SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES ON THE STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31^st MARCH, 2026

1. Basis of Preparation

The financial statements have been prepared under the historical cost convention, on the accrual basis of accounting on going concern basis, unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises statutory provisions, regulatory norms / guidelines prescribed by Reserve Bank of India (RBI), Banking Regulation Act - 1949, Accounting Standards/ guidance notes issued by the Institute of Chartered Accountants of India (ICAI) and the practices prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with.

Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, expenses, income and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

2. Foreign Currency Translation / Conversion of Foreign Currencies

2.1 Foreign currency monetary items are initially recorded at a notional rate. Foreign currency monetary items are restated at the rate published by 'Foreign Exchange Dealers' Association of India (FEDAI) at the end of each quarter. Exchange difference arising on restatement of such items at the quarterly rates is recognised in Profit and Loss Account.

2.2 Transactions and balances of foreign branches are classified as non-integral foreign operations. Such transactions and balances are consolidated by the Bank on a quarterly basis. Assets and Liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at the closing spot rate of exchange announced by Foreign Exchange Dealers' Association of India (FEDAI) as at the end of each quarter. Income and Expenditure items of the foreign branches are translated at the quarterly average rate published by FEDAI in accordance with Accounting Standard (AS) 11 -"The effect of Changes in Foreign Exchange rates" issued by the Institute of Chartered Accountants of India (ICAI) and as per the guidelines of Reserve Bank of India (RBI) regarding the compliance of the said standard.

The resultant exchange gain / loss is credited / debited to Foreign Currency Translation Reserve.

2.3 Forward Exchange Contracts

Premium or discount arising at the inception of all forward exchange contracts are amortized as expense or income over the life of the contract. Profit/ Losses arising on cancellation of forward exchange contracts, together with unamortized premium or discount, if any, is recognized on the date of termination. Exchange differences on such contracts are recognized in the Profit & Loss account in the reporting period in which the exchange rates change.

Contingent liability in respect of outstanding forward exchange contracts, guarantees, acceptances, endorsements and other obligations are stated in the balance sheet at the closing rates published by FEDAI.

3. Investments

3.1 Investments

The Bank's investment portfolio is classified as per master directions of RBI Commercial Bank - Classification, Valuation and Operation of Investment Portfolio Directions), 2025 ("Master Directions"). The entire investment portfolio of the Bank is classified under following categories viz. 'Held to Maturity' (HTM), 'Available for Sale' (AFS), 'Fair value through Profit and Loss' (FVTPL) and 'Subsidiaries, Joint Ventures and Associates'.

Held for Trading (HFT) is a separate investment subcategory within FVTPL. The category of the investment is decided before or at the time of acquisition and this decision is properly documented.

Investments are disclosed in the Balance Sheet (Schedule-8-Investments)undersixclassifications viz: (a) Government securities (b) Other approved securities (c) Shares (d) Debentures & Bonds

(e) subsidiaries, Joint Ventures & Associates and

(f) Others.

The valuation of Investments is done in accordance with the Master Directions issued by the RBI as under:

[A] HELD TO MATURITY

Securities that fulfil the following conditions are classified under HTM:

(i) The security 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

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

Notwithstanding the intent with which the following securities are acquired, they shall not meet the SPPI criteria and therefore shall not be eligible for classification either as HTM or AFS:

(i) Instruments with compulsorily, optionally or contingently convertible features.

(ii) Instruments with contractual loss absorbency features such as those qualifying for Additional Tier 1 and Tier 2 under Basel III Capital Regulations.

(iii) Instruments whose coupons are not in the nature of interest.

(iv) Preference shares and Equity shares.

Investments in the securitization notes, other than the equity tranche, shall be considered to

meet the SPPI criteria if the tranche in which the investment is made meets all the following conditions:

(i) The contractual terms of the tranche being assessed for classification (without looking through to the underlying pool of financial instruments) give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(ii) The underlying pool of financial instruments meet the SPPI criteria.

