3. Significant accounting policies

3.1. Investments
Classification:

In accordance with the RBI guidelines on
investment classification and valuation, investments
are classified on the date of purchase into three
categories (hereinafter called "categories") as
below:

i) Held to Maturity ("HTM")

ii) Available for Sale ("AFS")

iii) Fair Value through Profit and Loss ("FVTPL"),

Held for Trading ("HFT") is a separate investment
sub-category within FVTPL.

Under each of these categories, investments are
further classified under six groups (hereinafter
called "groups") - Government Securities, Other
Approved Securities, Shares, Debentures and Bonds,
Investments in Subsidiaries/Joint Ventures and
Other Investments. Purchase and sale transactions
in securities are recorded under 'Settlement Date'
accounting, except in the case of equity shares
where 'Trade Date' accounting is followed.

Basis of classification:

Held to Maturity (HTM):

Securities that fulfil the following conditions are
classified under HTM:

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 the principal
outstanding ('SPPI criterion') on specified
dates.

3) Notwithstanding the intent with which the
following securities are acquired, the following
do not meet the SPPI criterion and therefore
are not eligible for classification either as HTM
or AFS:

- Instruments with compulsorily, optionally
or contingently convertible features.

- Instruments with contractual loss

absorbency features such as those
qualifying for Additional Tier 1 and Tier
2 under Basel III Capital Regulations.

- I nstruments whose coupons are not in
the nature of interest as defined in RBI
Guidelines.

- Preference shares and Equity shares.

4) Investments in Securitization notes, other
than the equity tranche, are considered to
meet the SPPI criteria if the tranche in which
the investment is made meets all the following
conditions:

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

- The underlying pool of financial
instruments meets the SPPI criteria.

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

Available for Sale (AFS):

1) Securities that meet the following
conditions are classified under AFS:

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

- The contractual terms of the
security meet the SPPI criterion.

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

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

Fair Value through Profit or Loss (FVTPL).

Held for Trading (HFT) is a sub-category in
FVTPL.

Securities that do not qualify for inclusion in
HTM or AFS are classified under FVTPL.

Initial recognition

All investments are measured at fair value
on initial recognition. Unless facts and
circumstances suggest that the fair value is
materially different from the acquisition cost,
it is presumed that the acquisition cost is the
fair value. Situations where the presumption is
tested include where:

Ý The transaction is between related
parties

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

Ý The transaction is done outside the
principal market for that class of
securities.

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

I n respect of Government securities acquired
through auction (including devolvement),
switch operations and open market operations
(OMO) conducted by the RBI, the price at
which the security is allotted is the fair value
for initial recognition purposes.

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

Any Day 1 loss arising from Level 3 investments
are recognised immediately.

Any Day 1 gains arising from Level 3
investments are deferred. In the case of debt
instruments, the Day 1 gain are amortized on
a straight-line basis up to the maturity date (or
earliest call date for perpetual instruments),
while for unquoted equity instruments, the

gain are set aside as a liability until the security
is listed or derecognised.

Broken period interest paid to the seller as part
of cost is treated as an item of expenditure
under Profit & Loss Account. The transaction
cost, including brokerage, commission etc.,
paid at the time of acquisition of investments
are charged to Profit and loss.

Subsequent Measurement
HTM;

Securities held in HTM are carried at amortised
cost and are not marked to market (MTM)
after initial recognition.

Any discount or premium on the securities
under HTM are amortised over the remaining
life of the instrument on a straight-line
basis. Such amortisation is adjusted against
interest income under the head "Income from
investments" as per the RBI guidelines.

AFS:

The securities held in AFS are fair valued at
least on a quarterly basis. The valuation gains
and losses across all performing investments,
held under AFS are aggregated. The net
appreciation or depreciation, net of applicable
taxes is directly credited or debited to a reserve
named AFS-Reserve without routing through
the Profit & Loss Account.

The AFS-Reserve is reckoned as Common
Equity Tier (CET) 1 subject to below clause.

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

The unrealised gains transferred to AFS-
Reserve is not available for any distribution
such as dividend and coupon on Additional
Tier 1.

Any discount or premium on the acquisition
of debt securities under AFS is amortised
over the remaining life of the instrument.
Such amortisation is adjusted against interest

income under the head "Income from
investments" as per the RBI guidelines.

FVTPL:

The securities held in FVTPL are fair valued and
the net gain or loss arising on such valuation
is directly credited or debited to the Profit and
Loss Account. Securities that are classified
under the HFT sub-category within FVTPL are
fair valued on a daily basis, whereas other
securities in FVTPL are fair valued atleast on a
quarterly basis.

