Accounting Policies of State Bank Of Mysore Company

Mar 31, 2015

A. basis of preparation

The Bank''s financial statements are prepared under the historical cost convention, on the accrual basis of accounting and conform in all material aspects to Generally Accepted Accounting Principles (GAAP) in India, which comprise of applicable statutory provisions, regulatory norms/ guidelines prescribed by Reserve Bank of India (RBI), Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI), and the practices prevalent in the banking industry in India, unless otherwise stated.

b. use of estimates

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

c. significant accounting policies

1. Revenue recognition

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

1.2 Interest income is recognised in the Profit and Loss Account as it accrues except otherwise stated:

(i) I n c o m e f r o m nonperforming assets (NPAs), comprising of advances, leases and Investments, which

is recognized upon realisation as per the prudential norms prescribed by Reserve Bank of India.

(ii) Funded Interest on Standard Restructured Advances and interest on FITL, which is recognized upon realisation as per the guidelines of Reserve Bank of India.

(iii) Interest on application money on investments.

(iv) Overdue interest on investments and bills discounted.

(v) Income on Rupee Derivatives designated as ''Trading''.

(vi) In respect of compromise/ settlement proposals, accounting for income is recognised on complete closure/ realisation.

1.3 Profit or loss on sale of Investments is recognised in the Profit and Loss Account. However, the profit on sale of Investments in the ''Held to Maturity'' category is appropriated net of applicable taxes and amount required to be transferred to Statutory Reserve under ''Capital Reserve Account''.

1.4 Income (other than interest) on investments in ''Held to Maturity'' (HTM) category acquired at a discount to the face value, is recognised as follows :

a. On Interest bearing securities, it is recognized only at the time of sale/ redemption.

b. On zero-coupon securities, it is accounted for over the balance tenor of the security on a constant yield basis.

1.5 Dividend is accounted on an accrual basis where the right to receive the dividend is established.

1.6 All other commission and fee incomes are recognized on their realisation except Commission on Government Business, which is recognised as it accrues.

1.7 Expenditure is charged on accrual basis except for Electricity, Water, Rent, Property Taxes, Telephone, Insurance, Annual Maintenance Contracts, Law Charges, Advertisement & Publicity and Traveling & Conveyance.

1.8 One time Insurance Premium paid under Special Home Loan Scheme (December 2008 to June 2009) is amortised over loan period.

2. INVESTMENTS:

Transactions in all securities are

recorded on ''Settlement Date''.

2.1 Classification

Investments are classified into three categories, viz. Held to Maturity (HTM), Available for Sale (AFS) and Held for Trading (HFT).

2.2 Basis of classification:

i. Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

ii. Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

iii. Investments, which are not classified in the above two categories, are classified as Available for Sale.

iv. An investment is classified as Held to Maturity, Available for Sale or Held for Trading at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

v. Investments in subsidiaries, joint ventures and associates are classified as Held to Maturity.

2.3 Valuation:

i. In determining the acquisition cost of an investment:

a. Brokerage/commission received on subscriptions is reduced from the cost.

b. Brokerage, commission, securities transaction tax etc. paid in connection with acquisition of investments are expensed upfront and excluded from cost.

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

d. Cost is determined on Weighted Average Cost method for investments under all categories.

ii. The transfer of a security amongst the above three categories is accounted for at the least of Weighted Average Cost or Market Value on the date of transfer, and the depreciation, if any, on such transfer is fully provided for.

iii. Treasury Bills and Commercial Papers are valued at carrying cost.

iv. Held to Maturity category:

Investments under Held to Maturity category are carried at acquisition cost unless it is more than the Face Value, in which case the premium is amortised over the period remaining maturity on constant yield basis. Such amortisation of premium is adjusted against income under the head ''interest on investments''. Investment in Regional Rural Banks is valued at carrying cost (i.e book value). A provision is made for diminution, other than temporary, for each investment individually.

v. Available for Sale and Held for Trading categories:

Investments held under AFS and HFT categories are individually revalued at the market price or fair value determined as per regulatory guidelines, and only the net depreciation of each group for each category is provided for and net appreciation is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.

vi. Security receipts issued by an Asset Reconstruction Company (ARC) are valued in accordance with the guidelines applicable to non-SLR instruments. Accordingly, in cases where the security receipts issued by the ARC are limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the Net Asset Value, obtained from the ARC, is reckoned for valuation of such investments.

vii. Investments are classified as performing and non-performing, based on the guidelines issued by the RBI. Investments become non-performing (NPI) where:

a. Interest/ installment (including maturity proceeds) is due and remains unpaid for more than 90 days.

b. The above applies mutatis-mutandis to preference shares where the fixed dividend is not paid. However, if only the preference shares are classified as NPI, the investment in any of the other performing securities issued by the same issuer is not classified as NPI and any performing credit facilities granted to that borrower is not treated as NPA.

c. In the case of equity shares, in the event the Investment in the shares of any company is valued at RS.1 per company on account of the non availability of the latest Balance Sheet, those equity shares would be reckoned as NPI.

d. If any credit facility availed by the issuer is NPA in the books of the Bank, Investment in any of the securities issued by the same issuer would also be treated as NPI and vice versa except in case of Preference Shares as stated in (b) above .

e. The investments in debentures/bonds, which are deemed to be in the nature of advance, are also subjected to NPI norms as applicable to investments.

viii. Accounting for Repo/ Reverse Repo transactions [other than transactions under the Liquidity Adjustment Facility (LAF) with the RBI:

a. The securities sold and purchased under Repo/ Reverse Repo are accounted as Collateralized lending and borrowing transactions. However securities are transferred as in 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 a/c is classified under Schedule 4 (Borrowings) and balance in Reverse Repo a/c is classified under Schedule 7 (Balance with Banks and Money at Call & Short Notice).

b. Securities purchased/ sold under LAF with RBI are debited/credited to Investment Account and reversed on maturity of the transaction. Interest expended/earned thereon is accounted for as expenditure/revenue.

