policy, assessment of unhedged foreign currency exposure is a part of assessment of borrowers and is undertaken while proposing limits or at the review stage. Additionally, at the time of sanctioning limits for all clients, the Bank stipulates a limit on the unhedged foreign currency exposure of the client (as a % of total foreign currency exposure sanctioned by the Bank). After considering factors such as internal rating of the borrower, size, possibility of natural hedging, relative size of unhedged foreign currency exposure with respect to total borrowings of the client, etc. Further, the Bank reviews the unhedged foreign currency exposure across its portfolio on a periodic basis. The Bank also maintains incremental provision towards the unhedged foreign currency exposures across of its borrowers in line with the extant RBI guidelines.

Further, the bank has maintained provision of Rs.23.85 crores (Previous year Rs.26.01 crores) and additional capital of Rs.18.18 crores (Previous year Rs.16.22 crores) on account of Unhedged Foreign Currency Exposure of its borrowers as at March 31, 2019.

12. Liquidity Coverage Ratio:

The necessary information is as under:

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Mar 31, 2017

b) Contingent Liability:

i) Claims against the Bank not acknowledged as debts:

* Excluding interest on claims, wherever applicable, since inception.

# Contingent liabilities include tax and interest of Rs,2,519.90 Crores (Previous Year Rs,2757.46 Crores)

C. ADDITIONAL DISCLOSURES 1. PROVISIONS AND CONTINGENCIES

Figures in Brackets represents Previous year Figures.

1. Letter of Comforts (LOCs) issued by banks:

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

2. Provisioning coverage ratio of the Bank as on March 31, 2017 is 55.17% as against 55.05% as on March 31, 2016.

3. During the year, the Bank has received fee/remuneration of Rs,14.24 Crores from Bank assurance business (Previous year Rs, 12.98 Crores).

4. During the year, 166 cases of fraud involving Rs,545.58 Crores are reported to RBI, with an outstanding balance of Rs,516.59 Crores as at March 31, 2017 and full provision has been made by the Bank. The Bank has credited Other Reserves for Rs,291.86 Crores which was debited during the year 2015-16 in terms of RBI Circular DRB. No. BP.BC.83/21.04.48/2014-15 dated April 1, 2015 and BR. No. BP.BC.92/21.04.48/2015-16 dated April 18, 2016. During the year, Rs,250.19 Crores has been provided (after adjusting ECGC claim of Rs,41.67 Crores).

5. Securitisation as Originating Bank

Information under Securitization transaction of the Bank as a Originating Bank is given below :

5. Unhedged Foreign Currency Exposure

The Bank has in place a policy on managing credit risk arising out of unhedged foreign currency exposure of its borrowers. The objective of this policy is to maximize the hedging on foreign currency exposure of borrowers by reviewing their foreign currency product portfolio and encouraging them to hedge the unhedged portion.

In line with the policy, assessment of unhedged foreign currency exposure is a part of assessment of borrowers and is undertaken while proposing limits or at the review stage. Additionally, at the time of sanctioning limits for all clients, the Bank stipulates a limit on the unhedged foreign currency exposure of the client (as a % of total foreign currency exposure sanctioned by the Bank) after considering factors such as internal rating of the borrower, size, possibility of natural hedging, relative size of unhedged foreign currency exposure with respect to total borrowings of the client, etc. Further, the Bank reviews the unhedged foreign currency exposure across its portfolio on a periodic basis. The Bank also maintains incremental provision towards the unhedged foreign currency exposure of its borrowers in line with the extant RBI guidelines.

Further, the bank has maintained provision of Rs,53.05 Crores (Previous year Rs,48.23 Crores) and additional capital of Rs,110.51 Crores (Previous year Rs,77.45 Crores) on account of Unhedged Foreign Currency Exposure of its borrowers as at March 31, 2017.

Qualitative Disclosure around LCR as on 31^st March 2017

6. The main drivers of LCR results and the evolution of contribution of inputs to LCR calculation over time:

Liquidity Coverage Ratio (LCR) is defined as the ratio of HQLA (High Quality Liquid Assets) to net cash outflows. It aims to ensure that the bank maintains adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario.

7 Main Drivers of LCR:

The Main drivers of LCR result are level of High Quality Liquid Assets, Cash Inflows and net Cash Outflow within next 30 days’ time horizon.

a. HQLA: This comprises of High Quality Liquid

Assets as under :

- Level-1 assets

- Level 2A assets

- Level 2B assets

The Level-1 assets comprise of:

- Cash

- Cash Reserve Ratio (CRR) balance in excess minimum regulatory requirement.

- Unencumbered Government Securities in excess of minimum Statutory Liquidity Requirement (SLR).

- Government securities within the mandatory SLR requirement, to the extent allowed by RBI under Marginal Standing Facility (MSF) (Presently 2% of NDTL is at present allowed for MSF).

- Facility to avail liquidity for Liquidity Coverage Ratio (FALLCR) (Presently 9% of NDTL is at present allowed for FALLCR).

- Marketable securities issued/guaranteed by sovereigns with 0% risk weight.

The yearly average of Level-1 assets of the Bank for the financial year were Rs,39,611.59 Crores (Previous year Rs,22,689.17 Crores) which accounts for 98.97% (Previous year 97.76%) of total average HQLA of Rs,40,024.32 Crores (Previous year Rs,23,208.73 Crores).

The Level 2A assets comprise of:

- Non-Financial Corporate Bonds rated AA- or above by external rating agencies.

- Non-Financial Commercial Papers rated AA- or above by external rating agencies.

- Marketable securities representing claims on or claims guaranteed by sovereigns, Public Sector Entities (PSEs) or multilateral development banks that are assigned 20% risk weight under the Basel II Standardised Approach for credit risk, provided that they are not issued by a bank/financial institution/NBFC or any of its affiliates.

Bank is applying 15% haircut on Level 2A assets as per extant guidelines of RBI. The share of average Level 2A assets is 0.72 % (Rs,287.30 crores) [Previous year 1.83% (Rs,424.84 Crores)] of total average HQLA.

The Level 2B assets comprise of:

- Equity Shares not issued by a bank/financial institution/NBFC or any of its affiliated entities and included in NSE CNX Nifty and/or S&P BSE Sensex indices.

- Corporate debt securities (including commercial paper) not issued by a bank/ financial institution/ PD/ NBFC or any of its affiliated entities and having a long-term credit rating from an eligible Credit Rating Agency between A and BBB- or in the absence of a long term rating, a short-term rating equivalent in quality to the long-term rating.

Bank is applying 50% haircut on Level 2B assets as per extant guidelines of RBI. The share of average Level 2B assets is 0.31% (Rs,125.43 crores) [Previous year 0.41% (Rs,94.72 Crores)] of total average HQLA and comprises mainly of equity shares of listed corporate which are listed in National Stock Exchange CNX NIFTY and/ or S&P BSE Sensex.

Bank has maintained a comfortable level of HQLA for the financial year 2016-17. Details are furnished below:

b. Cash inflows:

- Inflows from Secured Lending: It consists of short term lending such as CBLO.

- Inflows from fully performing exposure:

Scheduled loan repayment within 30 days, other than NPA, has been considered.

- Other Cash inflows: It includes investments in Liquid Mutual Funds/Certificate of Deposits etc which can be liquidated any time.

c. Cash Outflows: The outflows for the purpose of LCR have been divided in to following major categories:

- Outflows from retail deposits: All demand and term deposits placed with the Bank by a natural person are considered as retail deposits. The outflows from retail deposit are further bifurcated in to stable deposit and less stable deposit. Insured deposits (to the extent covered by DICGC) in transactional accounts where salaries/pensions are automatically deposited or are paid out from or relationship based accounts (e.g. the deposit customer has another relationship with bank, say, a loan) per borrower have been considered as stable deposit and the remaining portion (Total deposits - stable deposits) is classified as less stable deposits. Total yearly average retail deposit for LCR purposes is Rs,86,758.66 Crores (Previous year Rs,77,478.77 Crores) out of which average stable deposits was Rs,2,382.66 Crores (Previous year Rs,8,021.09 Crores) and less stable deposits was Rs,84,376.00 Crores (Previous year Rs,69,457.68 Crores). Bank has considered outflows of all retail deposits for LCR purpose, including those where residual maturity is beyond 30 days.

- Outflows from small business customers: The outflows from small business customers are those deposits where the deposit is managed as a retail deposit and aggregate funding from any such customer is up to 5 Crore. Outflows up to 30 days from these deposits have been considered for LCR purposes as per the RBI guidelines.

- Outflows from wholesale funding: The outflows other than those from retail deposits and small business customers are considered as outflows due to wholesale funding which has been further bifurcated in to unsecured wholesale funding and secured wholesale funding. For LCR purpose, all unsecured average wholesale funding of Rs,52,867.11 Crores (Previous year Rs,57,209.19 Crores) are classified as non-operational deposits as these deposit do not represent clearing, custody or cash management activities. The secured wholesale funding is consisting of secured borrowings through Liquidity Adjustment Facility (LAF)/ Collateralized Borrowing and Lending Obligation (CBLO) and Repurchase Agreement (REPO). Total average of secured borrowings is Rs,4,441.19 Crores (Previous year Rs,1,997.47 Crores).

- Outflows from Credit and Liquidity facilities:

The un-availed/ un-utilized limits of cash credit accounts (CC) and overdrafts (OD) accounts have been considered.

- Outflows from other contingent funding obligations: The outflows from other contingent funding obligations include outflows due to bank guarantee and letter of credit commitments etc. For LCR purposes, Bank has considered the entireNon fund based advance as on date as unweighted outflow. Bank has also considered entire claims against the Bank not considered as debt as LCR unweighted outflow.

*From 1^st January, 2017, bank is calculating LCR on a daily basis.

Average LCR of the Bank for 1^st three quarter (April-2016 to December-2016) is 167.70% as against the minimum requirement of 70%.

The average LCR of the bank from January-2017 to March-2017 is 158.91% as against the minimum requirement of 80%.

Bank had taken various steps to improve its Liquidity Coverage Ratio.

- Improving the retail portfolio of deposits where the run off factor is low.

- Introduction clause to disallow premature withdrawal of fresh/renewal deposits of 50 Crores & above.

- Introduction of Non-Callable term deposits.

- Investment in high rated/quality assets like Treasury Bills, Certificate of Deposits, and Commercial Papers where return as well as liquidity is high.

8. Intra-period changes as well as changes over time:

The Guidelines for computation of LCR is implemented with effect from 1^st Jan 2015. The minimum LCR requirement will increase from 60% as on 1^st Jan 2015 to 100% as on 1^st Jan 2019. The LCR requirement for the calendar year 2017 is 80%. The Bank has been maintaining sufficient liquid assets to maintain the required level of LCR.

9. Concentration of funding sources:

The Bank is primarily engaged in lending and borrowing activities. Bank is accepting deposit from the public as per the requirement of the Bank. Bank is borrowing from/lending in the money market to manage its day to day liquidity and other requirements. The ratio of bulk deposit (Rs. 1 crore and above) to aggregate deposits as on 31^st Mar 2017 was 38.4%, which has come down from 45.5% as at 31^st Mar 2016. Bank is taking concerted effort to reduce the share of bulk deposits by focusing more on retail deposits.

10. Derivative exposures and potential collateral calls:

Bank deals in derivative for trading as well as for hedging purpose. The volume of derivative deals undertaken is relatively small. The average net derivative cash outflow in LCR for the financial year 2016-17 is Rs,6.68 Crores (Previous year Rs,6.98 Crores).

11. Currency mismatch in the LCR:

Currency mismatch is applicable when the aggregate liabilities in the foreign currency amount to 5% or more of the bank’s total liabilities. In such cases, the currency is considered as ‘significant’. Our Bank’s banking and trading book is denominated in local currency. Bank does not have any foreign subsidiary. Foreign currency liabilities are less than 5% of total liabilities of the Bank and hence not treated as significant for application of currency mismatch.

