D. Significant accounting policies:

1. Cash and Cash equivalents:

Cash and cash equivalents include cash in hand
and ATMs, balances with the Reserve Bank of
India, balances with other banks and money at call
and short notice.

2. Revenue recognition:

2.1 General

I ncome/ expenditure is generally accounted for on
accrual basis except for income accounted on cash
basis as per regulatory provisions.

2.2 Income from investments

a) The Profit or loss on sale of investments is
recognised in the Profit and Loss Account.
In accordance with the guidelines issued by
the Reserve Bank of India, profit on sale of
investments in the Held to Maturity (HTM)
category is appropriated (Net of applicable
taxes and amount required to be transferred to
“Statutory Reserve Account”) to the “Capital
Reserve Account”.

b) Dividend income is recognized when right to
receive the dividend is established.

c) Upside on security receipts is recognised on
realisation as ‘Other income'.

2.3. Sale of financial assets

Financial Assets sold are recognized as under:

a) The sale of NPA is accounted as per guidelines
prescribed by RBI. When the Bank sells its
financial assets to Securitisation Company
(SC)/ Reconstruction Company (RC), the
same is removed from the books.

b) In case the sale to SC/ARC is at a price lower
than the Net Book Value (NBV) the shortfall is
charged to the Profit and Loss Account in the
year of sale.

c) I n case the sale is at a price higher than the
NBV on cash basis, the surplus is taken to the
credit of Profit and Loss Account.

2.4. Fee based income

Commission on letters of credit, bank guarantee
and deferred payment guarantee are recognised
on accrual basis proportionately over the period. All
other commission and fee income are recognised
on their realisation.

2.5 Others

a) Interest on income tax refund is accounted
on receipt of refund order(s)/ intimation from
Income Tax Department and acceptance by
the Bank.

b) Provision for interest payable on overdue
deposits is made as per Reserve Bank of India
guidelines.

3. Advances:

3.1 Based on the guidelines/ directives issued by
the RBI, loans and advances are classified as
performing and non-performing, as follows:

a) The term loan is classified as a non-performing
asset, if interest and/ or instalment of principal
remains overdue for a period of more than 90
days.

b) An overdraft or cash credit is classified as a
non-performing asset, if, the account remains
“out of order”, i.e. if the outstanding balance
exceeds the sanctioned limit/ drawing power
continuously for a period of 90 days, or if there
are no credits continuously for 90 days, or if the
credits are not adequate to cover the interest
debited during the previous 90 days period.

c) The bills purchased/ discounted are classified
as non-performing asset if the bill remains
overdue for a period of more than 90 days.

d) The agricultural advances are classified as a
non-performing if, (i) for short duration crops,
where the instalment of principal or interest
remains overdue for two crop seasons; and (ii)
for long duration crops, where the principal or
interest remains overdue for one crop season.

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

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

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

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

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

Sub-standard assets:

i. A general provision of 15% on the total outstanding.

ii. Additional provision of 10% for exposures which are
unsecured ab-initio (i.e. where realisable value of
security is not more than 10 percent ab-initio).

iii. Unsecured Exposure in respect of infrastructure
advances where certain safeguards such as escrow
accounts are available - 20%.

Advance covered by guarantees under any existing
or future schemes launched by Credit Guarantee
Fund Trust for Micro and Small Enterprises
(CGTMSE), Credit Risk Guarantee Fund Trust for
Low Income Housing (CRGFTLIH) and National
Credit Guarantee Trustee Company Ltd (NCGTC).

In case the advance covered by any existing or
future schemes/guarantees launched by CGTMSE,
CRGFTLIH and NCGTC becomes nonperforming,
no provision need be made towards the guaranteed
portion. The amount outstanding, in excess of the
guaranteed portion, should be provided for as
per the extant guidelines on provisioning for non¬
performing assets.

3.4 Advances are shown net of provisions (in case of
NPA), Unrealised Interest, amount recovered from
borrowers held in Sundries and claims received
from CGTSI/ ECGC, etc.

