Mar 31, 2015
1. CAPITAL
1.1 Capital Adequacy Ratio
As per the extant guidelines of RBI, Bank has migrated to Basel III
framework with efect from 01.04.2013. Bank has adopted Standardized
Approach for Credit Risk, Standardized Duration Approach for Market
Risk and Basic Indicator Approach for Operational Risk towards
compounding the minimum Capital under BASEL - III.
1.2 Preferential Allotment of Equity
During the year the Bank by way of a preferential allotment allotted
92,53,473 Equity Shares to SBI, which ranks pari - passu with the
existing equity shares of the Bank in all respects, including dividend,
at an issue price of Rs.416.06 per share (face value Rs.10 each at a
premium of Rs.406.06 per equity share). The said shares have been
locked in for a period of three years up to 10th June, 2017.
Consequently, the SBI shareholdings has increased from 75.00% to
78.91%.
1.3 Share Application Money Pending Allotments
The Bank has ofered 1,18,50,694 Equity Shares of Rs.10 each fully paid
up ("Rights Issue") for cash at a price of Rs.400 including a Premium
of Rs.390 per equity share aggregating to Rs.474.03 Crores to the
existing Equity Shareholders of the Bank on Rights Basis in the Ratio
of 1 (One) fully paid-up equity share for every 5 (Five) equity shares
held on the Record Date i.e. 4th March, 2015 ("Rights Issue"). The
Issue opened on 17th March 2015 and closed on 31st March 2015.
Application received for 1,18,50,694 equity shares amounting to
Rs.474.03 Crores (including 1,10,91,028 shares amounting to Rs.443.64
Crores received through ASBA process) is disclosed as Share Application
money pending allotment as on the date of Balance sheet.
Subsequent to the Balance Sheet date, on 13th April, 2015, the Bank has
allotted 1,18,50,694 equity shares of Rs.10 each against above share
application money.
The objects of the Issue are to augment the bank''s capital base to meet
the capital requirements and growth in the assets, primarily the loan
and investment portfolio.
a) The value of sales and transfers of securities to/from HTM category
does not exceed 5 per cent of the book value of investments held in HTM
category at the beginning of the year
Note: The 5 per cent threshold referred to above will exclude the one
time transfer of securities to / from HTM category with the approval of
Board of Directors permitted to be undertaken by banks at the beginning
of the accounting year and sales to the Reserve Bank of India under
pre-announced OMO auctions
b) In terms of RBI Circular No.DBOD.BP.BC.No.41/21.04.141/2013-14 dated
23.08.2013 on "Investments portfolio of banks - Classifcation,
Valuation and Provisioning", Bank has transferred SLR securities with
face value of Rs.1445 crores (Book Value of Rs.1402.15 crores) held
under AFS portfolio to HTM portfolio and the loss on such transfer
amounting to Rs.35.74 crores has been recognized during the year.
a. The Bank has entered into (1) Interest Rate Swap (Coupon only
swaps) for hedging the interest rate risks of Tier II Bonds and (2)
Interest Rate Swap for hedging the interest rate risks of FCNR (B)
deposits. No swap transaction was undertaken for trading purpose during
the year.
b. All the Interest Rate Swaps are within the counter party exposure
limits.
c. The value and maturity of the hedge have not exceeded the
underlying liabilities and no stand-alone transactions are initiated /
outstanding.
d. The Coupon only swaps are done in Japanese Yen and Indian Rupees
receiving Fixed Rate interest in Indian Rupee and paying Japanese Yen
LIBOR for one year (plus a spread) with a cap of 1%.
e. There is an exchange risk in respect of interest payout for coupon
only swap transaction as the same is marked to market.
f. Forex based Interest Rate Swaps are done in US Dollars receiving
fxed and paying six month LIBOR Â linked foating rate interest.
g. Carrying value of the Notional Principal amount of the outstanding
swaps is same as the Notional Principal amount and outstanding Interest
Rate Swaps arrived at FEDAI revaluation rate as on balance sheet dates
h. The Bank has not ofered any collateral for undertaking the swaps.
i. There is no concentration of credit risks arising from Interest
Rate Swaps undertaken during the year.
j. No Forward Rate Agreement transaction was undertaken during the
year.
k. Disclosure is made on the information/valuations provided by the
counterparty banks, viz, State Bank of India and ICICI Bank Limited.
3.4 Disclosures on risk exposure in derivatives
a. Qualitative Disclosure
i. Bank has started trading in currency futures through MCX Exchange
with IL&FS as Clearing agent as per Board approved policy.
ii. As risk measurement and monitoring, the hedge instrument is marked
to the market at periodical intervals to ensure its efectiveness.
iii. Identifying an underlying, employing a derivative to hedge the
Rate Sensitive Gap and reviewing the efectiveness based on interest
rate view are some of the processes in risk mitigation.
iv. Hedge transactions are accounted on accrual basis and no marking to
market is done. However, fair value and likely loss in the event of
counter party default is disclosed. Credit Risk is mitigated through
counter party exposure norms set internally.
b. Quantitative Disclosure
For compiling the country-wise risk exposure, the Bank has used the
Country Risk Management Policy last reviewed and approved by the Board
at its meeting held on 09.03.2015. Since the Bank does not have net
funded exposure of more than 1% of its total assets as on 31.03.2015 to
any of the Countries, provision for Country risk is not necessary.
7.4. Details of Single Borrower (SGL) / Group Borrower (GBL) Limit
exceeded by the Bank In terms of the Loan Policy, the exposure should
not exceed 15% of capital funds (Tier I and Tier II) for single
borrower and 40% of capital funds for a group borrower. The ceiling
may, however, go upto 20% for single borrower and 50% for a group
borrower provided the additional exposure is on account of
infrastructure projects in specifed sectors. The bank may also, in
exceptional circumstances, with the approval of the Board, consider the
enhancement of the exposure to a borrower (Single and Group) up to a
maximum of a further 5% of the Bank''s capital funds, subject to such
borrowers consenting to the bank to make appropriate disclosure in the
Bank''s Annual Report. The Bank''s position as on 31.03.2015 was as
under:
a. Individual accounts (Ceiling level 15% of Capital Funds- Rs.953.64
crore)
Bank has not exceeded the exposure ceiling in any single borrower.
b. Group Borrowers (Ceiling level of 40% of Capital Funds: Rs.2543.05
crores) Bank has not exceeded the exposure ceiling in any group of
borrowers.
8. Disclosures of Penalties imposed by Reserve Bank of India
During the year RBI has not imposed any penalty on the Bank under
Section 46(4) of Banking Regulation Act.
During the year RBI has imposed a penalty of Rs.6,21,900/- on the Bank
and the details are as under:
i. Penalty for irregularities in Currency Chest Branch -- Total 6 and
Rs.2,14,200/-.
ii. Penalty for the detection of Fake Indian Currency from soiled note
remittances -- Total 88 and Rs. 4,07,700/-
9. DISCLOSURE AS PER ACCOUNTING STANDARDS (AS)
9.1. Accounting Standard 5: Net profit or Loss for the period, prior
period items and changes in Accounting Policies There are no material
prior period income / expenditure items for the year.
9.2. Change in Accounting Policy in respect of Depreciation on Fixed
Assets.
1. The Bank has changed its method of charging depreciation on its fxed
assets from Written Down Value Method to Straight Line Method.
Computers and software (which do not form part of an integral part of
hardware) continue to be depreciated under Straight Line Method as in
earlier years.
2. The revised rates are based on the estimate of the management on the
useful life of the respective assets.
3. The impact of the change in the Accounting Policy is as follows:
a) The Book Value of the Fixed Assets has increased by Rs.8.36 Crores
and the Accumulated Depreciation as on 31st March, 2014 has reduced by
Rs.5.67 Crores and Depreciation for the year ended 31st March, 2015 has
also reduced by Rs.2.69 Crores.
b) Had the bank followed the earlier method, the depreciation for the
year would have been Rs. 92.51 Crores as against the actual charge of
Rs.84.16 Crores.
3. Under the new method, depreciation will be charged on the basis of
number of days put to use on a proportionate basis except in the case
of non  integral software which has been depreciated fully in the frst
year of use irrespective of the number of days the assets are put into
use. In the fnal year of depreciation, the book value of Rupee 1 would
be left in the books so to say that the book value of any assets will
not be zero at any point of time till it is discarded by the bank.
9.4 Accounting Standard 9: Revenue Recognition
Certain items of income are recognized on realization basis as per
Accounting Policy number 10.1. These are considered not material in
terms of RBI guidelines, and hence do not require disclosure.
9.5. Accounting Standard 15 (Revised): Employee Benefts
iii) All the actuarial gains and losses have been fully recognized in
the statement of profit and loss.
iv) Brief description of type of plan:
Pension is paid to all eligible pension optees, on superannuation,
voluntary retirement, etc. To be eligible for pension, the employee
should have put in minimum ten years of service.
Gratuity is payable to all eligible employees on superannuation,
voluntary retirement, etc. To be eligible for gratuity, the employee
should have put in minimum five years of service.
v) The expected return on plan assets over the accounting period is
based on an assumed rate of return. The assumed rate of return is
8.21% per annum for Pension Plan and 8.21% for Gratuity Plan.
vii) The estimates of future salary increase considered in actuarial
valuation, take into account of infation, seniority, promotion and
other relevant factors such as supply and demand in the employment
market.
viii) On and above the actuarial calculation, bank has provided an
adhoc provision @15% to meet the requirement due to salary revision
(bi-partite settlement) of Rs. 12.75 crores on account of pension and
Rs. 1.65 crores on account of Gratuity.
9.7. Defned Contribution Plan
Amount of Rs 0.46 crore (Rs. 0.49 crore) recognized as an expense
towards the Provident Fund scheme of the Bank and Rs. 10.62 crores (Rs
7.60 crore) as an expense towards new pension scheme is included under
the head ''Payments to and provisions for employees'' in profit and loss
account.
9.8. Other Long term Employee Benefts
Amount of Rs. 26.79 Crore (Previous Year Rs. 21.09 Crore) is recognized
as an expense towards Other Long term Employee Benefts included under
the head ''Payments to and Provisions for Employees'' in profit and loss
account.
9.9. Accounting Standard 17: Segment Reporting Part A: Business
Segments Pursuant to RBI guidelines, the Bank has re-classifed the
business segments in which the Bank operates into:
a. Corporate / Wholesale Banking
b. Retail Banking
c. Treasury and
d. Other Banking Operations
The classifcation has been done on the basis of following criteria:
Corporate / Wholesale Banking: All loan and advance accounts with
exposure of above Rs. 5 crore are classifed under wholesale / corporate
Banking.
Retail: All loan and advance accounts which are not covered above will
be taken as Retail Banking.
Treasury: Entire investment portfolios are classifed under Treasury
segment.
Other Banking Operations: The Bank does not have Other Banking
Operations segment.
Allocation of Income and Expenses and Assets / Liabilities:
(a) Income and Expenses and Assets / Liabilities directly attributed to
particular segment are allocated to the relative segment.
(b) Items that are not directly attributable to segments are allocated
to retail and wholesale segments in proportion to the business managed
/ ratio of number of employees / ratio of directly attributable income.
(c) The Bank has certain common assets / liabilities and income /
expense that cannot be attributed to any particular segment and hence
the same are treated as unallocated.
During year ended 31st March, 2015, the Bank has recognized Deferred
Tax Assets on provision for Diminution in fair value of restructured
standard assets, which was hitherto not being done. Accordingly, an
amount of Rs. 92.53 crores (including Rs. 77.82 crores relating to the
period upto 31.03.2014) has been accounted for in the current period
under review.
