Accounting Policies of Punjab National Bank Company

Mar 31, 2025

SIGNIFICANT ACCOUNTING POLICIES FOR THE FY 2024-25

1. BASIS OF PREPARATION:

The financial statements have been prepared on historical
cost basis and conform, in all material aspects, to Generally
Accepted Accounting Principles (GAAP) in India unless
otherwise stated encompassing applicable statutory
provisions, regulatory norms prescribed by the Reserve Bank
of India (RBI), circulars and guidelines issued by the Reserve
Bank of India (‘RBI'') from time to time, Banking Regulation Act
1949, Accounting Standards (AS) and pronouncements issued
by The Institute of Chartered Accountants of India (ICAI) and
prevailing practices in banking industry in India.

In respect of foreign offices, statutory provisions and practices
prevailing in respective foreign countries are complied with
except as specified elsewhere.

The financial statements have been prepared on going
concern basis with accrual concept and in accordance with the
accounting policies and practices consistently followed unless
otherwise stated.

2. USE OF ESTIMATES:

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

Future results could differ from these estimates. Difference
between the actual results and estimates is recognized in the
period in which the results are known / materialized.

Any revision to the accounting estimates is recognized
prospectively in the current and future periods unless otherwise
stated.

3. REVENUE RECOGNITION:

3.1 Income & expenditure (other than items referred to in
paragraph 3.2 & 3.5) are generally accounted for on accrual
basis.

3.2 Income from Non- Performing Assets (NPAs), comprising of
advances and investments, is recognized upon realization,
as per the prudential norms prescribed by the RBI/ respective
country regulators in the case of foreign offices (hereafter
collectively referred to as Regulatory Authorities).

3.3 Mode of appropriation of recovery in order of priority will be as
below:

(a) Appropriation of Recoveries in NPA accounts (irrespective
of the mode / status / stage of recovery actions) shall be
regulated in the following order of priority:

i. Expenditure/Out of Pocket Expenses incurred for
Recovery (earlier recorded in Memorandum Dues);

ii. Thereafter towards the interest irregularities / accrued
interest;

iii. Principal irregularities i.e. NPA outstanding in the account.

iv. Penal Charges

In case of borrowers who are having multiple accounts
- On receiving recovery in one account, system
appropriates recovery towards Expenditure, Interest,
Principal and penal charges. Further, surplus recovery
amount, if any, is appropriated towards Expenditure,
Interest, Principal and penal charges of another account
for same customer.

(b) However, in case of Compromise, Resolution/ Settlement
through NCLT, Technically Written Off (TWO) & Credits
received on account of CGTMSE / ECGC / GECL /
CGFMU and subsidy if any, shall be appropriated in the
order of Principal, Expenditure / out of pocket expenses
incurred for recovery (earlier recorded in Memorandum
Dues), Interest and penal charges.

(c) In case of suit filed/decreed accounts, recovery is
appropriated as under:

i. As per the directives of the concerned Court.

ii. In the absence of specific directives from the Court, as
mentioned at point (a) above.

Any exceptions to the above may be considered by
HOCAC-III (for proposals falling under the powers of
various committees upto HOCAC-III) & Management
Committee / Board for proposals under their vested
powers.

3.4 The sale of NPA is accounted as per guidelines prescribed by
RBI and as disclosed under Para 5.3.

3.5 Commission (excluding on Government Business, Insurance
Business, Mutual Fund Business, Letter of Credit and Bank
Guarantee), exchange, locker rent, Income on Rupee
Derivatives designated as ‘Trading'' and Income from units
of mutual funds, alternative investment funds & other such
pooled/ collective investment funds are accounted for on
realization and insurance claims are accounted for on
settlement. Interest on overdue inland bills is accounted
for on realization and interest on overdue foreign bill, till its
crystallization is accounted for on crystallization and thereafter
on realization.

3.6 In case of suit filed accounts, related legal and other expenses
incurred are charged to Profit & Loss Account and on recovery,
the same are accounted for as such.

3.7 Income from interest on refund of income tax is accounted for
in the year the order is passed by the concerned authority.

3.8 Lease payments including cost escalation for assets taken on
operating lease are recognized in the Profit and Loss Account
over the lease term in accordance with the AS 19 (Leases)
issued by ICAI.

3.9 Provision for Reward Points on Credit cards is made based on
the accumulated outstanding points in each category.

3.10 If Term Deposit (TD) matures and proceeds are unpaid, the
amount left unclaimed with the Bank attracts rate of interest as
applicable to savings account or the contracted rate of interest
on the matured TD, whichever is lower.

3.11 Bank recognizes dividend income on accrual basis for shares
of corporate bodies provided dividend has been declared by the
corporate body in its Annual General Meeting and the owner''s
right to receive payment is established. Dividend income on
equity investments held under AFS is also recognised in the
Profit and Loss Account.

4. INVESTMENTS:

4.1 As soon as the deal is entered into (whether settled or
not) necessary vouchers are passed. For the equity
deals, transaction vouchers are passed on the deal date
and for other deals, contra vouchers are passed on deal
date and transaction vouchers in securities are passed on
the date of settlement.

4.2 Investments are classified into six categories as stipulated
in Third Schedule to the Banking Regulation Act, 1949
(Form A- Schedule 8- Investment).

4.3 Entire investment portfolio (except investments in own
subsidiaries, joint ventures and associates) has been
classified under three categories, viz., Held to Maturity
(HTM), Available for Sale (AFS) and Fair Value through
Profit and Loss (FVTPL). Held for Trading (HFT) is a
separate investment subcategory within FVTPL. The
category of the investment is decided before or at the time
of acquisition.

(a) HTM: Securities fulfilling the following conditions are
classified under HTM:

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

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

(b) AFS: Securities fulfilling the following conditions are
classified under AFS:

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

(ii) The contractual terms of the security meet the ‘SPPI
criterion''.

(iii) Equity shares where, at initial recognition, the
irrevocable option to classify in AFS has been
exercised.

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

(c) FVTPL: Securities that do not qualify for inclusion in
HTM or AFS are classified under FVTPL. These inter-alia
include:

(i) Equity shares, other than (a) equity shares of
subsidiaries, associates or joint ventures and (b)
equity shares classified under AFS.

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

(iii) Investment in securitisation notes which do not meet
SPPI criterion.

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

HFT: Separate sub-category called HFT is created within
FVTPL and it consists of all instruments set out in the
following -

• short-term resale;

• profiting from short-term price movements;

• locking in arbitrage profits; or

• hedging risks that arise from instruments meeting
above.

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

• Any financial instrument when there is no legal
impediment against selling or fully hedging it.

4.4 Investments in Subsidiaries, Associates and Joint Ventures.
All investments in subsidiaries, associates and joint ventures
are held in a distinct category separate from the other
investment categories.

4.5 In case of Reclassification of investments from one category to
another category, the accounting treatment is as given in the
table below:

The reclassification is applied prospectively from reclassification
date and details of such reclassification including the reclassification
adjustments is provided as disclosure in the notes to the financial
statements, if the case persists.

4.6 In determining acquisition cost of an investment

(a) Brokerage, commission, Securities Transaction Tax (STT)
etc. paid in connection with acquisition of securities are
treated as revenue expenses upfront and excluded from
cost.

(b) Interest accrued up to the date of acquisition/sale of
securities i.e. broken-period interest is excluded from
the acquisition cost/sale consideration and the same is
accounted as interest accrued but not due.

(c) Cost is determined on the weighted average cost method
for all categories of investments.

(d) All investments are measured at fair value on initial
recognition. Unless facts and circumstances suggest that
the fair value is materially different from the acquisition
cost, it is presumed that the acquisition cost is the fair
value. In other cases, following treatment is done:

> Where the securities are quoted or the fair value
is determined based on market observable inputs
(such as yield curve, credit spread, etc.) any Day
1 gain/ loss is recognised in the Profit and Loss
Account, under Schedule 14: ‘Other Income'' within
the subhead ‘Profit on revaluation of investments'' or
‘Loss on revaluation of investments''.

> Any Day 1 loss arising from Level 3 investments is
recognised immediately.

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

4.7 Investments are valued as per RBI/ FIMMDA guidelines, on
the following basis:

I. Held to Maturity

Securities held in HTM are carried at cost and are not
marked to market (MTM) after initial recognition.

II. AFS

The securities held in AFS are fair valued on daily basis. The
valuation gains and losses across all performing investments,
irrespective of classification (i.e., Government securities, Other
approved securities, Bonds and Debentures, etc.), held under
AFS are aggregated and net appreciation or depreciation, is
directly credited or debited to AFS Reserve without routing
through the Profit and Loss account.

III. FVTPL

The securities held in FVTPL are fair valued and the net gain
or loss arising on such valuation is credited or debited to the
Profit and Loss Account. Out of above, Securities that are
classified under the HFT sub-category within FVTPL are fair
valued on daily basis and other securities under FVTPL on
daily basis.

IV. Investments in Subsidiaries, Associates and Joint
Ventures

All investments (i.e., including debt and equity) in subsidiaries,
associates and joint ventures are held at acquisition cost.
Investments in subsidiaries, associates or joint ventures are
evaluated for impairment on quarterly basis and if required,
on more frequent basis. In case of impairment, valuation of
the investment is being done by an independent registered
valuer and provision for impairment is made from Profit and
Loss Account. It can be subsequently reversed through Profit
and Loss Account, if there is a reversal of the diminution.

V. Amortization/ Accretion

Any discount or premium on the acquisition of debt securities
in HTM/ AFS/ FVTPL/ Subsidiaries, Associates and Joint
Ventures category is amortised over the remaining life of
the instrument. The amortised amount is reflected in the
financial statements under item II ‘Income on Investments'' of
Schedule 13: ‘Interest Earned'' with a contra in Schedule 8:
‘Investments''. For amortization and accretion of investments,
the Bank continues to follow the ‘straight line method''.

Fair Value of Investments:

The fair value for the purpose of initial recognition and periodical
valuation of Investments is determined as per table below:

4.8 When principal and/or interest are converted into equity,
debentures, bonds, etc., such instruments are categorised
in HTM, AFS or FVTPL (including HFT) at the time of
initial recognition. Further, the asset classification of such
instruments are same as the loan and provision are made as
per the relevant norms.

4.9 Accounting Treatment on sale/ maturity of investments:

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

II. AFS:

a. In the case of equity instruments designated under
AFS at the time of initial recognition, any gain or loss
on sale of such investments is transferred from AFS-
Reserve to the Capital Reserve.

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

III. FVTPL: Any profit or loss on the sale is recognised directly
through Profit and Loss Account including HFT securities.

IV. Subsidiaries, Associates and Joint Ventures: Any gain/
profit arising on the reclassification/ sale of an investment
in a subsidiary, associate or joint venture is first recognised
in the Profit and Loss Account and then appropriated
from the Profit and Loss Account to the ‘Capital Reserve
Account''. The amount so appropriated will be net of taxes
and the amount to be transferred to Statutory Reserves.

All other guidelines of RBI Master Direction on
Classification, Valuation and Operation of Investment
Portfolio of Commercial Banks (Directions), 2023 dated
September 12, 2023, and other subsequent guidelines/
clarifications are adhered to.

4.10 Securities repurchased/resold under buy back arrangement
are accounted for at original cost.

4.11 Investments are subject to appropriate provisioning/ de¬
recognition of income, in line with the prudential norms
of Reserve Bank of India for NPI classification. Once an
investment is classified as an NPI, it is segregated from rest
of the portfolio and not considered for netting valuation gains
and losses.

If any credit facility availed by an entity is NPA in the books
of the Bank, investment in any of the securities issued by the
same entity is also treated as NPI and vice versa. However,
in respect of NPI preference share where the dividend is not
paid, the corresponding credit facility is not treated as NPA.

In case of securities, i.e., bonds, debentures, etc. the provision
is made as higher of the following amounts -

(i) The amount of provision required as per IRACP norms
computed on the carrying value of the investment
immediately before it was classified as NPI; and

(ii) The depreciation on the investment with reference to its
carrying value on the date of classification as NPI.

Upon an account being upgraded as per IRACP norms, any
provision previously recognised is reversed and symmetric

recognition of MTM gains and losses will be resumed.

In the case of investment in the unquoted shares of any
company which are valued at ?1 per company on account of
the non-availability of the latest balance sheet, those equity
shares are reckoned as NPI. The NPI may be upgraded
subsequently on receipt of audited balance sheet.

Provisions for investments classified under AFS (Available for
Sale) are managed as follows:

• When there are cumulative gains in the AFS-Reserve, the
required provision may be created by charging the AFS-
Reserve up to the amountof these gains.

• When there are cumulative losses in the AFS-Reserve,
these losses are transferred from the AFS-Reserve to the
Profit and Loss Account.

4.12 Securities sold or purchased with an agreement to repurchase
or resell under Repo or Reverse Repo transactions, including
those under the Liquidity Adjustment Facility (LAF) with the
RBI, shall be recorded as borrowings or lending. Securities sold
under Repo agreements remain classified under investments,
while securities purchased under Reverse Repo agreements
shall not be included in investments. The associated costs and
revenues shall be accounted for as interest expenditure or
income, respectively.

4.13 The derivative transactions are undertaken for trading or
hedging purposes. Trading transactions are marked to market.
As per RBI guidelines, different categories of swaps are valued
as under:

Hedge Swaps

Interest rate swaps with hedge interest bearing asset or
liability are accounted for on accrual basis except the swaps
designated with an asset or liability that are carried at lower of
market value or cost in the financial statement.

Gain or losses on the termination of swaps are recognized
over the shorter of the remaining contractual life of the swap or
the remaining life of the asset/ liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes
recorded in the financial statements. 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.

4.14 Foreign Currency Options:

Foreign currency options written by the Bank with a back-to-
back contract with another bank are not marked to market
since there is no market risk.

Premium received is held as a liability and transferred to the
Profit and Loss Account on maturity/cancellation.

5. LOANS / ADVANCES AND PROVISIONS THEREON:

5.1 Advances are classified as performing and non¬
performing assets; provisions are made in accordance
with prudential norms prescribed by RBI.

(a) Advances are classified: Standard, Sub Standard,
Doubtful and Loss assets borrower wise.

(b) Advances are stated net of specific loan loss
provisions, provision for diminution in fair value of
restructured advances.

5.2 In respect of foreign offices, the classification of loans and
advances and provisions for NPAs are made as per the
local regulations or as per the norms of RBI, whichever is
more stringent.

Loans and advances held at the overseas branches that
are identified as impaired as per host country regulations for
reasons other than record of recovery, but which are standard
as per the extant RBI guidelines, are classified as NPAs to the
extent of amount outstanding in the host country.

5.3 Financial Assets sold are recognized as under:

(a) Prudential norms for the transfer transactions to
ARCs:

When the stressed loan is transferred to ARC at a price
below the NBV at the time of transfer, the Bank has
debited the shortfall to the profit and loss account for the
year in which the transfer has taken place. Banks are
permitted to use countercyclical or floating provisions for
meeting any shortfall on transfer of stressed loan when
the transfer is at a price below the NBV.

On the other hand, when the stressed loan is transferred
to an ARC for a value higher than the NBV at the time
of transfer, lenders shall reverse the excess provision
on transfer to the profit and loss account in the year
the amounts are received and only when the sum of
cash received by way of initial consideration and / or
redemption or transfer of Security Receipts (SR) / Pass
Through Certificates (PTCs)/ other securities issued by
ARCs is higher than the NBV of the loan at the time of
transfer. Further, such reversals are limited to the extent
to which cash received exceeds the NBV of the loan at
the time of transfer.

As per RBI/DOR/2024-25/135 DOR.STR.
REC.72/21.04.048/2024-25 dated March 29, 2025, with
a view to adopting a differentiated approach in respect
of SRs guaranteed by the Government of India, the
prudential treatment relating to valuation of such SRs
is such that if a loan is transferred to an ARC for a
value higher than the net book value (NBV), the excess
provision is reversed to the Profit and Loss Account in the
year of transfer if the sale consideration comprises only
of cash and SRs guaranteed by the Government of India.
However, the non-cash component in the form of SRs is
deducted from CET 1 capital, and no dividends are paid
out of this component.

(b) Prudential norms for the transfer transactions to
transferee(s) other than ARCs - Provisioning norms:

(i) When the bank transfers its NPAs to
transferee(s) other than ARCs, the same are
removed from the books on receipt of the entire
transfer consideration.

(ii) If the transfer to transferee(s) other than ARCs
is at a price below the net NBV at the time of
transfer, the shortfall is debited to the profit and
loss account of the year in which transfer has
taken place.

(iii) If the sale consideration is for a value higher
than the NBV at the time of transfer, the excess
provisions has been reversed.

(c) The excess amount received, if any, over & above
memoranda dues is credited proportionately to the
respective heads of Income Interest on Loans and
Advances say Income Interest on CC/ Term Loan,
etc.

In case, the excess amount is to be returned
subsequently due to, e.g., DRT/Court orders or any
other eventuality, the same head is debited to refund
the excess amount recovered.

j.4 Restructured Assets:

For restructured/rescheduled advances, provisions are made
in accordance with guidelines issued by RBI from time to time.
Provision for diminution in fair value of restructured advances is
measured at net present value terms as per RBI guidelines for
accounts where total dues to the bank are Rupees One Crore
and above. For other accounts, the provision for diminution in
fair value is computed notionally at 5% of total exposure to the
bank as per RBI guidelines.

j.5 In addition to the specific provision on NPAs, general
provisions are also made for standard assets as per extant
RBI Guidelines. These provisions are reflected in Schedule
5 of the Balance Sheet under the head ‘Other Liabilities &
Provisions - Others'' and are not considered for arriving at the
Net NPAs.

j.6 Amounts recovered against debts written-off in earlier years

and provisions no longer considered necessary in the context
of the current status of the borrower are recognized in the
profit and loss account.

5.7 Provision for Country Exposure:

In addition to the specific provisions held according to the
asset classification status, provisions are also made for
individual country exposures (other than the home country).
Countries are categorized into seven risk categories, namely,
insignificant, low, moderately low, moderate, moderately high,
high and very high, and provisioning made as per extant RBI
guidelines. If the country exposure (net) of the Bank in respect
of each country does not exceed 1% of the total funded assets,
no provision is maintained on such country exposures. The
provision is reflected in Schedule 5 of the Balance Sheet under
the ‘Other Liabilities & Provisions - Others''.

5.8 An additional provision of 2% (in addition to country risk
provision that is applicable to all overseas exposures) against
standard assets representing all exposures to step down
subsidiaries of Indian Corporates has been made to cover the
additional risk arising from complexity in the structure, location
of different intermediary entities in different jurisdictions
exposing the Indian Company, and hence the Bank, to a
greater political and regulatory risk. (As per RBI Cir.No. RBI/
2015.16/279 DBR. IBD.BC No. 68/ 23.37.001/ 2015-16 dated
31.12.2015).

5.9 Floating Provision:

The Bank has a policy for creation and utilisation of floating
provision. The floating provision, so created can be utilised
only for contingencies under extraordinary circumstances
specified in the policy after obtaining Bank''s Board approval
and with prior permission of Reserve Bank of India. Floating
provision is netted off from advances to the extent it is not
treated as Tier 2 capital.

6. PROPERTY, PLANT & EQUIPMENT:

6.1 Property, Plant & Equipment are stated at historical cost less
accumulated depreciation/amortization, wherever applicable,
except those premises, which have been revalued in terms
of Bank''s policy, i.e., every three years. The appreciation on
revaluation is credited to revaluation reserve and incremental
depreciation attributable to the revalued amount is deducted
there from.

6.2 Software is capitalized and clubbed under Intangible assets.

6.3 Cost includes cost of purchase and all expenditure such as
site preparation, installation costs and professional fees
incurred on the asset till the time of capitalization. Subsequent
expenditure/s incurred on the assets are capitalized only
when it increases the future benefits from such assets or their
functioning capability.

D. The depreciation on bank''s own premises existing at the close
of the year is charged for full year. The construction cost is
depreciated only when the building is complete in all respects.
Where the cost of land and building cannot be separately
ascertained, depreciation is provided on the composite cost,
at the rate applicable to buildings.

E. In respect of leasehold premises, the lease premium, if any,
is amortized over the period of lease and the lease rent is
charged in the respective year(s).

F. The Revalued assets are depreciated over the balance useful
life of the asset as assessed at the time of revaluation.

7. IMPAIRMENT OF ASSETS:

The carrying costs of assets are reviewed at each Balance
Sheet date if there is any indication of impairment based on
internal/external factors, an impairment loss is recognized
wherever the carrying cost of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the assets
net selling price and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and risks specific to
the asset.

After impairment, if any, depreciation is provided on the
revised carrying cost of the asset over its remaining useful
life. A previously recognized impairment loss is increased or
reversed depending on changes in circumstances. However,
the carrying value after reversal is not increased beyond the
carrying value that would have prevailed by charging usual
depreciation if there was no impairment.

Impairment loss, if any, in respect of non-banking assets
acquired in satisfaction of claims is recognized as an expense
in the statement of profit and loss immediately and carrying
value of Non-Banking Assets is adjusted.

8. EMPLOYMENT BENEFITS:

PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank
pays fixed contribution at pre-determined rates. The obligation
of the Bank is limited to such fixed contribution. The contribution
is charged to Profit & Loss A/c.