(iii) The credit risk of the tranche is equal to or lower than the credit risk of the combined underlying pool of assets.

Securities held in HTM are carried at cost and not marked to market (MTM) after initial recognition. Any discount or premium on the securities under HTM shall be amortised over the remaining life of the instrument. The amortised amount are reflected in the financial statements under Item II 'Income on Investments' of Schedule 13: 'Interest Earned' with a contra in Schedule 8:'Investments'.

Securities under HTM are subject to income recognition, asset classification and provisioning norms as applicable

[B] AVAILABLE FOR SALE

Securities that meet the following conditions are classified under AFS:

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

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

Provided that on initial recognition, a Bank may make an irrevocable election to classify an equity instrument that is not held with the objective of trading under AFS.

The objective of trading shall fulfil following purposes:

(a) Short-term resale;

(b) Profiting from short-term price movements;

(c) Locking in arbitrage profits; or

(d) Hedging risks that arise from instruments meeting (a), (b) or (c) above.

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

The securities held in AFS are fair valued on daily basis. Any discount or premium on the acquisition of debt securities under AFS are amortised over the remaining life of the instrument. The amortised amounts are reflected in the financial statements under Item II 'Income on Investments' of Schedule 13: 'Interest Earned' with a contra in Schedule 8:'Investments'.

The valuation gains and losses across all performing investments, irrespective of classification (i.e., Government securities, Other approved securities, Bonds and Debentures, etc.), held under AFS are aggregated. The net appreciation or depreciation are directly credited or debited to a reserve named AFS Reserve without routing through the Profit & Loss Account.

Securities under AFS are subject to income recognition, asset classification and provisioning norms as applicable. The AFS-Reserve is reckoned as Common Equity Tier (CET) 1. The unrealised gains transferred to AFS-Reserve are not available for any distribution such as dividend and coupon on Additional Tier 1.

Upon sale or maturity of a debt instrument in AFS category, the accumulated gain/ loss for that security in the AFS-Reserve is transferred from the AFS Reserve and recognized in the Profit and Loss Account under Item II 'Profit on Sale of Investments'

Add ' and S I caps under Schedule 14-Other Income. In the case of equity instruments designated under AFS at the time of initial recognition, any gain or loss on sale of such investments are not transferred from AFS-Reserve to the Profit and Loss Account. Instead, such gain or loss are transferred from AFS-Reserve to the Capital Reserve.

We will not pay dividends out of net unrealised gains recognised in the Profit and Loss Account arising on fair valuation of Level 3 investments on their Balance Sheet. Further, such net unrealised gains on Level 3 investments recognised in the Profit and Loss Account or in the AFS-Reserve are deducted from CET 1 capital.

Provided that this clause will not apply to investments that meet the SPPI criteria and are required to be risk weighted at 50% or lower for credit risk as per applicable regulatory instructions om capital adequacy. The unrealized gains transferred to AFS-Reserve are not available for any distribution such as dividend and coupon on Additional Tier 1.

[C] FAIR VALUE THROUGH PROFIT AND LOSS

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

(i) Equity shares, other than (a) equity shares of subsidiaries, associates or joint ventures and

(b) equity shares where, at initial recognition, the irrevocable option to classify at AFS has been exercised.

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

(iii) Investment in securitisation notes which represent the equity tranche of a securitisation transaction. Investments in senior and other sub-ordinate tranches shall need to be reviewed for their compliance with SPPI criterion.

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

The securities held in FVTPL and classified under the HFT sub-category within FVTPL are fair valued and the net gain or loss arising on such valuation are directly credited or debited to the Profit and Loss Account.

Any discount or premium on the acquisition of debt securities under FVTPL are amortised over the remaining life of the instrument. The amortised amount will reflect in the financial statements under Item II 'Income on Investments' of Schedule 13: 'Interest Earned' with a contra in Schedule 8:'Investments'.

