1.4 Significant Accounting Policies
I. Revenue Recognition
Revenue is recognized to the extent it is probable that the economic benefits will flow to the Bank and revenue can be reliably
measured under AS-9 “Revenue Recognition as prescribed under section 133 of the Companies Act, 2013 and as specified by
RBI guidelines.
A. Income on Advances
o Interest income from loans and advances, are recognized over the period of the loans and advances on accrual basis.
o I nterest accrued and other dues in the nature of non-interest income relating to Advances/ Investments, classified as
Non-performing Advances/ Investments under RBI guidelines, are recognized only on realization.
B. Income on Investments
o Interest income from Investments is recognized on accrual basis.
o Profit or loss on revaluation of Fair Value through Profit and Loss (FVTPL) investments is recognized in the Profit and Loss
Account.
o Broken period interest received and paid should be treated as item of Income and expenditure under 'Income on
Investments' in Schedule 13 of Profit and Loss account.
o The discount or premium on acquisition of debt securities are amortized over the remaining life of the instrument and
such amortized amount in case of HTM, AFS and FVTPL investments should be reflected in the financial statements
under item II 'Income on Investments' of Schedule 13: 'Interest Earned' with a contra in Schedule 8: 'Investments'.
o The net appreciation or depreciation in case of AFS investments shall be credited or debited to a reserve named 'AFS-
Reserve' without routing through the Profit and Loss account.
o Upon sale or maturity of a debt instrument in AFS category, the accumulated gain/ loss for that security in the AFS-
Reserve should be transferred from AFS-Reserve and recognized in the Profit and Loss account under item II Profit on
sale of investments under Schedule 14 - Other Income.
o Sale of investments in HTM should be recognized in the Profit and Loss Account under item II of Schedule 14:'Other
Income'. This shall be appropriated below the line from the Profit and Loss account to the 'Capital Reserve Account'.
o Upon sale of securities in HFT under FVTPL, profit /loss should be credited / debited to Profit and Loss account.
o Dividend on Equity Shares, Preference Shares and on Mutual Funds is recognized as Income when the right to receive
the dividend is established.
C. Other Income
o Interest on income tax refund is recognized in the year of receipt of Assessment Orders
o Commission on ATM interchange fees are recognized as they accrue.
o Upfront fees on restructured accounts are apportioned over the restructured period.
o Profit earned from the sale of gold/silver bullion, if any, (i.e., the difference between the sale price and the purchase
price) is included under “Other Income”.
o Insurance claims, Commission from distribution of Mutual Fund products and Commission from Depository services and
on government business are accounted on receipt basis.
o The claims from government departments on account of subsidy/ subvention etc., are accounted on receipt basis or
when the intimation for claim is received.
o The recoveries made from NPA accounts are appropriated based on the order of demand applicable to borrowers'
accounts as per Recovery policy,
o Locker Rent is accounted on receipt basis without spreading it over the remaining lease period. However, in respect of
advance remittances by the customers, for more than one year, one year locker rent is accounted on receipt basis
and balance will be credited to income only when it became due.
o Commission income on issuance of Bank Guarantee/ Letter of Credit and Discount on Bill Discounted is collected
upfront and is recognized over the period of the underlying liability,
o Commission on distribution of Insurance products is accounted on accrual basis.
o Processing fee/ upfront fee, handling charges or income of similar nature collected at the time of sanctioning or
renewal of loan/ facility is recognized in the year of receipt without spreading it over the period of loan/ facility,
o Unpaid funded interest on term loans is accounted on realization as per the guidelines of RBI.
o All other amounts collected from customers as non-interest income or recovery of expenses towards provision of various
services/ facilities are accounted/ recognized on receipt basis.
II. Expenses recognition
A) Interest Expenses
All interest expenses relating to deposits accepted and borrowings are recognized on accrual basis. Pursuant to RBI guide¬
lines, the interest payable on overdue term deposit is provided on accrual basis at simple rate of interest as applicable to
savings account or contracted rate of interest on the matured TD, whichever is lower from 09.07.2021.
