1. ACCOUNTING CONVENTION:

The financial statements are prepared by following
the going concern concept on historical cost
convention unless otherwise stated. They conform
to generally accepted accounting principles in India,
which comprises statutory provisions, regulatory
/ Reserve Bank of India guidelines, accounting
standards / guidance notes issued by the Institute
of Chartered Accountants of India and the practices
prevalent in the Banking Industry in India. In respect
of foreign branches as per statutory provisions and
practices prevailing in the respective countries.

2. USE OF ESTIMATES :

The preparation of financial statements requires the
management to make estimates and assumptions
for considering the reported assets and liabilities
(including contingent liabilities) as on the date of
financial statements and the income and expenses
for the reporting period. Management believes that
the estimates used in the preparation of the financial
statements are prudent and reasonable.

3. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

Foreign Currency transactions of Indian operations
and non-integral foreign operations are accounted
for as per Accounting Standard-11 (AS-11) issued by
the Institute of Chartered Accountants of India (ICAI).

3.1 Translation in respect of Indian operations

• Foreign exchange transactions are recorded
at the exchange rate prevailing at preceding
business day closing. The rate to be used is
closing rate.

• Foreign currency assets and liabilities are

translated at the Weekly Average Rates notified
by FEDAI every Weekend.

• Foreign currency assets and liabilities are

translated at the closing rates/Revaluation Rates

notified by FEDAI at every Month/Quarter/Year
end.

• Acceptances, endorsements and other
obligations and guarantees in foreign currency
are carried at the closing rates notified by FEDAI
at the Month/Quarter/Year end.

• Exchange differences arising on settlement
and translation of foreign currency assets and
liabilities at the end of the respective Quarter/
Year are recognized as income or expenses in
the period in which they arise.

• Outstanding forward exchange contracts are
disclosed at the Contracted rates, and revalued
at FEDAI closing rates, and the resultant effect is
recognized in the Profit and Loss account.

3.2 Translation in respect of non-integral foreign
operations.

Foreign branches are classified as non-integral
foreign operations and the financial statements are
translated as follows:

• Assets and liabilities including contingent
liabilities are translated at the closing rates
notified by FEDAI at the year end.

• Income and expenses are translated at the
Quarterly Average Closing rate notified by FEDAI
at the end of the respective quarter.

• All resulting exchange differences are
accumulated in a separate account "Foreign
Currency Translation Reserve" (FCTR) till the
disposal of the net investments.

4. INVESTMENTS

4.1 Bank shall classify the entire investment portfolio
(except investments in their own subsidiaries, joint
ventures and associates) under three categories, viz.,
Held to Maturity (HTM), Available for Sale (AFS), Fair
Value through Profit and Loss (FVTPL).

Held for Trading (HFT) shall be a separate investment
sub- category within FVTPL. The category of the
investment shall be decided by the bank before or
at the time of acquisition and this decision shall be
properly documented. All investments in subsidiaries,
associates and joint ventures shall be held sui generis

i.e., in a distinct category for such investments
separate from the other investment categories (viz.
HTM, AFS and FVTPL). All the investments will be
classified in the following category:

(i) Held to Maturity (HTM)

(ii) Available for Sale (AFS)

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

(i) Held for Trading (HFT)

(iv) Subsidiaries, associates and joint ventures (SAJV)

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) Otherapproved securities

(iii) Shares

(iv) Debentures&Bonds

(v) Subsidiariesand/ orjointventures

(vi) Others(tobe specified)

Held to Maturity (HTM):

(a) Securities that fulfill 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) Investments in the securitization notes, other than
the equity tranche, shall be considered to meet the

SPPI criteria if the tranche in which the investment is
made meets all the following conditions:

(i) 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.

(ii) The under lying pool of financial instruments
meet the SPPI criteria.

(iii) 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):

(a) 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 meet
the 'SPPI criterion' as given in RBI Circular-
Master Direction - Classification, Valuation and
Operation of Investment Portfolio of Commercial
Banks (Directions), 2023.

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.