9.14. Accounting Standard 28: Impairment of Assets
In the opinion of the Management, there is no impairment to the assets
to which Accounting Standard 28 on "Impairment of Assets" applies.
Mar 31, 2014
Not available
Mar 31, 2013
I.GENERAL
1.1 The accompanying financial statements have been prepared under the
historical cost convention and they conform to Generally Accepted
Accounting Principles (GAAP) in India, which comprise the statutory
provisions, guidelines of regulatory authorities and Resen/e Bank of
India (RBI), Accounting Standards and guidance notes issued by the
Institute of Chartered Accountants of India (ICAI) and the practices
prevalent in the banking industry in India.
1.2 The preparation of financial statements requires the management to
make estimates and assumptions considered in the reported amount of
assets and liabilities (including contingent liabilities) as of the
date ofthe financial statements and the reported income and expenses
during the reporting period. Management believes that the estimates
used in the preparation of the financial statements are prudent and
reasonable. Future results could drfferfrom estimates.
2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE
2.1 Foreign Currency transactions are recorded at the exchange rates
prevailing on the date ofthe respective transactions.
2.2 Monetary assets and liabilities denominated in Foreign Currencies
are translated at the Foreign Exchange Dealers Association of India
(FEDAI) closing spot rates prevailing on the Balance Sheet date.
2.3 Guarantees / Standby Letters of Credit, Letters of Credit, Forward
Rate Agreements, Foreign Currency Options and Forward Exchange
Contracts are translated at FEDAI closing spot rates as on the Balance
Sheet date.
2.4 a) Each outstanding forward exchange contract is subjected to
revaluation process separately.
b)The revaluation rate for each outstanding contract is derived by
maturity date-wise arithmetic interpolation. The difference between
revalued amount and the contracted amount is recognized as profit or
loss as the case may be.
2.5 Premium received /paid on outstanding currency options are
accounted for as per FEDAI guidelines.
2.6 Gains/Losses on account of change in exchange rates of open
position in currency futures trades are settled with the exchange
clearing house on daily basis and such gains/losses are recognized in
profit and loss account
3. INVESTMENTS-Domestic
Investments are accounted for in accordance with the extant regulatory
guidelines.
3.1 Classification
Investments are classified into three categories namely: Held to
Maturity, Available for Sale and Held for Trading. Investments are
further classified into the following six groups in the balance sheet:
(i) Government Securities, (ii) Other Approved Securities, (iii)
Shares, (iv) Debentures and Bonds, (v) Subsidiaries / Joint Ventures
and (vi) Others (CPs, Mutual Funds, Units, etc.)
3.2 Basis of Classification
Investments that the Bank intends to hold till maturity are classified
as Held to Maturity
Investments that are held principally for resale within 90 days from
the date of purchase are classified as Held for Trading.
Investments that are not classified in the above two categories are
classified as Available for Sale.
An investment is classified as ''Held to Maturity1, Available for Sale1
or ''Held for Trading'' at the time of its purchase and subsequent shift
amongst categories is done in conformity with Regulatory Guidelines.
3.3 Valuations and Accounting
i. In determiningthe cost of an investment:
a) Brokerage/commission received on subscription is reduced from the
cost.
b) Brokerage / commission etc., paid in connection with the acquisition
of investments is charged to revenue and not included in cost.
c) Broken period interest paid / received on debt instruments is
treated as interest expended / income and is not included in cost/sale
consideration.
d) Cost is determined on the weighted average cost method.
e) The transfer of a security amongstthe above three categories is
accounted for at the least of the acquisition cost / book value /
market value on the date of transfer and the depreciation, if any, on
such transfer is fully provided for.
ii. Held to Maturity categories:
Each security is carried at acquisition cost or at amortized cost, if
acquired at a premium over the face value. Any premium on acquisition
is amortized over the remaining maturity period of the security on
constant yield basis. Such amortization of premium is adjusted against
income underthe head "Interest on investments".
iii. Available for Sale and Held for Trading categories:
a) The value of investments held under the Available For Sale category
is determined as per Reserve Bank of India guidelines as under:
- Central Government Securities: Marked to market on the basis of
prices declared forthe purpose of valuation jointly by Fixed Income
Money Market and Derivatives Association of India (FIMMDA) and Primary
Dealers Association of India (PDAI).
- State Government Securities and Other Trustee Securities: Marked to
market on the basis of prices derived out ofthe yield for respective
maturities declared for the purpose of valuation jointly by FIMMDA and
PDAI.
- Shares: Wherever Stock Exchange quotations are available valuation
is done as per lower of the quotations in Bombay Stock Exchange or
National Stock Exchange. Wherever current quotations are not available
and in respect of unquoted shares (i) Valuation is as per Book Value
(without considering Revaluation Reserves, if any) ascertained from the
latest Balance Sheet of the Company (which is not more than one year
prior to the date of valuation) (ii) In case the latest Balance Sheet
is not available, the shares are valued at 1.00 per Company
- Bonds & Debentures: Valued on the YTM method for the respective
maturity and rating put out by FI MM DA and PDAI.
- Mutual Fund Units: Quoted MF Units are valued as per Stock Exchange
quotations. Un-quoted MF Units are valued on the basis ofthe latest
re-purchase price declared by the MF in respect of each
particularscheme. Incaseoffundswithalock in period, where re-purchase
price/market quote is not available, units arevalued at Net Asset Value
(NAV). IfNAVis not available, then these are valued at cost, till the
end of lock in period.
- Treasury Bills, Certificates of Deposits and Commercial Papers are
valued at carrying cost.
- Preference Shares are valued at lower of market value determined on
YTM basis and its redemption value.
b) Each security in the above two categories is revalued at the market
price or fair value determined as per Regulatory Guidelines and only
the net depreciation of each group for each category is provided for
and net appreciation is ignored. On provision for depreciation, the
book value of the individual securities remains unchanged after marking
to market.
iv. Security receipts issued by an Asset Reconstruction Company (ARC)
are valued in accordance with the guidelines applicable for Non-SLR
investments.
v. Investments are classified as performing and non-performing based
on the following guidelines issued by the RBI.
a. Interest / Installment (including maturity proceeds) is due and
remains unpaid for more than 90 days.
b. In the case of equity shares, in the event of the investment in the
share of any company is valued at Rs. 1.00 per company on account ofthe
non-availability ofthe latest balance sheet, those equity shares would
be reckoned as NPI.
c. If any credit facility availed by the issuer is NPAinthe books of
the Bank, investment in any ofthe securities issued by the same issuer
would also be treated as NPI and vice versa.
d. The above would apply mutatis mutandis to preference shares where
the fixed dividend is not paid.
e. The investments in debentures /bonds, which are deemed to be in the
nature of advance, are also subjected to NPI norms as applicable to
investments.
vi. The Bank has adopted the Uniform Accounting Procedure prescribed
by the RBI for accounting of Repo and Reverse Repo transactions.
3.4 Non-Performing Investments
All such securities where repayment of principal or interest not
serviced within 90 days from the due date are classified as
Non-performing Investments, except securities guaranteed by the Central
Government, which is, treated as performing investments notwithstanding
arrears of principal / interest payments. In respect of investments
classified as Non-performing, appropriate provisions are made for the
depreciation in the value. The depreciation requirement in respect of
these securities is not set off against appreciation in respect of
other performing securities.
4. DERIVATIVES
4.1 The Bank enters into derivative contracts, such as foreign currency
options, interest rate swaps, currency swaps, and cross currency
interest rate swaps and forward rate agreements in order to hedge
on-balance sheet/off-balance sheet assets and liabilities or for
trading purposes. The swap contracts entered to hedge on-balance sheet
assets and liabilities are structured in such a way that they bear an
opposite and offsetting impact with the underlying on-balance sheet
items. The impact of such derivative instruments is correlated with the
movement of the underlying assets and accounted in accordance with the
principles of hedge accounting.
4.2 Derivative contracts classified as hedge are recorded on accrual
basis. Hedge contracts are not marked to market unless the underlying
Assets / Liabilities are also marked to market.
4.3 Except as mentioned above, all other derivative contracts are
marked to market as per the generally accepted practices prevalent in
the industry. In respect of derivative contracts that are marked to
market, changes in the market value are recognized in the profit and
loss account in the period of change. Any receivable under derivatives
contracts, which remain overdue for more than 90 days, are reversed
through profit and loss account.
4.4 Option premium paid or received is recorded in profit and loss
account at the expiry ofthe option. The Balance in the premium received
on options sold and premium paid on options bought have been considered
to arrive at Mark to Market value for forex Over the Counter options.
4.5 Exchange Traded Derivatives entered into for trading purposes are
valued at prevailing market rates based on rates given by the Exchange
and the resultant gains and losses are recognized in the Profit and
Loss Account.
4.6 Interest Rate Swaps and Forward Rate Agreements
a) When a hedge becomes naked in part or full owing to shrinking
portfolio, and if allowed to continue till maturity, it is marked to
market at regular intervals.
b) The periodical net cash flows arising out of Interest Rate Swaps in
domestic currency are booked as income / expenditure.
c) The periodical net cash flows arising out of Interest Rate Swaps in
foreign currency are booked as income / expenditure and form part of
the exchange position in Forex transactions.
d) Gain / Loss arising out of swap transactions in respect of Tier I /
II bonds, is computed separately. Losses, if any, are fully provided
for. Gains on reset or sale is recognized as Income and appropriated to
Special Reserve net of taxes and mandatory transferto statutory
reserve.
5. ADVANCES
5.1 All advances have been classified under four categories i.e., (i)
Standard Assets (ii) Sub-Standard Assets (iii) Doubtful Assets and (iv)
Loss Assets as per RBI directives / guidelines.
5.2 Advances shown in the Balance Sheet are net of:
(a) Provision made on Non-Performing Assets (NPA)
(b) Uncollected Interest Income in respect of NPA
(c) Bills rediscounted with IDBI /SIDBI
(d) Claims received
(e) Diminution infairvalueof Restructured Assets
(f) Technical write-off
(g) Inter-Bank Participations with Risksharing
5.3 Provision on advances have been made in accordance with RBI
guidelines/directives as under:
(a) For Standard Assets:
(I) 0.25% on directadvanceto agriculture and SME sectors
(ii) 1.00% on advances to commercial real estate.
(iii) 2.00% on Teaser Home Loans
(iv) 2.75% on Restructured Accounts classified as standard advances for
the first two years from the date of restructuring. In cases of
moratorium on payment of interest/ principal after restructuring, the
period covered will be moratorium period plus two years.
(v) 2.75% on Restructured Accounts classified as Non- Performing
Assets, when upgraded to Standard category for the fi rst year from the
date of u pgradation.
(vi) 0.40% on all overadvances
(b) Forall Non-Performing Assets (NPA):
(i) Sub-standard Assets:
(a) Ageneral provision of 15%
(b) Additional provision of 10% for exposures, which are unsecured
ab-initio (where realizable value of security is not more than 10%
ab-initio)
(ii) Doubtful assets at 25%, 40% or 100% of the secured portion based
on the number of years the account remained as "Doubtful Asset" and
at 100% of the unsecured portion of the outstanding after netting
retainable amount ofthe guarantee cover underthe scheme of Export
Credit and Guarantee Corporation (ECGC) / Credit Guarantee Fund Trust
for Micro and Small Enterprises (CGTMSE), wherever applicable and
(iii) Loss Assets at 100%.