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

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

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

3.8 Amounts recovered against debts written off in
earlier years are recognised as revenue in the year
of recovery.

3.9 Additional provisions higher than regulatory norms
are made in specific assets in view of the identified
weakness and/ or prevailing economic situation.

3.10Partial recoveries in non-performing account
(including partially written off accounts) are
appropriated in the following order:

i. Principal Overdue / Irregularities

ii. Unrealised interest

iii. Partial Written Off principal

iv. Uncharged Interest

v. Unrealised charges

In case of suit filed/SARFAESI/ recalled accounts,
recovery is appropriated in the following order:

i. Ledger outstanding balance

ii. Unrealised interest

iii. Partial Written Off principal

iv. Uncharged Interest

v. Unrealised charges

However, where any borrower account is required
to be classified as non-performing from an earlier
date, any recovery till the account was classified as
Standard is first credited to Interest on Loans and
Advances

4. Provision for country exposure:

In addition to the specific provisions held according
to the asset classification status, provisions are also
made for individual country exposures (other than
the home country). Countries are categorised into
seven risk categories, namely, insignificant, low,
moderate, high, very high, restricted and off-credit
and provisioning made as per extant RBI guidelines.
If the country exposure (net) of the Bank in respect
of each country does not exceed 1% of the total
funded assets, no provision is maintained on such
country exposures.

5. Investments:

Investments are accounted for in accordance with
the extant guidelines Reserve Bank of India Master
Direction - Classification, Valuation and Operation of
Investment Portfolio of Commercial Banks (Directions),
2023 vide RBI RBI/DOR/2023-24/104 DOR.
MRG.36/21.04.141/2023-24 dated 12.09.2023

5.1 Classification:

In accordance with the guidelines issued by the
Reserve Bank of India, Investment portfolio is

to be classified (except investments in their own
subsidiaries, joint ventures and associates) under
three categories, viz., Held to Maturity (HTM),
Available for Sale (AFS) and Fair Value through Profit
and Loss (FVTPL). Held for Trading (HFT) shall be
a separate investment sub- category within FVTPL.
Investments in subsidiaries, associates and joint
ventures shall be held in a distinct category i.e..
SAJV separate from the other investment categories.

For disclosure in the Balance Sheet in Schedule 8,
investments are classified as Investments in India
and outside India.

Under each category, the investments in India are
further classified as

a) Government Securities

b) Other Approved Securities

c) Shares

d) Debentures and Bonds

e) Subsidiaries, joint ventures/associates and
sponsored institutions; and

f) Others (Commercial Papers and units of
Mutual Funds etc.)

The investments outside India are further classified
under 3 categories

a) Government Securities

b) Subsidiaries and Joint Ventures/Associates

c) Other Investments

5.2 Basis of Classification:

Classification of an investment is done at the time of
purchase into the following categories:

a) Held to Maturity: Investments that the Bank
intends to hold till maturity are classified as
“Held to Maturity (HTM)” which meets Solely
Payment of Principal and Interest (SPPI) criteria.

b) Available for Sale: Investments that the Bank
intends to hold till maturity & sale which meets
SPPI Criteria.

c) FVTPL: Securities that do not qualify for
inclusion in HTM or AFS shall be classified
under FVTPL. HFT shall be separate sub¬
category within FVTPL.

d) Investments in subsidiaries, associates and
joint ventures shall be held sui generis i.e.,
in a distinct category for such investments

(viz. HTM, AFS and FVTPL).

e) Only those financial instruments are included
in HFT where there is no legal impediment
against selling or fully hedging it.

5.3 Valuation:

The transactions in all securities are recorded on

a Settlement Date and cost is determined on the

weighted average cost method.

A. Incentive, front-end fees etc., received on
purchase of securities are reduced from the
cost of investments.

B. Expenses such as brokerage, fees, commission
or taxes incurred at the time of acquisition of
securities are charged to the Profit and Loss
Account as revenue expenses.