(b) AFS securities shall inter-alia 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 to maturity or selling
before maturity.

(c) Notwithstanding the intent with which the following
securities are acquired, they shall not meet the
SPPI criteria and therefore shall not be eligible for
classification either as HTM or AFS:

(i) Instruments with compulsorily, optionally or
contingently convertible features.

(ii) Instruments with contractual loss absorbency
features such as those qualifying for Additional
Tier 1 and Tier 2 under Basel III Capital
Regulations.

(iii) Instruments whose coupons are not in the
nature of interest as defined in RBI Circular-
Master Direction - Classification, Valuation and
Operation of Investment Portfolio of Commercial
Banks (Directions), 2023.

(iv) Preference shares and Equity shares.

FVTPL

(a) Securities that do not qualify for inclusion in HTM or

AFS shall be classified under FVTPL. These shall inter-

alia include:

(i) Equity shares, other than (a) equity shares of
subsidiaries, associates or joint ventures and (b)
equity shares where, at initial recognition, the
irrevocable option to classify at AFS has been
exercised.

(ii) Investments in Mutual Funds, Alternative
Investment Funds, Real Estate Investment
Trusts, Infrastructure Investment Trusts, etc.

(iii) Investment in securitisation notes which
represent the equity tranche of a securitisation
transaction. Investments in senior and other
subordinate tranches shall need to be reviewed
for their compliance with SPPI criterion.

(iv) Bonds, debentures, etc. where the payment is
linked to the movement in a particular index
such as an equity index rather than an interest
rate benchmark.

HFT

Bank shall create a separate sub-category called HFT within
FVTPL. Bank shall comply with the requirements specified
in RBI Circular-Master Direction - Classification, Valuation
and Operation of Investment Portfolio of Commercial
Banks (Directions), 2023 for classifying investments under
HFT. Details in Annexure 1

Investments in Subsidiaries, Associates and Joint
Ventures

All investments in subsidiaries, associates and joint
ventures shall be held sui generis i.e., in a distinct category
for such investments separate from the other investment
categories (viz. HTM, AFS and FVTPL).

4.2 INITIAL RECOGNITION

4.2.1 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. Situations where
the presumption shall be tested include where:

(a) The transaction is between related parties.

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

(c) The transaction is done outside the principal
market for that class of securities.

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

4.2.2 In 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
shall be the fair value for initial recognition purposes.

4.2.3 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 shall be 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', as the case may
be.

4.2.4 Any Day 1 loss arising from Level 3 investments shall
be recognised immediately.

4.2.5 Any Day 1 gains arising from Level 3 investments
shall be deferred. In the case of debt instruments,

the Day 1 gain shall be 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 shall be set aside as a liability
until the security is listed or derecognised.

4.3 SUBSEQUENT MEASUREMENT

4.3.1 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 as specified in RBI Circular-
Master Direction - Classification, Valuation and
Operation of Investment Portfolio of Commercial
Banks (Directions), 2023.

(b) Any discount or premium on the securities under
HTM shall be amortised over the remaining life
of the instrument. The amortised 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) The acquisition cost adjusted for any premium/
discount amortised between date of acquisition
and March 31, 2024, shall be the revised
carrying value.The difference between the
revised carrying value and the previous carrying
value shall be adjusted in any Revenue/General
Reserve.

(d) Only in exceptional circumstances, where it is
not practicable to calculate revised carrying
value as above, the fair value of the securities as
of March 31, 2024, may be taken as the revised
carrying value.

4.3.2 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 amortised

over the remaining life of the instrument. The
amortised 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) Securities under AFS shall be subject to
income recognition, asset classification and
provisioning norms as specified in RBI Circular-
Master Direction - Classification, Valuation and
Operation of Investment Portfolio of Commercial
Banks (Directions), 2023.

(d) The AFS-Reserve shall be reckoned as Common
Equity Tier (CET) 1 subject to clause 28 of these
Directions. The unrealised gains transferred
to AFS-Reserve shall not be available for any
distribution such as dividend and coupon on
Additional Tier 1.

(e) 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.