5.4 Restructuring of Advances: In respect of restructured accounts,
wherethe outstanding isRs. 1.00 crore and above, the erosion in the
fair value of the advance is computed as the difference between the
fair value of the loan before and after restructuring.
Fair value of the loan before restructuring is computed as the present
value of cash flows representing the interest at the existing rate
charged on the advance before restructuring and the principal,
discounted at a rate equal to the Bank''s BPLR or Base rate (which ever
is applicable to the Borrower) as on the date of restructuring plus the
appropriate term premium and credit risk premium for the borrower
category on the date of restructuring. Fair value of the loan after
restructuring is computed as the present value of cash flows
representing the interest at the rate charged on the advance on
restructuring and the principal, discounted at a rate equal to the
Bank''s BPLR or Base rate (which ever is applicable to the Borrower) as
on the date of restructuring plus the appropriate term premium and
credit risk premium for the borrower category on the date of
restructuring.
In respect of restructured accounts, where the outstanding is less than
Rs. 1.00 crore, the amount of diminution in the Fair value has been
computed at 5% of the outstanding.
5.5 In the case of suit filed accounts, legal expenses are charged to
Profit & Loss account and credited to revenue expenditure, when
recovered.
5.6 Financial assets sold to Asset Reconstruction Company (ARC) /
Securitisation Company (SC) are recognized as under:
(a) In case the sale is at a price lower than the Net Book Value (N
BV), the difference is charged to the Profit & Loss account.
(b) In case the sale is at a price higher than the NBV the surplus
provision is not reversed but held separately for meeting the loss if
any on future sale of financial assets.
6. DEPOSITS
Interest on deposits, with provision for re-investment of interest, is
capitalized for every completed quarter and shown as principal.
7. FIXED ASSETS & DEPRECIATION
7.1 Premises and other fixed assets have been accounted for at
historical cost. Pending registration, the land and buildings acquired
by the Bank are capitalized, based on letters of allotment/agreementand
the physical possession.
7.2 (a) Cost of furnishing items like curtains (including stitching
charges) / carpets / mattresses and pillows irrespective of cost,
(b) Cost of replacement of Batteries for UPS / Inverters irrespective
of cost and
(c) Other individual items costing Rs. 1000 or less are changed to
profit and loss account in the year of purchase.
7.3 Depreciation on premises and other fixed assets including system
software is provided for on written down value method in the manner and
at rates as per Income Tax Act
7.4 In respect of assets acquired duringthe year, depreciation is
charged for half year in respect of assets used for 182 days or less
and for the full year in respect of assets used for more than 182 days,
except depreciation on computers and software, which is charged forthe
full year irrespective ofthe period for which the asset was put to use.
No depreciation is provided in the year of sale /disposal of an asset.
7.5 In respect of Leasehold Properties, the lease premium is amortized
over the period of the lease.
8. EMPLOYEE BENEFITS
8.1 Short Term Employee benefits:
Amount of short-term employee benefits, such as casual leave and
medical benefits, expected to be paid in exchange for the services
rendered by employees is recognized duringthe period when the employee
renders the service.
8.2 Post Employment benefits:
(i) Defined Contribution Plan
The Bank operates a Provident Fund scheme, which is a defined
contribution plan. All eligible employees are entitled to receive
benefits underthe Bank''s Provident Fund scheme. The Bank contributes
monthly at a determined rate (currently 10% of employee''s basic pay
plus eligible allowance). These contributions are made to a fund set up
by the Bank and administered by a Board of Trustees. The Bank has no
liability for future provident fund benefits otherthan its annual
contribution, and recognizes such contributions as an expense in the
year to which they relate.
(ii) Defined Benefit Plan
(a) The Bank operates gratuity, pension and resettlement schemes, which
are defined benefit plans.
(b) The Bank provides for gratuity to all eligible employees. The
benefit is in the form of lump sum payments to vested employees on
superannuation, on death while in employment or on termination of
employment. The rate of gratuity payable to an employee is 15 days
based on the rate of wages / salary last drawn by the employee as per
the Payment of Gratuity Act, 1972 for every completed year of service.
Gratuity is payable to an employee on the termination of his employment
after he has rendered continuous service for a period of not less than
5 years (on retirement, resignation, except death & disablement). To be
eligible under SBT (P&yment of Gratuity to Employees) Regulations, 1972
minimum service required is lOyears.
The Bank makes annual contribution to the Fund administered by the
Board of Trustees based on independent actuarial valuation carried out
annually. The maximum amount payable as per the Payment of Gratuity
Act, 1972 is Rs. 10.00 lakhs. The amount payable to the employees will
be higher of the amount calculated as per SBT (Payment of Gratuity to
Employees) Regulations or Payment of Gratuity Act, 1972, subject to
deduction of Income Tax on amount in excess of Rs. 10.00 lakhs.
(c) The Bank provides for pension to all eligible employees who have
opted for pension and joined the services of the Bank on or before 3151
March 2010. The benefit is in the form of monthly payments as per rules
and regular payments to vested employees on retirement, on death while
in employment, or on termination of employment. Vesting occurs at
different stages as per rules. The Bank makes annual contributions to
fund administered by Board of Trustees based on an independent external
actuarial valuation carried out annually.
(d) The cost of providing defined benefits is determined using the
projected unit credit method with actuarial valuations being carried
out at each balance sheet date. Actuarial gains / losses are
immediately recognized in the statement of profit and loss and are not
deferred.
(e) The bank has exercised the option of recognizing the transitional
liability on adoption of Accounting Standard 15 (2005) for its defined
benefit schemes against revenue and other reserves.
(f) Defined Contributory Pension Scheme: Employees, joining services of
the Bank on or after Ia April 2010 are eligible for Defined
Contributory Pension Scheme in line with the New Pension Scheme
introduced for employees of Central Government.
(g) The additional liability on account of reopening of pension option
for serving employees who had not opted for pension earlier as well as
the enhancement in gratuity limits is being amortized over a period of
five years beginning with the financial year ending March 3 1, 201 I as
per the RBI notification.
(h) The additional liability on account of reopening of pension option
for retired employees who had not opted for pension earlier as well as
the enhancement in gratuity limit is being charged to the profit and
loss account.
(iii) Other Long Term Employee benefits:
(a) All eligible employees of the bank are eligible to encash certain
portion of their earned leave while in employment or on retirement, on
death or on termination of employment, subject to a maximum amount.
This is paid by the Bank as and when the liability arises.
(b) The cost of providing other long-term benefits is determined using
the projected unit credit method with actuarial valuations being
carried out at each balance sheet date. Past service cost is
immediately recognized in the statement of profit and loss and is not
deferred.
9. PROVISION FORTAXATION
(a) Income tax expense is the aggregate amount of current tax, deferred
tax and wealth tax. Current year taxes are determined in accordance
with the prevailing tax rates and tax laws. Deferred tax adjustments
comprise of changes in the deferred tax assets or liabilities duringthe
year.
(b) Deferred tax assets and liabilities are recognized on a prudent
basis for the future tax consequences of timing differences arising
between the carrying values of assets and liabilities and their
respective tax basis and carry forward losses. Deferred tax assets and
liabilities are measured using tax rates and tax laws that have been
enacted or subsequently enacted prior to the balance sheet date. The
impact of changes in the deferred tax assets and liabilities is
recognized in the profit and loss account.
(c) Deferred tax assets are recognized and reassessed at each reporting
date, in accordance with Accounting Standard 22 and based upon
Management''s judgment as to whether realization is considered certain.
Deferred tax assets are recognized only if there is virtual certainty
that such deferred tax assets can be realized against future taxable
income.
10. REVENUE RECOGNITION
10.1 Income: Interest and other income are recognized on accrual basis
except for the following, which are recognized on cash basis:
(a) Incomefrom Non performing assets (NPAs), projects under
implementation with time over run and government guaranteed accounts
where interest is not received regularly, is recognized upon
realization as per RBI prudential norms.
(b) Dividend on investment in shares and income distributed on units of
Mutual Funds.
(c) Locker Rent.
(d) Exchange on demand bills purchased / commission on bills sentfor
collection.
(e) Interest on Overdue bills on realization basis.
(f) Income on cross selling products and management fee.
(g) Interest on application moneyfor Investments.
(h) Insurance claims.
(I) Funded interest on restructured accounts represented by FITL.
(j) Profit on sale / redemption of securities is recognized as income
and appropriated to Capital Reserve net of taxes and mandatory transfer
to statutory reserves.
(k) Income (other than interest) on investments in "Held to
Maturity" category acquired at a discount to the face value is
recognized as follows:
a. On interest bearing securities, it is recognized only at the time
of sale/redemption
b. On zero-coupon securities, it is accounted for over the balance
tenor of the security on a constant yield basis.
10.2 Adjustment in respect of recoveries made in NPA accounts; The
recoveries made are appropriated in the order of Charges, Interest and
then to Principal in live NPA and in respect of protested bills
accounts, the recoveries made are appropriated in the order of
Principal, Charges and then to unrealized Interest.
10.3 Income from interest on refund of income tax is accounted for in
the year the assessment order is passed by the concerned authority.
10.4 Expenditure: Revenue expenditure is accounted for on accrual basis
except Property Taxes and Bank''s liabilities in respect of disputes
pertaining to additional rent / lease rent, which are accounted for on
cash basis.
11. NET PROFIT
The net profit disclosed in the Profit and Loss account is arrived at,
after making provisions for the following:
(a) Provision for taxes on Income including Deferred Tax and Wealth
Tax,
(b) Provision for Non-performing Advances and / or Investments,
(c) Provision on Standard Assets,
(d) Interest sacrifice on restructured accounts,
(e) Depreciation on Investments,
(f) Transfers to contingencies and
(g) Other usual and necessary provisions.
12. IMPAIRMENTOF ASSETS
Impairment loss, if any, on Rxed Assets is recognized in accordance
with the Accounting Standard 28 issued in this regard by the Institute
of Chartered Accountants of India.
13. ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT
ASSETS
I. In conformity with Accounting Standard 29, "Provisions, Contingent
Liabilities and Contingent Assets", the Bank recognizes provisions only
when it has a present obligation as a result of a past event, it is
probable that an out flow of resources embodying economic benefits will
be required to settle the obligations, and when a reliable estimate of
the amount of the obligation can be made.
2. No provision required 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 ofthe Bank; or
ii any present obligation that arises from past events but is not
recognised because
a. it is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; or
b. a reliable estimate of the amount of obligation cannot be made.Such
obligations are recorded as Contingent Liabilities. These are assessed
at regular intervals and only that part of the obligation for which an
outflow of resources embodying economic benefits is probable, is
provided for, except in the extremely rare circumstances where no
reliable estimate can be made.
3. Contingent Assets are not recognised in the financial Statements.
Mar 31, 2012
1. GENERAL
1.1 The accompanying financial statements have been prepared under the
historical cost convention and they conform to Generally Accepted
Accounting Principles (GAAP) in India, which comprise the statutory
provisions, guidelines of regulatory authorities and Reserve Bank of
India (RBI), Accounting Standards and guidance notes issued by the
Institute of Chartered Accountants of India (ICAI) and the practices
prevalent in the banking industry in India.
1.2 The preparation of financial statements requires the management to
make estimates and assumptions considered in the reported amount of
assets and liabilities (including contingent liabilities) as of the
date of the financial statements and the reported income and expenses
during the reporting period. Management believes that the estimates
used in the preparation of the financial statements are prudent and
reasonable. Future results could differ from estimates.
2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE
2.1 Foreign Currency transactions are recorded at the exchange rates
prevailing on the date of the respective transactions.
