4.1 Investments
Classification
In accordance with the RBI guidelines, investments (except investments in subsidiaries, joint ventures and associates)
are classified at the time of acquisition as:
• Held to Maturity ('HTM');
• Available for Sale (AFS') and
• Fair Value through Profit and Loss (FVTPL) with Held for Trading (HFT) as a separate investment
subcategory within FVTPL.
Classification of Investments in the Balance sheet
For disclosure in the Balance Sheet, investments in India are classified under six categories - Government Securities,
Other Approved Securities, Shares, Debentures and Bonds, Investment in Subsidiaries/Joint Ventures/Associates and
Others. Investments made outside India are classified under three categories - Government Securities, Subsidiaries
and/or Joint Ventures abroad and Others.
All investments are accounted for on settlement date, except investments in equity shares which are accounted
for on trade date.
i. Held to Maturity (‘HTM’)
The Bank classifies investments as HTM, if both of the following conditions are met:
• The investment is acquired with the intention and objective of holding it to maturity, i.e., the financial assets
are held with an objective to collect the contractual cash flows; and
• The contractual terms of the investment give rise to cash flows that are solely payments of principal and
interest on principal outstanding ('SPPI criterion') on specified dates.
ii. Available for Sale (‘AFS’)
The Bank classifies investments as AFS, if both the following conditions are met:
• The investment is acquired with an objective which is achieved by both collecting contractual cash flows and
selling securities; and
• The contractual terms of the investment give rise to cash flows that meet SPPI criterion on specified dates.
The Bank, upon initial recognition, may make an irrevocable election to classify an equity instrument as an AFS
that is not held with the objective of trading.
iii. Fair Value through Profit and Loss (FVTPL)
The investments that are not classified as HTM or AFS are classified as FVTPL. The Bank classifies investments in
FVTPL category as either FVTPL-Held for Trading (‘HFT') or FVTPL Non-HFT. Any investment held by the Bank
for one or more of the following purposes is, when it is first recognised on its books, designated as a FVTPL HFT:
• short-term resale;
• profiting from short-term price movements;
• locking in arbitrage profits; or
• hedging risks that arise from instruments meeting all of the above
Investments in listed equities, trading-related repo-style transactions, instruments resulting from market-making
activities, equity investments in a fund are included in FVTPL HFT category. Investments in unlisted equities are
included in FVTPL Non-HFT category.
All other investments forming part of FVTPL category are classified as FVTPL Non-HFT.
Investments in Subsidiaries, Associates and Joint Ventures
All investments in subsidiaries, associates and joint ventures held by Bank are classified under this category
separately from the aforesaid investment categories.
Initial recognition
The Bank measures all investments 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. Any discount or premium on the investments under HTM category is amortised over the remaining life of
the instrument on a constant yield basis.
i. Acquisition cost
Costs incurred at the time of acquisition, pertaining to investments, such as brokerage, commission etc. are
charged to the Profit and Loss Account. Broken period interest is charged to the Profit and Loss Account. Cost
of investments is computed based on the weighted average cost method.
ii. Day 1 gain/loss
Day 1 Gain/loss is the difference between the fair value at initial recognition and acquisition cost. Any Day 1
gain/loss arising on quoted investments is recognized in the Profit and Loss Account. 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.
iii. Subsequent measurement
a. Investments classified under the HTM category
Investments held in HTM category are carried at cost and are not Mark-to-Market (MTM) after initial
recognition. The amortised amount is reflected under item II ‘Income on Investments' of Schedule 13: ‘Interest
Earned' with a contra in Schedule 8: ‘Investments'.
Realised gains on sale of investments in HTM category are recognised in the Profit and Loss Account and
subsequently appropriated to the Capital Reserve Account (net of taxes and transfer to statutory reserves) in
accordance with the RBI guidelines. Realised losses are recognised in the Profit and Loss Account.
b. Investments classified under AFS category
Investments held in AFS category are fair valued. Any discount or premium on the acquisition of debt
securities under AFS is amortised over the remaining life of the instrument on a constant yield basis. 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'.
The net valuation gains and losses across all performing investments under AFS is aggregated and the net
appreciation or depreciation (net of tax) is directly credited or debited to the AFS Reserve without routing
through the Profit & Loss Account.
The AFS-Reserve is reckoned as Common Equity Tier (CET) 1 capital but not available for distribution of
dividend and coupon on Additional Tier I instruments.
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.
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 Capital Reserve in accordance with the RBI
Investment Direction, 2023.
c. Investments classified under FVTPL category
Investments held under FVTPL category are fair valued and the net gain or loss arising on such valuation is
directly credited or debited to the Profit and Loss Account. Any discount or premium on the debt securities
under FVTPL 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'.
d. Investments in Subsidiaries, Associates and Joint Ventures
The Bank measures all the investments (i.e., including debt and equity) in subsidiaries, associates and joint
ventures at acquisition cost.