GRATUITY:

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

PENSION:

Pension liability is a defined benefit obligation and is provided

for on the basis of an actuarial valuation. The scheme is
funded by the Bank and is managed by a separate trust.

The Bank operates a New Pension Scheme (NPS) for all
officers/ employees who have joined the Bank on or after
01.04.2010. As per the scheme, the covered employees
contribute 10% of their basic pay plus dearness allowance to
the scheme together with contribution of 14% of their basic pay
plus dearness allowance from the Bank. Pending completion
of the registration procedures of the employees concerned,
these contributions are retained. The Bank recognizes such
annual contributions as an expense in the year to which they
relate. Upon the receipt of the Permanent Retirement Account
Number (PRAN), the consolidated contribution amounts are
transferred to the NPS Trust.

COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave
(PL - Superannuation) and Sick Leave (including unavailed
casual leave) are provided for based on actuarial valuation.
The scheme for Privilege Leave (PL - Superannuation) is
funded by the Bank and is managed by a separate trust.

Privilege Leave (PL) encashment other than superannuation
are being paid from Bank expenditure account directly.

OTHER EMPLOYEE BENEFITS:

Other Employee Benefits such as Leave Fare Concession
(LFC), Silver Jubilee Award, etc., are provided for based on
actuarial valuation.

In respect of overseas branches and offices, the benefits in
respect of employees other than those on deputation are
accounted for as per laws prevailing in the respective countries.

The valuation method used for defined benefit obligations for
employee benefits is ‘Projected Unit Credit Method''.

9. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS

& BALANCES:

Transactions involving foreign exchange are accounted for
in accordance with AS 11, ‘The Effect of Changes in Foreign
Exchange Rates''.

9.1 Except advances of erstwhile London branches which are
accounted for at the exchange rate prevailing on the date
of parking in India, all other monetary assets and liabilities,
guarantees, acceptances, endorsements and other obligations
are translated in Indian Rupee equivalent at the exchange
rates prevailing as on the Balance Sheet date as per Foreign
Exchange Dealers'' Association of India (FEDAI) guidelines.

9.2 Non-monetary items other than fixed assets which are carried
at historical cost are translated at exchange rate prevailing on
the date of transaction.

9.3 Outstanding Foreign Exchange Spot and Forward contracts
are translated as on the Balance Sheet date at the rates
notified by FEDAI and the resultant gain/loss on translation is
taken to Profit & Loss Account.

Funding Swaps that are outstanding on the Balance Sheet
date is out of purview of FEDAI revaluation guidelines. The
premium or discount arising at the inception of such a forward
exchange contract is amortized as interest expense or income
over the life of the contract.

9.4 Income and expenditure items are accounted for at the
exchange rate prevailing on the date of transaction.

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

Gains/Losses on account of changes 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 the Profit and Loss Account.

9.5 Offices outside India / Offshore Banking Units:

(i) Operations of foreign branches and off shore banking unit are
classified as ‘Non-integral foreign operations'' and operations
of representative offices abroad are classified as ‘integral
foreign operations''.

(ii) Foreign currency transactions of integral foreign operations
and non-integral foreign operations are accounted for as
prescribed by AS-11.

(iii) Exchange Fluctuation resulting into Profit / loss of non-integral
operations is credited /debited to Exchange Fluctuation
Reserve.

10. TAXES ON INCOME

Income tax expense is the aggregate amount of current tax
including Minimum Alternate Tax (MAT), wherever applicable
and deferred tax expense incurred by the Bank. The current
tax and deferred tax are determined in accordance with the
provisions of the Income Tax Act, 1961 and as per Accounting
Standard 22 - Accounting for Taxes on Income respectively
after taking into account taxes paid at the foreign offices, which
are based on the tax laws of respective jurisdictions.

MAT credit is recognized as an asset only when and to the
extent there is convincing evidence that there will be payment
of normal income tax during the period specified under the
Income Tax Act, 1961.

Deferred Tax adjustments comprises of changes in the
deferred tax assets or liabilities during the year. Deferred tax
assets and liabilities are recognized by considering the impact

of timing differences between taxable income and accounting
income for the current year, and carry forward losses. Deferred
tax assets and liabilities are measured using tax rates and
tax laws that have been enacted or substantively enacted at
the balance sheet date. The impact of changes in deferred
tax assets and liabilities is recognized in the profit and loss
account. Deferred tax assets are recognized and re-assessed
at each reporting date, based upon management''s judgment
as to whether their realization is considered as reasonably/
virtually certain.

11. EARNINGS PER SHARE:

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

Diluted Earnings per Share reflects the potential dilution that
could occur if securities or other contracts to issue equity
shares were exercised or converted during the year. Diluted
Earnings per Share is computed using the weighted average
number of equity shares and dilutive potential equity shares
outstanding.

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Mar 31, 2024

SIGNIFICANT ACCOUNTING POLICIES FOR THE FY 2023-24

1. BASIS OF PREPARATION:

The financial statements have been prepared on historical cost basis and conform, in all material aspects, to Generally Accepted Accounting Principles (GAAP) in India unless otherwise stated encompassing applicable statutory provisions, regulatory norms prescribed by Reserve Bank of India (RBI), circulars and guidelines issued by the Reserve Bank of India (‘RBI'') from time to time, Banking Regulation Act 1949, Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and prevailing practices in Banking industry in India.

In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with except as specified elsewhere.

The financial statements have been prepared on going concern basis with accrual concept and in accordance with the accounting policies and practices consistently followed unless otherwise stated.

2. USE OF ESTIMATES:

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

Future results could differ from these estimates. Difference between the actual results and estimates is recognized in the period in which the results are known / materialized.

Any revision to the accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

3. REVENUE RECOGNITION:

3.1 Income & expenditure (other than items referred to in paragraph 3.5) are generally accounted for on accrual basis.

3.2 Income from Non- Performing Assets (NPAs), comprising of advances and investments, is recognized upon realization, as per the prudential norms prescribed by the RBI/ respective country regulators in the case of foreign offices (hereafter collectively referred to as Regulatory Authorities).

3.3 Mode of appropriation of recovery in order of priority will be as below:

(a) Appropriation of Recoveries in NPA accounts (irrespective of the mode / status / stage of recovery actions) shall be regulated in the following order of priority:

i. Expenditure/Out of Pocket Expenses incurred for Recovery (earlier recorded in Memorandum Dues)

ii. Thereafter towards the interest irregularities/accrued interest.

iii. Principal irregularities i.e. NPA outstanding in the account. Clarification:

In case of borrowers who are having multiple accounts -On receiving recovery in one account system appropriates recovery towards Expenditure, Recorded Interest and Principal outstanding of same account. Further, surplus recovery amount, if any, takes care of Expenditure, Recorded Interest and Principal outstanding of another account for same Customer.

(b) However, in case of Compromise, Resolution/Settlement through NCLT, Technically Written Off (TWO) & Credits received on account of CGTMSE/ECGC/GECL/CGMFU and subsidy if any, shall be appropriated in the order of Principal, Charges and interest.

(c) In case of suit filed/decreed accounts, recovery shall be appropriated as under: -

i. As per the directives of the concerned Court.

ii. In the absence of specific directives from the Court, as mentioned at point (a) above.

Any exceptions to the above may be considered by HOCAC-III (for proposals falling under the powers of various committee''s up to HOCAC-III & Management Committee for proposals under its vested powers.

3.4 The sale of NPA is accounted as per guidelines prescribed by RBI and as disclosed under Para 5.3.

3.5 Commission (excluding on Government Business, Insurance Business, Mutual Fund Business, Letter of Credit and Bank Guarantee), exchange, locker rent and Income on Rupee Derivatives designated as ‘Trading'' are accounted for on realization and insurance claims are accounted for on settlement. Interest on overdue inland bills is accounted for on realization and interest on overdue foreign bill, till its crystallization is accounted for on crystallization and thereafter on realization.

3.6 In case of suit filed accounts, related legal and other expenses incurred are charged to Profit & Loss Account and on recovery, the same are accounted for as such.

3.7 Income from interest on refund of income tax is accounted for in the year the order is passed by the concerned authority.

3.8 Lease payments including cost escalation for assets taken on operating lease are recognized in the Profit and Loss Account over the lease term in accordance with the AS 19 (Leases) issued by ICAI.

3.9 Provision for Reward Points on Credit cards is made based on the accumulated outstanding points in each category.

3.10 I f Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank attracts rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.

3.11 Dividend (excluding Interim Dividend) is accounted for as and when the right to receive the dividend is established.

4. INVESTMENTS:

4.1 The transactions in Securities are recorded on ‘Settlement Date''.

4.2 Investments are classified into six categories as stipulated in Form A of the Third Schedule to the Banking Regulation Act, 1949.

4.3 Investments have been categorized into ‘Held to Maturity'', ‘Available for Sale'' and ‘Held for Trading'' in terms of RBI guidelines as under:

(a) Securities acquired by the Bank with an intention to hold till maturity are classified under ‘Held to Maturity''.

(b) The securities acquired by the Bank with an intention to trade by taking advantages of short-term price/ interest rate movements are classified under ‘Held for Trading''.

(c) The securities, which do not fall within the above two categories, are classified under ‘Available for Sale''.

4.4 Investments in subsidiaries, joint ventures and associates are classified as HTM.

4.5 Transfer of securities from AFS / HFT category to HTM category is made at the lower of book value or market value.

Provided that where the market value is higher than the book value at the time of transfer, the appreciation shall be ignored, and the security shall be transferred at the book value.

Provided further that in cases where the market value is lower than the book value, the provision for depreciation held against the security (including the additional provision, if any, required based on valuation done on the date of transfer) shall be adjusted to reduce the book value to the market value and the security shall be transferred at the market value.

However, transfer of securities from HTM category to AFS category is carried out on book value. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.

4.6 In determining acquisition cost of an investment:

(a) Brokerage, commission, Securities Transaction Tax (STT), etc., paid in connection with acquisition of securities are treated as revenue expenses upfront and excluded from cost.

(b) Interest accrued up to the date of acquisition/sale of securities, i.e., broken- period interest is excluded from the acquisition cost/sale consideration and the same is accounted as interest accrued but not due.

(c) Cost is determined on the weighted average cost method for all categories of investments.

4.7 Investments are valued as per RBI/ FIMMDA guidelines, on

the following basis:

Held to Maturity

(i) Investments under ‘Held to Maturity'' category are carried at acquisition cost.

Wherever the book value is higher than the face value/ redemption value, the premium is amortized over the remaining period to maturity on straight line basis. Such amortization of premium is reflected in Interest Earned under the head ‘Income on investments'' as a deduction.

(ii) Investments in subsidiaries/joint ventures/associates are valued at carrying cost less diminution, other than temporary in nature for each investment individually.

(iii) Investments in sponsored regional rural banks are valued at carrying cost.

(iv) Investment in Venture Capital is valued at carrying cost.

(v) Equity shares held in HTM category are valued at carrying cost.

Available for Sale and Held for Trading:

(a)	Govt. Securities
	I. Central Govt. Securities	At market prices/YTM as published by Fixed Income Money Market and Derivatives Association of India (FIMMDA) / Financial Benchmark India Pvt. Ltd (FBIL).
	II. State Govt. Securities	On appropriate yield to maturity basis as per FIMMDA/RBI guidelines.
(b)	Securities guaranteed by Central / State Government, PSU Bonds (not in the nature of advances)	On appropriate yield to maturity basis as per FIMMDA/RBI guidelines.
(c)	Treasury Bills	At carrying cost

(d)	Equity shares	At market price, if quoted, otherwise at breakup value of the Shares as per latest Balance Sheet. (The date as on which the latest balance sheet is drawn up shall not precede the date of valuation by more than 18 months), otherwise at Re.1 per company.
(e)	Preference shares	At market price, if quoted, or on appropriate yield to maturity basis not exceeding redemption value as per RBI/FIMMDA guidelines.
(f)	Bonds and debentures (not in the nature of advances)	At market price, if quoted, or on appropriate yield to maturity basis as per RBI/FIMMDA guidelines.
(g)	Units of mutual funds	As per stock exchange quotation, if quoted; at repurchase price/NAV, if unquoted.
(h)	Commercial Paper	At carrying cost.
(i)	Certificate of Deposits	At carrying cost.
(j)	Security receipts	Investments by lenders in SRs (Security Receipts) / other securities issued by ARCs (Asset Reconstruction Companies) shall be valued periodically by reckoning the Net Asset Value (NAV) declared by the ARC based on the recovery ratings received for such instruments.
		The Bank shall carry the investment in its books, on an ongoing basis until its transfer or its realization, at lower of redemption value of SRs arrived based on NAV, and the Net Book Value (NBV) of the transferred stressed loan at the time of transfer.
		If the investment by the transferor (Bank) in SRs issued against loans transferred by it is more than 10 percent of all SRs issued against the transferred asset, then the valuation of the SRs on the books of the transferor shall be the lower of the following:
		i) Net Asset Value (NAV) declared by the ARC based on the recovery ratings received for such instruments; and
		ii) Face value of the SRs reduced by the notional provisioning rate applicable if the loans had continued on the books of the bank.
(k)	Venture Capital Funds	At net asset value (NAV) declared by the VCF.
(l)	Other Investments	At carrying cost less diminution in value.

The above valuation in category of Available for Sale and Held for Trading is done scrip wise on quarterly basis and depreciation/appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for while net appreciation is ignored. On provision for depreciation, the book value of the individual security remains unchanged after marking to market.

Investments in sponsored regional rural banks shall be valued at carrying cost irrespective of Category (HTM & AFS).

4.8 Investments are subject to appropriate provisioning/ derecognition of income, in line with the prudential norms of Reserve Bank of India for NPI classification. The depreciation/ provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities.

If any credit facility availed by an entity is NPA in the books of the Bank, investment in any of the securities issued by the same entity would also be treated as NPI and vice versa. However, in respect of NPI preference share where the dividend is not paid, the corresponding credit facility is not treated as NPA.

In case of securities, i.e., bonds, debentures, etc., where the credit facilities are availed by the borrowers, the provision has been made on the basis of YTM or IRAC norms whichever is higher.

4.9 Profit or loss on sale of investments in any category is taken to Profit and Loss account but, in case of profit on sale of investments in ‘Held to Maturity'' category, an equivalent amount (net of taxes and amount transferred to Statutory Reserve) is appropriated to ‘Capital Reserve Account'', at year end.

Profit or loss on redemption of investments in AFS & HFT category is reflected in interest earned income on investments, as an addition/deduction from interest income earned.

4.10 Securities repurchased/resold under buy back arrangement are accounted for at original cost.

4.11 The securities sold and purchased under Repo/Reverse Repo are accounted as Collateralized lending and borrowing transactions. However, securities are transferred as in the case of normal outright sale/purchase transactions and such movement of securities is reflected using the Repo/Reverse Repo Accounts and Contra entries. The above 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 Account is classified under schedule 4 (Borrowings).

4.12 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under:

Hedge Swaps

Interest rate swaps with hedge interest bearing asset or liability are accounted for on accrual basis except the swaps designated with an asset or liability that are carried at lower of market value or cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/ liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes recorded in the financial statements.

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.

4.13 Foreign Currency Options:

Foreign currency options written by the Bank with a back-to-back contract with another bank are not marked to market since there is no market risk.

Premium received is held as a liability and transferred to the Profit and Loss Account on maturity/cancellation.

5. LOANS / ADVANCES AND PROVISIONS THEREON:

5.1 Advances are classified as performing and non-performing assets; provisions are made in accordance with prudential norms prescribed by RBI.

(a) Advances are classified: Standard, Sub Standard, Doubtful and Loss assets borrower wise.

(b) Advances are stated net of specific loan loss provisions, provision for diminution in fair value of restructured advances.

5.2 In respect of foreign offices, the classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent.

Loans and advances held at the overseas branches that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the host country.

5.3 Financial Assets sold are recognized as under:

(a) Prudential norms for the transfer transactions to ARCs: When the stressed loan is transferred to ARC at a price below the NBV at the time of transfer, the Bank has debited the shortfall to the profit and loss account for the year in which the transfer has taken place. Banks are permitted to use countercyclical or floating provisions for meeting any shortfall on transfer of stressed loan when the transfer is at a price below the NBV.

On the other hand, when the stressed loan is transferred to an ARC for a value higher than the NBV at the time of transfer, lenders shall reverse the excess provision on transfer to the profit and loss account in the year the amounts are received and only when the sum of cash received by way of initial consideration and / or redemption or transfer of Security Receipts (SR) / Pass Through Certificates (PTCs)/ other securities issued by ARCs is higher than the NBV of the loan at the time of transfer. Further, such reversal are limited to the extent to which cash received exceeds the NBV of the loan at the time of transfer”

(b) Prudential norms for the transfer transactions to transferee(s) other than ARCs - Provisioning norms:

i. When the bank transfers its NPAs to transferee(s) other than ARCs, the same are removed from the books on receipt of the entire transfer consideration.

ii. If the transfer to transferee(s) other than ARCs is at a price below the net NBV at the time of transfer, the shortfall is debited to the profit and loss account of the year in which transfer has taken place.

iii. If the sale consideration is for a value higher than the NBV at the time of transfer, the excess provisions has been reversed.

(c) The excess amount received, if any, over & above memoranda dues is credited proportionately to the respective heads of Income Interest on Loans and Advances say Income Interest on CC/ Term Loan, etc.

In case, the excess amount is to be returned subsequently due to, e.g., DRT/Court orders or any other eventuality, the same head is debited to refund the excess amount recovered.

5.4 Restructured Assets:

For restructured/rescheduled advances, provisions are made in accordance with guidelines issued by RBI from time to time. Provision for diminution in fair value of restructured advances is measured at net present value terms as per RBI guidelines for accounts where total dues to the bank are Rupees One Crore and above. For other accounts, the provision for diminution in fair value is computed notionally at 5% of total exposure to the bank as per RBI guidelines.

5.5 In addition to the specific provision on NPAs, general provisions are also made for standard assets as per extant RBI Guidelines. These provisions are reflected in Schedule 5 of the Balance Sheet under the head ‘Other Liabilities & Provisions - Others'' and are not considered for arriving at the Net NPAs.

5.6 Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized in the profit and loss account.

5.7 Provision for Country Exposure:

In addition to the specific provisions held according to the asset classification status, provisions are also made for individual country exposures (other than the home country). Countries are categorized into seven risk categories, namely, insignificant, low, moderately low, moderate, moderately high, high and very high, and provisioning made as per extant RBI guidelines. If the country exposure (net) of the Bank in respect of each country does not exceed 1 % of the total funded assets, no provision is maintained on such country exposures. The provision is reflected in Schedule 5 of the Balance Sheet under the ‘Other Liabilities & Provisions - Others''.

5.8 An additional provision of 2% (in addition to country risk provision that is applicable to all overseas exposures) against standard assets representing all exposures to step down subsidiaries of Indian Corporates has been made to cover the additional risk arising from complexity in the structure, location of different intermediary entities in different jurisdictions exposing the Indian Company, and hence the Bank, to a greater political and regulatory risk. (As per RBI Cir.No. RBI/ 2015.16/279 DBR. IBD.BC No. 68/ 23.37.001/ 2015-16 dated 31.12.2015).

6. PROPERTY, PLANT & EQUIPMENT:

6.1 Property, Plant & Equipment are stated at historical cost less accumulated depreciation/amortization, wherever applicable, except those premises, which have been revalued. The appreciation on revaluation is credited to revaluation reserve and incremental depreciation attributable to the revalued amount is deducted there from.

6.2 Software is capitalized and clubbed under Intangible assets.

6.3 Cost includes cost of purchase and all expenditure such as site preparation, installation costs and professional fees incurred on the asset till the time of capitalization. Subsequent expenditure/s incurred on the assets are capitalized only when it increases the future benefits from such assets or their functioning capability.

6.4 Depreciation:

A. Depreciation on assets (including land where value is not separable) is provided on straight-line method based on estimated life of the asset, except in respect of computers where it is calculated on the straight-line method, at the rates prescribed by RBI.

B. Depreciation on assets has been provided at the rates furnished below: -

Particulars	Rate of Depreciation
PREMISES
Freehold Properties
Land	NIL
Depreciation to be provided on Construction Cost where the land cost is segregated and on total cost where the land cost is not ascertainable and cannot be segregated	2.50% (40 years Straight Line Method or remaining life whichever is lower)
Land acquired on perpetual lease where no lease period is mentioned	NIL
Land acquired on lease where lease period is mentioned	Over lease period
Building
Constructed on free hold land and on leased land, where lease period is above 40 years	2.50%
Constructed on leased land where lease period is below 40 years	Over lease period
FIXED ASSETS EXCEPT PREMISES
Furniture and fixtures- Steel articles	5.00%
Furniture and fixtures-wooden articles	10.00%
Mattresses	20.00%
Mobile Phone Instruments	33.33%
Machinery, electrical and miscellaneous articles	15.00%
Motor cars and cycles	15.00%
Computers, ATMs and related items, Laptop, I- pad, etc., Servers, Network, Equipment & Automated Teller Machines (Including software forming an integral part of computer hardware)	33.33%
Items of office fixed assets amounting less than Rs. 25,000/-and/or having useful life of less than 12 months from the date of acquisition are recognized as expense (except to staff, items costing more than Rs. 1,500/- which can be separately used). Assets costing less than Rs. 1,500/- each are depreciated@100% in the year of purchase. Cost of Application Software / Operating System / Data base amounting up to Rs. 25,000/- are charged to revenue.

