4. SIGNIFICANT ACCOUNTING POLICIES4.1 Revenue Recognition

Revenue is recognised to the extent it is probable that

the economic benefits will flow to the Bank and the

revenue can be reliably measured.

a) Interest/discount on advances/bills is recognised
on accrual basis, except in case of non-performing
assets in which case the income is recognised as
per The Reserve Bank of India (Commercial Bank
- Income Recognition, Asset Classification and
Provisioning) Directions, 2025 ("IRCAP norms”)
issued by RBI.

b) Guarantee commission, commission on letter of
credit are recognised on a straight-line basis over
the period of contract.

c) I ncome on insurance commission are accounted
on right to receive basis.

d) Interest on income tax refund is recognised in the
year of receipt of Assessment Orders.

e) Loan processing fee is accounted for upfront
when it becomes due.

f) Income on instruments discounted by Bank is
recognised over the tenure of the instrument on
a straight line basis.

g) I ncome on Investments (other than dividend on
shares & mutual funds, interest on Pass Through
Certificates and income on non performing
investments) is recognised on accrual basis.

h) Dividend income is recognised as income when
the right to receive payment is established.

i) Fee paid/received for priority sector lending
certificates (PSLC) is recognised in the year of
sale/purchase.

j) All other fees are recognised when due, where the
Bank is reasonably certain of ultimate collection.

k) Credit card related charges / fees are booked on
due basis net off corresponding charges / fees
shared with service provider.

l) Legal expenses incurred on suit filed accounts
are expensed in profit and loss account as per
RBI guidelines. Such amount when recovered is
treated as income.

4.2 Advances

a) The Bank classifies its loans and investments,
into performing and NPAs in accordance with the
applicable regulatory guidelines. Further, NPAs
are classified into sub-standard, doubtful and

loss assets based on the criteria stipulated by
RBI.

b) Interest on non-performing advances is
transferred to an interest suspense account and
not recognised in profit and loss account until
received.

c) The Bank considers an account as restructured,
where for economic or legal reasons relating
to the borrower's financial difficulty, the Bank
grants concessions to the borrower, that the Bank
would not otherwise consider. The moratorium
granted to the borrowers based on RBI guidelines
is not accounted as restructuring of loan. Certain
specified guidelines by RBI requires the asset
classification to be maintained as "Standard”.
Therefore, the borrowers where resolution
plan was implemented under these guidelines
are classified as standard restructured. Non¬
performing and restructured loans are upgraded
to standard as per the extant RBI guidelines
regulations, as applicable.

d) Provision for Non-Performing Advances
comprising Sub-standard, Doubtful and Loss
Assets is made in accordance with the RBI
guidelines, which prescribe minimum provision
levels and encourage banks to make a higher
provision based on sound commercial judgement.
In respect of identified NPAs, provision is
recognised at borrower level based on ageing
of loans. As per the Board Approved policy,
the provisioning done is at rate higher than
the minimum rate prescribed under the RBI
guidelines.

e) In respect of loans reported as fraud to RBI the
entire amount is provided outrightly when such
fraud is detected.

f) The Bank makes provision on restructured loans
subject to minimum requirements as per RBI
guidelines. Provision due to diminution in the
fair value of restructured/rescheduled loans
and advances is made in accordance with the
applicable RBI guidelines. Non-performing and
restructured loans are upgraded to standard as
per the extant RBI guidelines.

g) In terms of RBI guidelines, Non performing
advances are written off in accordance with the
Bank's policy, and any subsequent recoveries
from such written off accounts are recorded
under provisions and contingencies.

h) The Bank maintains general provision on
performing loans and advances in accordance

with the RBI guidelines, including provisions on
loans to borrowers having unhedged foreign
currency exposure. These provisions are included
under in Item No. IV of Schedule 5 - Other
Liabilities & Provisions.

i) The amount of advances shown in the Balance
Sheet is net of provisions against NPA and
interest suspense, ECGC claims received.

j) In the event of substantial erosion in value of
loan and remote possibility of collection, non
performing loans with adequate provisions are
evaluated for technical / prudential write off
based on Bank's policy and the RBI guidelines.
Such write off does not have an impact on the
Bank's legal claim against the borrower. The Bank
may also write off non performing loans on one
time settlement with the borrower or otherwise.
Amounts recovered from borrowers against
debts written off is recognised in the Profit and
Loss Account.