2.2 Monetary assets and liabilities denominated in Foreign Currencies
are translated at the Foreign Exchange Dealers Association of India
(FEDAI) closing spot rates prevailing on the Balance Sheet date.
2.3 Guarantees / Standby Letters of Credit, Letters of Credit, Forward
Rate Agreements, Foreign Currency Options and Forward Exchange
Contracts are translated at FEDAI closing spot rates as on the Balance
Sheet date.
2.4 All outstanding forward exchange contracts in each currency are
revalued on the Balance Sheet date at the corresponding forward rates
for the respective maturity of the contract. The difference between
revalued amount and the contracted amount is recognized as profit or
loss, as the case may be.
2.5 Premium received / paid on outstanding currency options are
accounted for as per FEDAI guidelines.
2.6 Gains/Losses on account of change in exchange rates of open
position in currency futures trades are settled with the exchange
clearing house on daily basis and such gains/losses are recognized in
profit and loss account
3. INVESTMENTS - Domestic
Investments are accounted for in accordance with the extant regulatory
guidelines
3.1 Classification
Investments are classified into three categories namely: Held to
Maturity, Available for Sale and Held for Trading. Investments are
further classified into the following six groups in the balance sheet:
(i) Government Securities, (ii) Other Approved Securities, (iii)
Shares, (iv) Debentures and Bonds,
(v) Subsidiaries/ Joint Ventures and (vi) Others (CPs, Mutual Funds,
Units, etc.)
3.2 Basis of Classification
Investments that the Bank intends to hold till maturity are classified
as Held to Maturity.
Investments that are held principally for resale within 90 days from
the date of purchase are classified as Held for Trading.
Investments that are not classified in the above two categories are
classified as Available for Sale.
An investment is classified as 'Held to Maturity', 'Available for Sale'
or 'Held for Trading' at the time of its purchase and subsequent shift
amongst categories is done in conformity with Regulatory Guidelines..
3.3 Valuations and Accounting
(i) In determining the cost of an investment:
(a) Brokerage / commission received on subscription is reduced from the
cost..
(b) Brokerage / commission etc., paid in connection with the
acquisition of investments is charged to revenue and not included in
cost.
(c) Broken period interest paid / received on debt instruments is
treated as interest expended / income and is not included in cost /
sale consideration.
(d) Cost is determined on the weighted average cost method.
(e) The transfer of a security amongst the above three categories is
accounted for at the least of the acquisition cost / book value /
market value on the date of transfer and the depreciation, if any, on
such transfer is fully provided for.
(ii) Held to Maturity categories:
Each security is carried at acquisition cost or at amortized cost, if
acquired at a premium over the face value. Any premium on acquisition
is amortized over the remaining maturity period of the security on
constant yield basis. Such amortization of premium is adjusted against
income under the head Interest on investments..
(iii) Available for Sale and Held for Trading categories:
(a) The value of investments held under the Available For Sale category
is determined as per Reserve bank of India guidelines as under:
- Central Government Securities: Marked to market on the basis of
prices declared for the purpose of valuation jointly by Fixed Income
Money Market and Derivatives Association of India (FIMMDA) and Primary
Dealers Association of India (PDAI).
- State Government Securities and Other Trustee Securities: Marked to
market on the basis of prices derived out of the yield for respective
maturities declared for the purpose of valuation jointly by FIMMDA and
PDAI.
- Shares: Wherever Stock Exchange quotations are available valuation
is done as per lower of the quotations in Bombay Stock Exchange or
National Stock Exchange. Wherever current quotations are not available
and in respect of unquoted shares (i) Valuation is as per Book Value
(without considering Revaluation Reserves, if any) ascertained from the
latest Balance Sheet of the Company (which is not more than one year
prior to the date of valuation)
(ii) In case the latest Balance Sheet is not available, the shares are
valued at Re.1.00 per Company.
- Bonds & Debentures: Valued on the YTM method for the respective
maturity and rating put out by FIMMDA and PDAI.
- Mutual Fund Units: Quoted Mutual Fund Units are valued as per Net
Asset Value as declared by the Mutual Fund.
- Treasury Bills, Certificates of Deposits and Commercial Papers are
valued at carrying cost.
- Preference Shares are valued at lower of market value determined on
YTM basis and its redemption value.
(b) Each security in the above two categories is revalued at the market
price or fair value determined as per Regulatory Guidelines and only
the net depreciation of each group for each category is provided for
and net appreciation is ignored. On provision for depreciation, the
book value of the individual securities remains unchanged after marking
to market.
(iv) Security receipts issued by an Asset Reconstruction Company (ARC)
are valued in accordance with the guidelines applicable for Non-SLR
investments.
(v) Investments are classified as performing and non- performing based
on the following guidelines issued by the RBI.
(a) Interest / Installment (including maturity proceeds) is due and
remains unpaid for more than 90 days.
(b) In the case of equity shares, in the event of the investment in the
share of any company is valued at Re.1.00 per company on account of the
non- availability of the latest balance sheet, those equity shares
would be reckoned as NPI.
(c) If any credit facility availed by the issuer is NPA in the books of
the Bank, investment in any of the securities issued by the same issuer
would also be treated as NPI and vice versa.
(d) The above would apply mutatis mutandis to preference shares where
the fixed dividend is not paid.
(e) The investments in debentures / bonds, which are deemed to be in
the nature of advance, are also subjected to NPI norms as applicable to
investments.
(vi) The Bank has adopted the Uniform Accounting Procedure prescribed
by the RBI for accounting of Repo and Reverse Repo transactions.
3.4 Non-Performing Investments
All such securities where repayment of principal or interest not
serviced within 90 days from the due date are classified as
Non-performing Investments, except securities guaranteed by the Central
Government, which is, treated as performing investments notwithstanding
arrears of principal / interest payments. In respect of investments
classified as Non-performing, appropriate provisions are made for the
depreciation in the value. The depreciation requirement in respect of
these securities is not set off against appreciation in respect of
other performing securities.
4. Derivatives
4.1 The Bank enters into derivative contracts, such as foreign currency
options, interest rate swaps, currency swaps, and cross currency
interest rate swaps and forward rate agreements in order to hedge
on-balance sheet/off-balance sheet assets and liabilities or for
trading purposes. The swap contracts entered to hedge on-balance sheet
assets and liabilities are structured in such a way that they bear an
opposite and offsetting impact with the underlying on-balance sheet
items. The impact of such derivative instruments is correlated with the
movement of the underlying assets and accounted in accordance with the
principles of hedge accounting.
4.2 Derivative contracts classified as hedge are recorded on accrual
basis. Hedge contracts are not marked to market unless the underlying
Assets / Liabilities are also marked to market.
4.3 Except as mentioned above, all other derivative contracts are
marked to market as per the generally accepted practices prevalent in
the industry. In respect of derivative contracts that are marked to
market, changes in the market value are recognized in the profit and
loss account in the period of change. Any receivable under derivatives
contracts, which remain overdue for more than 90 days, are reversed
through profit and loss account.
4.4 Option premium paid or received is recorded in profit and loss
account at the expiry of the option. The Balance in the premium
received on options sold and premium paid on options bought have been
considered to arrive at Mark to Market value for fore Over the Counter
options.
4.5 Exchange Traded Derivatives entered into for trading purposes are
valued at prevailing market rates based on rates given by the Exchange
and the resultant gains and losses are recognized in the Profit and
Loss Account.
4.6 Interest Rate Swaps and Forward Rate Agreements.
(a) When a hedge becomes naked in part or full owing to shrinking
portfolio, and if allowed to continue till maturity, it is marked to
market at regular intervals.
(b) The periodical net cash flows arising out of Interest Rate Swaps in
domestic currency are booked as income/expenditure.
(c) The periodical net cash flows arising out of Interest Rate Swaps in
foreign currency are booked as income / expenditure and form part of
the exchange position in Force transactions.
(d) Gain / Loss arising out of swap transactions in respect of Tier I /
II bonds, is computed separately. Losses, if any, are fully provided
for. Gains on reset or sale is recognized as Income and appropriated to
Special Reserve net of taxes and mandatory transfer to statutory
reserve.
S. ADVANCES
5.1 All advances have been classified under four categories i.e., (i)
Standard Assets (ii) Sub-Standard Assets (iii) Doubtful Assets and (iv)
Loss Assets as per RBI directives / guidelines.
5.2 Advances shown in the Balance Sheet are net of:
(a) Provision made on Non-Performing Assets (NPA)
(b) Uncollected Interest Income in respect of NPA
(c) Bills rediscounted with IDBI / SIDBI
(d) Claims received
(e) Diminution in fair value of Restructured Assets
(f) Technical write-off
(g) Inter-Bank Participations with Risk sharing
5.3 Provision on advances have been made in accordance with RBI
guidelines/directives as under:
(a) For Standard Assets:
(i) 0.25% on direct advance to agriculture and SME sectors
(ii) 1.00% on advances to commercial real estate.
(iii) 2.00% on Teaser Home Loans
(iv) 2.00% on Restructured Accounts classified as standard advances for
the first two years from the date of restructuring. In cases of
moratorium on payment of interest/ principal after restructuring,
the period covered will be moratorium period plus two years.
(v) 2.00% on Restructured Accounts classified as Non- Performing
Assets, when upgraded to Standard category for the first year from the
date of up gradation.
(vi) 0.40% on all other advances
(b) For all Non-Performing Assets (NPA):
(i) Sub-standard Assets:
(a) A general provision of 15%
(b) Additional provision of 10% for exposures, which are unsecured
ab-initio (where realizable value of security is not more than 10%
ab-initio)
(ii) Doubtful assets at 25%, 40% or 100% of the secured portion based
on the number of years the account remained as "Doubtful Asset" and
at 100% of the unsecured portion of the outstanding after netting
retainable amount of the guarantee cover under the scheme of Export
Credit and Guarantee Corporation (ECGC) / Credit Guarantee Fund Trust
for Micro and Small Enterprises (CGTMSE), wherever applicable and
(iii) Loss Assets at 100%.
5.4 Restructuring of Advances: In respect of restructured accounts,
where the outstanding is Rs.1.00 crore and above, the erosion in the
fair value of the advance is computed as the difference between the
fair value of the loan before and after restructuring.
Fair value of the loan before restructuring is computed as the present
value of cash flows representing the interest at the existing rate
charged on the advance before restructuring and the principal,
discounted at a rate equal to the Bank's BPLR as on the date of
restructuring plus the appropriate term premium and credit risk premium
for the borrower category on the date of restructuring. Fair value of
the loan after restructuring is computed as the present value of cash
flows representing the interest at the rate charged on the advance on
restructuring and the principal, discounted at a rate equal to the
Bank's BPLR as on the date of restructuring plus the appropriate term
premium and credit risk premium for the borrower category on the date
of restructuring.
In respect of restructured accounts, where the outstanding is less than
Rs.1.00 crore, the amount of diminution in the Fair value has been
computed at 5% of the outstanding.
5.5 In the case of suit filed accounts, legal expenses are charged to
Profit & Loss account and credited to revenue expenditure, when
recovered.
5.6 Financial assets sold to Asset Reconstruction Company (ARC) /
Securitization Company (SC) are recognized as under:
(a) In case the sale is at a price lower than the Net Book Value (NBV),
the difference is charged to the Profit & Loss account.
(b) In the case the sale is at a price higher than the NBV, the surplus
provision is not reversed but held separately for meeting the loss if
any on future sale of financial assets.
6. DEPOSITS
Interest on deposits, with provision for re- investment of interest, is
capitalized for every completed quarter and shown as principal.
