Accounting Policies of CSB Bank Ltd. Company

Mar 31, 2025

4. SIGNIFICANT ACCOUNTING POLICIES

4.1 Revenue Recognition

Revenue is recognised to the extent it is probable that

the economic benefits will flow to the Bank and the

revenue can be reliably measured.

a) Interest/discount on advances/bills is recognised
on accrual basis, except in case of non-performing
assets in which case the income is recognised as
per prudential norms issued by RBI.

b) Income on Exchange fee, Brokerage, Commission
& Rent on lockers are recognised on cash basis.

c) I ncome on insurance commission are accounted
on right to receive basis.

d) Interest on income tax refund is recognised in the
year of receipt of Assessment Orders.

e) Loan processing fee is accounted for upfront
when it becomes due.

f) Income on instruments discounted by Bank is
recognised over the tenure of the instrument on
a straight line basis.

g) I ncome on Investments (other than dividend on
shares & mutual funds, interest on Pass Through
Certificates and income on non performing
investments) is recognised on accrual basis.

h) Dividend income is recognised as income when
the right to receive payment is established.

i) Fee paid/received for priority sector lending
certificates (PSLC) is recognised in the year of
sale/purchase.

j) All other fees are accounted for as and when they
become due.

k) Credit card related charges / fees are booked on
due basis net off corresponding charges / fees
shared with service provider.

l) Legal expenses incurred on suit filed accounts
are expensed in profit and loss account as per
RBI guidelines. Such amount when recovered is
treated as income.

4.2 Advances

a) Advances are classified as ‘Performing assets''
and ‘Non-performing Assets'' (NPA) in accordance
with the applicable regulatory guidelines. NPAs
are further classified in to Sub-standard,
Doubtful and Loss assets based on the criteria
stipulated by the RBI.

b) Provision for Non-Performing Advances
comprising Sub-standard, Doubtful and Loss

Assets is made in accordance with the RBI
guidelines, which prescribe minimum provision
levels and encourage banks to make a higher
provision based on sound commercial judgement.
In respect of identified NPAs, provision is
recognised at borrower level based on ageing
of loans. As per the Board Approved policy,
the provisioning done is at rate higher than
the minimum rate prescribed under the RBI
guidelines.

c) The amount of advances shown in the Balance
Sheet is net of provisions against NPA and
interest suspense, ECGC claims received.

d) Provision on Standard Asset, is maintained as
per RBI guidelines. In respect of Rescheduled/
Restructured Advances, provision is made for
the diminution in the fair value of restructured
advances as per RBI Guidelines. In case of
advances to stressed sectors, the Bank has
recognised provision in line with RBI guidelines.
These provisions are included under in Item No. IV
of Schedule 5 - Other Liabilities & Provisions.

e) In classification under Schedule-9 Advances, all
outstanding advances net of provisions made
is classified under three heads given below and
include both secured and unsecured advances.

(i) Bills purchased and Discounted :-
Receivables acquired under factoring is
reported under this head.

(ii) Cash credits, overdrafts, and loans repayable
on demand :- All loans repayable on demand
and short-term loans with original maturity
up to one year and outstanding balances on
credit cards is included under this category.
Other balances pertaining to credit
operations, even if they are dues from other
banks/ organisations is shown as part of
advances. However, where such dues are in
the nature of fee or other revenue receivable
the same is shown as Other Assets.

(iii) Term loans :- A ‘Term Loan'' is a loan which
has a specified maturity and is payable
in instalments or in bullet form. All Term
Loans with maturity in excess of one year is
classified under this category.

f) In the event of substantial erosion in value of
loan and remote possibility of collection, non
performing loans with adequate provisions are
evaluated for technical / prudential write off
based on Bank''s policy and the RBI guidelines.
Such write off does not have an impact on the

Bank''s legal claim against the borrower. The Bank
may also write off non performing loans on one
time settlement (‘OTS'') with the borrower or
otherwise. Amounts recovered from borrowers
against debts written off is recognised in the
Profit and Loss Account.

g) Non-performing and restructured loans are
upgraded to standard as per the extant RBI
guidelines.

h) Foreign Currency loans shall be sanctioned for
both capital expenditure and working capital,
based on the requirements. Rate of interest on
such loans will be linked to Term SOFR (Secured
Overnight Financing Rate)/ Term SONIA (Sterling
Overnight Interbank Average Rate) / EURIBOR or
other market linked external benchmark, based
on currency involved.

i) Provision for Unhedged Foreign Currency
Exposure (UFCE) of borrower entities is made in
accordance with the guidelines issued by RBI,
which requires the Bank to ascertain the amount
of UFCE, estimate the extent of likely loss and
estimate the riskiness of unhedged position of
those entities. The Provision is classified under
Schedule 5 - Other Liabilities and Provisions in
the Balance Sheet.

j) While computing the provision requirement
pertaining to fraud accounts, adjustment is made
for financial collateral eligible under "BASEL III
Capital regulations - Capital charge for credit
risk (standardised approach)”, if available and
amount so arrived at is charged fully to Profit and
Loss Account in the same quarter of detection.

4.3 Country risk

In addition to the provisions required to be held
according to the asset classification status, provisions
are held for individual country exposure (other than
for home country as per the RBI guidelines). The
countries are categorised into seven risk categories
namely insignificant, low, moderately low, moderate,
moderately high, high and very high, as per Export
Credit Guarantee Corporation of India Limited
(ECGC) guidelines and provision is made on exposures
exceeding 180 days on a graded scale ranging from
0.25% to 25%. For exposures with contractual
maturity of less than 180 days, provision is required
to be held at 25% of the rates applicable to exposures
exceeding 180 days. If the country exposure (net) of
the Bank in respect of each country does not exceed
1% of the total funded assets, no provision is required
on such country exposure.

4.4 Investments

A) Classification

All Investments are accounted for on settlement
dates. In accordance with the RBI guidelines, the
category of investments decided at the time of
acquisition as:

a. Held to Maturity (HTM)

b. Available for Sale (AFS)

c. Fair Value through Profit and Loss (FVTPL)

c.1 Held for Trading (HFT)

c.2 Non Held for Trading (Non HFT)

Under each of these categories, investments are
further classified under six groups (hereinafter
called groups) - Government Securities, Other
Approved Securities, Shares, Debentures
and Bonds, Investments in Subsidiaries/Joint
Ventures and Other Investments for the purposes
of disclosure in the Balance Sheet.

Basis of classification:

a) Held to Maturity (HTM)

i. Securities that fulfil the following
conditions are classified under HTM:

a) The security is acquired with the
intention and objective of holding
it to maturity, i.e., the financial
assets are held with an objective
to collect the contractual cash
flows; and

b) the contractual terms of the
security give rise to cash flows
that are solely payments of
principal and interest on principal
outstanding (‘SPPI criterion'') on
specified dates.

ii. Notwithstanding the intent with which
the following securities are acquired,
they not meet the SPPI criteria
and therefore are not eligible for
classification either as HTM or AFS:

a) Instruments with compulsorily,
optionally or contingently
convertible features.

b) Instruments with contractual
loss absorbency features such
as those qualifying for Additional
Tier 1 and Tier 2 under Basel III
Capital Regulations.

c) Instruments whose coupons are

not in the nature of interest-

("Interest” for the purposes of

determining eligibility under the
solely payments of principal and
interest (‘SPPI'') criteria consists
of consideration for the time
value of money, for the credit
risk associated with the principal
amount outstanding during a
particular period of time and
for other basic lending risks and
costs, as well as a profit margin).

d) Preference shares and Equity
shares.

b) Available for Sale (AFS)

i. Securities that meet the following
conditions are classified under AFS:

a) The security is acquired with an
objective that is achieved by both
collecting contractual cash flows
and selling securities; and

b) the contractual terms of the
security meet the ‘SPPI criterion''
The Bank in certain cases, elects
an equity instrument to classify
with irrevocable option on initial
recognition, that is not held with
the objective of trading under AFS.

ii. AFS securities include debt securities
held for asset liability management
(ALM) purposes that meet the SPPI
criterion where the Bank''s intent is
flexible with respect to holding to
maturity or selling before maturity.

c) Fair Value through Profit and Loss (FVTPL)

Securities that do not qualify for inclusion

in HTM or AFS are classified under FVTPL.

These inter- alia include:

i. Equity shares, other than (a) equity
shares of subsidiaries, associates or
joint ventures and (b) equity shares
where, at initial recognition, the
irrevocable option to classify at AFS
has been exercised.

ii. Investments in Mutual Funds,
Alternative Investment Funds,
Real Estate Investment Trusts,
Infrastructure Investment Trusts, etc.

iii. Bonds, debentures, etc. where the
payment is linked to the movement in
a particular index such as an equity
index rather than an interest rate
benchmark.

c.1) Held for Trading (HFT)

Held for Trading (HFT), which is a sub¬
category of Fair Value through Profit and
Loss (FVTPL) consists of all instruments that
meet the specifications for HFT instruments
set out in the following paragraphs. All other
instruments are be excluded from HFT.

i. The Bank only include those financial
instruments in HFT when there is no
legal impediment against selling or fully
hedging it.

ii. The Bank fair values daily all HFT
instruments and recognises any
valuation changes in the profit and loss
account.

iii. Any instrument that the Bank holds for
one or more of the following purposes is,
when it is first recognised on its books,
is designated as a HFT instrument,
unless specifically otherwise provided
for in paragraph (i) or (vi):

a) short-term resale;

b) profiting from short-term price
movements;

c) locking in arbitrage profits; or

d) hedging risks that arise from
instruments meeting (a), (b) or (c)
above.

iv. The following instruments are included
in HFT, unless specifically otherwise
provided for in paragraph (i) or (vi) :

a) instruments in the correlation
trading portfolio;

b) instruments that would give rise
to a net short credit or equity
position in the banking book or

c) instruments resulting from
underwriting commitments, where
underwriting commitments refer
only to securities underwriting,
and relate only to securities
that are expected to be actually
purchased by the Bank on the
settlement date.

v. Any instrument which is not held for
any of the purposes listed in paragraph
(iii) at inception, nor seen as being
held for these purposes according to
paragraph (iv), are not assigned to HFT.

vi. The following instruments are not

included in HFT category:

a) unlisted equities and equity
investments in subsidiaries,
associates and joint ventures;

b) instruments designated for
securitisation warehousing;

c) direct holding of real estate and
derivatives on direct holdings of
real estate;

d) equity investments in a fund,
unless the Bank meets at least
one of the following conditions:

• the Bank is able to look
through the fund to its
individual components
and there is sufficient
and frequent information,
verified by an independent
third party, provided to the
Bank regarding the fund''s
composition; or

• the Bank obtains daily price
quotes for the fund and it has
access to the information
contained in the fund''s
mandate or in the national
regulations governing such
investment funds;

e) derivative instruments and funds
that have instrument types
specified from (a) to (d) above as
underlying assets; or

f) instruments held for the purpose
of hedging a particular risk
of a position in the types of
instruments specified from (a) to
(e) above.