C. Depreciation on fresh additions to assets other than Bank''s own premises is provided from the day in which the assets are capitalized and in the case of assets sold/disposed-off during the year, up to the date in which it is sold/ disposed-off, i.e., daily basis.

D. The depreciation on bank''s own premises existing at the close of the year is charged for full year. The construction cost is depreciated only when the building is complete in all respects. Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

E. In respect of leasehold premises, the lease premium, if any, is amortized over the period of lease and the lease rent is charged in the respective year(s).

F. The Revalued assets is depreciated over the balance useful life of the asset as assessed at the time of revaluation.

7. IMPAIRMENT OF ASSETS:

The carrying costs of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors, an impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.

After impairment, if any, depreciation is provided on the revised carrying cost of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

8. EMPLOYMENT BENEFITS:

PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit & Loss A/c.

GRATUITY:

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

PENSION:

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

The Bank operates a New Pension Scheme (NPS) for all officers/ employees who have joined the Bank on or after 01.04.2010. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with contribution of 14% of their basic pay plus dearness allowance from the Bank. Pending completion of the registration procedures of the employees concerned, these contributions are retained. The Bank recognizes such annual contributions as an expense in the year to which they relate. Upon the receipt of the Permanent Retirement Account Number (PRAN), the consolidated contribution amounts are transferred to the NPS Trust.

COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave (PL) and Sick Leave (including unavailed casual leave) are provided for based on actuarial valuation. The scheme for Privilege Leave (PL) is funded by the Bank and is managed by a separate trust.

OTHER EMPLOYEE BENEFITS:

Other Employee Benefits such as Leave Fare Concession (LFC), Silver Jubilee Award, etc., are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective countries.

The valuation method used for defined benefit obligations for employee benefits is ‘Projected Unit Credit Method''.

9. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS & BALANCES:

Transactions involving foreign exchange are accounted for in accordance with AS 11, ‘The Effect of Changes in Foreign Exchange Rates''.

9.1 Except advances of erstwhile London branches which are accounted for at the exchange rate prevailing on the date of parking in India, all other monetary assets and liabilities, guarantees, acceptances, endorsements and other obligations are translated in Indian Rupee equivalent at the exchange rates prevailing as on the Balance Sheet date as per Foreign Exchange Dealers'' Association of India (FEDAI) guidelines.

9.2 Non-monetary items other than fixed assets which are carried at historical cost are translated at exchange rate prevailing on the date of transaction.

9.3 Outstanding Forward exchange spot and forward contracts are translated as on the Balance Sheet date at the rates notified by FEDAI and the resultant gain/loss on translation is taken to Profit & Loss Account.

Foreign exchange spot/forward contracts/deals (Merchant and Inter-bank) which are not intended for trading/Merchant Hedge and are outstanding on the Balance Sheet date, are reverse re-valued at the closing FEDAI spot/forward rate in order to remove revaluation effect on exchange profit. The premium or

discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the life of the contract.

9.4 Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.

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

Gains/Losses on account of changes 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 the Profit and Loss Account.

9.5 Offices outside India / Offshore Banking Units:

(i) Operations of foreign branches and off shore banking unit are classified as ‘Non-integral foreign operations'' and operations of representative offices abroad are classified as ‘integral foreign operations''.

(ii) Foreign currency transactions of integral foreign operations and non-integral foreign operations are accounted for as prescribed by AS-11.

(iii) Exchange Fluctuation resulting into Profit / loss of non-integral operations is credited /debited to Exchange Fluctuation Reserve.

10. TAXES ON INCOME

Income tax expense is the aggregate amount of current tax including Minimum Alternate Tax (MAT), wherever applicable and deferred tax expense incurred by the Bank. The current tax and deferred tax are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - Accounting for Taxes on Income respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.

MAT credit is recognized as an asset only when and to the extent there is convincing evidence that there will be payment of normal income tax during the period specified under the income Tax Act, 1961.

Deferred Tax adjustments comprises of changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognized by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognized in the profit and loss account. Deferred tax assets are recognized and re-assessed at each reporting date, based upon management''s judgment as to whether their realization is considered as reasonably/ virtually certain.

11. EARNINGS PER SHARE:

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

Diluted Earnings per Share reflects the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted Earnings per Share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding.

12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

In conformity with AS 29, ‘Provisions, Contingent Liabilities and Contingent Assets'', issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when it has a present obligation as a result of a past event, and it is probable that outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

A Contingent Liability is a potential liability, in terms of money, which may arise depending on the outcome of an uncertain specific event. A possible obligation which may or may not arise depending on how a future event unfolds has been recognized as Contingent Liability.

Further, the cases which although have been filed against the Bank, but possibility of any obligation arising upon the Bank in those case is remote, have not been construed and included in Contingent Liability.

Contingent Assets are not recognized in the financial statements.

13. BULLION TRANSACTIONS:

The Bank imports bullion including precious metal bars on a consignment basis for selling to its customers. The imports are typically on a back-to-back basis and are priced to the customer based on price quoted by the supplier. The Bank earns a fee on such bullion transactions.

The fee is classified under commission income. The Bank also accepts deposits and lends gold, which is treated as deposits/ advances as the case may be with the interest paid / received classified as interest expense/income.

14. SEGMENT REPORTING:

The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in compliance with the Accounting Standard 17 issued by ICAI.

15. The Bank, in accordance with RBI Circular FIDD.CO.Plan. BC.23/ 04.09.01/ 2015-16 dated April 7, 2016, trades in Priority Sector portfolio by selling or buying PSLC. There is no transfer of risks or loan assets in these transactions. The fee paid for purchase of the PSLC is treated as an ‘Expense'' and the Fee received from sale of PSLCs is treated as ‘Other Income''.

16. CASH & CASH EQUIVALENTS

Cash and cash equivalents include:

a) Cash and Balances with RBI, Balances with Bank and money at call and short notice.

b) The balances in Reverse Repo are reported as per the guidelines provided by RBI vide its circular dated 19.05.2022, (i.e., under schedule 6, schedule 7 and schedule 9, as applicable). The balance held by the Bank under Standing Deposit Facility (SDF) is also reported similarly.

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Mar 31, 2023

1. BASIS OF PREPARATION:

The financial statements have been prepared on historical cost basis and conform, in all material aspects, to Generally Accepted Accounting Principles (GAAP) in India unless otherwise stated encompassing applicable statutory provisions, regulatory norms prescribed by Reserve Bank of India (RBI), circulars and guidelines issued by the Reserve Bank of India (''RBI'') from time to time, Banking Regulation Act 1949, Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and prevailing practices in Banking industry in India.

In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with except as specified elsewhere.

The financial statements have been prepared on going concern basis with accrual concept and in accordance with the accounting policies and practices consistently followed unless otherwise stated.

2. USE OF ESTIMATES:

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

Future results could differ from these estimates. Difference between the actual results and estimates is recognized in the period in which the results are known / materialized.

Any revision to the accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

3. REVENUE RECOGNITION:

3.1 Income & expenditure (other than items referred to in paragraph 3.5) are generally accounted for on accrual basis.

3.2 Income from Non- Performing Assets (NPAs), comprising of advances and investments, is recognized upon realization, as per the prudential norms prescribed by the RBI/ respective country regulators in the case of foreign offices (hereafter collectively referred to as Regulatory Authorities).

3.3 Mode of appropriation of recovery in order of priority will be as below:

(a) Recoveries in NPA accounts (irrespective of the mode / status / stage of recovery actions) are appropriated in the following order of priority except for the cases covered under below mentioned points (b) & (c):

I. Expenditure/Out of Pocket Expenses incurred for Recovery, including under SARFAESI Action (Recorded in Memorandum Dues);

ii. Unrealized/accrued interest.

iii. Principal irregularities i.e. NPAoutstanding in the account.

Any exceptions to the above may be considered by HOCAC-III (for proposals falling under the powers of various committees up to HOCAC-III) & Management Committee forproposals under its vested powers.

(b) However, in case of Compromise and Resolution/ Settlement through NCLT, recovery is appropriated as per the terms of respective compromise/ resolution settlement.

c) In case of suit filed/decreed accounts, recovery is appropriated as under:

• As perthe directives of the concerned Court.

¦ In the absence of specific directives from the Court, as mentioned at point (a) above.

3.4 The sale of NPA is accounted as per guidelines prescribed by RBI and as disclosed under Para 5.3.

3.5 Commission (excluding on Government Business, Insurance Business, Mutual Fund Business, Letter of Credit and Bank Guarantee), exchange, locker rentand Income on Rupee Derivatives designated as ''Trading'' are accounted for on realization and insurance claims are accounted for on settlement. Interest on overdue inland bills is accounted for on realization and interest on overdue foreign bill, till its crystallization is accounted for on crystallization and thereafteron realization.

3.6 In case of suit filed accounts, related legal and other expenses incurred are charged to Profit & Loss Account and on recovery, the same are accounted for as such.

3.7 Income from interest on refund of income tax is accounted for in the year the order is passed by the concerned authority.

3.8 Lease payments including cost escalation for assets taken on operating lease are recognized in the Profit and Loss Account over the lease term in accordance with the AS 19 (Leases) issued by ICAI.

3.9 Provision for Reward Points on Credit cards is made based on the accumulated outstanding points in each category.

3.10 Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank attracts rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.

3.11 Dividend (excluding Interim Dividend) is accounted for as and when the right to receive the dividend is established.

4. INVESTMENTS:

4.1 The transactions in Securities are recorded on ''Settlement Date''.

4.2 Investments are classified into six categories as stipulated in Form A of the Third Schedule to the Banking Regulation Act, 1949.

4.3 Investments have been categorized into ''Held to Maturity'', ''Available for Sale'' and ''Held for Trading'' in terms of RBI guidelines as under:

(a) Securities acquired by the Bank with an intention to hold till maturity are classified under''Heldto Maturity''.

(b) The securities acquired by the Bank with an intention to trade by taking advantages of short-term price/ interest rate movements are classified under ''Held forTrading''.

c) The securities, which do not fall within the above two categories, are classified under''Available for Sale''.

4.4 Investments in subsidiaries, joint ventures and associates are classified asHTM.

4.5 Transfer of securities from one category to another is carried out at the lower of acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

However, transfer of securities from HTM category to AFS category is carried out on book value. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.

An investment is classified as HTM, HFT or AFS at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

4.6 In determining acquisition cost of an investment:

(a) Brokerage, commission, Securities Transaction Tax (STT), etc.

paid in connection with acquisition of securities are treated as revenue expenses upfront and excluded from cost

(b) Interest accrued up to the date of acquisition/sale of securities i.e. broken- period interest is excluded from the acquisition cost/sale consideration and the same is accounted as interest accrued but not due.

(c) Cost is determined on the weighted average cost method forall categories of investments.

4.7 Investments are valued as per RBI/ FIMMDA guidelines, on the following basis:

Held to Maturity

(i) Investments under ''Held to Maturity¹ category are carried at acquisition cost.

Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity on straight line basis. Such amortization of premium is reflected in Interest Earned under the head ''Income on investments'' as a deduction.

(ii) Investments in subsidiaries/joint ventures/associates are valued at carrying cost less diminution, other than temporary in nature for each investment individually.

(iii) Investments in sponsored regional rural banks are valued at carrying cost.

(iv) Investment in Venture Capital is valued at carrying cost.

(v) Equity shares held in HTM category are valued at carrying cost.

Available for Sale and Held for Trading:
(a)	Govt. Securities I. Central Govt. Securities II. State Govt. Securities	At market prices/YTM as published by Fixed Income Money Market and Derivatives Association of India (FIMMDA) / Financial Benchmark India Pvt. Ltd (FBI L). On appropriate yield to maturity basis as per FIMMDA/RBI guidelines.
(b)	Securities guaranteed by Central / State Government, PSU Bonds (not in the nature of advances)	On appropriate yield to maturity basis as per FIMMDA/RBI guidelines.
(c)	Treasury Bills	At carrying cost
(d)	Equity shares	At market price, if quoted, otherwise at breakup value of the Shares as per latest Balance Sheet. (The date as on which the latest balance sheet is drawn up shall not precede the date of valuation by more than 18 months), otherwise at Re.l per company.

(e)	Preference shares	At market price, if quoted, or on appropriate yield to maturity basis not exceeding redemption value as per RBI/FIM MDAguidelines.
(f)	Bonds and debentures (not in the nature of advances)	At market price, if quoted, or on appropriate yield to maturity basis as per RBI/FI M MDAguidelines.
(g)	Units of mutual funds	As per stock exchange quotation, if quoted; at repurchase price/NAV, if unquoted
(h)	Commercial Paper	At carrying cost
(0	Certificate of Deposits	At carrying cost
G)	Security receipts	Investments by lenders in SRs (Security Receipts) / other securities issued by ARCs (Asset Reconstruction Companies) shall be valued periodically by reckoning the Net Asset Value (NAV) declared by the ARC based on the recovery ratings received forsuch instruments. The Bank shall carry the investment in its books, on an ongoing basis until its transfer or its realization, at lower of redemption value of SRs arrived based on NAV, and the Net Book Value (NBV) of the transferred stressed loan at the time of transfer. If the investment by the transferor (Bank) in SRs issued against loans transferred by it is more than 10 percent of all SRs issued against the transferred asset, then the valuation of the SRs on the books of the transferor shall be the lower of the following: i) Net Asset Value (NAV) declared by the ARC based on the recovery ratings received forsuch instruments; and ii) Face value of the SRs reduced by the notional provisioning rate applicable if the loans had continued on the books of the bank.
(k)	Venture Capital Funds	At net asset value (NAV) declared by the VCF
(1)	Other Investments	At carrying cost less diminution in value

The above valuation in category of Available for Sale and Held for Trading is done scrip wise on quarterly basis and depreciation/appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for while net appreciation is ignored. On provision for depreciation, the book value of the individual security remains unchanged after marking to market.

Investments in sponsored regional rural banks shall be valued at carrying cost irrespective of Category (HTM & AFS)

4.8 Investments are subject to appropriate provisioning/ derecognition of income, in line with the prudential norms of Reserve Bank of India for NPI classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities.

If any credit facility availed by an entity is NPAin the books of the Bank, investment in any of the securities issued by the same entity would also be treated as NPI and vice versa. However, in respect of NPI preference share where the dividend is not paid, the corresponding credit facility is not treated as NPA.

In case of securities i.e. bonds, debentures, etc. where the credit facilities are availed by the borrowers, the provision has been made on the basis of YTM or IRAC norms whichever is higher.

4.9 Profit or loss on sale of investments in any category is taken to Profit and Loss account but, in case of profit on sale of investments in ''Held to Maturity'' category, an equivalent amount (net of taxes and amount transferred to Statutory Reserve) is appropriated to ''Capital Reserve Account'', atyearend.

Profit or loss on redemption of investments in AFS & HFT category is reflected in interest earned income on investments, as an addition/deduction from interest income earned.

4.10Securities repurchased/resold under buy back arrangement are accounted for at original cost.

4.11 The securities sold and purchased under Repo/Reverse Repo are accounted as Collateralized lending and borrowing transactions. However, securities are transferred as in the case of normal outright sale/purchase transactions and such movement of securities is reflected using the Repo/Reverse Repo Accounts and Contra entries. The above 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 Account is classified under schedule 4 (Borrowings).

4.12 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under:

Hedge Swaps

Interest rate swaps with hedge interest bearing asset or liability are accounted for on accrual basis except the swaps designated with an asset or liability that are carried at lower of market value or cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap orthe remaining life of the asset/ liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes recorded in the financial statements.

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.

4.13 Foreign Currency Options:

Foreign currency options written by the Bank with a back-to-back contract with another bank are not marked to market since there is no market risk.

Premium received is held as a liability and transferred to the Profit and Loss Account on maturity/cancellation.

5. LOANS / ADVANCES AND PROVISIONSTHEREON:

5.1 Advances are classified as performing and non-performing assets; provisions are made in accordance with prudential norms prescribed by RBI.

(a) Advances are classified: Standard, Sub Standard, Doubtful and Loss assets borrowerwise.

(b) Advances are stated net of specific loan loss provisions, provision for diminution in fair value of restructured advances.

5.2 In respect of foreign offices, the classification of loans and advances and provisions for N PAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent.

Loans and advances held at the overseas branches that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the host country.

5.3 Financial Assets sold are recognized as under:

(a) ForSale of financial assets sold to SCs/RCs

(i) If the sale to SCs/RCs is at a price below the Net Book Value (NBV), (i.e. Book Value less provisions held), the shortfall is debited to the Profit & Loss account. Bank can also use counter cyclical / floating provisions for meeting the shortfall on sale of NPAs i.e. when the sale is at a price below the NBV.

(ii) If the sale is for a value higher than the NBV, Bank can reverse the excess provision on sale of NPAs to its profit and loss account in the year, the amounts are received. However, Bank can reverse excess provision (when the sale is for a value higher than the N BV) arising out of sale of

NPAs, only when the cash received (by way of initial consideration and/ or redemption of SRs/ PTCs) is higher than the NBV of the asset. Further, reversal of excess provision will be limited to the extent to which cash received exceeds the N BV of the asset.

(b) For Sale of financial assets sold to Other Banks/NBFCs/FIs etc.

(i) In case the sale is at a price below the Net Book Value (NBV) i.e. Book Value less provision held, the shortfall should be debited to the Profit & Loss A/c of that year.

(ii) In case the sale is for a value higher than the Net Book Value (NBV) i.e. Book Value less provision held, the excess provision shall not be reversed but will be utilized to meet the shortfall / loss on account of sale of other Non Performing Financial Assets.

(iii) In case there is overall surplus over and above the excess provision in any of the sale transaction that surplus amount will be taken in the Profit & loss a/c.

5.4 Restructured Assets:

For restructured/rescheduled advances, provisions are made in accordance with guidelines issued by RBI from time to time. Provision for diminution in fair value of restructured advances is measured at net present value terms as per RBI guidelines for accounts where total dues to the bank are Rupees One Crore and above. For other accounts, the provision for diminution in fair value is computed notionally at 5% of total exposure to the bankas per RBI guidelines.

5.5 In addition to the specific provision on NPAs, general provisions are also made for standard assets as per extant RBI Guidelines. These provisions are reflected in Schedule 5 of the Balance Sheet under the head ''Other Liabilities & Provisions - Others'' and are not considered for arriving at the Net NPAs.

5.6 In accordance with RBI guidelines, accelerated provision is made on non-performing advances which were not earlier reported by the Bank as Special Mention Account under ''SMA-2'' category to Central Repository of Information on Large Credits (CRILC).

5.7 Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized in the profit and loss account.

5.8 Provision forCountry Exposure:

In addition to the specific provisions held according to the asset classification status, provisions are also made for individual country exposures (other than the home country). Countries are categorized into seven risk categories, namely, insignificant, low, moderately low, moderate, moderately high, high and very high, and provisioning made as per extant RBI guidelines. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposures. The provision is reflected in Schedule 5 of the Balance Sheet underthe ''Other Liabilities & Provisions - Others''.

5.9 An additional provision of 2% (in addition to country risk provision that is applicable to all overseas exposures) against standard assets representing all exposures to step down subsidiaries of Indian Corporates has been made to cover the additional risk arising from complexity in the structure, location of different intermediary entities in different jurisdictions exposing the Indian Company, and hence the Bank, to a greater political and regulatory risk. (As per RBI Cir.No. RBI/ 2015.16/279 DBR. IBD.BC No. 68/ 23.37.001/ 2015-16 dated 31.12.2015).

6. PROPERTY, PLANT&EQUIPMENT:

6.1 Property, Plant & Equipment are stated at historical cost less accumulated depreciation/amortization, wherever applicable, except those premises, which have been revalued. The appreciation on revaluation is credited to revaluation reserve and incremental depreciation attributable to the revalued amount is deducted there from.

6.2 Software is capitalized and clubbed under Intangible assets.

6.3 Cost includes cost of purchase and all expenditure such as site preparation, installation costs and professional fees incurred on the asset till the time of capitalization. Subsequent expenditure/s incurred on the assets are capitalized only when it increases the future benefits from such assets ortheirfunctioning capability.

6.4 Depreciation:

A. Depreciation on assets (including land where value is not separable) is provided on straight-line method based on estimated life of the asset, except in respect of computers where it is calculated on the straight-line method, at the rates prescribed by RBI.

B. Depreciation on assets has been provided at the rates furnished below:-

Particulars	Rate of Depreciation
PREMISES
Freehold Properties
Land	NIL

Depreciation to be provided on Construction Cost where the land cost is segregated and on total cost where the land cost is not ascertainable and cannot be segregated	2.50% (40 years Straight Line Method or remaining life whichever is lower)
Land acquired on perpetual lease where no lease period is mentioned	NIL
Land acquired on lease where lease period is mentioned	Over lease period
Building
Constructed on free hold land and on leased land, where lease period is above 40 years	2.50%
Constructed on leased land where lease period is below 40 years	Over lease period
FIXED ASSETS EXCEPT PREMISES
Furniture and fixtures- Steel articles	5.00%
Furniture and fixtures-wooden articles	10.00%
Mattresses	20.00%
Mobile Phone Instruments	33.33%
Machinery, electrical and miscellaneous articles	15.00%
Motor cars and cycles	15.00%
Computers, ATMs and related items, laptop, i pad etc Servers, Network, Equipment & Automated Teller Machines (Including software forming an integral part of computer hardware)	33.33%
Items of office fixed assets (excepts to staff) amount less than Rs. 25,000/-and / or having useful life of less than 12 months from the date of acquisition are recognized as expense.
Cost of Application Software / Operating System / Data base amounting up to Rs. 25,000/- are charged to revenue.