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

All the securities have been valued as per
extant RBI guidelines and also as per the
prices / quotes declared by FIMMDA / FIBIL
and stock exchanges.

a) Valuation of investments classified as
Held to Maturity:

The investments classified under this category
are carried at acquisition cost. The difference
of acquisition cost / book value over the
face value is amortised over the remaining
period of maturity. Such amortisation of
premium/discount is accounted as expense/
income. However, they shall be subject to
income recognition, asset classification and
provisioning norms.

b) Investments in Subsidiaries, Joint
ventures and Associates (SAJV)

All investments (i.e., including debt and equity)
in subsidiaries, associates and joint ventures
shall be held at acquisition cost. A provision is
made for diminution, other than temporary in
nature, for each investment individually.

c) Valuation of investments classified as
Available for sale:

Investments classified as Available for Sale
are individually revalued at market price or

fair value determined as per the regulatory
guidelines. The difference of acquisition cost
/ book value over the face value is amortised
over the remaining period of maturity.
Such amortisation of premium/discount is
accounted as expense/income. 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 is aggregated. The net appreciation
or depreciation is credited or debited to AFS-
Reserve without routing through the Profit &
Loss Account. However, they shall be subject
to income recognition, asset classification and
provisioning norms.

d) Valuation of investments classified as
FVTPL (HFT & NON HFT):

Investments classified as FVTPL (HFT & NON
HFT) are individually revalued at market price
or fair value determined as per the regulatory
guidelines. The net Gain or loss arising on
valuation is directly credited/debited to the
Profit and Loss Account. For securities which
meet SPPI criterion, the difference of acquisition
cost / book value over the face value is
amortised over the remaining period of maturity.
Such amortisation of premium/discount is
accounted as expense/income. However, they
shall be subject to income recognition, asset
classification and provisioning norms. Fair
Valuation of all HFT instruments is done on daily
basis any valuation change is recognised in
profit and loss account.

e) Valuation in case of sale of NPA (financial
asset) to Asset Reconstruction Company
(ARC) against issue of Govt Guaranteed
Security Receipts (SRs):

i) If a loan is transferred to an ARC for a
value higher than the book value (NBV),
the excess provision can be reversed to
the Profit and Loss Account in the year of
transfer if the sale consideration comprises
only of cash and SRs guaranteed by Govt
of India.

ii) SRs shall be valued periodically by
reckoning the Net Asset value (NAV)
declared by the ARC based on the recovery

ratings received. SRs Outstanding after
the final settlement of the government
guarantee or the expiry of the guarantee
period whichever is earlier, shall be valued
at one Rupee ('1).

f) Valuation in case of sale of NPA (financial

asset) to Asset Reconstruction Company

(ARC) against issue of Non Govt

Guaranteed Security Receipts (SR):

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

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

iii) Investments by lenders in SRs / PTCs /
other securities issued by ARCs shall be
valued periodically by reckoning the Net
Asset Value (NAV) declared by the ARC
based on the recovery ratings received
for such instruments. Provided that when
transferors invest in the SRs/PTCs issued
by ARCs in respect of the stressed loans
transferred by them to the ARC, the
transferors shall carry the investment
in their books on an ongoing basis, until
its transfer or realization, at lower of the
redemption value of SRs arrived based
on the NAV as above, and the NBV of the
transferred stressed loan at the time of
transfer.

participants. Repurchase transaction represents
borrowing by selling the securities with an agreement
to repurchase the securities. Reverse repurchase
transactions on the other hand represent lending
funds by purchasing the securities.

a) The securities sold and purchased under Repo/
Reverse Repo (other than LAF) are accounted
as overnight Tri-party Repo (TREPS) dealing
and settlement.

b) However, securities are transferred as in
the case of normal outright sale/ purchase
transactions and such movement of securities
is reflected using the Repo/ Reverse Repo
Accounts and contra entries.

c) The above entries are reversed on the date of
maturity. Balance in Repo Account is classified
under Schedule 4 (Borrowings) and balance
in Reverse Repo Account is classified under
Schedule 7 (Balance with Banks and Money at
call & short notice).

d) Interest expended/ earned on Securities
purchased/ sold under LAF with RBI is
accounted for as expenditure/ revenue.