vii. The following instruments are
presumed to be in HFT unless
specifically otherwise provided for in
paragraph (i) or (vi):

a) instruments resulting from

market-making activities;

C) Initial recognition

i. All investments are measured at fair value
on initial recognition. Unless facts and
circumstances suggest that the fair value
is materially different from the acquisition
cost, it is presumed that the acquisition
cost is the fair value. Situations where the
presumption is tested include where:

a) The transaction is between related
parties.

b) The transaction is taking place under
duress where one party is forced to
accept the price in the transaction.

c) The transaction is done outside the
principal market for that class of
securities.

d) Other situations, where in the
opinion of the supervisor, facts and
circumstances warrant testing of the
presumption.

ii. In respect of government securities acquired
through auction (including devolvement),
switch operations and Open Market
Operations (OMO) conducted by the RBI,
the price at which the security is allotted
shall be the fair value for initial recognition
purposes.

iii. Where the securities are quoted or the
fair value can be determined based on
market observable inputs (such as yield
curve, credit spread, etc.) any Day 1 gain/
loss is recognised in the Profit and Loss

Account, under Schedule 14: ‘Other Income''
within the subhead ‘Profit on revaluation
of investments'' or ‘Loss on revaluation of
investments'', as the case may be.

iv. Any Day 1 loss arising from Level 3
investments shall be recognised immediately.

v. Any Day 1 gains arising from Level 3
investments shall be deferred. In the case
of debt instruments, the Day 1 gain shall
be amortised on a straight-line basis up to
the maturity date (or earliest call date for
perpetual instruments), while for unquoted
equity instruments, the gain shall be set
aside as a liability until the security is listed
or derecognised.

D) Subsequent Measurement

Held to Maturity (HTM)

i. Securities held in HTM carried at cost and
not marked to market (MTM) after initial
recognition. However, they shall be subject
to income recognition, asset classification
and provisioning norms of RBI

ii. Any discount or premium on the securities
under HTM is amortised over the remaining
life of the instrument. The amortised
amount reflected in the financial statements
under item II ‘Income on Investments'' of
Schedule 13: ‘Interest Earned'' with a contra
in Schedule 8:''Investments''.

Available for Sale (AFS)

i. The securities held in AFS are fair valued
at least on a quarterly basis. Any discount
or premium on the acquisition of debt
securities under AFS shall be amortised
over the remaining life of the instrument.
The amortised amount shall be reflected
in the financial statements under item II
‘Income on Investments'' of Schedule 13:
‘Interest Earned'' with a contra in Schedule
8:''Investments''.

ii. The valuation gains and losses across all
performing investments, irrespective of
classification (i.e., Government securities,
Other approved securities, Bonds and
Debentures, etc.), held under AFS shall

be aggregated. The net appreciation or
depreciation shall be directly credited or
debited to AFS-Reserve without routing
through the Profit & Loss Account.

iii. Securities under AFS are subject to income
recognition, asset classification and
provisioning norms of RBI

iv. The AFS-Reserve is reckoned as Common
Equity Tier (CET). The unrealised gains
transferred to AFS-Reserve is not available
for any distribution such as dividend and
coupon on Additional Tier 1.

v. Upon sale or maturity of a debt instrument
in AFS category, the accumulated gain/
loss for that security in the AFS-Reserve
is transferred from the AFS-Reserve and
recognised in the Profit and Loss Account
under item II Profit on sale of investments
under Schedule 14-Other Income.

vi. In the case of equity instruments designated
under AFS at the time of initial recognition,
any gain or loss on sale of such investments
is not transferred from AFS-Reserve to the
Profit and Loss Account. Instead, such gain
or loss is transferred from AFS-Reserve to
the Capital Reserve.

Fair Value through Profit and Loss (FVTPL)

i. The securities held in FVTPL are fair valued
and the net gain or loss arising on such
valuation is directly credited or debited to
the Profit and Loss Account. Securities that
are classified under the HFT sub-category
within FVTPL is fair valued on a daily basis,
whereas other securities in FVTPL is fair
valued at least on a quarterly basis.

ii. Any discount or premium on the acquisition
of debt securities under FVTPL shall be
amortised over the remaining life of the
instrument. The amortised amount shall
be reflected in the financial statements
under item II ‘Income on Investments'' of
Schedule 13: ‘Interest Earned'' with a contra
in Schedule 8:''Investments''.

iii. Securities under FVTPL is subject to
income recognition, asset classification and
provisioning norms of RBI.

iv. Upon sale of instrument in FVTPL category,
the gain/ loss shall be recognised in the
Profit and Loss Account under item II Profit
on sale of investments under Schedule
14-Other Income

E) Fair Value of Investments

Quoted Securities:

The fair value for the quoted securities is the
prices declared by the Financial Benchmarks
India Private Ltd. (FBIL) in accordance with RBI
circular FMRD.DIRD.7/14.03.025/2017-18 dated
March 31, 2018, as amended from time to time.
For securities whose prices are not published by
FBIL, the fair value of the quoted security is based
upon quoted price as available from the trades/
quotes on recognised stock exchanges, reporting
platforms or trading platforms authorised by
RBI/SEBI or prices declared by the Fixed Income
Money Market and Derivatives Association of
India (FIMMDA).

Unquoted SLR Securities:

(a) Treasury Bills are valued at carrying cost.

(b) Unquoted Central / State Government
securities are valued on the basis of the
prices/ YTM rates published by the FBIL.

Unquoted Non-SLR Securities:

(a) Unquoted debentures and bonds are valued
by applying the appropriate mark-up over
the YTM rates for Central Government
Securities as put out by FBIL/FIMMDA

(b) Unquoted equity shares are valued at the
break-up value arrived at from the latest
balance sheet, or at '' 1, if the balance sheet
prior to one year is not available.

(c) Security receipts are valued as per the Net
Asset Value (NAV) obtained from the issuing
Reconstruction Company/Securitisation
Company. Depreciation in each scrip is
provided for while appreciation is ignored.

(d) Unquoted instruments of Alternative
Investment Funds (AIFs) are valued NAV as
disclosed by the AIF

(e) Investment in un-quoted MF units are valued
on the basis of the latest re-purchase price
declared by the MF in respect of each
scheme.

(f) Commercial papers and Certificate of
Deposits are valued at the carrying cost.

F) Investment Fluctuation Reserve (IFR)

i. The Bank creates an Investment Fluctuation
Reserve (IFR) until the amount of IFR is at least
two per cent of the AFS and FVTPL (including HFT)
portfolio, on a continuing basis, by transferring
to the IFR an amount not less than the lower of
the following:

a) Net profit on sale of investments during the
year.

b) Net profit for the year, less mandatory
appropriations.

ii. IFR shall be eligible for inclusion in Tier II capital.
The cap applicable on recognition of General
Provisions and Loss Reserves as Tier II capital is
not applicable on IFR.

iii. The Bank is permitted to draw down the balance
available in IFR in excess of two percent of its
AFS and FVTPL (including HFT) portfolio, for
credit to the balance of Profit/Loss as disclosed
in the Profit and Loss account at the end of any
accounting year.

iv. In the event the balance in the IFR is less than
two percent of the AFS and FVTPL (including
HFT) investment portfolio, a draw down shall be
permitted subject to the following conditions:

a) The drawn down amount is used only for
meeting the minimum CET 1/Tier 1 capital
requirements by way of appropriation to
free reserves or reducing the balance of
loss.

b) The amount drawn down shall not be more
than the extent the MTM provisions/losses
during the aforesaid year exceed the net
profit on sale of investments during that
year.

G) Sale of investments from HTM

i. In any financial year, the carrying value
of investments sold out of HTM shall not
exceed 5% of the opening carrying value
of the HTM portfolio. Any sale beyond this
threshold shall require prior approval from
DoS, RBI.

ii. Treasury is allowed to sell 5% of the HTM
after approval from ALCO and citing
optimistic recognition. The sale will be
reported in the next Board meeting.

iii. Details of sales out of HTM shall be disclosed
in the notes to accounts of the financial
statements.

iv. Sales of securities in the situations given
below is excluded from the regulatory limit
of five per cent .

a) Sales to the RBI under liquidity
management operations of RBI such
as the Open Market Operations (OMO)
and Government Securities Acquisition
Programme (GSAP).

b) Repurchase of Government Securities
by Government of India from banks
under buyback or switch operations.

c) Repurchase of State Development
Loans by respective state governments
under buyback or switch operations.

d) Repurchase, buyback or exercise of
call option of non-SLR securities by the
issuer.

e) Sale of non-SLR securities following a
downgrade in credit ratings or default
by the counterparty.

f) Sale of securities as part of a resolution
plan under the Prudential Framework
for Resolution of Stressed Assets for a
borrower facing financial distress.

g) Additional sale of securities explicitly
permitted by the Reserve Bank of India.

v. Any profit or loss on the sale of investments
in HTM is recognised in the Profit and
Loss Account under Item II of Schedule
14:''Other Income''. The profit on sale of an
investments in HTM is appropriated below
the line from the Profit and Loss Account to
the ‘Capital Reserve Account''. The amount
so appropriated shall be net of taxes and
the amount required to be transferred to
Statutory Reserve.

H) Repo and Reverse Repo transactions

Repo and Reverse repo transactions in
Government Securities and corporate debt
securities including those conducted under the
Liquidity Adjustment Facility (‘LAF'') and Marginal
Standby Facility (‘MSF'') with RBI are accounted as
collateralized borrowing and lending respectively.
Borrowing cost on repo transactions is accounted
as interest expense and revenue on reverse repo
transactions is accounted as interest income.

I) Short Sales

In accordance with the RBI guidelines, the Bank
undertakes short sale transactions in Central

Government dated securities. The Short Sales
positions are reflected in ‘Securities Short Sold
(‘SSS'') A/C, specifically created for this purpose.
The short position is categorised under HFT
category and netted off from investments in the
Balance Sheet. These positions are marked-to-
market and resultant gains/losses are accounted
for as per the relevant RBI guidelines for valuation
of Investments discussed earlier.

4.5 Transactions Involving Foreign Exchange and
Derivative transactions.

a) Monetary foreign currency assets and liabilities
are translated at closing exchange rates notified
by FEDAI relevant to the balance sheet date. The
resulting gain or loss on revaluation are included
in the Profit and Loss Account in accordance
with the RBI / FEDAI guidelines.

Foreign exchange forward contracts not intended
for trading that are entered into to establish
the amount of reporting currency required or
available at the settlement date of transactions,
which are outstanding at the Balance Sheet date
are effectively valued at closing spot rate. The
premium or discount arising at the inception of
such a forward exchange contract is amortised
as expense or income over the life of the contract.

b) Foreign currency income and expenditure items
are translated at the exchange rates prevailing on
the date of the transaction.

c) Outstanding foreign exchange forward contracts
are revalued at the rates applicable on the closing
date as advised by FEDAI. The resultant gains
or losses are recognised in the Profit and Loss
Account.

d) Contingent Liabilities on guarantees, letters
of credit, acceptances and endorsements are
disclosed at closing rates of exchange notified by
FEDAI.