C. Depreciation on fresh additions to assets other than Bank''s own premises is provided from the day in which the assets are capitalized and in the case of assets sold/disposed off during theyear, up to the date in which it is sold/ disposed off i.e. daily basis.

D. The depreciation on bank''s own premises existing at the close of the year is charged for full year. The construction cost is depreciated only when the building is complete in all respects. Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

E. In respect of leasehold premises, the lease premium, if any, is amortized over the period of lease and the lease rent is charged in the respective yea r(s).

F. The Revalued assets is depreciated over the balance useful life of the asset as assessed at the time of revaluation.

7. IMPAIRMENTOFASSETS:

The carrying costs of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors an impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.

After impairment, if any, depreciation is provided on the revised carrying cost of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

8. EMPLOYMENTBENEFITS:

PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit & Loss A/c.

GRATUITY:

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

PENSION:

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

The Bank operates a New Pension Scheme (NPS) for all officers/ employees who have joined the Bank on or after 01.04.2010. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with contribution of 14% of their basic pay plus dearness allowance from the Bank. Pending completion of the registration procedures of the employees concerned, these contributions are retained.

The Bank recognizes such annual contributions as an expense in the year to which they relate. Upon the receipt of the Permanent Retirement Account Number (PRAN), the consolidated contribution amounts are transferred to the N PS Trust.

COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave (PL) and Sick Leave (including unavailed casual leave) are provided for based on actuarial valuation. The scheme for Privilege Leave (PL) is funded by the Bank and is managed by a separate trust.

OTHER EMPLOYEE BENEFITS:

Other Employee Benefits such as Leave Fare Concession (LFC), Silver Jubilee Award, etc. are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective countries.

9. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS & BALANCES:

Transactions involving foreign exchange are accounted for in accordance with AS 11, ''The Effect of Changes in Foreign Exchange Rates''.

9.1 Except advances of erstwhile London branches which are accounted for at the exchange rate prevailing on the date of parking in India, all other monetary assets and liabilities, guarantees, acceptances, endorsements and other obligations are translated in Indian Rupee equivalent at the exchange rates prevailing as on the Balance Sheet date as per Foreign Exchange Dealers'' Association of India (FEDAI) guidelines.

9.2 Non-monetary items other than fixed assets which are carried at historical cost are translated at exchange rate prevailing on the date of transaction.

9.3 Outstanding Forward exchange spot and forward contracts are translated as on the Balance Sheet date at the rates notified by FEDAI and the resultant gain/loss on translation is taken to Profit & Loss Account.

Foreign exchange spot/forward contracts/deals (Merchant and Inter-bank) which are not intended for trading/Merchant Hedge and are outstanding on the Balance Sheet date, are reverse re-valued at the closing FEDAI spot/forward rate in order to remove revaluation effect on exchange profit. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the life of the contract.

9.4 Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.

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

Gains/Losses on account of changes 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 the Profit and Loss Account.

9.5 Offices outside India / Offshore Banking Units:

(i) Operations of foreign branches and off shore banking unit are classified as ''Non-integral foreign operations'' and operations of representative offices abroad are classified as ''integral foreign operations''.

(ii) Foreign currency transactions of integral foreign operations and non-integral foreign operations are accounted foras prescribed byAS-11.

(iii) Exchange Fluctuation resulting into Profit / loss of nonintegral operations is credited /debited to Exchange Fluctuation Reserve.

10. TAXES ON INCOME

Income tax expense is the aggregate amount of current tax including Minimum Alternate Tax (MAT), wherever applicable and deferred tax expense incurred by the Bank. The current tax and deferred tax are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - Accounting for Taxes on Income respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.

MAT credit is recognized as an asset only when and to the extent there is convincing evidence that there will be payment of normal income tax during the period specified underthe incomeTaxAct, 1961.

Deferred Tax adjustments comprises of changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognized by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognized in the profit and loss account. Deferred tax assets are recognized and re-assessed at each reporting date, based upon management''s judgment as to whether their realization is considered as reasonably/virtually certain.

11. EARNINGS PERSHARE:

The Bank reports basic and diluted earnings per share in accordance with AS 20 - ''Earnings per Share¹ issued by the ICAI. Basic Earnings per Share is computed by dividing the Net Profit after Tax for the year attributable to equity shareholders by the weighted average number of equity sha res outsta nding for the year.

Diluted Earnings per Share reflects the potential dilution that could occur if securities or other contracts to issue equity sha res were exercised or converted during the year. Diluted Earnings perShareis computed using the weighted average number of equity shares and dilutive potential equity shares outstanding.

12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

In conformity with AS 29, ''Provisions, Contingent Liabilities and Contingent Assets'', issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when it has a present obligation as a result of a past event, and it is probable that outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

A Contingent Liability is a potential liability, in terms of money, which may arise depending on the outcome of an uncertain specific event. A possible obligation which may or may not arise depending on how a future event unfolds has been recognized as Contingent Liability.

Further, the cases which although have been filed against the Bank, but possibility of any obligation arising upon the Bank in those case is remote, have not been construed and included in Contingent Liability.

Contingent Assets are not recognized in the financial statements.

13. BULLION TRANSACTIONS:

The Bank imports bullion including precious metal bars on a consignment basis for selling to its customers. The imports are typically on a back-to-back basis and are priced to the customerbased on price quoted by the supplier. The Bank earns a fee on such bullion transactions. The fee is classified under commission income. The Bank also accepts deposits and lends gold, which is treated as deposits/advances as the case may be with the interest paid / received classified as interest expense/income.

14. SEGMENTREPORTING:

The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in compliance with the Accounting Standard 17 issued by ICAI.

15. The Bank, in accordance with RBI Circular FIDD.CO. Plan.BC.23/ 04.09.01/ 2015-16 dated April 7, 2016, trades in Priority Sector portfolio by selling or buying PSLC. There is no transfer of risks or loan assets in these transactions. The fee paid for purchase of the PSLC is treated as an ''Expense'' and the Fee received from sale of PSLCs is treated as ''Other Income''.

16. CASH&CASH EQUIVALENTS

Cash and cash equivalents include:

a) Cash and Balances with RBI, Balances with Bank and money at call and short notice.

b) The balances in Reverse Repo are reported as per the guidelines provided by RBI vide its circular dated 19.05.2022 (i.e. under schedule 6, schedule 7 and schedule 9, as applicable). The balance held by the Bank under Standing Deposit Facility (SDF) is also reported similarly.

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Mar 31, 2022

SIGNIFICANT ACCOUNTING POLICIES

1. BASIS OF PREPARATION:

The financial statements have been prepared on historical cost basis and conform, in all material aspects, to Generally Accepted Accounting Principles (GAAP) in India unless otherwise stated encompassing applicable statutory provisions, regulatory norms prescribed by Reserve Bank of India (RBI), circulars and guidelines issued by the Reserve Bank of India (''RBI'') from time to time, Banking Regulation Act 1949, Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and prevailing practices in Banking industry in India.

In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with except as specified elsewhere.

The financial statements have been prepared on going concern basis with accrual concept and in accordance with the accounting policies and practices consistently followed unless otherwise stated.

2. USE OF ESTIMATES:

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

Future results could differ from these estimates.

Difference between the actual results and estimates is recognized in the period in which the results are known / materialized.

Any revision to the accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

3. REVENUE RECOGNITION:

3.1 Income & expenditure (other than items referred to in paragraph 3.5) are generally accounted for on accrual basis.

3.2 Income from Non- Performing Assets (NPAs), comprising of advances and investments, is recognized upon realization, as per the prudential norms prescribed by the RBI/ respective country regulators in the case of foreign offices (hereafter collectively referred to as Regulatory Authorities).

3.3 Mode of appropriation of recovery in order of priority will be as below:

(a) Recoveries in NPA accounts (irrespective of the mode / status / stage of recovery actions) shall be appropriated in the following order of priority except for the cases covered under below mentioned points (b) & (c):

i. Expenditure/Out of Pocket Expenses incurred for Recovery, including under SARFAESI Action (Recorded in Memorandum Dues);

ii. Thereafter towards the unrealised/accrued interest.

iii. Principal irregularities i.e. NPA outstanding in the account.

Any exceptions to the above may be considered by HOCAC-III (for proposals falling under the powers of various committee''s upto HOCAC-III) & Management Committee for proposals under its vested powers.

(b) However, in case of Compromise and Resolution/ Settlement through NCLT, recovery shall be appropriated as per the terms of respective compromise/ resolution settlement.

(c) In case of suit filed/decreed accounts, recovery shall be appropriated as under:-

• As per the directives of the concerned Court.

• In the absence of specific directives from the Court, as mentioned at point (a) above.

3.4 The sale of NPA is accounted as per

guidelines prescribed by RBI and as disclosed under Para 5.3.

3.5 Commission (excluding on Government Business, Insurance Business, Mutual Fund Business, Letter of Credit and Bank Guarantee), exchange, locker rent and Income on Rupee Derivatives designated as "Trading" are accounted for on realization and insurance claims are accounted for on settlement. Interest on overdue inland bills is being accounted for on realization and interest on overdue foreign bill, till its crystallization is accounted for on crystallization and thereafter on realization.

3.6 In case of suit filed accounts, related legal and other expenses incurred are charged to Profit & Loss Account and on recovery the same are accounted for as such.

3.7 Income from interest on refund of income tax is accounted for in the year the order is passed by the concerned authority.

3.8 Lease payments including cost escalation for assets taken on operating lease are recognized in the Profit and Loss Account over the lease term in accordance with the AS 19 (Leases) issued by ICAI.

3.9 Provision for Reward Points on Credit cards is made based on the accumulated outstanding points in each category.

3.10 Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower.

3.11 Dividend (excluding Interim Dividend) is accounted for as and when the right to receive the dividend is established.

4. INVESTMENTS:

4.1 The transactions in Securities are recorded on "Settlement Date".

4.2 Investments are classified into six categories as stipulated in form A of the third schedule to the Banking Regulation Act, 1949.

4.3 Investments have been categorized into "Held to Maturity", "Available for Sale" and "Held for Trading" in terms of RBI guidelines as under:

(a) Securities acquired by the Bank with an intention to hold till maturity are classified under "Held to Maturity".

(b) The securities acquired by the Bank with an intention to trade by taking advantages of shortterm price/ interest rate movements are classified under "Held for Trading".

(c) The securities, which do not fall within the above two categories, are classified under "Available for Sale".

4.4 Investments in subsidiaries, joint ventures and associates are classified as HTM.

4.5 Transfer of securities from one category to another is carried out at the lower of acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

However, transfer of securities from HTM category to AFS category is carried out on book value. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.

An investment is classified as HTM, HFT or AFS at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

4.6 In determining acquisition cost of an investment

(a) Brokerage, commission, Securities Transaction Tax (STT) etc. paid in connection with acquisition of securities are treated as revenue expenses upfront and excluded from cost.

(b) Interest accrued up to the date of acquisition/sale of securities i.e. broken- period interest is excluded from the acquisition cost/sale consideration and the same is accounted in interest accrued but not due account.

(c) Cost is determined on the weighted average cost method for all categories of investments.

4.7 Investments are valued as per RBI/ FIMMDA guidelines, on the following basis:

Held to Maturity

(i) Investments under "Held to Maturity "category are carried at acquisition cost.

Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity on straight line basis. Such amortization of premium is reflected in Interest Earned under the head "Income on investments" as a deduction.

(ii) Investments in subsidiaries/joint ventures/ associates are valued at carrying cost less diminution, other than temporary in nature for each investment individually.

(iii) Investments in sponsored regional rural banks are valued at carrying cost.

(iv) Investment in Venture Capital is valued at carrying cost.

(v) Equity shares held in HTM category are valued at carrying cost.

Available for Sale and Held for Trading:

(a)	Govt. Securities
	I. Central Govt. Securities	At market prices/YTM as published by Fixed Income Money Market and Derivatives Association of India (FIMMDA) / Financial Benchmark India Pvt. Ltd (FBIL).
	II. State Govt. Securities	On appropriate yield to maturity basis as per FIMMDA/RBI guidelines.

(b)	Securities guaranteed by Central / State Government, PSU Bonds (not in the nature of advances)	On appropriate yield to maturity basis as per FIMMDA/ RBI guidelines
(c)	Treasury Bills	At carrying cost
(d)	Equity shares	At market price, if quoted, otherwise at breakup value of the Shares as per latest Balance Sheet (not more than one year old), otherwise at Re.1 per company
(e)	Preference shares	At market price, if quoted or on appropriate yield to maturity basis not exceeding redemption value as per RBI/ FIMMDA guidelines.
(f)	Bonds and debentures (not in the nature of advances)	At market price, if quoted, or on appropriate yield to maturity basis as per RBI/ FIMMDA guidelines.
(g)	Units of mutual funds	As per stock exchange quotation, if quoted; at repurchase price/NAV, if unquoted
(h)	Commercial Paper	At carrying cost
(i)	Certificate of Deposits	At carrying cost
(j)	Security receipts of ARCIL	At net asset value of the asset as declared by ARCIL
(k)	Venture Capital Funds	At net asset value (NAV) declared by the VCF
(l)	Other Investments	At carrying cost less diminution in value

The above valuation in category of Available for Sale and Held for Trading is done scrip wise on quarterly basis and depreciation/appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for while net appreciation is ignored. On provision for depreciation, the book value of the individual security remains unchanged after marking to market.

4.8 Investments are subject to appropriate provisioning/ de-recognition of income, in line with the prudential norms of Reserve Bank of India for NPI classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities.

If any credit facility availed by an entity is NPA in the books of the Bank, investment in any of the securities issued by the same entity would also be treated as NPI and vice versa. However, in respect of NPI preference share where the dividend is not paid, the corresponding credit facility is not treated as NPA.

In case of securities i.e. bonds, debentures, etc. where the credit facilities are availed by the borrowers, the provision has been made on the basis of YTM or IRAC norms whichever is higher.

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

4.10 Securities repurchased/resold under buy back arrangement are accounted for at original cost.

4.11 The securities sold and purchased under Repo/ Reverse Repo are accounted as Collateralized lending and borrowing transactions. However, securities are transferred as in the case of normal outright sale/ purchase transactions and such movement of securities is reflected using the Repo/Reverse Repo Accounts and Contra entries. The above 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 Account is classified under schedule 4 (Borrowings) and balance in Reverse Repo Account is classified under Schedule 7 (Balance with Banks and Money at Call & Short Notice).The same is also applicable to LAF with RBI.

4.12 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under:-

Hedge Swaps

Interest rate swaps with hedge interest bearing asset or liability are accounted for on accrual basis except the swaps designated with an asset or liability that are carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/ liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes recorded in the financial statements.

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.

4.13 Foreign Currency Options:

Foreign currency options written by the bank with a back-to-back contract with another bank are not marked to market since there is no market risk.

Premium received is held as a liability and transferred to the Profit and Loss Account on maturity/cancellation.

5. LOANS / ADVANCES AND PROVISIONS THEREON:

5.1 Advances are classified as performing and nonperforming assets; provisions are made in accordance with prudential norms prescribed by RBI.

(a) Advances are classified: Standard, Sub Standard, Doubtful and Loss assets borrower wise.

(b) Advances are stated net of specific loan loss provisions, provision for diminution in fair value of restructured advances.

5.2 In respect of foreign offices, the classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent.

Loans and advances held at the overseas branches that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the host country.

5.3 Financial Assets sold are recognized as under:

(a) For Sale of financial assets sold to SCs/RCs

(i) If the sale to SCs/RCs is at a price below the Net Book Value (NBV), (i.e. Book Value less provisions held), the shortfall should be debited to the Profit & Loss account of that year. Bank can also use counter cyclical / floating provisions for meeting the shortfall on sale of NPAs i.e. when the sale is at a price below the NBV.

(ii) If the sale is for a value higher than the NBV, Bank can reverse the excess provision on sale of NPAs to its profit and loss account in the year, the amounts

are received. However, Bank can reverse excess provision (when the sale is for a value higher than the NBV) arising out of sale of NPAs, only when the cash received (by way of initial consideration and/ or redemption of SRs/ PTCs) is higher than the NBV of the asset. Further, reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.

(b) For Sale of financial assets sold to Other Banks/NBFCs/ FIs etc.

(i) In case the sale is at a price below the Net Book Value (NBV) i.e. Book Value less provision held, the shortfall should be debited to the Profit & Loss A/c of that year.

(ii) In case the sale is for a value higher than the Net Book Value (NBV) i.e. Book Value less provision held, the excess provision shall not be reversed but will be utilized to meet the shortfall / loss on account of sale of other Non Performing Financial Assets.

(iii) In case there is overall surplus over and above the excess provision in any of the sale transaction that surplus amount will be taken in the Profit & loss a/c.

5.4 Restructured Assets:

For restructured/rescheduled advances, provisions are made in accordance with guidelines issued by RBI from time to time. Necessary provision for diminution in the fair value of a restructured account is made.

The bank considered a restructured account as one where the bank, for economic or legal reasons relating to the borrower''s financial difficulty, grants concessions to the borrower. Restructuring would normally involve modification of terms of the advances / securities, which would generally include, among others, alteration of repayment period / repayable amount/ the amount of installments / rate of interest / roll over of credit facilities / sanction of additional credit facility / enhancement of existing credit limits / compromise settlements where time for payment of settlement amount exceeds three months. Restructured accounts are classified as such by the Bank only upon approval and implementation of the restructuring package.

Standard accounts classified as NPA and NPA accounts retained in the same category on restructuring by the bank are upgraded only when all the outstanding loan / facilities in the account demonstrate ''satisfactory performance'' (i.e., the payments in respect of borrower entity are not in default at any point of time) during the ''specified period''.

''Specified period'' means the period from the date of implementation of Resolution plan (RP) up to the date by which at least 20 percent of the outstanding principal debt as per the RP and interest capitalization sanctioned as part of the restructuring, if any, is repaid. Provided that the specified period cannot end before one year from the commencement of the first payment of interest or principal (whichever is later) on the credit facility with longest period of moratorium under the terms of RP.

For the large accounts (i.e., accounts where the aggregate exposure of lenders is Rs 100 crore and above) to qualify for an upgrade, in addition to demonstration of satisfactory performance, the credit facilities of the borrower shall also be rated as investment grade (BBB-or better) as at the end of the ''specified period'' by CRAs accredited by the Reserve Bank for the purpose of bank loan ratings. While accounts with aggregate exposure of Rs 500 crore and above shall require two ratings, those below Rs 500crore shall require one rating. If the ratings are obtained from more than the required number of CRAs, all such ratings shall be investment grade to qualify for an upgrade.

In case satisfactory performance during the specified period is not demonstrated, the accounts, immediately on such default, are reclassified as per the repayment schedule that existed before the restructuring. Any future upgrade for such accounts would be contingent on implementation of a fresh RP and demonstration of satisfactory performance thereafter.

5.5 In addition to the specific provision on NPAs, general provisions are also made for standard assets as per extant RBI Guidelines. These provisions are reflected in Schedule 5 of the Balance Sheet under the head "Other Liabilities & Provisions - Others" and are not considered for arriving at the Net NPAs.

5.6 In accordance with RBI guidelines, accelerated provision is made on non-performing advances which were not earlier reported by the Bank as Special Mention Account under "SMA-2" category to Central Repository of Information on Large Credits (CRILC).

5.7 Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized in the profit and loss account.

5.8 Provision for Country Exposure:

In addition to the specific provisions held according to the asset classification status, provisions are also made for individual country exposures (other than the home country). Countries are categorized into seven risk categories, namely, insignificant, low, moderately low, moderate, moderately high, high & very high and provisioning made as per extant RBI guidelines. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposures. The provision is reflected in Schedule 5 of the Balance Sheet under the "Other liabilities & Provisions - Others".

5.9 An additional provision of 2% (in addition to country risk provision that is applicable to all overseas exposures) against standard assets representing all exposures to step down subsidiaries of Indian Corporates has been made to cover the additional risk arising from complexity in the structure, location of different intermediary entities in different jurisdictions exposing the Indian Company, and hence the Bank, to a greater political and regulatory risk. (As per RBI Cir.No. RBI/ 2015.16/279 DBR. IBD.BC No. 68/ 23.37.001/ 2015-16 dated 31.12.2015).

6. PROPERTY, PLANT & EQUIPMENT:

6.1 Property, Plant & Equipment are stated at historical cost less accumulated depreciation/amortization, wherever applicable, except those premises, which have been revalued. The appreciation on revaluation is credited to revaluation reserve and incremental depreciation attributable to the revalued amount is deducted there from.

6.2 Software is capitalized and clubbed under Intangible assets.

6.3 Cost includes cost of purchase and all expenditure such as site preparation, installation costs and professional fees incurred on the asset till the time of capitalization. Subsequent expenditure/s incurred on the assets are capitalized only when it increases the future benefits from such assets or their functioning capability.

6.4 DEPRECIATION:

A. Depreciation on assets (including land where value is not separable) is provided on straight-line method based on estimated life of the asset, except in respect of computers where it is calculated on the straight-line method, at the rates prescribed by RBI.