Any discount or premium on the acquisition
of debt securities under FVTPL is amortised
over the remaining life of the instrument.
Such amortisation is adjusted against interest
income under the head "Income from
investments" as per the RBI guidelines.

Valuation

Fair value of investments are categorised into
3 levels based on the inputs used for valuation
of the investments.

Level 1 means, inputs used for valuation of a
financial instrument are those inputs which are
quoted prices (unadjusted) in active markets
for identical instruments that the Bank can
access at the measurement date

Level 2 means inputs used for valuation of a
financial instrument are those inputs, other
than quoted prices included within Level 1,
that are observable for the asset or liability,
either directly or indirectly.

Level 3 means inputs used for valuation of a
financial instrument are unobservable inputs.

Quoted Investments are valued based on
the trades/quotes on the recognised stock
exchanges, price list of RBI or prices periodically
declared by Financial Benchmark India Pvt.
Ltd. [FBIL], based on relevant RBI circular.

The market value of unquoted Government
securities which are in the nature of Statutory
Liquidity Ratio ('SLR') securities included in the
AFS and HFT categories are valued as per rates
published by FBIL.

For securities whose prices are not published
by FBIL, the fair value of the securities are
based upon quoted price as available from

the trades/ quotes on recognised stock
exchanges, reporting platforms or trading
platforms authorized by RBI/SEBI or prices
declared by the Fixed Income Money Market
and Derivatives Association of India (FIMMDA)

The valuation of other unquoted fixed income
securities (viz., State Government securities,
other approved securities, bonds and
debentures) and preference shares, wherever
linked to the YTM rates, is done with a mark¬
up (reflecting associated credit and liquidity
risk) over the YTM rates for Government
securities published by FBIL.

I n case of unquoted bonds, debentures and
preference shares where interest/dividend is
received regularly (i.e., not overdue beyond
90 days), the market price is derived based on
the Yield to Maturity (YTM) for Government
Securities as published by FBIL and suitably
marked up for credit risk applicable to the
credit rating of the instrument. The matrix for
credit risk mark-up for each categories and
credit ratings along with residual maturity
issued by FBIL is adopted for this purpose.

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

Units of mutual funds are valued at the latest
repurchase price/net asset value declared by
the mutual fund.

Treasury, Bills, Commercial Papers (CPs) and
Certificate of Deposits (CDs) being discounted
instruments, are valued at carrying cost.

I n respect of stressed assets sold by the Bank
under an asset securitisation, where the
investment by the Bank in security receipts
(SRs) backed by the assets sold by it is more
than 10 percent of such SRs then the valuation
shall be lower of the following:

i. Value arrived by reckoning the Net Asset
Value (NAV) declared by the ARC based
on the recovery ratings received for such
instruments.

ii. Face value of the SRs reduced by the
notional provisioning rate applicable if
the loans had continued on the books of
the transferor.

I nvestments in SRs issued by ARCs are valued
periodically by reckoning the Net Asset Value
(NAV) declared by the ARC based on the
recovery ratings received for such instruments.
However, in respect of the stressed loans
transferred to ARC, the investments are
carried 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.

Investment in Pass Through Certificates which
is done to meet the Minimum Retention Ratio
(MRR) are valued at cost.

Non-performing investments are identified
and depreciation/provision is made thereon
based on the RBI guidelines. Interest on non¬
performing investments is not recognised in
the Profit and Loss Account until received.

The amount outstanding in Repurchase (Repo)
including Marginal Standing Facility (MSF)
are accounted as borrowings and amount
outstanding in Reverse Repurchase (Reverse
Repo) are accounted as Lending. The accrued
income and expenditure till the balance sheet
date is recognised in Profit and Loss account

Transfer between categories:

Post approval of the Board of Directors and
Department of Supervision (DoS)- RBI, the
Bank may shift investments to/from HTM/AFS/
FVTPL as a special case. The reclassification
is applied prospectively from reclassification
date.

Disposal of investments:

Profit/Loss on sale of investments under AFS
and FVTPL categories are recognised in the
Profit and Loss Account.

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

I n the case of equity instruments designated
under AFS at the time of initial recognition,
any gain or loss on sale of such investments
is not be transferred from AFS-Reserve to the
Profit and Loss Account. Instead, such gain or
loss is being transferred from AFS-Reserve to
the Capital Reserve.