12. Degree of centralization of liquidity management and interaction between the group’s units:

The Bank manages its liquidity risk proactively in a centralized manner through monitoring of various ratios both under stock and flow approach and the results are placed before the management for decision taking. Bank prepares Structural Liquidity Statement (SLS) on a daily basis for analyzing / monitoring of liquidity mismatches in different time buckets according to internal/RBI norms. Such analysis is being reported to top management. SLS as on each Friday and 15th and last day of every month are placed before Asset Liability Management Committee (ALCO). Dynamic Liquidity Analysis (DLS) for likely position over a 90 days’ time horizon is placed to ALCO on monthly / quarterly basis. For financial year 2016-17 bank has been calculating LCR on a monthly basis as on last day of every month for the period from April-2016 to December-2016 and w.e.f January 01, 2017 LCR is calculated on a daily basis and reported to ALCO and the management.

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Mar 31, 2016

A. DISCLOSURES REQUIRED IN TERMS OF GUIDELINES ISSUED BY RBI

1. CAPITAL

a) During the year 15,66,15,497 equity shares of ‘2/- face value at a premium of ‘52.72 per share have been issued and allotted to Government of India on a preferential basis on September 30, 2015 for a total consideration of Rs,857.00 Crores.

b) During the year, 2,81,60,693 equity shares of Rs,2/- face value at a premium of Rs,48.78 per share have been issued and allotted to Life Insurance Corporation of India on a preferential basis on December 31, 2015 for a total consideration of Rs,143.00 Crores.

c) The BankRs,s Capital to Weighted Risk Assets Ratio (CRAR) has been worked out as per Reserve Bank of India guidelines. The ratios as at March 31, 2016 are:

Notes :

Investments includes securities of the face value of Rs,11,610.00 crore (Previous year Rs,11,610.00 crore), pledged/transferred to RBI for availing various facilities. It also includes securities of the face value of Rs,7,200.00 crore (Previous year Rs, 7,200.00 crore) transferred in the name of Reserve Bank of India out of which securities of the face value of Rs,6,705.92 crore (Previous year Rs,3,062.80 crore) were encumbered for borrowing under LAF-Repo as on 31.03.2016.

In terms of the RBI Circular DBOP. No. BP.BC.31/21.04/048/2015-16 dated July 16, 2015, the Bank has included its deposits placed with NABARD/ RIDF/SIDBI/NHB on account of shortfall in priority sector lending under Other Assets. However, in the earlier year/ corresponding previous period the same was grouped under the head Investments. Figures for the previous period have been regrouped/reclassified to conform to current period’s presentation.

2. Premium of Rs,87.96 crore (Previous year Rs,90.10 crore) has been amortized in respect of securities under “Held to Maturity” category.

3. Depreciation ofRs,122.47 crore (Previous year Rs,234.15 Crore reversed) has been provided for investments under the “Available for Sale” category.

4. Depreciation of Rs,0.0016 crore has been reversed (Previous year Rs,0.0016 crore provided) under the “Held for Trading” category.

5. During the year, the Bank has transferred securities of book value of Rs,1,655.33 crore (Previous year Rs,3,014.84 crore) from “Available for Sale Category” to “Held to Maturity”, transferred securities of book value of Rs,490.43 crore (Previous year Rs,17.91 crore) from “Held to Maturity” to “Available for Sale category”, transferred securities of book value of Rs,NIL crore (Previous year Rs,Nil) from “Held for Trading” to “Available for Sale Category” and also transferred securities of book value of Rs,NIL crore (Previous year Rs,Nil) from “Held for Trading” to “Held to Maturity”.

6. During the year, the value of sales/transfer of securities to / from HTM category {excluding portfolio transfer of securities (under one time/special window permitted by RBI) and sales to RBI under OMO auctions} was within 5% of the book value of the investment held in HTM category at the beginning of the year.

7. In accordance with UDAY (Ujwal Discom Assurance Yojna) Scheme, of Government of India, Ministry of Power of Operational and Financial Turnaround of Power Distribution Companies (“DISCOMs”) during the year 2015 — 16, the Bank has subscribed to Non-SLR SDL Bonds of Government of Rajasthan and Government of Uttar Pradesh amounting to ‘1,43,184 lakhs & Rs,67,567 lakhs respectively.

8. Disclosure on Risk Exposure in Derivatives

(i) Qualitative Disclosure:

a. The Bank’s Derivative Policy as approved by Board permits Bank to undertake deals in over-the-counter (OTC) as well as exchange traded (ET) interest rate and currency derivatives. The policy permits the offering of the products to the customer to manage their foreign currency exposures, which are to be covered on Back-to-Back basis in the inter-bank market. Derivatives can also be used by the Bank both for trading as well as hedging on-balance sheet items. In the current financial year Bank has entered into derivative deals involving forwards and currency futures.

b. The Asset Liability Management Committee (ALCO) of the Bank overseas management of these risks. The Bank’s Integrated Risk Management Department (IRMD), independently identifies, measures and monitors market risk associated with derivative transactions, assists ALCO in controlling and managing these risks and reports compliance with policy prescriptions to the Risk Management Committee of the Board (RMCB) at regular intervals.

c. Derivative transactions carry market risk i.e., the probable loss the Bank may incur as a result of adverse movements in interest rates/exchange rates and credit risk i.e. the probable loss the Bank may incur if the counterparties fail to meet their obligations. The Bank’s “Derivative Policy” approved by the Board prescribes the market risk parameters as well as Customer Appropriateness policy for entering into derivative transactions. Credit risk is controlled by entering into derivative transactions only with counterparties in respect of whom appropriate credit limits are sanctioned taking into account their ability to honor obligations. The Bank enters into International Swap Dealers Association (ISDA) agreements with each counter party.

d. The accounting policy for derivatives as stated in Significant Accounting Policies, has been drawn-up in accordance with RBI guidelines and revenues are recognized accordingly.

4. ASSET QUALITY

9. ADVANCES

a) In the case of unaudited branches, the classification of advances, as certified by the Branch Managers has been incorporated.

b) During the year the Bank has made provision for NPAs of Rs,5,378.65 crores (Previous year Rs,1,969.04 crore). The Bank has made required provision cumulative for non-performing advances as at March 31, 2016 Rs,5,378.65 crores (as at March 31, 2015 Rs, 2,607.15 crore) in line with RBI guidelines.

c) During the year, as a part of asset quality review, RBI has directed the Bank to revise asset classification/ provisions in respect of certain advance accounts over the two quarters ending December 31, 2015 and March 31, 2016. The Bank has completed this exercise over the timeframe stipulated by RBI.

* Excluding the figures of Standard Restructured Advances which do not attract higher provisioning or risk weight (if applicable)

** Adjustments on account of interest charge, partial repayments, additional facilities availed by existing restricted accounts etc., has been considered

Notes:

a) The above disclosures on restructured accounts is compiled and certified by the management and relied upon by the Auditors. Details of restructured accounts (number of accounts and value) have been comprehensively reviewed by collating the information obtained from the branches and on further migration to reporting structure, wherein the correction were carried out for excluding rescheduled/ rephrased accounts and reporting borrower wise instead of facility wise.

b) In case of restructured Standard Advances — classification of advances, income recognition and provisioning thereon have been done, based on substantial compliance of major conditions contained in restructuring undertaken under CDR/JLF/RBI guidelines.

c) During the year, the Bank, following the RBI Circular No. DBR.No.BP.BC.27/21.04.048/2015-16 dated July 2, 2015, has changed the basis of calculation of provision for diminution in fair value of assets from base rate / Prime Lending Rate as on the date of restructuring plus appropriate term / credit risk premium to the actual interest rate charged befsore restructuring for the purpose of discounting future cash flows. Consequent to this change, there is a net write back of provision, pertaining to the period up to March 31, 2015 amounting to Rs,400.95 crores during the year.

10. Details of financial assets sold to Securitization/ Reconstruction Company for Asset Reconstruction:

Note —

*** includes investments of Rs,534.24 crore (Previous year is Rs,429.05 crore) which are exempted from 20% ceiling and Rs,3.97 crore (Previous year is Rs,4.47 crore) of investment in NCD which is secured by equity shares of the company.

11. Risk Category wise Country Exposure

The following are the bankRs,s countrywide net risk exposure based on the Country risk classification provided by the Export Credit Guarantee Corporation (ECGC).

12. DISCLOSURE OF PENALTIES IMPOSED BY RBI

During the year, Reserve Bank of India (“RBI”) has imposed following Penalties:

A. i) As per the provision of RBI Master Circular DCM (CC)

No. G-3/03.39.01/2014-15 — Scheme of Incentive and penalties for Bank branches based on performance in rendering customer service to the member of public dated July 1, 2014 an amount of Rs,0.05 Crore (Previous Year Rs,0.01 crore) has been debited for discrepancies detected while processing the soiled note remittances received from currency chest.

ii) Penalty levied for wrong reporting, discrepancies detected during examination of soiled notes and others of currency chest transactions Rs,0.001 crore (Previous year Rs,0.001 Crore).

B. DISCLOSURE REQUIREMENTS AS PER ACCOUNTING STANDARDS WHERE RBI HAS ISSUED GUIDELINES IN RESPECT OF DISCLOSURE ITEMS FOR NOTES TO ACCOUNTS

13. PRIOR PERIOD ITEMS

Prior Period expenses (net of Income) incurred during the year Rs,1.18 Crores (Previous year Rs,7.39 crores to the extent identified).

14. FIXED ASSETS

1 Premises include properties costing Rs,12.30 crore (previous year Rs,12.30 crore) for which registration formalities are pending.

2 Fixed Assets include Rs, 0.38 crore (previous year Rs, Nil) in respect of Capital Work in Progress-Premises.

3 During the year 2015-16 cost of software acquired is Rs,17.38 crore (previous year Rs,19.13 crore) and the amount amortized during the year is Rs,16.24 crore (previous year Rs,14.66 crore).

4 Contracts pending execution on Capital account and not provided for is Rs,243.60 crore (Previous year Rs,65.73 crore).

5 During the year the Bank has revalued its land and building (other than leasehold land) as at September

30, 2015 (post-depreciation). The incremental amount of Rs,688 crore has been credited to Revaluation Reserve by adopting the realizable value of such assets by the registered values, based on respective guidance value.

6 During the year the Bank has reversed Rs,8.25 crores from the revaluation reserve towards the depreciation on the revalued assets.

2.4 During the year the Bank has paid an amount of Rs,256.57 crores (Previous Year Rs, Nil crores) on account of wage arrears relating to the period from November 2012 to March 2015 out of the provision made in the earlier years amounting to Rs,316.00 crores under Provisions and Contingencies. The excess provision of Rs,59.43 crores (Previous Year Rs, Nil ccrores) has been reversed during the year.

Notes:

a) Segment Liabilities are distributed in the ratio of their respective Segment Assets

b) The Bank does have any foreign branches hence no geographic segment furnished.

15. RELATED PARTY DISCLOSURE

In compliance with Accounting Standard 18 - Related Party Disclosures, issued by the Institute of Chartered Accountants of India read along with the Reserve Bank of India guidelines, the details pertaining to Related Party transactions are disclosed as under:

a) Details of the related parties:

* actual amount being less than Rs,50,000/- , the same is not furnished.

Transactions in the nature of banker customer relationship including those with KMP and relatives of KMP have not been disclosed in terms of para - 5 of AS - 18.

16. LEASES

The Bank has entered into various operating lease for offices, guest house and residential premises for employees that are renewable on a periodical basis and cancellable at the Bank’s option. Rental expenses for such operating leases included in the financial statements for the year 2015-16 are Rs,242.22 Crore (Previous year Rs,209.96 Crore).

17. EARNINGS PER SHARE

Basic and diluted earnings per share has been computed in accordance with Accounting Standard - 20 (Earnings Per Share):

Diluted: Not applicable as there are no dilutive potential equity shares.

18. ACCOUNTING FOR TAXES ON INCOME

a) Bank continues to consider the difference between accounting income and taxable income on valuation of securities as permanent difference during financial year 2015 - 16.:

b) The Bank has recognized deferred tax assets and liabilities as per Accounting Standard No. 22, major components of which are set out below:

c) Income Tax and Wealth Tax

i) Break-up of provision made for Income Tax and wealth tax during the year :

ii) Assessments for Income Tax have been completed up to the financial year 2013 - 14 and assessments for Wealth Tax have been completed up to the financial year 2006-07 and for the financial year 2011-12 only.