B. Depreciation on assets has been provided at the rates furnished below:-

Particulars	Rate of Depreciation
PREMISES
Freehold Properties
Land	NIL
Depreciation to be provided on Construction Cost where the land cost is segregated and on total cost where the land cost is not ascertainable and cannot be segregated.	2.5% (40 years Straight Line Method or remaining life whichever is lower)
Land acquired on perpetual lease where no lease period is mentioned	NIL
Land acquired on lease where lease period is mentioned	Over lease period
Building
Constructed on free hold land and on leased land, where lease period is above 40 years	2.50%
Constructed on leased land where lease period is below 40 years.	Over lease period
FIXED ASSETS EXCEPT PREMISES
Furniture and fixtures-Steel articles	5.00%
Furniture and fixtures-wooden articles	10.00%
Mattresses	20.00%
Mobile Phone Instruments	33.33%
Machinery, electrical and miscellaneous articles	15.00%
Motor cars and cycles	15.00%
Computers, ATMs and related items, laptop, i pad etc:-	33.33%
Servers, Network, Equipment & Automated Teller Machines (Including software forming an integral part of computer hardware)

C. Depreciation on fresh additions to assets other than bank''s own premises is provided from the day in which the assets are capitalized and in the case of assets sold/ disposed off during the year, up to the date in which it is sold/ disposed off i.e. daily basis.

Items of office fixed assets (excepts to staff) amount less than Rs. 25000.00 and / or having useful life of less than 12 months from the date of acquisition should be recognized as expense.

Cost of Application Software / Operating System / Data base amounting upto Rs. 25000.00 are charged to revenue.

D. The depreciation on bank''s own premises existing at the close of the year is charged for full year. The construction cost is depreciated only when the building is complete in all respects. Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

E. In respect of leasehold premises, the lease premium, if any, is amortized over the period of lease and the lease rent is charged in the respective year(s).

F. The Revalued assets is depreciated over the balance useful life of the asset as assessed at the time of revaluation.

7. IMPAIRMENT OF ASSETS:

The carrying costs of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors.

An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.

After impairment, if any, depreciation is provided on the revised carrying cost of the asset over its remaining useful life.

A previously recognized impairment loss is increased or reversed depending on changes in circumstances.

However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

8. EMPLOYMENT BENEFITS:

PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit & Loss A/c.

GRATUITY:

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

PENSION:

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

The Bank operates a New Pension Scheme (NPS) for all officers/ employees joining the Bank on or after 01.04.2010. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with contribution of 14% of their basic pay plus dearness allowance from the Bank w.e.f. 11.11.2020. Pending completion of the registration procedures of the employees concerned, these contributions are retained. The Bank recognizes such annual contributions as an expense in the year to which they relate. Upon the receipt of the Permanent Retirement Account Number (PRAN), the consolidated contribution amounts are transferred to the NPS Trust.

COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave (PL) and Sick Leave (including unavailed casual leave) are provided for based on actuarial valuation. The scheme for Privilege Leave (PL) is funded by the Bank and is managed by a separate trust.

OTHER EMPLOYEE BENEFITS:

Other Employee Benefits such as Leave Fare Concession (LFC), Silver Jubilee Award, etc. are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective countries.

9. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS & BALANCES:

Transactions involving foreign exchange are accounted for in accordance with AS 11, "The Effect of Changes in Foreign Exchange Rates".

9.1 Except advances of erstwhile London branches which are accounted for at the exchange rate prevailing on the date of parking in India, all other monetary assets and liabilities, guarantees, acceptances, endorsements and other obligations are translated in Indian Rupee equivalent at the exchange rates prevailing as on the Balance Sheet date as per Foreign Exchange Dealers'' Association of India (FEDAI) guidelines.

9.2 Non-monetary items other than fixed assets which are carried at historical cost are translated at exchange rate prevailing on the date of transaction.

9.3 Outstanding Forward exchange spot and forward contracts are translated as on the Balance Sheet date at the rates notified by FEDAI and the resultant gain/ loss on translation is taken to Profit & Loss Account.

Foreign exchange spot/forward contracts/ deals (Merchant and Inter-bank) which are not intended for trading/Merchant Hedge and are outstanding on the Balance Sheet date, are reverse re-valued at the closing FEDAI spot/forward rate in order to remove revaluation effect on exchange profit. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the life of the contract.

9.4 Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.

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

Gains/Losses on account of changes 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 the Profit and Loss Account.

9.5 Offices outside India / Offshore Banking Units:

(i) Operations of foreign branches and off shore banking unit are classified as "Non-integral foreign operations" and operations of representative offices abroad are classified as "integral foreign operations".

(ii) Foreign currency transactions of integral foreign operations and non-integral foreign operations are accounted for as prescribed by AS-11.

(iii) Exchange Fluctuation resulting into Profit / loss of non-integral operations is credited /debited to Exchange Fluctuation Reserve.

10. TAXES ON INCOME

Income tax expense is the aggregate amount of current tax including Minimum Alternate Tax (MAT), wherever applicable and deferred tax expense incurred by the Bank. The current tax and deferred tax are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - Accounting for Taxes on Income respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.

MAT credit is recognized as an asset only when and to the extend there is convincing evidence that there will be payment of normal income tax during the period specified under the income Tax Act, 1961,

Deferred Tax adjustments comprises of changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognized by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognized in the profit and loss account. Deferred tax assets are recognized and re-assessed at each reporting date, based upon management''s judgment as to whether their realization is considered as reasonably/virtually certain.

11. Earnings per Share:

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

Diluted Earnings per Share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted Earnings per Share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding at year.

12. Provisions, Contingent Liabilities and Contingent Assets:

In conformity with AS 29, "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, the Bank recognises provisions only when it has a present obligation as a result of a past event, and would result in a probable outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

A Contingent Liability is a potential liability, in terms of money, which may arise depending on the outcome of an uncertain specific event. A possible obligation which may or may not arise depending on how a future event unfolds has been recognized as Contingent Liability.

Further, the cases which although have been filed against the bank, but possibility of any obligation arising upon the bank is those case is remote, have not been construed and included in Contingent Liability. Contingent Assets are not recognised in the financial statements.

13. Bullion Transactions:

The Bank imports bullion including precious metal bars on a consignment basis for selling to its customers. The imports are typically on a back-to-back basis and are priced to the customer based on price quoted by the supplier. The Bank earns a fee on such bullion transactions. The fee is classified under commission income. The Bank also accepts deposits and lends gold, which is treated as deposits/ advances as the case may be with the interest paid / received classified as interest expense/income.

14. Segment Reporting:

The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in compliance with the Accounting Standard 17 issued by ICAI.

15. The Bank, in accordance with RBI Circular FIDD. CO.Plan.BC.23/ 04.09.01/ 2015-16 dated April 7, 2016, trades in Priority Sector portfolio by selling or buying PSLC. There is no transfer of risks or loan assets in these transactions. The fee paid for purchase of the PSLC is treated as an ''Expense'' and the Fee received from sale of PSLCs is treated as ''Other Income''.

16 CASH & CASH EQUIVALENTS

Cash and cash equivalents include Cash and Balances with RBI, Balances with Banks and money at call and short notice.

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Mar 31, 2021

1. BASIS OF PREPARATION:

The financial statements have been prepared on historical cost basis and conform, in all material aspects, to Generally Accepted Accounting Principles (GAAP) in India unless otherwise stated encompassing applicable statutory provisions, regulatory norms prescribed by Reserve Bank of India (RBI), circulars and guidelines issued by the Reserve Bank of India (‘RBI'') from time to time, Banking Regulation Act 1949, Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and prevailing practices in Banking industry in India.

In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with except as specified elsewhere.

The financial statements have been prepared on going concern basis with accrual concept and in accordance with the accounting policies and practices consistently followed unless otherwise stated.

2. USE OF ESTIMATES:

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

Future results could differ from these estimates.

Difference between the actual results and estimates is recognized in the period in which the results are known / materialized.

Any revision to the accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

3. REVENUE RECOGNITION:

3.1 Income & expenditure (other than items referred to in paragraph 3.5) are generally accounted for on accrual basis.

3.2 Income from Non- Performing Assets (NPAs), comprising of advances and investments, is recognized upon realization, as per the prudential norms prescribed by the RBI/ respective country regulators in the case of foreign offices (hereafter collectively referred to as Regulatory Authorities).

3.3 Mode of appropriation of recovery in order of priority will be as below:

(a) Recoveries in NPA accounts (irrespective of the mode / status / stage of recovery actions) shall be appropriated in the following order of priority except

for the cases covered under below mentioned points

(b) & (c):

i. Expenditure/Out of Pocket Expenses incurred for Recovery, including under SARFAESI Action (Recorded in Memorandum Dues);

ii. Thereafter towards the unrealised/accrued interest.

iii. Principal irregularities i.e. NPA outstanding in the account.

Any exceptions to the above may be considered by HOCAC-III (for proposals falling under the powers of various committee''s upto HOCAC-III) & Management Committee for proposals under its vested powers.

(b) However, in case of Compromise and Resolution/ Settlement through NCLT, recovery shall be appropriated as per the terms of respective compromise/ resolution settlement.

(c) In case of suit filed/decreed accounts, recovery shall be appropriated as under:-

• As per the directives of the concerned Court.

• In the absence of specific directives from the Court, as mentioned at point (a) above.

3.4 The sale of NPA is accounted as per guidelines prescribed by RBI and as disclosed under Para 5.3.

3.5 Commission (excluding on Government Business, Insurance Business and Mutual Fund Business), exchange, locker rent and Income on Rupee Derivatives designated as “Trading” are accounted for on realization and insurance claims are accounted for on settlement. Interest on overdue inland bills is being accounted for on realization and interest on overdue foreign bill, till its crystallization is accounted for on crystallization and thereafter on realization.

3.6 In case of suit filed accounts, related legal and other expenses incurred are charged to Profit & Loss Account and on recovery the same are accounted for as such.

3.7 Income from interest on refund of income tax is accounted for in the year the order is passed by the concerned authority.

3.8 Lease payments including cost escalation for assets taken on operating lease are recognized in the Profit and Loss Account over the lease term in accordance with the AS 19 (Leases) issued by ICAI.

3.9 Provision for Reward Points on Credit cards is made based on the accumulated outstanding points in each category.

3.10 Interest on unpaid and unclaimed matured term deposits is accounted for at savings bank rate.

3.11 Dividend (excluding Interim Dividend) is accounted for as and when the right to receive the dividend is established.

4. INVESTMENTS:

4.1 The transactions in Securities are recorded on “Settlement Date”.

4.2 Investments are classified into six categories as stipulated in form A of the third schedule to the Banking Regulation Act, 1949.

4.3 Investments have been categorized into "Held to Maturity", "Available for Sale" and "Held for Trading" in terms of RBI guidelines as under:

(a) Securities acquired by the Bank with an intention to hold till maturity are classified under "Held to Maturity".

(b) The securities acquired by the Bank with an intention to trade by taking advantages of short-term price/ interest rate movements are classified under “Held for Trading”.

(c) The securities, which do not fall within the above two categories, are classified under "Available for Sale".

4.4 Investments in subsidiaries, joint ventures and associates are classified as HTM.

4.5 Transfer of securities from one category to another is carried out at the lower of acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

However, transfer of securities from HTM category to AFS category is carried out on book value. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.

An investment is classified as HTM, HFT or AFS at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

4.6 In determining acquisition cost of an investment

(a) Brokerage, commission, Securities Transaction Tax (STT) etc. paid in connection with acquisition of securities are treated as revenue expenses upfront and excluded from cost.

(b) Interest accrued up to the date of acquisition/sale of securities i.e. broken- period interest is excluded from the acquisition cost/sale consideration and the same is accounted in interest accrued but not due account.

(c) Cost is determined on the weighted average cost method for all categories of investments.

4.7 Investments are valued as per RBI/ FIMMDA guidelines, on the following basis:

Held to Maturity

(i) Investments under "Held to Maturity "category are carried at acquisition cost.

Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity on straight line basis. Such amortization of premium is reflected in Interest Earned under the head “Income on investments” as a deduction.

(ii) Investments in subsidiaries/joint ventures/associates are valued at carrying cost less diminution, other than temporary in nature for each investment individually.

(iii) Investments in sponsored regional rural banks are valued at carrying cost.

(iv) Investment in Venture Capital is valued at carrying cost.

(v) Equity shares held in HTM category are valued at carrying cost.

Available for Sale and Held for Trading:

	(a)	Govt. Securities
		I. Central Govt. Securities	At market prices/YTM as published by Fixed Income Money Market and Derivatives Association of India (FIMMDA) / Financial Benchmark India Pvt. Ltd (FBIL).
		II. State Govt. Securities	On appropriate yield to maturity basis as per FIMMDA/RBI guidelines.
	(b)	Securities guaranteed by Central / State Government, PSU Bonds (not in the nature of advances)	On appropriate yield to maturity basis as per FIMMDA/RBI guidelines
	(c)	Treasury Bills	At carrying cost
	(d)	Equity shares	At market price, if quoted, otherwise at breakup value of the Shares as per latest Balance Sheet (not more than one year old), otherwise at Re.1 per company
	(e)	Preference shares	At market price, if quoted or on appropriate yield to maturity basis not exceeding redemption value as per RBI/FIMMDA guidelines.
	(f)	Bonds and debentures (not in the nature of advances)	At market price, if quoted, or on appropriate yield to maturity basis as per RBI/FIMMDA guidelines.
	(g)	Units of mutual funds	As per stock exchange quotation, if quoted; at repurchase price/ NAV, if unquoted
	(h)	Commercial Paper	At carrying cost
	(i)	Certificate of Deposits	At carrying cost
	(j)	Security receipts of ARCIL	At net asset value of the asset as declared by ARCIL
	(k)	Venture Capital Funds	At net asset value (NAV) declared by the VCF
	(l)	Other Investments	At carrying cost less diminution in value

The above valuation in category of Available for Sale and Held for Trading is done scrip wise on quarterly basis and depreciation/appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for

while net appreciation is ignored. On provision for depreciation, the book value of the individual security remains unchanged after marking to market.

4.8 Investments are subject to appropriate provisioning/ de-recognition of income, in line with the prudential norms of Reserve Bank of India for NPI classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities.

If any credit facility availed by an entity is NPA in the books of the Bank, investment in any of the securities issued by the same entity would also be treated as NPI and vice versa. However, in respect of NPI preference share where the dividend is not paid, the corresponding credit facility is not treated as NPA.

In case of securities i.e. bonds, debentures, etc. where the credit facilities are availed by the borrowers, the provision has been made on the basis of YTM or IRAC norms whichever is higher.

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

4.10 Securities repurchased/resold under buy back arrangement are accounted for at original cost.

4.11 The securities sold and purchased under Repo/ Reverse Repo are accounted as Collateralized lending and borrowing transactions. However, securities are transferred as in the case of normal outright sale/purchase transactions and such movement of securities is reflected using the Repo/Reverse Repo Accounts and Contra entries. The above 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 Account is classified under schedule 4 (Borrowings) and balance in Reverse Repo Account is classified under Schedule 7 (Balance with Banks and Money at Call & Short Notice).The same is also applicable to LAF with RBI.

4.12 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under:-

Hedge Swaps

Interest rate swaps with hedge interest bearing asset or liability are accounted for on accrual basis except the swaps designated with an asset or liability that are carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/ liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes recorded in the financial statements.

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.

4.13 Foreign Currency Options:

Foreign currency options written by the bank with a back-to-back contract with another bank are not marked to market since there is no market risk.

Premium received is held as a liability and transferred to the Profit and Loss Account on maturity/cancellation.

5. LOANS / ADVANCES AND PROVISIONS THEREON:

5.1 Advances are classified as performing and non-performing assets; provisions are made in accordance with prudential norms prescribed by RBI.

(a) Advances are classified: Standard, Sub Standard, Doubtful and Loss assets borrower wise.

(b) Advances are stated net of specific loan loss provisions, provision for diminution in fair value of restructured advances.

5.2 In respect of foreign offices, the classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent.

Loans and advances held at the overseas branches that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the host country.

5.3 Financial Assets sold are recognized as under:

(a) For Sale of financial assets sold to SCs/RCs

(i) If the sale to SCs/RCs is at a price below the Net Book Value (NBV), (i.e. Book Value less provisions held), the shortfall should be debited to the Profit & Loss account of that year. Bank can also use counter cyclical / floating provisions for meeting the shortfall on sale of NPAs i.e. when the sale is at a price below the NBV.

(ii) If the sale is for a value higher than the NBV, Bank can reverse the excess provision on sale of NPAs to its profit and loss account in the year, the amounts are received. However, Bank can reverse excess provision (when the sale is for a value higher than the NBV) arising out of sale of NPAs, only when the cash received (by way of initial consideration and/ or redemption of SRs/ PTCs) is higher than the NBV of the asset. Further, reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.

(b) For Sale of financial assets sold to Other Banks/ NBFCs/FIs etc.

(i) In case the sale is at a price below the Net Book Value (NBV) i.e. Book Value less provision held, the shortfall should be debited to the Profit & Loss A/c of that year.

(ii) In case the sale is for a value higher than the Net Book Value (NBV) i.e. Book Value less provision held, the excess provision shall not be reversed but will be utilized to meet the shortfall / loss on account of sale of other Non Performing Financial Assets.

(iii) In case there is overall surplus over and above the excess provision in any of the sale transaction that surplus amount will be taken in the Profit & loss a/c.

5.4 Restructured Assets:

For restructured/rescheduled advances, provisions are made in accordance with guidelines issued by RBI from time to time. Necessary provision for diminution in the fair value of a restructured account is made.

The bank considered a restructured account as one where the bank, for economic or legal reasons relating to the borrower''s financial difficulty, grants concessions to the borrower. Restructuring would normally involve modification of terms of the advances/securities, which would generally include, among others, alteration of repayment period/ repayable amount/the amount of installments/rate of interest/ roll over of credit facilities/sanction of additional credit facility/enhancement of existing credit limits/ compromise settlements where time for payment of settlement amount exceeds three months. Restructured accounts are classified as such by the Bank only upon approval and implementation of the restructuring package.

Standard accounts classified as NPA and NPA accounts retained in the same category on restructuring by the bank are upgraded only when all the outstanding loan / facilities in the account demonstrate ‘satisfactory performance'' (i.e., the payments in respect of borrower entity are not in default at any point of time) during the ‘specified period''.

‘Specified period'' means the period from the date of implementation of Resolution plan (RP) up to the date by which at least 20 percent of the outstanding principal debt as per the RP and interest capitalization sanctioned as part of the restructuring, if any, is repaid. Provided that the specified period cannot end before one year from the commencement of the first payment of interest or principal (whichever is later) on the credit facility with longest period of moratorium under the terms of RP.

For the large accounts (i.e., accounts where the aggregate exposure of lenders is Rs 100 crore and above) to qualify for an upgrade, in addition to demonstration of satisfactory performance, the credit facilities of the borrower shall also be rated as investment grade (BBB- or better) as at the end of the ‘specified period'' by CRAs accredited by the Reserve Bank for the purpose of bank loan ratings. While accounts with aggregate exposure of Rs 500 crore and above shall require two ratings, those below Rs 500crore shall require one rating. If the ratings are obtained from more than the required number of CRAs, all such ratings shall be investment grade to qualify for an upgrade.

In case satisfactory performance during the specified period is not demonstrated, the accounts, immediately on such default, are reclassified as per the repayment schedule that existed before the restructuring. Any future upgrade for such accounts would be contingent on implementation of a fresh RP and demonstration of

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5.5 In addition to the specific provision on NPAs, general provisions are also made for standard assets as per extant RBI Guidelines. These provisions are reflected in Schedule

5 of the Balance Sheet under the head “Other Liabilities & Provisions - Others” and are not considered for arriving at the Net NPAs.

5.6 In accordance with RBI guidelines, accelerated provision is made on non-performing advances which were not earlier reported by the Bank as Special Mention Account under “SMA-2” category to Central Repository of Information on Large Credits (CRILC).

5.7 Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized in the profit and loss account.

5.8 Provision for Country Exposure:

In addition to the specific provisions held according to the asset classification status, provisions are also made for individual country exposures (other than the home country). Countries are categorized into seven risk categories, namely, insignificant, low, moderately low, moderate, moderately high, high & very high and provisioning made as per extant RBI guidelines. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposures. The provision is reflected in Schedule 5 of the Balance Sheet under the “Other liabilities

6 Provisions - Others”.

5.9 An additional provision of 2% (in addition to country risk provision that is applicable to all overseas exposures) against standard assets representing all exposures to step down subsidiaries of Indian Corporates has been made to cover the additional risk arising from complexity in the structure, location of different intermediary entities in different jurisdictions exposing the Indian Company, and hence the Bank, to a greater political and regulatory risk. (As per RBI Cir.No. RBI/ 2015.16/279 DBR. IBD.BC No. 68/ 23.37.001/ 2015-16 dated 31.12.2015).

6. PROPERTY, PLANT & EQUIPMENT:

6.1 Property, Plant & Equipment are stated at historical cost less accumulated depreciation/amortization, wherever applicable, except those premises, which have been revalued. The appreciation on revaluation is credited to revaluation reserve and incremental depreciation attributable to the revalued amount is deducted there from.

