C SIGNIFICANT ACCOUNTING POLICIES

1. Investments
Classification:

In accordance with the RBI guidelines on classification,
valuation and operation of investment portfolio by Banks,
investments are classified on the date of purchase into
“Held to Maturity” (‘HTM’), “Available for Sale” (‘AFS’)
and “Fair value through Profit and Loss” (‘FVTPL’)
categories (hereinafter called “categories”). “Held for
Trading” (‘HFT’) is a separate investment sub-category
within FVTPL. All investments in subsidiaries, associates
and joint ventures are categorised in a distinct category
called Group Companies (“Group Cos.”). 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 accounted
on settlement date except in the case of equity shares
which are accounted on trade date.

Basis of classification:

Investments which the Bank intends to hold till maturity
and whose contractual terms gives rise to cash flows that
are solely payment of principal and interest on principal
outstanding (SPPI) are classified under HTM category. All
investments in subsidiaries / associates / joint ventures
are classified under the category of Group Companies
("Group Cos."). Investments which the Bank acquires with
an objective that is achieved by both collecting contractual
cash flows and selling securities and where the contractual
terms of the investment meet the SPPI criterion are
classified under AFS category. On initial recognition, the
Bank makes an irrevocable selection to classify an equity
instrument, that is not held with the objective of trading,
under AFS. Investments not classified in any of the above
categories are classified under FVTPL category. H FT, which
is a sub-category of FVTPL consists of all instruments that
meet the specifications for HFT instruments prescribed
by the RBI. Reclassification of investments between
categories (viz. HTM, AFS and FVTPL) if any is carried out
only after, prior approval of the Board of Directors and the
RBI and the same is accounted for in accordance with

the RBI guidelines. Due to subsequent listing of equity
shares, Bank transfers such securities from FVTPL to HFT.
Such reclassification to HFT sub-category will not require
approvals mentioned in RBI guidelines.

Acquisition cost:

Costs, including brokerage and commission paid at the
time of acquisition of investments and broken period
interest on debt instruments, are recognised in the Profit
and Loss Account and are not included in the cost of
acquisition.

Valuation:

In accordance with the norms on investments:

• Investments classified under FVTPL and AFS
categories are fair valued individually. Net gain or
loss arising on such valuation of FVTPL category is
directly taken to the Profit and Loss Account. The net
appreciation or depreciation (adjusted for the effect
of applicable taxes, if any) in AFS Category is directly
taken to AFS Reserve without routing through the
Profit and Loss Account.

• Quoted investments are valued based on the trades /
quotes on the recognised stock exchanges or prices
published by Financial Benchmarks India Pvt Ltd.
(FBIL) or Fixed Income Money Market and Derivatives
Association (FIMMDA). Investments denominated in
foreign currencies are valued based on the prices
provided by market information providers such as
Bloomberg, Refinitiv, etc.

• Unquoted Government of India securities, State
Government securities, bonds and debentures and
special bonds such as oil bonds, fertilizer bonds
etc. issued by the Government of India are valued
as per the prices published by FBIL or FIMMDA. The
valuation of other unquoted fixed income securities
for which price is not published (viz. other approved
securities and bonds and debentures) and preference
shares is done with appropriate mark-up, i.e.,
applicable FIMMDA published credit spreads over
the Yield to Maturity (YTM) rates for Government of
India securities as published by FBIL.

• Unquoted equity shares are valued at the break-up
value, ascertained from the company’s latest balance
sheet. The date as on which the latest balance sheet
is drawn up does not precede the date of valuation
by more than 18 months. In case the latest audited
balance sheet is not available or is more than 18
months old, the shares are valued at ' 1 per company.

• Units of mutual funds are valued at the latest Net Asset
Value (NAV) declared by the mutual fund.

• Treasury bills, commercial papers and certificates of
deposits being discounted instruments are valued at
carrying cost.

• Investments in Security Receipts (SRs) and unquoted
units of Infrastructure Investment Trust (InvIT) are
valued as per the net asset value provided by the
issuing Asset Reconstruction Company and InvIT
respectively.