Any sales from HTM are done as per Board
approved policy. In any financial year, the
carrying value of investments sold out of HTM
will not exceed five per cent of the opening
carrying value of the HTM portfolio. Any sale
beyond this threshold will be made with the
prior approval from DoS, RBI.

Sale of securities in the situations given below

are excluded from the regulatory limit of five

per cent:

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

ii. Repurchase of Government Securities by
Government of India from Banks under
buyback or switch operations.

iii. Repurchase of State Development Loans
by respective state governments under
buyback or switch operations.

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

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

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

vii. Additional sale of securities explicitly
permitted by the Reserve Bank of India.

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

In accordance with extant RBI circular, an
amount not less than the net profit on sale
of investments during the year or net profit
for the year less mandatory appropriations
is created as Investment Fluctuation Reserve
(IFR) until the Bank achieve a reserve balance
of 2% of the FVTPL - HFT and AFS portfolio.

3.2. Advances
Classification:

Advances are classified as Performing Assets
(Standard) and Non-performing Assets (NPAs)
in accordance with the RBI guidelines on Income
Recognition and Asset Classification (IRAC). Further,
NPAs are classified into sub-standard, doubtful and
loss assets based on the criteria stipulated by RBI.

The Advances are stated net of specific provisions
made towards NPAs, unrealised interest on NPAs,
bills rediscounted, amounts received in advance
from customers, if any etc. Interest on NPAs is
transferred to an interest suspense account and
not recognised in the Profit and Loss Account until
received.

The Bank transfers advances through inter¬
bank participation with and without risk, which
are accounted for in accordance with the RBI
guidelines, as follows. In the case of participation
with risk, the aggregate amount of participation
transferred out of the Bank is reduced from
advances; and participations transferred in to the
Bank are classified under advances. In the case of
participation without risk, the aggregate amount of
participation issued by the Bank is classified under
borrowings; and where the Bank is participating in,
the aggregate amount of participation is shown as
due from Banks under advances.

Provisioning:

I n accordance with RBI guidelines, the Bank has
provided general provision on standard assets

at levels stipulated by RBI from time to time.
In addition, the Bank has a policy for making
provisions for standard assets at rates higher than
the regulatory minimum, based on evaluation of
risk and stress in various sectors.

Provision for Unhedged Foreign Currency Exposure
(UFCE) of borrower entities is made in accordance
with the guidelines issued by RBI, which requires
the Bank to ascertain the amount of UFCE, estimate
the extent of likely loss and estimate the riskiness of
unhedged position of those entities. The Provision
is classified under Schedule 5 - Other Liabilities in
the Balance Sheet.

Provision for non-performing advances comprising
Sub-standard, Doubtful and Loss Assets is made at
a minimum in accordance with the RBI guidelines.
In addition, specific loan loss provisions in respect
of non-performing assets are made based on
management's assessment and estimates of the
degree of impairment of advances, based on past
experience, evaluation of security and other related
factors; the nature of product and delinquency
levels. Loan loss provisions in respect of non¬
performing advances are charged to the Profit
and Loss Account and included under Provisions
and Contingencies. Advances are disclosed, net of
provisions in the Balance Sheet.

Provisions made in excess of the Bank's policy for
specific loan loss provisions for non-performing assets
and regulatory general provisions are categorised as
Floating Provision. Creation of Floating Provision is
considered by the Bank up to a level approved by
the Board of Directors. In accordance with the RBI
guidelines, Floating Provisions are utilised up to a
level approved by the Board with prior permission
of RBI, only for contingencies under extraordinary
circumstances for making specific provisions for
impaired accounts.

The Bank considers restructured account, if any, as
one where the Bank, for economic or legal reasons
relating to the borrower's financial difficulty, grants
to the borrower concessions that the Bank would
not otherwise consider. Restructuring would
normally involve modification of terms of the
advance/securities, which would generally include,
amongst others, alteration of repayment period/
repayable amount/the amount of instalments/rate
of interest (due to reasons other than competitive
reasons). Restructured accounts are classified
as such by the Bank only upon approval and

implementation of the restructuring package. In
respect of loans and advances accounts subjected
to restructuring, the accounts are classified as NPA
and 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, in accordance with the extant RBI guidelines
in this regard.

Non-performing advances are written-off in
accordance with the Bank's policies. Recoveries
from bad debts written-off are recognised in the
Profit and Loss Account and included under 'Other
Income'.

Recording and Presentation

Provisions created against individual accounts as
per RBI guidelines are not netted in the individual
account. For presentation in the financial
statements, provision created is netted against
gross amount of advance. Provision held against
an individual account is adjusted against account
balance at individual level only at the time of write-
off/settlement of the account.