Any discount or premium on the acquisition of debt securities of subsidiaries, associates and joint ventures
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'.
Valuation
The Bank determines the fair values of its investments according to the following hierarchy:
Level 1: Valuation based on quoted market price: These investments are valued with quoted prices (unadjusted) for
identical instruments in active markets that the Bank can access at the measurement date.
Level 2: Valuation based on using observable inputs: These investments are valued with inputs other than quoted
prices included within Level 1, that are observable, either directly or indirectly.
Level 3: Valuation technique with significant unobservable inputs: These investments are valued using valuation
techniques where one or more significant inputs are unobservable.
The fair value of various types of instruments is determined as per the valuation norms laid down in RBI
guidelines, as follows:
• The fair value of quoted investments (other than discounted instruments) included in the AFS and FVTPL
categories is considered as available from the trades/quotes on the stock exchanges or prices, yield and
spread matrix declared by the Fixed Income Money Market and Derivatives Association of India (‘FIMMDA')/
Financial Benchmark India Private Limited (‘FBIL'), periodically.
• Treasury Bills, Exchange Funded Bills, Commercial Paper and Certificate of Deposits being discounted
instruments, are valued at carrying cost which includes discount accreted over the period to maturity.
• Units of mutual funds are valued at the latest repurchase price/Net Asset Value (‘NAV') declared by
the mutual fund.
• Units of Venture Capital Funds (‘VCF') and Unquoted Alternative Investment Fund (AIFs) are valued at Net
Asset Value (NAV) declared by the funds. Where an AIF fails to carry out and disclose the valuation of its
investments by an independent valuer as per the frequency mandated by SEBI (Alternative Investment Fund)
Regulations, 2012, the value of its units is treated as Re. 1. In case AIF is not registered under SEBI (Alternative
Investment Fund) Regulations, 2012 and the latest disclosed valuation of its investments by an independent
valuer precedes the date of valuation by more than 18 months, the value of its units is treated as Re. 1.
• Investments in Subsidiaries, Associates and Joint Ventures category are assessed for impairment to determine
permanent diminution, if any, in accordance with the RBI guidelines and suitable provisions are made.
• The fair value of investments where current quotations are not available, is determined in accordance with
the norms prescribed by the RBI/FIMMDA/FBIL as under:
a) The fair value of unquoted government securities which are in the nature of Statutory Liquidity Ratio
(‘SLR') securities forming part of AFS, FVTPL-HFT and FVTPL Non-HFT categories are computed as per
the rates published by FIMMDA/FBIL.
b) I n case of special bonds issued by the Government of I ndia that do not qualify for SLR purposes, unquoted
bonds, debentures and preference shares where interest/dividend is received regularly (i.e. not overdue
beyond 90 days), the market price is derived based on the Yield to Maturity (‘YTM') for such securities as
published by FIMMDA/FBIL and suitably marked up for credit risk applicable to the credit rating of the
instrument. The matrix for credit risk mark-up for each category and credit ratings along with residual
maturity issued by FIMMDA/FBIL is adopted for this purpose.
c) In case of bonds & debentures where interest is not received regularly (i.e. overdue beyond 90 days), the
valuation is in accordance with prudential norms for provisioning as prescribed by the RBI.
d) Pass Through Certificates (PTCs) are valued based on yields published by FIMMDA, suitably adjusted
downwards for the quality and characteristics of the underlying pool of assets in the PTCs.
e) Equity shares, for which current quotations are not available or where the shares are not quoted on the
stock exchanges, are valued at break-up value (without considering revaluation reserves, if any) which
is ascertained from the company's latest Balance Sheet (not older than 18 months). In case the latest
Balance Sheet is not available, the shares are valued at Re. 1 per company.
f) Valuation of investments in private equity funds and limited liability partnership funds is based on
valuation of their underlying exposures.
g) I nvestments in listed instruments of Real Estate Investment Trust (‘REIT')/Infrastructure Investment
Trust (‘INVIT') are valued at the closing price on the recognised stock exchange. In case the instruments
are not traded on any stock exchange for a period of 30 days, valuation is carried out based on lower of
the latest NAV (not older than 1 year) submitted by the trust or the last available traded price.
h) Investments in Government guaranteed Security Receipts (‘SRs') are valued periodically by reckoning
the Net Asset Value (NAV) declared by the Asset Reconstruction Company (‘ARC') based on the recovery
ratings received for such instruments. Any Government guaranteed SRs outstanding after the final
settlement of the Government guarantee or the expiry of the guarantee period, whichever is earlier, are
valued at one rupee (1).
Investments in other SRs are valued as per the NAV declared by the issuing ARC or net book value
of loans transferred or estimated recoverable value based on Bank's internal assessment on case to
case basis, whichever is lower. Investments in such Security Receipts where original maturity period has
expired are valued at one rupee (1).