6.2 Software is capitalized and clubbed under Intangible assets.

6.3 Cost includes cost of purchase and all expenditure such as site preparation, installation costs and professional fees incurred on the asset till the time of capitalization. Subsequent expenditure/s incurred on the assets are capitalized only when it increases the future benefits from such assets or their functioning capability.

6.4 DEPRECIATION:

A. Depreciation on assets (including land where value is not separable) is provided on straight-line method based on estimated life of the asset, except in respect of computers where it is calculated on the straight-line method, at the rates prescribed by RBI.

B. Depreciation on assets has been provided at the rates furnished below:-

Particulars	Rate of Depreciation
PREMISES
Freehold Properties
Land	NIL
Depreciation to be provided on Construction Cost where the land cost is segregated and on total cost where the land cost is not ascertainable and cannot be segregated.	2.5% (40 years Straight Line Method or remaining life whichever is lower)
Land acquired on perpetual lease where no lease period is mentioned	NIL
Land acquired on lease where lease period is mentioned	Over lease period
Building
Constructed on free hold land and on leased land, where lease period is above 40 years	2.50%
Constructed on leased land where lease period is below 40 years.	Over lease period
FIXED ASSETS EXCEPT PREMISES
Furniture and fixtures- Steel articles	5.00%
Furniture and fixtures-wooden articles	10.00%
Mattresses	20.00%
Mobile Phone Instruments	33.33%
Machinery, electrical and miscellaneous articles	15.00%
Motor cars and cycles	15.00%
Computers, ATMs and related items, laptop, i pad etc:-Servers, Network, Equipment & Automated Teller Machines (Including software forming an integral part of computer hardware)	33.33%
Items of office fixed assets (excepts to staff) amount less than Rs. 25000.00 and / or having useful life of less than 12 months from the date of acquisition should be recognized as expense. Cost of Application Software / Operating System / Data base amounting upto Rs. 25000.00 are charged to revenue.

C. Depreciation on fresh additions to assets other than bank''s own premises is provided from the day in which the assets are capitalized and in the case of assets sold/disposed off during the year, up to the date in which it is sold/ disposed off i.e. daily basis.

D. The depreciation on bank''s own premises existing at the close of the year is charged for full year. The construction cost is depreciated only when the building is complete in all respects. Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

E. In respect of leasehold premises, the lease premium, if any, is amortized over the period of lease and the lease rent is charged in the respective year(s).

F. The Revalued assets is depreciated over the balance useful life of the asset as assessed at the time of revaluation.

7. IMPAIRMENT OF ASSETS:

The carrying costs of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors.

An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.

After impairment, if any, depreciation is provided on the revised carrying cost of the asset over its remaining useful life.

A previously recognized impairment loss is increased or reversed depending on changes in circumstances.

However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

8. EMPLOYMENT BENEFITS:PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit & Loss A/c.

GRATUITY:

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

PENSION:

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

The Bank operates a New Pension Scheme (NPS) for all officers/ employees joining the Bank on or after 01.04.2010. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with a matching contribution from the Bank. Pending completion of the registration procedures of the employees concerned, these contributions are retained. The Bank recognizes such annual contributions as an expense in the year to which they relate. Upon the receipt of the Permanent Retirement Account Number (PRAN), the consolidated contribution amounts are transferred to the NPS Trust.

COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave (PL) and Sick Leave (including unavailed casual leave) are provided for based on actuarial valuation.

OTHER EMPLOYEE BENEFITS:

Other Employee Benefits such as Leave Fare Concession (LFC), Silver Jubilee Award, etc. are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective countries.

9. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS & BALANCES:

Transactions involving foreign exchange are accounted for in accordance with AS 11, “The Effect of Changes in Foreign Exchange Rates”.

9.1 Except advances of erstwhile London branches which are accounted for at the exchange rate prevailing on the date of parking in India, all other monetary assets and liabilities, guarantees, acceptances, endorsements and other obligations are translated in Indian Rupee equivalent at the exchange rates prevailing as on the Balance Sheet date as per Foreign Exchange Dealers'' Association of India (FEDAI) guidelines.

9.2 Non-monetary items other than fixed assets which are carried at historical cost are translated at exchange rate prevailing on the date of transaction.

9.3 Outstanding Forward exchange spot and forward contracts are translated as on the Balance Sheet date at the rates notified by FEDAI and the resultant gain/loss on translation is taken to Profit & Loss Account.

Foreign exchange spot/forward contracts/deals (Merchant and Inter-bank) which are not intended for trading/Merchant Hedge and are outstanding on the Balance Sheet date, are reverse re-valued at the closing FEDAI spot/forward rate in order to remove revaluation effect on exchange profit. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the life of the contract.

9.4 Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.

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

Gains/Losses on account of changes 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 the Profit and Loss Account.

9.5 Offices outside India / Offshore Banking Units:

(i) Operations of foreign branches and off shore banking unit are classified as "Non-integral foreign operations" and operations of representative offices abroad are classified as "integral foreign operations".

(ii) Foreign currency transactions of integral foreign operations and non-integral foreign operations are accounted for as prescribed by AS-11.

(iii) Exchange Fluctuation resulting into Profit / loss of non-integral operations is credited /debited to Exchange Fluctuation Reserve.

10. TAXES ON INCOME

Income tax expense is the aggregate amount of current tax including Minimum Alternate Tax (MAT), wherever applicable and deferred tax expense incurred by the Bank. The current tax and deferred tax are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - Accounting for Taxes on Income respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.

MAT credit is recognized as an asset only when and to the extend there is convincing evidence that there will be payment of normal income tax during the period specified under the income Tax Act, 1961,

Deferred Tax adjustments comprises of changes in the deferred tax assets or liabilities during the year. Deferred tax assets and liabilities are recognized by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognized in the profit and loss account. Deferred tax assets are recognized and re-assessed at each reporting date, based upon management''s judgment as to whether their realization is considered as reasonably/virtually certain.

11. Earnings per Share:

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

12. Provisions, Contingent Liabilities and Contingent Assets:

In conformity with AS 29, “Provisions, Contingent Liabilities and Contingent Assets”, issued by the Institute of Chartered Accountants of India, the Bank recognises provisions only when it has a present obligation as a result of a past event, and would result in a probable outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

Contingent Assets are not recognised in the financial statements.

13. Bullion Transactions:

The Bank imports bullion including precious metal bars on a consignment basis for selling to its customers. The imports are typically on a back-to-back basis and are priced to the customer based on price quoted by the supplier. The Bank earns a fee on such bullion transactions. The fee is classified under commission income. The Bank also accepts deposits and lends gold, which is treated as deposits/advances as the case may be with the interest paid / received classified as interest expense/income.

14. Segment Reporting:

The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in compliance with the Accounting Standard 17 issued by ICAI.

15. The Bank, in accordance with RBI Circular FIDD.CO.Plan. BC.23/ 04.09.01/ 2015-16 dated April 7, 2016, trades in Priority Sector portfolio by selling or buying PSLC. There is no transfer of risks or loan assets in these transactions. The fee paid for purchase of the PSLC is treated as an ‘Expense'' and the Fee received from sale of PSLCs is treated as ‘Other Income''.

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Mar 31, 2018

PUNJAB NATIONAL BANK

SCHEDULE 17 (SOLO) - 31.03.2018 SIGNIFICANT ACCOUNTING POLICIES

1. BASIS OF PREPARATION:

The financial statements have been prepared on historical cost basis and conform, in all material aspects, to Generally Accepted Accounting Principles (GAAP) in India unless otherwise stated encompassing applicable statutory provisions, regulatory norms prescribed by Reserve Bank of India (RBI), circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time, Banking Regulation Act 1949, Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and prevailing practices in Banking industry in India.

In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with except as specified elsewhere.

The financial statements have been prepared on going concern basis with accrual concept and in accordance with the accounting policies and practices consistently followed unless otherwise stated

2. Use of Estimates

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

Future results could differ from these estimates

Difference between the actual results and estimates is recognized in the period in which the results are known / materialized.

Any revision to the accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

3. REVENUE RECOGNITION

3.1 Income & expenditure (other than items referred to in paragraph 3.5) are generally accounted for on accrual basis.

3.2 Income from Non- Performing Assets (NPAs), comprising of advances, and investments, is recognized upon realization, as per the prudential norms prescribed by the RBI/ respective country regulators in the case of foreign offices (hereafter collectively referred to as Regulatory Authorities).

3.3 Recoveries in NPA accounts (irrespective of the mode / status / stage of recovery actions) are appropriated in the following order of priority : -

a) Expenditure/out of pocket expenses incurred for recovery (earlier recorded in memorandum dues);

b) Principal irregularities i.e. NPA outstanding in the account.

c) Towards the interest irregularities/accrued interest.

3.4 The sale of NPA is accounted as per guidelines prescribed by RBI and as disclosed under Para 5.3.

3.5 Commission (excluding on Government Business), interest on overdue bills, exchange, locker rent, income from merchant banking transactions and Income on Rupee Derivatives designated as “Trading” are accounted for on realization and insurance claims are accounted for on settlement.

3.6 In case of suit filed accounts, related legal and other expenses incurred are charged to Profit & Loss Account and on recovery the same are accounted for as such.

3.7 Income from interest on refund of income tax is accounted for in the year the order is passed by the concerned authority.

3.8 Lease payments including cost escalation for assets taken on operating lease are recognized in the Profit and Loss Account over the lease term in accordance with the AS 19 (Leases) issued by ICAI.

3.9 Provision for Reward Points on Debit/Credit cards is made based on the accumulated outstanding points in each category.

3.10 Interest on unpaid and unclaimed matured term deposits is accounted for at savings bank rate.

3.11 Dividend is accounted for as and when the right to receive the dividend is established.

4. INVESTMENTS

4.1 The transactions in Securities are recorded on “Settlement Date”.

4.2 Investments are classified into six categories as stipulated in form A of the third schedule to the Banking Regulation Act, 1949.

4.3 Investments have been categorized into "Held to Maturity", "Available for Sale" and "Held for Trading" in terms of RBI guidelines as under:

(a) Securities acquired by the Bank with an intention to hold till maturity are classified under "Held to Maturity".

(b) The securities acquired by the Bank with an intention to trade by taking advantages of short-term price/ interest rate movements are classified under “Held for Trading”.

(c) The securities, which do not fall within the above two categories, are classified under "Available for Sale"

4.4 Investments in subsidiaries, joint ventures and associates are classified as HTM.

4.5 Transfer of securities from one category to another is carried out at the lower of acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

However, transfer of securities from HTM category to AFS category is carried out on book value. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.

An investment is classified as HTM, HFT or AFS at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

4.6 In determining acquisition cost of an investment

a. Brokerage, commission, Securities Transaction Tax (STT) etc. paid in connection with acquisition of securities are treated as revenue expenses upfront and excluded from cost.

b. Interest accrued up to the date of acquisition/sale of securities i.e. broken- period interest is excluded from the acquisition cost/sale consideration and the same is accounted in interest accrued but not due account.

c. Cost is determined on the weighted average cost method for all categories of investments.

4.7 Investments are valued as per RBI/ FIMMDA guidelines, on the following basis:

Held to Maturity

i) Investments under "Held to Maturity "category are carried at acquisition cost.

Wherever the book value is higher than the face value/ redemption value, the premium is amortized over the remaining period to maturity on straight line basis. Such amortization of premium is reflected in Interest Earned under the head “ Income on investments” as a deduction.

ii) Investments in subsidiaries/joint ventures/associates are valued at carrying cost less diminution, other than temporary in nature for each investment individually.

iii) Investments in sponsored regional rural banks are valued at carrying cost.

iv) Investment in Venture Capital is valued at carrying cost.

v) Equity shares held in HTM category are valued at carrying cost.

The above valuation in category of Available for Sale and Held for Trading is done scrip wise on quarterly basis and depreciation/appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for while net appreciation is ignored. On provision for depreciation, the book value of the individual security remains unchanged after marking to market.

4.8 Investments are subject to appropriate provisioning/ de-recognition of income, in line with the prudential norms of Reserve Bank of India for NPI classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities. For NPI in preference share, debentures and bonds, provision is made on Substandard and Doubtful assets as per NPA provisioning norms.

If any credit facility availed by an entity is NPA in the books of the Bank, investment in any of the securities issued by the same entity would also be treated as NPI and vice versa. However, in respect of NPI preference share where the dividend is not paid, the corresponding credit facility is not treated as NPA.

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

4.10 Securities repurchased/resold under buy back arrangement are accounted for at original cost.

4.11 The securities sold and purchased under Repo/Reverse Repo are accounted as Collateralized lending and borrowing transactions. However, securities are transferred as in the case of normal outright sale/purchase transactions and such movement of securities is reflected using the Repo/ Reverse Repo Accounts and Contra entries. The above 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 Account is classified under schedule 4 (Borrowings) and balance in Reverse Repo Account is classified under Schedule7 (Balance with Banks and Money at Call & Short Notice).The same is also applicable to LAF with RBI.

4.12 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under: -

Hedge Swaps

Interest rate swaps which hedge interest bearing asset or liability are accounted for on accrual basis except the swaps designated with an asset or liability that are carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/ liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes recorded in the financial statements.

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.

4.13 Foreign currency options

Foreign currency options written by the bank with a back-to-back contract with another bank are not marked to market since there is no market risk.

Premium received is held as a liability and transferred to the Profit and Loss Account on maturity/cancellation.

5. LOANS / ADVANCES AND PROVISIONS THEREON:

5.1 Advances are classified as performing and non-performing assets; provisions are made in accordance with prudential norms prescribed by RBI.

5.1 .(a)Advances are classified: Standard, Sub Standard, Doubtful and Loss assets borrower wise.

5.1.(b) Advances are stated net of specific loan loss provisions, provision for diminution in fair value of restructured advances.

5.2 In respect of foreign offices, the classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent.

Loans and advances held at the overseas branches that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the host country.

5.3 Financial Assets sold are recognized as under:

(a) For Sale of financial assets sold to SCs/RCs

(i) If the sale to SCs/RCs is at a price below the Net Book Value (NBV), (i.e. Book Value less provisions held), the shortfall should be debited to the Profit & Loss account of that year. Bank can also use countercyclical / floating provisions for meeting the shortfall on sale of NPAs i.e when the sale is at a price below the NBV.

(ii) If the sale is for a value higher than the NBV, Bank can reverse the excess provision on sale of NPAs to its profit and loss account in the year, the amounts are received. However, Bank can reverse excess provision (when the sale is for a value higher than the NBV) arising out of sale of NPAs, only when the cash received (by way of initial consideration and/ or redemption of SRs/PTCs) is higher than the NBV of the asset. Further, reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.

(b) For Sale of financial assets sold to Other Banks/ NBFCs/FIs etc.

(i) In case the sale is at a price below the Net Book Value (NBV) i.e. Book Value less provision held, the shortfall should be debited to the Profit & Loss A/c of that year.

(ii) In case the sale is for a value higher than the Net Book Value (NBV) i.e. Book Value less provision held, the excess provision shall not be reversed but will be utilized to meet the shortfall/loss on account of sale of other NPAs.

5.4 Restructured Assets

For restructured/rescheduled advances, provisions are made in accordance with guidelines issued by RBI. Necessary provision for diminution in the fair value of a restructured account is made.

The bank considered a restructured account as one where the bank, for economic or legal reasons relating to the borrower''s financial difficulty, grants concessions to the borrower. Restructuring would normally involve modification of terms of the advances / securities, which would generally include, among others, alteration of repayment period / repayable amount / the amount of installments / rate of interest / roll over of credit facilities/ sanction of additional credit facility / enhancement of existing credit limits / compromise settlements where time for payment of settlement amount exceeds three months. Restructured accounts are classified as such by the Bank only upon approval and implementation of the restructuring package.

Standard accounts classified as NPA and NPA accounts retained in the same category on restructuring by the bank are upgraded only when all the outstanding loan / facilities in the account demonstrate ‘satisfactory performance’ (i.e., the payments in respect of borrower entity are not in default at any point of time) during the ‘specified period’

Specified period’ means the period from the date of implementation of Resolution plan (RP) up to the date by which at least 20 percent of the outstanding principal debt as per the RP and interest capitalization sanctioned as part of the restructuring, if any, is repaid. Provided that the specified period cannot end before one year from the commencement of the first payment of interest or principal (whichever is later) on the credit facility with longest period of moratorium under the terms of RP.

In case satisfactory performance during the specified period is not demonstrated, the accounts , immediately on such default, are reclassified as per the repayment schedule that existed before the restructuring. Any future upgrade for such accounts would be contingent on implementation of a fresh RP and demonstration of satisfactory performance thereafter.

5.5 In addition to the specific provision on NPAs, general provisions are also made for standard assets as per extant RBI Guidelines. These provisions are reflected in Schedule

5 of the Balance Sheet under the head “Other Liabilities & Provisions - Others” and are not considered for arriving at the Net NPAs.

5.6 In accordance with RBI guidelines, accelerated provision is made on non-performing advances which were not earlier reported by the Bank as Special Mention Account under “SMA-2” category to Central Repository of Information on Large Credits (CRILC).

5.7 Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized in the profit and loss account.

5.8 Provision for Country Exposure:

In addition to the specific provisions held according to the asset classification status, provisions are also made for individual country exposures (other than the home country). Countries are categorized into seven risk categories, namely, insignificant, low, moderately Low, moderate, moderately high, high & very high and provisioning made as per extant RBI guidelines. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposures. The provision is reflected in Schedule 5 of the Balance Sheet under the “Other liabilities & Provisions - Others”.

5.9 An additional provision of 2% (in addition to country risk provision that is applicable to all overseas exposures) against standard assets representing all exposures to step down subsidiaries of Indian Corporate has been made to cover the additional risk arising from complexity in the structure, location of different intermediary entities in different jurisdictions exposing the Indian Company, and hence the Bank, to a greater political and regulatory risk. (As per RBI Cir.No. RBI/2015.16/279 DBR.IBD.BC No. 68/23.37.001/2015-16 dated 31.12.2015).

6. PROPERTY, PLANT, & EQUIPMENT

6.1 Property, Plant & Equipment are stated at historical cost less accumulated depreciation/amortization, wherever applicable, except those premises, which have been revalued. The appreciation on revaluation is credited to revaluation reserve and incremental depreciation attributable to the revalued amount is deducted there from.

6.2 Software is capitalized and clubbed under Intangible assets.

6.3 Cost includes cost of purchase and all expenditure such as site preparation, installation costs and professional fees incurred on the asset till the time of capitalization. Subsequent expenditure/s incurred on the assets are capitalized only when it increases the future benefits from such assets or their functioning capability.

6.4 DEPRECIATION

A. Depreciation on assets (including land where value is not separable) is provided on straight-line method based on estimated life of the asset, except in respect of computers where it is calculated on the straight-line method, at the rates prescribed by RBI.

B. Depreciation on assets has been provided at the rates furnished below

C. Depreciation on fresh additions to assets other than bank''s own premises is provided from the month in which the assets are put to use and in the case of assets sold/disposed off during the year, up to the month preceding the month in which it is sold/ disposed off.

D. The depreciation on bank''s own premises existing at the close of the year is charged for full year. The construction cost is depreciated only when the building is complete in all respects. Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

E. In respect of leasehold premises, the lease premium, if any, is amortised over the period of lease and the lease rent is charged in the respective year(s).

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Mar 31, 2017

The financial statements have been prepared on historical cost basis and conform, in all material aspects, to Generally Accepted Accounting Principles (GAAP) in India unless otherwise stated encompassing applicable statutory provisions, regulatory norms prescribed by Reserve Bank of India (RBI), circulars and guidelines issued by the Reserve Bank of India (‘RBI'') from time to time, Banking Regulation Act 1949, Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and prevailing practices in Banking industry in India.

In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with except as specified elsewhere.

The financial statements have been prepared on going concern basis with accrual concept and in accordance with the accounting policies and practices consistently followed unless otherwise stated

2. Use of Estimates

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

Future results could differ from these estimates.

Difference between the actual results and estimates is recognized in the period in which the results are known / materialized.

Any revision to the accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

3. REVENUE RECOGNITION

3.1 Income & expenditure (other than items referred to in paragraph 3.5) are generally accounted for on accrual basis.

3.2 Income from Non- Performing Assets (NPAs), comprising of advances, and investments, is recognized upon realization, as per the prudential norms prescribed by the RBI/ respective country regulators in the case of foreign offices (hereafter collectively referred to as Regulatory Authorities).

3.3 Recoveries in NPA accounts (irrespective of the mode / status / stage of recovery actions) are appropriated in the following order of priority : -

a) Expenditure/out of pocket expenses incurred for recovery (earlier recorded in memorandum dues);

b) Principal irregularities i.e. NPA outstanding in the account.

c) Towards the interest irregularities/accrued interest.

3.4 The sale of NPA is accounted as per guidelines prescribed by RBI and as disclosed under Para 5.4.

3.5 Commission (excluding on Government Business), interest on overdue bills, exchange, locker rent, income from merchant banking transactions and Income on Rupee Derivatives designated as “Trading” are accounted for on realization and insurance claims are accounted for on settlement.

3.6 In case of suit filed accounts, related legal and other expenses incurred are charged to Profit & Loss Account and on recovery the same are accounted for as such.

3.7 Income from interest on refund of income tax is accounted for in the year the order is passed by the concerned authority.

3.8 Lease payments including cost escalation for assets taken on operating lease are recognized in the Profit and Loss Account over the lease term in accordance with the AS 19 (Leases) issued by ICAI.