• Investments in unquoted units of Alternative
Investment Fund (AIF) are valued at NAV provided
by the AIF based on its financial statements. Where
an AIF fails to carry out and disclose the valuation of
its investments by an independent valuer as per the
frequency mandated by SEBI, the value of its units is
treated as ' 1. In case AIF is not registered under SEBI
(Alternative Investment Fund) Regulation, 2012, and
the latest disclosed valuation of its investments by an
independent valuer precedes the date of valuation by
more than 18 months the value of its units is treated
as ' 1.

• Pass Through Certificates (PTCs) including Priority
Sector-PTCs are valued by using FIMMDA credit
spreads as applicable for the NBFC category, based
on the cred it rating of the respective PTC over the YTM
rates for Government of India securities published by
FBIL.

• Investments classified under HTM and Group Cos.
category are carried at their acquisition cost and
not marked to market. Any diminution, other than
temporary, in the value of investments in HTM and
Group Cos. category is provided for.

• For all debt securities meeting SPPI criteria (except
short sale securities), any discount or premium on
acqu isition is accreted or amortised over the remaining
maturity period of the security on a constant yield-to-
maturity basis. However, any discount or premium on
acquisition of perpetual debt security is accreted or
amortised upto the earliest call date. Such accretion
or amortisation of discount or premium is classified
under interest income from investments.

• The investment portfolio is categorised into three fair
value hierarchies viz. Level 1, Level 2, and Level 3:

> Level 1 Financial Instruments are valued with
inputs such as quoted prices in active markets
for identical instruments.

> Level 2 Financial Instruments are valued with
inputs other than quoted prices, that are
observable for asset or liability either directly
or indirectly.

> Level 3 Financial Instruments are valued using
unobservable inputs.

• 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. In case of Level 1 and Level 2
instruments, when acquisition cost is not equal to fair
value, any Day 1 gain / loss is recognised in the Profit
and Loss Account. In case of Level 3 instruments, any
Day 1 loss is recognised immediately in the Profit and
Loss Account whereas any Day 1 gain is deferred. In
case of Level 3 debt instruments, the Day 1 gain is
amortised on a straight-line basis up to the maturity
date (or earliest call date for perpetual instruments),
while for unquoted Level 3 equity instruments, the
gain is set aside as a liability until the security is listed
or derecognised.

• Non-performing investments (NPIs) are identified, and
provision is made thereon based on the RBI guidelines.
Provision for NPIs is not set-off against appreciation
in respect of performing investments. Appreciation, if
any, in the value of a NPI is not recognised. Income on
NPIs is not recognised until received.

Disposal of investments:

In accordance with the norms on investments, Profit / Loss
on sale of investments under the aforesaid categories is
recognised in the Profit and Loss Account except for equity
instruments designated under AFS at the time of initial
recognition, in respect of which the gains and losses are
transferred from AFS Reserve to the Capital Reserve. The
profit from sale of investment under HTM and Group Cos.
categories, net-off taxes and transfer to statutory reserve is
appropriated from the Profit and Loss Account to “Capital
Reserve”, in accordance with RBI guidelines.

Short sale:

The Bank undertakes short sale transactions in Central
Government dated securities in accordance with the RBI
guidelines. The short position is categorised under HFT
and netted off from investments in government securities.
The short position along with other government securities
under HFT portfolio is marked to market and the resultant
MTM profit or loss, is taken to the Profit and Loss Account.
Profit / Loss on short sale is recognised on settlement date.

2. Repurchase and reverse repurchase transactions

Repurchase (Repo) and reverse repurchase (Reverse Repo)
transactions are reported as borrowing and lending (lending
above 14 days tenor reported as advances) respectively.

Borrowing cost on repo transactions is accounted as
interest expense and revenue on reverse repo transactions
is accounted as interest income.

3. Advances
Classification:

Advances are classified as performing and non-performing
based on the RBI guidelines and are stated net of bills
rediscounted, inter-bank participation with risk, specific
loan loss provision, interest suspense for non-performing
advances, claims received from Credit Guarantors,
provision for funded interest term loan and provision for
diminution in the fair value of restructured assets.

The Bank classifies its loans and investments, including
overseas branches and overdues from crystallised
derivative contracts, into performing assets and non¬
performing assets (NPAs) in accordance with RBI
guidelines. Further, the NPAs are classified into sub¬
standard, doubtful and loss assets based on the criteria
stipulated by RBI. Non-performing assets are upgraded
into standard as per the extant RBI guidelines.