In case of investments in SRs which are backed by more than 10 percent of the stressed assets sold by
the Bank, the valuation of such SRs is additionally subject to a floor of face value of the SRs reduced by
the provisioning rate as per the extant asset classification and provisioning norms as applicable to the
underlying loans, assuming that the loan notionally continued in the books of the Bank.
Investment asset classification and provisioning
Investments under HTM, AFS and FVTPL category are subjected to income recognition, asset classification and
provisioning norms of RBI. Non-performing Investments (NPIs) are identified and provision is made thereon in
the Profit and Loss account, as per the RBI guidelines. Once an investment becomes NPI, the Bank segregates
it from rest of the portfolio and does not consider it for netting valuation gains and losses. An NPI investment
is segregated from other investments within the same category [i.e., HTM, AFS, or FVTPL] under which it was
classified at initial recognition. Interest on NPIs is not recognized in the Profit and Loss Account until received.
MTM appreciation in case of NPIs over and above the book value is not recognized and ignored.
Reclassification between categories
Reclassification of investments between categories (viz. HTM, AFS and FVTPL) if any is carried out only after, prior
approval of Board of Directors and RBI and the same is accounted for in accordance with the RBI guidelines.
Short sales
In accordance with the RBI guidelines, the Bank undertakes short sale transactions in Central Government dated
securities. Such short positions are categorised under FVTPL category and netted off from investments in the
Balance Sheet. These positions are marked-to-market along with the other securities under FVTPL portfolio and
the resultant MTM gains/losses are accounted for as per the relevant RBI guidelines for valuation of investments.
4.2 Repurchase and reverse repurchase transactions
Repurchase transactions (‘Repos’)
Repurchase transactions in Government securities and corporate debt securities including those conducted under the
Liquidity Adjustment Facility (‘LAF') and Marginal Standby Facility (‘MSF') with RBI are accounted for as collateralised
borrowings. Accordingly, securities given as collateral under an agreement to repurchase them, continue to be held
under the investment account and the Bank continues to accrue the coupon on the security during the repo period.
Borrowing cost on such repo transactions is accounted as interest expense in “Schedule 15 - Interest Expended” in the
Profit and Loss Account.
Reverse repurchase transactions (‘Reverse repos’)
Reverse repurchase transactions with RBI with original maturity upto 14 days, including those conducted under
the Liquidity Adjustment Facility (‘LAF') and Standing Deposit Facility (‘SDF'), are accounted for as collateralised
lending under “Schedule 6 - Balances with RBI - in Other Accounts”. Reverse repurchase transactions with banks
and other financial institutions with original maturity upto 14 days, are accounted for as collateralised lending under
“Schedule 7 - Balances with Banks and Money at call and short notice”. Revenue on such reverse repos is accounted for
as interest income under “Schedule 13 - Interest Earned - Interest on balances with Reserve Bank of India and Other
Inter-bank Funds” in the Profit and Loss Account.
Reverse repos with original maturity of more than 14 days are accounted for as collateralised lending under “Schedule
9 - Advances”. Revenue on such reverse repos is accounted for as interest income under “Schedule 13 - Interest Earned
- Interest/discount on advances/bills” in the Profit and Loss account.
4.3 Advances
Classification and measurement of advances
Advances are classified into performing and non-performing advances (‘NPAs') as per the RBI guidelines and are stated
net of bills rediscounted, inter-bank participation certificates, specific provisions made towards NPAs, interest in
suspense for NPAs, claims received from Export Credit Guarantee Corporation, provisions for funded interest on term
loans classified as NPAs and floating provisions. Structured collateralised foreign currency loans extended to customers
and deposits received from the same customer are reported on a net basis.
The Bank transfers advances through inter-bank participation with and without risk. In accordance with the RBI
guidelines, in the case of participation with risk, the aggregate amount of the participation issued by the Bank is
reduced from advances and where the Bank is participating, the aggregate amount of the participation is classified
under advances. In the case of participation without risk, the aggregate amount of participation issued by the Bank is
classified under borrowings and where the Bank is participating, the aggregate amount of participation is shown as due
from banks under advances.
Non-performing advances and provision on non-performing advances
NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by the RBI. 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 RBI guidelines, are classified as NPAs to the extent of amount
outstanding in the host country. NPAs are upgraded to standard as per the extant RBI guidelines.
Provisions for NPAs are made for sub-standard and doubtful assets at rates as prescribed by the RBI with the exception
of schematic retail advances, agriculture advances and advances to Commercial Banking segment. In respect of
schematic retail advances, provisions are made in terms of a bucket-wise policy upon reaching specified stages of
delinquency (90 days or more of delinquency) under each type of loan, which satisfies the RBI prudential norms on
provisioning. Provisions in respect of Commercial Banking segment advances and agriculture advances classified into
sub-standard and doubtful assets are made at rates which are higher than those prescribed by the RBI.