3.9 Provision for Reward Points on Debit/Credit cards is made based on the accumulated outstanding points in each category.

3.10 Interest on unpaid and unclaimed matured term deposits is accounted for at savings bank rate.

3.11 Dividend is accounted for as and when the right to receive the dividend is established.

4. INVESTMENTS

4.1 The transactions in Securities are recorded on “Settlement Date”.

4.2 Investments are classified into six categories as stipulated in form A of the third schedule to the Banking Regulation Act, 1949.

4.3 Investments have been categorized into "Held to Maturity", "Available for Sale" and "Held for Trading" in terms of RBI guidelines as under:

(a) Securities acquired by the Bank with an intention to hold till maturity are classified under "Held to Maturity".

(b) The securities acquired by the Bank with an intention to trade by taking advantages of short-term price/ interest rate movements are classified under “Held for Trading”.

(c) The securities, which do not fall within the above two categories, are classified under "Available for Sale"

4.4 Investments in subsidiaries, joint ventures and associates are classified as HTM.

4.5 Transfer of securities from one category to another is carried out at the lower of acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

However, transfer of securities from HTM category to AFS category is carried out on book value. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.

An investment is classified as HTM, HFT or AFS at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

4.6 In determining acquisition cost of an investment

a. Brokerage / commission received on subscription is deducted from the cost of securities.

b. Brokerage, commission, Securities Transaction Tax (STT) etc. paid in connection with acquisition of securities are treated as revenue expenses upfront and excluded from cost.

c. Interest accrued up to the date of acquisition/sale of securities i.e. broken — period interest is excluded from the acquisition cost/sale consideration and the same is accounted in interest accrued but not due account.

d. Cost is determined on the weighted average cost method for all categories of investments.

4.7 Investments are valued as per RBI/ FIMMDA guidelines, on the following basis:

Held to Maturity

i) Investments under "Held to Maturity "category are carried at acquisition cost.

Wherever the book value is higher than the face value/ redemption value, the premium is amortized over the remaining period to maturity on straight line basis. Such amortization of premium is reflected in Interest Earned under the head “ Income on investments” as a deduction.

ii) Investments in subsidiaries/joint ventures/associates are valued at carrying cost less diminution, other than temporary in nature for each investment individually.

iii) Investments in sponsored regional rural banks are valued at carrying cost.

iv) Investment in Venture Capital is valued at carrying cost.

v) Equity shares held in HTM category are valued at carrying cost.

The above valuation in category of Available for Sale and Held for Trading is done scrip wise on quarterly basis and depreciation/appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for while net appreciation is ignored. On provision for depreciation, the book value of the individual security remains unchanged after marking to market.

4.8 Investments are subject to appropriate provisioning/ de-recognition of income, in line with the prudential norms of Reserve Bank of India for NPI classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities. For NPI in preference share, debentures and bonds, in addition to valuation as above, further provision is made on Sub-standard and Doubtful assets as per NPA provisioning norms.

If any credit facility availed by an entity is NPA in the books of the Bank, investment in any of the securities issued by the same entity would also be treated as NPI and vice versa. However, in respect of NPI preference share where the dividend is not paid, the corresponding credit facility is not treated as NPA.

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

4.10 Securities repurchased/resold under buy back arrangement are accounted for at original cost.

4.11 The securities sold and purchased under Repo/Reverse Repo are accounted as Collateralized lending and borrowing transactions. However, securities are transferred as in the case of normal outright sale/purchase transactions and such movement of securities is reflected using the Repo/ Reverse Repo Accounts and Contra entries. The above 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 Account is classified under schedule 4 (Borrowings) and balance in Reverse Repo Account is classified under Schedule7 (Balance with Banks and Money at Call & Short Notice).The same is also applicable to LAF with RBI.

4.12 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under: -

Hedge Swaps

Interest rate swaps which hedge interest bearing asset or liability are accounted for on accrual basis except the swaps designated with an asset or liability that are carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/ liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes recorded in the financial statements.

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.

4.13 Foreign currency options

Foreign currency options written by the bank with a back-to-back contract with another bank are not marked to market since there is no market risk.

Premium received is held as a liability and transferred to the Profit and Loss Account on maturity/cancellation.

5. LOANS / ADVANCES AND PROVISIONS THEREON:

5.1 Advances are classified as performing and nonperforming assets; provisions are made in accordance with prudential norms prescribed by RBI.

5.1 (a) Advances are classified : Standard, Sub Standard, Doubtful and Loss assets borrower wise.

5.1 (b) Advances are stated net of specific loan loss provisions, provision for diminution in fair value of restructured advances.

5.2 In respect of foreign offices, the classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent.

Loans and advances held at the overseas branches that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the host country.

5.3 Financial Assets sold are recognized as under:

(a) For Sale of financial assets sold to SCs/RCs

(i) If the sale to SCs/RCs is at a price below the Net Book Value (NBV), (i.e. Book Value less provisions held), the shortfall should be debited to the Profit & Loss account of that year. Bank can also use countercyclical / floating provisions for meeting the shortfall on sale of NPAs i.e when the sale is at a price below the NBV.

However, for assets sold on or after 26.02.2014 and up to 31.03.2016, as incentive for early sale of NPAs, bank can spread over any shortfall, if the sale value is lower than the NBV, over a period of two years. However, assets sold from 01.04.2016 to 31.03.2017, shortfall is to be amortized over a period of only four quarters from the quarter, in which the sale took place.

(ii) If the sale is for a value higher than the NBV, Bank can reverse the excess provision on sale of NPAs to its profit and loss account in the year, the amounts are received. However, Bank can reverse excess provision (when the sale is for a value higher than the NBV) arising out of sale of NPAs, only when the cash received (by way of initial consideration and/ or redemption of SRs/PTCs) is higher than the NBV of the asset. Further, reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.

(b) For Sale of financial assets sold to Other Banks/NBFCs/ FIs etc.

(i) In case the sale is at a price below the Net Book Value (NBV) i.e. Book Value less provision held, the shortfall should be debited to the Profit & Loss A/c of that year.

(ii) In case the sale is for a value higher than the Net Book Value (NBV) i.e. Book Value less provision held, the excess provision shall not be reversed but will be utilized to meet the shortfall/loss on account of sale of other NPAs.

The Bank considers a restructured account as one where the Bank, for economic or legal reasons relating to the borrower''s financial difficulty, grants to the borrower concessions that the Bank would not otherwise consider. Restructuring would normally involve modification of terms of the advance / securities, which would generally include, among others, alteration of repayment period / repayable amount / the amount of installments / rate of interest (due to reasons other than competitive reasons). Restructured accounts are classified as such by the Bank only upon approval and implementation of the restructuring package. Necessary provision for diminution in the fair value of a restructured account is made.

5.4 For restructured/rescheduled advances, provisions are made in accordance with guidelines issued by RBI.

In respect of non-performing loans and advances accounts subjected to restructuring, the account is upgraded to standard only after the specified period i.e. a period of one year after the date when first payment of interest or of principal, whichever is later, falls due, subject to satisfactory performance of the account during the period.

5.5 In addition to the specific provision on NPAs, general provisions are also made for standard assets as per extant RBI Guidelines. These provisions are reflected in Schedule 5 of the Balance Sheet under the head “Other Liabilities & Provisions - Others” and are not considered for arriving at the Net NPAs.

5.6 In accordance with RBI guidelines, accelerated provision is made on non-performing advances which were not earlier reported by the Bank as Special Mention Account under “SMA-2” category to Central Repository of Information on Large Credits (CRILC). Accelerated provision is also made on non-performing advances which are erstwhile SMA-2 accounts with Aggregate Exposure (AE) '' 1,000 million or above and Joint Lenders'' Forum (JLF) is not formed or they fail to agree upon a common Corrective Action Plan (CAP) within the stipulated time frame.

Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized in the profit and loss account.

5.7 Provision for Country Exposure:

In addition to the specific provisions held according to the asset classification status, provisions are also made for individual country exposures (other than the home country). Countries are categorized into seven risk categories, namely, insignificant, low, moderately Low, moderate, moderately high, high & very high and provisioning made as per extant RBI guidelines. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposures. The provision is reflected in Schedule 5 of the Balance Sheet under the “Other liabilities & Provisions - Others”.

5.8 An additional provision of 2% ( in addition to country risk provision that is applicable to all overseas exposures) against standard assets representing all exposures to step down subsidiaries of Indian Corporate has been made to cover the additional risk arising from complexity in the structure, location of different intermediary entities in different jurisdictions exposing the Indian Company, and hence the Bank, to a greater political and regulatory risk. (As per RBI Cir.No. RBI/2015.16/279 DBR.IBD.BC No. 68/23.37.001/2015-16 dated 31.12.2015).

6. FIXED ASSETS

6.1 Fixed assets are stated at historical cost less accumulated depreciation/amortization, wherever applicable, except those premises, which have been revalued. The appreciation on revaluation is credited to revaluation reserve and incremental depreciation attributable to the revalued amount is deducted there from.

6.2 Software is capitalized and clubbed under Intangible assets.

6.3 Cost includes cost of purchase and all expenditure such as site preparation, installation costs and professional fees incurred on the asset till the time of capitalization. Subsequent expenditure/s incurred on the assets are capitalized only when it increases the future benefits from such assets or their functioning capability.

6.4 DEPRECIATION

A. Depreciation on assets (including land where value is not separable) is provided on straight-line method based on estimated life of the asset, except in respect of computers where it is calculated on the straight-line method, at the rates prescribed by RBI.

C. Depreciation on fresh additions to assets other than bank''s own premises is provided from the month in which the assets are put to use and in the case of assets sold/ disposed off during the year, up to the month preceding the month in which it is sold/ disposed off.

D. The depreciation on bank''s own premises existing at the close of the year is charged for full year. The construction cost is depreciated only when the building is complete in all respects. Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

E. In respect of leasehold premises, the lease premium, if any, is amortized over the period of lease and the lease rent is charged in the respective year(s).

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Mar 31, 2015

1. AS 23- Accounting for Investments in Associates in Consolidated financial Statements

Since Investments of the bank in its Associates are participative in nature and the Bank having the power to exercise significant influence on their activities , such Investments are recognized in the Consolidated Financial Statements of the Bank.

2. AS 24 - Discontinuing Operations

During the period from 01.04.2014 to 31.03.2015, the bank has not discontinued operations of any of its branches, which resulted in shedding of liability and realization of the assets and no decision has been finalized to discontinue an operation in its entirety which will have the above effect.

3. AS 25- Interim Financial reporting

The Bank is adopting the format prescribed by the RBI for the purpose of half yearly review of its accounts as per RBI Circular No. DBS.ARS.No.BC 13/08.91.001/2000-01 dated 17th May 2001.

4. AS 28 - Impairment of Assets

A substantial portion of the bank''s assets comprise of ''financial assets'' to which Accounting Standard 28 ''Impairment of Assets'' is not applicable. In the opinion of the bank, there is no impairment of its assets (to which the standard applies) to any material extent as at 31.03.2015 requiring recognition in terms of the said standard.

5. AS-29 Provisions, Contingent Liabilities and Contingent Assets i) Movement of provisions for liabilities*

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Mar 31, 2013

1. BASIS OF PREPARATION

The financial statements have been prepared on the historical cost basis and conform, in all material aspects, to Generally Accepted Accounting Principles (GAAP) in India which encompasses applicable statutory provisions, regulatory norms prescribed by Reserve Bank of India (RBI), Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and prevailing practices in Banking industry in India.

Use of Estimates

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

2. METHOD OF ACCOUNTING

The Financial Statements have been prepared on the going concern basis with accrual concept and in accordance with the accounting policies and practices consistently followed unless otherwise stated.

3. FIXED ASSETS

3.1 Fixed assets are stated at historical cost except those premises, which have been revalued. The appreciation on revaluation is credited to revaluation reserve and incremental depreciation attributable to the revalued amount is deducted there from.

3.2 a. Depreciation on assets (including land where value is not separable) are provided on straight-line method based on estimated life of the asset.

b. Depreciation on assets has been provided at the rates furnished on next page:-

c. Depreciation on fresh additions to assets other than bank''s own premises is provided from the month in which the assets are put to use and in the case of assets sold/disposed off during the year, up to the month preceding the month in which it is sold/ disposed off.

The depreciation on bank''s own premises existing at the close of the year is charged for full year. The construction cost is depreciated only when the building is complete in all respects.

4. ADVANCES

4.1 Advances are classified as performing and non- performing assets; provisions are made in accordance with prudential norms prescribed by RBI.

4.2 Advances are stated net of provisions in respect of non-performing assets.

4.3 Offices outside India / Offshore Banking Units:

a Advances are classified under categories in line with those of Indian Offices. b Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

4.4. Financial Assets sold are recognized as under:

a. In case the sale is at a price lower than the Net Book Value (NBV) the shortfall is charged to the Profit and Loss Account.

b. In case the sale is at a price higher than the NBV, the surplus provision is retained to meet shortfall/ loss on account of sale of other non-performing financial assets.

4.5 For restructured/rescheduled advances, provisions are made in accordance with guidelines issued by RBI.

5. INVESTMENTS

5.1 Investments are classified into six categories as stipulated in form A of the third schedule to the Banking Regulation Act, 1949.

5.2 Investments have been categorized into "Held to Maturity", "Available for Sale" and "Held for Trading" in terms of RBI guidelines. Securities acquired by the Bank with an intention to hold till maturity is classified under "Held to Maturity".

5.3 The securities acquired by the Bank with an intention to trade by taking advantage of short-term price/ interest rate movements are classified under "Held for Trading".

5.4 The securities, which do not fall within the above two categories, are classified under "Available for Sale".

5.5 Transfer of securities from one category to another is carried out at the lower of acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

5.6 In determining acquisition cost of an investment

a. Brokerage / commission received on subscription is deducted from the cost of securities.

b. Brokerage, commission etc. paid in connection with acquisition of securities are treated as revenue expenses.

c. Interest accrued up to the date of acquisition of securities i.e. broken - period interest is excluded from the acquisition cost and the same is accounted in interest accrued but not due account.

5.7 Investments are valued as per RBI/ FIMMDA guidelines, on the following basis:

Held to Maturity

i) Investments under " Held to Maturity " category are carried at acquisition cost. Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity.

ii) Investments in subsidiaries/joint ventures/ associates are valued at carrying cost less diminution, other than temporary, in nature.

iii) Investments in sponsored regional rural banks are valued at carrying cost.

iv) Investment in venture capital is valued at carrying cost.

The above valuation in category of Available for Sale and Held for Trading are done scrip wise and depreciation / appreciation is aggregated for each classification. Net depreciation for each classification if any is provided for while net appreciation is ignored.

5.8 Investments are subject to appropriate provisioning/ de-recognition of income, in line with the prudential norms of Reserve Bank of India for NPI classification. The depreciation/provision in respect of non- performing securities is not set off against the appreciation in respect of the other performing securities.

5.9 Profit or loss on sale of investments in any category is taken to Profit and Loss account but, in case of profit on sale of investments in "Held to Maturity" category, an equivalent amount is appropriated to "Capital Reserve Account".

5.10 Securities repurchased/resold under buy back arrangement are accounted for at original cost.

5.11 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different category of swaps are valued as under: -

Hedge Swaps

Interest rate swaps which hedges interest bearing asset or liability is accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/ liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes recorded in the financial statements.

5.12 Foreign currency options

Foreign currency options written by the bank with a back- to-back contract with another bank is not marked to market since there is no market risk.

Premium received is held as a liability and transferred to the Profit and Loss Account on maturity/cancellation.

6. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS & BALANCES:

a) Except advances of erstwhile London branches which are accounted for at the exchange rate prevailing on the date of parking in India, all other monetary assets and liabilities, guarantees, acceptances, endorsements and other obligations are translated in Indian Rupee equivalent at the exchange rates prevailing at the end of the year as per Foreign Exchange Dealers'' Association of India (FEDAI) guidelines.

b) Non-monetary items other than fixed assets are translated at exchange rate prevailing on the date of transaction.

c) Forward exchange contracts are translated at the year end rates notified by FEDAI and the resultant Gain/ loss on evaluation is taken to profit & Loss Account.

d) Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.

e) Offices outside India / Offshore Banking Units:

(i) Operations of foreign branches and off shore banking unit are classified as "Non-integral foreign operations" and operations of representative offices abroad are classified as "integral foreign operations".

(ii) Foreign currency transactions of integral foreign operations and non-integral foreign operations are accounted for as prescribed by AS-11.

(iii) Exchange Fluctuation on Profit / loss of non- integral operations are credited /debited to exchange fluctuation reserve.

7. TAXES ON INCOME

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made.

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

8. EMPLOYMENT BENEFITS

- PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to Profit & Loss A/c.

- GRATUITY:

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of the financial year. The scheme is funded by the bank and is managed by a separate trust.

- PENSION:

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

- COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave (PL) and Sick Leave (including un- availed casual leave) is provided for based on actuarial valuation.

- OTHER EMPLOYEE BENEFITS:

Other Employee benefits such as Leave Fare Concession (LFC), Silver jubilee award, Medical Benefits etc. are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are accounted for as per laws prevailing in the respective countries.

9. IMPAIRMENT OF ASSETS

Impairment loss, if any, is recognised in accordance with the accounting standard issued in this regard by ICAI and impairment loss on any revalued asset is treated as a revaluation decrease.

10. REVENUE RECOGNITION

10.1 Income / expenditure (other than items referred to in paragraph 10.4) is generally accounted for on accrual basis.

10.2 Income on non-performing assets is recognized on realisation as per RBI guidelines.

10.3 Recoveries in NPA accounts (irrespective of the mode / status / stage of recovery actions) are appropriated in the following order of priority :-

a) Expenditure/out of pocket Expenses incurred for recovery (earlier recorded in memorandum dues);

b) Principal irregularities i.e. NPA outstanding in the account.

c) Towards the interest irregularities/accrued interest.

10.4 Commission (excluding on Government Business), interest on overdue bills, exchange, locker rent, income from merchant banking transactions and dividend income are accounted for on realization and insurance claims are accounted for on settlement.

10.5 Income from interest on refund of income tax is accounted for in the year the order is passed by the concerned authority.

11. OTHERS

11.1 Interest on unpaid and unclaimed matured term deposits are accounted for at savings bank rate.

---

Mar 31, 2012

1. BASIS OF PREPARATION:

The financial statements have been prepared on the historical cost basis and conform, in all material aspects, to Generally Accepted Accounting Principles (GAAP) in India which encompasses applicable statutory provisions, regulatory norms prescribed by Reserve Bank of India (RBI), Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and prevailing practices in Banking industry in India.

Use of Estimates

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

2. METHOD OF ACCOUNTING:

The Financial Statements have been prepared on the going concern basis with accrual concept and in accordance with the accounting policies and practices consistently followed unless otherwise stated.

3. FIXED ASSETS

3.1 Fixed assets are stated at historical cost except those premises, which have been revalued. The appreciation on revaluation is credited to revaluation reserve and incremental depreciation attributable to the revalued amount is deducted there from.

3.2 a. Depreciation on assets (including land where value is

not separable) are provided on straight-line method based on estimated life of the asset.

c. Assets taken over from erstwhile New Bank of India and Nedungadi Bank Ltd are depreciated based on their estimated life based on broad groups / categories instead of individual assets.

d. Depreciation on additions to assets is provided from the month in which the asset is put to use and in case of assets sold/disposed of during the year, up to the month preceding the month in which it is sold/ disposed of.

4. ADVANCES

4.1 Advances are classified as performing and non-performing assets; provisions are made in accordance with prudential norms prescribed by RBI.

4.2 Advances are stated net of provisions in respect of non- performing assets.

4.3 Offices outside India / Offshore Banking Units:

a Advances are classified under categories in line with those of Indian Offices.

b Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

4.4. Financial Assets sold are recognized as under:

a. In case the sale is at a price lower than the Net Book Value (NBV) the shortfall is charged to the Profit and Loss Account.

b. In case the sale is at a price higher than the NBV, the surplus provision is retained to meet shortfall/loss on account of sale of other non-performing financial assets.

4.5 For restructured/rescheduled advances, provisions are made in accordance with guidelines issued by RBI.

5. INVESTMENTS

5.1 Investments are classified into six categories as stipulated in form A of the third schedule to the Banking Regulation Act, 1949.

5.2 Investments have been categorized into "Held to Maturity", "Available for Sale" and "Held for Trading" in terms of RBI guidelines. Securities acquired by the Bank with an intention to hold till maturity is classified under "Held to Maturity".

5.3 The securities acquired by the Bank with an intention to trade by taking advantage of short-term price/ interest rate movements are classified under "Held for Trading".

5.4 The securities, which do not fall within the above two categories, are classified under "Available for Sale".

5.5 Transfer of securities from one category to another is carried out at the lower of acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

5.6 In determining acquisition cost of an investment

a. Brokerage / commission received on subscription is deducted from the cost of securities.

b. Brokerage, commission etc. paid in connection with acquisition of securities are treated as revenue expenses.

c. Interest accrued up to the date of acquisition of securities

i.e. broken-period interest is excluded from the acquisition cost and the same is accounted in interest accrued but not due account.