Provisioning:

Specific loan loss provision in respect of non-performing
advances is made based on management’s assessment
of the degree of impairment of advances, subject to the
minimum provisioning prescribed by the RBI.

The specific loan loss provision for retail non-performing
advances is also made based on the nature of product and
delinquency levels.

Non-performing advances are written-off in accordance
with the Bank’s policy. Recoveries from bad debts written-
off are included under other income.

Loans reported as frauds are classified as loss assets
and fully provided for immediately without considering the
value of security.

The Bank maintains general provision for standard assets
including credit exposures computed as per the current
marked to market values of interest rate and foreign
exchange derivative contracts and gold. The Bank also
maintains general provision for unhedged foreign currency
exposures of borrowers, provision on loans to specific
borrowers in specific stressed sectors, provision on
exposures to step-down subsidiaries of Indian companies
as prescribed by RBI. In the case of overseas branches,
general provision on standard assets is maintained at the
higher of the levels stipulated by the respective overseas
regulator or RBI. The provision for standard assets is
included under other liabilities.

I n addition to the above, the Bank on a prudent basis
makes provision on advances or exposures which are not
NPAs, but has reasons to believe on the basis of the extant
environment or specific information or basis regulatory
guidance / instructions, that slippage of a specific advance
or a group of advances or exposures or potential exposures
is possible. These are classified as contingent provisions
and included under other liabilities.

Provision made in addition to the Bank’s policy for specific
loan loss provision for non-performing assets, possible
slippage of specific exposures and regulatory general
provision is categorised as floating provision. Creation of
floating provision is considered by the Bank up to a level
approved by the Board of Directors. Floating provisions
are used only for contingencies under extraordinary
circumstances and for making specific provisions for non¬
performing accounts. Floating provisions are included
under other liabilities.

Further to the provisions required to be held according
to the asset classification status, provision is held for
individual country exposures (other than for home country
exposure). Countries are categorised into risk categories
as per Export Credit Guarantee Corporation of India Ltd.
(‘ECGC’) guidelines and provisioning is made in respect of
that country where the net funded exposure is 1 percent or
more of the Bank’s total assets. Provision for country risk
is included under other liabilities.

In accordance with the RBI guidelines on the prudential
framework for resolution of stressed assets and the
resolution frameworks for COVID-19 related stress and
its Board approved policy, the Bank has implemented
resolution plans for eligible borrowers. The asset
classification and necessary provision thereon is made
in accordance with the said RBI guidelines. Restructured
assets involving compromise settlements, where the time
for payment of the agreed settlement amount exceeds
three months are classified and provided for in accordance
with the guidelines issued by the RBI from time to time.

The restructured loans are upgraded into standard
category as per the extant RBI guidelines. Further, in
respect of restructuring of loans pertaining to projects
under implementation, the asset classification and
necessary provision thereon is made in accordance with
the RBI guidelines.

4. Securitisation and transfer of assets

Assets transferred through securitisation and direct
assignment of cash flows are de-recognised in the Balance
Sheet when they are sold (true sale criteria being fully met
with) and consideration is received. Sales / transfers that do
not meet true sale criteria are accounted for as borrowings.
For a securitisation or direct assignment transaction, the
Bank recognises profit upon receipt of the funds and loss is
recognised at the time of sale. Unrealised gains associated
with expected future margin income is recognised in Profit
and Loss Account on receipt, after absorbing losses, if any.

On sale of stressed assets, if the sale is at a price below
the net book value (i.e., funded outstanding less specific
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 when the sum of cash
received by way of initial consideration and / or redemption
or transfer of security receipts issued by Securitisation
Company (‘SC’) / Reconstruction Company (‘RC’) exceeds
the net book value of the loan at the time of transfer. Where
the sale consideration is comprised of only cash and
SRs guaranteed by the Government of India, the excess
provision is credited to the Profit and Loss Account in the
year of transfer.

I n respect of stressed assets sold under an asset
securitisation, where the investment by the bank in SRs
issued against the assets transferred by it is more than 10
percent of such SRs, provisions held against outstanding
SRs are higher of the provisions required in terms of net

asset value declared by the SC / RC and provisions as
per the extant norms applicable to the underlying loans,
notionally treating the book value of these SRs as the
corresponding stressed loans assuming the loans
remained in the books of the Bank.