4.3 Country risk

In addition to the provisions required to be held
according to the asset classification status, provisions
are held for individual country exposure (other than for
home country as per the RBI guidelines). The countries
are categorised as per Export Credit Guarantee
Corporation of India Limited (ECGC) guidelines and
provision is made in respect of each country where the
net funded exposure of the Bank in respect of each
country exceed 1% of the total assets.

4.4 Investments

Investments are accounted for in accordance with the
extant RBI guidelines on classification, valuation and
operation of investment portfolio by Banks. The Bank
follows Settlement date method of accounting for
purchase and sale of investments.

A) Initial Recognition:

All investments are recognised at fair value on
initial recognition, primarily the acquisition cost.
Where facts and circumstances suggest that
the fair value is materially different from the
acquisition cost, the difference between the fair
value and the acquisition cost is recognised in
accordance with RBI guidelines.

B) Classification and subsequent measurement:

All investments are classified into ‘Held to
Maturity' (HTM), ‘Available for Sale' (AFS) and
Fair value through Profit and Loss account
(FVTPL) including Held for Trading (HFT) which

is a separate investment sub-category within
FVTPL on the date of purchase as per the extant
RBI guidelines on classification, valuation and
operation of investment portfolio by Banks.
Under each classification, the investments are
further categorised as (a) government securities,
(b) other approved securities, (c) shares, (d)
bonds and debentures and (e) others. Further,
all the investments including debt investments
in subsidiaries, joint ventures and associates are
classified in a separate category.

Held to Maturity (HTM) investments:

Investments are classified as HTM if:

1) 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

2) 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.

HTM securities are carried at cost. Any premium
or discount over the face value of fixed rate and
floating rate/ staggered securities acquired is
amortised over the remaining period to maturity
on a constant yield basis.

Available for sale (AFS) investments:

Investments are classified as AFS if:

1) the security is acquired with an objective that
is achieved by both collecting contractual
cash flows and selling securities; and

2) the contractual terms of the security meet
the ‘SPPI criterion'.

Further, certain equity investments are also
designated as AFS investments, where on initial
recognition, the Bank has made an irrevocable
election to classify such equity investments as
AFS investments.

Investments classified as AFS are fair valued
periodically as per RBI guidelines. Any premium or
discount over/below the face value of securities
acquired is amortised over the remaining period
to maturity on a constant yield basis. The
unrealised gain or loss across all performing AFS
investments (adjusted for effect of taxes, if any)
is recognised in "AFS reserves”.

a mark-up (reflecting associated credit
risk) over the YTM rates for government
securities published by FIMMDA.

4) Treasury bills, commercial papers and
certificate of deposits, being discounted
instruments, are valued at carrying cost.

5) The units of mutual funds are valued at
the latest repurchase price/net asset value
declared by the mutual fund.

6) Unquoted equity shares are valued at the
break-up value, if the latest balance sheet is
available, or at ' 1, as per RBI guidelines.

7) Investments in units of Venture Capital
Funds (VCFs)/Alternative Investment Fund
(AIF) are categorised under FVTPL and are
valued at the net asset value (NAV) declared
by the VCF/AIF respectively. If the latest
NAV is not available continuously for more
than 18 months, the units of VCF/AIF are
valued at ' 1, as per RBI guidelines.

8) The units of Infrastructure Investment Trust
(InvIT) are valued as per the quoted price
available on the exchange.

9) At the end of each reporting period,
security receipts issued by the asset
reconstruction companies are valued in
accordance with the guidelines applicable
to such instruments, prescribed by RBI from
time to time. Accordingly, in cases where the
cash flows from security receipts issued
by the asset reconstruction companies
are limited to the actual realisation of the
financial assets assigned to the instruments
in the concerned scheme, the Bank reckons
the net asset value obtained from the asset
reconstruction company from time to time,
for valuation of such investments at each
reporting period end.

Impairment and provisioning:

Impairment of non-performing investments
is made as per requirements of RBI.

C) Disposal of Investments:

Profit or loss on sale of investments, except equity
instruments classified under AFS, is recognised
in the Profit and Loss Account. The cost of
investments is determined using the Weighted
Average method. In case of equity instruments
under AFS, the net realised gain or loss is
recognised in the AFS Reserve. Further, gains
on sale of investments from the HTM category,

investments in subsidiaries, joint ventures and
associates, and AFS equity instruments, net of
applicable taxes and statutory reserve transfer,
are appropriated to the Capital Reserve, in
accordance with RBI guidelines.