Derivative transactions

The Bank recognises all derivative contracts at fair
value except for contracts that are covered within the
scope of AS 11, on the date on which the derivative
contracts are entered into and are re-measured at
fair value as at the Balance sheet or reporting dates.
Derivatives are classified as assets when the fair
value is positive or as liabilities when the fair value is
negative. Changes in the fair value of derivatives are
recognised in the Profit and Loss Account.

4.6 Fixed Assets and Depreciation

a) Fixed Assets other than premises are carried at cost
less accumulated depreciation and impairment, if
any. Cost includes cost of purchase and freight,
duties, taxes and incidental expenses related to the
acquisition and installation of the asset.

b) Premises are stated at revalued amount. Appreciation
on revaluation of premises is credited to Revaluation
Reserve. The additional depreciation on the revalued
portion of buildings is charged to Profit and Loss
Account and an equivalent amount is withdrawn from
Revaluation Reserve and credited to General Reserve.
Valuations are obtained from two independent valuers,
at least once in every 3 years.

Intangible Assets

Accounting and amortisation of computer software
are in accordance with the provisions of Accounting
Standard 26 - Intangible Assets, specified under
Section 133 of the Companies Act, 2013 read with the
Companies (Accounts) Rules, 2014 and the Companies
(Accounting Standards) Rules, 2021.

a) Intangible asset includes purchase price, non¬
refundable taxes and duties and any other
directly attributable expenditure on making the
asset ready for its intended use and net of any
trade discounts and rebates.

b) Application Software purchased is amortised
over a period of 5 years on pro rata basis under
Straight Line Method.

c) Internally Generated Application Software is
accounted as an intangible asset and is amortised
over a period of 5 years on pro rata basis under
Straight Line Method from the date the software
becomes available for use. If the software is still
in the development phase and has not become

c) Subsequent expenditure incurred on fixed assets
put to use is capitalised only when it represents an
improvement which increases the future benefits
from the existing asset beyond its previously assessed
standard of performance or an extension which
becomes an integral part of the asset.

d) Depreciation on additions to fixed assets is provided
on pro rata basis. Depreciation on assets sold during
the year is recognised on a pro-rata basis till the date
of sale. Gain or losses arising from the retirement
or disposal of fixed assets are determined as the
difference between the net disposal proceeds and
the carrying amount of assets and are recognised as
income or expense in the Profit and Loss Account.

available for use, no amortisation is charged to
Profit & Loss Account.

Capital work in progress

Capital work-in-progress includes cost of fixed assets
under installation/under development as at the
reporting date.

4.7 Impairment of Assets

The carrying amount of the assets at each Balance
Sheet date is reviewed for impairment. If any indication
of impairment based on internal / external factors
exists, the recoverable amount of such assets is
estimated and impairment is recognised wherever the
carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the
net selling price and its value in use, which is arrived at
by discounting the future cash flows to their present
value, based on an appropriate discounting factor.
Impairment losses, if any, on Fixed Assets (including
revalued assets) are recognised in accordance with
the Accounting Standard 28 ‘Impairment of Assets''

specified under Section 133 of the Companies Act,
2013 read with the Companies (Accounts) Rules, 2014
and the Companies (Accounting Standards) Rules,
2021 and charged to Profit and Loss Account.

4.8 Non-Banking Assets

The Non-Banking asset are recognised based on the
cost of acquisition. In the case of diminution in value,
if any, is provided for.

4.9 Employee Benefits

a) Short Term Employee Benefits

The undiscounted amount of short-term employee
benefits which are expected to be paid in exchange for
the services rendered by employees are recognised
during the period when the employee renders
the service. These benefits include performance
incentives.

b) Post Employment Benefit

(i) Defined Contribution Plan - Provident Fund and
New Pension Scheme (Contributory) are the
defined contribution plans of the Bank. The
contribution for Provident Fund is made by the
Bank to The Catholic Syrian Bank Ltd Employees
Provident Fund, administered by the trustees. In
addition to contribution for the period, shortfall,
if any, in the Provident Fund Trust is charged to
Profit and Loss Account of the Bank.

(ii) Defined Benefit Plans - Liabilities towards
Gratuity and Pension are defined benefit
obligations and are provided for on the basis
of actuarial valuation made at the end of each
financial year. Projected Unit Credit Method is
used by the actuary for valuing the obligations in
case of Pension and Gratuity. Discount rate used
to arrive at the present value of estimated future
cash flows is arrived at by reference to market
yields on balance sheet date on government
bonds of term consistent with estimated term
of the obligations as per paragraph 78 of AS 15
Employee Benefits. Actuarial Gains/Losses are
immediately taken to the Profit and Loss Account
and are not deferred.

Brief description of the defined benefit plans:

(i) Pension - Pension is payable, as per CSB Bank
Limited Employees'' Pension Regulation 1993 and
as modified in 1995, to the employees who have
specifically opted for the same. The contribution
is made by the Bank to The Catholic Syrian Bank
Limited Employees Pension Fund, administered
by the trustees. For becoming eligible for
pension, the employee should have served the

Bank for a minimum period of 10 years in the case
of retirement on superannuation and 20 years in
other cases. At the time of retirement or death of
the pension eligible employee, the pension trust
purchases annuity from insurance company, out
of the contributions made by the Bank.

(ii) Gratuity - As per the Gratuity Act 1972, Gratuity
is payable to all employees on termination
of employment due to retirement, death or
resignation, provided that the employee has
continuously served the Bank for a minimum
period of 5 years. The contribution is made by
the Bank to The Catholic Syrian Bank Limited
Employees Gratuity Fund, administered by the
trustees.

c) Long term compensated absences and other long¬
term employee benefits viz:

a. Privilege Leave

b. Leave Fare Concession

c. Sick Leave

are based on actuarial valuation at the end of the
financial year.

d) Employee Stock Options (ESOS)

The Bank has formulated a stock option scheme called
"CSB Employees Stock Option Scheme 2019” ("ESOS
2019” or "Scheme”) in accordance with the Securities
and Exchange Board of India (Share Based Employee
Benefits) Regulations, 2014 which was subsequently
repealed with the Securities and Exchange Board
of India (Share Based Employee Benefits and Sweat
Equity) Regulations, 2021. The scheme is intended
to enable the employees, present and future, to
get a share in the value that they help to create for
the organisation over a period of time, aligning the
objectives of an individual with those of the Bank as
well as to attract and retain critical senior talents with
Employee Stock Options as a compensation tool. The
options granted to employees vest in a graded manner
as per vesting schedule even beyond retirement /early
retirement date and these may be exercised by option
grantee within a specified period, as per the terms
of grant; otherwise options stand lapsed as per the
scheme.

The accounting for shares granted under Employee
Stock Option Scheme is done as per the ICAI
Guidance note on Accounting for Employee Share
based payments and clarification dated August 30,
2021, issued by Reserve Bank of India on Guidelines
on Compensation of Whole Time Directors/ Chief
Executive Officers/ Material Risk Takers and Control

Function staff, dated November 04, 2019 (RBI
guidelines). Accordingly, for options granted up to
and including March 31, 2021, Bank has applied the
intrinsic value method to arrive at the compensation
cost of stock options granted to the employees. The
intrinsic value is the amount by which the market
price exceeds the exercise price of the options. The
market price for this purpose is the latest available
closing price, prior to the date of grant, on the stock
exchange on which the shares of the Bank are listed.
If the shares are listed on more than one stock
exchange, then the stock exchange where there is
highest trading volume on the said date is considered.
For options granted after March 31, 2021 fair value
method using Black-Scholes model has been applied
to arrive at the compensation cost of stock options
granted to the employees, in compliance with the
RBI guidelines. Compensation cost so determined is
recognised as expense beginning with the accounting
period for which approval has been granted.

In case the vested stock options expire unexercised,
the balance in stock options outstanding is transferred
to the general reserve. In case the unvested stock
options get lapsed/cancelled, the balance in stock
option outstanding account is transferred to the
Profit and Loss Account.

4.10 Segment Information

As per the RBI guidelines, business segments of the
Bank are divided under a) Treasury b) Corporate
and Wholesale Banking c) Retail Banking and d)
Other Banking Business. Business segments have
been identified and reported considering the target
customer segment, the nature of products, internal
business reporting system, Segment reporting policy
approved by the Board, the guidelines prescribed by
the RBI.

4.11 Lease transactions

Operating Lease

Leases where the lessor effectively retains
substantially all the risks and benefits of ownership
over the lease term are classified as operating lease.
Lease payments for assets taken on operating lease
are recognised as an expense in the Profit and Loss
Account as per the lease terms. Amount due under
the operating leases, including cost escalation, are
charged on a straight line method over the lease
term in the Profit and Loss Account. Initial direct
cost incurred specifically for operating leases are
recognised as expense in the Profit and Loss Account
in the year in which they are incurred.

4.12 Earnings Per Share

The Bank reports basic and diluted Earnings per equity
share in accordance with the Accounting Standard 20
on "Earnings per share specified under Section 133
of the Companies Act, 2013 read with Rule 7 of the
Companies (Accounts) Rules, 2014 and the Companies
(Accounting Standards) Rules, 2021. Basic Earnings
per share (EPS) reported is computed by dividing net
profit after tax by the weighted average number of
equity shares outstanding for the period.

Diluted earnings per share reflect the potential
dilution that could occur if securities or other
contracts to issue equity shares were exercised or
converted during the year. Diluted earnings per equity
share have been computed using the weighted average
number of equity shares and dilutive potential equity
shares outstanding during the period except where
the results are anti-dilutive.

4.13 Taxes on Income

Income tax expense is the aggregate amount of
current tax and deferred tax charge. Current year
taxes are determined in accordance with the Income
Tax Act, 1961 and Deferred tax expense in accordance
with Accounting Standard 22 - Accounting for Taxes
on Income. Deferred income taxes reflect the impact
of current year timing differences between taxable
income and accounting income for the year and
reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and
the tax laws enacted or substantively enacted at the
Balance Sheet date. Deferred tax assets and deferred
tax liabilities are offset, if a legally enforceable right
exists to set off current tax assets against current tax
liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same
governing taxation laws.

Deferred tax liabilities are recognised for all timing
differences. Deferred tax assets are recognised for
timing differences of items other than unabsorbed
depreciation and carry forward losses only to the
extent that reasonable certainty exists that sufficient
future taxable income will be available against which
these can be realised. However, if there are unabsorbed
depreciation and carry forward of losses and items
relating to capital losses, deferred tax assets are
recognised only if there is virtual certainty supported
by convincing evidence that there will be sufficient
future taxable income available to realise the assets.
The impact of changes in the deferred tax assets and
liabilities is recognised in the Profit and Loss Account.
Deferred tax assets are recognised and reassessed

at each reporting date, based upon management''s
judgement as to whether realisation is considered as
reasonably certain.