The Bank invests in PTCs issued by Special Purpose
Vehicles (SPVs). These are accounted at acquisition cost
and are classified as investments. The Bank also buys loans
through the direct assignment route which are classified as
advances. PTCs are carried at acquisition cost unless it
is more than the face value, in which case the premium is
amortised based on effective interest rate method.

The Bank transfers advances through inter-bank
participation with and without risk. In the case of
participation with risk, the aggregate amount of the
participation issued by the Bank is reduced from advances.
In case where the Bank is assuming risk by participation, the
aggregate amount of the participation is classified under
advances. In the case of issue of participation certificate
without risk, the aggregate amount of participation issued
by the Bank is classified under borrowings and where the
Bank is acquiring participation certificate, the aggregate
amount of participation acquired is shown as due from
banks under advances.

5. Fixed assets (Property, Plant and Equipment) and
depreciation

Fixed assets are stated at cost less accumulated
depreciation as adjusted for impairment, if any. The cost
of an item of fixed asset is recognised as an asset if, and
only if: (a) it is probable that future economic benefits
associated with the item will flow to the enterprise; and (b)
the cost of the item can be measured reliably. Cost includes
cost of purchase and all expenditure like site preparation,
installation costs and professional fees incurred on the
asset before it is ready 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.

Depreciation is charged over the estimated useful life of
the fixed asset on a straight-line basis except for freehold
land. The management believes that the useful life of assets
assessed by the Bank, pursuant to Part C of Schedule II to

the Companies Act, 2013, taking into account changes in
environment, changes in technology, the utility and efficacy
of the asset in use, fairly reflects its estimate of useful lives
of the fixed assets. The estimated useful lives of key fixed
assets are given below:

6. Non-Banking Assets

Non-Banking Assets (NBAs) acquired in satisfaction
of claims are carried at lower of net book value or net
realisable value.

7. Impairment of assets

The Bank assesses at each Balance Sheet date whether
there is any indication that an asset may be impaired.
Impairment loss, if any, is provided to the extent the
carrying amount of assets exceeds their estimated
recoverable amount.

8. Translation of foreign currency items

Foreign currency income and expenditure items of
domestic operations are translated at the exchange
rates prevailing on the date of the transaction. Income
and expenditure items of integral foreign operations
(representative offices) are translated at the weekly average
closing rates and of non-integral foreign operations (foreign
branches and offshore banking units) at the monthly
average closing rates.

Outstanding foreign currency monetary items of domestic
and integral foreign operations are translated at the closing
exchange rates notified by Foreign Exchange Dealers’
Association of India (FEDAI) as at the Balance Sheet date
and the resulting net revaluation profit / loss is recognised
in the Profit and Loss Account.

Both monetary and non-monetary foreign currency
assets and liabilities of non-integral foreign operations
are translated at closing exchange rates notified by FEDAI
at the Balance Sheet date and the resulting profit / loss
arising from exchange differences are accumulated in the
Foreign Currency Translation Reserve until disposal of the
non-integral foreign operations in accordance with AS-11,
The Effects of Changes in Foreign Exchange Rates and the
extant RBI guidelines.

Foreign currency denominated contingent liabilities on
account of foreign exchange and derivative contracts,
guarantees, letters of credit, acceptances and
endorsements are translated at closing rates of exchange
notified by FEDAI as at the Balance Sheet date.

9. Foreign exchange and derivative contracts

Foreign exchange spot and forward contracts, outstanding
as at the Balance Sheet date and held for trading, are
revalued at the closing spot and forward rates respectively
as notified by FEDAI and at interpolated rates for contracts

of interim maturities. The USD-INR exchange rate for
valuation of contracts having longer maturities i.e., greater
than one year, is derived using the USD-INR spot rate as
well as relevant INR yield curve and USD yield curve. For
other currency pairs, and non-deliverable contracts, the
forward points (for rates / tenors not published by FEDAI)
are obtained / derived basis data published by Refinitiv
or Bloomberg for valuation of the contracts. Valuation is
considered on present value basis. For this purpose, the
forward profit / loss on the contracts are discounted to the
valuation date using the discounting yields. The resulting
profit / loss on valuation is recognised in the Profit and
Loss Account. Marked to market value of foreign exchange
contracts are classified as assets when the fair value is
positive or as liabilities when the fair value is negative.