The following appeals by the Bank/Income Tax Department are pending at various stages:

iii) Advance Taxes paid, Taxes Paid under Disputes, CENVAT Credit availed and TDS deducted on Income to the Bank are appearing under “Other Assets — Tax Paid in Advance / Tax Deducted at Source”. With regard to the Taxes paid under disputes the Bank has gone on appeal and no additional provision is considered necessary in view of favorable judicial pronouncements in similar cases.

19. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

* includes provision for claims against the Bank not acknowledged as debt, provision towards fraudulent transactions and other miscellaneous transactions.

Figures in brackets represent previous year figure.

* Excluding interest on claims, wherever applicable, since inception.

# Contingent Liabilities include disputed Income Tax and interest of Rs, 2757.46 crore (previous year 1810.91 crore.

C. ADDITIONAL DISCLOSURES 1. PROVISIONS AND CONTINGENCIES

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

6. Provisioning coverage ratio of the Bank as on 31^st March, 2016 is 55.05% as against 55.34% as on 31^st March, 2015.

7. During the year ended 31^st March, 2016, Bank has received fee/remuneration of Rs,12.98 crore from Bancassurance business (Previous year Rs,10.46 crore).

8. CONCENTRATION OF DEPOSITS, ADVANCES, EXPOSURES AND NPAs

* Gross Advances before PWO is taken as one of the component of total advances.

20.. During the year, 199 cases of frauds involving Rs,1,318.37 crore were reported to RBI, with an outstanding balance of Rs,1,092.82 crores as at March 31, 2016. During the year the Bank has made a provision of Rs,800.96 crores and balance Rs,291.86 crores has been debited to Rs,Other Reserves’ based on the RBI circulars DBR. No. BP. BC.83/21.04.048/2014 - 15 dated April 1, 2015 and DBR. No. BP. BC. 92/21.04.048/2015 - 16 dated April 18, 2016.

21.. Off-Balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms)

22. Securitization as Originating Bank

We submit the information under Securitization transaction of the Bank as a Originating Bank as at 31.03.2016. after considering factors such as internal rating of the borrower, size, possibility of natural hedging, relative size of unheeded foreign currency exposure with respect to total borrowings of the client, etc. Further, the Bank reviews the unheeded foreign currency exposure across its portfolio on a periodic basis. The Bank also maintains incremental provision towards the unheeded foreign currency exposures of its borrowers in line with the extant RBI guidelines.

Further, the bank has maintained provision of’48.23 Crore (Previous year ‘13.22 Crore) and additional capital of ‘77.45 Crore (Previous year Rs,19.04 crore) on account of Un-hedged Foreign Currency Exposure of its borrower as at March 31, 2016.

23.. Liquidity Coverage Ratio

In pursuant to RBI circular no. DBOD.BP.BC.No.120 / 21.04.098/2013-14 dated June 9, 2014 on Basel III Framework on Liquidity Standards — Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards, Bank has to disclose information on LCR in the annual financial statement under Notes to Accounts, starting with financial year ending March 31, 2015, for which the LCR related information needs to be furnished only for the year ending March 31, 2016. The necessary information is as under: Qualitative Disclosure around LCR as on March 31, 2016

1. The main drivers of LCR results and the evolution of contribution of inputs to LCR calculation over time:

Liquidity Coverage Ratio (LCR) is defined as the ratio of HQLA (High Quality Liquid Assets) to net cash outflows. It aims to ensure that the bank maintains adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario.

24. Main Drivers of LCR:

The Main drivers of LCR result are level of High Quality Liquid Assets, Cash Inflows andnet Cash Out flow within next 30 days’ time horizon.

a. HQLA: This comprises of High Quality Liquid

Assets as under :

^ Level-1 assets

^ Level 2A assets

^ Level 2B assets

The Level-1 assets comprise of:

^ Cash

^ Cash Reserve Ratio (CRR) balance in excess minimum regulatory requirement.

^ Unencumbered government Securities in excess of minimum Statutory Liquidity Requirement (SLR).

^ Government securities within the mandatory SLR requirement, to the extent allowed by RBI under Marginal Standing Facility (MSF) (Presently 2% of NDTL is at present allowed for MSF).

^ Facility to avail liquidity for Liquidity Coverage Ratio (FALLCR)(Presently 8% of NDTL is at present allowed for FALLCR)

^ Marketable securities issued/guaranteed by sovereigns with 0% risk weight.

The yearly average of Level-1 assets of the Bank for the financial year ended March 31, 2016 were Rs, 22,689.17 crore which accounts for 97.76% of total average HQLA of Rs,23,208.73 crore for the same period.

The Level 2A assets comprise of:

^ Non-Financial Corporate Bonds rated AA- or above by external rating agencies.

^ Non-Financial Commercial Papers rated AA- or above by external rating agencies.

^ Marketable securities representing claims on or claims guaranteed by sovereigns, Public Sector Entities (PSEs) or multilateral development banks that are assigned 20% risk weight under the Basel II Standardized Approach for credit risk, provided that they are not issued by a bank/financial institution/NBFC or any of its affiliates.

Bank is applying 15% haircut on Level 2A assets as per extant guidelines of RBI. The share of average Level 2A assets is 1.83 % (Rs,424.84 crore) of total average HQLA for the financial year ended March 31, 2016.

The Level 2B assets comprise of:

^ Equity Shares not issued by a bank/financial institution/NBFC or any of its affiliated entities and included in NSE CNX Nifty and/or S&P BSE Sensex indices.

^ Corporate debt securities (including commercial paper) not issued by a bank/ financial institution/ PD/ NBFC or any of its affiliated entities and having a long-term credit rating from an eligible Credit Rating Agency between A and BBB- or in the absence of a long term rating, a short-term rating equivalent in quality to the long-term rating.

Bank is applying 50% haircut on Level 2B assets as per extant guidelines of RBI. The share of average Level 2B assets is 0.41% (Rs,94.72 crore) of total average HQLA for the financial year ended March 31, 2016 and comprises mainly of equity shares of listed corporate which are listed in National Stock Exchange CNX NIFTY and/or S&P BSE Sensex.

b. Cash inflows:

^ Inflows from Secured Lending: It consists of short term lending such as reverse repo, CBLO etc.

^ Inflows from fully performing exposure:

Scheduled loan repayment within 30 days, other than NPA, has been considered.

^ Other Cash inflows: It includes investments in Liquid Mutual Funds/Certificate of Deposits etc. which can be liquidated any time and Non SLR investment maturing within 30 days.

c. Cash Outflows:

The outflows for the purpose of LCR have been

divided in to following major categories:

^ Outflows from retail deposits: All demand and term deposits placed with the Bank by a natural person are considered as retail deposits. The outflows from retail deposit are further bifurcated in to stable deposit and less stable deposit. Insured deposits (to the extent covered by DICGC) in transactional accounts where salaries/pensions are automatically deposited or are paid out from or relationship based accounts (e.g. the deposit customer has another relationship with bank, say, a loan) per borrower have been considered as stable deposit and the remaining portion (Total deposits - stable deposits) is classified as less stable deposits. Total yearly average retail deposit for LCR purposes for the year ended March 31, 2016 was Rs,77,478.77 crore out of which average stable deposits was Rs,8,021.09 crore and less stable deposits was Rs, 69,457.68 crore. Bank has considered outflows of all retail deposits for LCR purpose, including those where residual maturity is beyond 30 days.

^ Outflows from small business customers: The

outflows from small business customers are those

deposits where the deposit is managed as a retail deposit and aggregate funding from any such customer is up to 5 crore . Outflows up to 30 days from these deposits have been considered for LCR purposes as per the RBI guidelines.

^ Outflows from wholesale funding: The outflows other than those from retail deposits and small business customers are considered as outflows due to wholesale funding which has been further bifurcated in to unsecured wholesale funding and secured wholesale funding. For LCR purpose, all unsecured average wholesale funding of Rs,57,209.19 crore for the financial year ended March 31, 2016 are classified as non-operational deposits as these deposit do not represent clearing, custody or cash management activities. The secured wholesale funding is consisting of secured borrowings through Liquidity Adjustment Facility (LAF)/ Collateralized Borrowing and Lending Obligation (CBLO) and Repurchase Agreement (REPO). Total average of secured borrowings for the financial year ended March 31, 2016 was Rs,1,997.47crore.

^ Outflows from Credit and Liquidity facilities: The un-availed/un-utilized limits of cash credit accounts (CC) and overdrafts (OD) accounts have been considered.

^ Outflows from other contingent funding obligations: The outflows from other contingent funding obligations include outflows due to bank guarantee and letter of credit commitments etc. For LCR purposes, Bank has considered the entire Non fund based advance as on date as unweighted outflow. Bank has also considered entire claims against the Bank not considered as debt as LCR unweighted outflow.

Average LCR of the Bank for 1^st three quarter (April-2015 to December-2015) is 63.63% as against the minimum requirement of 60%. The average LCR of the bank from January-2016 to March-2016 is 89.72% as against the minimum requirement of 70%.

Bank had taken various steps to improve its Liquidity Coverage Ratio.

- Improving the retail portfolio of deposits where the run off factor is low.

- Imposition of Penalty/Prevention clause for premature withdrawal of term deposits.

- Introduction of Non-Callable term deposits.

- Investment in high rated/quality assets like Treasury Bills, Certificate of Deposits and Commercial Papers where return as well as liquidity is high.

2. Intra-period changes as well as changes over time:

The Guidelines for computation of LCR is implemented with effect from January 1, 2015. The minimum LCR requirement will increase from 60% as on January 1, 2015 to 100% as on January 1, 2019. The LCR requirement for the calendar year 2016 is 70%. The Bank has been maintaining sufficient liquid assets to maintain the required level of LCR.

3. Concentration of funding sources:

The Bank is primarily engaged in lending and borrowing activities. Bank is accepting deposit from the public as per the requirement of the Bank. Bank is borrowing from/lending in the money market to manage its day to day liquidity and other requirements. The ratio of bulk deposit (Rs,1 crore and above) to aggregate deposits as on March 31, 2016 was 45.5%, which has come down from 51.1% as at March 31, 2015. Bank is taking concerted effort to reduce the share of bulk deposits by focusing more on retail deposits.

4. Derivative exposures and potential collateral calls:

Bank deals in derivative for trading as well as for hedging purpose. The volume of derivative deals undertaken is relatively small. The average net derivative cash outflow in LCR for the financial year 2015-16 is Rs,6.98 crore.

5. Currency mismatch in the LCR:

Currency mismatch is applicable when the aggregate liabilities in the foreign currency amount to 5% or more of the bank’s total liabilities. In such cases, the currency is considered as ‘significant’. Our Bank’s banking and trading book is denominated in local currency. Bank does not have any foreign subsidiary. Foreign currency liabilities sare less than 5% of total liabilities of the Bank and hence not treated as significant for application of currency mismatch.

6. Degree of centralization of liquidity management and interaction between the group’s units:

The Bank manages its liquidity risk proactively in a centralized manner at its Head Office through monitoring of various ratios both under stock and flow approach and the results are placed before the management for decision taking. Bank prepares Structural Liquidity Statement (SLS) on a daily basis for analyzing / monitoring of liquidity mismatches in different time buckets according to internal/RBI norms. Such analysis is being reported to top management. SLS as on each Friday, first and third Wednesday and 15 th and last day of every month are placed before Asset Liability Management Committee (ALCO). Dynamic Liquidity Analysis (DLS) for likely position over a 90 days’ time horizon is placed to ALCO on monthly / quarterly basis. Bank calculates liquidity coverage ratio (LCR) on monthly basis for monitoring liquidity & place the note before ALCO every month. In addition, the Bank conducts back testing on a quarterly basis and reports to ALCO. Back testing of DLS is done on fortnightly basis and reported to top management.

D. OTHERS

25. Inter Branch Transactions:

Reconciliation of transactions between Branches, Controlling offices and Head office has been done. All inter branch transactions up to December 1, 2015 stand adjusted as at March 31, 2016.

26. Gold in hand as at March 31, 2016 of Rs,13.26 crore (Previous Year Rs,340.74 crore) includes Gold held outside India amounting to Rs, Nil crore (Previous Year Rs,339.68 crore) for which Bank possesses statement of holding from the custodian.