Short sale: The Bank undertakes short sale
transactions in dated central government
securities in accordance with RBI guidelines.
The short positions are categorised under HFT
category and are marked to market. The mark-
to market gain/loss is charged to profit and loss
account as per RBI guidelines.

Repurchase transactions: Market repurchase,
reverse repurchase and transactions with
RBI under Liquidity Adjustment Facility (LAF)/
Marginal Standing Facility (MSF) are accounted
for as borrowing and lending transactions in
accordance with the extant RBI guidelines.

4.5 Transactions Involving Foreign Exchange and

Derivative transactions.

a) Monetary foreign currency assets and liabilities
are translated at closing exchange rates notified
by FEDAI relevant to the balance sheet date. The
resulting gain or loss on revaluation are included
in the Profit and Loss Account in accordance
with the RBI / FEDAI guidelines.

Foreign exchange forward contracts not intended
for trading that are entered into to establish
the amount of reporting currency required or
available at the settlement date of transactions,
which are outstanding at the Balance Sheet date
are effectively valued at closing spot rate. The
premium or discount arising at the inception of
such a forward exchange contract is amortised
as expense or income over the life of the contract.

b) Foreign currency income and expenditure items
are translated at the exchange rates prevailing on
the date of the transaction.

c) Outstanding foreign exchange forward contracts
are revalued at the rates applicable on the closing
date as advised by FEDAI. The resultant gains
or losses are recognised in the Profit and Loss
Account.

d) Contingent Liabilities on guarantees, letters
of credit, acceptances and endorsements are
disclosed at closing rates of exchange notified by
FEDAI.

Derivative transactions

The Bank recognises all derivative contracts at
fair value except for contracts that are covered

within the scope of AS11, on the date on which
the derivative contracts are entered into and are
re-measured at fair value as at the Balance sheet
or reporting dates. Derivatives are classified
as assets when the fair value is positive or as
liabilities when the fair value is negative. Changes
in the fair value of derivatives are recognised in
the Profit and Loss Account.

4.6 Fixed Assets and Depreciation

a) Fixed assets have been stated at cost less
accumulated depreciation and amortisation and
adjusted for impairment, if any. Cost includes
cost of purchase inclusive of freight, duties,
incidental expenses and all expenditure like site
preparation, installation costs and professional
fees incurred on the asset before it is ready to
put to use. Subsequent expenditure incurred
on assets put to use is capitalised only when
it increases the future benefit / functioning
capability from / of such assets.

b) Land and Premises are stated at revalued amount.
Appreciation on revaluation of land and premises
is credited to Revaluation Reserve. The additional
depreciation on the revalued portion of premises
is charged to Profit and Loss Account and an
equivalent amount is withdrawn from Revaluation
Reserve and credited to General Reserve.
Valuations are obtained from two independent
valuers, at least once in every 3 years.

c) Depreciation on fixed assets is provided over
their estimated useful lives using the Straight¬
Line method on pro rata basis, and premises are
depreciated using the Written Down Value basis,
except land. The Management believes that
depreciation rates currently used, fairly reflect
its estimate of the useful lives and residual values
of fixed assets based on the historical experience
of the Bank, though these rates in certain cases
are different from those prescribed under
Schedule II of the Companies Act, 2013.

The estimated useful lives of key fixed assets are
given below:

Note:

1) Excludes software, which are procured
based on licensing arrangements and
depreciated over the period of license.

2) Core banking solution and related software
is amortised over a period 8 years.

Capital work in progress

Capital work-in-progress includes cost of fixed
assets that are not ready for their intended use.

4.7 Impairment of Assets

The carrying amount of the assets at each Balance
Sheet date is reviewed for impairment. If any indication
of impairment based on internal / external factors
exists, the recoverable amount of such assets is
estimated and impairment is recognised wherever the
carrying amount of an asset exceeds its recoverable
amount. The recoverable amount is the greater of the
net selling price and its value in use, which is arrived at
by discounting the future cash flows to their present
value, based on an appropriate discounting factor.
Impairment losses, if any, on Fixed Assets (including
revalued assets) are recognised in accordance with
the Accounting Standard 28 ‘Impairment of Assets'
specified under Section 133 of the Companies Act,
2013 read with the Companies (Accounts) Rules, 2014
and the Companies (Accounting Standards) Rules,
2021 and charged to Profit and Loss Account.