Provision made against standard assets in
accordance with RBI guidelines as above is disclosed
separately under Other Liabilities and not netted off
against Advances.

Financial Assets sold to Reconstruction
Company

I n accordance with RBI guidelines on sale of non¬
performing advances, if the sale is at a price below
the net book value (i.e., book value less provisions
held), the shortfall is charged to the Profit and Loss
Account and if the sale is for a value higher than the
net book value, the excess provision is credited to
the Profit and Loss Account in the year the amounts
are received. Further, such reversal shall be limited
to the extent to which cash received exceeds the
net book value of the loan at the time of transfer as
per RBI guidelines.

3.3. Securitisation transactions and direct
assignments and transfer of assets

The Bank transfers its loan receivables both through
Direct Assignment route as well as transfers to
Special Purpose Vehicles (SPV).

The securitization transactions are without recourse
to the Bank. The transferred loans and such
securitized receivables are de-recognized as and
when these are sold (true sale criteria being fully
met) and the consideration has been received by
the Bank.

Any profit, loss or premium realised at the time
of the sale are accounted for in the accounting
period during which the sale is completed in line
with RBI Master Direction - Reserve Bank of India
(Securitisation of Standard Assets) Directions, 2021
dated September 24, 2021.

The unrealised gains, associated with expected
future margin income is recognised in profit and
loss account on receipt of cash, after absorbing
losses, if any.

As per the RBI guidelines issued on September 24,
2021, any loss or realised gain from sale of loan
assets through direct assignment is accounted
through profit and loss account on completion of
transaction.

3.4. Fixed Assets (Property, Plant and Equipment
(PPE) and depreciation)

Property, Plant and Equipment are stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any. The cost comprises
purchase price, borrowing costs if capitalization
criteria are met, directly attributable cost of bringing
the asset to its working condition for the intended
use and initial estimate of decommissioning,
restoring and similar liabilities, if any.

Any trade discounts and rebates are deducted in
arriving at the purchase price. Such cost includes
the cost of replacing part of the plant and
equipment. When significant parts of the plant and
equipment are required to be replaced at intervals,
the Bank depreciates them separately based on its
specific useful lives. Assets under development as
at balance sheet date are shown as Capital Work in
Progress. Advance paid towards such development
are shown as capital advance.

Depreciation on PPE has been provided on the
straight-line method as per the useful life prescribed
in Schedule II to the Companies Act, 2013 except
in respect of the following categories of assets, in
whose case the life of the assets has been assessed

PPE held for sale is valued at lower of their carrying
amount and net realizable value. Any write-down is
recognized in the Profit and Loss Account.

3.5. Intangible Assets and amortisation

I ntangible assets acquired separately are measured
on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost
less accumulated amortization and accumulated
impairment losses, if any.

I ntangible assets are amortized on a straight line
basis over the estimated useful economic life.
The Bank uses a rebuttable presumption that the
useful life of an intangible asset will not exceed ten
years from the date when the asset is available for
use. Software with perpetual license and system
development expenditure, if any, is amortised over
an estimated economic useful life of 5 years or
license period, whichever is lower. Intangible assets
under development as at balance sheet date are
shown as Capital Work in Progress.

The amortization period and the amortization
method are reviewed at least at the Balance
Sheet date. If the expected useful life of the asset
significantly differs from previous estimates, the
amortization period is changed accordingly. If
there has been a significant change in the expected
pattern of economic benefits from the asset, the
amortization method is changed to reflect the
changed pattern. Such changes are accounted
for in accordance with AS 5 Net Profit or Loss
for the Period, Prior Period Items and Changes in
Accounting Policies.

Gains or losses arising from de-recognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the carrying
amount of the asset and are recognized in the Profit
and Loss Account when the asset is derecognized.

3.6. Impairment of Assets

The carrying values of assets/cash generating
units at the Balance Sheet date are reviewed for
impairment, if any indication of impairment exists.
If the carrying amount of the assets exceed the
estimated recoverable amount, an impairment is
recognised for such excess amount. The impairment
loss is recognised as an expense in the Profit and
Loss Account.

The recoverable amount is the greater of the net
selling price and their value in use. Value in use
is arrived at by discounting the future cash flows
to their present value based on an appropriate
discount factor.

When there is indication that an impairment
loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased,
such reversal of impairment loss is recognised
in the Profit and Loss Account, to the extent the
amount was previously charged to the Profit and
Loss Account.