Provisions for advances booked in overseas branches, which are standard as per the RBI guidelines but are identified
as impaired as per host country regulations for reasons other than record of recovery, are made as per the host
country regulations.
In case of NPAs referred to the National Company Law Tribunal (‘NCLT') under the Insolvency and Bankruptcy Code,
2016 (‘IBC') where resolution plan or liquidation order has been approved by NCLT, provision is maintained at higher of
the requirement under the RBI guidelines or the likely haircut as per resolution plan or liquidation order.
Loans reported as fraud are classified as loss assets, and fully provided for immediately without considering the
value of security.
Provision on restructured assets
Restructured assets including compromise settlements where the time for payment of the agreed settlement
amount exceeds three months are classified and provided for in accordance with the guidelines issued by the RBI
from time to time.
In respect of advances where resolution plan has been implemented under the RBI guidelines on “Resolution Framework
for COVID 19-related Stress” and “Micro, Small and Medium Enterprises (MSME) Sector - Restructuring of Advances”,
provisions are maintained as per the internal framework of the Bank at rates which are higher than those specified
under the extant RBI guidelines. Restructured loans are upgraded to standard as per the extant RBI guidelines.
Provisions held on restructured assets are reported in Schedule 5 - Other Liabilities and Provisions in the Balance Sheet.
Write-offs and recoveries from written-off accounts
Write-offs are carried out in accordance with the Bank's policy.
Amounts recovered against debts written off are recognised in the Profit and Loss Account as a credit to Provision
and Contingencies.
Appropriation of funds for standard advances
In case of Equated Monthly Instalment (EMI) based standard retail advances, funds received from customers are
appropriated in the order of principal, interest and charges. In case of other standard advances, funds received from
customers are appropriated in the order of charges, interest and principal.
Other provisions on advances classified under Schedule 5 - ‘Other Liabilities and Provisions’ in the Balance Sheet
The Bank recognises additional provisions as per the RBI's guidelines on accounts in default and with aggregate
exposure above the threshold limits as laid down in the guidelines where the resolution plan is not implemented within
the specified timelines. These provisions are written back on satisfying the conditions for reversal as per RBI guidelines.
In respect of borrowers classified as non-cooperative or wilful defaulters, the Bank makes accelerated provisions as per
the extant RBI guidelines.
In the case of one-time settlements with borrowers that are entered into but not closed as on the reporting date, the
Bank makes provisions which is the higher of (i) the provision required based on asset classification; and (ii) the amount
of contracted sacrifice, on a portfolio basis.
The Bank makes incremental provisioning (determined based on a time scale and on occurrence of predefined events)
on all outstanding advances and investments relating to borrowers tagged as Red Flagged Accounts (‘RFA').
For entities with Unhedged Foreign Currency Exposure (‘UFCE'), provision is made in accordance with the guidelines
issued by the RBI, which requires ascertaining the amount of UFCE, estimating the extent of likely loss and estimating
the riskiness of the unhedged position. Further, incremental capital is maintained in respect of such borrower counter
parties in the highest risk category, in line with stipulations by the RBI.
Upto 31 December, 2025 the Bank maintained provisions for incremental exposure of the banking system to specified
borrowers beyond the Normally Permitted Lending Limit (‘NPLL') in proportion to the Bank's funded exposure to the
specified borrowers as per the RBI guidelines.
The Bank maintains a general provision on standard advances at the rates prescribed by the RBI. In respect of advances
to stressed sectors, such general provision is made at rates higher than the regulatory minimum as per the internal
policy of the Bank. The general provision on corporate standard advances internally rated ‘BB and Below' or ‘Unrated'
and all Special Mention Accounts-2 (‘SMA-2') advances as reported to Central Repository of Information on Large
Credits (‘CRILC'), is maintained at rates that are higher than those prescribed by RBI. In case of overseas branches,
general provision on standard advances is maintained at the higher of the levels stipulated by the respective overseas
regulator or by the extant RBI guidelines. The Bank also maintains general provision on positive Mark-to-Market (MTM)
on derivative transactions at the rates prescribed under the extant RBI guidelines.
The Bank maintains additional specific provision on projects under implementation which have availed deferment in
date of commencement of commercial operations and are classified as standard as per extant RBI guidelines.
The Bank also maintains additional provision on standard accounts in a particular borrower group where one or
more entity in the group is classified as NPA, subject to the aggregate outstanding of such entities being above a
certain threshold limit. Such provision is in addition to and at rates higher than the provision for standard assets as
prescribed by RBI.
The Bank also maintains provision on non-funded outstanding in relation to NPAs, prudentially written off accounts,
corporate standard advances internally rated ‘BB and Below' or ‘Unrated' and all SMA-2 advances as reported to CRILC.