Securities under FVTPL are subject to income recognition, asset classification and provisioning norms as applicable.

Banks shall only include those financial instruments in HFT when there is no legal impediment against selling or fully hedging it.

Any instrument that a Bank holds for one or more of the following purposes will when it is first recognised on its books, be designated as a HFT instrument

(a) Short-term resale;

(b) Profiting from short-term price movements;

(c) Locking in arbitrage profits; or

(d) Hedging risks that arise from instruments meeting

(a), (b) or (c) above.

The following instruments are included in HFT, unless specifically otherwise provided

(a) Instruments in the correlation trading portfolio

(b) Instruments that would give rise to a net short credit or equity position in the banking book

(c) Instruments resulting from underwriting commitments, where underwriting commitments refer only to securities underwriting, and relate only to securities that are expected to be actually purchased by the Bank on the settlement date.

The following instruments shall not be included in HFT category:

(a) Unlisted equities and equity investments in subsidiaries, associates and joint ventures;

(b) Instruments designated for securitisation warehousing;

(c) Direct holding of real estate and derivatives on direct holdings of real estate;

(d) Equity investments in a fund, unless the Bank meets at least one of the following conditions:

i. The Bank is able to look through the fund to its individual components and there is sufficient and frequent information, verified by an independent third party, provided to the Bank regarding the fund's composition; or

ii. The Bank obtains daily price quotes for the fund and it has access to the information contained in the fund's mandate or in the national regulations governing such investment funds;

(e) Derivative instruments and funds that have instrument types specified from (a) to (d) above as underlying assets; or

(f) Instruments held for the purpose of hedging a particular risk of a position in the types of instruments specified from (a) to (e) above.

The following instruments shall be presumed to be in HFT unless specifically otherwise provided for:

(a) Instruments resulting from market-making activities;

(b) Equity investments in a fund excluding those exempted from assignment to HFT or

(c) Listed equities.

(d) Trading-related repo-style transaction; or

[D] SUBSIDIARIES AND JOINT VENTURES

All investments in subsidiaries, associates and joint ventures are held sui generis i.e., in a distinct category for such investments separate from the other investment categories (viz. HTM, AFS and FVTPL).

All investments (i.e., including debt and equity) in subsidiaries, associates and joint ventures will be held at acquisition cost.

Any discount or premium on the acquisition of debt securities of subsidiaries, associates and joint ventures, meeting SPPI criteria, are amortised over the remaining life of the instrument. The amortised amount will reflect in the financial statements under item II 'Income on Investments' of Schedule 13: 'Interest Earned'.

In case where there is already an investment in an entity which is not a subsidiary, associate or joint venture and subsequently the investee entity becomes a subsidiary, associate or joint venture, the revised carrying value as at the date of such investee entity becoming a subsidiary, associate or joint venture are determined as under:

(i) Where the investment is held under HTM, the carrying value less any permanent impairment will the revised carrying value.

(ii) Where an investment is held under AFS, the cumulative gains and losses previously recognised in AFS-Reserve are

reversed and adjusted to the carrying value of the investment along with any permanent diminution in the value of the investment to arrive at the revised carrying value.

(iii) Where an investment is held in FVTPL, the fair value as on the date of the investee becoming a subsidiary, associate or joint venture will be taken as the carrying value.

(d) When an investee ceases to be a subsidiary, associate or joint venture, the investments are reclassified to the respective category as under:

i) Where the investment is reclassified into HTM, there will be no change in the carrying value and consequently no accounting adjustment per se are required.

ii) Where the investment is reclassified into AFS or FVTPL, the fair value on the date of such reclassification shall be the revised carrying value. The difference between the revised and previous carrying value shall be transferred to AFS-Reserve and Profit and Loss Account in case of reclassification into AFS and FVTPL respectively.