---

Mar 31, 2024

1. BACKGROUND

CSB Bank Limited ("the Bank”), was incorporated in 1920. The Bank has a network of 779 branches in India and provide a range of banking and financial services including SME banking, Retail banking, Corporate banking and Treasury operations. The Bank is governed by the Banking Regulation Act, 1949. The Bank''s shares are listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited.

2. BASIS OF PREPARATION

a) The financial statements have been prepared in accordance with the requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the circulars and guidelines issued by the Reserve Bank of India (RBI) from time to time, the Accounting Standards (AS) notified under Section 133 of the Companies Act, 2013 read together with the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Rules, 2021 to the extent applicable and practices generally prevalent in the banking industry in India.

b) The Bank follows the historical cost convention and the accrual method of accounting, in the preparation of the financial statements, except as stated in paragraph 4.1 "Revenue recognition”. The accounting policies adopted in the preparation of financial statements are consistent with those followed in the previous year.

3. USE OF ESTIMATES

The preparation of the financial statements, in conformity with the generally accepted accounting principles, requires management to make estimates and assumptions that are considered in the reported amounts of assets and liabilities (including contingent liabilities), as of the date of financial statements and the reported income and expenses during the reporting period. The estimates and assumptions used in the accompanying financial statements are based upon the management''s evaluation of the relevant facts and circumstances as of the date of the financial statements. Management believes that the estimates

used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. The impact of any revision in these estimates is recognised prospectively from the period of change.

4. SIGNIFICANT ACCOUNTING POLICIES4.1 Revenue Recognition

Revenue is recognised to the extent it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured.

a) Interest/discount on advances/bills is recognised on accrual basis, except in case of non-performing assets in which case the income is recognised as per prudential norms issued by RBI.

b) Income on Exchange fee, Brokerage, Commission & Rent on lockers are recognised on cash basis.

c) I ncome on insurance commission are accounted on right to receive basis.

d) Interest on income tax refund is recognised in the year of receipt of Assessment Orders.

e) The recovery in Non-Performing Assets is first appropriated towards principal dues and the balance, if any, towards charges, cost and interest suspense except in case appropriation has to be made as per any statute/direction/ order of judicial forum, the appropriation is to be made based on the same.

f) Loan processing fee is accounted for upfront when it becomes due.

g) Income on instruments discounted by Bank is recognised over the tenure of the instrument on a straight line basis.

h) I ncome on Investments (other than dividend on shares & mutual funds, interest on Pass Through Certificates and income on non performing investments) is recognised on accrual basis.

i) Dividend income is recognised as income when the right to receive payment is established.

j) Fee paid/received for priority sector lending certificates (PSLC) is recognised in the year of sale/purchase.

k) All other fees are accounted for as and when they become due.

l) Credit card related charges / fees are booked on accrual basis net off corresponding charges / fees shared with service provider,

m) In the case of purchase of loans from other banks/NBFOs through direct assignment of cash flows, the Bank recognises interest income on the basis of original IRR/actual collection record of the pool. The discount, if any, on such purchase is recognised in proportion to the principal received,

n) In case of Asset Sale to ARCs, where the sales is at a price higher than the net book value (NBV), (i.e. outstanding less provision held) and consideration is received in cash, the excess provision on NPA is credited to Profit and loss account, If consideration is other than cash, the excess provision is retained. If the sale is at a price below the NBV, the shortfall is debited to Profit & Loss Account, as per the option given by RBI.

o) Legal expenses incurred on suit filed accounts are expensed in profit and loss account as per RBI guidelines. Such amount when recovered is treated as income.

4.2 Advances

a) Advances are classified as ‘Performing assets'' and ‘Non-performing Assets'' (NPA) in accordance with the applicable regulatory guidelines. NPAs are further classified in to Sub-standard, Doubtful and Loss assets based on the criteria stipulated by the RBI.

b) Provision for Non-Performing Advances comprising Sub-standard, Doubtful and Loss Assets is made in accordance with the RBI guidelines, which prescribe minimum provision levels and encourage banks to make a higher provision based on sound commercial judgement. In respect of identified NPAs, provision is recognised at borrower level based on ageing of loans. As per the Board Approved policy, the provisioning done is at rate higher than the minimum rate prescribed under the RBI guidelines.

c) The amount of advances shown in the Balance Sheet is net of provisions against NPA and interest suspense, ECGC claims received and discount on assignment transactions.

d) Provision on Standard Asset, is maintained as per RBI guidelines. In respect of Rescheduled/ Restructured Advances, provision is made for the diminution in the fair value of restructured advances measured in present value terms as per RBI Guidelines. In case of advances to stressed sectors such as Cashew, Cotton Textile, Infra - Telecom and Retail Trade, the Bank has recognised provision in line with RBI guidelines. These provisions are included under in Item No. IV of Schedule 5 - Other Liabilities & Provisions.

e) In classification under Schedule-9 Advances, all outstanding advances net of provisions made is classified under three heads given below and include both secured and unsecured advances.

(i) Bills purchased and Discounted :-Receivables acquired under factoring is reported under this head

(ii) Cash credits, overdrafts, and loans repayable on demand :- All loans repayable on demand and short-term loans with original maturity up to one year and outstanding balances on credit cards is included under this category Other balances pertaining to credit operations, even if they are dues from other banks/ organisations is shown as part of advances. However, where such dues are in the nature of fee or other revenue receivable the same is shown as Other Assets

(iii) Term loans :- A ‘Term Loan'' is a loan which has a specified maturity and is payable in instalments or in bullet form. All Term Loans with maturity in excess of one year is classified under this category

f) The RBI had issued guidelines on enhancing credit supply for Large Borrowers through Market Mechanism dated August 25, 2016. The said guidelines are applicable to exposure on all single counterparties of the Bank. These guidelines came into effect from the financial year 2017-18 onwards for identification of specified borrowers. The bank''s incremental exposures from FY 201819 onwards to the specified borrowers exceeding the Net Permitted Lending Limits (‘NPLL'') would attract prudential measures. Incremental Exposure of the Banking System to a specified borrower beyond NPLL shall be deemed to carry higher risk which shall be recognised by way of additional standard asset provisioning and higher risk weights.

g) Further, the RBI has issued guidelines on "Prudential Framework for Resolution of Stressed Assets dated June 07, 2019” with a view to providing a framework for early recognition, reporting and time bound resolution of stressed assets. The Bank has put in place Board-approved policy for resolution of distressed borrowers with an objective to initiate the process of resolution of a distressed borrower even before a default and prior to the initiation of proceedings under the IBC.

h) The Bank is required to make an additional provisioning for the delayed implementation of Resolution Plan (RP) as under:

(a) Additional provision of 20% of total

outstanding, if RP is implemented beyond 180 days from the end of the review period

(b) Additional provision of 35% of total

outstanding, if RP is implemented beyond 360 days from the end of the review period

The additional provisions shall be made over and above the higher of the following, subject to the total provisions held being capped at 100% of total outstanding: (a) The provisions already held; or, (b) The provisions required to be made as per IRAC norms

i) In the event of substantial erosion in value of loan and remote possibility of collection, non performing loans with adequate provisions are evaluated for technical / prudential write off based on Bank''s policy and the RBI guidelines. Such write off does not have an impact on the Bank''s legal claim against the borrower. The Bank may also write off non performing loans on one time settlement (‘OTS'') with the borrower or otherwise. Amounts recovered from borrowers against debts written off is recognised in the Profit and Loss Account.

j) Non-performing and restructured loans are upgraded to standard as per the extant RBI guidelines.

k) Policy on Managing Currency induced credit risk: As per Credit Policy of the Bank, Foreign Currency loans are sanctioned for both capital expenditure and working capital based on the requirements. Rate of interest on such loans are linked to LIBOR or other market linked external benchmark. From January 01, 2022 onwards all new foreign currency loans/contracts, and fresh disbursals

under existing facilities (PCFC/EBD/PSCFC/Easy imports) shall be entered by using the Alternate reference rates (ARR) viz. Term SOFR (Secured Overnight Financing Rate)/ Term SONIA (Sterling Overnight Interbank Average Rate) / EURIBOR or other market linked external benchmark, based on currency involved. For existing US dollar denominated FC loans benchmarked to LIBOR as on 31.12.2021, since $ LIBOR rates are available (on ‘synthetic basis'' for 1, 3, 6, & 12 month maturities) till June 30, 2023, roll over/ reset can be done using these rates till June 30, 2023. However, based on mutual consent with the borrower switchover to ARR for respective currencies is considered.

Forward exchange cover is insisted in all cases unless there is natural hedge by way of export/ other earnings. However, if the loan amount is less than $ 1 (one) Million, forward exchange cover is made optional to the borrower subject to furnishing of an unconditional undertaking to bear the exchange loss if any.

l) Provision for Unhedged Foreign Currency Exposure (UFCE) of borrower entities is made in accordance with the guidelines issued by RBI, which requires the Bank to ascertain the amount of UFCE, estimate the extent of likely loss and estimate the riskiness of unhedged position of those entities. The Provision is classified under Schedule 5 - Other Liabilities and Provisions in the Balance Sheet.

m) While computing the provision requirement pertaining to fraud accounts, adjustment is made for financial collateral eligible under "BASEL III Capital regulations - Capital charge for credit risk (standardised approach)”, if available and amount so arrived at is charged fully to Profit and Loss Account in the same quarter of detection.

4.3 Country risk

In addition to the provisions required to be held according to the asset classification status, provisions are held for individual country exposure (other than for home country as per the RBI guidelines). The countries are categorised into seven risk categories namely insignificant, low, moderately low, moderate, moderately high, high and very high, as per Export Credit Guarantee Corporation of India Limited (ECGC) guidelines and provision is made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 25%. For exposures with contractual

maturity of less than 180 days, provision is required to be held at 25% of the rates applicable to exposures exceeding 180 days. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is required on such country exposure.

4.4 Investments

a) Classification

All Investments are accounted for on settlement dates. In accordance with the RBI guidelines, investments are categorised at the time of purchase as:

• Held for Trading (HFT);

• Available for Sale (AFS);

• Held to Maturity (HTM)

Under each of these categories, investments are further classified under six groups (hereinafter called groups) - Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries/ Joint Ventures and Other Investments for the purposes of disclosure in the Balance Sheet.

Basis of classification:

Investments that are held primarily for resale within 90 days from the date of purchase are classified under the "Held for Trading (HFT)” category. As per RBI guidelines, HFT Securities, which remain unsold for a period of 90 days, are classified as AFS Securities on that date. Investments that the Bank intends to hold till maturity are classified under the "Held to Maturity (HTM)” category. Investments, which are not classified in the above categories, are classified under the "Available For Sale [AFS]” category. Purchase and sale transactions in securities are recorded under settlement date of accounting.

b) Transfer of Investments between categories

Reclassification of investments from one category to the other, if done, is in accordance with the RBI guidelines. Transfer of scrips from AFS/HFT category to HTM category is made at the lower of book value or market value. In the case of transfer of securities from HTM to AFS/ HFT category, the investments held under HTM at a discount, are transferred to AFS/HFT category at the acquisition price and investments placed in the HTM category at a premium, are transferred to AFS/H FT at the amortised cost.