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Mar 31, 2015

A. DISCLOSURES REQUIRED IN TERMS OF GUIDELINES ISSUED BY RBI

1.0 CAPITAL

a) During the year, Bank has raised an amount of Rs.500 crore through issue of bonds which are eligible to be considered as additional tier I capital.

b) The Bank''s Capital to Weighted Risk Assets Ratio (CRAR) has been worked out as per Reserve Bank of India guidelines. The ratios as at 31st March, 2015 are:

Investments includes securities of the face value of Rs.11,610.00 Crore (Previous year Rs.19,860.00 Crore), pledged/transferred to RBI for availing various facilities. It also includes securities of the face value of Rs.7,200.00 Crore (Previous year Rs.15,450.00 Crore) transferred in the name of Reserve Bank of India out of which securities of the face value of Rs.3,062.80 Crore (Previous year Rs.5,464.16 Crore) were encumbered for borrowing under LAF-Repo as on 31.03.2015.

2.1 Premium of Rs.90.10 Crore (Previous year Rs.77.24 Crore) has been amortized in respect of securities under "Held to Maturity" category.

2.2 Depreciation ofRs.234.15 Crore (Previous year Rs.512.30 crore provided) has been reversed for investments under the "Available for Sale" category.

2.3 Depreciation of Rs.0.0016 Crore (Previous year Rs.3.11 crore reversed) has been provided for investments under the "Held for Trading" category.

2.4 During the year, the Bank has transferred securities of book value of Rs.3014.84 Crore (Previous year Rs.8369.93 Crore) from "Available for Sale category" to "Held to Maturity", transferred securities of book value of Rs.17.91 Crore (Previous year Rs.8093.67 Crore) from "Held to Maturity" to "Available for Sale category", transferred securities of book value of Rs. NIL (Previous year Rs.340.62 Crore) from "Held for Trading" to "Available for Sale category" and also transferred securities of book value of Rs. NIL (Previous year Rs.505.24 Crores) from "Held for Trading" to "Held to Maturity".

2.5 During the current year, the value of sales / transfers of securities to / from HTM category {excluding portfolio transfer of securities (under one time / special window permitted by RBI) and sales to RBI under OMO auctions} was within 5% of the book value of the investment held in HTM category at the beginning of the year.

3.3 Disclosure on Risk Exposure in Derivatives:

(i) Qualitative Disclosure:

a. The Bank''s Derivative Policy as approved by Board permits Bank to undertake deals in over-the- counter (OTC) as well as exchange traded (ET) interest rate and currency derivatives. The policy permits the offering ofthe products to the customer to manage their foreign currency exposures, which are to be covered on Back-to-Back basis in the interbank market. Derivatives can also be used by the Bank both for trading as well as hedging on- balance sheet items. In the current financial year Bank has entered into derivative deals involving forwards and currency futures.

b. The Asset Liability Management Committee (ALCO) of the Bank overseas management of these risks. The Bank''s Integrated Risk Management Department (IRMD), independently identifies, measures and monitors market risk associated with derivative transactions, assists ALCO in controlling and managing these risks and reports compliance with policy prescriptions to the Risk Management Committee of the Board (RMCB) at regular intervals.

c. Derivative transactions carry market risk i.e. the probable loss the Bank may incur as a result of adverse movements in interest rates / exchange rates and credit risk i.e. the probable loss the Bank may incur if the counterparties fail to meet their obligations. The Bank''s "Derivative Policy" approved by the Board prescribes the market risk parameters as well as Customer Appropriateness policy for entering into derivative transactions. Credit risk is controlled by entering into derivative transactions only with counterparties in respect of whom appropriate credit limits are sanctioned taking into account their ability to honor obligations. The Bank enters into International Swap Dealers Association (ISDA) agreements with each counter party.

d. The accounting policy for derivatives as stated in Significant Accounting Policies has been drawn-up in accordance with RBI guidelines and revenues are recognized accordingly.

3.4 Credit Default Swaps (CDS)

The Bank has not entered into any Credit Default Swap during the year.

4. ASSET QUALITY

4.1 ADVANCES

a) In the case of unaudited branches, the classification of advances, as certified by the Branch Managers has been incorporated.

b) Bank has made required provision for NPAs of Rs.2,607.15 Crores (Previous Year Rs.1,551.11 Crore) in line with RBI guidelines as at 31st March, 2015. During the year, Bank has made provision of Rs.1,969.04 crore (Previous year Rs.1,520.84 crore).

4.4 Details of financial assets sold to Securitization/ Reconstruction Company for Asset Reconstruction:

5.1 Risk Category wise Country Exposure

The following are the bank''s country wise net risk exposure based on the Country risk classification provided by the Export Credit Guarantee Corporation (ECGC).

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

During the year ended 31st March, 2015, the Bank has not exceeded the exposure ceiling as a percentage of capital funds of the Bank fixed by RBI to individual borrower/Group (excluding non-committal Line of credit)

6.0 DISCLOSURE OF PENALTIES IMPOSED BY RBI

During the financial year 2014-15, Reserve Bank of India

("RBI") has imposed following Penalties:

i) Penalty of Rs.0.10 crore under section 47A(1) of the Banking Regulation Act, 1949 for non obtention of certain documents in the sanction of credit facilities.

ii) As per the provision of RBI Master Circular DCM (CC) No. G-3/03.39.01/2014-15 — Scheme of Incentive and penalties for Bank branches based on performance in rendering customer service to the member of public dated July 1, 2014 an amount of Rs.0.01 Crore has been debited for discrepancies detected while processing the soiled note remittances received from currency chest.

iii) Penalty levied for wrong reporting, discrepancies detected during examination of soiled notes and others of currency chest transactions Rs.0.02 Crores.

B. DISCLOSURE REQUIREMENTS AS PER ACCOUNTING STANDARDS WHERE RBI HAS ISSUED GUIDELINES IN RESPECT OF DISCLOSURE ITEMS FOR NOTES TO ACCOUNTS

1.0 FIXED ASSETS

1. Pursuant to the notification ofSchedule II to the Companies Act 2013, w.e.f. 01.04.2014, following changes have been effected during the Financial Year 2014-15:

a. Depreciation has been provided on straight line method as compared to diminishing value method which was hitherto being followed up till 31.03.2014 (except in case of computers, ATMs and leasehold improvements).

b. Accordingly, useful life of the assets has been re- estimated and an amount of Rs.32.04 crore (net of deferred tax) has been adjusted against General Reserves for assets having no residual life as at 1st April, 2014. For assets having residual value as on 31.03.2014, depreciation is being spread over the remaining useful life of the asset keeping a residual value of Rs.10/- in respect of each asset.

c. Had the Bank continued with the old method of charging depreciation, the General Reserve (Opening Balance) would have been higher by Rs.45.17 crores, profit of the Bank for the year FY 2014-15 would have been lowered by Rs.3.68 crores and Fixed Asset would have been higher by Rs.41.49 crore.

2. Premises include properties costing Rs.12.30 crore (previous year Rs.12.30 crore) for which registration formalities are pending.

3. Fixed Assets include Nil (previous year Rs.0.09 crore) in respect of Capital Work in Progress-Premises.

4. During the year 2014-15 cost of software acquired is Rs.19.13 crore (previous year Rs.14.24 crore) and the amount amortized during the year is Rs.14.66 crore (previous year Rs.14.15 crore).

5. Contracts pending execution on Capital account and not provided for is Rs.65.73 crore (previous year Rs.86.09 crore).

2.0 EMPLOYEE BENEFITS

2.1 The Bank has accounted for Employee Benefits as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

2.2 (a) The Principal actuarial assumptions used as at the balance sheet date :

2.3 In terms of RBI circular no: DBOD.

BP.BC.80/21.04.018/2010-11 dated 9th February, 2011, after reckoning the available pension fund balance of Rs.338.67 Crore, the net incremental liability of Rs.552.53 Crore has been amortized over a period of five years starting from 2010-11. Accordingly a sum of Rs.110.49 Crore (representing one-fifth of Rs.552.53 Crore) has been charged to the Profit and Loss Account for the year ended 31st March, 2015. The net liability relating to serving employees being carried forward in terms of the requirements of the aforesaid circular amounts to Rs.Nil.

2.4 Pending settlement of the proposed wage revision of employees effective from 01st November, 2012, an adhoc provision of Rs.198.00 Crore has been made during the current year. The total provision held on this account as at 31st March, 2015 is Rs.316.00 Crore.

3.0 SEGMENT REPORTING - In terms of "AS 17 -

Segment Reporting", issued by the Institute of Chartered Accountants of India is as follows:

4.0 RELATED PARTY DISCLOSURE

In compliance with Accounting Standard 18 - Related Party Disclosures, issued by the Institute of Chartered Accountants of India read along with the Reserve Bank of India guidelines, the details pertaining to Related Party transactions are disclosed as under:

*Actual amount being less than Rs.50000/-, the same is not furnished.

Note : Where there is only one entity in any category of related party, banks need not disclose any details pertaining to that related party other than the relationship with that related party [c.f. Para 8.3.1 of the Guidelines].

5.0 LEASES

The Bank has entered into various operating lease for offices, guest house and residential premises for employees that are renewable on a periodical basis and cancellable at the Bank''s option. Rental expenses for such operating leases included in the financial statements for the year 2014-15 are Rs.209.96 crore (Previous year Rs.183.24 crore).

6.0 EARNINGS PER SHARE

Basic: Rs.6.97 per share (The face value of the share has been reduced to Rs.2.00 per share. Accordingly, the previous year figures have been restated).

7.0 ACCOUNTING FOR TAXES ON INCOME

a) Bank continues to consider the difference between accounting income and taxable income on valuation of securities as permanent difference during financial year 2014-15.

Deferred tax liability (net) Rs.13.89 Crore (Previous year Rs.174.06 Crore) is included under "Other Liabilities and Provisions".

c) Income Tax and Wealth Tax

i) Break-up of provision made for Income Tax and wealth tax during the year :

ii) Assessments for Income Tax have been completed up to the financial year 2012-13 and assessments for Wealth Tax have been completed up to the financial year 2006-07 and for the financial year 2011-12 only.

The following appeals by the Bank/Income Tax Department are pending at various stages:

i) Tax paid in advance and tax deducted at source appearing under "Other Assets" includes Rs.1091.93 Crore (previous year Rs.559.92 Crore) paid on account of demands disputed by the Bank, against which the Bank holds a provision of Rs.0.04 Crore (Previous year Rs.0.04 Crore). The Bank has gone on appeal and no additional provision is considered necessary in view of favorable judicial pronouncements in similar cases.

8.0 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

b) Contingent Liability:

(Rs. in Crore)

Claims against the Bank not acknowledged as debts:

Particulars No. of Gross Claim Net Claim claim

Total Claims outstanding as on 01.04.2014 111 596.74 587.83

Less: Claims deleted/revised during the period from 01.04.2014 to 30 71.76 69.57 31.03.2015

Add : New Claims added during the period from 01.04.2013 to 15 1329.05 1328.54 31.03.2015

96 1854.03 1846.80 Total Claims outstanding as on 31.03.2015

3. Draw Down from Reserves : Nil (Previous Year Nil)

4. Complaints / unimplemented awards of Banking Ombudsmen

6. Provisioning coverage ratio of the Bank as on 31st March, 2015 is 55.34% as against 52.90% as on 31st March, 2014.

7. During the year ended 31st March, 2015, Bank has received fee/remuneration of Rs.10.46 Crore from Bancassurance business (Previous year Rs.10.85 Crore).

15. Transfers to Depositor Education and Awareness Fund (DEAF)

Bank has transferred the below mentioned amount to DEAF during the year ended 31.03.2015.

16. Unhedged Foreign Currency Exposure

The Bank has in place a policy on managing credit risk arising out of unhedged foreign currency exposures of its borrowers. The objective of this policy is to maximize the hedging on foreign currency exposures of borrowers by reviewing their foreign currency product portfolio and encouraging them to hedge the unhedged portion.