Any gain / profit arising on the reclassification/ sale of an investment in a subsidiary, associate or joint venture is first recognised in the Profit and Loss Account and then will be appropriated below the line from the Profit and Loss Account to the 'Capital Reserve Account'. The amounts so appropriated are net of taxes and the amount required to be transferred to Statutory Reserves.

3.2 Initial Recognition

All investments are measured at fair value on initial recognition. Unless facts and circumstances suggest that the fair value is materially different from the acquisition cost, it will be presumed that the acquisition cost is the fair value.

Situations where the presumption shall be tested include where:

(a) The transaction is between related parties.

(b) The transaction is taking place under duress where one party is forced to accept the price in the transaction.

(c) The transaction is done outside the principal market for that class of securities.

(d) Other situations, where in the opinion of the supervisor, facts and circumstances warrant testing of the presumption.

In respect of Government securities acquired through auction (including devolvement), switch operations and Open Market Operations (OMO) conducted by the RBI, the price at which the security is allotted will be the fair value for initial recognition purposes.

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

Any Day 1 loss arising from Level 3 investments are recognised immediately. Any Day 1 gains arising from Level 3 investments will be deferred. In the case of debt instruments, the Day 1 gain shall be 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.

Reclassification between categories:

Banks will not reclassify investments between categories (viz. HTM, AFS and FVTPL) without the approval of their Board of Directors. Further, reclassification will also require the prior approval of the Department of Supervision (DoS), RBI.

The reclassification is applied prospectively from reclassification date.

Sale of investments from HTM:

Any sales from HTM are as per a Board approved policy. Details of sales out of HTM are disclosed in the notes to accounts of the financial statements. In any financial year, the carrying value of investments sold out of HTM shall not exceed five per cent of the opening carrying value of the HTM portfolio. Any sale beyond this threshold shall require prior approval from DoS, RBI.

Sales of securities in the situations given below are excluded from the regulatory limit of five per cent:

(a) Sales to the RBI under liquidity management operations of RBI such as the Open Market Operations (OMO) and Government Securities Acquisition Programme (GSAP).

(b) Repurchase of Government Securities by Government of India from Banks under buyback or switch operations.

(c) Repurchase of State Development Loans by respective State Governments under buyback or switch operations.

(d) Repurchase, buyback or exercise of call option of non-SLR securities by the issuer.

(e) Sale of non-SLR securities following a downgrade in credit ratings or default by the counterparty.

(f) Sale of securities as part of a resolution plan under the Prudential Framework for Resolution of Stressed Assets for a borrower facing financial distress.

(g) Additional sale of securities explicitly permitted by the Reserve Bank of India.

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

Income Recognition, Asset Classification and Provisioning:

Income recognition:

(a) Banks shall recognize income on accrual basis for the following investments:

(i) Government Securities, bonds and debentures of corporate bodies, where interest rates on these securities are predetermined and provided interest is serviced regularly and is not in arrears.

ii) Shares of corporate bodies provided dividend has been declared by the corporate body in its Annual General Meeting and the owner's right to receive payment is established.

(b) Income from units of mutual funds, alternative investment funds and other such pooled/ collective investment funds are recognized on cash basis.

(c) Subject to sub-clause (a) above, dividend income on equity investments held under AFS are recognised in the Profit and Loss Account.

Accounting for Broken Period Interest:

Banks will not capitalize the broken period interest paid to the seller as part of cost and shall treat it as an Item of expenditure under Profit & Loss Account in respect of investments in securities.

Non-Performing Investments (NPI):

a) The criterion used to classify an asset as NonPerforming Asset (NPA) as per the extant Prudential Norms on Income Recognition, Asset Classification and Provisioning (IRACP) pertaining to Advances are used to classify an investment as a Non-Performing Investment (NPI). Similarly, an NPI is upgraded to standard when it meets the criteria specified in the IRACP norms.

(i) In respect of debt instruments such as bonds or debentures, an NPI is one where interest/ instalment (including maturity proceeds) is due and remains unpaid for more than 90 days.