Transfer of investments from AFS to HFT or vice versa is done at the book value. Depreciation carried, if any, on such investments is also transferred from one category to another.

c) Cost of acquisition

In determining the acquisition cost of the Investment:

(i) Transaction costs including brokerage and commission pertaining to acquisition of Investments are charged to the Profit and Loss Account

(ii) Broken period interest (the amount of interest from the previous interest payment date till the date of purchase / sale of instrument) on debt instrument is treated as revenue item

(iii) Cost of investments is computed based on the weighted average cost method

d) Valuation of Investments:

(i) Investments in "Held to Maturity” category are accounted for at acquisition cost or at amortised cost, if acquired at a premium. In case the cost is higher than the face value, the premium is amortised over the period remaining to maturity using Constant Yield Method. Such amortisation of premium is adjusted against income under the head "Income on Investments”. Where the face value is higher than the cost, the discount is ignored and is accounted only on maturity date of the instrument.

(ii) Securities classified as "Available for Sale” are marked to market scrip-wise on a quarterly basis other than shares, which is done on a weekly basis. Net depreciation, if any, compared to the acquisition cost, in any of the categories, is charged to the Profit and Loss Account. The net appreciation in each category, if any, is not recognised.

(iii) Individual scrips in "Held for Trading” category are marked to market at daily intervals. Net depreciation, if any, compared to the acquisition cost, in any of the categories, is charged to the Profit and Loss Account. The net appreciation in each category, if any, is not recognised.

(iv) The market/fair value of unquoted government securities which are in nature

of Statutory Liquidity Ratio (SLR) securities included in the ‘Available for Sale'' and ‘Held for Trading'' categories is as per the rates published by FIMMDA/FBIL. The valuation of other unquoted fixed income securities, including Pass Through Certificates wherever linked to the Yield-to-Maturity (YTM) rates, is computed with a mark-up (reflecting associated credit risk) over the YTM rates for government securities published by FIMMDA. Units of Alternate Investment Funds (‘AIF'') held under AFS category are valued using the ‘NAV'' published by the fund (AIF).

(v) Unquoted equity shares are valued at the break-up value arrived at from the latest balance sheet, or at '' 1, if the balance sheet prior to one year is not available.

(vi) Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost.

(vii) Security receipts are valued as per the Net Asset Value (NAV) obtained from the issuing Reconstruction Company/Securitisation Company. Depreciation in each scrip is provided for while appreciation is ignored.

(viii) Non-performing investments (‘NPI'') are identified and depreciation / provision is made thereon based on the RBI guidelines. The depreciation / provision against NPI is not set off against the appreciation in respect of other performing securities. Interest on non-performing investments is recognised on cash basis.

(ix) As per RBI circular [RBI/2022-23/55 DOR. ACC.REC.No.37/21.04.018/2022-23, dated 19.05.2022], the Bank is classifying Repo / Reverse Repo under LAF scheme in Schedule 4 [Borrowings] and Schedule 6 [Cash and balances with Reserve Bank of India] respectively.

e) Investment Fluctuation Reserve (‘IFR’):

The RBI has advised banks to create an Investment Fluctuation Reserve (‘IFR'') with effect from FY 2018-19. Accordingly, an amount not less than the lower of net profit on sale of investments during the year or net profit for the year less mandatory appropriations shall be transferred to the IFR, until the amount of IFR is

at least 2 percent of the HFT and AFS portfolio on a continuing basis. Where feasible, this should be achieved within a period of 3 years.

Draw down, if any, from the Investment Fluctuation Reserve shall be in accordance with the applicable RBI guidelines.

Also, IFR is eligible for inclusion in Tier 2 capital.

f) Disposal of Investments

(i) Held for Trading and Available for Sale -Profit or loss on sale / redemption is included in the Profit and Loss account

(ii) Held to Maturity - Profit on sale /redemption of investments is included in the Profit and Loss Account and is appropriated to Capital Reserve after adjustments for tax and transfer to Statutory Reserve. Loss on sale / redemption is charged to the Profit and Loss account

g) Repo and Reverse Repo transactions

Repo and reverse repo transactions in government securities and corporate debt securities including those conducted under the Liquidity Adjustment Facility (‘LAF'') and Marginal Standby Facility (‘MSF'') with RBI are accounted as collateralised borrowing and lending respectively. Borrowing cost on repo transactions is accounted as interest expense and revenue on reverse repo transactions is accounted as interest income.

h) Short Sales

In accordance with the RBI guidelines, the Bank undertakes short sale transactions in Central Government dated securities. The Short Sales positions are reflected in ‘Securities Short Sold (‘SSS'') A/C, specifically created for this purpose. The short position is categorised under HFT category and netted off from investments in the Balance Sheet. These positions are marked-to-market and resultant gains/losses are accounted for as per the relevant RBI guidelines for valuation of Investments discussed earlier.

4.5 Transactions Involving Foreign Exchange

a) Monetary foreign currency assets and liabilities are translated at closing exchange rates notified by FEDAI relevant to the balance sheet date. The resulting gain or loss on revaluation are included in the Profit and Loss Account in accordance with the RBI / FEDAI guidelines.

4.7 Intangible Assets

Accounting and amortisation of computer software are in accordance with the provisions of Accounting Standard 26 -Intangible Assets, specified under Section 133 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Rules, 2021.

a) Application Software purchased is amortised over a period of 5 years on pro rata basis under Straight Line Method

b) Internally Generated Application Software is accounted as an intangible asset and is amortised over a period of 5 years on pro rata basis under Straight Line Method from the date the software becomes available for Use. If the software is still in the development phase and has not become Available for Use, no amortisation is charged to Profit & Loss Account

The useful lives of the groups of fixed assets are given below:
Type of Fixed Asset	Estimated useful life specified under Schedule II of the Companies Act, 2013	Estimated useful life as assessed by the Bank*	Depreciation Method
Premises	60 Yrs	58 Yrs	Written Down Value
Computer & data Processing Machines	3 Yrs	3 Yrs	Straight Line
ATMs	3 Yrs	8 Yrs	Straight Line
Furniture & Fixtures	10 Yrs	8 Yrs	Straight Line
Office Equipment	5 Yrs	5 Yrs	Straight Line
Motor Cars	8 Yrs	5 Yrs	Straight Line
*The useful life of assets is based on historical experience of the Bank, which is different from the useful life as prescribed in Schedule II to the Companies Act, 2013.

Foreign exchange forward contracts not intended for trading that are entered into to establish the amount of reporting currency required or available at the settlement date of transactions, which are outstanding at the Balance Sheet date are effectively valued at closing spot rate. The premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.

b) Foreign currency income and expenditure items are translated at the exchange rates prevailing on the date of the transaction.

c) Outstanding foreign exchange forward contracts are revalued at the rates applicable on the closing date as advised by FEDAI. The resultant gains or losses are recognised in the Profit and Loss Account.

d) Contingent Liabilities on guarantees, letters of credit, acceptances and endorsements are disclosed at closing rates of exchange notified by FEDAI.

4.6 Fixed Assets and Depreciation

a) Fixed Assets other than premises are carried at cost less accumulated depreciation and impairment, if any. Cost includes cost of purchase and freight, duties, taxes and incidental expenses

related to the acquisition and installation of the asset.

b) Premises are stated at revalued amount. Appreciation on revaluation of premises is credited to Revaluation Reserve. The additional depreciation on the revalued portion of buildings is charged to Profit and Loss Account and an equivalent amount is withdrawn from Revaluation Reserve and credited to General Reserve. Valuations are obtained from two independent valuers, at least once in every 3 years.

c) Subsequent expenditure incurred on fixed assets put to use is capitalised only when it represents an improvement which increases the future benefits from the existing asset beyond its previously assessed standard of performance or an extension which becomes an integral part of the asset.

d) Depreciation on additions to fixed assets is provided on pro rata basis. Depreciation on assets sold during the year is recognised on a pro-rata basis till the date of sale. Gain or losses arising from the retirement or disposal of fixed assets are determined as the difference between the net disposal proceeds and the carrying amount of assets and are recognised as income or expense in the Profit and Loss Account.

4.8 Impairment of Assets

The carrying amount of the assets at each Balance Sheet date is reviewed for impairment. If any indication of impairment based on internal / external factors exists, the recoverable amount of such assets is estimated and impairment is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and its value in use, which is arrived at by discounting the future cash flows to their present value, based on an appropriate discounting factor.

Impairment losses, if any, on Fixed Assets (including revalued assets) are recognised in accordance with the Accounting Standard 28 ‘Impairment of Assets'' specified under Section 133 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Rules, 2021 and charged to Profit and Loss Account.

4.9 Non-Banking Assets

The Non-Banking asset are recognised based on the cost of acquisition. In the case of diminution in value, if any, is provided for.

4.10 Employee Benefits

a) Short Term Employee Benefits

The undiscounted amount of short-term employee benefits which are expected to be paid in exchange for the services rendered by employees are recognised during the period when the employee renders the service. These benefits include performance incentives

b) Long term Employee Benefits

(i) Defined Contribution Plan - Provident Fund and New Pension Scheme (Contributory) are the defined contribution plans of the Bank. The contribution for Provident Fund is made by the Bank to The Catholic Syrian Bank Limited Employees Provident Fund, administered by the trustees. In addition to contribution for the period, shortfall, if any, in the Provident Fund Trust is charged to Profit and Loss Account of the Bank

(ii) Defined Benefit Plans - Liabilities towards Gratuity, Pension and Leave benefits to employees are defined benefit obligations and are provided for on the basis of actuarial valuation made at the end of each financial year. Projected Unit Credit Method is used by the actuary for valuing the obligations

in case of Pension, Gratuity and Long term Compensated Absences and other long term employee benefits. Discount rate used to arrive at the present value of estimated future cash flows is arrived at by reference to market yields on balance sheet date on government bonds of term consistent with estimated term of the obligations as per paragraph 78 of AS 15 Employee Benefits. Actuarial Gains/Losses are immediately taken to the profit and loss account and are not deferred.