3. LOANS/ADVANCES AND PROVISIONS THEREON

3.1 Loans and Advances are classified as performing and non-performing, based on the guidelines issued by RBI. Loan assets become Non-Performing Assets (NPAs) where:

i. In respect of Term Loans, interest and/ or installment of principal remains overdue for a period of more than 90 days;

ii. In respect of Overdraft or Cash Credit advances, the account remains ''out of order'', i.e. if the outstanding balance exceeds the sanctioned limit/drawing power continuously for a period of 90 days, or if there are no credits continuously for 90 days as on the date of Balance Sheet, or if the credits are not adequate to cover the interest debited during the same period;

iii. In respect of bills purchased/ discounted, the bill remains overdue for a period of more than 90 days;

iv. In respect of agricultural advances for short duration crops, where the instalment of principal or interest remains overdue for two crop seasons;

v. In respect of agricultural advances for long duration crops, where the principal or interest remains overdue for one crop season.

3.2 NPAs are classified into Substandard, Doubtful and Loss Assets, based on the following criteria stipulated by RBI:

i. Sub-standard: A loan asset that has remained nonperforming for a period less than or equal to 12 months.

ii. Doubtful: A loan asset that has remained in the sub-standard category for a period of 12 months.

iii. Loss: A loan asset where loss has been identified but the amount has not been fully written off.

3.3 Provisions are made for NPAs as per the extant guidelines prescribed by the regulatory authorities, subject to minimum provisions as prescribed below:

i. Substandard Assets:

i. A general provision of 15%

ii. Additional provision of 10% (5% incase of Infrastructure Loan accounts) for exposures which are unsecured ab-initio (where realisable value of security is not more than 10 percent ab-initio).

ii. Doubtful Assets:

Secured portion:

i. Upto one year : 25%

ii. One to three years : 40%

iii. More than three years : 100% Unsecured portion 100%

iv. Loss Assets : 100%

3.4 The sale of NPAs is accounted as per guidelines prescribed by RBI. If the sale is at a price below net book value, the shortfall is debited to the Profit and Loss Account, and in case of sale for a value higher than net book value, the excess provision is retained and utilized to meet the shortfall / loss on sale of other financial assets. Net book value is outstandings as reduced by specific provisions held and ECGC/CGTMSE claims received.

3.5 Advances are net of specific loan loss provisions including floating provisions, counter cyclical provisions, provision for diminution in fair value and interest sacrifice, unrealised interest, ECGC/CGTMSE claims received and bills rediscounted.

3.6 For restructured/rescheduled assets, provisions are made in accordance with the guidelines issued by RBI, which require that the difference between the fair value of the loan before and after restructuring is provided for, in addition to provision for NPAs. The provision for diminution in fair value and interest sacrifice, arising of the above, is reduced from advances.

3.7 In the case of loan accounts classified as NPAs, an account may be reclassified as a performing asset if it conforms to the guidelines prescribed by RBI.

3.8 Amounts recovered against debts written off in earlier years are recognised as revenue.

3.9 In addition to the specific provision on NPAs, general provisions are also made for standard assets. 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 Net NPAs. Further as per the guidelines issued by RBI, provision on standard restructured advances is made as follows:

i. Provision on the stock of restructured accounts as on 31st May 2013 is made as follows:

a. 3.50% as at 31st March 2014

b. 4.25% as at 31st March 2015

c. 5.00% as at 31st March 2016

ii. Provision @5.00% in respect of accounts restructured from 1st June 2013.

4. FLOATING & COUNTER

CYCLICAL PROVISIONS

A. Floating Provision: The

Bank has a policy for creation and utilisation of floating provisions separately for advances, investments and general purpose. The quantum of floating provisions to be created is assessed at the end of each financial year. The floating provisions are utilised only for contingencies under extra ordinary circumstances specified in the policy with prior permission of Reserve Bank of India. (The provision is netted off in Schedule 9 of the Balance Sheet under the ''Advances'')

B. Counter Cyclical Provision:

In order to maintain a Provision Coverage Ratio (PCR) as prescribed by RBI, the Bank provides Counter Cyclical Provision from time to time to meet the gap, if any, between specific loan loss provisions, other provisions like floating provisions etc., and the minimum provision as per PCR. (The provision is netted off in Schedule 9 of the Balance Sheet under the ''Advances'')

5. provision for country exposure

In addition to the specific provisions held according to the asset classification status, provisions are held for individual country exposures (other than the home country). Countries are categorised into seven risk categories, namely, insignificant, low,

moderate, high, very high, restricted and off-credit, and provisioning made as per 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''.

6. FIXED ASSETS

AND DEPRECIATION

6.1 Fixed assets have been accounted for at cost less accumulated depreciation, except certain land and buildings included in the head ''Premises'', which are stated at revalued amount.

6.2 Premises include freehold as well as leasehold properties. The land and building allotted by Government/ Government agencies are capitalised based on letters of allotment/ agreement/ physical possession.

6.3 Cost includes cost of purchase and all expenditure such as site preparation, installation costs and professional fees incurred on the asset before it is put to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefits from such assets or their functioning capability.

6.4.Depreciation is provided on Straight Line Method (SLM) at the rates fixed by the Bank as under:

* Premises including

building used for Bank business, guest house & residential purposes 1.6667%

* Vehicles (Car) Motor 20%

* Safe Deposit Lockers,Fire proof Data Safe,Strong room doors 5%

* Furniture & Fixtures other than Electrical Fittings & Fixtures 10%

* Electrical Fittings& Fixtures 20%

* Items Provided at residences of Officers :

* Electrical Equipments 20%

* Carpets & Curtains 10%

* Wooden and Steel Furniture 33.33%

* Computers & ATM 33.33%

* Computer Software forming for integral part of Hardwares 33.33%

* Computer Software which does not form integral part of Hardware 100%

6.5 Depreciation on premises is provided on composite cost, where the value of land and building is not separately identifiable.