The Bank recognises all derivative contracts at fair value,
on the date on which such derivative contracts are entered
into and are re-measured at fair value as at the Balance
Sheet date. Marked to market values of such derivatives
are classified as assets when the fair value is positive or as
liabilities when the fair value is negative.

The Bank as part of its risk management strategy, makes
use of derivative instruments, including foreign exchange
forward contracts, for hedging the risk embedded in
some of its financial assets or liabilities recognised on the
balance sheet. The Bank identifies the hedged item (asset
or liability) at the inception of the transaction itself. Hedge
effectiveness is ascertained at the time of the inception of
the hedge and at the reporting date thereafter.

Foreign exchange forward contracts and Principal only
swaps (POS) not intended for trading, that are entered into
to establish the amount of reporting currency required or
available at the settlement date of a transaction, and are
outstanding at the Balance Sheet date, are accounted in
accordance with AS-11. Accordingly, such contracts are
not marked to market and only translated at spot rate.
The premium or discount arising at the inception of such
forward exchange contract is amortised on a straight line
basis as expense or income over the life of the contract.
The interest income / expense on such POS transaction is
accounted on accrual basis.

In case of a fair value hedge, the changes in the fair value of
the hedging instruments and hedged items are recognised
in the Profit and Loss Account and in case of cash flow
hedges, the changes in fair value of effective portion are
recognised in Reserves and Surplus under ‘Cash flow
hedge reserve’ and ineffective portion of an effective

hedging relationship, if any, is recognised in the Profit
and Loss Account. The accumulated balance in the cash
flow hedge reserve, in an effective hedging relationship, is
recycled in the Profit and Loss Account at the same time
that the impact from the hedged item is recognised in the
Profit and Loss Account.

In relation to derivative contracts with non-performing
borrowers, the Bank makes provision for the entire amount
of overdue and future receivables relating to positive
marked to market value of the said derivative contracts.

10. Revenue recognition

I nterest income is recognised in the Profit and Loss
Account on an accrual basis, except in the case of non¬
performing assets which is recognised when realised.

Interest income on investments in PTCs and loans bought
out through the direct assignment route is recognised at
their effective interest rate.

Income on non-coupon bearing discounted instruments is
recognised over the tenor of the instrument on a constant
yield basis.

Dividend on equity shares and preference shares is
recognised as income when the right to receive the
dividend is established.

Income from units of mutual funds / AIF is recognised on
cash basis.

Loan processing fee is recognised as income when due.
Syndication / Arranger fee is recognised as income when
a significant act / milestone is completed.

Gain / loss on sell down of loans is recognised in line with
the extant RBI guidelines.

Guarantee commission, commission on letter of credit,
annual locker rent fees and annual fees for credit cards
are recognised on a straight-line basis over the period
of contract. Other fees and commission income are
recognised when due, where the Bank is reasonably
certain of ultimate collection.

Fees paid / received for priority sector lending certificates
(PSLC) is recognised on straight-line basis over the period
of the certificate.

11. Employee benefits

Stock based Employee Compensation:

The Employee Stock Option Scheme (‘the Scheme’)
provides for the grant of options to acquire equity shares

of the Bank to its employees and whole time directors. The
Employee Stock Incentive Master Scheme-2022 (ESIS-
2022) provides for the grant of Restricted Stock Units (units)
to acquire equity shares of the Bank to its employees and
whole-time directors. The options / units granted shall vest
as per their vesting schedule and these may be exercised
within a specified period.

The Bank followed the intrinsic value method to account for
its stock-based employee compensation plans in respect
of options granted up to March 31, 2021. Compensation
cost was measured by the excess, if any, of the market
price of the underlying stock over the exercise price as
determined under the option plan. The market price is the
closing price on the stock exchange where there is highest
trading volume on the working day immediately preceding
the date of grant.

Effective April 01, 2021, the fair value of share-linked
instruments on the date of grant for all instruments granted
after March 31, 2021 is recognised as an expense in
accordance with the RBI guidelines on Compensation of
Whole Time Directors / Chief Executive Officers / Material
Risk Takers and Control Function staff. The fair value of the
stock-based employee compensation is estimated on the
date of grant using 'Black-Scholes model'.