Brief description of the defined benefit plans:

i) Pension - Pension is payable, as per CSB Bank Limited Employees'' Pension Regulation 1993 and as modified in 1995, to the employees who have specifically opted for the same. The contribution is made by the Bank to The Catholic Syrian Bank Limited Employees Pension Fund, administered by the trustees. For becoming eligible for pension, the employee should have served the Bank for a minimum period of 10 years in the case of retirement on superannuation and 20 years in other cases. At the time of retirement or death of the pension eligible employee, the pension trust purchases annuity from insurance company, out of the contributions made by the Bank.

ii) Gratuity - As per the Gratuity Act 1972, Gratuity is payable to all employees on termination of employment due to retirement, death or resignation, provided that the employee has continuously served the Bank for a minimum period of 5 years. The contribution is made by the Bank to The Catholic Syrian Bank Limited Employees Gratuity Fund, administered by the trustees.

iii) Long term compensated absences and other long-term employee benefits viz:

a. Privilege Leave

b. Leave fare concession

c. Sick Leave

are based on actuarial valuation at the end of the financial year.

c) Employee Stock Options (ESOS)

The Bank has formulated a stock option

scheme called "CSB Employees Stock Option

Scheme2019” ("ESOS 2019” or "Scheme”) in

accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 which was subsequently repealed with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. The scheme is intended to enable the employees, present and future, to get a share in the value that they help to create for the organisation over a period of time, aligning the objectives of an individual with those of the Bank as well as to attract and retain critical senior talents with Employee Stock Options as a compensation tool. The options granted to employees vest in a graded manner as per vesting schedule even beyond retirement / early retirement date and these may be exercised by option grantee within a specified period, as per the terms of grant; otherwise options stand lapsed as per the scheme.

The accounting for shares granted under Employee Stock Option Scheme is done as per the ICAI Guidance note on Accounting for Employee Share based payments and clarification dated August 30, 2021, issued by Reserve Bank of India on Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff, dated November 4, 2019 (RBI guidelines). Accordingly, for options granted up to and including March 31, 2021, Bank has applied the intrinsic value method to arrive at the compensation cost of stock options granted to the employees. The intrinsic value is the amount by which the market price exceeds the exercise price of the options. The market price for this purpose is the latest available closing price, prior to the date of grant, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered. For options granted after March 31,2021 fair value method using Black-Scholes model has been applied to arrive at the compensation cost of stock options granted to the employees, in compliance with the RBI guidelines. Compensation cost so determined is recognised as expense beginning with the accounting period for which approval has been granted.

In case the vested stock options expire unexercised, the balance in stock options

outstanding is transferred to the general reserve. In case the unvested stock options get lapsed/cancelled, the balance in stock option outstanding account is transferred to the Profit and Loss Account.

4.11 Segment Information

As per the RBI guidelines, business segments of the Bank are divided under a) Treasury b) Corporate and wholesale banking c) Retail Banking and d) Other Banking Business. Business segments have been identified and reported considering the target customer segment, the nature of products, internal business reporting system, Segment reporting policy approved by the Board, the guidelines prescribed by the RBI.

4.12 Lease transactions

Operating Lease

Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are classified as operating lease. Lease payments for assets taken on operating lease are recognised as an expense in the Profit and Loss Account as per the lease terms. Amount due under the operating leases, including cost escalation, are charged on a straight line method over the lease term in the Profit and Loss account. Initial direct cost incurred specifically for operating leases are recognised as expense in the Profit and Loss Account in the year in which they are incurred.

4.13 Earnings Per Share

The Bank reports basic and diluted Earnings per equity share in accordance with the Accounting Standard 20 on "Earnings per share specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Rules, 2021. Basic Earnings per share (EPS) reported is computed by dividing net profit after tax by the weighted average number of equity shares outstanding for the period.

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.

4.14 Taxes on Income

Income tax expense is the aggregate amount of current tax and deferred tax charge. Current year taxes are determined in accordance with the Income Tax Act, 1961 and Deferred tax expense in accordance with Accounting Standard 22 - Accounting for Taxes on Income. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws.

Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realise the assets. The impact of changes in the deferred tax assets and liabilities is recognised in the Profit and Loss Account. Deferred tax assets are recognised and reassessed at each reporting date, based upon management''s judgement as to whether realisation is considered as reasonably certain.

4.15 Accounting for Provisions, Contingent Liabilities and Contingent Assets

The Bank recognises provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made. Contingent assets are not recognised in the financial statements.

Provisions (excluding retirement benefits) are not discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

Provisions for onerous contracts are recognised when the expected benefits to be derived by the Bank from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Bank recognises any impairment loss on the assets associated with that contract.

A disclosure of contingent liability is made when there is:

• a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non-occurrence of one or more uncertain future events not within the control of the Bank; or

• a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made

When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

4.16 Share Issue Expenses

The share issue expenses are adjusted from share premium account in terms of Section 52 of the Companies Act, 2013, with the approval of Reserve Bank of India in terms of section 17 (2) of the Banking Regulation Act, 1949.

4.17 Proposed Dividend

In terms of Accounting Standard (AS) 4 "Contingencies and Events occurring after the Balance sheet date” as notified by the Ministry of Corporate affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016 dated March 30, 2016, Proposed Dividend or Dividend declared after balance sheet date, if any, are not shown as liability in current year balance sheet. This is disclosed in the notes to accounts.

4.18 Corporate Social Responsibility

Expenditure towards corporate social responsibility, in accordance with Companies Act, 2013 are recognised in the Profit and Loss Account.

4.19 Input Credit under GST

Goods & Service tax input credit is accounted for in the books within the time limit prescribed under CGST Rules, 2017, as amended.

4.20 Priority Sector Lending Certificates (PSLC)

The Bank vide RBI circular FIDD.CO.Plan.BC.23/ 04.09.01/2015-16 dated April 7, 2016 trades in priority sector portfolio by selling or buying PSLC. In case of a purchase transaction the Bank buys the fulfilment of priority sector obligation and in case of a sale transaction, the Bank sells the fulfilment of priority sector obligation through the RBI trading platform without any transfer of underlying risk or loan assets. There is no transfer of risks or loan assets in these transactions. The fee paid for purchase of the PSLC is treated as ‘Other expense'' in Schedule 16 and the fee received from the sale of PSLCs is treated as ‘Miscellaneous Income'' in Schedule 14 of the Profit and Loss account.

4.21 Cash and Cash Equivalents

Cash and cash equivalents include cash in hand, balances with Reserve Bank of India and Balances with Other Banks / institutions and money at call and short notice (including the effect of changes in exchange rates on cash and cash equivalents in foreign currency).

4.22 Net Profit/Loss

The net profit/loss disclosed in the Profit & Loss Account is after

(i) provision for taxes

(ii) provision for standard, restructured and nonperforming assets

(iii) provision for depreciation on investments and

(iv) other usual and necessary provisions

---

Mar 31, 2023

1. Background

CSB Bank Limited (“the Bank"), was incorporated in 1920. The Bank has a network of 703 branches in India and provide a range of banking and financial services including SME banking, Retail banking, Corporate banking and treasury operations. The Bank is governed by the Banking Regulation Act, 1949. The Bank''s shares are listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited.

2. Basis of preparation

a) The financial statements have been prepared in accordance with the requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the circulars and guidelines issued by the Reserve Bank of India (RBI) from time to time, the Accounting Standards (AS) notified under Section 133 of the Companies Act, 2013 read together with paragraph 7 of The Companies (Accounts) Rules, 2014 to the extent applicable and practices generally prevalent in the banking industry in India.

b) The Bank follows the historical cost convention and the accrual method of accounting, in the preparation of-the financial statements, except as stated in paragraph 4.1 “Revenue recognition". The accounting policies adopted in the preparation of financial statements are consistent with those followed in the previous year.

3. Use of estimates

The preparation of the financial statements, in conformity with the generally accepted accounting principles, requires management to make estimates and assumptions that are considered in the reported amounts of assets and liabilities (including contingent liabilities), as of the date of financial statements and the reported income and expenses during the reporting period. The estimates and assumptions used in the accompanying financial statements are based upon the management''s evaluation of the relevant facts and circumstances as of the date of the financial statements. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. The impact of any revision in these estimates is recognized prospectively from the period of change.

4. Significant accounting policies

4.1 Revenue Recognition

Revenue is recognized to the extent it is probable

that the economic benefits will flow to the Bank and

the revenue can be reliably measured.

a. Interest/discount on advances/bills is recognized on accrual basis, except in case of non-performing assets in which case the income is recognized as per prudential norms issued by RBI.

b. Exchange, Brokerage, Commission & Rent on lockers are recognized on cash basis.

c. Income on insurance commission are accounted on right to receive basis.

d. Interest on income tax refund is recognized in the year of receipt of Assessment Orders.

e. The recovery in Non-Performing Assets is first appropriated towards principal dues and the balance, if any, towards charges, cost and interest suspense except in case appropriation has to be made as per any statute/direction/ order of judicial forum, the appropriation is to be made based on the same.

f. Loan processing fee is accounted for upfront when it becomes due.

g. Income on instruments discounted by Bank is recognized over the tenure of the instrument on a straight line basis.

h. Income on Investments (other than dividend on shares & mutual funds, interest on Pass Through Certificates and income on non performing investments) is recognized on accrual basis.

i. Dividend income is recognized as income when the right to receive payment is established.

j. Fee paid/received for priority sector lending certificates (PSLC) is recognized in the year of sale/purchase.

k. All other fees are accounted for as and when they become due.

l. In the case of purchase of loans from other banks/NBFCs through direct assignment of cash flows, the Bank recognizes interest income on the basis of original IRR/actual collection record of the pool. The discount, if any, on such purchase is recognized in proportion to the principal received.

m. In case of Asset Sale to ARCs, where the sales is at a price higher than the net book value (NBV), (i.e. outstanding less provision held) and consideration is received in cash, the excess

provision on NPA is credited to Profit and loss account. If consideration is other than cash, the excess provision is retained. If the sale is at a price below the NBV, the shortfall is debited to Profit & Loss Account, as per the option given by RBI.

n. Legal expenses incurred on suit filed accounts are expensed in profit and loss account as per RBI guidelines. Such amount when recovered is treated as income.

4.2 Advances

a) Advances are classified as ''Performing assets'' and ''Non-performing Assets'' (NPA) in accordance with the applicable regulatory guidelines. NPAs are further classified in to Substandard, Doubtful and Loss assets based on the criteria stipulated by the RBI.

b) Provision for Non-Performing Advances comprising Sub-standard, Doubtful and Loss Assets is made in accordance with the RBI guidelines, which prescribe minimum provision levels and encourage banks to make a higher provision based on sound commercial judgement. In respect of identified NPAs, provision is recognized at borrower level based on ageing of loans. As per the Board Approved policy, the provisioning done is at rate higher than the minimum rate prescribed under the RBI guidelines.

c) The amount of advances shown in the Balance Sheet is net of provisions against NPA and provisions in lieu of diminution in the fair value of restructured asset, interest suspense, ECGC claims received and discount on assignment transactions.

d) Provision on Standard Assets, is maintained as per RBI guidelines. In respect of Rescheduled/ Restructured Advances, provision is made for the diminution in the fair value of restructured advances measured in present value terms as per RBI Guidelines. The said provision is reduced to arrive at net advances. In case of advances to stressed sectors such as Cashew, Cotton Textile, Infra - Telecom and Retail Trade, the Bank has recognized provision in line with RBI guidelines. These provisions are included under in Item No. IV of Schedule 5 - Other Liabilities & Provisions.

e) The RBI had issued guidelines on enhancing credit supply for Large Borrowers through Market Mechanism dated August 25, 2016. The said guidelines are applicable to exposure on all single counterparties of the Bank. These guidelines came into effect from the financial year 2017-18 onwards for identification of specified borrowers. The bank''s incremental exposures from FY 2018-19 onwards to the specified borrowers exceeding the Net Permitted Lending Limits (''NPLL'') would attract prudential measures. Incremental Exposure of the Banking System to a specified borrower beyond NPLL shall be deemed to carry higher risk which shall be recognized by way of additional standard asset provisioning and higher risk weights.

f) Further, the RBI has Issued guidelines on “Prudential Framework for Resolution of Stressed Assets dated June 07, 2019" with a view to providing a framework for early recognition, reporting and time bound resolution of stressed assets. The Bank is required to put in place Board-approved policy for resolution of distressed Borrowers with an objective to initiate the process of resolution of a distressed Borrower even before a default and prior to the initiation of proceedings under the IBC.

g) The Bank is required to make an additional provisioning for the delayed implementation of Resolution Plan (rp) as under:

[a] Additional provision of 20% of total outstanding, if RP is implemented beyond 180 days from the end of the review period.