6.6 Depreciation is charged on the basis of number of days the asset was put to use on a proportionate basis except in the case of non-integral software, which has to be depreciated fully in the first year of use irrespective of number of days put into use.

6.7 In the final year of depreciation, the book value of Rupee 1 should be left in the books so to say that the book value of any asset will not be zero at any point of time till it is discarded by the Branch.

6.8 In respect of ''Computer Software which does not form integral part of hardware'',

depreciation is charged @ 100% in the first year of use irrespective of number of days put in to use (i.e. irrespective of the date of purchase)

6.9 Depreciation on leased assets is charged on Straight Line Method over the primary period of lease.

6.10 The Bank is having a Policy for revaluation of Bank''s Land and Building which includes appropriate frequency of revaluation, in consonance with Accounting Standard 10 issued by the Institute of Chartered Accountants of India.

6.11 In the case of Land and Building, which have been revalued, the depreciation is provided over the remaining useful life of the assets.

6.12 Expenditure on miscellaneous civil works on the rented premises in respect of ATMs is being charged as ''Revenue expenditure'' to the Profit and Loss Account.

7. IMPAIRMENT OF FIXED ASSETS

7.1 In case of partial impairment of assets, the assets are restored to the normal condition and the expenditure incurred on such restoration is charged to revenue. The asset value and the cumulative depreciation are not altered.

7.2 In case of total impairment of assets, the assets are written off in the books. Such assets are auctioned or disposed off as per the e-Waste disposing policy of the Bank.

8. EFFECTS OF CHANGES IN

THE FOREIGN EXCHANGE RATE

8.1 All the monetary assets and liabilities in the form of balances

with the Banks abroad, deposits in Foreign Currency, overnight deposits/investments, Foreign Currency Loan Accounts etc. and other obligations such as Letters of Credit including Letters of Comfort for Indian operations, other than Forward Exchange Contracts are translated at the end of the year at the closing rates as per Accounting Standard 11 (Revised 2003) issued by the ICAI.

8.2 Income and Expenditure items are translated at the exchange rates prevailing on the date of transaction as per Accounting Standard 11(Revised 2003) issued by the ICAI.

8.3 Forward Exchange Contracts outstanding as on Balance Sheet date are revalued in accordance with guidelines of FEDAI. The difference between the revalued amount and the contracted amount is recognised as profit or loss, as the case may be.

9. EMPLOYEE BENEFITS:

9.1 Short Term Employee Benefits:

Short term employee benefits are accounted for at undiscounted amount as and when the liability becomes due.

9.2 Post Employment Benefits

9.2.1 Defined Benefit Plan

i. The Bank operates a Provident Fund scheme. All eligible employees who joined the bank on or before 31st March, 2010 and have not opted for pension benefits are entitled to receive benefits under the Bank''s Provident Fund Scheme. The Bank contributes on monthly basis at a predetermined rate (currently 10% of employee''s basic pay plus eligible allowances) towards the Bank''s Provident Fund. These contributions are remitted to a trust established for this purpose and are charged to Profit and Loss Account.

ii. The Bank operates gratuity and pension schemes which are defined benefit plans.

iii. The Bank provides for gratuity to all eligible employees. The benefit is in the form of lump sum payments to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs upon completion of five years of service. The bank makes annual contributions to a fund administered by trustees, for the deficit in plan assets based on an independent external actuarial valuation carried out annually.

iv. The Bank provides for pension to all eligible employees and family pension thereof. The benefit is in the form of monthly payments as per rules and regular payments are made to vested employees on retirement, on death while in employment, or on termination of employment. Vesting occurs at different stages as per the rules. The pension liability is reckoned based on an independent actuarial valuation carried out annually.

v. The cost of providing defined benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains/ losses are recognized in Profit and Loss Account.

9.2.2 Defined Contribution Plan

All the officers/employees joined/ joining the bank on or after 1st April 2010 are covered under the New Pension Scheme (NPS- Corporate Model) which is a defined contribution plan. New recruits are not entitled to become members of the existing Pension Scheme and Provident Fund Scheme. The employees covered under the scheme contribute 10% of their basic pay plus dearness allowance to the scheme together with a matching contribution from the Bank. The contributions are transferred to the respective PRAN (Permanent Retirement Account Number) as and when allotted by NSDL.

9.2.3 Other Long Term Employee benefits

All eligible employees of the Bank are entitled for sick leave, leave encashment, silver jubilee award, leave travel concession, resettlement expenses. The costs of such long term employee benefits are internally funded by the Bank.

The cost of providing other long term benefits is determined using the projected unit credit method with actuarial valuations being carried out at each Balance Sheet date.

9.3 Consequent upon the re-opening of Pension option to employees and enhancement in Gratuity Limit due to amendment in the Payment of Gratuity Act, the Bank has opted to amortize the incremental liability, as per RBI Circular, over a period of five years (subject to a minimum of 1/5th every year) beginning with the financial year ending 31st March 2011.

10. TAXES ON INCOME

10.1 Income tax expense is the aggregate amount of current tax and deferred tax. Current taxes are determined in accordance with the provisions of tax laws prevailing in India. Deferred tax adjustments comprise of changes in the deferred tax assets or liabilities during the period and Deferred Tax is determined in terms of Accounting Standard-22 issued by ICAI

10.2 Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted prior to the Balance Sheet date. Deferred tax assets and liabilities are recognised on a prudent basis for future tax consequences of timing differences by adoption of Profit and Loss approach with their respective tax rates. The impact of changes in the deferred tax assets and liabilities is recognized in the profit and loss account.