In line with the policy, assessment of unhedged foreign currency exposure is a part of assessment of borrowers and is undertaken while proposing limits or at the review stage. Additionally, at the time of sanctioning limits for all clients, the Bank stipulates a limit on the unhedged foreign currency exposure of the client (as a % of total foreign currency exposure sanctioned by the Bank) after considering factors such as internal rating of the borrower, size, possibility of natural hedging, relative size of unhedged foreign currency exposure with respect to total borrowings of the client, etc. Further, the Bank reviews the unhedged foreign currency exposure across its portfolio on a periodic basis. The Bank also maintains incremental provision towards the unhedged foreign currency exposures of its borrowers in line with the extant RBI guidelines.

Further, the bank has maintained provision of Rs.13.22 Crore and additional capital of Rs.19.04 crore on account of Un-hedged Foreign Currency Exposure of its borrower as at March 31, 2015.

17. Liquidity Coverage Ratio

In pursuant to RBI Circular No. DBOD.BP.BC.No. 120/ 21.04.098/2013-14 dated June 9, 2014 on Basel III Framework on Liquidity Standards — Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards, Bank has to disclose information on LCR in the annual financial statement under Notes to Accounts, starting with financial year ending 31st March, 2015, for which the LCR related information needs to be furnished only for the quarter ending March 31, 2015. The necessary information is as under:

Qualitative Disclosure around LCR as on 31st March, 2015

1. The main drivers of the LCR results and the evolution of the contribution of inputs to the LCR''s calculation over time:

Liquidity Coverage Ratio (LCR) is defined as the ratio of HQLA (High Quality Liquid Assets) to net cash outflows. It aims to ensure that a bank maintains adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario.

I. Main Drivers of LCR:

The Main drivers of LCR result are level of High Quality Liquid Assets, expected Cash Inflows and expected net Cash Outflow within next 30days time horizon.

a. HQLA This comprises of High Quality Liquid Assets as under :

Level-1 assets

Level-2A assets

Level-2B assets

The Level-1 assets comprise of:

Cash

Cash Reserve Ratio (CRR) balance in excess minimum regulatory requirement.

Government Securities in excess of minimum Statutory Liquidity Requirement (SLR).

Government securities within the mandatory SLR requirement, to the extent allowed by RBI under Marginal Standing Facility (MSF) (7% of NDTL is at present allowed for MSF).

Marketable securities issued/guaranteed by sovereigns with 0% risk weight.

The quarterly average of Level-1 assets of the Bank for the quarter ended 31st March, 2015 were Rs.20,484.60 crore which accounts for 97.21% of total average HQLA of Rs.21,073.37 crore for the same period.

The Level 2A assets comprise of:

Corporate Bonds rated AA- or above by external rating agencies. Bank is applying 15% haircut on Level 2A assets as per extant guidelines of RBI. The share of average Level 2A assets is 2.49 % (Rs.524.88 crore) of total average HQLA for the quarter ended 31st March, 2015 and mainly comprises of corporate bonds of Non-financial entities which have been rated AA- or above.

The Level 2B assets comprise of:

Equity Shares of listed corporates Bank is applying 50% haircut on Level 2B assets as per extant guidelines of RBI. The share of average Level 2B assets is 0.30% (Rs.63.89 crore) of total average HQLA for the quarter ended 31st March, 2015 and comprises of equity shares of listed corporates which are listed in National Stock Exchange CNX NIFTY and/or S&P BSE Sensex. However, shares of Banks, financial institution and NBFCs are not reckoned as level 2B assets.

b. Cash inflows:

Inflows from Secured Lending: It consists of short term lending such as reverse repo, call lending etc.

Inflows from fully performing exposure:

Scheduled loan repayment within 30 days, other than NPA, has been considered.

Other Cash inflows: It includes Investments/ Liquid Mutual Funds/Certificate of Deposits maturing within 30 days and bank balances with other banks.

c. Cash Outflows: The outflows for the purpose of LCR have been divided in to following major categories:

Outflows from retail deposits: All demand and term deposits including foreign currency deposits placed with the Bank by a natural person are considered as retail deposits. The outflows from retail deposit are further bifurcated in to stable deposit and unstable deposit. Insured deposits up to Rs.1 lakhs per borrower have been considered as stable deposit and the remaining portion (Total deposits less stable deposits) is classified as unstable deposit. Total quarterly average retail deposit for LCR purposes for the quarter ended 31st March, 2015 was Rs.77,460.06 crore out of which average stable deposits was Rs.38,877.84 crore and unstable deposits was Rs.38,582.22 crore. Bank has considered outflows of all retail deposits for LCR purpose, including those where residual maturity is beyond 30 days.

Outflows from small business customers: The outflows from small business customers are those deposits where aggregate value of deposits does not exceed Rs.50 crore. Outflows up to 30 days from these deposits have been considered for LCR purposes as per the RBI guidelines.

Outflows from wholesale funding: The outflows other than those from retail deposits and small business customers are considered as outflows due to wholesale funding which has been further bifurcated in to unsecured wholesale funding and secured wholesale funding. For LCR purpose, all unsecured average wholesale funding of Rs.69,341.24 crore for the quarter ended 31st March, 2015 are classified as non-operational deposits as these deposit do not represent clearing, custody or cash management activities. The secured wholesale funding is consisting of secured borrowings through Liquidity Adjustment Facility (LAF)/ Collateralized Borrowing and Lending Obligation (CBLO) and Repurchase Agreement (REPO). Total average of secured borrowings for the quarter ended as on 31st March, 2015 was Rs. 2,561.61 crore.

Outflows from Credit and Liquidity facilities:

The un-availed/un-utilized limits of cash credit accounts (CC) and overdrafts (OD) accounts have been considered.

Outflows from other contingent funding obligations: The outflows from other contingent funding obligations include outflows due to bank guarantee and letter of credit commitments. For LCR purposes, Bank has considered the entire bank guarantee outstanding as on date and outflows of letter of credit within 30 days'' time horizon. Bank has also considered entire claims against the Bank not considered as debt.

2. Month wise LCR:

The LCR guidelines are applicable with effect from 1st January, 2015. The LCR stated herein i.e. 54.07% is a simple average of last three months LCR as follows:

LCR of the Bank as on 31.03.2015 is 60.74% as against the requirement of 60%. Bank is taking various steps to improve its LCR like increasing the retail portion of deposits where the run off factor is low, imposition of Penalty/Prevention clause for premature withdrawal of term deposits etc. Bank is also exploring the avenues to invest in high rated/quality assets like commercial paper, Treasury Bills, liquid mutual funds where return as well as liquidity is very high.

3. Intra-period changes as well as changes over time:

The Guidelines for computation of LCR is implemented with effect from 1st Jan., 2015. The requirement of LCR will increase from existing 60% as on 1st Jan., 2015 to 100% as on 1st Jan., 2019. The Bank has been maintaining sufficient liquid assets even before implementation of LCR. Going forward, Bank will improve LCR by focusing more on retail deposit.

5. Concentration of funding sources:

The Bank is primarily engaged in lending and borrowing activities. Bank is accepting deposit from the public as per the requirement of the Bank. Bank is borrowing from/ lending in the money market to manage its day to day liquidities/other requirements. The ratio of bulk deposit (Rs.1 crore and above) as on 31st Mar., 2015 was 51% which has come down from 54% as at 31st Mar., 2014. Bank is taking concerted effort to reduce the share of bulk deposit by focusing more on retail deposits.

6. Derivative exposures and potential collateral calls:

Bank deals in derivative for trading as well as for hedging purpose. The volume of derivative deals undertaken is relatively small. The outstanding derivative (interest rate swaps, currency future) as on 31st March, 2015 was Rs.1,183 crore.

7. Currency mismatch in the LCR:

Currency mismatch is applicable when the aggregate liabilities in the foreign currency amount to 5% or more of the bank''s total liabilities. In such cases the currency is considered as ''significant''. Our Bank''s banking and trading book is denominated in local currency. Bank does not have any foreign subsidiary. Foreign currency liabilities are less than 5% of total liabilities of the Bank and hence not treated as significant for application of currency mismatch.

8. Degree of centralization of liquidity management and interaction between the group''s units:

The Bank manages its liquidity risk proactively in a centralized manner at its Head Office through monitoring of various ratios both under stock and flow approach and the results are placed before the management for decision taking. Bank prepares Structural Liquidity Statement (SLS) on a daily basis for analysing/monitoring of liquidity mismatches in different time buckets according to internal/RBI norms. Such analysis is being reported to top management. SLS as on each Friday, first and third Wednesday and 15 th and last day of every month are placed before Asset Liability Management Committee (ALCO). Dynamic Liquidity Analysis (DLS) for likely position over a 90 days'' time horizon is placed to ALCO on monthly/ quarterly basis. In addition the Bank conducts back testing on a quarterly basis and reports to ALCO and also short term back testing of DLS on a fortnightly basis and reports to top management.

9. Other inflows and outflows in the LCR calculation that are not captured in the LCR common template but which is relevant for liquidity profile:

As per the LCR common template, investment in marketable securities representing claims or claims guaranteed by Public Sector Enterprises (PSE''s) that are assigned a 20% risk weight under the Basel II Standardized approach for credit risk are captured under level 2 A assets, whereas our Bank has a portfolio of PSE''s securities under AFS and HFT portfolio which are Marked to Market and not covered under credit risk. Hence investments in Public Sector Enterprises have not contributed to HQLA of the Bank.

Note: The above disclosure on Liquidity Coverage Ratio is compiled and certified by the Management and relied upon by the Auditors.

D. OTHERS

1.0 Inter-Branch Transactions

Reconciliation of transactions between Branches, Controlling offices and Head office has been done. All inter branch transactions up to 6th October, 2014 stand adjusted as at 31st March, 2015.

2.0 Gold in hand as at 31st March, 2015 of Rs.340.74 crore includes Gold held outside India amounting to Rs.339.68 crore for which Bank possesses statement of holding from the custodian.

3.0 The Bank has proposed for a dividend of 70% i.e. Rs.1.40 per share of the face value of Rs.2/- each.

4.0 Previous year''s figures have been regrouped/rearranged wherever necessary in conformity with the current year presentation.

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Mar 31, 2014

1.0 CAPITAL

a) During the year the Bank has issued and allotted 1,46,27,486 equity shares to Government of India on preferential basis at a price of Rs.307.64 per Equity share (i.e. Rs.10/- face value and Rs. 297.64 towards premium per share) on 20th December, 2013.

b) The Issued and Subscribed Capital of the Bank has been raised from 15,29,14,391 to 16,75,41,877 Equity Shares due to allotment of 1,46,27,486 Equity Shares to Government of India (i.e. in the name of ''President of India'') on a Preferential allotment basis on 20th December, 2013.

c) The paid-up Capital of the Bank has been increased from Rs.152,91,43,910 to Rs.167,54,18,770 due to receipt of allotment money for 1,46,27,486 Equity Shares allotted to Government of India on Preferential basis on 20th December, 2013.

d) The Bank''s Capital to Weighted Risk Assets Ratio (CRAR) has been worked out as per Reserve Bank of India guidelines. The ratios as at 31st March, 2014 are:

Investments includes securities of the face value of Rs.19,860.00 Crore (Previous year Rs.15,175.00 Crore), pledged/transferred to RBI for availing various facilities. It also includes securities of the face value of Rs.15,450.00 Crore (Previous year Rs. 10,000.00 Crore) transferred in the name of Reserve Bank of India out of which securities of the face value of Rs.5464.16 Crore (Previous year Rs.4,725.00 Crore) were encumbered for borrowing under LAF-Repo as on 31.03.2014.

2.1 Premium of Rs.77.24 Crore (Previous year Rs.43.47 Crore) has been amortized in respect of securities under "Held to Maturity" category.

2.2 Depreciation of Rs.512.30 Crore has been provided for investments under the "Available for Sale" category as against the reversal of Rs.7.44 Crore being excess provision for depreciation in the said category during the last year.

2.3 Depreciation of Rs. 3.11 Crore (Previous year Rs.0.65 Crore) has been reversed for investments under the "Held for Trading" category.

2.4 During the year, the Bank has transferred securities of book value of Rs.8369.93 Crore (Previous year Rs.798.95 Crore) from "Available for Sale category" to "Held to Maturity" , transferred securities of book value of Rs.8093.67 Crore (Previous year Rs.796.03 Crore) from "Held to Maturity" to "Available for Sale category", transferred securities of book value of Rs.340.62 Crore (Previous year Rs.146.99 Crore) from "Held for Trading" to "Available for Sale category" and also transferred securities of book value of Rs.505.24 Crore (Previous year Rs.NIL) from "Held for Trading" to "Held to Maturity".