4.8 Non-Banking Assets

The Non-Banking asset are recognised based on the
cost of acquisition. In the case of diminution in value,
if any, is provided for.

4.9 Employee Benefits

a) Short Term Employee Benefits

The undiscounted amount 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. These benefits include performance
incentives.

b) Post Employment Benefit

(i) Defined Contribution Plan - Provident Fund and
New Pension Scheme (Contributory) are the
defined contribution plans of the Bank. The
contribution for Provident Fund is made by the
Bank to The Catholic Syrian Bank Ltd Employees
Provident Fund, administered by the trustees.

(ii) Defined Benefit Plans - Liabilities towards
Gratuity and Pension are defined benefit

obligations and are provided for on the basis
of actuarial valuation made at the end of each
financial year. Projected Unit Credit Method is
used by the actuary for valuing the obligations in
case of Pension and Gratuity. Discount rate used
to arrive at the present value of estimated future
cash flows is arrived at by reference to market
yields on balance sheet date on government
bonds of term consistent with estimated term
of the obligations as per paragraph 78 of AS 15
Employee Benefits. Actuarial Gains/Losses are
immediately taken to the profit and loss account
and are not deferred.

Brief description of the defined benefit plans:

(i) Pension - Pension is payable, as per CSB Bank
Limited Employees' Pension Regulation 1993 and
as modified in 1995, to the employees who have
specifically opted for the same. The contribution
is made by the Bank to The Catholic Syrian Bank
Ltd Employees Pension Fund, administered by
the trustees. For becoming eligible for pension,
the employee should have served the Bank for
a minimum period of 10 years in the case of
retirement on superannuation and 20 years in
other cases. At the time of retirement or death of
the pension eligible employee, the pension trust
purchases annuity from insurance company, out
of the contributions made by the Bank.

(ii) Gratuity - As per the Gratuity Act 1972, Gratuity
is payable to all employees on termination
of employment due to retirement, death or
resignation, provided that the employee has
continuously served the Bank for a minimum
period of 5 years. The contribution is made by the
Bank to The Catholic Syrian Bank Ltd Employees
Gratuity Fund, administered by the trustees.

c) Long term compensated absences viz:

a. Privilege Leave

b. Leave fare concession

c. Sick Leave

are based on actuarial valuation at the end of the

financial year.

d) Long Term Employee Benefits

The amount of long-term employee benefits which
are expected to be paid in future in exchange
for the services rendered by employees are
recognised during the period when the employee
renders the service. These benefits include long
term cash reward plan.

e) Employee share based payments:
a. Equity-settled scheme:

The Bank has formulated a stock option scheme
called "CSB Employees Stock Option Scheme
2019” ("ESOS 2019” or "Scheme”) in accordance
with the Securities and Exchange Board of India
(Share Based Employee Benefits) Regulations,
2014 which was subsequently repealed with the
Securities and Exchange Board of India (Share
Based Employee Benefits and Sweat Equity)
Regulations, 2021. The scheme is intended to
enable the employees, present and future, to get
a share in the value that they help to create for
the organisation over a period of time, aligning
the objectives of an individual with those of
the Bank as well as to attract and retain critical
senior talents with Employee Stock Options
as a compensation tool. The options granted
to employees vest in a graded manner as per
vesting schedule even beyond retirement /early
retirement date and these may be exercised by
option grantee within a specified period, as per
the terms of grant; otherwise options stand
lapsed as per the scheme.

The accounting for shares granted under
Employee Stock Option Scheme is done as per the
ICAI Guidance note on Accounting for Employee
Share based payments and clarification dated
August 30, 2021, issued by Reserve Bank of India
on Guidelines on Compensation of Whole Time
Directors/ Chief Executive Officers/ Material
Risk Takers and Control Function staff, dated
November 04, 2019 (RBI guidelines). Accordingly,
for options granted up to and including March
31, 2021, Bank has applied the intrinsic value
method to arrive at the compensation cost of
stock options granted to the employees. The
intrinsic value is the amount by which the market
price exceeds the exercise price of the options.
The market price for this purpose is the latest
available closing price, prior to the date of grant,
on the stock exchange on which the shares of
the Bank are listed. If the shares are listed on
more than one stock exchange, then the stock
exchange where there is highest trading volume
on the said date is considered. For options
granted after March 31,2021 fair value method
using Black-Scholes model has been applied to
arrive at the compensation cost of stock options
granted to the employees, in compliance with the
RBI guidelines. Compensation cost so determined
is recognised as expense beginning with the

accounting period for which approval has been
granted.