Under its home loan portfolio, the Bank offers housing loans with certain features involving waiver of EMIs for a specific
period subject to fulfilment of certain conditions by the borrower. The Bank makes provision against the probable
loss that could be incurred in future on account of these waivers to eligible borrowers, based on actuarial valuation
conducted by an independent actuary.
As approved by the Board of Directors, the Bank holds prudent provision of '7,013 crores towards certain standard
advances and / or exposures.
4.4 Country risk
In addition to the provisions required to be held according to the asset classification status, provisions are held for
individual country exposure (other than for home country) as per the RBI guidelines. Such provisions are held only in
respect of those countries where the net funded exposure of the Bank exceeds 1% of its total assets. For this purpose,
the countries are categorized into seven risk categories namely insignificant, low, moderate, high, very high, restricted
and off-credit as per internal parameters in accordance with RBI guidelines. Provision is made on exposures exceeding
180 days on a graded scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days,
25% of the normal provision requirement is held. If the net funded exposure of the Bank in respect of each country
does not exceed 1% of the total assets, no provision is maintained on such country exposure in accordance with RBI
guidelines. Indirect exposure is reckoned at 50% of the exposure. This provision is classified under Schedule 5 - Other
Liabilities and Provisions in the Balance Sheet.
4.5 Securitisation and transfer of assets
Securitisation of Standard Assets
The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose Vehicle
(‘SPV'). In most cases, post securitisation, the Bank continues to service the loans transferred to the assignee/SPV.
The Bank also provides credit enhancement in the form of cash collaterals and/or by subordination of cash flows to
Senior Pass Through Certificate holders. In respect of credit enhancements provided or recourse obligations (projected
delinquencies, future servicing etc.) accepted by the Bank, appropriate provision/disclosure is made at the time of sale
in accordance with AS-29, Provisions, Contingent Liabilities and Contingent Assets as notified under Section 133 of
the Companies Act, 2013 read together with the Companies (Accounts) Rules, 2014 and the Companies (Accounting
Standards) Rules, 2021. In accordance with RBI guidelines on Securitisation of Standard Assets, any loss, profit or
premium realised at the time of the sale is accounted for in the Profit & Loss Account for the accounting period during
which the sale is completed. However, in case of unrealised gains arising out of sale of underlying assets to the SPV,
the profit is recognised in Profit and Loss Account only when such unrealised gains associated with such income is
redeemed in cash.
Transfer of Loan Exposures
In accordance with RBI guidelines on Transfer of Loan exposures, any profit or loss arising post transfer of loans, which
is realised, is accounted for and reflected in the Profit & Loss Account for the accounting period during which the
transfer is completed. Loans acquired are carried at acquisition cost unless it is more than the outstanding principal at
the time of the transfer, in which case the premium paid is amortised based on a straight-line method.
4.6 Priority Sector Lending Certificates
The Bank enters into transactions for the sale or purchase of Priority Sector Lending Certificates (‘PSLCs'). In the case
of a sale transaction, the Bank sells the fulfilment of priority sector obligation and in the case of a purchase transaction
the Bank buys the fulfilment of priority sector obligation through the RBI trading platform. There is no transfer of loan
assets in PSLC transactions.
4.7 Translation of Foreign Currency items
In respect of domestic operations, transactions denominated in foreign currencies are accounted for at the rates
prevailing on the date of the transaction. Monetary foreign currency assets and liabilities are translated at the closing
rates of exchange as notified by the Foreign Exchange Dealers Association of India ('FEDAI'). All profits/losses resulting
from year end revaluations are recognised in the Profit and Loss Account.
Financial statements of foreign branches classified as non-integral foreign operations as per the RBI guidelines, are
translated as follows:
• Assets and liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at closing
exchange rates notified by FEDAI at the Balance Sheet date.
• Income and expenses are translated at the rates prevailing on the date of the transactions.
• All resulting exchange differences are accumulated in a separate 'Foreign Currency Translation Reserve' (FCTR) till
the disposal of the net investments. Any realised gains or losses on such disposal are recognised in the Profit and
Loss Account except for those that relate to repatriation of accumulated profits which are reclassified from FCTR
to 'Balance in Profit and Loss Account' under Schedule 2 - Reserves and Surplus in the Balance Sheet.
Contingent liabilities on account of forward exchange and derivative contracts, guarantees, acceptances, endorsements
and other obligations denominated in foreign currencies are disclosed at closing rates of exchange notified by FEDAI.
4.8 Foreign exchange and derivative contracts
Derivative transactions comprise of forward contracts, swaps, FRAs, futures and options which are disclosed as
contingent liabilities. The forwards, swaps and options are categorised as trading or hedge transactions.
Trading derivatives
Trading derivative contracts are revalued based on actual traded and/or derived from curves published by external
market sources or FBIL with the resulting unrealised gain or loss being recognised in the Profit and Loss Account and
correspondingly in other assets (representing positive MTM) and in other liabilities (representing negative MTM ) on
a gross basis.