10.3 Deferred tax assets are recognised at each reporting date, based upon management''s judgement as to whether realisation is considered reasonably certain. Deferred tax assets are recognized on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax assets can be realised against future profits.

10.4 In terms of the RBI circular DBOD No. BP.BC.77/21.04.018/2013-14 dated 20.12.2013 the Bank has adopted the policy of creating Deferred Tax Liability on the Special Reserve made under section 36 (i) (viii) of the Income Tax Act 1961.

11. EARNINGS PER SHARE

11.1 The Bank reports basic and diluted earnings per share in accordance with AS 20 -''Earnings per Share'' issued by the ICAI. Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding at the year end.

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

12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

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

12.2 No provision is recognised for

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

ii. any present obligation that arises from past events but is not recognised because

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

b. a reliable estimate of the amount of obligation cannot be made. Such obligations are recorded as Contingent Liabilities. These are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

12.3 Contingent Assets are not recognised in the financial statements.

13. SHARE ISSUE EXPENSES

Share issue expenses are charged to the Share Premium Account.

14. NET PROFIT:

The net profit disclosed in the Profit and Loss Account is after:

(i) Provisions as per RBI guidelines for bad and doubtful Advances and Investments.

(ii) Transfer to/from contingency funds.

(iii) Provisions for taxes in accordance with the statutory requirements.

(iv) Other usual and necessary provisions.

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Mar 31, 2012

A. BASIS OF PREPARATION

The Bank's financial statements are prepared under the historical cost convention, on the accrual basis of accounting and conform in all material aspects to Generally Accepted Accounting Principles (GAAP) in India, which comprise of applicable statutory provisions, regulatory norms/ guidelines prescribed by Reserve Bank of India (RBI), Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI), and the practices prevalent in the banking industry in India, unless otherwise stated.

B. USE OF ESTIMATES

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

C. SIGNIFICANT ACCOUNTING POLICIES

1. Revenue recognition

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

1.2 Interest income is recognised in the Profit and Loss Account as it accrues except the following,

(i) Income from nonperforming assets (NPAs), comprising of advances, leases and investments, which is recognised upon realisation, as per the prudential norms prescribed by Reserve Bank of India.

(ii) Funded Interest on Standard Restructured Advances and interest on FITL as per the guidelines of Reserve Bank of India

(iii) Interest on application money on investments

(iv) Overdue interest on investments and bills discounted,

(v) Income on Rupee Derivatives designated as 'Trading1'.

(vi) In respect of compromise/ settlement proposals, accounting for income/loss is recognised on complete closure/realisation.

1.3 Profit or loss on sale of investments is recognised in the Profit and Loss Account, however, the profit on sale of investments in the 'Held to Maturity' category is appropriated net of applicable taxes and amount required to be transferred to statutory reserve to 'Capital Reserve Account1.

1.4 Income (other than interest) on investments in "Held to Maturity" (HTM) category acquired at a discount to the face value, is recognised as follows :

a. On Interest bearing securities, it is recognized only at the time of sale/ redemption.

b. On zero-coupon securities, it is accounted for over the balance tenor of the security on a constant yield basis.

1.5 Dividend is accounted on an accrual basis where the right to receive the dividend is established.

1.6 All other commission and fee incomes are recognized on their realisation except Commission on Government Business, which is recognised as it accrues.

1.7 Expenditure is charged on accrual basis except Electricity, Water, Rent, Property Taxes, Telephone, Insurance, Annual Maintenance Contracts, Law Charges, Advertisement & Publicity and Traveling & Conveyance

1.8 One time Insurance Premium paid under Special Home Loan Scheme (December 2008 to June 2009) is amortised over loan period.

2. INVESTMENTS:

Transactions in all Govt, securities are recorded on "Settlement Date" and transactions in other securities have been recorded on "Trade Date" upto 8- Aug-2011 and on "Settlement Date" with effect from 9-Aug-2011.

2.1 Classification

Investments are classified into three categories, viz. Held to Maturity (HTM), Available for Sale (AFS) and Held for Trading (HFT),

2.2 Basis of classification:

i. Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

ii. Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

iii. Investments, which are not classified in the above two categories, are classified as Available for Sale.

iv. An investment is classified as Held to Maturity, Available for Sale or Held for Trading at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

v. Investments in subsidiaries, joint ventures and associates are classified as Held to Maturity.

2.3 Valuation:

i. In determining the acquisition cost of an investment:

(a) Brokerage/commission received on subscriptions is reduced from the cost.

(b) Brokerage, commission, securities transaction tax etc. paid in connection with acquisition of investments are expensed upfront and excluded from cost.

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

(d) Cost is determined on Weighted Average Cost method for investments under all categories.

ii. The transfer of a security amongst the above three categories is accounted for at the least of Weighted Average Cost or Market Value on the date of transfer, and the depreciation, if any, on such transfer is fully provided for.

iii. Treasury Bills and Commercial Papers are valued at carrying cost.

iv. Held to Maturity category:

Investments under Held to Maturity category are carried at acquisition cost unless it is more than the face value, in which case the premium is amortised over the period remaining maturity on constant yield basis. Such amortisation of premium is adjusted against income under the head "interest on investments". Investments in Regional Rural Banks is valued at carrying cost (i.e book value). A provision is made for diminution, other than temporary, for each investment individually.

v. Available for Sale and Held for Trading categories:

Investments held under AFS and HFT categories are individually revalued at the market price or fair value determined as per regulatory guidelines, and only the net depreciation of each group for each category is provided for and net appreciation, is ignored. On provision for depreciation, the book value of the individual securities remains unchanged after marking to market.

vi. Security receipts issued by an asset reconstruction company (ARC) are valued in accordance with the guidelines applicable to non-SLR instruments. Accordingly, in cases where the security receipts issued by the ARC are limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the Net Asset Value, obtained from the ARC, is reckoned for valuation of such investments.

vii. Investments are classified as performing and non-performing, based on the guidelines issued by the RBI. Investments become non- performing (NPI) where:

(a) Interest/installment (including maturity proceeds) is due and remains unpaid for more than 90 days.