(ii) Sub-clause (a)(i) above shall apply, mutatis mutandis to preference shares where the fixed dividend is not paid. If the dividend on preference shares (cumulative or noncumulative) is not declared / paid in any year it are treated as due / unpaid in arrears and the date of balance sheet of the issuer for that particular year are reckoned as due date for the purpose of asset classification. Such an investment can be upgraded subsequently on payment of dividend for the current period in the case of non-cumulative preference shares and payment of dividend in arrears and for current period in the case of cumulative preferences shares.

(iii) In the case of equity shares, in the event the investment in the shares of any company is valued at '1 per company on account of the non-availability of the latest balance sheet for 18 months, those equity shares are reckoned as NPI. The NPI can be upgraded subsequently on receipt of audited balance sheet.

(iv) If any credit facility availed by the issuer is NPA in the books of the Bank, investment in any of the securities, including preference shares issued by the same issuer shall also be treated as NPI and vice versa. However, this stipulation shall not be applicable in cases where only the preference shares are classified as NPI, and in such cases, the investment in any of the other performing securities issued by the same issuer need not be classified as NPI and any performing credit facilities granted to that borrower need not be treated as NPA.

(v) In case of conversion of principal and / or interest into equity, debentures, bonds, etc., such instruments are classified in the same asset classification category as the loan and provision are made as per the norms. In case of post-conversion, if the classification is standard or is subsequently upgraded to standard as per IRACP norms, the investment can be categorised in HTM, AFS or FVTPL (including HFT)

(b) Once an investment is classified as an NPI, it is segregated from rest of the portfolio and not considered for netting valuation gains and losses.

(c) Banks will not accrue any income on NPIs. Income are recognised only on realisation of the same. Further, any MTM appreciation in the security is ignored.

(d) Irrespective of the category (i.e., HTM, AFS or FVTPL (including HFT)) in which the investment has been placed, the expense for the provision for impairment shall always be recognised in the Profit and Loss Account. The provision to be held on an NPI are the higher of the following amounts:

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

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

In view of the above, no additional provision for depreciation are required over and above the provision for NPI as specified above.

Provided that in the case of an investment categorised under AFS against which there are cumulative gains in AFS-Reserve, the provision required may be created by charging the same to AFS-Reserve to the extent of such available gains.

Provided further that in the case of an investment categorised under AFS against which there are cumulative losses in AFS-Reserve, the cumulative losses are transferred from AFS-Reserve to the Profit and Loss Account.

(e) Upon an account being upgraded as per IRACP norms, any provision previously recognised are reversed and symmetric recognition of MTM gains and losses can resume.

(f) Investments in Government securities and Government guaranteed investment.

(i) Investments in Central Government Securities and State Government Securities shall not be classified as NPI.

(ii) Investments in Central Government guaranteed securities shall also not be classified as NPI until the Central Government has repudiated the guarantee when invoked. In respect of such securities held in AFS and FVTPL, Banks shall continue to recognise MTM gains / losses in AFS-Reserve and Profit and Loss respectively. However, any income are recognised only on realisation basis.

(iii) Investment in State Government guaranteed securities, shall attract prudential norms for identification of NPI and provisioning, when

interest / instalment of principal (including maturity proceeds) or any other amount due to the Bank remains unpaid for more than 90 days.

Investment Fluctuation Reserve

Banks will create an Investment Fluctuation Reserve (IFR) until the amount of IFR is at least two per cent of the AFS and FVTPL (including HFT) portfolio, on a continuing basis, by transferring to the IFR an amount not less than the lower of the following:

(i) Net profit on sale of investments during the year.

(ii) Net profit for the year, less mandatory appropriations.

Amortisation across the investment categories are on a straight-line basis over the residual maturity of the instrument. Daily premium amortisation and discount amortisation are reflected in expenses head and income head respectively.

