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Accounting Policies of Jammu & Kashmir Bank Ltd. Company

Mar 31, 2023

"Principal Accounting Policies"

A. Overview

Jammu and Kashmir Bank (J&K Bank) is a Scheduled Commercial Bank and one of the oldest private sector banks in India, incorporated in 1938. J&K Bank is listed on both NSE and BSE and has its Corporate Headquarters at Srinagar. The Bank functions as a leading bank in the Union Territories of Jammu & Kashmir and Ladakh and is designated by Reserve Bank of India as agency bank for carrying out banking business for the Government of Jammu & Kashmir and Ladakh. J&K Bank caters to banking requirements of various customer segments which includes Business enterprises, employees of government, semi-government and autonomous bodies, farmers, artisans, public sector organizations and corporate clients. Group companies of the J&K Bank include JKBFSL (wholly owned subsidiary) and JK Grameen Bank (Associate RRB). The Bank offers a wide range of retail credit products, including home finance, personal loans, education loan, agriculture lending, trade credit and consumer credit and a number of unique financial products tailored to the needs of various customer segments.

B. Basis of preparation of Financial Statements

The accompanying financial statements are prepared on historical cost basis, except as otherwise stated, following the "Going Concern” concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions and regulatory norms prescribed by the Reserve Bank of India (RBI), statutory guidelines of the Banking Regulation Act, 1949, applicable mandatory Accounting Standards (AS)/Guidance Notes/pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

The financial statements have been prepared in accordance with requirements under the Third Schedule of the Banking Regulation Act, 1949.

C. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions that are considered in the reported amount of assets and liabilities (including contingent liabilities) as on the date of financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

D. Significant Accounting Policies

1. Revenue Recognition

1.1 Income and expenditure are accounted on accrual basis, unless otherwise stated.

1.2 Interest / Discount income from Non-Performing Assets (NPAs) including investments is recognized in the Profit and Loss Account on realization basis, as per the prudential norms prescribed by RBI.

1.3 Partial recovery in Non-Performing Assets is appropriated first towards principal and thereafter towards interest.

1.4 Fee, commission (other than insurance commission & Government business), exchange income, locker rent, insurance claims, dividend on shares and units in Mutual Fund and interest on refund of income tax are accounted for on receipt basis.

1.5 Interest on overdue Term Deposits is provided at the rate of interest applicable to Savings Bank Deposits.

1.6 Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

1.7 Stationery issued to branches has been considered as consumed.

2. Investments

Investments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation, as given below:

2.1 Classification:

Investments are classified into Held to Maturity (HTM), Available for Sale (AFS) and Held for Trading (HFT) categories, in accordance with the guidelines issued by Reserve Bank of India. Disclosure of the investments under the three categories mentioned above is made under six classifications viz.

i. Government Securities

ii. Other Approved Securities

iii. Shares

iv. Bonds and Debentures

v. Subsidiaries and Joint Ventures

vi. Others

2.2 Basis of classification:

i. Investments that the Bank intends to hold till maturity are categorized as "Held to Maturity (HTM)”.

ii. Investments that are held principally for resale within 90 days from the date of purchase are categorized as "Held for Trading (HFT)”.

iii. Investments, which are not classified in above two categories, are classified as "Available for Sale (AFS)”.

iv. An investment is classified as HTM, HFT or AFS at the time of its acquisition. Subsequent shifting amongst categories is done with the approval of the Board normally once in a year and in conformity with regulatory guidelines.

v. Investments in subsidiaries and associates are classified as HTM.

2.3 Valuation:

i. Investments classified as "Held-to-Maturity” (HTM) category are carried at acquisition cost unless such costs are higher than the face value, in which case, the premium is amortised over the term to maturity using straight line method.

ii. The individual scrip''s in the "Available-for-Sale” category are marked to market at quarterly intervals. The net depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

iii. The individual scrip in the "held-for-trading” category is marked to market at weekly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

iv. The market value for the purpose of periodical valuation of investments, in case of quoted securities included in "Available for Sale” and "Held for trading” categories is based on the prices declared by the Financial Benchmarks India Pvt. Ltd. (FBIL) in accordance with RBI circular FMRD.DIRD.7/14.03.025/2017-18 dated March 31, 2018. For securities whose prices are not published by FBIL, securities are revalued at market prices available from the trades/quotes on the stock exchanges and prices declared by the Fixed Income Money Market and Derivatives Association of India (FIMMDA).

In respect of unquoted securities, the procedure adopted is as below:

Category of Securities

Value

Government of India Securities and State Government Securities

At rates put out by FIMMDA/PDAI/ Financial Benchmarks India Pvt. Ltd. (FBIL)

Other Approved Securities, Preference Shares, Debentures and PSU Bonds

On yield to maturity (YTM) basis at the rate prescribed by FIMMDA/PDAI/FBIL with such mark ups as laid down by RBI or FIMMDA/PDAI/FBIL

Equity Shares

At Break-up value (without considering revaluation reserves) to be ascertained from the company''s latest balance sheet. The date as on which the latest balance sheet is drawn up shall not precede the date of valuation by more than 18 months. In case, the latest balance sheet is not available, the shares shall be valued at Re.1 per company.

Mutual Fund Units

At latest re-purchase price declared by the Mutual Fund in respect of each scheme. In case of funds with a lock-in period or any other fund, where repurchase price is not available, units shall be value at Net Asset Value (NAV) of the scheme. If NAV is not available, these shall be valued at cost, till the end of the lock-in period.

Treasury Bills and Commercial Papers

At carrying cost

Certificate of deposits

At carrying cost

v. Transfer of securities amongst categories is effected at the lower of acquisition cost/ book value/ market value on the date of transfer and the depreciation, if any, on such shifting is fully provided for and the book value of securities is changed accordingly.

vi. The transactions in all securities are recorded on a Settlement Date and cost is determined on the weighted average cost method.

vii. Investments in subsidiary are valued at acquisition cost.

viii. Investments in J&K Grameen Bank/Sponsored Institutions are valued at carrying cost.

ix. The investment in security receipts obtained by way of sale of NPA to Asset Reconstruction Companies (ARCs) is recognized at lower of Net Book Value (NBV) (i.e. Book value less provisions held), of the financial asset and redemption value of the Security Receipt.

2.4 The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

2.5 Profit or loss on sale of investments is taken to the Profit and Loss account. However, in case of profit on sale of investments in "Held to Maturity” category, an equivalent amount of profit, net of taxes and the amount required to be transferred to Statutory reserve, is appropriated to the "Capital Reserve Account”.

2.6 Broken period interest paid/received on debt instruments is treated as interest expense/income and is excluded from cost/sale consideration.

2.7 Brokerage paid on securities purchased is charged to revenue account except for equity investment operations where the same is added to the cost of purchase of investment.

2.8 Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

2.9 In accordance with RBI circular No. FMRD.DIRD.01/14.03.038/2018-19 dated July 24, 2018, the Bank has made changes in accounting for Repo/ Reverse Repo transactions including Triparty Repo (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly, the securities sold and purchased under Repo/ Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in the case of normal outright sale/purchase transactions and such movement of securities are reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowing) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & money at call & short notice).

2.10 In respect of Non-Performing Securities, income is not recognized and appropriate provision is made for depreciation in the value of such securities as per Reserve Bank of India guidelines.

3. Advances

3.1 Classification of Advances and Provisions thereof have been made as per the Income Recognition, Asset Classification and Provisioning Norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets. Bank has made provisions on Non-Performing Assets as per the prudential norms prescribed by the RBI as under:

Category of Assets

Provision norms

Sub-Standard

15% on Secured Exposure 25% on Unsecured Exposure

20% on Unsecured Exposure in respect of Infrastructure loan accounts where certain safeguards such as escrow accounts are available

Doubtful-I

25% on Secured 100% on Unsecured

Doubtful-II

40% on Secured 100% on Unsecured

Doubtful-III

100% on Secured 100% on Unsecured

Loss

100%

3.2 Advances are shown net of unrealized interest and provisions/ Technical write offs made in respect of nonperforming advances. Provisions on standard advances are reflected in Schedule 5 of the Balance Sheet under the head "Other Liabilities & Provisions - Others” and are not considered for arriving at the Net NPAs.

3.3 Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

3.4 Amounts recovered against debts written off in earlier years are recognized as revenue in the year of recovery.

3.5 The Bank also makes additional provisions on specific non-performing assets.

3.6 Appropriation of recoveries in NPAs are made in order of priority as under:

i. Principal Due

ii. Charges, Costs, Commission etc.

iii. Unrealized Interest/ Interest

4. Floating Provisions

In accordance with the RBI guidelines, the Bank has an approved policy for creation and utilization of floating provisions for advances. The quantum of floating provisions to be created is assessed at the end of each quarter. These provisions are utilized only for contingencies under extraordinary circumstances specified in the policy with prior permission of Reserve Bank of India.

5. Fixed Assets and Depreciation

5.1 Fixed Assets, other than premises, are carried at cost less accumulated depreciation and impairment, if any. Freehold premises are carried at revalued amount, being fair value at the date of revaluation less accumulated depreciation.

5.2 Cost includes cost of purchase, freight, duties, taxes and all expenditure such as site preparation, installation costs and professional fees incurred on the asset before it is put-to-use. Subsequent expenditure(s) incurred on the assets put-to-use are capitalized only when it increases the future benefits from such assets or their functioning capability. The fixed assets are depreciated as per straight line method, considering residual value at 5% of original cost, as per the provisions of Companies Act 2013 based on the useful life of the assets prescribed in Part C of the Schedule II of the Companies Act 2013 as given hereunder:

Description of Fixed Assets

Useful Life (Years)

Buildings (With RCC Frame Structure)

60

Buildings (Other than RCC Frame Structure)

30

Boundary Wall

5

Plant and Machinery

15

Furniture and Fixtures

10

Vehicles

8

Others (Including temporary structures etc.)

3

Depreciation on computers (including ATMs/CDMs) along with software, forming integral part of the computers is computed at 33.33% on straight line method in terms of RBI guidelines issued vide letter no BP.1660/21.04.018/2001 dated 01.02.2001, taking residual value as Nil.

However, in compliance with Section 15(1) of Banking Regulation Act, 1949, the Bank has written off the entire amount of intangible assets amounting to Rs.35.72 crores as on March 31, 2023.

Useful life of the mobile phones is considered to be 2 years and the depreciation is charged in straight line method as per provisions of Companies Act 2013 with no residual value.

5.3 In respect of assets acquired during the year, depreciation is charged on proportionate basis for the number of days the assets have been put-to-use during the year.

5.4 Premium paid for leasehold properties is amortized over the period of lease.

5.5 The Bank revalues freehold immovable assets every three years. The increase in Net Book Value of the asset due to revaluation is credited to the Revaluation Reserve Account without routing through the Profit and Loss Account. However, where such an increase is a reversal of any previous decrease arising on revaluation which has been charged to profit and loss account, such increase is credited to profit and loss account to the extent that it offsets the previously recorded decrease. A decrease in net book value arising on revaluation of fixed assets is charged to profit and loss account except that, to the extent such a decrease is related to a previous increase on revaluation that is included in Revaluation Reserve, it is charged against that earlier increase. Additional Depreciation on the revalued asset is charged to the Profit and Loss Account and appropriated from the Revaluation Reserves to General Reserve. The revalued asset is depreciated over the balance useful life of the asset as assessed at the time of revaluation.

5.6 Assets costing less than Rs.1,000 each are charged off in the year of purchase.

6. Employee Benefits

6.1 Short Term Employee Benefits:

The undiscounted amounts 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.

6.2 Long Term Employee Benefits:

i. Defined Contribution Plan:

Provident Fund: Provident Fund is a defined contribution scheme as the bank pays fixed contribution at predetermined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to profit and loss account. The Bank is paying matching contribution towards those employees who have not opted for the pension.

ii. Defined Benefit Plan Gratuity

The Bank pays gratuity, a defined benefit plan, to vested employees on retirement or resignation or on death while in employment or on termination of employment. The Bank makes contribution to recognized trust which administers the funds on its own account or through insurance companies. Actuarial valuation of the gratuity

liability is determined by an independent actuary appointed by the Bank. Actuarial valuation of gratuity liability is determined based on certain assumptions regarding rate of interest, salary growth, mortality and staff attrition as per the projected unit credit method. The actuarial gains or losses arising during the year are recognized in the profit and loss account.