Brokerage, Commission, Securities Transaction Tax etc. paid in connection with acquisition of investments are expensed
upfront and excluded from cost. Broken period interest paid/ received on debt instruments is treated as interest expense/
income and is excluded from cost/ sale consideration.
B) Employee benefits
a) Provident Fund:
The contribution made by the bank to Dhanlaxmi Bank Ltd Employees Provident Fund, administered by the trustees is
charged to Profit & Loss account. Provident Fund is a Defined Contribution Plan in which both the employee and the
Bank contribute monthly at a pre-determined rate. Employers' contribution to provident fund is recognized as expense
as and when the services are rendered. The Bank has no liability for future provident fund benefits other than its annual
contribution.
b) Pension Fund
The contribution towards Dhanlaxmi Bank Ltd Employees' Pension Fund, managed by trustees, is determined on actuarial
basis on projected unit credit method as on the Balance Sheet date and is recognized in the accounts. The actuarial
gain or loss arising during the year is recognized in the Profit and Loss Account.
c) National Pension System (NPS)
Employees who had joined the services of the Bank with effect from April 01, 2010 are covered under Defined
Contributory Pension Scheme (DCPS). In respect of such employees the bank contributes 14% of the Basic Pay plus
Dearness Allowance and the expenditure thereof is charged to Profit and Loss account and the Bank has no further
liability beyond the contribution to the fund on this account.
d) Gratuity:
The Bank makes annual contribution to Dhanlaxmi Bank Ltd Employees' Gratuity Trust Fund administered and managed
by the trustees. The cost of providing such benefits is determined using the Projected Unit Credit method, with actuarial
valuations being carried out at each balance sheet date. Actuarial gains and losses are recognized in the Profit and
Loss Account in the period in which they occur. The retirement benefit obligation recognized in the Balance Sheet
represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, as
reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus
the present value of available refunds and reductions in future contributions to the schemes.
e) Compensation for absence on account of Privilege/ Sick Leave
The employees of the Bank are entitled to compensated absence on account of privilege/ sick leave as per the leave
rules. The bank measures the long term expected cost of compensated absence as a result of the unused entitlement
that has accumulated at the balance sheet date based on actuarial valuation and such costs are recognized in the
accounts.
f) Other Employee Benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered
by employee is recognized during the period when the employee renders the service.
g) Employee Stock Compensation Cost
Measurement and accounting of employee share-based payment plans will be done in accordance with the
Guidance Note on Accounting for Employee Share-based Payments issued by ICAI; SEBI (Share Based Employee
Benefits) Regulations, 2014 and RBI guidelines in this regard. The share linked payments will also be governed by Bank's
Scheme for Employee Stock Option Plan, once approved and implemented.
Other Operating Expenses:
Other operating expenses are generally accounted on accrual basis. In the case of rent, where rent agreement is expired,
rent is accounted on the basis of expired agreement till the new rent agreement is signed.
III. Net profit
Net Profit is arrived at after provisions for contingencies, which inter alia, include provision for Standard Assets, Restructured
Advances and NPAs and NPIs; Fraud and unhedged foreign currency exposure and Taxation in accordance with statutory
requirements. The provision for NPA include write off of bad debts also.
IV. Advances
A) Valuation/ Measurement
a) Advances are classified into performing assets (Standard) and non-performing assets ('NPAs') as per the RBI guidelines
and are stated net of specific provisions made towards NPAs, sacrifice provisions on restructured advances and
unrealized interest on NPAs. Interest on NPAs is transferred to an unrealized interest account and not recognized in profit
and loss account until received. Further, NPAs are classified into substandard, doubtful and loss assets based on the
criteria stipulated by the RBI. Provision for NPAs is made in accordance with the prudential norms prescribed by the RBI.