(b) The above would apply mutatis-mutandis to preference shares where the fixed dividend is not paid. However, if only the preference shares are classified as NPI, the investment in any of the other performing securities issued by the same issuer is not classified as NPI and any performing credit facilities granted to that borrower is not treated as NPA.

(c) In the case of equity shares, in the event the investment in the shares of any company is valued at Re. 1 per company on account of the non availability of the latest Balance Sheet, those equity shares would be reckoned as NPI.

(d) If any credit facility availed by the issuer is NPA in the books of the Bank, investment in any of the securities issued by the same issuer would also be treated as NPI and vice versa except in case of Preference Shares as stated in (b) above .

(e) The investments in debentures/bonds, which are deemed to be in the nature of advance, are also subjected to NPI norms as applicable to investments.

viii. Accounting for Repo/ reverse repo transactions (other than transactions under the Liquidity Adjustment Facility (LAF) with the RBI)

(a) The securities sold and purchased under Repo/ Reverse repo are accounted as Collateralized lending and borrowing transactions.

However securities are transferred as in 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 A/c is classified under Schedule 4 (Borrowings) and balance in Reverse Repo A/c is classified under Schedule 7 (Balance with Banks and Money at Call & Short Notice).

(b) Securities purchased/sold under LAF with RBI are debited/credited to Investment Account and reversed on maturity of the transaction. Interest expended/earned thereon is accounted for as expenditure/revenue.

3. LOANS/ADVANCES AND PROVISIONS THEREON

3.1 Loans and Advances are classified as performing and non- performing, based on the guidelines issued by RBI. Loan assets become non-performing assets (NPAs) where:

i. In respect of term loans, interest and/or installment of principal remains overdue for a period of more than 90 days;

ii. In respect of Overdraft or Cash Credit advances, the account remains "out of order", i.e. if the outstanding balance exceeds the sanctioned limit/drawing power continuously for a period of 90 days, or if there are no credits continuously for 90 days as on the date of balance- sheet, or if the credits are not adequate to cover the interest due during the same period;

iii. In respect of bills purchased/ discounted, the bill remains overdue for a period of more than 90 days;

iv. In respect of agricultural advances for short duration crops, where the instalment of principal or interest remains overdue for two crop seasons;

v. In respect of agricultural advances for long duration crops, where the principal or interest remains overdue for one crop season.

3.2 NPAs are classified into sub- standard, doubtful and loss assets, based on the following criteria stipulated by RBI:

i. Sub-standard: A loan asset that has remained non- performing for a period less than or equal to 12 months.

ii. Doubtful: A loan asset that has remained in the sub-standard category for a period of 12 months.

iii. Loss: A loan asset where loss has been identified but the amount has not been fully written off.

3.3 Provisions are made for NPAs as per the extant guidelines prescribed by the regulatory authorities, subject to minimum provisions as prescribed below:

I Substandard Assets:

i. A general provision of 15%

ii. Additional provision of 10% (5% incase of Infrastructure Loan accounts) for exposures which are unsecured abolition (where realisable value of security is not more than 10 percent abolition)

II Doubtful Assets:

- Secured portion:

i. Upto one year - 25%

ii. One to three years - 40%

iii. More than three years - 100%

- Unsecured portion 100%

III. Loss Assets: 100%

3.4 The sale of NPAs is accounted as per guidelines prescribed by RBI. If the sale is at a price below net book value, the shortfall is debited to the Profit and Loss Account, and in case of sale for a value higher than net book value, the excess provision is retained and utilized to meet the shortfall / loss on sale of other financial assets. Net book value is outstandings as reduced by specific provisions held and ECGC/CGTMSE claims received.

3.5 Advances are net of specific loan loss provisions including floating provisions, counter cyclical provisions, provision for diminution in fair value and interest sacrifice, unrealised interest, ECGC/ CGTMSE claims received and bills rediscounted.

3.6 For restructured/rescheduled assets, provisions are made in accordance with the guidelines issued by RBI, which require that the difference between the fair value of the loan before and after restructuring is provided for, in addition to provision for NPAs. The provision for diminution in fair value and interest sacrifice, arising of the above, is reduced from advances.

3.7 In the case of loan accounts classified as NPAs, an account may be reclassified as a performing asset if it conforms to the guidelines prescribed by RBI.

3.8 Amounts recovered against debts written off in earlier years are recognised as revenue.

3.9 In addition to the specific provision on NPAs, general provisions are also made for standard assets. 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 Net NPAs.

4. FLOATING & COUNTER CYCLICAL PROVISIONS

A Floating Provision: The Bank has a policy for creation and utilisation of floating provisions separately for advances, investments and general purpose. The quantum of floating provisions to be created is assessed at the end of each financial year. The floating provisions are utilised only for contingencies under extra ordinary circumstances specified in the policy with prior permission of Reserve Bank of India.

A. Counter Cyclical Provision: In order to maintain a Provision Coverage Ratio (PCR) as prescribed by RBI, the Bank provides Counter Cyclical Provision to meet the gap, if any, between specific loan loss provisions, other provisions like floating provisions etc., and the minimum provision as per PCR.

5. PROVISION FOR COUNTRY EXPOSURE

In addition to the specific provisions held according to the asset classification status, provisions are held for individual country exposures (other than the home country). Countries are categorised into seven risk categories, namely, insignificant, low, moderate, high, very high, restricted and off-credit, 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".

6. FIXED ASSETS AND DEPRECIATION

6.1 Fixed assets have been accounted for at cost less accumulated depreciation, except certain land and buildings which are stated at revalued amount.