[b] Additional provision of 35% of total outstanding, if RP is implemented beyond 360 days from the end of the review period.

The additional provisions shall be made over and above the higher of the following, subject to the total provisions held being capped at 100% of total outstanding: [a] The provisions already held; or, [b] The provisions required to be made as per IRAC norms

h) In the event of substantial erosion in value of loan and remote possibility of collection, non performing loans with adequate provisions are evaluated for technical / prudential write off based on Bank''s policy and the RBI guidelines. Such write off does not have an impact on the Bank''s legal claim against the borrower. The Bank may also write off non performing loans on one time settlement (''OTS'') with the borrower or otherwise. Amounts recovered from borrowers against debts written off is recognised in the Profit and Loss Account.

i) Non-performing and restructured loans are upgraded to standard as per the extant RBI guidelines.

j) Policy on Managing Currency induced credit risk: As per Credit Policy of the Bank, Foreign Currency loans are sanctioned for both capital expenditure and working capital, based on the requirements. Rate of interest on such loans are linked to LIBOR or other market linked external benchmark. From January 01, 2022 onwards all new foreign currency loans/ contracts, and fresh disbursals under existing facilities (PCFC/EBD/PSCFC/Easy imports) shall be entered by using the Alternate reference rates (ARR) viz. Term SOFR (Secured Overnight Financing Rate)/ Term SONIA (Sterling Overnight Interbank Average Rate) / EURIBOR or other market linked external benchmark, based on currency involved . For existing US dollar denominated FC loans benchmarked to LIBOR as on 31.12.2021, since USD LIBOR rates are available (on ''synthetic basis'' for 1, 3, 6, & 12 month maturities) till June 30, 2023, roll over/ reset can be done using these rates till June 30, 2023. However, based on mutual consent with the borrower switchover to ARR for respective currencies is considered.

Forward exchange cover is insisted in all cases unless there is natural hedge by way of export/ other earnings. However, if the loan amount is less than USD 1 (one) Million, forward exchange cover is made optional to the borrower subject to furnishing of an unconditional undertaking to bear the exchange loss if any.

k) Provision for Unhedged Foreign Currency Exposure (UFCE) of borrower entities is made in accordance with the guidelines issued by RBI, which requires the Bank to ascertain the amount of UFCE, estimate the extent of likely loss and estimate the riskiness of unhedged position of those entities. The Provision is classified under Schedule 5 - Other Liabilities and Provisions in the Balance Sheet.

l) While computing the provision requirement pertaining to fraud accounts, adjustment is made for financial collateral eligible under “BASEL III Capital regulations -Capital charge for credit risk (standardized approach)", if available and amount so arrived at is charged fully to Profit and Loss Account, in the same quarter of detection.

4.3 Country risk

In addition to the provisions required to be held according to the asset classification status, provisions are held for individual country exposure (other than for home country as per the RBI guidelines). The countries are categorized into seven risk categories namely insignificant, low, moderately low, moderate, moderately high, high and very high, as per Export Credit Guarantee Corporation of India Limited (ECGC) guidelines and provision is made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 25%. For exposures with contractual maturity of less than 180 days, provision is required to be held at 25% of the rates applicable to exposures exceeding 180 days. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is required on such country exposure.

4.4 Investments

a) Classification

All Investments are accounted for on settlement dates. In accordance with the RBI guidelines, investments are categorized at the time of purchase as:

• Held for Trading (HFT);

• Available for Sale (AFS);

• Held to Maturity (HTM)

Under each of these categories, investments are further classified under six groups (hereinafter called groups) - Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries/ Joint Ventures and Other Investments for the purposes of disclosure in the Balance Sheet.

Basis of classification:

Investments that are held primarily for resale within 90 days from the date of purchase are classified under the “Held for Trading (HFT)" category. As per RBI guidelines, HFT Securities, which remain unsold for a period of 90 days, are classified as AFS Securities on that date. Investments that the Bank intends to hold till maturity are classified under the “Held to Maturity (HTM)" category. Investments, which are not classified in the above categories, are classified under the “Available For Sale [AFS]" category. Purchase and sale transactions in securities are recorded under settlement date of accounting.

b) Transfer of Investments between Categories

Reclassification of investments from one category to the other, if done, is in accordance with the RBI guidelines. Transfer of scrips from AFS/HFT category to HTM category is made at the lower of book value or market value. In the case of transfer of securities from HTM to AFS/HFT category, the investments held under HTM at a discount, are transferred to AFS/HFT category at the acquisition price and investments placed in the HTM category at a premium, are transferred to AFS/HFT at the amortized cost.

Transfer of investments from AFS to HFT or vice versa is done at the book value. Depreciation carried, if any, on such investments is also transferred from one category to another.

c) Cost of Acquisition

In determining the acquisition cost of the Investment:

(i) Transaction costs including brokerage and commission pertaining to acquisition of Investments are charged to the Profit and Loss Account.

(ii) Broken period interest (the amount of interest from the previous interest payment date till the date of purchase / sale of instrument) on debt instrument is treated as revenue item.

(iii) Cost of investments is computed based on the weighted average cost method.

d) Valuation of Investments:

(i) Investments in “Held to Maturity" category are accounted for at acquisition cost or at amortized cost, if acquired at a premium. In case the cost is higher than the face value, the premium is amortized over the period remaining to maturity using Constant Yield Method. Such amortization of premium is adjusted against income under the head “Income on Investments". Where the face value is higher than the cost, the discount is ignored and is accounted only on maturity date of the instrument.

(ii) Securities classified as “Available for Sale" are marked to market scrip-wise on a quarterly basis other than shares, which is done on a weekly basis. Net depreciation, if any, compared to the acquisition cost, in any of the categories, is charged to the Profit and Loss Account. The net

appreciation in each category, if any, is not recognised.

(iii) Individual scrips in “Held for Trading" category are marked to market at daily intervals. Net depreciation, if any, compared to the acquisition cost, in any of the categories, is charged to the Profit and Loss Account. The net appreciation in each category, if any, is not recognised.

(iv) The market/fair value of unquoted government securities which are in nature of Statutory Liquidity Ratio (SLR) securities included in the ''Available for Sale'' and ''Held for Trading'' categories is as per the rates published by FIMMDA/ FBIL. The valuation of other unquoted fixed income securities, including Pass Through Certificates wherever linked to the Yield-to-Maturity (YTM) rates, is computed with a mark-up (reflecting associated credit risk) over the YTM rates for government securities published by FIMMDA. Units of Alternate Investment Funds (''AIF'') held under AFS category are valued using the ''NAV'' published by the fund (AIF).

(v) Unquoted equity shares are valued at the break-up value arrived at from the latest balance sheet, or at ''1, if the balance sheet prior to one year is not available.

(vi) Treasury Bills, Commercial Papers and Certificate of Deposits are valued at carrying cost.

(vii) Security receipts are valued as per the Net Asset Value (NAV) obtained from the issuing Reconstruction Company/Securitization Company. Depreciation in each scrip is provided for while appreciation is ignored.

(viii) Non-performing investments (''NPI'') are identified and depreciation / provision is made thereon based on the RBI guidelines. The depreciation / provision against NPI is not set off against the appreciation in respect of other performing securities. Interest on non-performing investments is recognised on cash basis.

(ix) As per RBI circular [FMOD.MAOG. No. 116/01.01.001/2016-17, dated 10.11.2016], the Bank is classifying Repo / Reverse Repo under LAF scheme in Schedule 4 [Borrowings] and Schedule 7 [Balances with banks and Money at call & short notice] respectively.

e) Investment Fluctuation Reserve (''IFR''):

The RBI has advised banks to create an Investment Fluctuation Reserve (''IFR'') with effect from FY 2018-19. Accordingly, an amount not less than the lower of net profit on sale of investments during the year or net profit for the year less mandatory appropriations shall be transferred to the IFR, until the amount of IFR is at least 2 percent of the HFT and AFS portfolio, on a continuing basis. Where feasible, this should be achieved within a period of 3 years.

Draw down, if any, from the Investment Fluctuation Reserve shall be in accordance with the applicable RBI guidelines.

Also, IFR is eligible for inclusion in Tier 2 capital.

f) Disposal of Investments

(i) Held for Trading and Available for Sale - Profit or loss on sale / redemption is included in the Profit and Loss account.

(ii) Held to Maturity - Profit on sale /redemption of investments is included in the Profit and Loss Account and is appropriated to Capital Reserve after adjustments for tax and transfer to Statutory Reserve. Loss on sale / redemption is charged to the Profit and Loss account.

g) Repo and Reverse Repo transactions

Repo and reverse repo transactions in government securities and corporate debt securities including those conducted under the Liquidity Adjustment Facility (''LAF'') and Marginal Standby Facility (''MSF'') with RBI are accounted as collateralized borrowing and lending respectively. Borrowing cost on repo transactions is accounted as interest expense and revenue on reverse repo transactions is accounted as interest income.

h) Short Sales

In accordance with the RBI guidelines, the Bank undertakes short sale transactions in Central Government dated securities. The Short Sales positions are reflected in ''Securities Short Sold (''SSS'') A/C, specifically created for this purpose. The short position is categorized under HFT category and netted off from investments in the Balance Sheet. These positions are marked-to-market and resultant gains/ losses are accounted for as per the relevant RBI guidelines for valuation of Investments discussed earlier.

4.5 Transactions Involving Foreign Exchange

a) Monetary foreign currency assets and liabilities are translated at closing exchange rates notified by FEDAI relevant to the balance sheet date. The resulting gain or loss on revaluation are included in the Profit and Loss Account in accordance with the RBI / FEDAI guidelines.

b) Foreign currency income and expenditure items are translated at the exchange rates prevailing on the date of the transaction.

c) Outstanding foreign exchange forward contracts are revalued at the rates applicable on the closing date as advised by FEDAI. The resultant gains or losses are recognized in the Profit and Loss Account.

d) Contingent Liabilities on guarantees, letters of credit, acceptances and endorsements are disclosed at closing rates of exchange notified by FEDAI.