In addition, the Bank makes higher provisions, wherever considered necessary, based on management's assessment
of the degree of recoverability, collateral value, and other relevant risk factors, particularly in respect of unsecured and
stressed exposures.
b) Amounts recovered against debts written off are recognized in the profit and loss account and included under “Other
Income”. The recovery of unrealized interest is accounted under “Interest on Loans & Advances” in the profit and loss
account.
c) For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by the RBI, which
requires the diminution in the fair value of the assets to be provided at the time of restructuring. In respect of loans and
advances accounts subjected to restructuring, the account is upgraded to standard only after the specified period
i.e., a period of one year after the date when first payment of interest or of principal, whichever is later, falls due, subject
to satisfactory performance of the account during the period. The provision for diminution in fair value and interest
sacrifice, if any relating to NPA accounts, arising out of the above, is reduced from advances.
d) For entities with Un-hedged Foreign Currency Exposure (UFCE), provision is made in accordance with the guidelines
issued by RBI, which requires to ascertain the amount of UFCE, estimate the extent of likely loss and estimate the riskiness
of un-hedged position. The Provision is classified under Schedule 5 - Other Liabilities in the Balance Sheet.
e) The Bank maintains general provision for standard assets including credit exposures computed as per the current
marked-to-market values of foreign exchange derivative contracts, in accordance with the guidelines and at levels
stipulated by RBI from time to time. 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.
f) Bank makes additional provision on project finance, relevant restructuring schemes announced by RBI, borrowers
classified as fraud, etc., as per RBI norms.
g) Loss on sale of assets to Asset Reconstruction Companies: RBI issued Master Direction- Reserve Bank of India (Transfer of
Loan Exposures) Directions, 2021 on September 24, 2021. In accordance with these guidelines, when the stressed loan
is transferred to ARC at a price below the Net Book Value (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. when the stressed loan is transferred
to an ARC for a value higher than the NBV at the time of transfer, the excess provision on transfer is written back 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 (SRs) / Pass Through Certificates / 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. In case, SRs guaranteed by the Government of
India are received as a part of sale consideration, the excess provision to the extent of Face Value of Security Receipts
guaranteed by Government of India is written back in the year of transfer/sale.
B) Recording/ Presentation
Provisions created against individual accounts as per RBI guidelines are not netted in the individual account. For presentation
in financial statements, provision created for NPA is netted against gross amount of advance without adjusting the same at
individual account level. Provision held against an individual account is adjusted against individual account's balance only
at the time of write off of the account.
V. Floating Provisions
The bank shall maintain floating provisions as per the guidelines outlined in Recovery Policy, The floating provisions are utilized only
for contingencies under extraordinary circumstances specified in the policy after obtaining the approval of Board of Directors of
the Bank and with prior permission of Reserve Bank of India.
VI. 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). The countries are categorized into seven risk categories namely, insignificant,
low, moderate, high, very high, restricted and off-credit as per Export Credit Guarantee Corporation of India Limited guidelines
and provision is made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 100%. For exposures with
contractual maturity of less than 180 days, 25% of the normal provision requirement is held. If the 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, The
provision is reflected in Schedule -5 of the Balance Sheet under “Other liabilities and Provisions- Others”.
VII. Investments
i) Classification
In accordance with the RBI guidelines, the separation of the total investment portfolio is made on the basis of investment
objectives and by type of investment. When the investment objectives are taken into consideration, Investments are
classified as:
a. Held to Maturity (HTM)
b. Available for Sale (AFS)
c. Fair Value Through Profit & Loss (FVPTL) with a sub-category named Held for Trading (HFT).
The category of the investment should be recorded at the time of acquisition itself.
The Bank shall continue to present the investments in the Balance Sheet as set out in The Third Schedule to the BR Act (Form
A, Schedule 8 - Investments) as under:
i) Government securities; (ii) Other approved securities; (iii) Shares; (iv) Debentures & Bonds; (v) Subsidiaries and / or joint
ventures and (vi) Others (to be specified)
a) Held To Maturity
Securities that fulfil the following conditions shall be 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.
b) AFS
Securities that meet the following conditions shall be 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 give rise to cash flows that are solely payments of principal and interest on
principal outstanding on specified dates.
c) FVTPL
Securities that do not qualify for inclusion in HTM or AFS are classified under FVTPL with a subcategory named HFT. Any
instrument that is held for one or more of the following purposes is 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.