The compensation cost is amortised on a straight-line
basis over the vesting period after adjusting estimated
forfeiture. Ultimately, the cost for all instruments that vest
is recognised. The compensation expense is recognised in
the Profit and Loss Account with a corresponding credit to
Employee Stock Options Outstanding. On exercise of the
stock options, corresponding balance in Employee Stock
Options Outstanding is transferred to Share Premium.
In respect of the options which expire unexercised, the
balance standing to the credit of Employee Stock Options
Outstanding is transferred to General Reserve.

Gratuity:

The Bank has an obligation towards gratuity, a defined
benefit retirement plan, covering all eligible employees. The
plan benefit vests upon completion of minimum prescribed
period of continuous years of service, and is in the form
of lump sum amount, without an upper limit, equivalent
to 15 days’ basic salary payable for each completed
year of service to all eligible employees on resignation,

retirement or death while in employment or on termination
of employment, except in respect of employees of eHDFC
Limited, where the vesting is equivalent to one month’s
basic salary for each completed year of service till the
effective date of amalgamation.

On November 21, 2025, the Government of India notified
four Labour Codes - the Code on Wages, 2019, the
Industrial Relations Code, 2020, the Code on Social
Security, 2020, and the Occupational Safety, Health and
Working Conditions Code, 2020, collectively referred
to as the 'New Labour Codes'. Accordingly, gratuity is
determined as the higher of the obligation computed under
the New Labour Codes, subject to a statutory ceiling of ' 20
lacs, and the obligation computed as aforesaid without an
upper limit.

The Bank makes contributions to a recognised Gratuity
Trust administered by trustees and whose funds are
managed by insurance companies. In respect of erstwhile
Lord Krishna Bank (eLKB) employees, the Bank makes
contribution to a fund set up by eLKB and administered by
the Board of Trustees. The defined gratuity benefit plans
are valued by an independent actuary as at the Balance
Sheet date using the projected unit credit method as per
the requirement of AS-15, Employee Benefits, to determine
the present value of the defined benefit obligation and the
related service costs. The actuarial calculations entail
assumptions about demographics, early retirement,
salary increases and interest rates. Actuarial gain / loss is
recognised in the Profit and Loss Account.

Superannuation:

The Bank has a Superannuation Plan under which
employees of the Bank, above a prescribed grade, are
entitled to receive retirement benefits either through salary
or under a defined contribution plan. For those opting for
a defined contribution plan, the Bank contributes a sum
equivalent to 13% of the employee’s eligible annual basic
salary (15% for the whole - time directors and for certain
eligible employees of the erstwhile Centurion Bank of
Punjab (eCBoP staff)) to a Trust administered by trustees
and whose funds are managed by insurance companies.
The Bank has no liability towards future superannuation
fund benefits other than its contribution and recognises
such contribution as an expense in the year incurred.

Provident fund:

The Bank is covered under the Employees Provident Funds
and Miscellaneous Provisions Act, 1952 read with New

Labour codes and accordingly all employees of the Bank
are entitled to receive benefits under the provident fund.
The Bank contributes an amount, on a monthly basis, at a
determined rate (currently 12% of employee’s basic salary).
Of this, the Bank contributes an amount equal to 8.33% of
employee’s basic salary up to a maximum salary level of
' 15,000/- per month for Employee Pension Scheme (EPS)
members, to the Pension Scheme administered by the
Regional Provident Fund Office. The balance amount out
of the 12% employer’s share is contributed to an exempted
Trust set up by the Bank and administered by the Board of
Trustees. The Bank recognises such contributions as an
expense in the year in which it is incurred.

Interest payable to the members of the exempted trust shall
not be lower than the statutory rate of interest declared by
the Central Government under the Employees Provident
Funds and Miscellaneous Provisions Act, 1952 and
shortfall, if any, shall be made good by the Bank.

The guidance note on implementing AS-15, Employee
Benefits, states that benefits involving employer
established provident funds, which require interest
shortfalls to be provided, are to be considered as defined
benefit plan. Actuarial valuation of this Provident Fund
interest shortfall is done as per the guidance note issued
in this respect by The Institute of Actuaries of India ("IAI")
and provision towards this liability is made.

The overseas branches of the Bank make contribution to the
respective applicable government social security scheme
calculated as a percentage of the employees’ salaries.
The Bank’s obligations are limited to these contributions,
which are expensed when due, as such contribution is in
the nature of defined contribution.