6. Derivatives:

The Bank enters into derivative contracts, such
as interest rate swaps, currency swaps and cross
currency swaps in order to hedge on balance sheet/
off-balance sheet assets and liabilities or for trading
purposes.

6.1 Derivatives used for hedging are accounted
as under:

a) In cases where the underlying assets/ liabilities
are marked to market, resultant gain/loss is
recognised in the Profit and Loss Account.

b) Derivative contracts classified as hedge are
recorded on accrual basis. Hedge contracts
are not marked to market unless the underlying
assets/ liabilities are also marked to market.

c) Gain or losses on the termination of Swaps are
recognised over the shorter of the remaining
contractual life of the swaps or the remaining
life of the assets/ liabilities.

6.2 Derivatives used for trading are accounted as
under:

a) Currency futures and interest rate futures
are marked to market on daily basis as per
exchange guidelines of MCX-SX, NSE and BSE.

b) Mark to market profit or loss is accounted by
credit/ debit to the margin account on daily
basis and the same is accounted in the Bank's
profit and loss account on final settlement.

c) Trading swaps are marked to market at
frequent intervals. Any mark to market losses
are booked and gains, if any, are ignored on
net basis.

d) Gains or losses on termination of swaps are
recorded immediately as income/ expense
under the above head.

7. Transactions involving foreign exchange:

7.1 Foreign currency transactions are recorded on initial
recognition in the reporting currency by applying
to the foreign currency amount the exchange rate
between the reporting currency and the foreign
currency.

7.2 Foreign currency monetary items are reported
using the Foreign Exchange Dealers Association
of India (“FEDAI”) closing (spot/ forward) rates and
the resultant profit or loss is recognised in the Profit
and Loss Account.

Foreign currency non-monetary items, which are
carried at historical cost, are reported using the
exchange rate on the date of the transaction.

Contingent liabilities denominated in foreign
currency are reported using the FEDAI closing spot
rates.

7.3 Outstanding foreign exchange spot and forward
contracts are revalued at the exchange rates
notified by FEDAI for specified maturities, and the
resulting Profit or Loss is recognised in the Profit
and Loss Account. Foreign exchange forward
contracts which are not intended for trading and
are outstanding at the balance sheet date, are
valued at the closing spot rate.

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

7.5 Gains/ Losses on account of changes in exchange
rates of open position in currency futures trades are
settled with the exchange clearing house on daily
basis and such gains/losses are recognised in the
profit and loss account.

7.6 Accounting procedure in respect to the Forex
Derivatives of the bank adheres to the RBI Master

Direction No. RBI/DOR/2023-24/104 DOR.
MRG.36/21.04.141/2023-24 dated September
12, 2023 and provisions of ICAI guidelines on
accounting for Derivatives contract (revised 2021).

8 Investment Fluctuation Reserve:

Investment Fluctuation Reserve is maintained on
continuing basis i.e. at least two percent of the AFS
and FVTPL (including HFT) portfolio.

9. Fixed assets and depreciation:

9.1 Fixed Assets are carried at cost less accumulated
depreciation/ amortisation.

Cost includes cost of purchase and all expenditure
such as site preparation, installation costs, taxes
and professional fees incurred on the asset before
it is put to use.

9.2 Subsequent expenditure(s) incurred on the assets
put to use are capitalised only when it increases the
future benefits from such assets or their functioning
capability.

9.3 Fixed Assets are depreciated under ‘Written Down
Value Method' at the following rates (other than
computers which are depreciated on Straight Line
Method):

a) Premises at varying rates based on estimated
life

b) Furniture, Lifts, Safe Vaults 10%

c) Vehicles, Plant & Machinery 20%

d) Air conditioners, Coolers, Typewriters etc. 15%.

e) Computers including Systems Software 33.33%

(Application Software is charged to the
Revenue during the year of acquisition.)