ii) 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.
iii) Subsequent Measurement
HTM
a) Securities held in HTM shall be carried at cost and shall not be marked to market (MTM) after initial recognition. However,
they shall be subject to income recognition, asset classification and provisioning norms.
b) Any discount or premium on the securities under HTM shall be amortized over the remaining life of the instrument. The
amortized 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'
AFS
a) The securities held in AFS shall be fair valued at least on a quarterly basis, if not more frequently. Any discount or
premium on the acquisition of debt securities under AFS shall be amortized over the remaining life of the instrument. The
amortized 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) 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.
c) 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.
d) 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 be transferred from AFS-Reserve to the Capital Reserve.
FVTPL
(a) 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 shall be
fair valued on a daily basis, whereas other securities in FVTPL shall be fair valued at least on a quarterly, if not on a more
frequent basis.
(b) Any discount or premium on the acquisition of debt securities under FVTPL shall be amortized over the remaining
life of the instrument. The amortized 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'.
c) Securities under FVTPL shall be subject to income recognition, asset classification and provisioning norms.
iv) Reclassifications between categories
Re-classification would be permitted only under exceptional circumstances. Such re-classification would require a prior
approval of the Board of Directors and the Department of supervision of RBI. Re-classification should be applied prospectively
from the re-classification date and the details of such reclassification (including the re-classification adjustments) shall be
disclosed in the notes to the financial statements.
Accounting treatment on re -classification (Para 5.3 of Treasury Management Policy)
From HTM to AFS
• The fair value measured at the re-classification date shall be the revised carrying value
• Any gain or loss arising from a difference between the revised carrying value and the previous carrying value shall be
recognized in AFS -Reserve
From HTM to FVTPL
• The fair value measured at the re-classification date shall be the revised carrying value
• Any gain or loss arising from a difference between the revised carrying value and the previous carrying value of the
investments shall be recognized in the Profit and Loss account under item III: 'Profit on revaluation of investments' under
Schedule 14: 'Other Income'
From AFS to HTM
• The investments are re -classified at its fair value at the reclassification date. However, the cumulative gain / loss
previously recognized in the AFS - Reserve shall be withdrawn therefrom and adjusted against the fair value of the
investments at the reclassification date to arrive at the revised carrying value. Thus, the revised carrying value shall be
the same as if the bank had classified the investment in HTM ab initio itself.
From AFS to FVTPL
• The investments shall continue to be measured at fair value. The cumulative gain or loss previously recognized in AFS
-Reserve shall be withdrawn therefrom and recognized in the Profit and Loss Account, under item III: 'Profit on revaluation
of investments' under Schedule 14: 'Other Income'.
From FVTPL to HTM or AFS
• The carrying amount representing the fair value at the reclassification date remains unchanged
v) Sale of investments from HTM
Any profit or loss on the sale of investments in HTM shall be recognized in the Profit and Loss Account under Item II of
Schedule 14:'Other Income'. The profit on sale of an investment in HTM 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 Reserve.
vi) Valuation of Investments (Para 5.4 of Treasury Management Policy)
The fair value for the purpose of initial recognition and periodical valuation of investments shall be determined as per the
valuation norms.
Quoted Securities
The fair value for the quoted securities shall be the prices declared by the Financial Benchmarks India Private Ltd. (FBIL) in
accordance with the RBI circular FMRD.DIRD.7/14.03.025/2017-18 dtd March 31,2018, as amended from time to time. For
securities whose prices are not published by FBIL, the fair value of the quoted security shall be based upon quoted price as
available from trades / quotes on recognized 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).
a. Unquoted SLR Securities
i) Treasury Bills shall be valued at carrying cost.
ii) Unquoted Central / State Government securities shall be valued on the basis of the prices / YTM rates published by
the FBIL.
iii) 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.
b. Unquoted Non-SLR securities
i) Unquoted debentures and bonds
a) Valued by applying the appropriate mark -up over the YTM rates for Central Government Securities as put out
by FBIL / FIMMDA subject to the following:
The mark-up applied shall be determined based on the ratings assigned to the debenture / bonds by the
credit rating agencies and shall be subject to the following:
i) The mark up shall be at least 50 basis points above the rate applicable to a Central Government security
of equivalent maturity for rated debentures / bonds.