Pension

The Bank provides for pension to all eligible employees. The Bank makes contribution to a trust which administers the funds on its own account or through insurance companies. The plan provides for pension payment including dearness relief on a monthly basis to these employees based on the respective employee''s years of service with the Bank and applicable salary. Actuarial valuation of the pension liability is determined by an independent actuary appointed by the Bank. Actuarial valuation of gratuity liability is determined based on certain assumptions regarding rate of interest, salary growth, mortality and staff attrition as per the projected unit credit method. The actuarial gains or losses arising during the year are recognized in the profit and loss account. Employees covered by the pension plan are not eligible for employer''s contribution under the provident fund plan.

The Bank also operates a New Pension Scheme (NPS) for all employees joining the Bank on or after 1st August, 2010 (Such new joinees not being entitled to become members of the existing pension scheme). As per the scheme, these employees contribute 10% of their salary and the Bank contributes 14% of the employee''s salary. The amount contributed by the Bank to NPS during the year is recognized in the profit and loss account. Leave Salary

The Bank provides for compensated absence based on actuarial valuation conducted by an independent actuary, appointed by the Bank.

7. Transactions involving Foreign Exchange

7.1 Foreign currency transactions are recorded on initial recognition in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency on the date of transaction.

7.2 Foreign currency monetary items are reported using the Foreign Exchange Dealers Association of India (FEDAI) closing (spot/forward) rates.

7.3 Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by FEDAI.

7.4 Exchange difference arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognized as income or as an expense in the period in which they arise.

7.5 Outstanding foreign exchange spot and forward contracts held for trading are revalued at the exchange rates notified by FEDAI for specified maturities and the resulting Profit or Loss is recognized in the Profit and Loss Account.

8. Segment Reporting

The Bank recognizes the business segment as the primary reporting segment in accordance with the RBI guidelines and in compliance with the Accounting Standard 17 issued by Institute of Chartered Accountants of India.

9. Taxes on Income

Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22- "Accounting for taxes on Income” respectively. Deferred Tax adjustments comprises of changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognized by considering the impact of timing differences between taxable income and accounting income for the current year and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognized in the profit and loss account.

10. Provisions, Contingent Liabilities and Contingent Assets

10.1 In conformity with AS 29 - "Provisions, Contingent Liabilities and Contingent Assets” issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when it has a present obligation because of a past event, and would result in a probable outflow of resources to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

10.2 No provision is recognized for

I. Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

II. Any present obligation that arises from past events but is not recognized because:

• It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

• A reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent Liabilities.

10.3 The Bank has made 100% provision for redemption against the accumulated reward points in respect of standard credit card holders.

10.4 Contingent Assets are not recognized in the financial statements.

11. Impairment of Assets

Fixed assets are reviewed for impairment whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

12. Share Issue Expenses

Share issue expenses are charged to the Profit and Loss Account.

13. Earnings per Share

13.1 The Bank reports basic and diluted earnings per share in accordance with AS 20 - "Earnings per Share” issued by the ICAI. Basic Earnings per Share are computed by dividing the Net Profit after Tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding for the year.

13.2 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 Share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at year end.


Mar 31, 2022

1. Overview

Jammu and Kashmir Bank (J&K Bank) is a Scheduled Commercial Bank and one of the oldest private sector banks in India, incorporated in 1938. Bank is listed on the NSE and the BSE and has its Corporate Headquarters at Srinagar. Bank functions as a leading bank in the Union Territories of Jammu & Kashmir and Ladakh and is designated by Reserve Bank of India as agency bank for carrying out banking business for the Government of Jammu & Kashmir and Ladakh. J&K bank caters to banking requirements of various customer segments which includes Business enterprises, employees of government, semigovernment and autonomous bodies, farmers, artisans, public sector organizations and corporate clients. Group companies of the J&K Bank include JKBFSL (wholly owned subsidiary) and JK Grameen Bank (Associate RRB). The Bank offers a wide range of retail credit products, including home finance, personal loans, education loan, agriculture lending, trade credit and consumer credit, a number of unique financial products tailored to the needs of various customer segments.

A. Significant Accounting policies followed by the Company

1. Basis of preparation of Financial Statements

The accompanying financial statements are prepared on historical cost basis, except as otherwise stated, following the "Going Concern” concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

2. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. Outstanding forward exchange contracts are revalued at the exchange rates for appropriate maturity rates as announced by FEDAI at the year-end exchange rates and the resultant gain/ loss is taken to revenue.

4. Investments

i. Investments are classified into "Held-to-Maturity”, "Available-for-Sale” and "Held-for-Trading” categories, in accordance with the guidelines issued by Reserve Bank of India.

ii. Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

iii. "Held-to- Maturity” category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading” category comprises securities acquired by the Bank with the intention of trading. "Available-for-Sale” securities are those, which do not fall in either of the above categories.

iv. Investments classified as "Held-to-Maturity” (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity using straight line method.

v. (a) The individual scrip''s in the "Available-for-Sale” category are marked to market at quarterly intervals. The net

depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale” and "Held for trading” categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by Financial Benchmarks India Pvt. Ld. (FBIL).

(c) Unquoted shares are valued at break-up value ascertained from the latest balance sheet (which should not be more than 18 months prior to the date of valuation) and in case the latest balance sheet is not available the same are valued at 1/- per Company, as per RBI guidelines.

(d) Security receipts (SRs) issued by Asset Reconstruction Companies (ARCs) are valued at cost or NAV, whichever is lower, declared periodically by the ARCs. Depreciation, if any, in individual SRs is fully provided for, appreciation, if any, is ignored.

(e) Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in unquoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

vi. The individual scrip in the "held-for-trading” category is marked to market at weekly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

vii. The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

viii. (a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective

security.

(b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in "Held-to-Maturity” category, an equivalent amount of profit net of taxes and the amount required to be transferred to Statutory reserve is appropriated to the "Capital Reserve Account”.

ix. Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

x. Brokerage paid on securities purchased is charged to revenue account except for equity investment operations where the same is added to the cost of purchase of investment.

xi. Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

xii. Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

xiii. Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

xiv. Bank is following settlement date accounting policy.

In accordance with RBI circular No. FMRD.DIRD.01/14.03.038/2018-19 DATED July 24, 2018, the Bank has made changes in accounting for Repo/ Reverse Repo transactions including Triparty Repo (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly, the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowing) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & money at call & short notice).

5. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition, Asset Classification and Provisioning norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA''s. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

iii) Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

6. Fixed Assets/Depreciation

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is charged on straight line method as per provisions of Companies Act 2013 based on the useful life of the assets prescribed in Part C of the schedule II of the Companies Act 2013 as given hereunder.

Sn.

Block

Useful Life (Years)

A.

Building (With RCC Frame Structure)

-Commercial

60

-Residential

60

B.

Building (with other than RCC Frame Structure)

-Commercial

30

-Residential

30

C.

Plant & Machinery

15

D.

Furniture & Fixtures

10

E.

Vehicles

8

F.

Fences

5

G.

Others (Including temporary Structures etc.)

3

Depreciation on computers (including ATMs) along with software forming integral part of the computers is computed at 33.33% on straight line method in terms of RBI guidelines issued vide letter no BP.1660/21.04.018/2001 dated 01.02.2001.

The expenditure on computer software where it is probable that future benefits attributable to such software will flow to Bank is capitalized and depreciation is charged @33.33% in terms of RBI guidelines on straight line method.

Useful life of the mobile phones is considered to be 2 years and the depreciation is charged on straight line method as per provisions of Companies Act 2013 with no residual value.

e) Premium paid for Leasehold properties is amortized over the period of the lease.

f) In compliance to the directions of RBI, Board of Directors vide resolution no. 47 dated 21-04-2016 approved the policy on Revaluation of Bank''s own properties which covered all the immovable properties owned by the bank including land & office buildings except those fixed assets whose useful life has expired.

In respect of revaluation of the Bank''s own properties/assets, the bank had obtained Valuation Reports from two independent Valuers, irrespective of the value of the property. As per the policy, the valuation of the property was taken as the average of the two valuations.

7. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered.

ii) Long Term Employee Benefit

a) Defined Contribution Plan

Provident Fund: - Provident Fund is a defined contribution scheme as the bank pays fixed contribution at predetermined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to profit &loss A/C. The bank is paying matching contribution towards those employees who have not opted for the pension.

b) Defined Benefit Plan

Gratuity: Gratuity liability is a defined obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

Pension: Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

Leave Salary: Leave salary is a defined benefit obligation and is provided for on the basis of an actuarial valuation determined on the basis of un-availed privilege leave of an employee at the time of leaving services of the company.

8. Revenue Recognition and Expenditure booking

Income and expenditure are accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classified as Non-Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) The recovery in Non-Performing Assets has been first appropriated towards amount of principal and thereafter towards amount of interest.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

9. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the accumulated reward points in respect of standard card holders.

10. Net Profit/Loss

The net profit is disclosed in the profit and loss account after providing for:

i) Income Tax and Deferred Tax.

ii) Provision for Standard Assets, Non-Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency fund, if any.

v) Other usual and necessary provisions.

11. Taxes on Income

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on "Accounting for Taxes on Income”.

12. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions”.

Disclosures made by Company

1. Reconciliation/adjustment of inter-bank/inter-branch transactions, branch suspense, Government Transactions, NOSTRO, System Suspense, Clearing, and Sundry Deposits is in progress on an ongoing basis. The impact, in the opinion of the management of the un-reconciled entries, if any, on the financial statements would not be material.

2. Tax paid in Advance/ Tax deducted at source includes amount adjusted by Income Tax Department in respect of various disputed demands. Based on the favourable appellate orders and interpretation of law, no further provision has been considered by the management in respect of the disputed demands.

3. Fixed Assets

a) Documentation formalities are pending in respect of certain immovable properties held by the bank valued at '' 9.18 crores (previous year '' 9.31 crores). In respect of immovable properties valued at '' 48.95 Crore (previous year '' 50.16 crores) Bank holds agreement to sell along with the possession of the properties.

b) Pursuant to the revised Accounting Standard-10 "Property, Plant & Equipment” applicable from 1st April 2017 depreciation of ''22.77 crores (previous year being '' 23.38 crores) on the revalued portion of the fixed assets (being Premises & Land) has been transferred from the Revaluation reserve to General/ Revenue reserve instead of crediting to Profit & Loss account.

c) Depreciation is provided on straight line method in accordance with the provisions of Companies Act 2013 based on the useful life of the assets. However, the depreciation on the computers (including ATMs) along with software forming integral part of the computers is computed @ 33.33% on straight line method in terms of RBI guidelines.

d) In compliance to the directions of RBI, Board of Directors vide resolution no. 47 dated 21-04-2016 approved the policy on Revaluation of Bank''s own properties which covered all the immovable properties owned by the bank including land & office buildings except those fixed assets whose useful life has expired.

In compliance to Accounting Standard (AS)-26 the acquisition cost of computer software, not forming integral part of the computers and where it is probable that the future economic benefits that are attributable to this software will flow to bank, is being capitalized and depreciation is charged at the rate of 33.33% on straight line method in terms of RBI guidelines.

Further useful life of mobile phones is considered to be 2 years and the depreciation is charged on straight line method.

Depreciation on Bank''s property includes amortization in respect of leased properties amounting to '' 0.76 Crores (previous

year '' 0.76 Crores).

4. Capital

a) Composition of Regulatory Capital

(''in Crore)

Sr.

No.