9.4 Land acquired on lease for over 99 years is treated
as freehold land and those for 99 years or less is
treated as leasehold land. Cost of leasehold land is
amortized over the period of lease.

9.5 In case of assets, which have been revalued, the
depreciation/ amortization is provided on the
revalued amount and is charged to the Profit and
Loss Account. Amount of incremental depreciation/
amortization attributable to the revalued amount is
transferred from ‘Revaluation Reserve' and credited
to ‘Revenue and Other Reserves'.

9.6 Depreciation on additions to assets, made upto
30^th September is provided for the full year and on
additions made thereafter, is provided for the half
year.

No depreciation is provided on assets sold before
30^th September and depreciation is provided for the
half year on assets sold after 30^th September.

9.7 The Bank considers only immovable assets for
revaluation. Properties acquired during the last
three years are not revalued. Valuation of the
revalued assets is done every three years thereafter.

9.8 The revalued asset is depreciated over the balance
useful life of the asset as assessed at the time of
revaluation.

10 Leases:

Leases where risks and rewards of ownership are
retained by lessor are classified as Operating Lease
as per AS-19 (Leases). Lease payments on such
lease are recognised in Profit and Loss account
on a straight-line basis over the lease term in
accordance with AS 19.

11 Impairment of Assets:

Fixed Assets are reviewed for impairment whenever
events or changes in circumstances warrant
that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying
amount of an asset to future net discounted cash
flows expected to be generated by the asset. If
such assets are considered to be impaired, the
impairment to be recognised is measured by the
amount by which the carrying amount of the asset
exceeds the fair value of the asset.

12. Employee Benefits:

12.1Employee benefits are accrued in the year in
which services are rendered by the employees.

12.2 Short Term Employee Benefits:

The undiscounted amounts of short-term employee
benefits, which are expected to be paid in exchange
for the services rendered by employees, are
recognised during the period when the employee
renders the service.

12.3 Defined benefit plans:

The Bank operates Gratuity and Pension schemes
which are defined benefit plans.

a) The Bank provides for gratuity to all eligible
employees. The benefit is in the form of
lump sum payments to vested employees on
retirement, or on death while in employment,

or on termination of employment, for an
amount equivalent to 15 days basic salary
payable for each completed year of service,
subject to the cap prescribed by the Statutory
Authorities. Vesting occurs upon completion
of five years of service. The Bank makes
periodic contributions to a fund administered
by Trustees based on an independent external
actuarial valuation.

b) The Bank provides for pension to all eligible
employees. The benefit is in the form of monthly
payments as per rules to vested employees on
retirement or on death while in employment, or
on termination of employment. Vesting occurs
at different stages as per rules. The pension
liability is reckoned based on an independent
actuarial valuation carried out annually and
Bank makes such additional contributions
periodically to the Fund as may be required
to secure payment of the benefits under the
pension regulations.

c) The cost of providing defined benefits is
determined using the projected unit credit
method, with actuarial valuations being carried
out at each balance sheet date. Actuarial gains/
losses are immediately recognised in the Profit
and Loss Account and are not deferred.

d) When the benefits of the plan are changed, or
when a plan is curtailed or settlement occurs,
the portion of the changed benefit related to
past service by employees, or the gain or loss
on curtailment or settlement, is recognized
immediately in the profit or loss account when
the plan amendment or when a curtailment or
settlement occurs.

Liability for long term employee benefit under
defined benefit scheme such as contribution to
gratuity, pension fund and leave encashment
are determined at close of the year at present
value of the amount payable using actuarial
valuation technique.

e) Actuarial gain/losses are recognised in the
year when they arise.

12.4 Defined Contribution Plan:

Provident fund is a defined contribution as the bank

pays fixed contribution at predetermined rates.

The obligation of the bank is limited to such fixed

contribution. The contributions are charged to

Profit and Loss account.