7. FIXED ASSETS & DEPRECIATION
7.1 Premises and other fixed assets have been accounted for at
historical cost. Pending registration, the land and buildings acquired
by the Bank are capitalized, based on letters of allotment / agreement
and the physical possession.
7.2 (a) Cost of mobile sets/phones up to Rs.5000/-,
(b) Cost of furnishing items like curtains (including stitching
charges) / carpets / mattresses and pillows irrespective of cost,
(c) Cost of replacement of Batteries for UPS / Inverters irrespective
of cost and
(d) Other individual items costing Rs.1000 or less are charged to
profit and loss account in the year of purchase.
7.3 Depreciation on premises and other fixed assets including system
software is provided for on written down value method in the manner and
at rates as per Income Tax Act / Rules except as under:
7.4 In respect of assets acquired during the year, depreciation is
charged for half year in respect of assets used for 182 days or less
and for the full year in respect of assets used for more than 182 days,
except depreciation on computers and software, which is charged for the
full year irrespective of the period for which the asset was put to
use. No depreciation is provided in the year of sale / disposal of an
asset.
7.5 In respect of Leasehold Properties, the lease premium is amortized
over the period of the lease.
8. EMPLOYEE BENEFITS
8.1 Short Term Employee benefits:
Amount of short-term employee benefits, such as casual leave and
medical benefits, expected to be paid in exchange for the services
rendered by employees is recognized during the period when the employee
renders the service.
8.2 Post Employment benefits:
(i) Defined Contribution Plan
The Bank operates a Provident Fund scheme, which is a defined
contribution plan. All eligible employees are entitled to receive
benefits under the Bank's Provident Fund scheme. The Bank contributes
monthly at a determined rate (currently 10% of employee's basic pay
plus eligible allowance). These contributions are made to a fund set
up by the Bank and administered by a Board of Trustees. The Bank has
no liability for future provident fund benefits other than its annual
contribution, and recognizes such contributions as an expense in the
year to which they relate.
(ii) Defined Benefit Plan
(a) The Bank operates gratuity, pension and resettlement schemes, which
are defined benefit plans.
(b) The Bank provides for gratuity to all eligible employees. The
benefit is in the form of lump sum payments to vested employees on
superannuation, on death while in employment or on termination of
employment. The rate of gratuity payable to an employee is 15 days
based on the rate of wages / salary last drawn by the employee as per
the Payment of Gratuity Act, 1972 for every completed year of service.
Gratuity is payable to an employee on the termination of his employment
after he has rendered continuous service for a period of not less than
5 years (on retirement, resignation, except death & disablement). To be
eligible under SBT (Payment of Gratuity to Employees) Regulations, 1972
minimum service required is 10 years. The Bank makes annual
contribution to the Fund administered by the Board of Trustees based on
independent actuarial valuation carried out annually. The maximum
amount payable as per the Payment of Gratuity Act, 1972 is Rs.10.00
lakhs. The amount payable to the employees will be higher of the amount
calculated as per SBT (Payment of Gratuity to Employees) Regulations or
Payment of Gratuity Act, 1972, subject to deduction of Income Tax on
amount in excess of Rs.10.00 lakhs.
(c) The Bank provides for pension to all eligible employees who have
opted for pension and joined the services of the Bank on or before 31st
March 2010. The benefit is in the form of monthly payments as per rules
and regular payments to vested employees on retirement, on death while
in employment, or on termination of employment. Vesting occurs at
different stages as per rules. The Bank makes annual contributions to
fund administered by Board of Trustees based on an independent external
actuarial valuation carried out annually.
(d) The cost of providing defined benefits is determined using the
projected unit credit method with actuarial valuations being carried
out at each balance sheet date. Actuarial gains / losses are
immediately recognized in the statement of profit and loss and are not
deferred.
(e) The bank has exercised the option of recognizing the transitional
liability on adoption of Accounting Standard 15 (2005) for its defined
benefit schemes against revenue and other reserves.
(f) Defined Contributory Pension Scheme: Employees, joining services of
the Bank on or after 1st April 2010 are eligible for Defined
Contributory Pension Scheme in line with the New Pension Scheme
introduced for employees of Central Government.
(g) The additional liability on account of reopening of pension option
for serving employees who had not opted for pension earlier as well as
the enhancement in gratuity limits is being amortized over a period of
five years beginning with the financial year ending March 31, 2011 as
per the RBI notification.
(h) The additional liability on account of reopening of pension option
for retired employees who had not opted for pension earlier as well as
the enhancement in gratuity limit is being charged to the profit and
loss account.
(iii) Other Long Term Employee benefits:
(a) All eligible employees of the bank are eligible to encase certain
portion of their earned leave while in employment or on retirement, on
death or on termination of employment, subject to a maximum amount.
This is paid by the Bank as and when the liability arises.
(b) The cost of providing other long-term benefits is determined using
the projected unit credit method with actuarial valuations being
carried out at each balance sheet date. Past service cost is
immediately recognized in the statement of profit and loss and is not
deferred.
9. PROVISION FOR TAXATION
(a) Income tax expense is the aggregate amount of current tax, deferred
tax and wealth tax. Current year taxes are determined in accordance
with the prevailing tax rates and tax laws. Deferred tax adjustments
comprise of changes in the deferred tax assets or liabilities during
the year.
(b) Deferred tax assets and liabilities are recognized on a prudent
basis for the future tax consequences of timing differences arising
between the carrying values of assets and liabilities and their
respective tax basis and carry forward losses. Deferred tax assets and
liabilities are measured using tax rates and tax laws that have been
enacted or subsequently enacted prior to the balance sheet date. The
impact of changes in the deferred tax assets and liabilities is
recognized in the profit and loss account.
(c) Deferred tax assets are recognized and reassessed at each reporting
date, in accordance with Accounting Standard 22 and based upon
Management's judgment as to whether realization is considered certain.
Deferred tax assets are recognized only if there is virtual certainty
that such deferred tax assets can be realized against future taxable
income.
10. REVENUE RECOGNITION
10.1 Income: Interest and other income are recognized on accrual basis
except for the following, which are recognized on cash basis:
(a) Income from Non performing assets (NPAs), projects under
implementation with time over run and government guaranteed accounts
where interest is not received regularly, is recognized upon
realization as per RBI prudential norms.
(b) Dividend on investment in shares and income distributed on units of
Mutual Funds;
(c) Locker Rent;
(d) Exchange on demand bills purchased / commission on bills sent for
collection;
(e) Interest on Overdue bills on realization basis;
(f) Income on cross selling products and management fee;
(g) Interest on application money for Investments
(h) Insurance claims.
(i) Funded interest on restructured accounts represented by FITL.
(j) Profit on sale / redemption of securities is recognized as income
and appropriated to Capital Reserve net of taxes and mandatory transfer
to statutory reserves.
(k) Income (other than interest) on investments in "Held to
Maturity" category acquired at a discount to the face value, is
recognized as follows:
(i) On interest bearing securities, it is recognized only at the time
of sale/redemption
(ii) On zero-coupon securities, it is accounted for over the balance
tenor of the security on a constant yield basis.
10.2 Adjustment in respect of recoveries made in NPA accounts - the
recoveries made are appropriated in the order of Charges, Interest and
then to Principal in live NPA and in respect of protested bills
accounts, the recoveries made are appropriated in the order of
Principal, Charges and then to unrealized Interest.
10.3 Income from interest on refund of income tax is accounted for in
the year the assessment order is passed by the concerned authority.
10.4 Expenditure: Revenue expenditure is accounted for on accrual basis
except Property Taxes and Bank's liabilities in respect of disputes
pertaining to additional rent / lease rent, which are accounted for on
cash basis.
11. NET PROFIT
The net profit disclosed in the Profit and Loss account is arrived at,
after making provisions for the following:
(a) Provision for taxes on Income including Deferred Tax and Wealth
Tax,
(b) Provision for Non-performing Advances and / or Investments,
(c) Provision on Standard Assets,
(d) Interest sacrifice on restructured accounts,
(e) Depreciation on Investments,
(f) Transfers to contingencies and
(g) Other usual and necessary provisions.
12. IMPAIRMENT OF ASSETS
Impairment loss, if any, on Fixed Assets is recognized in accordance
with the Accounting Standard 28 issued in this regard by the Institute
of Chartered Accountants of India.
13. ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT
ASSETS
13.1 In conformity with Accounting Standard 29, Provisions,
Contingent Liabilities and Contingent Assets, the Bank recognizes
provisions only when it has a present obligation as a result of a past
event, it is probable that an out flow of resources embodying economic
benefits will be required to settle the obligations, and when a
reliable estimate of the amount of the obligation can be made.
13.2 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
a. it is not probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; or
b. a reliable estimate of the amount of obligation cannot be made.
Such obligations are recorded as Contingent Liabilities. These are
assessed at regular intervals and only that part of the obligation for
which an outflow of resources embodying economic benefits is probable,
is provided for, except in the extremely rare circumstances where no
reliable estimate can be made.
13.3 Contingent Assets are not recognized in the financial Statements.
Mar 31, 2011
1. GENERAL
The accompanying financial statements have been prepared under the
historical cost convention as modified for foreign currency
transactions and they conform to Generally Accepted Accounting
Principles (GAAP) in India, which comprise the statutory provisions,
guidelines of regulatory authorities and Reserve Bank of India (RBI),
Accounting Standards and guidance notes issued by the Institute of
Chartered Accountants of India (ICAI) and the practices prevalent in
the banking industry in India.
2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE
2.1 Monetary assets and liabilities denominated in Foreign Currencies
are translated at the Foreign Exchange Dealers Association of India
(FEDAI) rates prevailing on the Balance Sheet date.
2.2 Guarantees / Standby Letters of Credit, Letters of Credit, Forward
Rate Agreements, Foreign Currency Options and Forward Exchange
Contracts are translated at FEDAI rates as on the Balance Sheet date.
2.2 Income and Expenses are translated at the market exchange rates
prevailing on the date of the respective transactions. Interest earned
but not due on foreign currency funds deployed abroad, are translated
at the FEDAI rates as on the balance sheet date.
2.4 In accordance with the guidelines of FEDAI all outstanding forward
exchange contracts in each currency are revalued on the Balance Sheet
date at the corresponding forward rates for the respective maturity of
the contract. The difference between revalued amount and the contracted
amount is recognized as profit or loss, as the case may be.
2.5 Premium received / paid on outstanding currency options has been
accounted for as per FEDAI guidelines.
3. INVESTMENTS - Domestic
Investments are accounted for in accordance with the extant regulatory
guidelines. The Bank has changed (w.e.f.) 01.01.2011 the method of
accounting of investments from Trade Date to Settlement Date
method.
3.1 Classification
Investments are classified into three categories namely: Held to
Maturity, Available for Sale and Held for Trading. Investments are
further classified into the following six
groups in the balance sheet:
(i) Government Securities, (ii) Other Approved Securities, (iii)
Shares, (iv) Debentures and Bonds, (v) Subsidiaries / Joint Ventures
and (vi) Others (CPs, Mutual Funds, Units, etc.)
3.2 Basis of Classification
Investments that the Bank intends to hold till maturity are classified
as Held to Maturity.
Investments that are held principally for resale within 90 days from
the date of purchase are classified as Held for Trading.
Investments that are not classified in the above two categories are
classified as Available for Sale.
An investment is classified as Held to Maturity, Available for Sale
or Held for Trading at the time of its purchase and subsequent shift
amongst categories is done in conformity with Regulatory Guidelines.