2.5 During the current year, the value of sales / transfers of securities to / from HTM category {excluding portfolio transfer of securities (under one time / special window permitted by RBI) and sales to RBI under OMO auctions } was within 5% of the book value of the investment held in HTM category at the beginning of the year.

2.6 On 29th November, 2013, there was an instance of short fall of Rs.8.25 Crore in borrowing under Clearcorp Repo Order Matching Systems (CROMS) due to technical reasons. The bank had sufficient surplus of un-encumbered securities and at the end of the day, the requisite shortfall under CROMS was transferred to Principal SGL account.

3.1 Disclosure on Risk Exposure in Derivatives:

(i) Qualitative Disclosure:

a. The Bank''s Derivative Policy as approved by Board permits Bank to undertake deals in over-the-counter (OTC) as well as exchange traded (ET) interest rate and currency derivatives. The policy permits the offering of the products to the customer to manage their foreign currency exposures, which are to be covered on Back-to-Back basis in the interbank market. Derivatives can also be used by the Bank both for trading as well as hedging on-balance sheet items. In the current financial year Bank has entered into derivative deals involving forwards and currency futures.

b. The Asset Liability Management Committee (ALCO) of the Bank overseas management of these risks. The Bank''s Integrated Risk Management Department (IRMD), independently identifies, measures and monitors market risk associated with derivative transactions, assists ALCO in controlling and managing these risks and reports compliance with policy prescriptions to the Risk Management Committee of the Board (RMCB) at regular intervals.

c. Derivative transactions carry market risk i.e. the probable loss the Bank may incur as a result of adverse movements in interest rates / exchange rates and credit risk i.e. the probable loss the Bank may incur if the counterparties fail to meet their obligations. The Bank''s "Derivative Policy" approved by the Board prescribes the market risk parameters as well as Customer Appropriateness policy for entering into derivative transactions. Credit risk is controlled by entering into derivative transactions only with counterparties in respect of whom appropriate credit limits are sanctioned taking into account their ability to honor obligations. The Bank enters into International Swap Dealers Association (ISDA) agreements with each counterparty.

d. The accounting policy for derivatives as stated in Significant Accounting Policies has been drawn-up in accordance with RBI guidelines and revenues are recognized accordingly.

3.2 The Bank has not entered into any Credit Default Swap during the year.

4.0 ASSET QUALITY

4.1 ADVANCES

a) In the case of unaudited branches, the classification of advances, as certified by the Branch Managers has been incorporated.

b) Bank has made required provision for NPAs of Rs.1,551.11 Crore (Previous Year Rs. 575.74 Crore) in line with RBI guidelines as at 31st March, 2014.

7.1 Risk Category wise Country Exposure

The following are the bank''s country wise net risk exposure based on the Country risk classification provided by the Export Credit Guarantee Corporation (ECGC).

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

During the year ended 31st March, 2014, the Bank has not exceeded the exposure ceiling* fixed by RBI to individual borrower / Group except in the following cases, which have been approved by the Board:

8.0 Disclosure of Penalties Imposed by RBI

A. During the financial year 2013-14, the Reserve Bank of India has imposed a penalty of Rs.1.53 Crore for violation of KYC guidelines and delayed reporting / remittance.

B. Disclosure Requirements as Per Accounting Standards where RBI has Issued Guidelines in Respect of Disclosure Items for Notes to Accounts

9.1 Fixed Assets

a) Premises include properties costing Rs.12.30 Crore (Previous year Rs.12.30 Crore) for which registration formalities are pending.

b) Fixed Assets include Rs.0.09 Crore (Previous year Rs. Nil) in respect of Capital Work in Progress-Premises and Rs.0.24 Crore (Previous year Rs. Nil) in Capital Advance- Premises Account.

c) During the year 2013-14, cost of software acquired is Rs. 14.24 Crore (Previous year Rs.9.61 Crore) and the amount amortized till 2013-14 is Rs.14.15 Crore (Previous year Rs.12.55 Crore).

d) Premises include buildings of Rs. 3.59 Crore (Previous year Rs. 3.59 Crore) which are subject to previous owner''s right of redemption.

e) Contracts pending execution on Capital account and not provided for is Rs. 86.09 Crore (Previous year Rs. 4.61 Crore).

10 Employee Benefits

10.1 The Bank has accounted for Employee Benefits as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

10.2 (a) The Principal actuarial assumptions used as at the balance sheet date :

10.3 In terms of RBI Circular No.: DBOD.BP.BC.80/ 21.04.018/2010-11 dated 9th February, 2011, after reckoning the available pension fund balance of Rs.338.67 Crore, the net incremental liability of Rs.552.53 Crore is being amortized over a period of five years starting from 2010-11. Accordingly a sum of Rs.110.51 Crore (representing one-fifth of Rs. 552.53 Crore) has been charged to the Profit and Loss Account for the year ended 31st March, 2014. The net liability relating to serving employees being carried forward in terms of the requirements of the aforesaid circular amounts to Rs.110.49 Crore.

10.4 Pending settlement of the proposed wage revision of employees effective from 01st November, 2012, an adhoc provision of Rs.75.00 Crore has been made during the current year. The total provision held on this account as at 31st March, 2014 is Rs.118.00 Crore.

11. Related Party Disclosure :

In compliance with Accounting Standard 18 - Related Party Disclosures, issued by the Institute of Chartered Accountants of India read along with the Reserve Bank of India guidelines, the details pertaining to Related Party transactions are disclosed as under:

12. Accounting for Taxes on Income

a) Pursuant to 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. 364.46 Crore due to the creation of DTL on Special Reserve as at March 31, 2014, not previously charged to the Profit and Loss Account, has now been adjusted directly from the General Reserves. 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 be lower by such amount.

b) Bank has considered the difference between accounting income and taxable income on valuation of securities as permanent difference which were hitherto considered as timing difference. Accordingly, creation of Deferred Tax Liability of Rs.869.00 Crore has not been considered necessary. Further, Deferred Tax Liability of Rs.191.10 Crore created up to the previous year has been reversed during the current year.

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

14. Provisioning coverage ratio of the Bank as on 31st March, 2014 is 52.82% as against 62.06% as on 31st March, 2013.

15. During the year ended 31st March, 2014, Bank has received fee/remuneration of Rs. 10.85 Crore from Bancassurance business (Previous year Rs. 8.27 Crore).

D. Others

1.0 Inter Branch Transactions

Reconciliation of transactions between Branches, Controlling offices and Head office has been done. All inter branch transactions up to 8th January, 2014 stand adjusted as at 31st March, 2014.

2.0 BALANCING OF BOOKS

a) Books of account have been balanced and tallied up to 31st March, 2014.

b) Other Assets and Other Liabilities and accounts with other banks/institutions include a few old entries pending for reconciliation and adjustment, having no material impact on the Profit & Loss and Balance Sheet of the Bank.

3.0 The Bank has declared an interim dividend of 45% i.e. Rs.4.50 per share and proposed for a dividend of 22.50% i.e. Rs.2.25 per share of the face value of Rs.10/- each.

4.0 Previous year''s figures have been regrouped/rearranged wherever necessary in conformity with the current year presentation.

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Mar 31, 2013

1. CAPITAL

The Bank''s Capital to Weighted Risk Assets Ratio (CRAR) has been worked out as per Reserve Bank of India guidelines. The ratios as at 31st March 2013 are:

1. INVESTMENTS

2.1 In terms of the guidelines of the Reserve Bank of India,

a. Premium of Rs. 43.47 crore (previous year Rs. 42.12 crore) has been amortized in respect of securities under "Held to Maturity" category.

b. Rs. 7.44 crore being excess provision for depreciation for investment under the "Available for Sale" category has been reversed during the year as against Rs.62.18 crore depreciation provided during the last year.

c. Rs. 0.65 crore being excess provision for depreciation for investment under the "Held For Trading" category has been reversed during the year as against Rs. 10.18 crore depreciation provided during the last year.

d. During the year, the Bank as a one-time measure, transferred securities of book value of Rs.798.95 crore (Previous year Rs. 1795.51 crore) from "Available for Sale category" to "Held to Maturity", transferred securities of book value of Rs.796.03 crore (Previous year Rs. 1.50 crore) from "Held to Maturity" to "Available for Sale category"and also transferred securities of book value of Rs. 146.99 Crore (Previous year Rs. 52.61 Crore) from "Held for Trading" to "Available for Sale category".

2.2 In terms of the guidelines issued by the Reserve Bank of India, the following are the disclosures: -

Investments includes securities of the face value of Rs.15115.00 crore (Previous year Rs.12325.00 crore), pledged/transferred to RBI for availing various facilities. It also includes securities of the face value of Rs. 10000.00 crore (Previous year Rs. 1000.00 crore) transferred in the name of Reserve Bank of India out of which securities of the face value of Rs. 4125.00 crore (Previous year Rs. 5401.50 crore) encumbered for borrowing under LAF-Repo as on 31.03.2013.

The Bank has not contracted any exchange traded interest rate derivatives during the year.

1.1 Disclosure on Risk Exposure in Derivatives: Qualitative Disclosure:

1. The Bank''s Derivative Policy as approved by Board permits Bank to undertake deals in over-the-counter (OTC) as well as exchange traded (ET) interest rate and currency derivatives. The policy permits the offering of the products to the customer to manage their foreign currency exposures, which are to be covered on Back-to-Back basis in the interbank market. Derivatives can also be used by the Bank both for trading as well as hedging on-balance sheet items. In the current financial year Bank has entered into derivative deals involving forwards and currency futures.

2. The Asset Liability Management Committee (ALCO) of the Bank overseas management of these risks. The Bank''s Integrated Risk Management Department (IRMD), independently identifies, measures and monitors market risk associated with derivative transactions, assists ALCO in controlling and managing these risks and reports compliance with policy prescriptions to the Risk Management Committee of the Board (RMCB) at regular intervals.

3. Derivative transactions carry market risk i.e. the probable loss the Bank may incur as a result of adverse movements in interest rates / exchange rates and credit risk i.e. the probable loss the Bank may incur if the counterparties fail to meet their obligations. The Bank''s "Derivative Policy" approved by the Board prescribes the market risk parameters as well as Customer Appropriateness policy for entering into derivative transactions. Credit risk is controlled by entering into derivative transactions only with counterparties in respect of whom appropriate credit limits are sanctioned taking into account their ability to honour obligations. The Bank enters into International Swap Dealers Association (ISDA) agreements with each counterparty.

4. The accounting policy for derivatives as stated in Significant Accounting Policies, has been drawn-up in accordance with RBI guidelines and revenues are recognized accordingly.

5. ASSET QUALITY

5.1 ADVANCES

a. In the case of unaudited branches, the classification of advances, as certified by the Branch Managers has been incorporated.

b. As against total provision of Rs. 515.14 crore (previous year Rs. 356.29 crore) required for NPAs in line with RBI guidelines as of 31.03.2013, provision of Rs. 915.94 crore (previous year Rs. 629.54 crore) has been made during the year.

c. Provision on standard advances amounting to Rs. 618.00 crore (including Rs. 496.00 crore created in earlier years) is shown as per RBI guidelines, under "Other Liabilities and Provisions - others" in Schedule No. 5 of the Ba1ance Sheet.

Note:

1. The above disclosure on restructured accounts is compiled and certified by the Management and relied upon by the Auditors. Opening balance includes closed accounts during the year. Movement of closed accounts is not shown in the statement.

2. One of the restructured accounts, of a Public Sector Undertaking, has been treated as Standard Asset as per the special dispensation granted by Reserve Bank of India. The consequent provision towards the diminution in fair value and towards standard assets is being amortized over 8 quarters commencing from 1st quarter of FY 2012-13 as per the said dispensation.

Note: Average working funds represent average of total assets as reported to RBI during 12 months of the financial year.