3.7. Transactions involving foreign exchange
Initial recognition

Transactions in foreign currencies entered into
by the Bank are accounted at the exchange rates
prevailing on the date of the transaction or at rates
that closely approximate the rate at the date of the
transaction.

Measurement at the Balance Sheet date

Foreign currency monetary items, if any, of the
Bank, outstanding at the balance sheet date are
restated at the rates prevailing at the year-end as
notified by Foreign Exchange Dealers Association of
India ('FEDAI'). Non-monetary items of the Bank are
carried at historical cost.

Contingent liabilities on account of foreign exchange
contracts, currency future contracts, guarantees,
letters of credit, acceptances and endorsements are
reported at closing rates of exchange notified by
FEDAI as at the Balance Sheet date.

Treatment of Exchange differences

Exchange differences arising on settlement/
restatement of foreign currency monetary assets
and liabilities of the Bank are recognised as income
or expense in the Profit and Loss Account.

3.8. Revenue Recognition

Interest Income on loans, advances and
investments (including deposits with Banks and
other institutions) are recognised on accrual basis.
Income on Non-performing Assets is recognized
upon realisation as per RBI norms.

Fee and Commission income are recognised as
income when due, except in cases where the Bank
is uncertain of its ultimate collection.

Bank Guarantee commission and commission on
letter of credit, and locker rent are recognised on
a straight- line basis over the period of contract.
Interest Income on deposits/investments is
recognized on a time proportion basis taking into
account the amount outstanding and the rate
applicable. Income on discounted instruments is
recognised over the tenor of the instruments on a
straight line basis.

Dividend income, if any, is accounted for, when the
right to receive the same is established.

Amounts recovered against debts written off in
earlier years and provisions no longer considered
necessary in the context of the current status of
the borrower are recognized in the Profit and Loss
Account.

3.9. Employee Benefits

Employee benefits include provident fund, National
Pension Scheme, gratuity and compensated
absences.

Defined contribution plan:

Provident Fund (PF)

The Bank's contribution to provident fund are
considered as defined contribution plan and are
charged as an expense as they fall due based on
the amount of contribution required to be made
when the services are rendered by the employees.

National Pension Scheme (NPS)

I n respect of employees who opt for contribution
to the NPS, the Bank contributes certain percentage
of the basic salary of employees to the aforesaid
scheme, a defined contribution plan, which is
managed and administered by pension fund
management companies. The Bank has no liability
other than its contribution, and recognises such
contributions as an expense in the year incurred.

Defined Benefits Plan

For defined benefit plans in the form of gratuity fund,
the cost of providing 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 recognised
in the Profit and Loss Account in the period in
which they occur. Past service cost is recognised
immediately to the extent that the benefits are
already vested while otherwise, it is amortised

on a straight-line basis over the average period
until the benefits become vested. The retirement
benefit obligation recognised in the Balance Sheet
represents the present value of the defined benefit
obligation as adjusted for unrecognised 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.

Long term Employee benefits

The Bank accrues the liability for compensated
absences based on the actuarial valuation as at the
Balance Sheet date conducted by an independent
actuary which includes assumptions about
demographics, early retirement, salary increases,
interest rates and leave utilisation. The net present
value of the Banks' obligation is determined using
the Projected Unit Credit Method as at the Balance
Sheet date. Actuarial gains/losses are recognised in
the Profit and Loss Account in the year in which
they arise.

Other Employee benefits

The undiscounted amount of short-term employee
benefits expected to be paid in exchange for the
services rendered by employees are recognised
during the year when the employees render
the service. These benefits include performance
incentive.

Employee Stock Compensation Cost

Employee stock compensation cost for stock
options is recognised as per the Guidance Note on
Accounting for Employee Share-based Payments,
issued by the Institute of Chartered Accountants of
India and Guidelines issued by the Reserve Bank of
India on Compensation of Whole Time Directors /
Chief Executive Officers/Material Risk Takers and
Control Function Staff (WTD/CEO/MRTs).

The Bank follows intrinsic value method to account
for its stock based employee compensation plans
for all the options granted till the accounting period
ending March 31, 2021.