6.2 Premises include freehold as well as leasehold properties. The land and building allotted by Government/ Government agencies are capitalised based on letters of allotment / agreement / physical possession.

6.3 Cost includes cost of purchase and all expenditure such as site preparation, installation costs and professional fees incurred on the asset before it is put to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefits from such assets or their functioning capability.

6.5 Depreciation on premises is provided on composite cost, where the value of land and building is not separately identifiable.

6.6 Depreciation on additions to fixed assets, excluding premises procured during the second half of the financial year has been provided at 50% of the normal depreciation. In respect of (i) Premises and (ii) application software, depreciation @ 100% of the normal depreciation is charged irrespective of the date of purchase.

6.7 Depreciation on leased assets is charged on Straight Line Method over the primary period of lease.

6.8 The Bank is having a Policy for revaluation of Bank's Land and Building which includes appropriate frequency of revaluation, in consonance with Accounting Standard 10 issued by the Institute of Chartered Accountants of India.

6.9 In the case of Land and Building, which have been revalued, the depreciation is provided on the revalued amount and the incremental depreciation attributable to the revalued amount is adjusted to the 'Revaluation Reserve'.

6.10 Expenditure on miscellaneous civil works on the rented premises in respect of ATMs is being charged as "Revenue expenditure" to the Profit and Loss Account.

7. IMPAIRMENT OF FIXED ASSETS

7.1 In case of partial impairment of assets, the assets are restored to the normal condition and the expenditure incurred on such restoration is charged to revenue. The asset value and the cumulative depreciation are not altered.

7.2 In case of total impairment of assets, the assets are written off in the books. The scrap value of such assets is auctioned or disposed off as per the E-Waste disposing policy of the Bank.

8. EFFECTS OF CHANGES IN THE FOREIGN EXCHANGE RATE

8.1 All the monetary assets and liabilities in the form of balances with the Banks abroad, deposits in Foreign Currency, overnight deposits/investments, Foreign Currency Loan Accounts etc. and other obligations such as Letters of Credit including Letters of Comfort for Indian Operations, other than Forward Exchange Contracts are translated at the end of the year at the closing rates as per Accounting Standard 11 (Revised 2003) issued by the ICAI.

8.2 Income and Expenditure items are translated at the exchange rates prevailing on the date of transaction as per Accounting Standard 11 (Revised 2003) issued by the ICAI.

8.3 Forward Exchange Contracts outstanding as on Balance Sheet date are revalued in accordance with guidelines of FEDAI. The difference between the revalued amount and the contracted amount is recognised as profit or loss, as the case may be.

9. EMPLOYEE BENEFITS

9.1 Short Term Employee Benefits:

Short term employee benefits are accounted for at undiscounted amount as and when the liability becomes due.

9.2 Post Employment Benefits

9.2.1 Defined Benefit Plan

1. The Bank operates a Provident Fund scheme. All eligible employees who joined the bank on or before 31st March, 2010 and not opted for pension t benefits are entitled to receive benefits under the Bank's Provident Fund Scheme. The Bank contributes monthly at a determined rate (currently 10% of employee's basic pay plus eligible allowance). These contributions are remitted to a trust established for this purpose and are charged to Profit and Loss Account.

---

Mar 31, 2011

1. GENERAL:

The accompanying Financial

Statements have been prepared on historical cost basis and conform to the generally accepted accounting practices and statutory provisions unless otherwise stated.

2. REVENUE RECOGNITION:

A. INCOME:

i) Interest and other income are recognised on accrual basis except the following, owing to significant uncertainties in collection thereof:

(a) Interest and Other Income on Non- Performing Assets/Investments as per the norms prescribed by the Reserve Bank of India.

(b) Funded Interest on Standard Restructured Advances as per the guidelines of Reserve Bank of India.

(c) Interest on overdue bills

ii) The following items of income are recognized on realisation basis:

a) Commission on Letters of Credit and Guarantees and cross selling.

b) Income from Merchant Banking activities.

c) Dividend on investment in shares and units of Mutual Funds.

d) Locker rentals.

e) Insurance claims.

B. EXPENDITURE:

Expenditure is charged on accrual basis except the following:

i) Electricity, Water, Telephone, Rent, Property Taxes, Insurance, Annual Maintenance Contracts, Travelling and Conveyance.

ii) Interest on Overdue Time Deposits.

C. In respect of compromise/settlement proposals, accounting for income / loss is recognized on complete closure/realisation.

3. TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

(i) All the monetary Assets and Liabilities in the form of balances with the banks abroad, deposits in Foreign Currency, overnight deposits/investments, Foreign Currency Loan accounts etc. and

other obligations such as Letters of Credit, Guarantees including Letters of Comfort of Indian operations, other than Forward Exchange Contracts are translated at the end of the year at the closing rates as per AS 11 (Revised 2003), issued by the Institute of Chartered Accountants of India.

(ii) Income and expenditure items are translated at the exchange rates prevailing on the date of the transaction as per AS 11 (Revised 2003), issued by the Institute of Chartered Accountants of India.

(iii) Forward Exchange contracts outstanding as on Balance Sheet date are revalued in accordance with guidelines of FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

4. INVESTMENTS:

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

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

(iil) "Held-to-Maturity" category

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

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

(v) (a) The individual scrips in the "Available-for-Sale" category are marked to market at quarterly intervals. The net depreciation under each of six classifications [(i)

Government Securities (ii) Other approved securities (iii) Shares (iv) Debentures and bonds (v) Subsidiaries/Joint Ventures and (vi) Other Investments.] under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications above is ignored.

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

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

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

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

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

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

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

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

(x) The Bank has adopted the Uniform Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions including transactions under the Liquidity Adjustment Facility (LAF) with the RBI.