Outstanding forward exchange contracts including tom/spot contracts (excluding swaps undertaken to hedge foreign
currency assets/liabilities and funding swaps) as at Balance Sheet date are revalued at closing spot and forward rates as
applicable as notified by FEDAI/FBIL and at interpolated rates for contracts of interim maturities. Valuation is considered
on present value basis by discounting the forward value till cash date using Alternative Reference Rate ('ARR') curve and
converting the foreign currency amount using the respective spot rates as notified by FEDAI/FBIL. The resulting gains
or losses on revaluation are included in the Profit and Loss Account.
Currency futures contracts are mark-to-market, using the daily settlement price on a trading day, which is the closing
price of the respective futures contracts on that day. While the daily settlement price is computed based on the last
half an hour weighted average price of such contracts, the final settlement price is taken as the RBI reference rate on
the last trading day of the futures contracts or as may be specified by the relevant authority from time to time. All
open positions are marked-to-market based on the settlement price and the resultant MTM profit/loss is daily settled
with the exchange.
Valuation of Exchange Traded Currency Options ('ETCO') is carried out using internal pricing models and valuation
of Interest Rate Futures ('IRF') is carried out on the basis of the daily settlement price of each contract provided
by the exchange.
Premium on options is recognized as income/expense on expiry or early termination of the transaction.
Hedging derivatives including funding swaps
Foreign exchange forward contracts not intended for trading (including funding swaps), that are entered into to establish
the amount of reporting currency required or available at the settlement date of a transaction, and are outstanding at
the Balance Sheet date, are effectively valued at the closing spot rate. The premium or discount arising at the inception
of such forward exchange contract is amortised on a straight-line basis as expense or income over the life of the contract.
For hedge transactions through other derivatives, the Bank identifies the hedged item (asset or liability) at the inception
of transaction itself. The effectiveness is ascertained at the time of inception of the hedge and periodically thereafter.
In case of a fair value hedge, the changes in the fair value of the hedging instruments and hedged items are recognized
in the Profit and Loss Account and in case of cash flow hedges, the change in fair value of hedging instrument for
the effective portion is recognised in Schedule 2- ‘Reserves and Surplus' under ‘Cash Flow Hedge Reserve' and the
ineffective portion of an effective hedging relationship, if any, is recognised in the Profit and Loss Account. The
accumulated balance in the Cash Flow Hedge Reserve, in an effective hedging relationship, is recycled in the Profit and
Loss Account at the same time that the impact from the hedged item is recognised in the Profit and Loss Account.
Provisioning
Pursuant to the RBI guidelines, any receivables under derivative contracts comprising of crystallised receivables as well
as positive MTM in respect of future receivables which remain overdue for more than 90 days are reversed through the
Profit and Loss account and are held in a separate suspense account under Schedule 5 - ‘Other Liabilities and Provisions'.
4.9 Revenue recognition
Interest income is recognised on an accrual basis in accordance with AS-9, Revenue Recognition as notified under
Section 133 of the Companies Act, 2013 read together with the Companies (Accounts) Rules, 2014, the Companies
(Accounting Standards) Rules, 2021 and the RBI guidelines, except in the case of interest income on non-performing
assets where it is recognised on receipt basis as per the income recognition and asset classification norms of RBI. Any
discount or premium on the investments in debt-securities is amortised as interest income over the remaining life of the
instrument. Interest income on investments in PTCs is recognized on a constant yield basis.
Commission on Guarantees and Letters of Credit (‘LC') is recognized on a pro-rata basis over the period of the Guarantee/
LC. Locker rent is recognized on a straight-line basis over the period of contract. Annual fee for credit cards and debit
cards is recognised on a straight-line basis over the period of service. Arrangership/syndication fee is accounted for on
completion of the agreed service and when the right to receive is established.
Loan processing fee is accounted for upfront when due, where the Bank is reasonably certain of ultimate collection.
Penal charges on loans are recognized as income on actual realization.
Other fees and commission income are recognised when due, where the Bank is reasonably certain of ultimate
collection. Payouts made to network partners and entities with co-branded arrangements, in the nature of sharing of
fees or based on driver of volume/spends are netted off from the respective fee and commission income.
Dividend income is accounted on an accrual basis when the right to receive the dividend is established. Income from
units of mutual funds / AIFs / VCFs is recognised on cash basis in line with regulatory guidelines.
Gain/loss on sell down of loans and advances through direct assignment is recognised at the time of sale.
Fees paid for purchase of PSLCs are amortised on straight-line basis over the tenor of the certificate as ‘Other Expenditure'
under Schedule 16 of the Profit and Loss Account. Fees received on sale of PSLCs are amortised on straight-line basis
over the tenor of the certificate as ‘Miscellaneous Income' under Schedule 14 of the Profit and Loss Account.