ii) The mark-up for unrated debentures or bonds shall not be less than the mark-up applicable to rated de¬
bentures or bonds of equivalent maturity,
Provided that the mark -up for the unrated debentures or bonds should appropriately reflect the credit risk
borne by the bank.
b) Where the debentures / bonds are quoted and there have been transactions within 15 days prior to the valu¬
ation date, the value adopted shall not be higher than the rate at which the transaction has been recorded
on the Exchanges / trading platforms / reporting platforms authorized by RBI / SEBI
c) Ujjwal DISCOM Assurance Yojana (UDAY) bonds and bonds issued by state distribution companies (DISCOMs)
under financial restructuring plan.
i) UDAY bonds shall be valued on basis of prices / yields published by FBIL.
ii) State Government guaranteed bonds issued and serviced by DISCOM shall be valued by applying a
mark -up of 75 basis points on YTM rates for Central Government Securities of equivalent maturities as
published by FBIL.
iii) other bonds issued and serviced by DISCOMs shall be valued by applying a mark-up of 100 basis points
on YTM rates for Central Government Securities of equivalent maturities as published by FBIL.
iv) Bonds issued and serviced by the State Government shall be valued by applying a mark-up of 50 basis
points on YTM rates for Central Government Securities of equivalent maturities as published by FBIL.
d) Special securities, which are directly issued by Government of India, and which do not carry SLR status shall
be valued at a spread of 25 basis points above the corresponding yield on Central Government securities of
equivalent maturity.
e) Zero Coupon Bonds (ZCBs): In the absence of market value, the ZCBs shall be marked to market with reference
to the present value of the ZCB. The fair value so determined should be compared with the carrying cost to
determine valuation gain or loss.
ii) Preference shares
a) When a preference share has been traded on exchange within 15 days prior to the valuation date, the value
shall not be higher than the price at which the share was traded.
b) The valuation of unquoted preference shares shall be done on YTM basis with appropriate mark-up over the
YTM rates for Central Government Securities of equivalent maturity put out by the FBIL subject to such prefer¬
ence share not being valued above its redemption value. The mark -up shall be graded according to the
rating assigned to the preference shares by the rating agencies and shall be subject to the following:
i. The mark-up cannot be negative. i.e., the YTM rate shall not be lower than the coupon rate / YTM for a
Central Government India security of equivalent maturity,
ii. The rate used for the YTM for unrated preference shares shall not be less than the rate applicable to rated
preference shares of equivalent maturity and shall appropriately reflect the credit risk borne by the bank.
iii. Where the investment in preference shares is made as part of a resolution, the mark-up shall not be lower
than 1.5 percentage points.
c) Where preference dividends / coupons are in arrears, no credit should be taken for accrued dividends / cou¬
pons and the value determined as above on YTM basis should be discounted further by at least 15 per cent if
arrears are for one year, 25 per cent if arrears are for two years, so on and so forth (i.e., with 10 per cent incre¬
ments). The overarching principle should be that valuation shall be based on conservative assessment of cash
flows with appropriate discount rates to reflect the risk.
d) Investments in preference shares as part of the project finance shall be valued at par for a period of two years
after commencement of production or five years after subscription whichever is earlier.
iii) Equity Shares
Equity shares for which current quotations are not available i.e., which are classified as illiquid or which are not listed
on a recognized exchange, the fair value shall be the break-up value (without considering 'revaluation reserves', if
any) which is to be ascertained from the company's latest audited 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 au¬
dited balance sheet is not available or is more than 18 months old, the shares shall be valued at '1 per company,
Before Half an hour average (BHAV) price on the BSE and in absence of trading in BSE, BHAV price of NSE for the
day / previous trading day shall be taken for valuation of equity and if BSE/NSE quotes are not available, quotes of
other exchange /s may be taken. Equity shares for which current quotations are not available or where the shares
are not quoted on the stock exchanges should be valued at break-up value which is to be ascertained from the
company's latest balance sheet (which should not be more than 18 months prior to the date of valuation). In case
the latest balance sheet is not available the shares are to be valued at Re.1 per company,
iv) Mutual Funds Unit (MF Units)
a) Investment in unquoted MF units shall be valued on the basis of the latest re-purchase price declared by the
MF in respect of each scheme.