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

During the year ended 31.03.2013, the Bank has not exceeded the exposure ceiling* fixed by RBI to individual borrower / Group except in the following cases, which have been approved by the Board:

*As a percentage of capital funds of the Bank. The capital funds for this purpose were Rs. 13113.15 crore during the period from 01.04.2012 to 31.03.2013. Prudential exposure limits for this purpose is fixed by RBI are as follows:

6. Disclosure of Penalties imposed by RBI

During the financial year 2012-13, the Bank has not been subjected to any material penalty for contravention or non-compliance with any requirement of the Banking Regulation Act, 1949, or any order/ rules or conditions specified by the Reserve Bank of India under the said Act.

7. INTER- BRANCH TRANSACTIONS

Reconciliation of transactions between Branches, Controlling offices and Head office has been done. All inter branch transactions upto 14.12.2012 stand adjusted as at 31.03.2013.

8. BALANCING OF BOOKS

a. Books of account have been balanced and tallied up to 31st March 2013.

b. Other Assets and Other Liabilities and accounts with other banks/institutions include a few old entries pending reconciliation and adjustment having no material impact on the Profit & Loss and Balance Sheet of the Bank.

9. FIXED ASSETS

a. Premises include properties costing Rs. 12.30 crore (previous year Rs. 12.30 crore) for which registration formalities are pending.

b. Fixed Assets include Rs. Nil crore (previous year Rs. NIL) in respect of Capital Work in Progress-Premises.

c. During the year 2012-13, cost of software acquired is Rs.9.61 crore (previous year Rs.16.01 crore) and the amount amortised till 2012-13 is Rs. 12.55 crore (previous year Rs.9.76 crore).

d. Premises include buildings of 3.59 crore (previous year 3.59 crore) which are subject to previous owners right of redemption.

e) Contracts pending execution on Capital account and not provided for is Rs.4.61 crore (previous Year Rs. 7.15 crore).

10. CASH FLOW STATEMENT (AS 3)

The Cash Flow statement for the year is given separately.

11. EMPLOYEE BENEFITS

11.1 The Bank has accounted for Employee Benefits as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

11.2 A reconciliation of Opening and Closing Balances of the present value of the defined benefit obligation and Plan assets is as under:

11.3 The present value of defined benefits obligations, the fair value of plan assets, Surplus/ Deficits and experience adjustments for the current and previous four years are as under:

11.4 In terms of RBI circular no:DBOD. BP.BC.80/21.04.018/2010-11 dated 9th February 2011, after reckoning the available pension fund balance of 338.67 crore, the net incremental liability of 552.53 crore is being amortised over a period of five years starting from 2010-11. Accordingly a sum of Rs.110.51 crore (representing one-fifth of Rs. 552.53 crore) has been charged to the Profit and Loss Account for the year ended 31st March 2013. The net liability relating to serving employees being carried forward in terms of the requirements of the aforesaid circular amounts to Rs.221.00 crore.

Including Rs. 6.34 lakhs performance linked incentives paid to Mr. Ramnath Pradeep [Ex-CMD] and Mr. Ashwani Kumar [Ex-ED]

The Ministry of Finance, Government of India vide notification dated 1st November 2012 has amalgamated the Chikmagalur Kodagu Grameena Bank (Chiko Bank), Rural Regional Bank (RRB) sponsored by the Bank with Kaveri Grameena Bank, Mysore (a RRB sponsored by State Bank of Mysore).

Since, the Bank and its Subsidiary are state controlled, no disclosures are made pertaining to the transactions with them in accordance with the requirements of the Accounting Standard 18 issued by the Institute of Chartered Accountants of India.

b) Diluted: Not applicable as there are no dilutive potential equity shares.

Deferred tax liability (net) Rs. 130.38 crore (previous year 345.87 crore) is included under " Other Liabilities and Provisions".

* This includes provision for claims against the Bank not acknowledged as debt, provision towards fraudulent transactions and other miscellaneous transactions.

Contingent Liabilities includes disputed Income tax and interest tax of Rs.211.16 crore (previous year Rs.210.01 crore) for which the department has gone in appeal.

b) Assessments for Income Tax and Wealth Tax have been completed up to the financial year 2010-11 and 2001-08 respectively. The following appeals by the Bank/Income Tax Department are pending at various stages:

12. Provisioning coverage ratio of the Bank as on 31st March is 62.06% as against 65.30% as on 31st March 2012.

13. During the year ended 31st March 2013, Bank has received fee/remuneration of Rs.8.27 crore from Bancassurance business (previous year Rs.8.31 crore).

14. The Bank has not entered into any Credit Default Swap during the year.

15. The Bank has recommended a dividend of 190% i.e. Rs. 19.00 per share of the face value of Rs. 10/- each.

16. Previous year''s figures have been regrouped/rearranged wherever necessary.

---

Mar 31, 2012

1 INVESTMENTS

1.1 In terms of the guidelines of the Reserve Bank of India,

a) Premium of Rs42.12 crore (previous year Rs47.71 crore) has been amortized in respect of securities under "Held to Maturity" category.

b) Depreciation of Rs62.18 crore (previous year Rs72.22 crore) has been provided for investments under "Available for Sale" category.

c) Depreciation of Rs10.18 crore (previous year Rs7.49 crore) has been provided for investments under "Held for Trading" category.

d) During the year, the Bank as a one-time measure, transferred securities of book value of Rs1,795.51 crore (Previous year Rs1,893.38 crore) from "Available for Sale category" to "Held to Maturity", transferred securities of book value of Rs1.50 crore (Previous year Rs1,064.61 crore) from "Held to Maturity" to "Available for Sale" category and also transferred securities of book value of Rs52.61 crore (previous year Rs211.21 crore) from "Held for Trading" to "Available for Sale category".

Investments includes securities of the face value of Rs12,325.00 crores (Previous year Rs10,475 crore), pledged/transferred to RBI for availing various facilities. It also includes securities of the face value of Rs7,000.00 crore (Previous year Rs5,300.00 crore) transferred in the name of Reserve Bank of India out of which securities of the face value of Rs5,407.50 crore (Previous year Rs2,100.00 crore) encumbered for borrowing under LAF- Repo as on 31.03.2012.

The Bank has not contracted any exchange traded interest rate derivatives during the year.

2.1 Disclosure on Risk Exposure in Derivatives: Qualitative Disclosure:

1. The Bank's Derivative Policy as approved by Board permits Bank to undertake deals in over-the-counter (OTC) as well as exchange traded (ET) interest rate and currency derivatives. The policy permits the offering of the products to the customer to manage their foreign currency exposures, which are to be covered on Back-to-Back basis in the interbank market. Derivatives can also be used by the Bank both for trading as well as hedging on-balance sheet items. In the current financial year Bank has entered into derivative deals involving forwards and currency futures.

2. The Asset Liability Management Committee (ALCO) of the Bank overseas management of these risks. The Bank's Integrated Risk Management Department (IRMD), independently identifies, measures and monitors market risk associated with derivative transactions, assists ALCO in controlling and managing these risks and reports compliance with policy prescriptions to the Risk Management Committee of the Board (RMCB) at regular intervals.

3. Derivative transactions carry market risk i.e. the probable loss the Bank may incur as a result of adverse movements in interest rates / exchange rates and credit risk i.e. the probable loss the Bank may incur if the counterparties fail to meet their obligations. The Bank's "Derivative Policy" approved by the Board prescribes the market risk parameters as well as Customer Appropriateness policy for entering into derivative transactions. Credit risk is controlled by entering into derivative transactions only with counterparties in respect of whom appropriate credit limits are sanctioned taking into account their ability to honour obligations. The Bank enters into International Swap Dealers Association (ISDA) agreements with each counterparty.

4. The accounting policy for derivatives as stated in Significant Accounting Policies, has been drawn-up in accordance with RBI guidelines and revenues are recognized accordingly.

3. ASSET QUALITY

3.1 ADVANCES

a) In the case of unaudited branches, the classification of advances, as certified by the Branch Managers has been incorporated.

b) As against total provision of Rs356.29 crore (previous year Rs363.05 crore) required for NPAs in line with RBI guidelines as of 31.03.2012, provision of Rs629.54 crore (previous year Rs547.76 crore) has been made during the year.

c) Provision on standard advances amounting to Rs496.00 crore (including Rs375.75 crore created in earlier years) is shown as per RBI guidelines, under "Other Liabilities and Provisions - others" in Schedule No. 5 of the Balance Sheet.

One of the restructured accounts, of a Public Sector Undertaking, has been treated as Standard Asset as per the special dispensation granted by Reserve Bank of India. The consequent provision towards the diminution in fair value amounting to Rs128.00 crore and the additional provision required towards standard assets amounting to Rs26.00 crore will be amortized in 8 quarters commencing from 1st quarter of FY 2012-13 as per the said dispensation.

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

During the year ended 31.03.2012, the Bank has not exceeded the exposure ceiling* fixed by RBI to individual borrower / Group except in the following cases, which have been approved by the Board:

*As a percentage of capital funds of the Bank. The capital funds for this purpose were Rs12710.05 crore during the period from 01.04.2011 to 31.03.2012. Prudential exposure limits for this purpose is fixed by RBI are as follows:

Since Bank had a Provision Coverage Ratio of 74.68% as on September 30, 2010, with no floating provision, no Countercyclical Provisioning Buffer was required to be made as per the provision of the Reserve Bank of India circular no. DBOD.No.BP.BC.12 /21.04.048/2011-12 dated July 1, 2011.

5. Disclosure of Penalties imposed by RBI

During the financial year 2011-12, the Bank has not been subjected to any material penalty for contravention or non- compliance with any requirement of the Banking Regulation Act, 1949, or any order/rules or conditions specified by the Reserve Bank of India under the said Act except a penalty of Rs 10,000.00 for Non-acceptance of cut and soiled note in one of the branches.

6. Inter-branch Transactions

Reconciliation of transactions between Branches, Controlling offices and Head Office has been done. All inter branch transactions upto 31.01.2012 stand adjusted as at 31.03.2012.

7. Balancing of Books

a) Books of account have been balanced and tallied up to 31st March 2012.

b) Other Assets and Other Liabilities and accounts with other banks/institutions include a few old entries pending reconciliation and adjustment having no material impact on the Profit & Loss and Balance Sheet of the Bank.

8. Fixed Assets

a) Premises include properties costing Rs12.30 crore (previous year Rs12.30 crore) for which registration formalities are pending.

b) Fixed Assets include Rs Nil (previous year Rs0.01 crore) in respect of Capital Work in Progress-Premises.

c) During the year 2011-12 cost of software acquired is Rs16.01 crore (previous year Rs10.13 crore) and the amount amortised till 2011-12 is Rs9.76 crore (previous year Rs6.18 crore).

d) Premises include buildings of Rs3.59 crore (previous year Rs3.59 crore) which are subject to previous owners right of redemption.

e) Contracts pending execution on Capital account and not provided for is Rs7.15 crore (previous Year Rs6.03 crore).

9. Cash Flow Statement (AS 3)

The Cash Flow statement for the year is given separately.

10. Employee Benefits

10.1 The Bank has accounted for Employee Benefits as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

10.2 The Principal actuarial assumptions used as at the balance sheet date :

10.3 In terms of RBI circular no: DBOD. BP.BC.80/21.04.018/2010-11 dated 9th February 2011, after reckoning the available pension fund balance of Rs338.67 crore, the net incremental liability of Rs552.53 crore is being amortised over a period of five years starting from 2010-11. Accordingly a sum of Rs110.51 crore (representing one-fifth of Rs552.53 crore) has been charged to the Profit and Loss Account for the year ended 31st March, 2012. The net liability relating to serving employees being carried forward in terms of the requirements of the aforesaid circular amounts to Rs331.51 crores.

Including Rs6.00 lakhs performance linked incentives paid to Mr. J. M. Garg [Ex-CMD] and Mr. Asit Pal [Ex-ED].

Since, the Bank and its Subsidiary are state controlled, no disclosures are made pertaining to the transactions with them in accordance with the requirements of the Accounting Standard 18 issued by the Institute of Chartered Accountants of India. Accordingly, no disclosure has also been made in respect of the Regional Rural Bank (RRB) sponsored by the Bank.

b) Diluted: Not applicable as there are no dilutive potential equity shares.

* This includes provision for claims against the Bank not acknowledged as debt, provision towards fraudulent transactions and other miscellaneous transactions.