(f) 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 not
be transferred from AFS-Reserve to the Profit
and Loss Account. Instead, such gain or loss
shall be transferred from AFS-Reserve to the
Capital Reserve.

433 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) Bank shall fair value daily all HFT instruments
and recognise any valuation change in the profit
and loss account.

(c) Any discount or premium on the acquisition of
debt securities under FVTPL shall be amortised
over the remaining life of the instrument. The
amortised 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'.

(d) Securities under FVTPL shall be subject to
income recognition, asset classification and
provisioning norms as specified in RBI Circular-
Master Direction - Classification, Valuation and
Operation of Investment Portfolio of Commercial
Banks (Directions), 2023

4.3.4 Investments in Subsidiaries, Associates and Joint

ventures

a) All investments (i.e., including debt and equity)
in subsidiaries, associates and joint ventures
shall be held at acquisition cost, subject
to the requirements as per RBI Circular-
Master Direction - Classification, Valuation
and Operation of Investment Portfolio of
Commercial Banks (Directions), 2023.

(b) Any discount or premium on the acquisition
of debt securities of subsidiaries, associates
and joint ventures shall be amortised over
the remaining life of the instrument. The
amortised amount shall be reflected in the
financial statements under item II 'Income on
Investments' of Schedule 13: 'Interest Earned'.

(c) In case where there is already an investment
in an entity which is not a subsidiary, associate
or joint venture and subsequently the investee
entity becomes a subsidiary, associate or joint
venture, the revised carrying value as at the date
of such investee entity becoming a subsidiary,
associate or joint venture shall be determined
as under:

i. Where the investment is held under HTM,
the carrying value less any permanent
impairment shall be the revised carrying
value.

ii. Where an investment is held under AFS,
the cumulative gains and losses previously
recognised in AFS-Reserve shall be reversed
and adjusted to thecarrying value of the
investment along with any permanent
diminution in the value of the investment
to arrive at the revised carrying value.

iii. Where an investment is held in FVTPL, the
fair value as on the date of the investee
becoming a subsidiary, associate or joint
venture shall be taken as the carrying value.

(d) When an investee ceases to be a subsidiary,
associate or joint venture, the investments shall
be reclassified to the respective category as
under

i. Where the investment is reclassified
into HTM, there shall be no change in
the carrying value and consequently no
accounting adjustment per se shall be
required.

ii. Where the investment is reclassified into
AFS or FVTPL, the fair value on the date of
such reclassification shall be the revised
carrying value. The difference between the
revised and previous carrying value shall be
transferred to AFS-Reserve and Profit and
Loss Account in case of reclassification into
AFS and FVTPL respectively.

(e) Any gain/ profit arising on the reclassification/
sale of an investment in a subsidiary, associate
or joint venture shall be first recognised in
the Profit and Loss Account and then 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 Reserves.

(f) Bank shall evaluate investments in subsidiaries,
associates or joint ventures for impairment at
least on a quarterly, if not more frequent basis.
A non-exhaustive list of indicators of potential
impairment is as under:

i. The entity has defaulted in repayment of its
debt obligations.

ii. The loan amount of the entity with any bank
has been restructured.

iii. The credit rating of the entity has been
downgraded to below investment grade.

iv. The entity has incurred losses for a
continuous period of three years and the
net worth has consequently reduced by 25
per cent or more.

v. There is a significant decline in the fair value
vis-a-vis the carrying value for a period of
six months or more. For the purpose of
this sub-clause the term significant shall be
interpreted as at least 20 per cent. Bank,
with the approval of their Boards, may
apply even more conservative thresholds.

vi. Any or all of the entity's outstanding
securities have been delisted, are in the
process of being delisted, or are under
threat of being delisted from an exchange
due to noncompliance with the listing
requirements or for financial reasons.

vii. In the case of a new entity/ project where
the originally projected date of achieving

4.5 SALE OF INVESTMENTS FROM HTM

(a) Any sales from HTM shall be as per a Board
approved policy. Details of sales out of HTM
shall be disclosed in the notes to accounts of
the financial statements in the format specified
in RBI Circular-Master Direction - Classification,
Valuation and Operation of Investment Portfolio
of Commercial Banks (Directions), 2023.