Particulars

CurrentYear

PreviousYear

i)

Common Equity Tier 1 capital (CET 1)

7498.58

6079.37

ii)

Additional Tier 1 capital

1000.00

1000.00

iii)

Tier 1 capital (i ii)

8498.58

7079.37

iv)

Tier 2 capital

1084.99

1322.90

v)

Total capital (Tier 1 Tier 2)

9583.57

8402.27

vi)

Total Risk Weighted Assets (RWAs)

72457.73

68892.86

vii)

CET 1 Ratio (CET 1 as a percentage of RWAs)

10.35%

8.82%

viii)

Tier 1 Ratio (Tier 1 capital as a percentage of RWAs)

11.73%

10.28%

ix)

Tier 2 Ratio (Tier 2 capital as a percentage of RWAs)

1.50%

1.92%

x)

Capital to Risk Weighted Assets Ratio (CRAR) (TotalCapital as a percentage of RWAs)

13.23%

12.20%

xi)

Leverage Ratio

6.27%

5.65%

Percentage of the shareholding of a) Government of India

Nil

70.12

NA

Nil

xii)

b) State Government (Government of UT of Jammu & Kashmir)

68.18

c) Sponsor Bank

NA

xiii)

Amount of paid-up equity capital raised during the year

21.94

Share application money (Pending allotment)

2.85*

NIL

Amount of non-equity Tier 1 capital raised during the year, of which:

Give list as per instrument type (perpetual non-cumulative preference

NIL

NIL

xiv)

shares, perpetual debt instruments, etc.). Commercial banks (excluding RRBs) shall also specify if the instruments are Basel II or Basel III compliant.

Amount of Tier 2 capital raised during the year, of which

360

NIL

xv)

Give list as per instrument type (Non-Convertible Basel III Compliant Debt Instruments).

* On 31.03.2022 Bank has raised/received '' 93.50 crores by way of QIP (share application money- pending allotment) and

same has been shown as part of CET1 Capital of the Bank.

4.1 During the year ended March 31, 2022, the bank raised Basel III Compliant Tier II Bonds amounting to ''.360 crores.

4.2 The J&K Govt. General Administration Department S.O. No. 339 dated 30/10/2020 apportioned the Assets, Liabilities and Posts of the erstwhile State of Jammu and Kashmir between the Union Territory of Jammu and Kashmir and Union Territory of Ladakh w.e.f. 31.10.2020. As per the said notification 8.23% shareholding of Jammu & Kashmir Bank Ltd. consisting of 4,58,29,445 shares which amounts to 13.89% of the shareholding of the erstwhile state of Jammu and Kashmir as on 31.10.2019 shall be transferred to the UT of Ladakh and the remaining 51% of shareholding of erstwhile Jammu and Kashmir state would remain with the UT of Jammu and Kashmir. Necessary approvals in this regard have been received by the Bank and UT of Ladakh. The Bank is in the process of transferring the said shares to UT of Ladakh.

4.3 On 16th September, 2021, the Bank has allotted 16,76,72,702 (Sixteen Crore Seventy Six Lacs Seventy Two Thousand Seven Hundred and Two) equity shares at a price of ''.29.82 (Rupees Twenty Nine and Eighty Two Paisa Only) to Govt. of Jammu and Kashmir on preferential allotment basis amounting to a total of ''.499,99,99,973.64 (Rupees Four Hundred Ninety-Nine Crore Ninety Nine Lacs Ninety Nine Thousand Nine Hundred Seventy Three and Sixty Four Paisa Only).

4.4 On 24th September, 2021, the Bank has allotted 5,17,62,954 (Five Crore Seventeen Lacs Sixty Two Thousand Nine Hundred and Fifty Four) equity shares at a price of ''.28.97 (Rupees Twenty Eight and Ninety Seven Paisa Only) to the eligible employees of the Bank under Jammu and Kashmir Bank Employee Stock Purchase Scheme, 2021 (JKBESPS, 2021) amounting to a total of ''.149,95,72,777.38 (Rupees One Hundred Forty Nine Crore Ninety Five Lacs Seventy Two Thousand Seven Hundred Seventy Seven and Thirty Eight Paisa Only).

4.5 The Shareholders of the Bank on 20th March, 2022 have approved the reduction in authorized capital of the Bank from '' 250,00,00,000.00 (Rupees Two Hundred and Fifty Crores) to '' 185,00,00,000.00 (Rupees One Hundred and Eighty Five Crores) through Postal Ballot and the Reserve Bank of India granted its approval to the same vide its letter no. DoR.HOL.No.4635/16.01.063/2021-22 dated March 22, 2022. I

4.6 On 1st April, 2022, the bank has allotted 2,85,93,267 (Two Crore Eighty Five Lac Ninety Three Thousand Two Hundred And Sixty Seven) equity shares at a price of '' 32.70 (Rupees Thirty Two and Seventy Paisa Only) which was at a discount of 4.97% (i.e. Rs1.71 per equity share) to the Qualified Institutional Buyers (QIB) aggregating to a total of '' 93,49,99,830.90 (Rupees Ninety Three Crore Forty Nine Lacs Ninety Nine Thousand Eight Hundred Thirty and Ninety Paisa Only). The Issue opened on March 28, 2022 and closed on March 31, 2022. It is pertinent to mention that as on 31st March, 2022 the said amount was received in share application money account (Escrow Account) and was pending appropriation subject to allotment of equity shares to the subscribers.

Investments

5. The Bank has booked a profit of ''44.79 Crore (previous year 178.50 Crore) on direct sale of securities from HTM category during the year through open market operations (OMOs) purchase auction by RBI. As such an appropriation of ''33.51 Crore was made to Capital Reserve Account after netting of taxes and required transfer to statutory reserves.

6. The total investment of the Bank in PNB Met-life India Insurance Company Ltd stood at '' 61.08 Crores as on 31.03.2022 (Previous year '' 61.08 Crores). In compliance with RBI Letter No. DBOD.BP/-17099/21.4.141/ 2008-09 dated 9th April 2009, the investment stands transferred to AFS Category on October 1st, 2009. The valuation has

been carried out at an average of two independent valuation reports obtained from Category I Merchant Bankers as per RBI guidelines & the consequent appreciation has been ignored in view of the Accounting Policy in respect of such investments.

7. Investments include '' 45.67 Crores in Sponsored institution J&K Grameen Bank. Net worth of the J&K Grameen bank has eroded due to continuing losses and since there is a permanent diminution in carrying cost of investment the bank has made prudential provision of ''36.92 Crore.

8. In terms of RBI Circular no. DOR.MRG.43/21.04.141/2021-22 dated August 25, 2021, Bank holds Investment Fluctuation Reserve (IFR) of '' 37.78 crore created during the Financial Year 2018-19. As per trading portfolio (AFS HFT) held for the FY 2021-22 no addition is required in the IFR account. Further T-Bill and CDs being the instruments valued at carrying cost are excluded from trading portfolio for the purpose of IFR computation as follows:

Particulars

Amount ('' in Crores)

AFS HFT

10479.14

Less T-Bill

7109.14

Less CDs

3038.59

Total AFS HFT for IFR

331.40

Provision required (@2%)

6.63


Mar 31, 2021

1. Basis of preparation of Financial Statements

The accompanying financial statements are prepared on historical cost basis, except as otherwise stated, following the "Going Concern” concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

2. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. Outstanding forward exchange contracts are revalued at the exchange rates for appropriate maturity rates as announced by FEDAI at the year-end exchange rates and the resultant gain/ loss is taken to revenue.

4. Investments

i. Investments are classified into "Held-to-Maturity”, "Available-for-Sale” and "Held-for-Trading” categories, in accordance with the guidelines issued by Reserve Bank of India.

ii. Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

iii. "Held-to- Maturity” category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading” category comprises securities acquired by the Bank with the intention of trading. The securities which do not fall within the above two categories will be classified under ''Available for Sale (AFS).

iv. Investments classified as "Held-to-Maturity” (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity using straight line method.

v. (a) The individual scrip''s in the "Available-for-Sale” category are marked to market at quarterly intervals. The

net depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale” and "Held for trading” categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FBIL.

(c) Unquoted shares are valued at break-up value ascertained from the latest balance sheet (which should not be more than one year prior to the date of valuation) and in case the latest balance sheet is not available the same are valued at Rs.1/- per Company, as per RBI guidelines.

(d) Security receipts (SRs) issued by Asset Reconstruction Companies (ARCs) are valued at cost or NAV, whichever is lower, declared periodically by the ARCs. Depreciation, if any, in individual SRs is fully provided for. Appreciation, if any, is ignored.

(e) Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in unquoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/market

"Principal Accounting Policies"

quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

vi. The individual scrip in the ''''held-for-trading" category is marked to market at weekly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

vii. The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

viii. (a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the

respective security.

(b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in "Held-to-Maturity" category, an equivalent amount of profit net of taxes and the amount required to be transferred to Statutory reserve is appropriated to the ''Capital Reserve Account".

ix. Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

x. Brokerage paid on securities purchased is charged to revenue account except for equity investment operations the same is added to the cost of purchase of investment.

xi. Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

xii. Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

xiii. Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

xiv. Bank is following settlement date accounting policy.

In accordance with RBI circular No. FMRD.DIRD.01/14.03.038/2018-19 DATED July 24, 2018, the Bank has made changes in accounting for Repo/ Reverse Repo transactions including Triparty Repo (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly, the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/ purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowing) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & money at call & short notice).

5. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classification norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA''s. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

iii) Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

6. Fixed Assets/Depreciation

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is charged on straight line method as per provisions of Companies Act 2013 based on the useful life of the assets prescribed in Part C of the schedule II of the Companies Act 2013 as given hereunder.

Sn.

Block

Useful Life (Years)

A.

Building (With RCC Frame Structure)

-Commercial

60

-Residential

60

B.

Building (with other than RCC Frame Structure)

-Commercial

30

-Residential

30

C.

Plant & Machinery

15

D.

Furniture & Fixtures

10

E.

Vehicles

8

F.

Fences

5

G.

Others (Including temporary Structures etc.)

3

Depreciation on computers (including ATMs) along with software forming integral part of the computers is computed at 33.33% on straight line method in terms of RBI guidelines issued vide letter no BP.1660/21.04.018/2001 dated 01.02.2001.

The expenditure on computer software where it is probable that future benefits attributable to such software will flow to Bank is capitalized and depreciation is charged @33.33% in terms of RBI guidelines on straight line method.

Useful life of the mobile phones is considered to be 2 years and the depreciation is charged on straight line method as per provisions of Companies Act 2013 with no residual value.

e) Premium paid for Leasehold properties is amortized over the period of the lease.

f) In compliance to the directions of RBI, Board of Directors vide resolution no. 47 dated 21-04-2016 approved the policy on Revaluation of Bank''s own properties which covered all the immovable properties owned by the bank including land & office buildings except those fixed assets whose useful life has expired.

In respect of revaluation of the Bank''s own properties/assets, the bank had obtained Valuation Reports from two independent Valuers, irrespective of the value of the property. As per the policy, the valuation of the property was taken as the average of the two valuations.

7. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered.

ii) Long Term Employee Benefit

a) Defined Contribution Plan

Provident Fund: - Provident Fund is a defined contribution scheme as the bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to profit &loss A/C. The bank is paying matching contribution towards those employees who have not opted for the pension.

b) Defined Benefit Plan

Gratuity: - Gratuity liability is a defined obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

Pension: - Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

Leave Salary: - Leave salary is a defined benefit obligation and is provided for on the basis of an actuarial valuation determined on the basis of un-availed privilege leave of an employee at the time of leaving services of the company.

8. Revenue Recognition and Expenditure booking

Income and expenditure are accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classified as Non-Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) The recovery in Non-Performing Assets has been first appropriated towards amount of principal and thereafter towards amount of interest.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

9. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the accumulated reward points in respect of standard card holders.

10. Net Profit/Loss

The net profit is disclosed in the profit and loss account after providing for:

i) Income Tax, wealth tax and Deferred Tax.

ii) Provision for Standard Assets, Non-Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency fund, if any.

v) Other usual and necessary provisions.

11. Taxes on Income

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on "Accounting for Taxes on Income”.

12. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions”.


