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 RBI master directions- Classification,
Valuation and Operation of Investment Portfolio
of Commercial Banks (Directions), 2023. 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) shall be a separate investment
subcategory within FVTPL. The category of the
investment shall be decided before or at the time
of acquisition and this decision shall be properly
documented.
Investments are disclosed in the Balance Sheet
under six classifications 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-
Classification, Valuation and Operation of
Investment Portfolio of Commercial Banks
(Directions), 2023 issued by the RBI as under:
A. HELD TO MATURITY
Securities held in HTM shall be carried at cost
and shall not be 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 shall be reflected in the financial
statements under item II 'Income on Investments'
of Schedule 13: 'Interest Earned' with a contra in
Schedule 8: 'Investments'.
B. AVAILABLE FOR SALE
• The securities held in AFS are fair valued on
daily basis. Any discount or premium on the
acquisition of debt securities under AFS shall
be amortised over the remaining life of the
instrument. The amortised amount shall be
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 shall be aggregated. The
net appreciation or depreciation shall be directly
credited or debited to a reserve named AFS
Reserve without routing through the Profit &
Loss Account. In case of restructured securities,
appreciation is ignored and cumulative
depreciation is debited from AFS Reserve.
• Securities under AFS shall be subject to
income recognition, asset classification and
provisioning norms as applicable. The AFS-
Reserve shall be reckoned as Common Equity
Tier (CET) 1. The unrealised gains transferred
to AFS-Reserve shall not be 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 shall
be transferred from the AFS Reserve and
recognized in the Profit and Loss Account under
item II Profit on sale of investments under
Schedule 14-Other Income. In the case of equity
instruments designated under AFS at the time
of initial recognition, any gain or loss on sale of
such investments shall not be transferred from
AFS-Reserve to the Profit and Loss Account.
Instead, such gain or loss shall be transferred
from AFS-Reserve to the Capital Reserve.
• We shall 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 shall be deducted from CET 1
capital.
Provided that this clause shall 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 on capital adequacy. The unrealized
gains transferred to AFS-Reserve shall not be
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 shall
be transferred from the AFS Reserve and
recognized in the Profit and Loss Account under
item II Profit on sale of investments under
Schedule 14-Other Income. In the case of equity
instruments designated under AFS at the time
of initial recognition, any gain or loss on sale of
such investments shall not be transferred from
AFS-Reserve to the Profit and Loss Account.
Instead, such gain or loss shall be transferred
from AFS-Reserve to the Capital Reserve.
C. FAIR VALUE THROUGH PROFIT AND LOSS
The securities held in FVTPL shall be fair valued and
the net gain or loss arising on such valuation shall
be directly credited or debited to the Profit and
Loss Account. Securities that are classified under
the HFT sub-category within FVTPL are fair valued
on a daily basis, whereas other securities in FVTPL
are fair valued on a quarterly basis. Any discount
or premium on the acquisition of debt securities
under FVTPL shall be amortised over the remaining
life of the instrument. The amortised amount shall
be 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 FVTPL shall be subject to income
recognition, asset classification and provisioning
norms as applicable.
D. SUBSIDIARIES AND JOINT VENTURES
All investments in subsidiaries, associates and joint
ventures shall be held subsidiaries & Joint Ventures
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 shall be
held at acquisition cost. Any discount or premium
on the acquisition of debt securities of subsidiaries,
associates and joint ventures, meeting SPPI criteria,
shall be amortised over the remaining life of the
instrument. The amortised amount shall be reflected
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 shall be determined as under:
(i) Where the investment is held under HTM, the
carrying value less any permanent impairment
shall be the revised carrying value.
(ii) Where an investment is held under AFS,
the cumulative gains and losses previously
recognised in AFS-Reserve shall be 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 shall be
taken as the carrying value.
(d) When an investee ceases to be a subsidiary,
associate or joint venture, the investments shall be
reclassified to the respective category as under:
(i) Where the investment is reclassified into HTM,
there shall be no change in the carrying value
and consequently no accounting adjustment
per se shall be 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 shall be first recognised in
the Profit and Loss Account and then shall be
appropriated below the line from the Profit and
Loss Account to the 'Capital Reserve Account'.
The amount so appropriated shall be net of
taxes and the amount required to be transferred
to Statutory Reserves.
3.2 Initial Recognition
All investments shall be measured at fair
value on initial recognition. Unless facts and
circumstances suggest that the fair value is
materially different from the acquisition cost,
it shall be presumed that the acquisition cost
is the fair value. 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 shall
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 shall be 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
shall be recognised immediately. Any Day 1
gains arising from Level 3 investments shall 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 shall be
set aside as a liability until the security is listed
or derecognised.
Reclassification between categories:
Banks shall not reclassify investments between
categories (viz. HTM, AFS and FVTPL) without the approval
of their Board of Directors. Further, reclassification shall
also require the prior approval of the Department of
Supervision (DoS), RBI.
The reclassification should be applied prospectively from
reclassification date.
Acquisition cost:
Costs, including brokerage and commission paid at the
time of acquisition of investments and broken period
interest on debt instruments, are recognised in the
Profit and Loss Account and are not included in the cost
of acquisition. Cost of investments is determined based
on the weighted average cost method. Purchase and
sale transactions in securities are accounted on
settlement date.
Short sale:
The Bank undertakes short sale transactions in Central
Government dated securities in accordance with
the RBI guidelines. The short position is categorised
under FVTPL-HFT-PD category and netted off from
investments in government securities. The short
position along with other government securities under
FVTPL-HFT-PD portfolio is marked to market and the
resultant gain / loss, if any, is charged to the Profit and
Loss Account. Profit / Loss on short sale is recognised on
settlement date.