In accordance with RBI guidelines on sale of non-performing advances, if the sale is at a price below the net book
value (i.e. book value less provisions held), the shortfall is charged to the Profit and Loss Account. If the sale is for a
value higher than the net book value, the excess provision is credited to the Profit and Loss Account in the year the
amounts are received.
4.10 Bullion
The Bank deals in bullion on a consignment basis. The difference between the amount recovered from customers and
cost of bullion is accounted for at the time of sale to the customers. The Bank also deals in bullion on a borrowing and
lending basis and the interest paid/received is accounted for on an accrual basis.
4.11 Fixed assets and depreciation
Fixed assets are carried at cost of acquisition less accumulated depreciation and impairment, if any. Cost includes initial
handling and delivery charges, duties, taxes and incidental expenses related to the acquisition and installation of the
asset. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future economic
benefit / functioning capability from / of such assets.
Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes
advances paid to acquire fixed assets.
Depreciation is provided over the estimated useful life of a fixed asset on straight-line method from the date of addition.
The Management believes that depreciation rates currently used, fairly reflect its estimate of the useful lives and
residual values of fixed assets based on the historical experience of the Bank, though these rates in certain cases are
different from those prescribed under Schedule II of the Companies Act, 2013. Whenever there is a revision of the
estimated useful life of an asset, the unamortised depreciable amount is charged over the revised remaining useful life
of the said asset.
Assets costing less than '5,000 individually are fully depreciated in the year of purchase.
Depreciation on assets sold during the year is recognised on a pro-rata basis in the Profit and Loss Accounts till
the date of sale.
Gains or losses arising from the retirement or disposal of fixed assets are determined as the difference between the net
disposal proceeds and the carrying amount of assets and are recognised as income or expense in the Profit and Loss
Account. Further, profit on sale of premises is appropriated to the Capital Reserve Account (net of taxes and transfer to
Statutory Reserve) in accordance with RBI instructions.
4.12 Impairment of Fixed Assets
The carrying amounts of fixed assets are reviewed at each Balance Sheet date to ascertain if there is any indication of
impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an
asset exceeds its recoverable amount. The recoverable amount is the greater of the asset's net selling price and value
in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted
average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the asset over its
remaining useful life.
4.13 Non-banking assets
Non-banking assets (‘NBAs') acquired in satisfaction of claims include land. In the case of land, the Bank creates
provision and follows the accounting treatment as per specific RBI directions.
4.14 Lease Transactions
Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are
classified as operating lease. Lease payments for assets taken on operating lease are recognised as an expense in the
Profit and Loss Account on a straight-line basis over the lease term, unless the payments are structured to increase in
line with expected general inflation to compensate for the lessor's expected inflationary cost increase. Lease income
from assets given on operating lease is recognized as income in the Profit and Loss Account on a straight-line basis over
the lease term.
Short-term employee benefits
Short-term employee benefits comprise salaries and other compensations payable for services which the employee has
rendered during the period. These are recognized at the undiscounted amount in the Profit and Loss Account.
Defined benefit plans
The Bank has defined benefit plans in the form of provident fund, gratuity and resettlement allowance. Provident Fund
and Gratuity are in the nature of funded defined benefit plans and resettlement allowance is in the nature of unfunded
defined benefit plan.
• Provident Fund
Retirement benefit in the form of provident fund is a defined benefit plan wherein the contributions are charged
to the Profit and Loss Account of the year when such contributions are due and when services are rendered
by the employees. Further, an actuarial valuation is conducted by an independent actuary using the Projected
Unit Credit Method as at 31 March each year to determine the deficiency, if any, in the interest payable on the
contributions as compared to the interest liability as per the statutory rate declared by the Central Government
and the shortfall, if any, due to fluctuations in price or impairment, in the aggregate asset values of the Trust as
compared to the market value. Actuarial gains/losses are immediately recognised in the Profit and Loss Account
and are not deferred.
The overseas branches of the Bank and its eligible employees contribute a certain percentage of their salary
towards respective government schemes as per local regulatory guidelines.
• Gratuity
The Bank contributes towards gratuity fund (defined benefit retirement plan) administered by various insurers for
eligible employees. Under this scheme, the settlement obligation remains with the Bank, although the insurers
administer the scheme and determine the contribution premium required to be paid by the Bank. The plan
provides a lump sum payment to vested employees at retirement or termination of employment based on the
respective employee's salary and the years of employment with the Bank. The liability with regard to the gratuity
fund is recognised based on actuarial valuation conducted by an independent actuary using the Projected Unit
Credit Method as at each reporting date based on certain assumptions regarding rate of interest, salary growth,
mortality and staff attrition. Actuarial gains/losses are immediately recognized in the Profit and Loss Account and
are not deferred.
In respect of employees at overseas branches (other than expatriates), the liability with regard to gratuity is
provided on the basis of a prescribed method as per local laws, wherever applicable.