Bank is following Revenue Method of accounting. The basic price is treated as cost of purchase and debited to the investment account whereas the broken period interest (accrued interest up to the purchase date) is treated as revenue expenditure and is to be booked as an expense under Profit & Loss Account. Costs such as brokerage, commission, stamp duty, taxes etc. incurred at the time of acquisition/sale of securities are treated as revenue expenditure. Brokerage/underwriting commission received shall be accounted under income.

In case of shares which were taken into books at '1/-(without paying any consideration) following the best practices, Bank should book profit on realization as in the case of other securities in the respective portfolio. However, Bank should continue to value these securities at '1 and should not consider the MTM appreciation till the time of eventual realization.

Interest income on investments shall include all income derived from the investment portfolio by way of interest and dividend (except dividend from subsidiaries, associates and joint ventures).

Income earned by way of dividend etc. from subsidiaries, companies, joint ventures abroad / in India to be accounted and presented separately.

Provision for non-performing investments (NPI) are reflected under Provisions and Contingencies.

Accounting of Interest:

For the purpose of Balance Sheet, interest income (including dividend) is classified under three heads viz., Interest received, Interest Accrued & due and Interest Accrued but not due.

For provision of interest under interest accrued and not due, for all Government debts and approved securities / bonds, year is reckoned as 360 days and month as 30 days. For non-approved and other corporate bonds / debts year is reckoned as 365 days and month as actual days.

Accrued Discount on zero coupon bonds are amortized over the remaining maturity period by taking the difference between the book value and redemption value of zero coupon bonds. Thereafter, valuation shall be carried out.

Bank is recognizing income on accrual basis for Government Securities, bonds and debentures of corporate bodies, where interest rates on these securities are predetermined and provided interest is serviced regularly and is not in arrears.

Interest on other approved securities and NCDs / FCDs / PCDs / PSU bonds are accounted on accrual basis if the investment continues to be classified as standard, otherwise the same is accounted on cash basis only.

Discount on Deep Discount (Zero Coupon) Bonds, are accounted pro-rata, on accrual basis.

Discount accrued on Treasury Bills / Cash Management Bills / Discounted instruments are accrued and accounted under interest income on investments. On sale of such instruments the income over and above the accrual are booked as profit on sale.

Income distribution on MF instruments are accounted on cash basis.

Profit on Sale of Investments

Profit on Sale of Investments in respect of "Available for Sale" and "Held for Trading" categories is recognized in Profit & Loss Account.

Profit on Sale of Investments in respect of "Held to Maturity" category is first taken to the Profit & Loss Account and an equivalent amount of Profit is appropriated to the Capital Reserve (net of taxes and amount required to be transferred to Statutory Reserve).

Loss on Sale of Investments in all the three categories is recognized in Profit & Loss Account.

Repurchase and Reverse Repurchase Transactions

Repurchase (Repo) and reverse repurchase (Reverse Repo) transactions are reported as borrowing and lending respectively.

Borrowing cost on repo transactions is accounted as interest expense and revenue on reverse repo transactions is accounted as interest income.

Accounting of MIBOR- O/S Derivative contracts

All derivatives are recognised on the balance sheet and measured at fair value since a derivative contract represents a contractual right or an obligation. In case of MIBOR- O/S, principal amount is notional in nature.

Forward Exchange Contracts

Premium or discount arising at the inception of all forward exchange contracts are amortized as expense or income over the life of the contract. Profit / Losses arising on cancellation of forward exchange contracts, together with unamortized premium or discount, if any, is recognized on the date of termination. Exchange differences on such contracts are recognized in the Profit & Loss account in the reporting period in which the exchange rates change.

Contingent liability in respect of outstanding forward exchange contracts, guarantees, acceptances, endorsements and other obligations are stated in the balance sheet at the closing rates published by FEDAI.