For all options granted after March 31, 2021, the
Bank follows the fair value method and recognizes
the fair value of such options computed using the
Black-Scholes model, as compensation expense
over the vesting period, as per RBI Guidelines
dated August 30, 2021. The compensation cost is

amortised on a straight-line basis over the vesting
period of the option with a corresponding credit
to Share Based Reserve. On exercise of the stock
options, corresponding balance in the Share
Based Reserve is transferred to Share Premium. In
respect of the options which expire unexercised,
the balance standing to the credit of Share Based
Reserve is transferred to the Balance in Surplus in
profit and loss account. Also refer Note 18.21

3.10. Leases

Lease arrangements where the risks and rewards
incidental to ownership of an asset substantially
vest with the lessor are recognised as operating
leases. Lease rentals under operating leases are
recognised in the Profit and Loss Account on a
straight-line basis over the lease term.

3.11. Accounting of Priority Sector Lending
Certificate (PSLC)

The Bank enters into transactions for the sale or
purchase of Priority Sector Lending Certificates
(PSLCs). In the case of a sale transaction, the Bank
sells the fulfilment of priority sector obligation and
in the case of a purchase transaction the Bank buys
the fulfilment of priority sector obligation through
the RBI trading platform. There is no transfer of
risks or loan assets. The fee received for the sale
of PSLCs is recorded as Other Income and the fee
paid for purchase of the PSLCs is recorded as other
Expenditure in Profit and Loss Account. These are
amortised over the period of the Certificate.

3.12. Taxes on Income

Current tax is the amount of tax payable on the
taxable income for the year as determined in
accordance with the applicable tax rates and the
provisions of the Income Tax Act, 1961 and other
applicable Income tax laws.

Deferred tax is recognised on timing differences,
being the differences 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 is measured
using the tax rates and the tax laws enacted or
substantively enacted as at the reporting date.
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 realised. 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 realise the assets. Deferred tax
assets and liabilities are offset if such items relate to
taxes on income levied by the same governing tax
laws and the Bank has a legally enforceable right
for such set off. Deferred tax assets are reviewed at
each balance sheet date for their realizability.

At each reporting date, the Bank re-assesses
unrecognized deferred tax assets. It recognizes
unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually
certain, as the case may be, that sufficient future
taxable income will be available against which such
deferred tax assets can be realized.

3.13. Earnings per Share

Basic earnings per share is computed by dividing
the profit after tax (including the post-tax effect
of extraordinary items, if any) by the weighted
average number of equity shares outstanding
during the year. Diluted earnings per share is
computed by dividing the profit after tax (including
the post-tax effect of extraordinary items, if any) as
adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential
equity shares, by the weighted average number of
equity shares considered for deriving basic earnings
per share and the weighted average number of
equity shares which could have been issued on the
conversion of all dilutive potential equity shares.

Potential equity shares are deemed to be dilutive
only if their conversion to equity shares would
decrease the net profit per share from continuing
ordinary operations. Potential dilutive equity shares
are deemed to be converted as at the beginning
of the period, unless they have been issued at a
later date. The dilutive potential equity shares are
adjusted for the proceeds receivable had the shares
been actually issued at fair value (i.e. average market
value of the outstanding shares). Dilutive potential
equity shares are determined independently for
each period presented. The number of equity

shares and potentially dilutive equity shares are
adjusted for share splits/reverse share splits and
bonus shares, as appropriate.

3.14. Proposed Dividend

Dividend proposed/ declared after the balance
sheet date is accounted in the books of the Bank
in the year in which the dividend is approved by
the shareholders. Proposed dividend or dividend
declared after the balance sheet date are disclosed
in the notes to accounts. However, the Bank reckons
proposed dividend in determining the capital fund
in computing the capital adequacy ratio.

3.15. Segment reporting

The disclosure relating to segment information is
in accordance with AS-17, Segment Reporting and
guidelines issued by RBI.

I n accordance with guidelines issued by RBI, the
Bank has adopted segment reporting as under:

Treasury includes all investment portfolios, Profit/
Loss on sale of investments, Profit/Loss on foreign
exchange transaction, equities, income from
derivatives and money market operations. The
expenses of this segment consist of interest expenses
on funds borrowed from external sources as well as
internal sources and depreciation/amortisation of
premium on HTM category investments.

Corporate/Wholesale Banking includes all
advances to trusts, partnership firms, companies
and statutory bodies, which are not included under
'Retail Banking'.

Retail Banking includes lending to and deposits,
from retail customers and identified earnings and
expenses of the segment.

Other Banking Operations includes all other
operations not covered under Treasury, Corporate/
Wholesale Banking and Retail Banking.

Unallocated includes Capital and reserves and
other un-allocable assets, liabilities, income and
expenditure.

Geographic segment

The Bank operations are predominantly confined
within one geographical segment (India) and
accordingly, this is considered as the only secondary
segment.