** including provision made by debit of Rs12.79 crore to other than provision and contingencies.

c) Contingent Liability:

(Rs in crore)

i) Claims against the Bank not acknowledged as debts:

No. of Gross Net

Particulars claim Claim Claim

Total Claims outstanding as m n/nnn 106 303.86 296.82 on 01.04.2011

Less: Claims deleted/revised during the period from 23 303.71 303.35 01.04.2011 to 31.03.2012

Add : New Claims added during the period from 33 285.70 284.36 01.04.2011 to 31.03.2012

Total Claims outstanding as

116 285.85 277.83 on 31.03.2012

Contingent Liabilities includes disputed Income tax and interest tax of Rs270.07 crore (previous year Rs147.76 crore) for which the department has gone in appeal.

b) Assessments for Income Tax and Wealth Tax have been completed up to the financial year 2009-10 and 2007-08 respectively. The following appeals by the Bank / Income Tax Department are pending at various stages:

c) Tax paid in advance and tax deducted at source appearing under "Other Assets" includes Rs341.44 crore (previous year Rs286.97 crore) paid on account of demands disputed by the Bank, against which the Bank holds a provision of Rs0.04 crore. The Bank has gone on appeal and no additional provision is considered necessary in view of favourable judicial pronouncements in similar cases.

11. Drawn Down from Reserves : Nil (Previous Year Nil)

12. Letter of Comforts (LOCs) issued by the Bank (other than for Buyers Credit) during the year is Nil (Previous Year Nil).

13. Provisioning coverage ratio as at 31st March 2012 works out to 89.06% with respect to Gross NPA as at September 30, 2010 and 65.30% with respect to Gross NPA as at 31st March 2012. Provisioning Coverage Ratio of the Bank as on 31.03.2011 is 74.70%.

14. During the year ended 31st March 2012, Bank has received fee/remuneration of Rs8.31 crore from Bancassurance business ( previous year Rs7.68 crore).

15. The Bank has recommended a dividend of 205% i.e. Rs20.50 per share of the face value of Rs10/- each.

16. During the year ended 31st March 2012, Bank has forfeited 3300 equity shares on which allotment money of Rs40 per share (Rs5 towards face value and Rs35 towards share premium) was unpaid. Consequently a sum of Rs33000 deducted from paid up capital.

17. Previous year's figures have been regrouped/rearranged wherever necessary.

---

Mar 31, 2010

1 Capital

The Banks Capital to weighted Risk Assets Ratio (CRAR) has been worked out as per Reserve Bank of India guidelines. The ratios as at 31st March, 2010 are:

2 Investments

2.1 In view of the guidelines of the Reserve Bank of India,

a) Premium of Rs.68.16 crore (previous year Rs.73.60 crore) has been amortized in respect of securities under "Held to Maturity" category.

b) Depreciation of Rs.0.l4 crore (previous year Rs.43.68 crore) has been provided for investments under the "Held for Trading" category.

c) During the year, the Bank as a one-time measure, transferred securities of book value of Rs.2,382.51 crore (P.Y.455.73 crore) from "Available for Sale category" to "Held to Maturity".

d) Pursuant to the guidelines contained in Reserve Bank of India communication vide DBOD.BP.BC.

No.133/21.04.018/2008-09 dated May 11, 2009, the Bank has recognized as income Rs.0.51 crore representing unreconciled credit entries in Nostro Mirror Accounts and earlier parked in blocked account.

Investments includes securities of the face value of Rs.92 crores (Previous year Rs.65 crore), pledged/transferred to CCIL/MCX/ NSC for availing various facilities. It also includes securities of the face value of Rs.550 crore (Previous year Rs. 1,400 crore) transferred in the name of Reserve Bank of India out of which securities of the face value of Rs.367.50 crore (Previous year Rs. Nil crore) encumbered for borrowing under LAF-Repo as on 31.3.2010.

3.3 Disclosure on Risk Exposure in Derivatives:

Qualitative Disclosure:

i. The Banks Derivative Policy as approved by Board permits Bank to undertake deals in over-the-counter (OTC) as well as exchange traded (ET) interest rate and currency derivatives. The policy permits the offering of the products to the customer to manage their foreign currency exposures, which are to be covered on Back-to- Back basis in the interbank market. Derivatives can also be used by the Bank both for trading as well as hedging on-balance sheet items. In the current financial year Bank has entered into derivative deals involving forwards and currency futures.

ii. The Asset Liability Management Committee (ALCO) of the Bank overseas management of these risks. The Banks Integrated Risk Management Department (IRMD), independently identifies, measutes and monitors market risk associated with derivative transactions, assists ALCO in controlling and managing these risks and reports compliance with policy prescriptions to the Risk Management Committee of the Board (RMCB) at regular intervals.

iii. Derivative transactions carry market risk i.e. the probable loss the Bank may incut as a result of adverse movements in interest rates / exchange rates and credit risk i.e. the probable loss the Bank may incut if the counterparties fail to meet their obligations. The Banks "Derivative Policy" approved by the Board prescribes the matket risk parameters as well as Customer Appropriateness policy for entering into derivative transactions. Credit risk is controlled by entering into derivative transactions only with counterparties in respect of whom appropriate credit limits are sanctioned taking into account their ability to honour obligations. The Bank enters into International Swap Dealers Association (ISDA) agreements with each counterparty.

iv. The accounting policy for derivatives as stated in Significant Accounting Policies, has been drawn-up in accordance with RBI guidelines and revenues are recognized accordingly.

4. Asset Quality

4.1 Advances

a) In the case pf unaudited branches, the classification of advances, a5 certified by the Branch Managers has been incorporated.

b) Out of thej total provision of Rs.426.48 crore (previous year Rs.4l4-96 crore) required for NPAs in line with RBI guidelines ^s of 31.03.2010, provision of Rs.345.25 crore (previous yiar Rs. 170 crore) has been made during the year after taking into consideration provision of Rs.81.23 crore (previous year Rs.244.96 crore) held already in books of account.

c) Provision cjn standard advances amounting to Rs.285.76 crore (including Rs.246.26 crore created in earlier years) is shown ai per RBI guidelines, under "Other Liabilities and Provisipns - others" in Schedule No. 5 of the Balance Sheet.

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

During the year ended 31st March, 2010, the Bank has not exceeded the exposure ceiling* fixed by RBI to individual borrower/ Group except in the following cases, which have been approved by the Board.

6. Disclosure of Penalties imposed by RBI

During the financial year 2009-10, the Bank has not been subjected to any penalty for contravention or non-compliance with any requirement of the Banking Regulation Act, 1949, or any order/rules or conditions specified by the Reserve Bank of India under the said Act.

7. Inter-Branch Transactions

Reconciliation of transactions between Branches, Controlling offices and Head office has been done. All inter branch transactions upto 28.2.2010 stand adjusted as at 31.3.2010.

8. Balancing of Books

a) Books of account have been balanced and tallied up to 31st March, 2010.

b) Other Assets and Other Liabilities and accounts with other banks/institutions include a few old entries pending reconciliation and adjustment having no material impact on the Profit & Loss and Balance Sheet of the Bank.

9. Under Agricultural Debt Relief Scheme (AD WDR Scheme) the last date for payment of 75% of the overdue portion by the other farmers have been extended upto 30.6.2010. The eligible other farmers are allowed to repay the amount in one or more installments upto 30.6.2010. Hence the loan accounts of the other farmers, who have given consent to the scheme, have been classified as standard.

10. Fixed Assets

a) Premises include properties costing Rs.0.43 crore (previous year Rs.l.6l crore) for which registration formalities are pending.

b) Fixed Assets include Rs.1.75 crore (previous year Rs.0.76 crore) in respect of Capital Work in Progress and Rs.0.20 crore (previous year Rs.1.75 crore) towards Capital Advances.

c) During the year 2009-2010 cost of software acquired is Rs.6.36 crore (previous year Rs.6.77 crore) and the amount amortised till 2009-10 is Rs.6.05 crore (previous year Rs.6.29 crore).

d) Premises include buildings of Rs.3.59 crore (previous year Rs.3.59 crore) which are subject to previous owners right of redemption.

e) Contracts pending execution on Capital account and not provided for is Rs.20.26 crore (previous year Rs.20.40 crore).

11. Cash Flow Statement (AS 3)

The Cash Flow Statement for the year is given separately.

12. Employee Benefits

12.1 The Bank has accounted for Employee Benefits as per Accounting Standard 15 issued by the Institute of Chartered Accountants of India.

12.2 A reconciliation of Opening and Closing Balances of the present value of the defined benefit obligation and the effects during the period attributable to each of the following is as under:

13. Segment Reporting

In terms of "AS 17 - Segment Reporting", issued by the Institute of Chartered Accountants of India, the Segment Report has been given for the Consolidated Financial Statements.

14. Related Party Disclosure

In compliance with Accounting Standard 18 - Related Party Disclosures, issued by the Institute of Chartered Accountants of India read along with the Reserve Bank of India guidelines, the details pertaining to Related Party transactions are disclosed as under:

Names of Related Party and their Relationship with the Bank:

Subsidiaries: - Corpbank Securities Ltd.

Associate (RRB): - Chikmagalur Kodagu

Grameena Bank (Chiko Bank)

Key Management Personnel:-

Mr. J. M.Garg Chairman & Managing Director

Mr. As it Pal Executive Director

Mr. Narendra Singh Executive Director (From 07.12.2009)

Since, the Bank and its Subsidiary are state controlled, no disclosures are made pertaining to the transactions with them in accordance with the requirements of the Accounting Standard 18 issued by the Institute of Chartered Accountants of India. Accordingly, no disclosure has also been made in respect of the Rural Regional Bank (RRB) sponsored by the Bank.

15. Earnings Per Share

a) Basic: Rs.81.58 per share

b) Diluted: Not applicable as there are no dilutive potential equity shares.

* No provision for deferred tax liability on deduction claimed under Section 36(l)(viii) of the Income Tax Act, 1961 has been made as the same is considered as permanent difference, consequent to the decision of the Bank not to withdraw the reserve.

Deferred tax liability (net) Rs.278.47 crore (previous year Rs.105.45 crore) is included under "Other Liabilities and Provisions".

b) Contingent Liability:

i) Claims against the Bank not acknowledged as debts:

(Rs. in Crore) No of Amount Claims

Total Claims outstanding as on , 100 34.57 31/03/2009

Less: Claims deleted/revised during the period from 01/04/2009 to 31/03/2010 -27 -5.00

Add : New Claims added during the period from 01/04/2009 to 31/03/2010 29 0.70

Less Net Provision deleted from 1/4/2009 to 31/3/2010

Total Claims outstanding as on 31/03/2010 102 30.27

Subject-wise classification of the claims outstanding as on March 31,2010:

Contingent Liabilities include Disputed Income tax and interest tax of Rs.7.18 crore (previous year Rs.8.67 crore) for which the department has gone in appeal.

b) Assessments for Income Tax and Wealth Tax have been completed up to the financial year 2006-07. The following appeals by the Bank/Income Tax Department are pending at various stages:

c) Tax paid in advance and tax deducted at source appearing under "Other Assets" includes Rs.190.17 crore (previous year Rs.121.38 crore) paid on account of demands disputed by the Bank, against which the Bank holds a provision of Rs.77.09 crore. The Bank has gone on appeal and no additional provision is considered necessary in view of favourable judicial prouncements in similar cases.

16. Letter of Comforts (LOCs) issued by the Bank (other than for Buyers Credit) during the year is Nil (Previous Year Nil)

17. The Bank has raised Tier-I Bonds of Rs. 500.00 crore and Tier-II Bonds of Rs. 1,550 crore during the year.

18. The payment to and provision for wage revision of employees include an amount of Rs. 106.50 crore (Rs.45 crore for the year ended 31.3.2009) being the estimated liability towards wage computed at 17.5% consequent to signing of a MOU at Industry level.

19. During the year ended 31st March 2010, Bank has received fee/remuneration of Rs. 7.72 crore from Bancassurance business.

20. The Bank has recommended a dividend of 165% i.e. Rs.16.50 per share of the face value of Rs.10/- each.

21. Previous years figures have been regrouped/rearranged wherever necessary.