Mar 31, 2018

1. Basis of preparation of Financial Statements

The accompanying financial statements are prepared on historical cost basis, except as otherwise stated, following the "Going Concern" concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/ pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

2. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. Outstanding forward exchange contracts are revalue at the exchange rates for appropriate maturity rates as announced by FEDAI at the year-end exchange rates and the resultant gain/ loss is taken to revenue.

4. Investments

i. Investments are classified into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories, in accordance with the guidelines issued by Reserve Bank of India.

ii. Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

iii. "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. "Available-for-Sale" securities are those, which do not qualify for being classified in either of the above categories.

iv. Investments classified as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/ redemption value, in which case the premium is amortized over the period remaining to the maturity using straight line method.

v. (a) The individual scrip''s in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for trading" categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) Unquoted shares are valued at break-up value ascertained from the latest balance sheet (which should not be more than one year prior to the date of valuation) and in case the latest balance sheet is not available the same are valued at '' 1/- per Company, as per RBI guidelines.

(d) Security receipts (SRs) issued by Asset Reconstruction Companies (ARCs) are valued at cost or NAV, whichever is lower, declared periodically by the ARCs. Depreciation, if any, in individual SRs is fully provided for. Appreciation, if any, is ignored.

(e) Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

vi. The individual scrip in the "held-for-trading" category are marked to market at weekly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

vii. The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying

RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

viii. (a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

(b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in "Held-to-Maturity" category, an equivalent amount of profit net of taxes and the amount required to be transferred to Statutory reserve is appropriated to the "Capital Reserve Account".

ix. Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

x. Brokerage paid on securities purchased is charged to revenue account except for equity investment operations the same is added to the cost of purchase of investment.

xi. Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

xii. Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

xiii. Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

xiv. Bank is following settlement date accounting policy.

In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowing) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & money at call & short notice).

5. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classification norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA''s. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

iii) Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

6. Fixed Assets/Depreciation

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

Depreciation on computers (including ATMs) along with software forming integral part of the computers is computed at 33.33% on straight line method in terms of RBI guidelines issued vide letter no BP.1660/21.04.018/2001 dated 01.02.2001.

The expenditure on computer software where it is probable that future benefits attributable to such software will flow to Bank is capitalized and depreciation is charged @33.33% in terms of RBI guidelines on straight line method.

Useful life of the mobile phones is continued to be 2 years and the depreciation is charged on straight line method as per provisions of Companies Act 2013 with no residual value.

e) Premium paid for Leasehold properties is amortized over the period of the lease.

f) In compliance to the directions of RBI, Board of Directors vide resolution no. 47 dated 21-04-2016 approved the policy on Revaluation of Bank''s own properties which covered all the immovable properties owned by the bank including land & office buildings except those fixed assets whose useful life has expired.

In respect of revaluation of the Bank''s own properties/assets, the bank had obtained Valuation Reports from two independent valuers, irrespective of the value of the property. As per the policy, the valuation of the property was taken as the average of the two valuations.

7. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered.

ii) Long Term Employee Benefit

a) Defined Contribution Plan

Provident Fund:- Provident Fund is a defined contribution scheme as the bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to profit & loss A/C .The bank is paying matching contribution towards those employees who have not opted for the pension.

b) Defined Benefit Plan

Gratuity:- Gratuity liability is a defined obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

Pension:- Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

Leave Salary:- Leave salary is a defined benefit obligation and is provided for on the basis of an actuarial valuation determined on the basis of un-availed privilege leave of an employee at the time of leaving services of the company.

8. Revenue Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ Investments classified as Non Performing Advances/Investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) The recovery in Non-Performing Assets has been first appropriated towards amount of principal and thereafter towards amount of interest.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

9. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the accumulated reward points in respect of standard card holders.

10. Net Profit/Loss

The net profit is disclosed in the profit and loss account after providing for:

i) Income Tax, wealth tax and Deferred Tax.

ii) Provision for Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency fund, if any.

v) Other usual and necessary provisions.

11. Taxes on Income

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on "Accounting for Taxes on Income".

12. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".

1. Reconciliation/adjustment of inter-bank/inter-branch transactions, branch suspense, Government Transactions, NOSTRO, System Suspense, Clearing, and Sundry Deposits is in progress on an on-going basis. The impact, in the opinion of the management of the reconciled entries, if any, on the financial statements would not be material.

2. Tax paid in Advance/ Tax deducted at source includes amount adjusted by Income Tax Department in respect of various disputed demands. Based on the favourable appellate orders and interpretation of law, no further provision has been considered by the management in respect of the disputed demands.

3. Fixed Assets:

a) Documentation formalities are pending in respect of certain immovable properties held by the bank valued at Rs, 5.70 crores (Values of properties appreciated on account of revised valuation) (previous year Rs, 115.83 crores). In respect of immovable properties valued at Rs, 21.02 crores (Values of properties appreciated on account of revised valuation) (previous year Rs, 21.50crores) bank holds agreement to sell along with the possession of the properties.

b) Bank has completed the process of valuation in FY 2016-2017. In this connection, the depreciation for FY 2017-2018 for assets that showed appreciation in value has been vouched as under:-

Persuant to the revised Accounting Standard 10 "Property, Plant & Equipment" applicable from 1st April 2017 depreciation of Rs, 14.63 crores on the revalued portion of the fixed assets (being Premises & Land) has been transferred from the Revaluation reserve to Revenue reserve instead of crediting to Profit & Loss account.

c) Depreciation is provided on straight line method in accordance with the provisions of Companies Act 2013 based on the useful life of the assets prescribed in Part C of the Schedule II of the Companies Act 2013. However the depreciation on the computers (including ATMs) along with software forming integral part of the computers is computed at 33.33% on straight line method in terms of RBI guidelines issued vide letter no BP 1660/21.04.2018 /2001 dated 01.02.2001.

In compliance to Accounting Standard (AS)-26 the acquisition cost of computer software, not forming integral part of the computers and where it is probable that the future economic benefits that are contributable to this software will flow to bank, is being capitalized and depreciation is charged at the rate of 33.33% on straight line method in terms of RBI guidelines.

Further useful life of mobile phones is continued to be 2 years and the depreciation is charged on straight line method as per provisions of Companies Act 2013 with no residual value.

Depreciation on Banks property includes amortization in respect of leased properties amounting to Rs, 0.15 Crores (previous year Rs, 0.147 Crores).

Government of Jammu & Kashmir holds 59.23% of equity shares of the Bank as on 31.03.2018 (previous year 56.45% as on 31.03.2017).

The subordinate debt of Rs,600 Crores raised by way of Unsecured Redeemable Lower tier-II Bonds on 30.12.2009, maturing on 30.12.2019 has been shown under Borrowings as per RBI guidelines.

Rs, 500 crores of Basel III complaint Tier II capital raised on 24th March 2017 & another Rs, 500 crores raised on 28th December 2017, maturating on 24th June 2022 & 27th December 2024 respectively has been shown under Borrowings as per RBI guidelines.

Investments

5. The Bank has made no sale from HTM category securities during the year, as such no appropriation was made (Previous Year, Rs, 7.72 Crores) to Capital Reserve Account.

6. The Bank has Rs, 34,00,70,800 as share capital (previous year Rs, 34,00,70,800) and Rs, 11,66,76,915 in Tier II Perpetual bonds (previous year Rs, 11,66,76,915) in its sponsored Regional Rural Bank (J&K Grameen Bank).

7. The total investment of the Bank in the PNB Met-life India Insurance Co Pvt. Ltd stood at Rs, 102.19 Crores as on 31.03.2018 (Previous year Rs, 102.19 Crores). In compliance with RBI Letter No. DBOD.BP/-17099/21.4.141/ 2008-09 dated 9th April 2009, the investment stands transferred to AFS Category on October 1st, 2009. The valuation has been carried out at an average of two independent valuation reports obtained from Category I Merchant Bankers as per RBI guidelines & the consequent appreciation has been ignored in view of the Accounting Policy in respect of such investments.

8. RBI circular DBR.No.BP.BC.lO2/21.04.048/2017-18 dated April 2, 2018 grants banks an option to spread provisioning for mark to market losses on investments held in AFS and HFT for the quarters ended December 31, 2017 and March 31, 2018. The circular states that the provisioning for each of these quarters may be spread equally over up to four quarters, commencing with the quarter in which the loss was incurred. The Bank has recognised the entire mark to market loss on investments in the respective quarters and has not availed the said option.

9. During the FY 2017-18 Bank has raised capital by way of 9.25% Non- Convertible, redeemable, unsecured, Basel III compliant Tier

2 Bonds in the nature of debentures for augmenting Tier 2 Capital for an amount of Rs, 500 Crores (previous year Rs, 500 Crores) having duration of 7 years with IDBI Trusteeship Services Limited Asian Building, Ground Floor, 17, R. Kamani Marg, Ballard Estate, Mumbai-400001, as Debenture Trustee.

12.3 Sale and Transfers to/from Held to Maturity (HTM) Category

a) Bank has made no sale from HTM category securities during the year as such no appropriation was made to Capital Reserve Account (previous year Rs, 7.72 Crore).

b) With the approval of the Board of Directors, the Bank has shifted securities amounting to Rs, 691.44 Cr (FV) on 26/04/2017 (Previous year Rs, 634.81 Cr) at lower of book value or market value, scrip wise, from Held to Maturity (HTM) to Available for Sale (AFS) category in accordance with RBI guidelines.

c) On the basis of special dispensation being allowed by the Reserve Bank of India vide its Circular No. DBR.No.BP.BC.90/12.02.001/ 2017-18, dated 04/10/2017, the Bank undertook shifting of Govt. Securities having face value of Rs, 600 Cr and Rs, 525 Cr on 08/12/2017 & 26/03/2018 respectively from HTM to AFS Category.

d) The value of sales and transfer of securities to/from HTM category (excluding the exempted transfer) did not exceed 5% of book value of the investment in HTM category at the beginning of the year.

14.3 Disclosures on Risk exposures in derivatives

a) Qualitative Disclosures

The only derivatives traded by the Bank in the foreign exchange market are forward contracts. Forward contracts are being used to hedge /cover the exposure in foreign exchange arising out of Merchant transactions and trading positions.

To cover the risks arising out of above derivatives, various limits like AGL, IGL and stop loss have been prescribed in the trading policy of the bank which are monitored through VaR.

Outstanding forward exchange contracts held for trading are revalued at the exchange rates for appropriate maturity rates as announced by FEDAI at the year-end exchange rates and the resultant gain/ loss is taken to revenue.

*Net NPA has been arrived at after adding net ECGC claims of Rs, 11.54Crores, Interest Capitalization of Rs, 40.56 Crores & reducing DIFV of Rs, 6.07 crores

**Including floating provision of Rs, 348.72Crores (Previous year Rs, 348.72Crores).

Information regarding movement of Net NPA''s has been compiled at Corporate Office and relied upon by the Auditors.

18.2 Assets sold to Asset Reconstruction Companies (ARCs)

During the financial year six accounts (NPAs) were sold to Asset Reconstruction Companies (ARCS). Against total principal NPA balance of '' 1606.35Cr, the bank has received an amount of Rs, 948.45Cr, which constitutes 59.04% of the principal NPA. A collective Provisioning Coverage of these assets was to the tune of Rs, 1047.05Cr which constitutes 65%. Thus in totality there has been a positive impact of Rs, 389.15Cr on the balance sheet of the bank as on 31.03.2018 and NPA/NPI outstanding got reduced by Rs, 1606.35Cr.

18.3 Purchase of Property

During the FY 2017-18 the bank has purchased a non-banking asset under the provision of SARFAESI Act 2002 at a fixed reserve price of Rs, 8.70 Crores against an NPA asset M/S ETA Engineering Pvt. Ltd which had slipped to NPA category with an outstanding balance of Rs, 176.26 crores. The same has been categorized as other current asset.

* Working funds are the average of total of assets as reported to RBI in Form X.