b) In case of funds with lock -in period or any other Mutual fund, where repurchase price / market quote is not
available, units shall be valued at Net Asset Value (NAV) of the scheme. If NAV is not available, these shall be
valued at cost, till the end of the lock -in-period.
v) Commercial Paper
Commercial paper shall be valued at the carrying cost.
vi) Investment in Security Receipts (SRs) and other instruments issued by an Asset Reconstruction Company (ARC)
In respect of investments in SRs and other instruments issued by ARCs, the requirements as per the Transfer of Loan
Exposures Directions, 2021, as amended from time to time, should be followed.
vii) Non-Performing Investments (NPI) (Para 8 of Treasury Management Policy)
The criterion used to classify an asset as Non-Performing Asset (NPA) as per the extant Prudential Norms on Income
Recognition, Asset Classification and Provisioning (IRACP) pertaining to Advances shall be used to classify an invest¬
ment as a Non-Performing Investment (NPI). Similarly, an NPI shall only be upgraded to standard when it meets the
criteria specified in the IRACP norms.
viii) Repurchase (REPO) and Reverse Repurchase (Reverse REPO) transactions
The securities sold and purchased under Repo/ Reverse Repo (including transactions conducted under Liquidity
Adjustment Facility (LAF) and Marginal Standing Facility (MSF) with RBI) are accounted as collateralized lending and
borrowing transactions. However, securities are transferred as in the case of normal outright sale/ purchase transac¬
tions and such movement of securities is reflected using the Repo/Reverse Repo Accounts and Contra entries. The
above entries are reversed on the date of maturity, Costs and revenues are accounted as interest expenditure/
income, as the case may be. Balance in Repo Account is classified under Schedule 4 (Borrowings).
All type of reverse repos with the Reserve Bank including those under Liquidity Adjustment Facility shall be presented
under sub-item (ii) 'In Other Accounts' of item (II) 'Balances with Reserve Bank of India' under Schedule 6 'Cash and
balances with Reserve Bank of India'. Reverse repos with banks and other institutions having original tenors up to
and inclusive of 14 days shall be classified under item (ii) 'Money at call and short notice' under Schedule 7 'Bal¬
ances with banks and money at call and short notice'. Reverse Repo of original tenors more than 14 days shall be
classified under Schedule 9 - Advances.
ix) Short Sales
The Bank undertakes short sale transactions in Central Government dated securities in accordance with RBI guide¬
lines. The short position is reflected as the amount received on sale and is classified under 'Other Liabilities'. The
short position is marked to market and resultant mark-to-market gain/losses are accounted for as per the relevant
RBI guidelines for valuation of investments.
VIII. Fixed Assets
• An item of Fixed Assets that qualify for recognition as an asset are initially recognized and measured at cost.
• After initial recognition, the Bank follows the Revaluation Model for Land and Buildings and the Cost model for other fixed
assets.
• Fixed Assets following 'Cost Model' are carried at Cost less any accumulated depreciation/ amortization and any accumu¬
lated impairment losses if any,
• Fixed Assets following 'Revaluation Model' are carried at Revalued Amount, being the fair value at the date of revaluation
less any subsequent accumulated depreciation/ amortization and any accumulated impairment losses.
• Revaluations of Land and Buildings are performed once in three years to ensure that the carrying amount does not differ
materially from that which would be determined using fair value.
• An increase in the carrying amount of Land and Buildings arising on revaluation is credited to owners' interest under “Re¬
valuation Reserve”. However, the increase is recognized in the statement of profit and loss to the extent that it reverses a
decrease in the revaluation of same asset previously recognized in the profit and loss account. A decrease in the carrying
amount of an item of an asset arising on revaluation is charged to the statement of profit and loss. However, the decrease
is debited directly to owners' interest under the heading “Revaluation Surplus” to the extent of any credit balance existing in
the Revaluation Reserve in respect of that asset.