In case the vested stock options expire
unexercised, the balance in stock options
outstanding is transferred to the general
reserve. In case the unvested stock options get
lapsed/cancelled, the balance in stock option
outstanding account is transferred to the Profit
and Loss Account.
b. Cash-settled scheme:

Similar to Equity settled options, SARs granted
after March 31, 2021 are measured on fair value
basis. Fair value is amortised on a straight-line
basis over the vesting period with a recognition
of corresponding liability. This liability is
remeasured at each balance sheet date up to and
including the vesting date with changes in fair
value recognised in the profit and loss account
in ‘Payments to and provision for employees'.
The SARs that do not vest because of failure
to satisfy vesting conditions are reversed by a
credit to employee compensation expense, equal
to the amortised cost in respect of the lapsed
portion.

4.10 Segment Information

The disclosure relating to segment information is in
accordance with AS-17, Segment Reporting and as per
guidelines issued by RBI. The business segments of
the Bank are divided under a) Treasury b) Corporate
and wholesale banking c) Retail Banking and d)
Other Banking Business. Business segments have
been identified and reported considering the target
customer segment, the nature of products, internal
business reporting system, Segment reporting policy
approved by the Board, the guidelines prescribed by
the RBI.

4.11 Lease transactions

Operating Lease

Leases where the lessor effectively retains
substantially all the risks and benefits of ownership
over the lease term are classified as operating lease.
Lease payments for assets taken on operating lease
are recognised as an expense in the Profit and Loss
Account as per the lease terms. Amount due under
the operating leases, including cost escalation, are
charged on a straight line method over the lease
term in the Profit and Loss account. Initial direct
cost incurred specifically for operating leases are
recognised as expense in the Profit and Loss Account
in the year in which they are incurred.

4.12 Earnings Per Share

The Bank reports basic and diluted Earnings per equity
share in accordance with the Accounting Standard 20
on "Earnings per share specified under Section 133
of the Companies Act, 2013 read with Rule 7 of the
Companies (Accounts) Rules, 2014 and the Companies
(Accounting Standards) Rules, 2021. Basic Earnings
per share (EPS) reported is computed by dividing net
profit after tax by the weighted average number of
equity shares outstanding for the period.

Diluted earnings per share reflect the potential
dilution that could occur if securities or other
contracts to issue equity shares were exercised or
converted during the year. Diluted earnings per equity
share have been computed using the weighted average
number of equity shares and dilutive potential equity
shares outstanding during the period except where
the results are anti-dilutive.

4.13 Taxes on Income

Income tax expense is the aggregate amount of
current tax and deferred tax charge. Current year
taxes are determined in accordance with the Income
Tax Act, 1961 and Deferred tax expense in accordance
with Accounting Standard 22 - Accounting for Taxes
on Income. Deferred income taxes reflect the impact
of current year timing differences between taxable
income and accounting income for the year and
reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and
the tax laws enacted or substantively enacted at the
Balance Sheet date. Deferred tax assets and deferred
tax liabilities are offset, if a legally enforceable right
exists to set off current tax assets against current tax
liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same
governing taxation laws.

Deferred tax liabilities are recognised for all timing
differences. Deferred tax assets are recognised for
timing differences of items other than unabsorbed
depreciation and carry forward losses only to the
extent that reasonable certainty exists that sufficient
future taxable income will be available against which
these can be realized. However, if there are unabsorbed
depreciation and carry forward of losses and items
relating to capital losses, deferred tax assets are
recognised only if there is virtual certainty supported
by convincing evidence that there will be sufficient
future taxable income available to realize the assets.
The impact of changes in the deferred tax assets and
liabilities is recognised in the Profit and Loss Account.
Deferred tax assets are recognised and reassessed

at each reporting date, based upon management's
judgement as to whether realisation is considered as
reasonably certain.