Derivative contracts

The Bank deals in Interest Rate Swaps and Currency Derivatives. The Interest Rate Derivatives dealt by the Bank are Rupee Interest Rate Swaps, Cross Currency Interest Rate Swaps and Forward Rate Agreements. Currency Derivatives dealt by the Bank are Options and Currency Swaps. Such derivative contracts are valued as under:

a. Derivative contracts dealt for trading are valued

on mark to market basis, net depreciation is

recognized while net appreciation is ignored.

b. Derivative contracts undertaken for hedging are:

i. Derivative contracts designated as hedges are not marked to market unless their underlying asset is marked to market.

ii. Income / Expenditure is recognized on accrual basis for hedging swaps.

4. ADVANCES

1. Advances are classified as performing and non-performing assets in accordance with the prudential norms issued by RBI.

2. Advances are classified into Standard, Sub-Standard, Doubtful and Loss assets borrower wise.

3. Provisions for domestic advances are made for performing / non-performing advances in accordance with the RBI Guidelines.

4. Provisions for performing / non-performing advances with foreign branches are made as per regulations of host country or according to the norms prescribed by RBI, whichever is more stringent.

5. Advances stated in the Balance Sheet are net of provisions made for Non-Performing Assets, claims received from Credit Guarantee Institutions and bill rediscount.

6. Recoveries in Non-Performing Advances are apportioned first towards charges and interest, thereafter towards principal.

Recovery in NPA accounts in case of One Time Settlement (OTS) / National Company Law Tribunal (NCLT) / Technically Written-Off (TWO) & Accounts covered by Government Guarantees such as CGTMSE / ECGC / GECL / CGFMU and Subsidy if any, shall be appropriated in the order of Principal, Charges and Interest.

Recovery in suit filed / decreed accounts shall be appropriated in the manner as per specific directives from the Court / DRT, in case the same is other than the one mentioned above.

7. In case of financial assets sold to SC / RC, the valuation, income recognition etc., are done as per RBI guidelines.

8. In addition to the specific provision on NPAs, general provisions are also made for standard assets as per extant RBI guidelines.

5. Fixed Assets

(i) The premises of the Bank include freehold and leasehold properties. All the Fixed Assets are capitalized based on the date of put to use.

(ii) Land and Premises are stated at revalued cost and other fixed assets are stated at historical cost. The appreciation on revaluation, if any, is credited to the 'Revaluation Reserve' Account. Depreciation / Amortization attributable to the enhanced value have been debited to the Profit & Loss account. Equivalent amount has been transferred from Revaluation Reserve to Revenue Reserve.

Depreciation

1. Depreciation method is on Straight Line Method, for all Assets based on life span of the assets.

2. The life span of the assets is defined as per Part C Schedule II of the Companies Act, 2013 other than Software / Intangibles, Servers, Electrical Equipment's and Motor Vehicles.

3. Estimated life span of the assets adopted by the bank for different class of assets is as under:

4. Software / Intangible Assets are amortized over 5 years.

5. If the Item is put to use for 180 days and above in the year of acquisition, 100% depreciation will be charged for the concerned financial year. If the asset is put to use for less than 180 days in the year of acquisition, 50% depreciation is be charged for the concerned financial year.

6. 5% of the Original cost price will be residual value in case of the assets having useful life 8 years and above. '5/- of the Original cost price is residual value for other assets.

7. Premium paid on leasehold properties is charged off over the lease period or life span of relevant

asset whichever is earlier. Cost of leasehold land and leasehold improvements are amortised over the period of lease or life span of relevant assets whichever is lower.

8. In respect of fixed assets held at foreign offices, depreciation is provided as per the regulations / norms of the respective countries

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

Impairment of Assets

An assessment is made at each balance sheet date whether there is any indication that an asset is impaired. If any such indication exists, an estimate of the recoverable amount is made and impairment loss, if any, is provided for and charged off to Profit and Loss Account.

6. Revenue Recognition

Income and expenditure are generally accounted on accrual basis, except the following:

(a) Interest on non-performing advances and nonperforming investments is recognized on receipt basis as per norms laid down by Reserve Bank of India.