Fair Value of investments:
• Quoted Securities
The fair value for the quoted securities shall be the
prices declared by the Financial Benchmarks India
Private Ltd. (FBIL). For securities whose prices are not
published by FBIL, the fair value ofthe quoted security
shall be based upon quoted price as available from
the trades / quotes on recognised stock exchanges,
reporting platforms or trading platforms authorized
by RBI/SEBI or prices declared by the Fixed Income
Money Market and Derivatives Association of India
(FIMMDA).
• Unquoted SLR Securities
a. Treasury Bills shall be valued at carrying cost.
b. Unquoted Central / State Government
securities shall be valued on the basis of the
prices / YTM rates published by the FBIL.
c. Other approved securities shall be valued
applying the YTM method by marking them
up by 25 basis points above the yields of the
Central Government Securities of equivalent
maturity put out by FBIL.
• Unquoted debentures and bonds
The valuation of other unquoted fixed income
securities (viz. bonds and debentures), and
preference shares, is done with appropriate mark-up,
i.e. applicable FIMMDA published credit spread over
the Yield to Maturity (YTM) rates for Government of
India securities as published by FBIL.
• Unquoted equity shares are valued at
the breakup value, ascertained from the
company's latest balance sheet. The date as
on which the latest balance sheet is drawn up
shall not precede the date of valuation by more
than 18 months. In case the latest audited
balance sheet is not available or is more than
18 months old, the shares shall be valued at
'1 per company.
• Units of mutual funds are valued at the
latest Net Asset Value (NAV) declared by the
mutual fund.
• Treasury bills, commercial papers and
certificate of deposits being discounted
instruments, are valued at carrying cost.
• Investments in Security Receipts (SRs) and
unquoted units of Infrastructure Investment
Trust (InvIT) are valued as per the net asset value
provided by the issuing Asset Reconstruction
Company and InvIT respectively. Government-
guaranteed SRs must be valued periodically
based on the Net Asset Value (NAV) declared
by the ARC, which is determined by recovery
ratings. Unrealized gains from fair valuation
of government-backed SRs must be deducted
from Common Equity Tier 1 (CET 1) capital,
and no dividends can be distributed from
such gains.
• Investments in unquoted units of Alternative
Investment Fund (AIF) classified under
FVTPL category shall be valued at the NAV as
disclosed by the AIF. NAV shall be based on
valuation of its underlying investments by an
independent valuer on half yearly frequency as
mandated by SEBI (AIF) Regulations. Where an
AIF fails to carry out and disclose the valuation
of its investments by an independent valuer
as mandated by SEBI (Alternative Investment
Fund) Regulations, 2012, the value of its
units shall be treated as '1 for the purpose of
these Directions. 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 shall be
treated as '1.
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.
(b) Income from units of mutual funds, alternative
investment funds and other such pooled / collective
investment funds shall be recognized on cash basis.
Accounting for Broken Period Interest:
Banks shall 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) Once an investment is classified as an NPI, it should
be segregated from rest of the portfolio and not
considered for netting valuation gains and losses.
(b) Banks shall not accrue any income on NPIs. Income
shall be recognised only on realisation of the same.
Further, any MTM appreciation in the security shall
be ignored.
(c) 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.
Upon an account being upgraded as per IRACP
norms, any provision previously recognised shall be
reversed and symmetric recognition of MTM gains
and losses can resume.
Investment Fluctuation Reserve
Banks shall 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. Netprofitfor the year,lessmandatory appropriations.
Accounting of Interest:
• For the purpose of Balance Sheet, interest
income (including dividend) shall be 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 shall
be reckoned as 360 days and month as 30
days. For non-approved and other corporate
bonds / debts year shall be reckoned as 365
days and month as actual days.
• Accrued Discount on zero coupon bonds shall
be 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 shall recognize 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 shall be accounted on
accrual basis if the investment continues to
be classified as standard, other wise the same
shall be accounted on cash basis only.
• Discount on Deep Discount (Zero Coupon)
Bonds, shall be accounted pro-rata, on
accrual basis.
• Discount accrued on Treasury Bills / Cash
Management Bills / Discounted instruments
shall be accrued and accounted under interest
income on investments. On sale of such
instruments the income over and above the
accrual shall be booked as profit on sale.
• Income distribution on MF instruments shall
be accounted on cash basis. In respect of
reinvestment plan the dividend accrued shall
be accounted as income on the last day of each
quarter or the redemption date, whichever
is earlier.
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-OIS derivative contracts:
All derivatives are recognized on the balance sheet
and measured at fair value since a derivative contract
represents a contractual right or an obligation. In case of
MIBOR-OIS, principal amount is notional in nature.
Other Relevant Points:
• Amortisation across the investment categories shall
be on a straight-line basis over the residual maturity
of the instrument. Daily premium amortisation and
discount amortisation shall be reflected in expenses
head and income head respectively.
• Bank shall follow Revenue Method of accounting.
The basic price shall be treated as cost of purchase
and debited to the investment account whereas
the broken period interest (accrued interest up
to the purchase date) shall be 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 shall be
treated as revenue expenditure. Brokerage /
underwriting commission received shall be
accounted under income.
• In case of shares which were taken into books at
Re. 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 Re. 1 and do 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) shall
be reflected under Provisions and Contingencies.
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 Cross Currency Interest Rate Swaps and
Forward Rate Agreements. Currency Derivatives dealt by
the Bank are Currency 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 / appreciation
is recognized in the Profit & Loss Account.
b. Derivative contracts undertaken for hedging are:
i. Derivative contracts designated as hedges
are also marked to market along with their
underlying asset.
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:
The change in rates (based on life span)
of depreciation is applied effective from
01-04-2020.
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
non-performing 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 not being 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.
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
of 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 judgment 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.
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