** Assets are the average of the monthly total assets as reported to RBI in Form X.

*** Deposits (other than inter-bank deposits) & Gross Advances are as at the close of the year.

25. Penalty imposed by Reserve Bank of India

Penalty imposed by Reserve Bank of India during the year Rs, 6.28 lacs (Previous year Rs, 4.15 lacs).

1. Disclosures as per Accounting Standards (AS) in terms of RBI guidelines.

26.1 Accounting Standard 5

Net profit or loss for the period, prior period items and changes in accounting policies:

There is no material Prior Period item included in Profit & Loss Account required to be disclosed as per Accounting Standard-5 read with RBI Guidelines.

26.2 Accounting Standard 9- Revenue Recognition

There are no material deviations in the recognition of items of income, which are required to be disclosed as per Accounting Standard-9, read with the RBI guidelines.

26.3 Accounting Standard 15 - Employees Benefit

Adoption of AS -15 (R) The bank has adopted accounting standard 15 (R) - Employee Benefits, issued by the Institute of Chartered Accountants of India (ICAI), the Bank recognizes in its books of accounts the liability arising out of employee benefits as the sum of the present value of obligation as reduced by fair value of plan assets on the balance sheet date.

The disclosure required under Accounting Standard 15 “Employee Benefits- in line with the accounting policy as per the Accounting Standard- issued by the Institute of Chartered Accountants of India are as under":

Particular Basis of assumption:

Discount rate : Discount rate has been determined by reference to market yields on the balance sheet date on Government Bonds of term consistent with estimated term of the obligations as per para 78 of AS-15R.

Expected rate of return on plan assets: The expected return on plan assets is based on market expectations, at the beginning of the period, for returns over the entire life of the related obligation.

Rate of escalation in salary: The estimates of future salary increases considered in actuarial valuations taking into account inflation, seniority, promotion and other relevant factors mentioned in paras 83-91 of AS-15R.

Attrition rate: Attrition rate has been determined by reference to past and expected future experience and includes all types of withdrawals other than death but including those due to disability.

The above information is based on the information certified by the actuary except para XI above.

The Jammu & Kashmir Asset Reconstruction Limited has been incorporated by Government of J&K and J&K Bank Ltd on 28.04.2017. The Bank has subscribed capital to the tune of Rs,98 lakhs whereas Government of J&K has subscribed Rs,102 Lakh. The Bank has incurred Rs,76,32,730/- towards incorporation expenses for the company. The State Government has not released the initial Share Capital to the tune of Rs,102 Lakh and the Bank has also not received share certificate till reporting date.

26.6 Accounting Standard 19 - Leases

The properties taken on lease/rental basis are renewable/cancellable at the option of the Bank.

The lease entered into by the Bank are for agreed period with an option to terminate the leases even during the currency of lease period by giving agreed calendar months'' notice in writing.

Lease rent paid for operating leases are recognized as an expense in the Profit & Loss account in the year to which it relates. The lease rent recognized during the year is Rs, 55.90 crores (previous year Rs, 47.58 crores)

26.8 Accounting Standard -21 (Consolidated Financial Statements)

The Bank has a fully owned subsidiary company “JKB Financial Services Ltd." In terms of the approval of Reserve Bank of India vide its letter No DBOD.FSD.No./1124/24.01.001/2007-08 dated July 31, 2007. The investment towards the capital of subsidiary company is Rs, 20.00 Crores (Previous Year Rs, 20.00 Crores). The consolidated financial statements are placed accordingly in terms of AS 21 issued by the Institute of Chartered Accountants of India.

26.9 Accounting standard 22 - Accounting for taxes on income

The Bank has accounted for Income Tax in compliance with Accounting Standard-22 accordingly Deferred Tax Assets and Liabilities are recognized.

(Rs, In Lacs)

26.10 Accounting Standard 26-Intangible Assets

The Bank has incurred an amount of Rs, 134.25 Lacs on Brand names bifurcated into two heads namely Business Unit Signage and Brand Strategy Project. Expenditure on Business Unit Signage amounting to Rs, 52.79 Lacs has been debited under the head Furniture & Fixture, whereas, Brand strategy project expenses amounting to Rs,81.46 Lacs has been charged to Profit & Loss account treating it as a Revenue expenditure for the reason that the Bank cannot declare dividend to shareholders without writing it off completely in view of the provisions of the Banking Regulation Act, 1949. Accordingly, the Bank has not evaluated useful life of this Brand strategy project over which the expenses could be amortized.

Further, the Bank has incurred an amount of Rs, 9.65 Crores on account of purchase of computer software, not forming integral part of computers, and has capitalized the cost of the same.

26.11 Accounting Standard 28 - Impairment of Assets

Majority of Fixed Assets of the Bank are considered as Corporate Assets and not cash generating assets and in the opinion of Management there is no material impairment in these Fixed Assets. Regarding other Fixed Assets generating cash there is no material impairment. As such no provision is required as per AS-28 issued by ICAI.

26.12 Accounting Standard 29- Provisions, Contingent Liabilities and Contingent Assets

In respect of Contingent Liabilities under each class shown as per Schedule 12, in the opinion of the Management, the possibility of any out flow in settlement is remote. A provision of Rs, 0.47 crores (Previous year Rs,5.89 Crores) has been made during the year totaling to Rs, 11.91 crores (Previous year Rs, 11.45 Crores) upto 31.03.2018 against claims decreed against the Bank. Claims have not been acknowledged as debts owing to the appeal filed by the bank before the court of competent jurisdiction, pending adjudication.


Mar 31, 2017

1. Basis of preparation of Financial Statements

The accompanying financial statements are prepared on historical cost basis, except as otherwise stated, following the "Going Concern" concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/ pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

2. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income over the period of contract.

4. Investments

i. Investments are classified into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories, in accordance with the guidelines issued by Reserve Bank of India.

ii. Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

iii. "Held-to- Maturity" (HTM) category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" (HFT) category comprises securities acquired by the Bank with the intention of trading. "Available-for-Sale" (AFS) securities are those, which do not qualify for being classified in either of the above categories.

iv. Investments classified as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/ redemption value, in which case the premium is amortized over the period remaining to the maturity using straight line method.

v. (a) The individual scrip''s in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for trading" categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) Unquoted shares are valued at break-up value ascertained from the latest balance sheet (which should not be more than one year prior to the date of valuation) and in case the latest balance sheet is not available the same are valued at Rs. 1/- per Company, as per RBI guidelines.

(d) Security receipts (SRs) issued by Asset Reconstruction Companies (ARCs) are valued at cost or NAV, whichever is lower, declared periodically by the ARCs. Depreciation, if any, in individual SRs is fully provided for. Appreciation, if any, is ignored.

(e) Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

vi. The individual scrip in the "held-for-trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

vii. The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

viii. (a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

(b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in "Held-to-Maturity" category, an equivalent amount of profit net of taxes and the amount required to be transferred to Statutory reserve is appropriated to the "Capital Reserve Account".

ix. Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

x. Brokerage paid on securities purchased is charged to revenue account except for equity investment operations the same is added to the cost of purchase of investment.

xi. Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

xii. Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

xiii. Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

xiv. Bank is following settlement date accounting policy.

In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowing) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & money at call & short notice).

5. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classification norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA''s. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

iii) Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

6. Fixed Assets/Depreciation

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is charged on straight line method as per provisions of Companies Act 2013 based on the useful life of the assets prescribed in Part C of the schedule II of the Companies Act 2013 as given hereunder.

Depreciation on computers (including ATMs) along with software forming integral part of the computers is computed at 33.33% on straight line method in terms of RBI guidelines issued vide letter no BP.1660/21.04.018/2001 dated 01.02.2001.

The expenditure on computer software where it is probable that future benefits attributable to such software will flow to Bank is capitalized and depreciation is charged @33.33% in terms of RBI guidelines on straight line method.

Useful life of the mobile phones is continued to be 2 years and the depreciation is charged on straight line method as per provisions of Companies Act 2013 with no residual value.

e) Premium paid for Leasehold properties is amortized over the period of the lease.

f) In compliance to the directions of RBI, Board of Directors vide resolution no. 47 dated 21-04-2016 approved the policy on Revaluation of Bank''s own properties which covered all the immovable properties owned by the bank including land & office buildings except those fixed assets whose useful life has expired.

In respect of revaluation of the Bank''s own properties/assets, the bank obtained Valuation Reports from two independent valuers, irrespective of the value of the property. As per the policy, the valuation of the property was taken as the average of the two valuations.

7. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered.

ii) Long Term Employee Benefit

a) Defined Contribution Plan

Provident Fund: Provident Fund is a defined contribution scheme as the bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to profit &loss A/C .The bank is paying matching contribution towards those employees who have not opted for the pension.

b) Defined Benefit Plan

Gratuity: Gratuity liability is a defined obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

Pension: Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

Leave Salary: Leave salary is a defined benefit obligation and is provided for on the basis of an actuarial valuation determined on the basis of un-availed privilege leave of an employee at the time of leaving services of the company.

8. Revenue Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classified as Non Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) The recovery in Non-Performing Assets has been first appropriated towards amount of principal and thereafter towards amount of interest.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

9. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the accumulated reward points in respect of standard card holders.

10. Net Profit/Loss

The net profit is disclosed in the profit and loss account after providing for:

i) Income Tax, wealth tax and Deferred Tax.

ii) Provision for Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency fund, if any.

v) Other usual and necessary provisions.

11. Taxes on Income

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on "Accounting for Taxes on Income".

12. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".


Mar 31, 2016

1. Basis of preparation of Financial Statements

The accompanying financial statements are prepared on historical cost basis, except as otherwise stated, following the "Going Concern" concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

2. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income over the period of contract.

4. Investments

i. Investments are classified into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories, in accordance with the guidelines issued by Reserve Bank of India.

ii. Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

iii. "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. "Available-for-Sale" securities are those, which do not qualify for being classified in either of the above categories.

iv. Investments classified as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity using straight line method.

v. (a) The individual scrip''s in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for trading" categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) Unquoted shares are valued at break-up value ascertained from the latest balance sheet (which should not be more than one year prior to the date of valuation) and in case the latest balance sheet is not available the same are valued at Rs.1/- per Company, as per RBI guidelines.

(d) Security receipts (SRs) issued by Asset Reconstruction Companies (ARCs) are valued at cost or NAV, whichever is lower, declared periodically by the ARCs. Depreciation, if any, in individual SRs is fully provided for. Appreciation, if any, is ignored.

(e) Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un- quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

vi. The individual scrip in the "held-for-trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

vii. The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

viii. (a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

(b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in "Held-to-Maturity" category, an equivalent amount of profit net of taxes is appropriated to the "Capital Reserve Account", ix. Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

x. Brokerage paid on securities purchased is charged to revenue account except for equity investment operations the same is added to the cost of purchase of investment.

xi. Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

xii. Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

xiii. Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

xiv. Bank is following settlement date accounting policy.

In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowing) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & money at call & short notice).

5. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classification norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA''s. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

iii) Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

6. Fixed Assets

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is charged on straight line method as per provisions of Companies Act 2013 based on the useful life of the assets prescribed in Part C of the schedule II of the Companies Act 2013 as given hereunder.

7. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered,

ii) Long Term Employee Benefit

iii) Defined Contribution Plan

(a) Provident Fund: Provident Fund is a defined contribution scheme as the bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution .The contributions are charged to profit & loss A/C .The bank is paying matching contribution towards those employees who have not opted for the pension,

iv) Defined Benefit Plan

(a) Gratuity: Gratuity liability is a defined obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

(b) Pension: Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

(c) Leave Salary: Leave salary is a defined benefit obligation and is provided for on the basis of an actuarial valuation determined on the basis of un-availed privilege leave of an employee at the time of leaving services of the company.

8. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classified as Non Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) The recovery in Non-Performing Assets has been first appropriated towards amount of principal and thereafter towards amount of interest.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/ other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

9. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on the reporting date.

10. Profit

The net profit is disclosed in the profit and loss account after providing for:

i) Income Tax, wealth tax and Deferred Tax.

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency fund.

v) Other usual and necessary provisions.

11. Taxation

Provision for tax is made for both current and deferred taxes in accordance with As-22 on "Accounting for Taxes on Income.

12. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".

1. Reconciliation/adjustment of inter-bank/inter-branch transactions, branch suspense, Government Transactions, NOSTRO, System Suspense, Clearing, and Sundry Deposits is in progress on an ongoing basis. The impact, in the opinion of the management of the un-reconciled entries, if any, on the financial statements would not be material.

2. Tax paid in Advance/ Tax deducted at source includes amount adjusted by Income Tax Department in respect of various disputed demands. Based on the favorable appellate orders and interpretation of law, no further provision has been considered by the management in respect of the disputed demands.

3. Fixed Assets:

a) Documentation formalities are pending in respect of two immovable properties held by the bank valued atRs.1.10 crores (previous year Rs.1.12 crores). Depreciation in respect of immovable properties valued at Rs.15.68 crores (previous year Rs.16.02 crores) bank holds agreement to sell along with the possession of the properties.

b) Depreciation is provided on straight line method in accordance with the provisions of Companies Act 2013 based on the useful life of the assets prescribed in Part C of the Schedule II of the Companies Act 2013. However the depreciation on computers (including ATMs) along with software forming integral part of the computers is computed at 33.33% on straight line method in terms of RBI guidelines issued vide letter no BP.1660/21.04.018/2001 dated 01.02.2001.

c) In compliance to Accounting Standard (AS-26) the acquisition cost of computer software, not forming integral part of the computers and where it is probable that the future economic benefits that are contributable to this software will flow to bank, is being capitalized and depreciation is charged at the rate of 33.33% on straight line method in terms of RBI guidelines.

d) Further useful life of mobile phones is continued to be 2 years and the depreciation is charged on straight line method as per provisions of Companies Act 2013 with no residual value.

e) Depreciation on Banks property includes amortization in respect of leased properties amounting to Rs.0.14 Crores (previous year Rs.0.14 Crores)

Investments

5. The Bank has made no profit on sale of HTM category securities during the year, as such no appropriation was made (Previous Year, Rs.Nil) to Capital Reserve Account.

6. The Bank has Rs.70,00,000 as share capital (previous year Rs.70,00,000) and Rs.44,97,47,715 in share capital deposit account (previous year Rs.44,97,47,715) in its sponsored Regional Rural Bank (J&K Grameen Bank).

7. The total investment of the Bank in the Met-life India Insurance Co Pvt. Ltd stood at Rs.102.19 Crores as on 31.03.2016 (Previous year Rs.102.19 Crores). In compliance with RBI Letter No. DB0D.BP/-17099/21.4.141/ 2008-09 dated 9th Apri 2009, the investment stands transferred to AFS Category on October 1st, 2009. The valuation has been carried out at an average of two independent valuation reports obtained from Category I Merchant Bankers as per RBI guidelines & the consequent appreciation has been ignored in view of the Accounting Policy in respect of such investments.

10.2 Sale and Transfers to/from Held to Maturity (HTM) Category

a) Bank has not sold any HTM category securities during the year (previous year nil) as such no appropriation was made to Capital Reserve Account.

b) With the approval of the Board of Directors, the Bank has shifted securities amounting to Rs.753.75 Cr (FV) on 08/06/2015 (Previous year Rs.370.00 Cr) at lower of book value or market value, scrip wise, from Held to Maturity (HTM) to Available for Sale (AFS) category in accordance with RBI guidelines.

c) On the basis of special dispensation being allowed by the Reserve Bank of India vide its Circular No. DBOD.No.BP. BC.42/21.04.141/2014-15, dated 07/10/2014 & Circular No.DBR.No.BP.BC.65/21.04.141/2015-16, Dated 10/12/2015, the Bank undertook shifting of Govt. Securities having face value of Rs.650 Cr & 825 Cr on 02/09/2015 & 01/01/2016 respectively from HTM to AFS Category.

d) The value of sales and transfer of securities to/from HTM category (excluding the exempted transfer) did not exceed 5% of book value of the investment in HTM category at the beginning of the year.

11.3 Disclosures on Risk exposures in derivatives

a) Qualitative Disclosures

The only derivatives traded by the Bank in the foreign exchange market are forward contracts. Forward contracts are being used to hedge /cover the exposure in foreign exchange arising out of Merchant transactions and trading positions.

To cover the risks arising out of above derivatives, various limits like AGL, IGL and stop loss have been prescribed in the trading policy of the bank which are monitored through VaR.

Outstanding forward exchange contracts held for trading are revalued at the exchange rates for appropriate maturity rates as announced by FEDAI at the year-end exchange rates and the resultant gain/ loss is taken to revenue.


Mar 31, 2015

1. Basis of preparation of Financial Statements

The accompanying financial statements are prepared on historical cost basis, except as otherwise stated, following the "Going Concern" concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/ Guidance Notes/pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

2. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income over the period of contract.

4. Investments

(i) Investments are classified into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories, in accordance with the guidelines issued by Reserve Bank of India.

(ii) Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

(iii) "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. "Available-for-Sale" securities are those, which do not qualify for being classified in either of the above categories.

(iv) Investments classified as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity.

(v) (a) The individual scrip's in the "Available-for-Sale" category are marked to market at weekly intervals in case of equity and quarterly intervals in case of other investments. The net depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for Trading" categories is based on the market price available from the trades/quotes on stock exchanges. Central/ State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) Un-quoted shares are valued at break-up value ascertained from the latest balance sheet and in case the latest balance sheet is not available the same are valued at Rs. 1/- per Company, as per RBI guidelines.

Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

(vi) The individual scrip in the "Held-for-Trading" category are marked to market at weekly intervals in case of equity and monthly intervals in case of other investments and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

(vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

(viii) a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in "Held-to-Maturity" category, an equivalent amount of profit net of taxes is appropriated to the "Capital Reserve Account".

(ix) Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

(x) Brokerage paid on securities purchased is charged to revenue account except for equity investment operations the same is added to the cost of purchase of investment.

(xi) Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

(xii) Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

(xiii) Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

(xiv) Bank is following settlement date accounting policy.

(xv) In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/ Income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowings) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & Money at Call & Short Notice).

5. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classification norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA's. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

iii) Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

6. Fixed Assets

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is charged on straight line method as per provisions of Companies Act, 2013 based on the useful life of the assets prescribed in Part C of the schedule II of the Companies Act, 2013 as given hereunder.

S.No. Block Useful Life

a Building (with RCC Frame Structure Commercial 60 yrs

Residential 60 yrs

b Building (with Other than RCC Frame Structure)

Commercial 30 yrs

Residential 30 yrs

c Plant&Machinery 15 yrs

d Furniture Fixture 10 yrs

e Vehicles 8 yrs

f Fences 5 yrs

g Others (including temporary structures etc) 3 yrs

Depreciation on computers (including ATMs) along with software forming integral part of the computers is computed at 33.33% on straight line method in terms of RBI guidelines issued vide letter no BP.1660/21.04.018/2001 dated 01.02.2001

The depreciation on computer software where it is probable that the future benefits that are contributable to such software will flow to Bank is being capitalized and depreciation is charged @33.33% in terms of RBI guidelines on straight line method Useful life of the mobile phones is continued to be 2 years and the depreciation is charged on straight line method as per provisions of Companies Act, 2013 with no residual value.

e) Premium paid for Leasehold properties is amortized over the period of the lease.

7. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered.

ii) Long Term Employee Benefits Defined Contribution Plan

(a) Provident Fund:- Provident Fund is a defined contribution scheme as the bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to profit & loss a/c. The bank is paying matching contribution towards those employees who have not opted for the pension.

iii) Defined Benefit Plan

a) Gratuity:- Gratuity liability is a defined obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

b) Pension:- Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation The scheme is funded by the bank and is managed by a separate trust.

c) Leave Salary:- Leave salary is a defined benefit obligation and is provided for on the basis of an actuarial valuation determined on the basis of un-availed privilege leave of an employee at the time of leaving services of the company.

8. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classified as Non Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) The recovery in Non-Performing Assets has been first appropriated towards amount of principal and thereafter towards amount of interest.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/ other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

9. Credit Card Reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on the reporting date.

10. Profit

The net profit is disclosed in the profit and loss account after providing for:

i) Income Tax, Wealth Tax and Deferred Tax.

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ Amortization on Investments.

iv) Transfer to contingency fund.

v) Other usual and necessary provisions.

11. Taxation

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on "Accounting for Taxes on Income".

12. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".


Mar 31, 2014

1. Basis of preparation of Financial Statements

The accompanying fnancial statements are prepared on historical cost basis, except as otherwise stated, following the "Going Concern" concept and conform to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/pronouncements issued by the Institute of Chartered Accountants of India (ICIA) and practices prevailing in the banking industry in India.

2. Use of Estimates

The preparation of fnancial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of fnancial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the fnancial statements are prudent and reasonable.

3. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income over the period of contract.

4. Investments

(i) Investments are classifed into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories, in accordance with the guidelines issued by Reserve Bank of India.

(ii) Bank decides the category of each investment at the time of acquisition and classifes the same accordingly.

(iii) "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. "Available-for-Sale" securities are those, which do not qualify for being classifed in either of the above categories.

(iv) Investments classifed as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity.

(v) (a) The individual scrip''s in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifcations under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifcations is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for Trading" categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) Unquoted shares are valued at break-up value ascertained from the latest balance sheet and in case the latest balance sheet is not available the same are valued at Rs.1/- per Company, as per RBI guidelines. signifcant accounting policies and notes on accounts

Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

(vi) The individual scrip in the "Held for Trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifcations under which investments are presented in the Balance Sheet is accounted for in the Proft and Loss account and appreciation is ignored.

(vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non- performing Non-SLR investments are treated applying RBI prudential norms on NPA Classifcation and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

(viii) a) Proft or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

b) Proft or loss on sale of investments in any category is taken to the Proft and Loss account. In case of proft on sale of investments in "Held-to-Maturity" category, an equivalent amount of proft net of taxes is appropriated to the "Capital Reserve Account".

(ix) Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

(x) Brokerage paid on securities purchased is charged to revenue account except for equity investment operations the same is added to the cost of purchase of investment.

(xi) Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

(xii) Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

(xiii) Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

(xiv) Bank is following settlement date accounting policy.

(xv) In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is refected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classifed under schedule 4 (Borrowing) and balance in Reverse Repo account is classifed under schedule 7 (Balance with Banks & money at call & short notice).

5. Advances

i) Classifcation of Advances and Provisions thereof have been made as per the Income Recognition

and Asset Classifcation norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA''s. Provisions for advances classifed as Standard Assets is shown under Other Liabilities & Provisions.

iii) Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

6. Fixed Assets

a) Premises and other fxed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is provided on diminishing balance method in accordance with the provisions of Income Tax Act 1961, as per the rates prescribed in Income Tax Rules given below: -

S. No. Heads Rates

A Furniture & Fixtures (including electric fttings) 10%

B Wooden partitions 100%

C Vehicles 15%

D Plant & Machinery 15%

E Premises

i) Offce Premises 10%

ii) Residential & STC buildings 5%

However, in terms of RBI guidelines depreciation on computers (including ATMs) along with software forming integral part of computers is charged at the rate of 33.33% on straight-line method for the full year even if the computers (including ATMs) have been purchased during the second half.

The depreciation on computer software where it is probable that the future benefts that are contributable to such software will fow to Bank is being capitalized and depreciation is charged @33.33% in terms of RBI guidelines on straight line method.

The depreciation on mobile phones is being charged @50% on straight line method.

e) The expenditure incurred towards furniture & fxture in building (M-6G) being used as Chairman''s residence has been treated as asset of the Bank under this head. The expenditure on repairs and renovation of this building has been charged to revenue, as the building is not owned by the Bank, hence not capitalized.

f) Depreciation on additions to Assets made up to 30th September of the year is provided for at full rates and on additions thereafter at 50% of the rates. No depreciation is provided on assets sold/ discarded during the year.

g) Premium paid for Leasehold properties is amortized over the period of the lease.

signifcant accounting policies and notes on accounts

7. Employees Benefts

i) Short-term employee benefts are charged to revenue in the year in which the related service is rendered.

ii) In respect of employees who have opted for provident fund scheme, matching contribution is made.

iii) Contribution to Defned Beneft Plans (Gratuity, Pension and Leave Encashment) has been made as per AS-15 (on Employees benefts) issued by the Institute of Chartered Accountants of India.

8. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classifed as Non Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) The recovery in Non-Performing Assets has been frst appropriated towards amount of principal and thereafter towards amount of interest.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/ other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

9. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on the reporting date.

10. Proft

The net proft is disclosed in the proft and loss account after providing for: i) Income Tax, wealth tax and Deferred Tax.

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency fund.

v) Other usual and necessary provisions.

11. Taxation

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on "Accounting for Taxes on Income".

12. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".


Mar 31, 2013

1. Accounting Conventions

The accompanying financial statements are prepared by following the going concern concept and on the historical cost basis unless otherwise stated and conform to the statutory provisions and practices prevailing within the Banking Industry in the country.

2. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income over the period of contract.

3. Investments

(i) Investments are classified into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories in accordance with the guidelines issued by Reserve Bank of India.

(ii) Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

(iii) "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. "Available-for-Sale" securities are those which do not qualify for being classified in either of the above categories.

(iv) Investments classified as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity.

(v) (a) The individual scrips in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifications under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for trading" categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) Unquoted shares are valued at break-up value ascertained from the latest balance sheet and in case the latest balance sheet is not available the same are valued at Rs. 1/- per Company, as per RBI guidelines.

Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular scheme. In case of Funds with a lock-in period, where repurchase price/ market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

(vi) The individual scrip in the "Held-for-Trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and Loss account and appreciation is ignored.

(vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

(viii) a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in "Held-to-Maturity" category, an equivalent amount of profit net of taxes is appropriated to the "Capital Reserve Account".

(ix) Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

(x) Brokerage paid on securities purchased is charged to revenue account.

(xi) Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

(xii) Transfer of securities from one category to another is done at the least of the acquisition cost/book value/ market value on the date of transfer.

(xiii) Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

(xiv) Bank is following settlement date accounting policy as per RBI guidelines.

(xv) In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/ Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowing) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & money at call & short notice).

4. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classification norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA''s. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

5. Fixed Assets

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

d) Depreciation is provided on diminishing balance method in accordance with the provisions of Income Tax Act 1961, as per the rates prescribed in Income Tax Rules given below: -

However, in terms of RBI guidelines depreciation on computers (including ATMs) along with software forming integral part of computers is charged at the rate of 33.33% on straight-line method for the full year even if the computers (including ATMs) have been purchased during the second half.

The depreciation on computer software where it is probable that the future benefits that are contributable to such software will flow to Bank is being capitalized and depreciation is charged @33.33% in terms of RBI guidelines on straight line method.

The depreciation on mobile phones is being charged @50% on straight line method.

e) The expenditure incurred towards furniture & fixture in building (M-6G) being used as Chairman''s residence has been treated as asset of the Bank under this head. The expenditure on repairs and renovation of this building has been charged to revenue, as the building is not owned by the Bank, hence not capitalized.

f) Depreciation on additions to Assets made up to 30th September of the year is provided for at full rates and on additions thereafter at 50% of the rates. No depreciation is provided on assets sold/ discarded during the year.

g) Premium paid for Leasehold properties is amortized over the period of the lease.

6. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered.

ii) In respect of employees who have opted for provident fund scheme, matching contribution is made.

iii) Contribution to Defined Benefit Plans (Gratuity, Pension and Leave Encashment) has been made as per AS 15 (Revised 2005) issued by the Institute of Chartered Accountants of India.

7. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated.

a) Interest and other income on advances/ investments classified as Non Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) Recovery in Non-Performing Assets is appropriated first towards the interest and there after towards principal/ arrears of asset.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than commission on insurance & Government business), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/ other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

8. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on the reporting date.

9. Profit

The net profit is disclosed in the profit and loss account after providing for:

i) Income Tax, wealth tax and Deferred Tax.

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency reserves.

v) Other usual and necessary provisions.

10. Taxation

Tax expense includes Income Tax, Wealth Tax and Deferred Tax determined in accordance with the provisions of Income/Wealth Tax Act, and the Accounting Standards issued by The Institute of Chartered Accountants of India.

The deferred tax charge or credit is recognized using the tax rates that have been enacted or substantially enacted by the Balance Sheet date. In terms of Accounting Standard 22 issued by ICAI, provision for deferred tax liability is made on the basis of review at each Balance Sheet date and deferred tax assets are recognized only if there is virtual certainty of realization of such assets in future.

11. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".


Mar 31, 2012

1. Accounting Conventions

The accompanying financial statements are prepared by following the going concern concept and on the historical cost basis unless otherwise staThed and conform to the statutory provisions and practices prevailing within the Banking Industry in the country.

2. Transactions involving Foreign Exchange

i. Monetary Assets and Liabilities as on balance sheet date have been translaThed using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii. Exchange diff erences arising on settlement of monetary items have been recognised as income or as expense in the period in which they arise.

iii. The premium or discount arising at the inception of a forward exchange contract, which is not inThended for trading purpose, has been amortised as expense or income over the period of contract.

3. Investments

(i) Investments are classified into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" caThegories, in accordance with the guidelines issued by Reserve Bank of India.

(ii) Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

(iii) "Held-to- Maturity" caThegory comprises securities acquired by the Bank with the inThention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the inThention of trading. "Available-for-Sale" securities are those, which do not qualify for being classifi ed in either of the above caThegories.

(iv) Investments classified as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortised over the period remaining to the maturity.

(v) (a) The individual scrip's in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifi cations under which investments are presenThed in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifi cations is ignored.

(b) T e market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for trading" caThegories is based on the market price available from the trades/quoThes on stock exchanges. Central/State Government securities, other approved securities, debentures and bonds are valued as per the prices/YTM rates declared by FIMMDA.

(c) UnquoThed shares are valued at break up value ascertained from the laThest balance sheet and in case the latest balance sheet is not available the same are valued at Rs. 1/- per Company, as per RBI guidelines.

Investment in quoThed Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular Scheme. In case of Funds with a lock-in period, where repurchase price/market quoThe is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

(vi) The individual scrips in the "held-for-trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and loss account and appreciation is ignored.

(vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classification and appropriate provisions are made as per RBI norms and no income on such investments is recognised.

(viii) a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of Profit on sale of investments in "Held-to-Maturity" caThegory, an equivalent amount of Profit net of taxes is appropriated to the "Capital Reserve Account".

(ix) Interest accrued up to the date of acquisition of securities i.e. broken period inTherest is excluded from the acquisition cost and recognised as interest expense. Broken period inTherest received on Sale of securities is recognised as interest income.

(x) Brokerage paid on securities purchased is charged to revenue account.

(xi) Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

(xii) Transfer of securities from one caThegory to another is done as per RBI guidelines.

(xiii) Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

(xiv) Bank is following settlement daThe accounting policy as per RBI guidelines.

(xv) In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 daThed 23-03-2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collaTheralised lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the daThe of maturity. Cost and revenue are accounted as inTherest expenditure/Income as the case may be. Balance in Repo account is classifi ed under schedule 4 (Borrowing) and balance in Reverse Repo account is classifi ed under schedule 7 (Balance with Banks & money at call & short notice).

4. Advances

i) Classifi cation of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classifi cation norms formulaThed by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisiThe provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA's. Provisions for advances classifi ed as Standard Assets is shown under Other Liabilities & Provisions.

5. Fixed Assets

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

Hitherto acquisition cost of compuTher software, not forming inThegral part of compuThers, was being charged fully in the year of purchase. In compliance to Accounting Standard(AS)-26, the Bank has changed its accounting policy w.e.f. 1st April, 2011. Accordingly, acquisition cost of such software where it is probable that the future economic benefi ts that are contributable to this software will fl ow to bank is being capitalised and depreciation is charged at the raThe of 33.33% in Therms of RBI guidelines on straight line method.

T e depreciation on mobile phones is being charged @50% on straight line method.

e) T e expenditure incurred towards furniture & fixture in building (M-6G) being used as Chairman's residence has been treaThed as asset of the Bank under this head. T e expenditure on repairs and renovation of this building has been charged to revenue, as the building is not owned by the Bank, hence not capitalised.

f) Depreciation on additions to Assets made up to 30th SepThember of the year is provided for at full raThes and on additions thereafter at 50% of the raThes. No depreciation is provided on assets sold/ discarded during the year.

g) Premium paid for Leasehold properties is amortised over the period of the lease.

6. Employees Benefi ts

i) Short-Therm employee benefi ts are charged to revenue in the year in which the relaThed service is rendered.

ii) In respect of employees who have opThed for provident fund scheme, matching contribution is made.

iii) Contribution to Defi ned Benefi t Plans (Gratuity, Pension and Leave Encashment) has been made as per AS 15 (Revised 2005) issued by the Institute of Chartered Accountants of India. However, in respect of transition liability the Bank has opThed an irrevocable choice to recognise the increase in its defi ned benefi t liability deThermined as per Actuarial valuation as an expense on a straight-line basis over a period of fi ve years beginning from 01.04.2007.

7. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise staThed

a) InTherest and other income on advances/ investments classifi ed as Non Performing Advances/ investments are recognised to the exThent realised in accordance with the guidelines issued by the Reserve Bank of India.

b) Recovery in Non Performing Assets is appropriaThed fi rst towards the inTherest and there after towards principal/ arrears of asset.

c) InTherest on overdue Therm deposits is provided at Savings Bank RaThe of InTherest.

d) Fee, commission (other than commission on insurance & Government business ), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognised on realisation basis.

e) Income from inTherest on income tax/ other tax refunds is accounted for on the basis of orders passed by the CompeThent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

8. Credit Card reward Points

T e Bank has estimaThed the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on the reporting daThe.

9. Profit

T e net Profit is disclosed in the Profit and loss account after providing for:

i) Income Tax , wealth tax and Deferred Tax .

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortisation on Investments.

iv) Transfer to contingency reserves.

v) Other usual and necessary provisions.

10. Taxation

Tax expense includes Income Tax , Wealth Tax and Deferred Tax deThermined in accordance with the provisions of Income/Wealth Tax Act, and the Accounting Standards issued by The Institute of Chartered Accountants of India.

The deferred tax charge or credit is recognised using the tax rates that have been enacted or substantially enacted by the Balance Sheet daThe. In Therms of Accounting Standard 22 issued by ICAI, provision for deferred tax liability is made on the basis of review at each Balance Sheet daThe and deferred tax assets are recognised only if there is virtual certainty of realisation of such assets in future.

11. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".


Mar 31, 2011

1. Accounting Conventions

The accompanying financial statements are prepared by following the going concern concept and on the historical cost basis unless otherwise stated and conform to the statutory provisions and practices prevailing within the Banking Industry in the country.

2. Transactions involving Foreign Exchange

i) Monetary Assets and Liabilities as on Balance Sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii) Exchange differences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii) The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income over the period of contract.

3. Investments

i) Investments are classified into "Held-to-Maturity", Available-for-Sale" and "Held-for-Trading" categories, in accordance with the guidelines issued by Reserve Bank of India.

ii) Bank decides the category of each investment at the time of acquisition and classifies the same accordingly.

iii) "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. Available-for-Sale" securities are those, which do not qualify for being classified in either of the above categories.

iv) Investments classified as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/ redemption value, in which case the premium is amortized over the period remaining to the maturity.

v) a) The individual scrip’s in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifi cations under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications is ignored.

b) The market value for the purpose of periodical valuation of investments, included in "Available for Sale" and "Held for trading" categories is based on the market price available from the trades/quotes on stock exchanges. Central/ State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

Unquoted shares are valued at break up value ascertained from the latest balance sheet and in case the latest balance sheet is not available the same are valued at Re1/- per Company, as per RBI guidelines.

Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un-quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular Scheme. In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period. Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

vi) The individual scrips in the "held-for-trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifications under which investments are presented in the Balance Sheet is accounted for in the Profit and loss account and appreciation is ignored.

vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classifi cation and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

viii) a) Profit or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security

b) Profit or loss on sale of investments in any category is taken to the Profit and Loss account. In case of profit on sale of investments in "Held-to-Maturity" category, an equivalent amount of profit net of taxes is appropriated to the "Capital Reserve Account".

ix) Interest accrued up to the date of acquisition of securities i.e. broken period interest is excluded from the acquisition cost and recognized as interest expense. Broken period interest received on Sale of securities is recognized as interest income.

x) Brokerage paid on securities purchased is charged to revenue account.

xi) Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

xii) Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

xiii) Repurchase & Reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

xiv) Bank is following settlement date accounting policy as per RBI guidelines.

xv) In accordance with RBI circular No. IDMD 4135/11.08.43/2009-10 dated 23.03.2010, the Bank has made changes in accounting for Repo/ Reverse Repo transactions (Other than transactions under the liquidity adjustment facility (LAF) with the RBI). Accordingly the securities sold and purchased under Repo/Reverse Repo are accounted for as collateralized lending and borrowing transactions. However, securities are transferred as in case of normal outright sale/purchase transactions and such movement of security is reflected using Repo/Reverse Repo accounts and contra entries. The above entries are reversed on the date of maturity. Cost and revenue are accounted as interest expenditure/Income as the case may be. Balance in Repo account is classified under schedule 4 (Borrowing) and balance in Reverse Repo account is classified under schedule 7 (Balance with Banks & money at call & short notice).

4. Advances

i) Classification of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classification norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPA’s. Provisions for advances classified as Standard Assets is shown under Other Liabilities & Provisions.

5. Fixed Assets

a) Premises and other fixed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

However, in terms of RBI guidelines depreciation on computers (including ATMs) along with software forming integral part of computers is charged at the rate of 33.33% on straight-line method for the full year even if the computers (including ATMs) have been purchased during the second half. In respect of Computer software, not forming integral part of computers, acquisition cost has been charged fully in the year of purchase. The depreciation on mobile phones is being charged @50% on straight line method.

e) The expenditure incurred towards furniture & fixture in building (M-6G) being used as Chairman’s residence has been treated as asset of the Bank under this head. The expenditure on repairs and renovation of this building has been charged to revenue, as the building is not owned by the Bank, hence not capitalized.

f) Depreciation on additions to Assets made up to 30th September of the year is provided for at full rates and on additions thereafter at 50% of the rates. No depreciation is provided on assets sold/ discarded during the year.

g) Premium paid for Leasehold properties is amortized over the period of the lease.

6. Employees Benefits

i) Short-term employee benefits are charged to revenue in the year in which the related service is rendered.

ii) In respect of employees who have opted for provident fund scheme, matching contribution is made.

iii) Contribution to Defined Benefit Plans (Gratuity, Pension and Leave Encashment) has been made as per AS 15 (Revised 2005) issued by the Institute of Chartered Accountants of India. However, in respect of transition liability the Bank has opted an irrevocable choice to recognize the increase in its defined benefit liability determined as per Actuarial valuation as an expense on a straight-line basis over a period of five years beginning from 01.04.2007.

7. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated

a) Interest and other income on advances/ investments classified as Non Performing Advances/ investments are recognized to the extent realized in accordance with the guidelines issued by the Reserve Bank of India.

b) Recovery in Non Performing Assets is appropriated first towards the interest and there after towards principal/ arrears of asset.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission), exchange, locker rent, insurance claims and dividend on shares and units in Mutual Fund are recognized on realization basis.

e) Income from interest on income tax/ other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

8. Credit Card reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on the reporting date.

9. Profit

The net profit is disclosed in the Profit and Loss account after providing for:

i) Income Tax, wealth tax and Deferred Tax.

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines.

iii) Depreciation/ amortization on Investments.

iv) Transfer to contingency reserves.

v) Other usual and necessary provisions.

10. Taxation

Tax expense includes Income Tax, Wealth Tax and Deferred Tax determined in accordance with the provisions of Income/Wealth Tax Act, and the Accounting Standards issued by The Institute of Chartered Accountants of India.

The deferred tax charge or credit is recognized using the tax rates that have been enacted or substantially enacted by the Balance Sheet date. In terms of Accounting Standard 22 issued by ICAI, provision for deferred tax liability is made on the basis of review at each Balance Sheet date and deferred tax assets are recognized only if there is virtual certainty of realization of such assets in future.

11. Contingency Funds

Contingency Funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".


Mar 31, 2010

1. Accounting Conventions

T e accompanying fi nancial statements are prepared by following the going concern concept and on the historical cost basis unless otherwise stated and conform to the statutory provisions and Practices prevailing within the Banking Industry in the country.

2. Transactions involving Foreign Exchange

i) Monetary Assets and Liabilities as on balance sheet date have been translated using closing rate as at year-end announced by Foreign Exchange Dealers Association of India.

ii) Exchange diff erences arising on settlement of monetary items have been recognized as income or as expense in the period in which they arise.

iii) The premium or discount arising at the inception of a forward exchange contract, which is not intended for trading purpose, has been amortized as expense or income as on the balance sheet date.

3. Investments

i) Investments are classifi ed into "Held-to-Maturity", "Available-for-Sale" and "Held-for-Trading" categories, in accordance with the guidelines issued by Reserve Bank of India.

ii) Bank decides the category of each investment at the time of acquisition and classifi es the same accordingly.

iii) "Held-to- Maturity" category comprises securities acquired by the Bank with the intention to hold them up to maturity. "Held-for-Trading" category comprises securities acquired by the Bank with the intention of trading. Available-for-Sale" securities are those, which do not qualify for being classifi ed in either of the above categories.

iv) Investments classifi ed as "Held-to-Maturity" (HTM) category are carried at acquisition cost unless it is more than the face/redemption value, in which case the premium is amortized over the period remaining to the maturity.

v) (a) The individual scrips in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifi cations under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifi cations above is ignored.

(b) The market value for the purpose of periodical valuation of investments, included in Available for Sale and Held for trading categories is based on the market price available from the trades/quotes on stock exchanges. Central/State Government securities, other approved securities, debentures and Bonds are valued as per the prices/YTM rates declared by FIMMDA.

Unquoted shares are valued at break up value ascertained from the latest balance sheet and in case the latest balance sheet is not available the same are valued at Re1/- per Company, as per RBI guidelines.

Investment in quoted Mutual Fund Units is valued as per Stock Exchange quotations. An investment in un- quoted Mutual Fund Units is valued on the basis of the latest re-purchase price declared by the Mutual Fund in respect of each particular Scheme. (In case of Funds with a lock-in period, where repurchase price/market quote is not available, Units are valued at NAV. If NAV is not available, then these are valued at cost, till the end of the lock-in period). Wherever the re-purchase price is not available the Units are valued at the NAV of the respective scheme.

vi) The individual scrips in the "held-for-trading" category are marked to market at monthly intervals and the net depreciation under each of the six classifi cations under which investments are presented in the Balance Sheet is accounted in the Profi t and loss account and appreciation is ignored.

vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other performing securities. Such investments including Non-performing Non-SLR investments are treated applying RBI prudential norms on NPA Classifi cation and appropriate provisions are made as per RBI norms and no income on such investments is recognized.

viii) (a) Profi t or Loss on sale of Government Securities is computed on the basis of weighted average cost of the respective security.

(b) Profi t or loss on sale of investments in any category is taken to the Profi t and Loss account. In case of profi t on sale of investments in "Held-to-Maturity" category, an equi-valued amount of profi t net of taxes is appropriated to the "Capital Reserve Account".

ix) Investments in J&K Grameen Bank/Sponsored Institutions have been accounted for on carrying cost basis.

x) Transfer of securities from one category to another is done at the least of the acquisition cost/book value/market value on the date of transfer.

Revenue Recognition

Income

The dividend on Investment in shares and units of Mutual Funds are recognized on realization basis.

4. Advances

i) Classifi cation of Advances and Provisions thereof have been made as per the Income Recognition and Asset Classifi cation norms formulated by the RBI viz., Standard, Sub-Standard, Doubtful and Loss Assets and accordingly requisite provisions have been made thereof.

ii) Advances are shown net of provisions required for NPAs. Provisions for advances classifi ed as Standard Assets is shown under Other Liabilities & Provisions.

5. Fixed Assets

a) Premises and other fi xed assets are accounted for at historical cost.

b) Premises include free hold as well as lease hold properties.

c) Premises include capital work in progress.

e) However, in terms of RBI guidelines depreciation on computers (including ATMs) along with software forming integral part of computers is charged at the rate of 33.33% on straight-line method for the full year even if the computers (including ATMs) have been purchased during the second half. In respect of Computer software, not forming integral part of computers, acquisition cost has been charged fully in the year of purchase.

f) The Bank has changed the policy of charging depreciation on Mobile Phones from @33.33% to 50% from this year on the Straight Line Method.

g) The expenditure incurred towards furniture & fi xture on building (M-6G) being used as Chairmans residence has been treated as asset of the Bank under this head. The expenditure on repairs and renovation of this building has been charged to revenue, as the building is not owned by the Bank, hence not capitalized.

h) Depreciation on additions to Assets made up to 30th September of the year is provided for at full rates and on additions thereafter at 50% of the rates. No depreciation is provided on assets sold/ discarded during the year.

i) Premium paid for leasehold properties is amortized over the period of the lease.

6. Employees Benefits

i) Short-term employee benefi ts are charged to revenue in the year in which the related service is rendered. ii) In respect of employees who have opted for provident fund scheme, matching contribution is made.

iii) Contribution to Defi ned Benefi t Plans (Gratuity, Pension and Leave Encashment) has been made as per AS 15 (Revised 2005) issued by the Institute of Chartered Accountants of India. The Bank has opted an irrevocable choice to recognize the increase in its defi ned benefi t liability determined as per Actuarial valuation as an expense on a straight-line basis over a period of fi ve years beginning from 01.04.2007.

7. Income Recognition and Expenditure booking

Income and expenditure is accounted for on accrual basis unless otherwise stated

a) Interest and other income on advances/ investments classifi ed as Non Performing Advances/ investments are recognized to the extent realized in accordance with guidelines issued by the Reserve Bank of India.

b) Recovery in Non Performing Assets is appropriated fi rst towards the interest and there after towards principal/ arrears of asset.

c) Interest on overdue term deposits is provided at Savings Bank Rate of Interest.

d) Fee, commission (other than insurance commission), exchange, locker rent and insurance claims are recognized on realization basis.

e) Income from interest on income tax/ other tax refunds is accounted for on the basis of orders passed by the Competent Authorities.

f) Unforeseen income/ expenses are accounted for in the year of receipt/ payment.

g) Stationery issued to branches has been considered as consumed.

8. Credit Card Reward Points

The Bank has estimated the probable redemption of reward points by not using actuarial method but has made 100% provision for redemption against the loyalty points as on close of balance on 31.03.2010.

9. Profit

The net profi t is disclosed in the profi t and loss account after providing for:

i) Income Tax, wealth tax and Deferred Tax

ii) Standard Assets, Non Performing Advances/ Investments as per RBI guidelines

iii) Depreciation/ amortization on Investments

iv) Transfer to contingency reserves

v) Other usual and necessary provisions

10. Taxation

Tax expense includes income tax, wealth tax and Deferred Tax determined in accordance with the provisions of Income/ Wealth Tax Act, and the accounting standards issued by The Institute of Chartered Accountants of India.

The deferred tax charge or credit is recognized using the tax rates that have been enacted or substantially enacted by the balance sheet date. In terms of accounting standard 22 issued by ICAI, provision for deferred tax liability is made on the basis of review at each balance sheet date and deferred tax assets are recognized only if there is virtual certainty of realization of such assets in future. Deferred Tax Assets/ Liabilities are reviewed at each balance sheet date based on developments during the year.

11. Contingency Funds

Contingency funds have been grouped in the Balance Sheet under the head "Other Liabilities and Provisions".

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