• Revaluation Surplus included in owners' interest in respect of Land and Buildings is transferred to “Revenue Reserves” when
the asset is retired or disposed of. The difference between the depreciation based on the revalued carrying amount and
the depreciation based on original cost is also transferred to “Revenue Reserves” from “Revaluation Reserve”. However, such
transfers from “Revaluation Reserve” to “Revenue Reserve” are not made through the statement of profit or loss.
• Cost of an item of Fixed Assets includes a)purchase price, including freight, duties and taxes and incidental expenses, after
deducting trade discounts and rebates,; (b) any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by the management viz. cost of employee benefits
(as defined in AS-15 ' Employee Benefits') arising directly from the construction or acquisition of the item of Fixed Assets,
cost of site preparation, initial delivery and handling costs, installation and assembly costs, professional fees, cost of testing
whether the asset is functioning properly; (c) Taxes like GST paid on fixed assets (GST portion on which ITC was not availed).
(d) the initial estimate of the cost of dismantling, removing the item and restoring the site on which it is located, referred to
as 'decommissioning, restoration and similar liabilities'
• Items costing less than ' 1,000 each are charged off in the year of purchase.
• Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future economic benefit/
functional capability from/ of such assets.
• Depreciation on fixed assets is charged on a pro rata basis on a straight-line method on the estimated useful life of the asset
in compliance with the Schedule II of the Companies Act, 2013. The residual value is considered as Nil. Depreciable amount
of an asset is allocated on a systematic basis over the useful life of the asset.
• If expectations differ from previous estimates with respect to residual value, if any and useful life of the asset, such changes
are accounted for as a change in accounting estimate in accordance with ”AS-5 Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies”.
• Method of depreciation used is assessed and reviewed at each financial year end and if there is a significant change in the
pattern of consumption of the future economic benefits embodied in the asset, the method of depreciation is changed
to reflect the changed pattern and such a change is accounted for and disclosed as a change in Accounting Estimate in
accordance with ”AS-5” Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies”.
• Amount expended towards acquisition of Software is capitalized where it is reasonably estimated that the software has an
enduring useful life. Software is amortized over an estimated useful life of 3 to 5 years on straight-line basis.
• Grant related to Specific Fixed Assets - Grant received from the Government/ other agencies related to depreciable assets
are treated as deferred income which is recognized in the profit and loss statement on a systematic and rational basis over
the useful life of the asset.
• Capital Work in Progress includes cost of fixed assets that are not ready for their intended use and includes advance paid
to vendors to acquire the fixed assets.
• The fixed assets are depreciated at straight-line method based on useful life of the assets stated as under:
IX. Non-Banking Assets
Non-Banking Assets acquired in settlement of debts/dues are accounted at the lower of their cost or net realizable value.
X. Cash and Cash Equivalents
Cash and Cash Equivalents include cash in hand, balances with RBI and Balances with other banks/ institutions and money at
call and short notice (including effects of changes in exchange rates on cash and cash equivalents in foreign currency). Cash
flow statement is prepared under the indirect method.
XI. Transactions involving foreign exchange
1 Foreign Currency transactions are recorded on initial recognition in the reporting currency by applying the foreign currency
amount, the exchange rate/notional rate whichever is applicable between the reporting currency and the foreign currency
on the date of the transaction.
2 Foreign Currency Monetary items at balance sheet date are reported using the Foreign Exchange Dealers Association of
India (FEDAI) monthly closing (spot/forward) rates.
3 Foreign Currency Non-Monetary items, which are carried at historical cost, are reported using the exchange rate on the
date of the transaction.
4 Contingent Liabilities denominated in foreign currency are revalued using the exchange rate notified by FEDAI at the
balance sheet date.
5 Outstanding foreign exchange spot and forward contracts held for trading at balance sheet date are revalued at the
exchange rate notified by FEDAI for specified maturities and the resulting profit or loss is recognized in the statement of profit
and loss.