Pension:

In respect of pension payable to certain eLKB employees
under the Lord Krishna Bank (Employees) Pension
Scheme, which is a defined benefit scheme, the Bank
contributes 10% of basic salary to a pension trust set up by
the Bank and administered by the Board of Trustees and an
additional amount towards the liability shortfall based on
an independent actuarial valuation as at the Balance Sheet
date, which includes assumptions about demographics,
early retirement, salary increases and interest rates.

In respect of certain eLKB employees who had moved to
a Cost to Company (CTC) based compensation structure
and had completed less than 15 years of service, the
contribution which was made until then, is maintained as

a fund and will be converted into annuity on separation
after a lock-in-period of two years. For this category of
employees, liability stands frozen and no additional
provision is required except for interest as applicable to
Provident Fund, which is provided for.

In respect of certain eLKB employees who moved to a CTC
structure and had completed service of more than 15 years,
pension would be paid on separation based on salary
applicable as on the date of movement to CTC structure.
Provision thereto is made based on an independent
actuarial valuation as at the Balance Sheet date.

National Pension System (NPS):

In 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.

12. Debit and credit cards reward points

The Bank estimates the probable redemption of debit
and credit card reward points and cost per point using an
actuarial method by employing an independent actuary,
which includes assumptions such as discount rate, block,
withdrawal, cost per reward point, mortality, redemption
and spends. Provisions for liabilities on the outstanding
reward points are made based on an independent actuarial
valuation as at the Balance Sheet date and included in
other liabilities and provisions.

13. Bullion

The Bank imports bullion including precious metal bars
on a consignment basis or through exchange (India
International Bullion Exchange - GIFT City). The imports
are typically on a back-to-back basis and are priced to the
customer based on the price quoted by the supplier. The
difference between the price recovered from customers
and cost of bullion is accounted at the time of sale to the
customers and reported as ‘‘Other Income’’.

The Bank also deals in bullion on a borrowing and lending
basis and the interest thereon is accounted as interest
expense / income respectively.

14. Segment information

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

15. Lease accounting

Lease payments including cost escalation for assets taken
on operating lease are recognised as expense in the Profit
and Loss Account over the lease term on a straight-line
basis in accordance with the AS-19, Leases.

16. Earnings per share

The Bank reports basic and diluted earnings per equity
share in accordance with AS-20, Earnings per Share. Basic
earnings per equity share has been computed by dividing
net profit for the year attributable to equity shareholders by
the weighted average number of equity shares outstanding
for the year. The weighted average number of equity
shares outstanding during the year is adjusted for events
of bonus issue and share split. Diluted earnings per share
reflect the potential dilution that could occur if securities
or other contracts to issue equity shares were exercised
or converted to equity during the year. Diluted earnings
per equity share are computed using the weighted average
number of equity shares and the dilutive potential equity
shares outstanding during the year except where the
results are anti-dilutive.

17. Income tax

Income-tax expense is the aggregate amount of current
tax and deferred tax expense incurred by the Bank. Current
tax expense is determined in accordance with the relevant
provisions of the Income-Tax Act, 1961 and rules framed
thereunder and considering the material principles set out
in the Income Computation and Disclosure Standards to
the extent applicable. Deferred tax expense is determined
as per AS-22, Accounting for Taxes on Income. Deferred
tax assets and liabilities are recognised for the future tax
consequences of timing differences between the carrying
values of assets and liabilities and their respective tax
bases, and operating loss carried forward, if any. Deferred
tax assets and liabilities are measured using the enacted
or substantively enacted tax rates as at the Balance Sheet
date. In accordance with paragraph 2A of AS-22, the Bank
has neither recognised nor disclosed deferred tax assets
or liabilities in respect of Pillar Two income taxes.

Current tax assets and liabilities and deferred tax assets
and liabilities are off-set when they relate to income taxes
levied by the same taxation authority, when the Bank has
a legal right to off-set and when the Bank intends to settle
on a net basis.

Deferred tax assets are recognised only to the extent there
is reasonable certainty that the assets can be realised

in future. In case of unabsorbed depreciation or carried
forward loss under taxation laws, deferred tax assets are
recognised only if there is virtual certainty of realisation
of such assets. Deferred tax assets are reviewed at
each Balance Sheet date and appropriately adjusted to
reflect the amount that is reasonably / virtually certain to
be realised.