(b) Interest on Overdue Bills, Commission (other than Government business & Commission for LC BG), Exchange, Brokerage and rent on lockers is accounted on realization.

(c) Dividend Income is recognized when the right to receive the same is established.

(d) In case of suit filed accounts, related legal and other expenses incurred are charged to Profit & Loss Account and on recovery the same are accounted as Income.

7. Employee Benefits

Defined Contribution Plans

Defined Contribution to Plans such as Provident/ Pension fund are recognized as an expense and charged to Profit & Loss account.

The Bank operates a New Pension Scheme (NPS) for all officers / employees joining the Bank on or after 01-04-2010, which is a defined contribution

Pension Scheme, such new joinees are not entitled to become members of the existing Pension Scheme. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with a contribution from the Bank equivalent to 14% of the basic pay plus dearness allowance. The Bank recognizes such annual contributions as an expense in the year to which they relate.

Defined Benefit Plans

(a) Gratuity: The employee Gratuity Fund Scheme is funded by the Bank and managed by a separate trust who in turn manages their funds as per guidelines. The present value of the Bank's obligation under Gratuity is recognized on actuarial basis as at the year end and the fair value of the Plan assets is reduced from the gross obligation to recognize the obligation on a net basis.

(b) Pension: The employee Pension Fund Scheme is funded by the Bank and managed by a separate trust. The present value of the Bank's obligations under Pension is recognized on the basis of actuary's report as at the year end and the fair value of the Plan assets is reduced from the gross obligation to recognize the obligation on a net basis.

The privilege leave is considered as a long-term benefit and is recognized based on independent actuarial valuation.

The cost of providing long-term benefits under defined benefit Plans is determined using the projected unit credit method with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains/ losses are immediately recognised in the Profit and Loss Account and are not deferred.

8. Provision for Taxation

(a) Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - "Accounting for Taxes on Income" respectively after taking into account

taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.

(b) Deferred Tax adjustments comprises changes in the Deferred Tax Assets or liabilities during the year. Deferred Tax Assets and liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and laws that have been enacted or substantively enacted as of the balance sheet date. The impact of changes in Deferred Tax Assets and liabilities is recognised in the profit and loss account.

(c) Deferred Tax Assets are recognised and reassessed at each reporting date, based upon management's judgement as to whether their realisation is considered as reasonably certain or virtual certain as the case may be.

(d) 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 Assets can be realised against future profits. Deferred Tax Assets on the items other than above are recognized on the basis of reasonable certainty.

9. Net Profit

Provisions, Contingent Liabilities and Contingent Assets

In conformity with AS 29, "Provisions, Contingent Liabilities & Contingent Assets" issued by the Institute of Chartered Accountants of India, the Bank recognizes provision only when:

(a) It has a present obligation as a result of past event.

(b) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and

(c) A reliable estimate of the amount of the obligation can be made.

No provision is recognized:

(a) For 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.

(b) Where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or

(c) When 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 the outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

(i) Contingent Assets are not recognized in the financial Statements.

Net Profit

The Net Profit in the Profit & Loss Account is after:

(a) Provision for depreciation on Investments

(b) Provision for Taxation

(c) Provision on Non-Performing Advances

(d) Provision on Standard Assets

(e) Provision for Non-Performing Investments

(f) Provision for other usual & necessary Items

10. Earnings Per Share

The Bank reports basic and diluted Earnings Per Share in accordance with AS - 20 "Earnings Per Share", issued by ICAI. Basic Earnings Per Share is computed by dividing the net profit after tax attributable to equity Shareholders by the weighted average number of equity shares outstanding for the Year.

11. Cash Flow Statement

Cash flow Statement is reported by using indirect method.

12. Segment Reporting

The Bank recognises the business segment as the primary reporting segment and geographical segment as the secondary reporting segment in accordance with the RBI guidelines & in compliance with AS-17 issued by ICAI.