6 Foreign Exchange forward contracts which are not intended for trading and are outstanding on the Balance sheet date, are
revalued at FEDAI monthly closing spot/ forward rate.
7 For Investment Swap, the premium or discount arising at the inception of such contracts is amortized as expense or income
over the life of the contract.
8 Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially
recorded are recognized as income or as expense in the period in which they arise.
9. 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 recognized in the statement of profit and loss.
XII. Derivative Transactions
The Bank recognizes all derivative contracts at fair value, on the date on which the derivative contracts are entered into and
are measured at fair value as at the Balance Sheet or reporting dates. Derivatives are classified as assets when the fair value is
positive (positive marked-to-market) or as liabilities when the fair value is negative (negative marked-to-market). Changes in the
fair value of derivatives other than those designated as hedges are recognized in the Profit and Loss Account.
XIII. Segment Information
The disclosure relating to segment information is in accordance with the guidelines issued by RBI. The disclosure relating to
segment information is in accordance with Accounting Standard 17 - “Segment Reporting” and as per RBI Master Direction on
Financial Statements-Presentation and Disclosures ,2025. As per the Master Direction, the reportable segments are identified as
'Treasury', 'Corporate / Wholesale Banking', 'Retail Banking' and 'Other banking operations.
> Treasury' includes the entire investment portfolio of the Bank.
> Retail Banking include exposures which fulfil the four criteria of orientation, product, granularity, and low value of individual
exposures for retail exposures laid down in Master Directions on Basel III Capital Regulations. Individual housing loans also
form part of Retail Banking segment. Further, 'Digital Banking' has been identified as a sub-segment of the existing 'Retail
Banking' segment as per RBI guidelines.
> Corporate / Wholesale Banking include all advances to trusts, partnership firms, companies, and statutory bodies, which are
not included under 'Retail Banking'.
> Other Banking Business includes all other banking operations not covered under 'Treasury, 'Wholesale Banking' and 'Retail
Banking' segments. It also includes all other residual operations such as para banking transactions / activities.
XIV. Earnings per Share
The Bank reports basic and diluted earnings per share in accordance with AS 20, Earnings per Share, as prescribed under Section
133 of the Companies Act, 2013. Basic earnings per share are computed by dividing the net profit after tax by the weighted
average number of equity shares outstanding for the year. 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
share are computed using the weighted average number of equity shares and weighted average dilutive potential equity shares
during the period.
XV. 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 recognized as an expense in the Profit and Loss
Account as per the lease terms.
XVI. Impairment of Assets
The carrying values of assets at each balance sheet date are reviewed for impairment, if any indication of impairment exists. If the
carrying amount of the assets exceeds the estimated recoverable amount, impairment is recognized for such excess amount.
The impairment loss is recognized as an expense in the Profit and Loss Account, unless the asset is carried at revalued amount, in
which case any impairment loss of the revalued asset is treated as a reduction in revaluation to the extent a revaluation reserve
is available for that asset. When there is indication that an impairment loss recognized for an asset (other than a revalued asset)
in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognized in the Profit
and Loss Account, to the extent the amount was previously charged to the Profit and Loss Account. In case of revalued assets
such reversal is not recognized. Impairment of an item of Fixed Assets is determined by applying the Accounting Standard 28.
Compensation from third parties for items of Fixed Assets that were impaired, lost or given up is included in the statement of profit
and loss when the compensation becomes receivable.
XVII. Taxes on income
The income tax expense comprises current tax and deferred tax. Current tax is measured at the amount expected to be
paid in respect of taxable income for the year in accordance with the Income Tax Act. Deferred tax assets and liabilities are
recognized for the future tax consequences of timing differences, being the difference between the taxable income and the
accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax
asset is recognized subject to prudence and judgment that realization is more likely than not. Deferred tax assets and liabilities
are measured using tax rates under tax laws that have been enacted before the balance sheet date. Changes in deferred tax
assets/ liabilities on account of changes in enacted tax rates are given effect to in the profit and loss account in the period of
the change.
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