4.6 Fixed Assets and Depreciation

a) Fixed Assets other than premises are carried at cost less accumulated depreciation and impairment, if any. Cost includes cost of purchase and freight, duties, taxes and incidental expenses related to the acquisition and installation of the asset.

b) Premises are stated at revalued amount. Appreciation on revaluation of premises is credited to Revaluation Reserve. The additional depreciation on the revalued portion of buildings is charged to Profit and Loss Account and an equivalent amount is withdrawn from Revaluation Reserve and credited to General Reserve.

c) Subsequent expenditure incurred on fixed assets put to use is capitalized only when it represents an improvement which increases the future benefits from the existing asset beyond its previously assessed standard of performance or an extension which becomes an integral part of the asset.

d) Depreciation on additions to fixed assets is provided on pro rata basis. Depreciation on assets sold during the year is recognised on a pro-rata basis till the date of sale.

The useful lives of the groups of fixed assets are given below:

Type of Fixed Asset	Useful Life	Depreciation Method
Premises	58 Yrs*	Written Down Value
Computer & data Processing Machines	3 Yrs*	Straight Line
ATMs	8 Yrs*	Straight Line
Furniture & Fixtures	8 Yrs*	Straight Line
Plant & Machinery	5 Yrs*	Straight Line
Motor Cars	5 Yrs*	Straight Line
Computer Software, Patent & Copyright	5 Yrs	Straight Line

* The useful life of assets is based on historical experience of the Bank, which is different from the useful life as prescribed in Schedule II to the Companies Act, 2013.

4.7 Intangible Assets

Accounting and amortization of computer software are in accordance with the provisions of Accounting Standard 26 - Intangible Assets, specified under Section 133 of the Companies Act, 2013 read with Rule 7 of The Companies (Accounts) Rules, 2014.

a) Application Software purchased is amortized over a period of 5 years on pro rata basis under Straight Line Method.

b) Internally Generated Application Software is accounted as an intangible asset and is amortized over a period of 5 years on pro rata basis under Straight Line Method from the date the software becomes available for Use. If the software is still in the development phase and has not become Available for Use, no amortization is charged to Profit & Loss Account.

4.8 Impairment of Assets

The carrying amount of the assets at each Balance Sheet date is reviewed for impairment. If any indication of impairment based on internal / external factors exists, the recoverable amount of such assets is estimated and impairment is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the net selling price and its value in use, which is arrived at by discounting the future cash flows to their present value, based on an appropriate discounting factor.

Impairment losses, if any, on Fixed Assets (including revalued assets) are recognized in accordance with the Accounting Standard 28 ''Impairment of Assets'' specified under Section 133 of the Companies Act, 2013 read with Rule 7 of The Companies (Accounts) Rules, 2014 and charged to Profit and Loss Account.

4.9 Non-Banking Assets

The Non-Banking asset are initially recognized based on the cost of acquisition. In the case of diminution in value, if any, is provided for.

4.10 Employee Benefits

a) Short Term Employee Benefits

The undiscounted amount of short-term employee benefits which are expected to be paid in exchange for the services rendered by employees are recognized during the period when the employee renders the service. These benefits include performance incentives.

b) Long term Employee Benefits

(i) Defined Contribution Plan - Provident Fund and New Pension Scheme (Contributory) are the defined contribution plans of the Bank. The contribution for Provident Fund is made by the Bank to The Catholic Syrian Bank Ltd Employees Provident Fund, administered by the trustees. In addition to contribution for the period, shortfall, if any, in the Provident Fund Trust is charged to Profit and Loss Account of the Bank.

(ii) Defined Benefit Plans - Liabilities towards Gratuity, Pension and Leave benefits to employees are defined benefit obligations and are provided for on the basis of actuarial valuation made at the end of each financial year. Projected Unit Credit Method is used by the actuary for valuing the obligations in case of Pension, Gratuity and Long term Compensated Absences and other long term employee benefits. Discount rate used to arrive at the present value of estimated future cash flows is arrived at by reference to market yields on balance sheet date on government bonds of term consistent with estimated term of the obligations as per paragraph 78 of AS 15 Employee Benefits. Actuarial Gains/ Losses are immediately taken to the profit and loss account and are not deferred.

Brief description of the defined benefit plans:

i) Pension - Pension is payable, as per CSB Bank Ltd Employees'' Pension Regulation 1993 and as modified in 1995, to the employees who have specifically opted for the same. The contribution is made by the Bank to The Catholic Syrian Bank Ltd Employees Pension Fund, administered by the trustees. For becoming eligible for pension, the employee should have served the Bank for a minimum period of 10 years in

the case of retirement on superannuation and 20 years in other cases. At the time of retirement or death of the pension eligible employee, the pension trust purchases annuity from insurance company, out of the contributions made by the Bank.

ii) Gratuity - As per the Gratuity Act 1972, Gratuity is payable to all employees on termination of employment due to retirement, death or resignation, provided that the employee has continuously served the Bank for a minimum period of 5 years. The contribution is made by the Bank to The Catholic Syrian Bank Ltd Employees Gratuity Fund, administered by the trustees.

iii) Long term compensated absences and other long-term employee benefits viz:

a. Privilege Leave

b. Leave fare concession

c. Sick Leave

are based on actuarial valuation at the end of the financial year

c) Employee Stock Options (ESOS)

The Bank has formulated a stock option scheme called “CSB Employees Stock Option Scheme2019" (“ESOS 2019" or “Scheme") in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 which was subsequently repealed with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. The scheme is intended to enable the employees, present and future, to get a share in the value that they help to create for the organization over a period of time, aligning the objectives of an individual with those of the Bank as well as to attract and retain critical senior talents with Employee Stock Options as a compensation tool. The options granted to employees vest in a graded manner as per vesting schedule even beyond retirement /early retirement date and these may be exercised by option grantee within a specified period, as per the terms of grant; otherwise options stand lapsed as per the scheme.

The accounting for shares granted under Employee Stock Option Scheme is done as per the ICAI Guidance note on Accounting for Employee Share based payments and clarification dated August 30, 2021, issued

by Reserve Bank of India on Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff, dated November 4, 2019 (RBI guidelines). Accordingly, for options granted up to and including March 31, 2021, Bank has applied the intrinsic value method to arrive at the compensation cost of stock options granted to the employees. The intrinsic value is the amount by which the market price exceeds the exercise price of the options. The market price for this purpose is the latest available closing price, prior to the date of grant, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered. For options granted after March 31,2021 fair value method using Black-Scholes model has been applied to arrive at the compensation cost of stock options granted to the employees, in compliance with the RBI guidelines. Compensation cost so determined is recognised as expense beginning with the accounting period for which approval has been granted.

In case the vested stock options expire unexercised, the balance in stock options outstanding is transferred to the general reserve. In case the unvested stock options get lapsed/cancelled, the balance in stock option outstanding account is transferred to the Profit and Loss Account.

4.11 Segment Information

As per the RBI guidelines, business segments of the Bank are divided under a) Treasury b) Corporate and wholesale banking c) Retail Banking and d) Other Banking Business. Business segments have been identified and reported considering the target customer segment, the nature of products, internal business reporting system, Segment reporting policy approved by the Board, the guidelines prescribed by the RBI.

4.12 Lease transactions Operating Lease

Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are classified as operating lease. Lease payments for assets taken on operating lease are recognized as an expense in the Profit and Loss Account as per the lease terms. Amount due under the operating leases, including cost escalation, are charged on a straight line

method over the lease term in the Profit and Loss account. Initial direct cost incurred specifically for operating leases are recognised as expense in the Profit and Loss Account in the year in which they are incurred.

4.13 Earnings Per Share

The Bank reports basic and diluted Earnings per equity share in accordance with the Accounting Standard 20 on “Earnings per share specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Amendment Rules, 2016. Basic Earnings per share (EPS) reported is computed by dividing net profit after tax by the weighted average number of equity shares outstanding for the period.

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.

4.14 Taxes on Income

Income tax expense is the aggregate amount of current tax and deferred tax charge. Current year taxes are determined in accordance with the Income Tax Act, 1961 and Deferred tax expense in accordance with Accounting Standard 22 - Accounting for Taxes on Income. Deferred income taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same governing taxation laws.

Deferred tax liabilities are recognized for all timing differences. Deferred tax assets are recognized for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realized. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital

losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realize the assets. The impact of changes in the deferred tax assets and liabilities is recognized in the Profit and Loss Account. Deferred tax assets are recognized and reassessed at each reporting date, based upon management''s judgement as to whether realization is considered as reasonably certain.

4.15 Accounting for Provisions, Contingent Liabilities and Contingent Assets

The Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made. Contingent assets are not recognized in the financial statements.

Provisions (excluding retirement benefits) are not discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

Provisions for onerous contracts are recognised when the expected benefits to be derived by the Bank from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Bank recognises any impairment loss on the assets associated with that contract.

A disclosure of contingent liability is made when there is:

• a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non-occurrence of one or more uncertain future events not within the control of the Bank; or

• a present obligation arising from a past event which is not recognized as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

4.16 Share Issue Expenses

The share issue expenses are adjusted from share premium account in terms of Section 52 of the Companies Act, 2013, with the approval of Reserve Bank of India in terms of section 17 (2) of the Banking Regulation Act, 1949.

4.17 Proposed Dividend

In terms of Accounting Standard (AS) 4 “Contingencies and Events occurring after the Balance sheet date" as notified by the Ministry of Corporate affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016 dated March 30, 2016, Proposed Dividend or Dividend declared after balance sheet date, if any, are not shown as liability in current year balance sheet. This is disclosed in the notes to accounts.

4.18 Corporate Social Responsibility

Expenditure towards corporate social responsibility, in accordance with Companies Act, 2013 are recognized in the Profit and Loss Account.

4.19 Input Credit under GST

Goods & Service tax input credit is accounted for in the books within the time limit prescribed under CGST Rules, 2017, as amended.

4.20 Priority Sector Lending Certificates (PSLC)

The Bank vide RBI circular FIDD.CO.Plan.BC.23/ 04.09.01/2015-16 dated April 7, 2016 trades in priority

sector portfolio by selling or buying PSLC. In case of a purchase transaction the Bank buys the fulfilment of priority sector obligation and in case of a sale transaction, the Bank sells the fulfilment of priority sector obligation through the RBI trading platform without any transfer of underlying risk or loan assets. There is no transfer of risks or loan assets in these transactions. The fee paid for purchase of the PSLC is treated as an ''Expense'' and the fee received from the sale of PSLCs is treated as ''Other Income''.

4.21 Cash and Cash Equivalents

Cash and cash equivalents include cash in hand, balances with Reserve Bank of India and Balances with Other Banks / institutions and money at call and short notice (including the effect of changes in exchange rates on cash and cash equivalents in foreign currency).

4.22 Net Profit/Loss

The net profit/loss disclosed in the Profit & Loss Account is after

(i) provision for taxes

(ii) provision for standard, restructured and nonperforming assets.

(iii) provision for depreciation on investments and

(iv) other usual and necessary provisions.