(xi) Upfront incentives, commissions including commission related to subscriptions, brokerage and commission on underwriting to the extent of devolvement and any other incentives and brokerage received are reduced from the cost of the respective investments. Brokerage paid on securities purchased is charged to revenue account.

(xii)lnvestments in Regional Rural Banks and Sponsored Institutions have been accounted for on carrying cost basis.

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

(xw) The excess in the provision for depreciation arising as a result of valuation of AFS category of investment is transferred to Investment Reserve net of applicable Taxes and transfer to

Statutory Reserves. The said reserve will be utilized against depreciation, if any, in the valuation of AFS category of Investment in the subsequent period as per the RBI guidelines.

5. ADVANCES:

(i) Classification and provisions for advances have been made as per the Income Recognition & Asset classification norms as prescribed by Reserve Bank of India.

(ii) Provision for losses against advances is made on gross basis.

(iii) Advances shown in the Balance Sheet are net of:

(a) Provision for losses for Non Performing Assets in accordance with prudential accounting norms laid down by RBI;

(b) Bills rediscounted with IDBI/SIDBI; and

(c) Participation Certificates issued to other Banks.

(iv) Contingency Provisions against Standard Assets is shown under "Other Liabilities & Provisions" as per RBI Guidelines.

6. FIXED ASSETS:

(i) Premises and other fixed assets have been accounted for at the historical cost, except certain land and buildings which are stated at revalued amount.

(ii) Premises include freehold as well as leasehold properties. The land and building allotted by Government/ Government agencies are capitalised based on letters of allotment / agreement / physical possession.

(iii) Premises include work in progress on the date of the balance sheet.

(iv) Depreciation is provided for on Straight Line Method at the rates fixed by the Bank as under:

Premises 5%

Furniture & Fixtures 10%

Vehicles 20%

Office Equipment /

Electrical Fittings 20%

ATMs & Computer Systems/

Including System Software

UPS, UPS Batteries, ATM,

Access Locks & AC 33.33%

Application Software* *(Computer Software not 100.00%

forming an integral part of Hardware)

(v) Depreciation on premises is provided on composite cost, where the value of land and building is not separately identifiable.

(vi) Depreciation on additions to fixed assets, excluding premises procured during the second half of the financial year has been provided at 50% of the normal depreciation. In respect of application software, depreciation @ 100% is charged irrespective of the date of purchase.

(vii) Depreciation is not provided on assets sold / disposed off during the year.

(viii) Depreciation on leased assets is charged on Straight Line Method over the primary period of lease.

(ix) The Bank is having a Policy for revaluation of Banks Land and Building which includes appropriate frequency of revaluation, in consonance with Accounting Standard 10 issued by the Institute of Chartered Accountants of India.

(x) In the case of Land and Building, which have been revalued, the depreciation is provided on the revalued amount and the incremental depreciation attributable to the revalued amount is adjusted to the Revaluation Reserve.

(xi) Expenditure on miscellaneous civil works on the rented premises in respect of ATMs is being charged as "Revenue expenditure" to the profit and loss account.

7. EMPLOYEES BENEFITS:

Employee Benefits

Employee Benefits are being valued and disclosed in the Annual Accounts in accordance with Accounting Standard 15 (Revised).

Short Term Employee Benefits

Short Term Employee Benefits are accounted for as and when the liability becomes due.

Long Term Employee Benefits

Long Term Employee benefits are valued on the basis of actuarial

valuation, adopting the Projected Unit Credit Method, as stipulated in AS 15 (Revised). In case of Pension and Gratuity, the Bank has been consistently following the Projected Unit Credit Method. The Bank has also been providing for Leave Encashment as per actuarial valuation adopting AS 15 and Projected Unit Credit Method stipulated in AS 15 (Revised) has been adopted for this benefit with effect from 01.04.2007.

The following other benefits have also been recognised with effect from 01.04.2007 as other Long Term Employee Benefits and provisions are made according to the Projected Unit Credit Method for actuarial valuation:-

Sl. No BENEFITS

1 Sick Leave

2 Leave Travel Concession Home Travel Concession

3 Silver Jubilee Award

4 Resettlement Expenses

Plan assets forming part of Long Term Employee Benefits are being valued at the Fair Market Value.

Consequent on the re-opening of Pension option to employees and enhancement in Gratuity Limit due to amendment in the Payment of Gratuity Act, the Bank has opted to amortize the incremental liability, as per RBI Circular, over a period of five years (subject to a minimum of 1/5lh every year) beginning with the financial year ending 31st March 2011.

8. NET PROFIT:

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

(i) Provisions as per RBI guidelines for bad and doubtful Advances and investments.

(ii) Transfer to/from contingency funds.

(iii) Provisions for taxes in accordance with the statutory requirements.

(iv) Other usual and necessary provisions.

9. PROVISION FOR TAXATION:

Tax expenses for the period comprising current tax and Deferred Tax have been provided for in terms of Accounting Standard 22 issued by the Institute of Chartered Accountants of India.

---

Mar 31, 2010

1. GENERAL:

The accompanying Financial Statements have been prepared on historical cost basis and conform to the generally accepted accounting practices and statutory provisions unless otherwise stated.

2. REVENUE RECOGNITION:

A. INCOME

Interest and other income are recognised on accrual basis except the following, owing to significant uncertainties in collection thereof:

i) Interest and Other Income on Non- Performing Assets/Investments as per the norms prescribed by the Reserve Bank of India and interest on overdue bills.

ii) The following items of income are recognised on realisation basis:

a) Commission on Letters of Credit and Guarantees and Cross Selling.

b) Income from Merchant Banking activities.

c) Dividend on investment in shares and units of Mutual Funds.

d) Locker rentals.

e) Insurance claims.

B. EXPENDITURE :

Expenditure is charged on accrual basis except the following:

i) Electricity, Water, Telephone, Rent, Property Taxes, Insurance, Annual Maintenance Contracts, Travelling and Conveyance.

ii) Interest on Overdue Time Deposits.