3.3 Valuations and Accounting
(i) In determining the cost of an investment:
(a) Brokerage / commission received on subscription is reduced from the
cost.
(b) Brokerage / commission etc., paid in connection with the
acquisition of investments is charged to revenue and not included in
cost.
(c) Broken period interest paid / received on debt instruments is
treated as interest expended / income and is not included in cost /
sale consideration.
(d) Cost is determined on the weighted average cost method.
(e) The transfer of a security amongst the above three categories is
accounted for at the least of the acquisition cost / book value /
market value on the date of transfer and the depreciation, if any, on
such transfer is fully provided for.
(ii) Held to Maturity categories:
Each security is carried at acquisition cost or at amortized cost, if
acquired at a premium over the face value. Any premium on acquisition
is amortized over the remaining maturity period of the security on
constant yield basis. Such amortization of premium is adjusted against
income under the head "Interest on investments".
Profit on sale / redemption of securities is recognized as income and
appropriated to Capital Reserve net of taxes and mandatory transfer to
statutory reserves.
(iii) Available for Sale and Held for Trading categories:
(a) The value of investments held under the Available For Sale category
is determined as per Reserve bank of India guidelines as under:
- Central Government Securities: Marked to market on the basis of
prices declared for the purpose of valuation jointly by Fixed Income
Money Market and Derivatives Association of India (FIMMDA) and Primary
Dealers Association of India (PDAI).
- State Government Securities and Other Trustee Securities: Marked to
market on the basis of prices derived out of the yield for respective
maturities declared for the purpose of valuation jointly by FIMMDA and
PDAI.
- Shares: Wherever Stock Exchange quotations are available valuation is
done as per lower of the quotations in Bombay Stock Exchange or
National Stock Exchange. Wherever current quotations are not available
and in respect of unquoted shares (i) Valuation is as per Book Value
(without considering Revaluation Reserves, if any) ascertained from the
latest Balance Sheet of the Company (which is not more than one year
prior to the date of valuation) (ii) In case the latest Balance Sheet
is not available, the shares are valued at Re. 1.00 per Company.
- Bonds & Debentures: Valued on the YTM method for the respective
maturity and rating put out by FIMMDA and PDAI.
- Mutual Fund Units: Quoted Mutual Fund Units are valued as per Net
Asset Value as declared by the Mutual Fund.
- Treasury Bills, Certificates of Deposits and Commercial Papers are
valued at carrying cost.
- Preference Shares are valued at lower of market value determined on
YTM basis and its redemption value.
(b) Each security in the above two categories is revalued at the market
price or fair value determined as per Regulatory Guidelines and only
the net depreciation of each group for each category is provided for
and net appreciation is ignored. On provision for depreciation, the
book value of the individual securities remains unchanged after marking
to market.
(iv) Security receipts issued by an Asset Reconstruction Company (ARC)
are valued in accordance with the guidelines applicable for Non-SLR
investments.
(v) Investments are classified as performing and non- performing based
on the following guidelines issued by the RBI.
(a) Interest / Instalment (including maturity proceeds) is due and
remains unpaid for more than 90 days.
(b) In the case of equity shares, in the event of the nvestment in the
share of any company is valued at Re. 1.00 per company on account of
the non-availability of the latest balance sheet, those equity shares
would be reckoned as NPI.
(c) If any credit facility availed by the issuer is NPA in the books of
the Bank, investment in any of the securities issued by the same issuer
would also be treated as NPI and vice versa.
(d) The above would apply mutatis mutandis to preference shares where
the fixed dividend is not paid.
(e) The investments in debentures / bonds, which are deemed to be in
the nature of advance, are also subjected to NPI norms as applicable to
investments.
(vi) The Bank has adopted the Uniform Accounting Procedure prescribed
by the RBI for accounting of Repo and Reverse Repo transactions.
3.4 Interest Rate Swaps and Forward Rate Agreements
(a) Interest Rate Swaps and Forward Rate Agreements have been
undertaken for hedging purposes only and hence the cash flows are
accounted on accrual basis and the balances are carried at Notional
Principal Value.
(b) When a hedge becomes naked in part or full owing to shrinking
portfolio, and if allowed to continue till maturity, it is marked to
market at regular intervals.
(c) The periodical net cash flows arising out of Interest Rate Swaps in
domestic currency are booked as income / expenditure.
(d) The periodical net cash flows arising out of Interest Rate Swaps in
foreign currency are booked as income / expenditure and form part of
the exchange position in Forex transactions.
(e) The Forward Rate Agreements in foreign currency are valued at FEDAI
rate prevailing on the Balance Sheet date and the outstanding position
is shown under Contingent liabilities.
(f) Gain / Loss arising out of swap transactions in respect of Tier I /
II bonds, is computed separately. Losses, if any, are fully provided
for. Gains on reset or sale is recognized as Income and appropriated to
Special Reserve net of taxes and mandatory transfer to statutory
reserve.
3.5 Non-Performing Investments
All such securities where repayment of principal or interest not
serviced within 90 days from the due date are classified as
Non-performing Investments, except securities guaranteed by the Central
Government, which is, treated as performing investments notwithstanding
arrears of principal / interest payments. In respect of investments
classified as Non-performing, appropriate provisions are made for the
depreciation in the value. The depreciation requirement in respect of
these securities is not set off against appreciation in respect of
other performing securities.
4. ADVANCES
4.1 All advances have been classified under four categories i.e., (i)
Standard Assets (ii) Sub-Standard Assets (iii) Doubtful Assets and (iv)
Loss Assets as per RBI directives / guidelines.
4.2 Advances shown in the Balance Sheet are net of:
(a) Provision made on Non-Performing Assets (NPA)
(b) Uncollected Interest Income in respect of NPA
(c) Bills rediscounted with IDBI / SIDBI
(d) Claims received
(e) Diminution in fair value of Restructured Assets
(f) Technical write-off
(g) Inter-Bank Participations with Risk sharing
4.3 Provision on advances have been made in accordance with RBI
guidelines / directives as under:
(a) For Standard Assets:
(i) 0.25% on direct advance to agriculture and SME sectors
(ii) 1.00% on advances to commercial real estate.
(iii) 2.00% on Teaser Home Loans
(iv) 0.40% on all other advances
(b) For all Non-Performing Assets (NPA):
(i) Sub-standard Assets:
(a) A general provision of 10%
(b) Additional provision of 10% for exposures, which are unsecured
ab-initio (where realizable value of security is not more than 10%
ab-initio)
(ii) Doubtful assets at 20%, 30% or 100% of the secured portion based
on the number of years the account remained as "Doubtful Asset" and at
100% of the unsecured portion of the outstanding after netting
retainable amount of the guarantee cover under the scheme of Export
Credit and Guarantee Corporation (ECGC) / Credit Guarantee Fund Trust
for Micro and Small Enterprises (CGTMSE), wherever applicable and
(iii) Loss Assets at 100%.
4.4 Restructuring of Advances: In respect of restructured accounts,
where the outstanding is Rs. 1.00 crore and above, the erosion in the
fair value of the advance is computed as the difference between the
fair value of the loan before and after restructuring.
Fair value of the loan before restructuring is computed as the present
value of cash flows representing the interest at the existing rate
charged on the advance before restructuring and the principal,
discounted at a rate equal to the Banks BPLR as on the date of
restructuring plus the appropriate term premium and credit risk premium
for the borrower category on the date of restructuring. Fair value of
the loan after restructuring is computed as the present value of cash
flows representing the interest at the rate charged on the advance on
restructuring and the principal, discounted at a rate equal to the
Banks BPLR as on the date of restructuring plus the appropriate term
premium and credit risk premium for the borrower category on the date
of restructuring.
In respect of restructured accounts, where the outstanding is less than
Rs.1.00 crore, the amount of diminution in the Fair value has been
computed at 5% of the outstanding.
4.5 In the case of suit filed accounts, legal expenses are charged to
Profit & Loss account and credited to revenue expenditure, when
recovered.
4.6 Financial assets sold to Asset Reconstruction Company (ARC) /
Securitisation Company (SC) are recognized as under:
(a) In case the sale is at a price lower than the Net Book Value (NBV),
the difference is charged to the Profit & Loss account.
(b) In the case the sale is at a price higher than the NBV, the surplus
provision is not reversed but held separately for meeting the loss if
any on future sale of financial assets.
5. DEPOSITS
Interest on deposits, with provision for re-investment of interest, is
capitalized for every completed quarter and shown as principal.
6. FIXED ASSETS & DEPRECIATION
6.1 Premises and other fixed assets have been accounted for at
historical cost. Pending registration, the land and buildings acquired
by the Bank are capitalized, based on letters of allotment / agreement
and the physical possession.
6.2 (a) Cost of mobile sets / phones up to Rs. 5000,
(b) Cost of furnishing items like curtains (including stitching
charges) / carpets / mattresses and pillows irrespective of cost and
(c) Other individual items costing Rs.1000 or less are charged to
profit and loss account in the year of purchase.
6.3 Depreciation on premises and other fixed assets including system
software is provided for on written down value method in the manner and
at rates as per Income Tax Act / Rules except as under:
6.4 In respect of assets acquired during the year, depreciation is
charged for half year in respect of assets used for 182 days or less
and for the full year in respect of assets used for more than 182 days,
except depreciation on computers and software, which is charged for the
full year irrespective of the period for which the asset was put to
use. No depreciation is provided in the year of sale / disposal of an
asset.
6.5 In respect of Leasehold Properties, the lease premium is amortized
over the period of the lease.
7. EMPLOYEE BENEFITS
7.1 Short Term Employee benefits:
Amount of short-term employee benefits, such as casual leave and
medical benefits, expected to be paid in exchange for the services
rendered by employees is recognized during the period when the employee
renders the service.
7.2 Post Employment benefits:
(i) Defined Contribution Plan
The Bank operates a Provident Fund scheme, which is a defined
contribution plan. All eligible employees are entitled to receive
benefits under the Banks Provident Fund scheme. The Bank contributes
monthly at a determined rate (currently 10% of employees basic pay
plus eligible allowance). These contributions are made to a fund set up
by the Bank and administered by a Board of Trustees. The Bank has no
liability for future provident fund benefits other than its annual
contribution, and recognizes such contributions as an expense in the
year to which they relate.
(ii) Defined Benefit Plan
(a) The Bank operates gratuity, pension and resettlement schemes, which
are defined benefit plans.
(b) The Bank provides for gratuity to all eligible employees.
The benefit is in the form of lump sum payments to vested employees on
superannuation, on death while in employment or on termination of
employment. The rate of gratuity payable to an employee is 15 days
based on the rate of wages / salary last drawn by the employee as per
the Payment of Gratuity Act, 1972 for every completed year of service.
Gratuity is payable to an employee on the termination of his employment
after he has rendered continuous service for a period of not less than
5 years (on retirement, resignation, except death & disablement). To be
eligible under SBT (Employees) Gratuity Regulations, 1972 minimum
service required is 10 years. The Bank makes annual contribution to the
Fund administered by the Board of Trustees based on independent
actuarial valuation carried out annually. The maximum amount payable as
per the Payment of Gratuity Act, 1972 is Rs.10.00 lakhs. The amount
payable to the employees will be higher of the amount calculated as per
SBT (Payment of Gratuity to Employees) Regulations and Payment of
Gratuity Act, 1972, subject to deduction of Income Tax on amount in
excess of Rs.10.00 lakhs.