5.7 Investments are valued as per RBI/ FIMMDA guidelines, on the following basis:

Held to Maturity

i) Investments under "Held to Maturity" category are carried at acquisition cost. Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity.

ii) Investments in subsidiaries/joint ventures/associates are valued at carrying cost less diminution, other than temporary, in nature.

iii) Investments in sponsored regional rural banks are valued at carrying cost.

iv) Investment in venture capital is valued at carrying cost.

The above valuation in category of Available for Sale and Held for Trading are done scrip wise and depreciation / appreciation is aggregated for each classification. Net depreciation for each classification if any is provided for while net appreciation is ignored.

5.8 Investments are subject to appropriate provisioning/ de- recognition of income, in line with the prudential norms of Reserve Bank of India for NPI classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities.

5.9 Profit or loss on sale of investments in any category is taken to Profit and Loss account but, in case of profit on sale of investments in "Held to Maturity" category, an equivalent amount is appropriated to "Capital Reserve Account".

5.10 Securities repurchased/resold under buy back arrangement are accounted for at original cost.

5.11 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different category of swaps are valued as under: -

Hedge Swaps

Interest rate swaps which hedges interest bearing asset or liability is accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/ liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes recorded in the financial statements.

5.12 Foreign currency options

Foreign currency options written by the bank with a back-to- back contract with another bank is not marked to market since there is no market risk.

Premium received is held as a liability and transferred to the Profit and Loss Account on maturity/cancellation.

6. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS & BALANCES:

a) Except advances of erstwhile London branches which are accounted for at the exchange rate prevailing on the date of parking in India, all other monetary assets and liabilities, guarantees, acceptances, endorsements and other obligations are translated in Indian Rupee equivalent at the exchange rates prevailing at the end of the year as per Foreign Exchange Dealers' Association of India (FEDAI) guidelines.

b) Non-monetary items other than fixed assets are translated at exchange rate prevailing on the date of transaction.

c) Forward exchange contracts are translated at the year end rates notified by FEDAI and the resultant Gain/loss on evaluation is taken to profit & Loss Account.

d) Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.

e) Offices outside India / Offshore Banking Units:

(i) Operations of foreign branches and off shore banking unit are classified as "Non-integral foreign operations" and operations of representative offices abroad are classified as "integral foreign operations".

(ii) Foreign currency transactions of integral foreign operations and non-integral foreign operations are accounted for as prescribed by AS-11.

(iii) Exchange Fluctuation on Profit / loss of non-integral operations are credited /debited to exchange fluctuation reserve.

7. TAXES ON INCOME

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made.

The deferred tax charge or credit is recognized using the tax rates that have been enacted or substantially enacted by the Balance Sheet date. In terms of Accounting Standard 22 issued by ICAI, provision for deferred tax liability is made on the basis of review at each Balance Sheet date and deferred tax

assets are recognized only if there is virtual certainty of realization of such assets in future. Deferred tax assets/ liabilities are reviewed at each Balance Sheet date based on developments during the year.

8. EMPLOYMENT BENEFITS

- PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to Profit & Loss A/c.

- GRATUITY:

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of the financial year. The scheme is funded by the bank and is managed by a separate trust.

- PENSION:

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

- COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave (PL) and Sick Leave (including un-availed casual leave) is provided for based on actuarial valuation.

- OTHER EMPLOYEE BENEFITS:

Other Employee benefits such as Leave Fare Concession (LFC), Silver jubilee award, Medical Benefits etc. are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are accounted for as per laws prevailing in the respective countries.

9. IMPAIRMENT OF ASSETS

Impairment loss, if any, is recognised in accordance with the accounting standard issued in this regard by ICAI and impairment loss on any revalued asset is treated as a revaluation decrease.

10. REVENUE RECOGNITION

10.1 Income/expenditure (other than items referred to in paragraph 10.4) is generally accounted for on accrual basis.

10.2 Income on non-performing assets is recognized on realisation as per RBI guidelines.

10.3 Recovery in non-performing advances is appropriated first towards recorded interest and thereafter towards (i) arrears of instalments in term loans and (ii) principal irregularity in other accounts. However, recovery in suit filed (including accounts where recovery is under SARFEASI Act), decreed accounts and compromise cases is first appropriated towards principal or as per terms of decree/settlement.

10.4 Commission (excluding on Government Business), interest on overdue bills, exchange, locker rent, income from merchant banking transactions, dividend income and insurance claims are accounted for on realization/ settlement.

10.5 Income from interest on refund of income tax is accounted for in the year the order is passed by the concerned authority.

11. OTHERS

Interest on unpaid and unclaimed matured term deposits are accounted for at savings bank rate.

---

Mar 31, 2011

1. BASIS OF PREPARATION:

The financial statements have been prepared on the historical cost basis and conform, in all material aspects, to Generally Accepted Accounting Principles (GAAP) in India which encompasses applicable statutory provisions, regulatory norms prescribed by Reserve Bank of India (RBI), Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and prevailing practices in Banking industry in India.

2. METHOD OF ACCOUNTING:

The Financial Statements have been prepared on the going concern basis with accrual concept and in accordance with the accounting policies and practices consistently followed unless otherwise stated.

3. FIXED ASSETS

3.1 Fixed assets are stated at historical cost except those premises, which have been revalued. The appreciation on revaluation is credited to revaluation reserve and incremental depreciation attributable to the revalued amount is deducted therefrom.

3.2 a) Depreciation on assets (including land where value is not separable) are provided on straight-line method based on estimated life of the asset.

c) Assets taken over from erstwhile New Bank of India and Nedungadi Bank Ltd. are depreciated based on their estimated life based on broad groups / categories instead of individual assets.

d) Depreciation on additions to assets is provided from the month in which the asset is put to use and in case of assets sold/disposed of during the year, upto the month preceding the month in which it is sold/disposed of.

4. ADVANCES

4.1 Advances are classified as performing and non-performing assets; provisions are made in accordance with prudential norms prescribed by RBI.

4.2 Advances are stated net of provisions in respect of non- performing assets.

4.3 Offices outside India / Offshore Banking Units:

a) Advances are classified under categories in line with those of Indian Offices.

b) Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

4.4. Financial Assets sold are recognized as under:

a) In case the sale is at a price lower than the Net Book Value (NBV) the shortfall is charged to the Profit and Loss Account.

b) In case the sale is at a price higher than the NBV, the surplus provision is retained to meet shortfall/loss on account of sale of other non-performing financial assets.

4.5 For restructured/rescheduled advances, provisions are made in accordance with guidelines issued by RBI.

5. INVESTMENTS

5.1 Investments are classified into six categories as stipulated in form A of the third schedule to the Banking Regulation Act, 1949.

5.2 Investments have been categorized into “Held to Maturity”, “Available for Sale” and “Held for Trading” in terms of RBI guidelines. Securities acquired by the Bank with an intention to hold till maturity is classified under “Held to Maturity”.

5.3 The securities acquired by the Bank with an intention to trade by taking advantage of short-term price/ interest rate movements are classified under “Held for Trading”.

5.4 The securities, which do not fall within the above two categories, are classified under “Available for Sale”.

5.5 Transfer of securities from one category to another is carried out at the lower of acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

5.6 In determining acquisition cost of an investment

a) Brokerage / commission received on subscription is deducted from the cost of securities.

b) Brokerage, commission etc. paid in connection with acquisition of securities are treated as revenue expenses.

c) Interest accrued up to the date of acquisition of securities i.e. broken - period interest is excluded from the acquisition cost and the same is accounted in interest accrued but not due account.

5.7 Investments are valued as per RBI/ FIMMDA guidelines, on the following basis:

Held to Maturity

i) Investments under “ Held to Maturity “ category are carried at acquisition cost. Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity.

ii) Investments in subsidiaries/joint ventures/associates are valued at carrying cost less diminution, other than temporary, in nature.

iii) Investments in sponsored regional rural banks are valued at carrying cost.

iv) Investment in venture capital is valued at carrying cost.

Available for Sale and Held for Trading

a) Govt. Securities

I. Central Govt. Securities At market prices/YTM as published by Fixed Income Money Market And Derivatives Association of India (FIMMDA)

II. State Govt. Securities On appropriate yield to maturity basis as per FIMMDA/RBI guidelines.

b) Securities guaranteed by On appropriate yield to Central/State Government, maturity basis as per PSU Bonds (not in the FIMMDA/RBI guidelines nature of advances)

c) Treasury Bills At carrying cost

d) Equity shares At market price, if quoted, otherwise at break up value of the Shares as per latest Balance Sheet(not more than one year old), otherwise at Re.1 per company

e) Preference shares At market price, if quoted or on appropriate yield to maturity basis not exceeding redemption value as per RBI/FIMMDA guidelines.

f) Bonds and debentures (not At market price, if quoted, in the nature of advances) or on appropriate yield to maturity basis as per RBI/ FIMMDA guidelines.

g) Units of mutual funds As per stock exchange quotation, if quoted; at repurchase price/NAV, if unquoted

h) Commercial paper At carrying cost

i) Certificate of Deposits At carrying cost.

j) Security receipts of ARCIL At net asset value of the asset as declared by ARCIL

k) Venture Capital Funds At net asset value (NAV) declared by the VCF

l) Other Investments At carrying cost less diminution in value

The above valuation in category of Available for Sale and Held for Trading are done scrip wise and depreciation / appreciation is aggregated for each classification. Net depreciation for each classification if any is provided for while net appreciation is ignored.

5.8 Investments are subject to appropriate provisioning/ de- recognition of income, in line with the prudential norms of Reserve Bank of India for NPI classification. The depreciation/ provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities.

5.9 Profit or loss on sale of investments in any category is taken to Profit and Loss account but, in case of profit on sale of investments in “Held to Maturity” category, an equivalent amount is appropriated to “Capital Reserve Account”.

5.10 Securities repurchased/resold under buy back arrangement are accounted for at original cost.

5.11 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different category of swaps are valued as under: -

Hedge Swaps

Interest rate swaps which hedges interest bearing asset or liability is accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes recorded in the financial statements.

5.12 Foreign currency options

Foreign currency options written by the bank with a back- to-back contract with another bank is not marked to market since there is no market risk.

Premium received is held as a liability and transferred to the Profit and Loss Account on maturity/cancellation.

6. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS & BALANCES:

a) Except advances of erstwhile London branches which are accounted for at the exchange rate prevailing on the date of parking in India, all other monetary assets and liabilities, guarantees, acceptances, endorsements and other obligations are translated in Indian Rupee equivalent at the exchange rates prevailing at the end of the year as per Foreign Exchange Dealers’ Association of India (FEDAI) guidelines.

b) Non-monetary items other than fixed assets are translated at exchange rate prevailing on the date of transaction.

c) Forward exchange contracts are translated at the year end rates notified by FEDAI and the resultant Gain/loss on evaluation is taken to profit & Loss Account.

d) Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.

e) Offices outside India / Offshore Banking Units:

(i) Operations of foreign branches and off shore banking unit are classified as “Non-integral foreign operations” and operations of representative offices abroad are classified as “integral foreign operations”.

(ii) Foreign currency transactions of integral foreign operations and non-integral foreign operations are accounted for as prescribed by AS-11.

(iii) Exchange Fluctuation on Profit / loss of non-integral operations are credited /debited to exchange fluctuation reserve.

7. TAXES ON INCOME

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made.

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

assets/ liabilities are reviewed at each Balance Sheet date based on developments during the year.

8. EMPLOYMENT BENEFITS

- PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to Profit &

Loss A/c.

- GRATUITY:

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of the financial year. The scheme is funded by the bank and is managed by a separate trust.

- PENSION:

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

- COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave (PL) and Sick Leave (including un-availed casual leave) is provided for based on actuarial valuation.

- OTHER EMPLOYEE BENEFITS:

Other Employee benefits such as Leave Fare Concession (LFC), Silver jubilee award, Medical Benefits etc. are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are accounted for as per laws prevailing in the respective countries.

9. IMPAIRMENT OF ASSETS

Impairment loss, if any, is recognised in accordance with the accounting standard issued in this regard by ICAI and impairment loss on any revalued asset is treated as a revaluation decrease.

10. REVENUE RECOGNITION

10.1 Income / expenditure (other than items referred to in paragraph 10.4) is generally accounted for on accrual basis.

10.2 Income on non-performing assets is recognized on realisation as per RBI guidelines.

10.3 Recovery in non-performing advances is appropriated first towards recorded interest and thereafter towards (i) arrears of instalments in term loans and (ii) principal irregularity in other accounts. However, recovery in suit filed (including accounts where recovery is under SARFEASI Act), decreed accounts and compromise

cases is first appropriated towards principal or as per terms of decree/settlement.

10.4 Commission (excluding on Government Business), interest on overdue bills, exchange, locker rent, income from merchant banking transactions, dividend income and insurance claims are accounted for on realization/settlement.

10.5 Income from interest on refund of income tax is accounted for in the year the order is passed by the concerned authority.

11. OTHERS

Interest on unpaid and unclaimed matured term deposits are accounted for at savings bank rate. Interest differential on matured term deposit for overdue period is accounted for as and when such deposits are renewed as per bank’s rule.

---

Mar 31, 2010

1. BASIS OF PREPARATION:

The financial statements have been prepared on the historical cost basis and conform, in all material aspects, to Generally Accepted Accounting Principles (GAAP) in India, which encompasses applicable statutory provisions, regulatory norms prescribed by Reserve Bank of India (RBI), Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and prevailing practices in Banking industry in India.

2. METHOD OF ACCOUNTING:

The Financial Statements have been prepared on the going concern basis with accrual concept and in accordance with the accounting policies and practices consistently followed, unless otherwise stated.

3. FIXED ASSETS

3.1 Fixed assets are stated at historical cost except those premises, which have been revalued. The appreciation on revaluation is credited to revaluation reserve and incremental depreciation attributable to the revalued amount is deducted therefrom.

3.2 a. Depreciation on assets (including land where value is not separable) are provided on straight-line method based on estimated life of the asset.

c. Assets taken over from erstwhile New Bank of India and Nedungadi Bank Ltd are depreciated based on their estimated life based on broad groups / categories instead of individual assets.

d. Depreciation on additions to assets is provided from the month in which the asset is put to use and in case of assets sold/disposed of during the year, upto the month preceding the month in which it is sold/disposed of.

4. ADVANCES

4.1 Advances are classified as performing and non-performing assets; provisions are made in accordance with prudential norms prescribed by RBI.

4.2 Advances are stated net of provisions in respect of non-performing assets.

4.3 Offices outside India / Offshore Banking Units:

a Advances are classified under categories in line with those of Indian Offices.

b Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

4.4. Financial Assets sold are recognized as under:

a) In case the sale is at a price lower than the Net Book Value (NBV) the shortfall is charged to the Profit and Loss Account.

b) In case the sale is at a price higher than the NBV, the surplus provision is retained to meet shortfall/loss on account of sale of other non-performing financial assets.

4.5 For restructured/rescheduled advances, provisions are made in accordance with guidelines issued by RBI.

5. INVESTMENTS

5.1 Investments are classified into six categories as stipulated in form A of the third schedule to the Banking Regulation Act, 1949.

5.2 Investments have been categorized into “Held to Maturity”, “Available for Sale” and “Held for Trading” in terms of RBI guidelines. Securities acquired by the Bank with an intention to hold till maturity is classified under “Held to Maturity”.

5.3 The securities acquired by the Bank with an intention to trade by taking advantage of short-term price/ interest rate movements are classified under “Held for Trading”.

5.4 The securities, which do not fall within the above two categories, are classified under “Available for Sale”.

5.5 Transfer of securities from one category to another is carried out at the lower of acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

5.6 In determining acquisition cost of an investment

a. Brokerage / commission received on subscription is deducted from the cost of securities.

b. Brokerage, commission etc. paid in connection with acquisition of securities are treated as revenue expenses.

c. Interest accrued up to the date of acquisition of securities i.e. broken – period interest is excluded from the acquisition cost and the same is accounted in interest accrued but not due account.

5.7 Investments are valued as per RBI/ FIMMDA guidelines, on the following basis:

Held to Maturity

i) Investments under “ Held to Maturity “ category are carried at acquisition cost. Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity.

ii) Investments in subsidiaries/joint ventures/associates are valued at carrying cost less diminution, other than temporary, in nature.

iii) Investments in sponsored regional rural banks are valued at carrying cost.

iv) Investment in venture capital is valued at carrying cost. Available for Sale and Held for Trading

a) Govt. Securities

I. Central Govt. Securities

At market prices/YTM as published by Fixed Income Money Market And Derivatives Association of India (FIMMDA)

II. State Govt. Securities

On appropriate yield to maturity basis as per FIMMDA/RBI guidelines.

b) Securities guaranteed by Central / State Government, PSU Bonds (not in the nature of advances)

On appropriate yield to maturity basis as per FIMMDA/RBI guidelines

c) Treasury Bills

At carrying cost

d) Equity shares

At market price, if quoted, otherwise at break up value of the Shares as per latest Balance Sheet (not more than one year old), otherwise at Re.1 per company

e) Preference shares

At market price, if quoted or on appropriate yield to maturity basis not exceeding redemption value as per RBI/FIMMDA guidelines.

f) Bonds and debentures (not in the nature of advances)

At market price, if quoted, or on appropriate yield to maturity basis as per RBI/ FIMMDA guidelines.

g) Units of mutual funds

As per stock exchange quotation, if quoted; at repurchase price/NAV, if unquoted

h) Commercial paper At carrying cost

i) Certificate of Deposits At carrying cost.

j) Security receipts of ARCIL

At net asset value of the asset as declared by ARCIL

k) Venture Capital Funds

At net asset value (NAV) declared by the VCF

l) Other Investments

At carrying cost less diminution in value

The above valuation in category of Available for Sale and Held for Trading are done scrip wise and depreciation / appreciation is aggregated for each classification. Net depreciation for each classification if any is provided for while net appreciation is ignored.

5.8 Investments are subject to appropriate provisioning/ de- recognition of income, in line with the prudential norms of Reserve Bank of India for NPI classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities.

5.9 Profit or loss on sale of investments in any category is taken to Profit and Loss account but, in case of profit on sale of investments in “Held to Maturity” category, an equivalent amount is appropriated to “Capital Reserve Account”.

5.10 Securities repurchased/resold under buy back arrangement are accounted for at original cost.

5.11 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different category of swaps are valued as under: -

Hedge Swaps

Interest rate swaps which hedges interest bearing asset or liability is accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes recorded in the financial statements.

5.12 Foreign currency options

Foreign currency options written by the bank with a back- to-back contract with another bank is not marked to market since there is no market risk.

Premium received is held as a liability and transferred to the Profit and Loss Account on maturity/cancellation.

6. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS & BALANCES:

a) Except advances of erstwhile London branches which are accounted for at the exchange rate prevailing on the date of parking in India, all other monetary assets and liabilities, guarantees, acceptances, endorsements and other obligations are translated in Indian Rupee equivalent at the exchange rates prevailing at the end of the year as per Foreign Exchange Dealers’ Association of India (FEDAI) guidelines.

b) Non-monetary items other than fixed assets are translated at exchange rate prevailing on the date of transaction.

c) Forward exchange contracts are translated at the year end rates notified by FEDAI and the resultant Gain/loss on evaluation is taken to profit & Loss Account.

d) Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.

e) Offices outside India / Offshore Banking Units:

(i) Operations of foreign branches and off shore banking unit are classified as “Non-integral foreign operations” and operations of representative offices abroad are classified as “integral foreign operations”.

(ii) Foreign currency transactions of integral foreign operations and non-integral foreign operations are accounted for as prescribed by AS-11.

(iii) Exchange Fluctuation on Profit / loss of non-integral operations are credited /debited to exchange fluctuation reserve.

7. TAXES ON INCOME

Current tax is determined on the amount of tax payable in respect of taxable income for the year and accordingly provision for tax is made.

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

8. EMPLOYMENT BENEFITS

• PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to Profit & Loss A/c.

• GRATUITY:

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of the financial year. The scheme is funded by the bank and is managed by a separate trust.

• PENSION:

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

• COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave (PL) and Sick Leave (including un-availed casual leave) is provided for based on actuarial valuation.

• OTHER EMPLOYEE BENEFITS:

Other Employee benefits such as Leave Fare Concession (LFC), Silver jubilee award, Medical Benefits etc. are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are accounted for as per laws prevailing in the respective countries.

9. IMPAIRMENT OF ASSETS

Impairment loss, if any, is recognised in accordance with the accounting standard issued in this regard by ICAI and impairment loss on any revalued asset is treated as a revaluation decrease.

10. REVENUE RECOGNITION

10.1 Income / expenditure (other than items referred to in paragraph 10.4) is generally accounted for on accrual basis.

10.2 Income on non-performing assets is recognized on realisation as per RBI guidelines.

10.3 Recovery in non-performing advances is appropriated first towards recorded interest and thereafter towards (i) arrears of instalments in term loans and (ii) principal irregularity in other accounts. However, recovery in suit filed (including accounts where recovery is under SARFEASI Act), decreed accounts and compromise cases is first appropriated towards principal or as per terms of decree/ settlement.

10.4 Commission (excluding on Government Business), interest on overdue bills, exchange, locker rent, income from merchant banking transactions, dividend income and insurance claims are accounted for on realization/settlement.

10.5 Income from interest on refund of income tax is accounted for in the year the order is passed by the concerned authority.

11. OTHERS

Interest on unpaid and unclaimed matured term deposits are accounted for at savings bank rate. Interest differential on matured term deposit for overdue period is accounted for as and when such deposits are renewed as per bank’s rule.