• Resettlement Allowance
The Bank provides for resettlement allowance liability in the form of six months' pay at the time of separation, for
certain eligible employees who moved to the Bank as part of the Citibank India Consumer Business acquisition.
Provision for this liability is based on an actuarial valuation conducted by an independent actuary using the
Projected Unit Credit Method as at 31 March each year based on certain assumptions regarding discount rate and
salary escalation rate.
Defined Contribution plans
• Superannuation
Select employees of the Bank are entitled to receive retirement benefits under the Bank's superannuation scheme
either under a cash-out option through salary or under a defined contribution plan. For the employees covered
under the defined contribution plan, the Bank contributes annually a sum equal to 10% of the employee's eligible
annual basic salary to the Life Insurance Corporation of India (LIC), which undertakes to pay the lump sum and
annuity benefit payments pursuant to the scheme. Such contributions are recognised in the Profit and Loss
Account in the period in which they accrue.
• National Pension Scheme (‘NPS’)
In respect of employees who opt for contribution to the NPS, the Bank contributes a certain percentage of the
total basic salary of such employees to the aforesaid scheme, a defined contribution plan, which is managed and
administered by pension fund management companies. Such contributions are recognised in the Profit and Loss
Account in the period in which they accrue.
4.16 Reward points
The Bank runs a loyalty program which seeks to recognize and reward customers based on their relationship with
the Bank. Under the program, eligible customers are granted loyalty points redeemable in future, subject to certain
conditions. In addition, the Bank continues to grant reward points in respect of certain credit cards (not covered under
the loyalty program). The Bank estimates the provision for such loyalty/reward points using an actuarial method at the
Balance Sheet date through an independent actuary, basis assumptions such as redemption rate, lapse rate, discount
rate, value of reward points etc. Provision for the said reward points is then made based on the actuarial valuation
report as furnished by the said independent actuary.
4.17 Taxation
Income tax expense is the aggregate amount of current tax and deferred tax charge. Current year taxes are determined
in accordance with the relevant provisions of the Income Tax Act, 1961 and considering the material principles set out in
the Income Computation and Disclosure Standards to the extent applicable. Deferred income taxes reflect the impact
of current year timing differences between taxable income and accounting income for the year and reversal of timing
differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance
Sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off assets
against liabilities representing current tax and the deferred tax assets and deferred tax liabilities relate to the taxes on
income levied by same governing taxation laws.
Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be realised. The impact of changes in the deferred
tax assets and liabilities is recognised in the Profit and Loss Account.
Deferred tax assets are recognised and reassessed at each reporting date, based upon the Management's judgement
as to whether realisation is considered as reasonably certain. Deferred tax assets are recognised on carry forward of
unabsorbed depreciation and tax losses only if there is virtual certainty supported by convincing evidence that such
deferred tax asset can be realised against future profits.
4.18 Share issue expenses
Share issue expenses are adjusted from the Share Premium Account in terms of Section 52 of the Companies Act, 2013.
4.19 Corporate Social Responsibility
Expenditure towards Corporate Social Responsibility is recognised in the Profit and Loss Account in accordance with
the provisions of the Companies Act, 2013.
4.20 Earnings per share
The Bank reports basic and diluted earnings per share in accordance with AS-20, Earnings per Share, as notified under
Section 133 of the Companies Act, 2013 read together with the Companies (Accounts) Rules, 2014 and the Companies
(Accounting Standards) Rules, 2021. Basic earnings per share is computed by dividing the net profit after tax 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 at the year end except where the results
are anti-dilutive.
The Employee Stock Option Scheme (‘the Scheme') provides for grant of stock options on equity shares of the Bank to
employees and Directors, of the Bank and its subsidiaries. Under the Scheme, options are granted at an exercise price,
which is equal to the fair market price of the underlying equity shares at the date of the grant. The fair market price is
the latest available closing price, prior to the date of grant, on the stock exchange on which the shares of the Bank are
listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading
volume on the said date is considered.
Further, the Employees Stock Unit Scheme (‘the ESU Scheme') provides for grant of stock units convertible into
equivalent number of fully paid-up equity share(s) of the Bank to eligible employees. The stock units are granted at an
exercise price as determined by the Bank and specified at the time of grant which shall not be less than the face value
of the equity shares of the Bank.
As per RBI guidelines, for options/units granted after 31 March, 2021, the Bank follows the fair value method and
recognizes the fair value of such options/units computed using the Black-Scholes model without reducing estimated
forfeitures, as compensation expense over the vesting period. On exercise of the stock options/units, the correspondi ng
balance under Employee Stock Options/Units Outstanding account is transferred to the Share Premium account. In
respect of the options/units which expire unexercised, the balance standing to the credit of Employee Stock Options/
Units Outstanding account is transferred to the General Reserve. In respect of Employee Stock Options/Units which are
granted to the employees of the subsidiaries, the Bank recovers the cost from the subsidiaries over the vesting period.
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