(c) The Bank provides for pension to all eligible employees who have
opted for pension and joined the services of the Bank on or before 31st
March 2010. The benefit is in the form of monthly payments as per rules
and regular payments to vested employees on retirement, on death while
in employment, or on termination of employment. Vesting occurs at
different stages as per rules. The Bank makes annual contributions to
fund administered by Board of Trustees based on an independent external
actuarial valuation carried out annually.
(d) The cost of providing defined benefits is determined using the
projected unit credit method with actuarial valuations being carried
out at each balance sheet date. Actuarial gains / losses are
immediately recognized in the statement of profit and loss and are not
deferred.
(e) The bank has exercised the option of recognizing the transitional
liability on adoption of Accounting Standard 15 (2005) for its defined
benefit schemes against revenue and other reserves.
(f) Defined Contributory Pension Scheme: Employees, joining services of
the Bank on or after 1st April 2010 are eligible for Defined
Contributory Pension Scheme in line with the New Pension Scheme
introduced for employees of Central Government.
(g) The additional liability on account of reopening of pension option
for serving employees who had not opted for pension earlier as well as
the enhancement in gratuity limits is being amortized over a period of
five years beginning with the financial year ending March 31, 2011 as
per the RBI notification.
(h) The additional liability on account of reopening of pension option
for retired employees who had not opted for pension earlier as well as
the enhancement in gratuity limit is being charged to the profit and
loss account.
(iii) Other Long Term Employee benefits:
(a) All eligible employees of the bank are eligible to encash certain
portion of their earned leave while in employment or on retirement, on
death or on termination of employment, subject to a maximum amount.
This is paid by the Bank as and when the liability arises.
(b) The cost of providing other long-term benefits is determined using
the projected unit credit method with actuarial valuations being
carried out at each balance sheet date. Past service cost is
immediately recognized in the statement of profit and loss and is not
deferred.
8. PROVISION FOR TAXATION
(a) Income tax expense is the aggregate amount of current tax, deferred
tax and wealth tax. Current year taxes are determined in accordance
with the prevailing tax rates and tax laws. Deferred tax adjustments
comprise of changes in the deferred tax assets or liabilities during
the year.
(b) Deferred tax assets and liabilities are recognized on a prudent
basis for the future tax consequences of timing differences arising
between the carrying values of assets and liabilities and their
respective tax basis and carry forward losses. Deferred tax assets and
liabilities are measured using tax rates and tax laws that have been
enacted or subsequently enacted prior to the balance sheet date. The
impact of changes in the deferred tax assets and liabilities is
recognized in the profit and loss account.
(c) Deferred tax assets are recognized and reassessed at each reporting
date, in accordance with Accounting Standard 22 and based upon
Managements judgment as to whether realization is considered certain.
Deferred tax assets are recognized only if there is virtual certainty
that such deferred tax assets can be realized against future taxable
income.
9. REVENUE RECOGNITION
9.1 Income: Interest and other income are recognized on accrual basis
except for the following, which are recognized on cash basis:
(a) Interest and other income on NPA, projects under implementation
with time over run and government guaranteed accounts where interest is
not received regularly, as per Reserve Bank of India guidelines;
(b) Dividend on investment in shares and income distributed on units of
Mutual Funds;
(c) Locker Rent;
(d) Exchange on demand bills purchased / commission on bills sent for
collection;
(e) Interest on Overdue bills on realization basis;
(f) Income on cross selling products;
(g) Interest on Non Performing Investments and (h) Insurance claims
9.2 Adjustment in respect of recoveries made in NPA accounts - the
recoveries made are appropriated in the order of Charges, Interest and
then to Principal in live NPA and in respect of protested bills
accounts, the recoveries made are appropriated in the order of
Principal, Charges and then to unrealized Interest.
9.3 Income from interest on refund of income tax is accounted for in
the year the assessment order is passed by the concerned authority.
9.4 Expenditure: Revenue expenditure is accounted for on accrual basis
except Property Taxes and Banks liabilities in respect of disputes
pertaining to additional rent / lease rent, which are accounted for on
cash basis.
10. NET PROFIT
The net profit disclosed in the Profit and Loss account is arrived at,
after making provisions for the following:
(a) Provision for taxes on Income including Deferred Tax and Wealth
Tax,
(b) Provision for Non-performing Advances and / or Investments,
(c) Provision on Standard Assets,
(d) Interest sacrifice on restructured accounts,
(e) Depreciation on Investments,
(f) Transfers to contingencies and
(g) Other usual and necessary provisions.
11. IMPAIRMENT OF ASSETS
Impairment loss, if any, on Fixed Assets is recognized in accordance
with the Accounting Standard 28 issued in this regard by the Institute
of Chartered Accountants of India.
12. ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT
ASSETS
In conformity with Accounting Standard 29, "Provisions, Contingent
Liabilities and Contingent Assets", the Bank recognizes provisions only
when it has a present obligation as a result of a past event, it is
probable that an out flow of resources embodying economic benefits will
be required to settle the obligations, and when a reliable estimate of
the amount of the obligation can be made.
Mar 31, 2010
1. GENERAL
The accompanying financial statements have been prepared under the
historical convention as modified for foreign currency transactions and
they conform to Generally Accepted Accounting Principles (GAAP) in
India, which comprise the statutory provisions, guidelines of
regulatory authorities and Reserve Bank of India (RBI), Accounting
Standards and guidance notes issued by the Institute of Chartered
Accountants of India (ICAI) and the practices prevalent in the banking
industry in India.
2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE
2.1 Monetary assets and liabilities denominated in Foreign Currencies
have been translated at the Foreign Exchange Dealers Association of
India (FEDAI) rates prevailing on the Balance Sheet date.
2.2 Guarantees / Standby Letters of Credit, Letters of Credit, Interest
Rate Swaps, Forward Rate Agreements, Foreign Currency Options and
Forward Exchange Contracts are translated at FEDAI rates as on the
Balance Sheet date.
2.3 Income and Expenses are translated at the market exchange rates
prevailing on the date of the respective transactions. Interest earned
but not due on foreign currency funds deployed abroad, are translated
at the FEDAI rates as on the balance sheet date.
2.4 In accordance with the guidelines of FEDAI all outstanding forward
exchange contracts in each currency are revalued on the Balance Sheet
date at the corresponding forward rates for the respective maturity of
the contract. The difference between revalued amount and the contracted
amount is recognized as profit or loss, as the case may be.
2.5 Premium received / paid on outstanding currency options has been
accounted for as per FEDAI guidelines.
3. INVESTMENTS - Domestic
Investments are accounted for in accordance with the extant regulatory
guidelines. The Bank has changed w.e.f 01.04.2009 the method of
accounting of investments from ÃTransaction dateà to ÃTrade DateÃ
method.
3.1 Classification
Investments are classified into three categories namely: Held to
Maturity, Available for Sale and Held for Trading. Investments are
further classified into the following six groups in the balance sheet:
à Government Securities ÃOther Approved Securities
à Shares à Debentures and Bonds ÃSubsidiaries / Joint Ventures, and
éOthers (CPs, Mutual Funds, Units, etc)
3.2 Basis of Classification
Investments that the Bank intends to hold till maturity are classified
as Held to Maturity.
Investments that are held principally for resale within 90 days from
the date of purchase are classified as Held for Trading.
Investments that are not classified in the above two categories are
classified as Available for Sale.
An investment is classified as ÃHeld to MaturityÃ, Available for SaleÃ
or ÃHeld for Tradingà at the time of its purchase and subsequent shift
amongst categories is done in conformity with Regulatory Guidelines.
3.3 Valuation And Accounting
(i) In determining the cost of an investment:
a: Brokerage / commission received on subscription is reduced from the
cost.
b: Brokerage / commission etc., paid in connection with the acquisition
of investments is charged to revenue and not included in cost.
c: Broken period interest paid/received on debt nstruments is treated
as interest expended / income and is not included in cost/sale
consideration.
d: Cost is determined on the weighted average cost method.
e: The transfer of a security amongst the above three categories is
accounted for at the least of the acquisition cost/book value/market
value on the date of transfer and the depreciation, if any, on such
transfer is fully provided for.
(ii) Held to Maturity categories:
Each security is carried at acquisition cost or at amortized cost, if
acquired at a premium over the face value. Any premium on acquisition
is amortized over the remaining maturity period of the security on
constant yield basis.
Such amortization of premium is adjusted against income under the head
ÃInterest on investments.Ã
Profit on sale/redemption of securities is recognized as income and
appropriated to Capital Reserve net of taxes and mandatory transfer to
statutory reserves. (iii) Available for Sale and Held for Trading
categories:
a. The value of investments held under the Available For Sale category
is determined as per Reserve bank of India guidelines as under:
0 Central Government Securities: Marked to market on the basis of
prices declared for the purpose of valuation jointly by Fixed Income
Money Market and Derivatives Association of India (FIMMDA) and Primary
Dealers Association of India (PDAI).
0 State Government Securities and Other Trustee Securities: Marked to
market on the basis of prices derived out of the yield for respective
maturities declared for the purpose of valuation jointly by FIMMDA and
PDAI.
0 Shares: Wherever Stock Exchange quotations are available valuation is
done as per lower of the quotations in Bombay Stock Exchange or
National Stock Exchange. Wherever current quotations are not available
and in respect of unquoted shares (i) Valuation is as per Book Value
(without considering Revaluation Reserves, if any) ascertained from the
latest Balance Sheet of the Company (which is not more than one year
prior to the date of valuation) (ii) In case the latest Balance Sheet
is not available, the shares are valued at Re.1/- per Company.
0 Bonds & Debentures: Valued on the YTM method for the respective
maturity and rating put out by FIMMDA and PDAI.
0 Mutual Fund Units: Quoted Mutual Fund Units are valued as per Net
Asset Value as declared by the Mutual Fund.
0 Treasury Bills, Certificates of Deposits and Commercial Papers are
valued at carrying cost.
0 Preference Shares are valued at lower of market value determined on
YTM basis and its redemption value.
b. Each security in the above two categories is revalued at the market
price or fair value determined as per Regulatory Guidelines and only
the net depreciation of each group for each category is provided for
and net appreciation is ignored. On provision for depreciation, the
book value of the individual securities remains unchanged after marking
to market.
(iv) Security receipts issued by an Asset Reconstruction Company (ARC)
are valued in accordance with the guidelines applicable for Non SLR
investments.
(v) Investments are classified as performing and non- performing based
on the following guidelines issued by the RBI.
a) Interest / Instalment (including maturity proceeds) is due and
remains unpaid for more than 90 days.
b) In the case of equity shares, in the event of the investment in the
share of any company is valued at Re.1/- per company on account of the
non- availability of the latest balance sheet, those equity shares
would be reckoned as NPI.
c) If any credit facility availed by the issuer is NPA in the books of
the Bank, investment in any of the securities issued by the same issuer
would also be treated as NPI and vice versa.
d) The above would apply mutatis mutandis to preference shares where
the fixed dividend is not paid.
e) The investments in debentures / bonds, which are deemed to be in the
nature of advance, are also subjected to NPI norms as applicable to
investments.
f) The Bank has adopted the Uniform Accounting
Procedure prescribed by the RBI for accounting of Repo and Reverse Repo
transactions (other than transactions under the Liquidity Adjustment
Facility [LAF] with the RBI). Accordingly, the securities sold/
purchased under Repo/Reverse Repo are treated as outright
sales/purchases and accounted for in the Repo/Reverse Repo Accounts,
and the entries are reversed on the date of maturity. Costs and
revenues are accounted as interest expenditure/ income, as the case may
be. Balance in Repo/ Reverse Repo Account is adjusted against the
balance in the Investment Account.
g) Securities purchased/sold under LAF with RBI are debited/credited to
Investment account and reversed on maturity of the transaction.