C. In respect of compromise/ settlement proposals, accounting is done on complete closure/realisation.

3. TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

i) All the monetary Assets and Liabilities in the form of balances with the banks abroad, deposits in Foreign Currency, overnight deposits/investments, Foreign Currency Loan accounts etc., off Balance Sheet items other than forward exchange contracts and other obligations such as Letters of v Credit, Guarantees including Letters of Comfort of Indian operations are translated at the end of the year at the closing rates as per AS 11 (Revised 2003), issued by the Institute of Chartered Accountants of India.

ii) Income and expenditure items are translated at the exchange rates prevailing on the date of the transaction as per AS 11 (Revised 2003), issued by the Institute of Chartered Accountants of India.

iii) Forward Exchange contracts outstanding as on Balance Sheet date are revalued in accordance with guidelines of FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

4. INVESTMENTS:

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

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

iii) Held - to - Maturity category

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

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

v) a) The individual scrips in the Available-for-Sale category are marked to market at quarterly intervals. The net depreciation under each of six classifications [(i) Government Securities (ii) Other approved securities (iii) Shares (iv) Debentures and bonds (v) Subsidiaires/Joint Ventures and (vi) Other Investments.] under which investments are presented in the balance sheet is fully provided for, whereas the net appreciation under any of the aforesaid classifications above is ignored.

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

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

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

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

(vii) The depreciation in value of investments where interest/principal is in arrears is not set-off against the appreciation in respect of other

performing securities. Such investments including Non- , performing NON-SLR investments are treated applying RBI prudential norms on NPA classification and appropriate provisions are made as per RBI norms and no income on such investments is recognised.

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

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

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

(x) The bank has adopted the Uniform Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions (other than transactions under the Liquidity Adjustment Facility (LAF) with the RBI). At present the bank is not participating in the Market Repo/ Reverse Repo transactions, barring Repo/Reverse Repo under LAF of RBI.

xi) Upfront incentives, commissions including commission related to subscriptions, brokerage and commission on underwriting to the extent of devolvement and any other incentives and brokerage received are reduced from the cost of the respective investments. Brokerage paid on securities purchased is charged to revenue account.

xii) Investments in Regional Rural Banks and Sponsored Institutions have been accounted for on carrying cost basis.

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

xiv) The excess in the provision for depreciation arising as a result of valuation of AFS category of investment is transferred to Investment Reserve Account net of applicable Taxes and transfer to Statutory Reserves.

5. ADVANCES:

i) Classification and provisions for advances have been made as per the Income Recognition & Asset classification norms of the Reserve Bank of India.

ii) Provision for losses against advances is made on gross basis.

iii) Advances shown in the Balance Sheet are net of:

a) Provision for losses for Non Performing Assets in accordance with prudential accounting norms laid down by RBI;

b) Bills rediscounted with IDBI/ SIDBI; and

c) Participation Certificates issued to other Banks.

iv) Contingency Provisions against Standard Assets is shown under Other Liabilities & Provisions as per RBI Guidelines.

6. FIXED ASSETS:

i) Premises and other Fixed assets have been accounted for at the historical cost, except land and buildings which are stated at revalued amount.

ii) Premises include freehold as well as leasehold properties. The land and building allotted by Government/Government agencies are capitalised based on letters of allotment / agreement / physical possession.

iii) Premises include work in progress on the date of the balance sheet.

iv) Depreciation is provided for on Straight Line Method at the rates fixed by the Bank as under:

v) Depreciation on premises is provided on composite cost, where the value of land and building is not separately identifiable.

vi) Depreciation on additions to fixed assets, excluding premises procured during the second half of the financial year has been provided at 50% of the normal depreciation. However, 100% depreciation is charged in respect of application software irrespective of the date of purchase.

vii) On disposal/sale during the year, no depreciation is provided.

viii) Depreciation on leased assets is charged on Straight-Line Method over the primary period of lease.

(ix) The Bank is having a Policy for revaluation of Banks Fixed Assets which includes appropriate frequency of revaluation, in consonance with Accounting Standard 10 issued by the Institute of Chartered Accountants of India.

(x) In the case of assets, which have been revalued, the depreciation is provided on the revalued amount and the incremental depreciation attributable to the revalued amount is adjusted to the Revaluation Reserve.

(XI) Expenditure on miscellaneous civil works on the rented premises in respect of ATMs is being charged as "Revenue expenditure" to the profit and loss account.

7. EMPLOYEE BENEFITS: ACCOUNTING STANDARD 15

Employee Benefits

Employee Benefits are being valued and disclosed in the Annual Accounts in accordance with Accounting Standard 15 (Revised).

Short Term Employee Benefits

Short Term Employee Benefits are accounted for as and when the liability becomes due.

Long Term Employee Benefits

Long Term Employee benefits are valued on the basis of actuarial valuation, adopting the Projected Unit Credit Method, as stipulated in AS 15 (Revised). In case of Pension and Gratuity, the Bank has been consistently following the Projected Unit Credit Method. The Bank has also been providing for Leave Encashment as per actuarial valuation adopting AS 15. The valuation according to the Projected Unit Credit Method stipulated in AS 15 (Revised) has been adopted for this benefit with effect from 01.04.2007.

8. NET PROFIT:

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

(i) Provisions as per RBI guidelines for bad and doubtful Advances and Investments.

(ii) Transfer to/from contingency funds.

(iii) Provisions for taxes in accordance with the statutory requirements.

(iv) Other usual and necessary provisions.

9. PROVISION FOR TAXATION:

Tax expenses for the period comprising current tax and Deferred Tax have been provided for in terms of Accounting Standard 22 issued by the Institute of Chartered Accountants of India.

10. CONTINGENCY FUND:

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