Interest expended/ earned thereon is accounted for as expenditure /
revenue.
3.4 Interest Rate Swaps And Forward Rate Agreements
(a) Interest Rate Swaps and Forward Rate Agreements have been
undertaken for hedging purposes only and hence the cash flows are
accounted on accrual basis and the balances are carried at Notional
Principal Value.
(b) When a hedge becomes naked in part or full owing to shrinking
portfolio, and if allowed to continue till maturity, it is marked to
market at regular intervals.
(c) The periodical net cash flows arising out of Interest Rate Swaps in
domestic currency are booked as income/expenditure.
(d) The periodical net cash flows arising out of Interest Rate Swaps in
foreign currency are booked as income/expenditure and form part of the
exchange position in Forex transactions.
(e) The Interest Rate Swaps and Forward Rate Agreements in foreign
currency are valued at FEDAI rate prevailing on the Balance Sheet date
and the outstanding position is shown under Contingent liabilities.
(f) Gain/Loss arising out of swap transactions in respect of Tier I /
II bonds, is computed separately. Losses, if any, are fully provided
for. Gains on reset or sale is recognised as Income and appropriated to
Special Reserve net of taxes and mandatory transfer to statutory
reserve.
3.5 Non Performing Investments
All such securities where repayment of principal or interest not
serviced within 90 days from the due date are classified as
Non-performing Investments, except securities guaranteed by the Central
Government which are treated as performing investments notwithstanding
arrears of principal/interest payments. In respect of investments
classified as Non-performing, appropriate provisions are made for the
depreciation in the value. The depreciation requirement in respect of
these securities is not set off against appreciation in respect of
other performing securities.
4. ADVANCES
4.1 All advances have been classified under four categories i.e., (i)
Standard Assets (ii) Sub-Standard Assets (iii) Doubtful Assets and (iv)
Loss Assets as per RBI directives/guidelines.
4.2 Advances shown in the Balance Sheet are net of:
a) Provision made on Non-Performing Assets (NPAs)
b) Uncollected Interest Income in respect of NPAs
c) Bills rediscounted with IDBI/SIDBI
d) Claims received.
e) Diminution in fair value of Restructured Assets.
f) Technical write-off
4.3 Provision on advances have been made in accordance with RBI
guidelines/ directives as under:
a. For Standard Assets:
i. 0.25% on direct advance to agriculture and SME sectors
ii. 1.00% on advances to commercial real estate.
iii. 0.40% on all other advances.
b. For all Non-Performing Assets (NPAs):
i) Sub-standard Assets at 10% of the outstanding in the case of
ab-initio secured exposure and 20 % in the case of ab-initio unsecured
exposure.
ii) Doubtful assets at 20%, 30% or 100% of the secured portion based on
the number of years the account remained as ÃDoubtful Assetà and at
100% of the unsecured portion of the outstanding after netting
retainable amount of the guarantee cover under the scheme of Export
Credit and Guarantee Corporation (ECGC) / Credit Guarantee Fund Trust
for Micro and Small Enterprises (CGTMSE), wherever applicable, and
iii) Loss Assets at 100%.
4.4 Restructuring of Advances: In respect of restructured accounts,
where the outstanding is Rs. 1.00 crore and above, the erosion in the
fair value of the advance is computed as the difference between the
fair value of the loan before and after restructuring.
Fair value of the loan before restructuring is computed as the present
value of cash flows representing the interest at the existing rate
charged on the advance before restructuring and the principal,
discounted at a rate equal to the bankÃs BPLR as on the date of
restructuring plus the appropriate term premium and credit risk premium
for the borrower category on the date of restructuringÃ. Fair value of
the loan after restructuring is computed as the present value of cash
flows representing the interest at the rate charged on the advance on
restructuring and the principal, discounted at a rate equal to the
bankÃs BPLR as on the date of restructuring plus the appropriate term
premium and credit risk premium for the borrower category on the date
of restructuringÃ.
In respect of restructured accounts, where the outstanding is less than
Rs. 1.00 crore, the amount of diminution in the Fair value has been
computed at 5% of the outstanding.
4.5 In the case of suit filed accounts, legal expenses are charged to
Profit & Loss account and credited to revenue expenditure, when
recovered.
4.6 Financial assets sold to Asset Reconstruction Company (ARC)/
Securitisation Company (SC) are recognised as under:
a. In case the sale is at a price lower than the Net Book Value (NBV),
the difference is charged to the Profit & Loss account.
b. In the case the sale is at a price higher than the NBV, the surplus
provision is not reversed but held separately for meeting the loss if
any on future sale of financial assets.
5. DEPOSITS
Interest on deposits with provision for re-investment of interest is
capitalized for every completed quarter and shown as principal.
6. FIXED ASSETS & DEPRECIATION
6.1 Premises and other fixed assets have been accounted for at
historical cost. Pending registration, the land and buildings acquired
by the Bank are capitalized, based on letters of allotment/ agreement
and the physical possession.
6.2 Individual items costing Rs.1,000 or less are charged to revenue in
the year of purchase. Cost of mobile phones up to Rs. 5000/- and
furnishing items are debited to profit and loss account in the year of
purchase.
6.4 In respect of assets acquired during the year, depreciation is
charged for half year in respect of assets used for 182 days or less
and for the full year in respect of assets used for more than 182 days,
except depreciation on computers and software, which is charged for the
full year irrespective of the period for which the asset was put to
use. No depreciation is provided in the year of sale/ disposal of an
asset.
6.5 In respect of Leasehold Properties, the lease premium is amortized
over the period of the lease.
7. EMPLOYEE BENEFITS
7.1 Short Term Employee benefits:
Amount of short-term employee benefits, such as casual leave and
medical benefits, expected to be paid in exchange for the services
rendered by employees is recognised during the period when the employee
renders the service.
7.2 Post Employment benefits:
i. Defined Contribution Plan
The Bank operates a Provident Fund scheme, which is a defined
contribution plan. All eligible employees are entitled to receive
benefits under the BankÃs Provident Fund scheme. The Bank contributes
monthly at a determined rate (currently 10% of employeeÃs basic pay
plus eligible allowance). These contributions are made to a fund set up
by the Bank and administered by a Board of Trustees. The Bank has no
liability for future provident fund benefits other than its annual
contribution, and recognises such contributions as an expense in the
year to which they relate.
ii. Defined Benefit Plan
a. The bank operates gratuity, pension and resettlement schemes, which
are defined benefit plans.
b. The Bank provides for gratuity to all eligible employees. The
benefit is in the form of lump sum payments to vested employees on
superannuation, on death while in employment or on termination of
employment. The rate of gratuity payable to an employee is 15 days
based on the rate of wages / salary last drawn by the employee as per
the Payment of Gratuity Act 1972 for every completed year of service.
Gratuity is payable to an employee on the termination of his employment
after he has rendered continuous service for a period of not less than
5 years (on retirement, resignation, except death & disablement). To be
eligible under SBT (Employees) Gratuity Regulations 1972, minimum
service required is 10 years. The Bank makes annual contribution to the
Fund administered by the Board of Trustees based on independent
actuarial valuation carried out annually. The maximum amount payable as
per the Gratuity Act is Rs.3.50 lacs. As per the SBT (Payment of
Gratuity to employees) Regulations, it can go beyond Rs.3.50 lacs. The
higher amount will be paid to the employees, subject to deduction of
Income Tax on amount in excess of Rs.3.50 lacs.
c. The Bank provides for pension to all eligible employees who have
opted for pension. The benefit is in the form of monthly payments as
per rules and regular payments to vested employees on retirement, on
death while in employment, or on termination of employment. Vesting
occurs at different stages as per rules. The Bank makes annual
contributions to fund administered by Board of Trustees based on an
independent external actuarial valuation carried out annually.
d. The cost of providing defined benefits is determined using the
projected unit credit method with actuarial valuations being carried
out at each balance sheet date. Actuarial gains/losses are immediately
recognised in the statement of profit and loss and are not deferred.
e. The bank has exercised the option of recognising the transitional
liability on adoption of AS15 (2005) for its defined benefit schemes
against revenue and other reserves.
iii. Other Long Term Employee benefits:
a. All eligible employees of the bank are eligible to encash certain
portion of their earned leave while in employment or on retirement, on
death or on termination of employment, subject to a maximum amount.
This is paid by the Bank as and when the liability arises.
b. The cost of providing other long-term benefits is determined using
the projected unit credit method with actuarial valuations being
carried out at each balance sheet date. Past service cost is
immediately recognised in the statement of profit and loss and is not
deferred.
8. PROVISION FOR TAXATION
a. Income tax expense is the aggregate amount of current tax, deferred
tax and wealth tax. Current year taxes are determined in accordance
with the prevailing tax rates and tax laws. Deferred tax adjustments
comprise changes in the deferred tax assets or liabilities during the
year.
b. Deferred tax assets and liabilities are recognised on a prudent
basis for the future tax consequences of timing differences arising
between the carrying values of assets and liabilities and their
respective tax basis and carry forward losses. Deferred tax assets and
liabilities are measured using tax rates and tax laws that have been
enacted or subsequently enacted prior to the balance sheet date. The
impact of changes in the deferred tax assets and liabilities is
recognised in the profit and loss account.
c. Deferred tax assets are recognised and reassessed at each reporting
date, in accordance with AS-22 and based upon managementÃs judgement as
to whether realisation is considered certain. Deferred tax assets are
recognised only if there is virtual certainty that such deferred tax
assets can be realised against future taxable income.
9. REVENUE RECOGNITION
9.1 INCOME:
Interest and other income are recognized on accrual basis except for
the following, which are recognized on cash basis:
a. Interest and other income on NPAs, projects under implementation
with time over run and government guaranteed accounts where interest is
not received regularly, as per Reserve Bank of India guidelines;
b. Dividend on investment in shares and income distributed on units of
Mutual Funds ;
c. Locker Rent;
d. Exchange on demand bills purchased/ commission on bills sent for
collection;
e. Interest on Overdue bills on realization basis;
f. Income on cross selling products;
g. Interest on Non Performing Investments and h. Insurance claims
9.2 Adjustment in respect of recoveries made in NPA Accounts à the
recoveries made are appropriated in the order of Charges, Interest and
then to Principal in live NPA and in respect of protested bills
accounts, the recoveries made are appropriated in the order of
Principal, Charges and then to unrealized Interest.
9.3 Income from interest on refund of income tax is accounted for in
the year the assessment order is passed by the concerned authority.
9.4 EXPENDITURE:
a. Revenue expenditure is accounted for on accrual basis except
Interest on overdue deposits and Property Taxes, which are accounted
for on cash basis.
10. NET PROFIT
The net profit disclosed in the Profit and Loss account is arrived at,
after making provisions for the following:
Provision for taxes on income including Deferred Tax and Wealth Tax;
o Provision for Non performing Advances and/ or
Investments
o Provision on Standard Assets;
o Interest sacrifice on restructured accounts;
o Depreciation on Investments;
o Transfers to contingencies, and,
o Other usual and necessary provisions.
11. IMPAIRMENT OF ASSETS
Impairment loss, if any, on Fixed Assets is recognised in accordance
with the Accounting Standard-28 issued in this regard by the Institute
of Chartered Accountants of India.
12. ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT
ASSETS
In conformity with AS 29, ÃProvisions, Contingent Liabilities and
Contingent assetsÃ, the Bank recognises provisions only when it has a
present obligation as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to
settle the obligations, and when a reliable estimate of the amount of
the obligation can be made.
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