(b) In any financial year, the carrying value of
investments sold out of HTM shall not exceed
five per cent of the opening carrying value of the

HTM portfolio. Any sale beyond this threshold
shall require prior approval from DoS, RBI.

(c) Sales of securities in the situations given
below shall be excluded from the regulatory
limit of five per cent prescribed in RBI Circular-
Master Direction - Classification, Valuation and
Operation of Investment Portfolio of Commercial
Banks (Directions), 2023

i. Sales 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 Bank 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.

(d) Any profit or loss on the sale of investments in HTM
shall be recognised in the Profit and Loss Account
under Item II of Schedule 14:'Other Income'. The
profit on sale of an investments 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.

(e) Any gain/ profit arising on the reclassification/ sale
of an investment in a subsidiary, associate or joint

venture shall be first recognised in the Profit and Loss
Account and then 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 Reserves

4.5 FAIR VALUE OF INVESTMENTS

The fair value for the purpose of initial recognition
and periodical valuation of investments as required
by these Directions shall be determined as per the
valuation norms laid down in this Chapter.

4.6.1 Quotes Securities

The fair value for the quoted securities shall be
the prices declared by the Financial Benchmarks
India Private Ltd. (FBIL) in accordance with RBI
circularFMRD.DIRD.7/14.03.025/2017-18 dated
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 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).

4.6.2 Unquoted SLR Securities

(a) Treasury Bills shall be valued at carrying cost.

(b) Unquoted Central / State Government securities
shall be valued on the basis of the prices/ YTM
rates published by the FBIL.

(c) 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.

4.6.3 Unquoted Non-SLR Securities

I. Unquoted debentures & Bonds

a) Unquoted debentures and bonds shall be
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:

i. The mark-up applied shall be determined
based on the ratings assigned to the
debentures/ bonds by the credit rating
agencies and shall be subject to the
following:

• 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.

• The mark-up for unrated debentures or
bonds shall not be less than the mark¬
up applicable to rated debentures 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.

• Where the debentures/ bonds are quoted
and there have been transactions within 15
days prior to the valuation 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.

b) 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 (i.e., when
bonds' liabilities are with the DISCOMs)
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 (i.e., when bonds' liabilities are
with 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.

c) 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.

d) 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 preference
share not being valued above its redemption
value. The mark-up shall be graded according to
the ratings 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/coupons 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 percent
increments). The overarching principle should
be that valuation shall be based on conservative
assessment of cash flows with appropriate
discount rates to reflect the risk. Statutory
Auditors should also specifically examine as
to whether the valuations adequately reflect
the risk associated with such instruments. The
depreciation/provision requirement arrived
at in respect of non-performingshares where
dividends are in arrears shall not be allowed
to be set-off against appreciation on other
performing preference shares.

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 recognised exchange, the fair
value for the purposes of these directions shall be
the break-up value (without considering 'revaluation
reserves', if any) which is to be as certained 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. Incase the latest audited balance sheet
is not available or is more than 18 months old, the
shares shall be valued at ? 1 per company.

IV. Mutual Fund Units

a) Investment in un-quoted 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 a 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, Bank shall
comply with the requirements of Reserve Bank of
India (Transfer of LoanExposures) Directions, 2021,
as amended from time to time.

VII. Investment in Alternative Investment Funds
(AIFs)

a) Quoted equity shares, bonds, units of AIFs in
the bank's portfolio shall be valued mutatis
mutandis as per instructions given in these
directions for quoted securities.

b) Unquoted instruments of AIFs shall be valued as
under:

i. Units: The valuation shall be done at the
NAV as disclosed by the AIF. 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

(Alternative Investment Fund) Regulations,
2012, the value of its units shall be treated
as ?1 for the purpose of these Directions.
In case AIF is not registered under SEBI
(Alternative Investment Fund) Regulations,
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 shall
be treated as ?1 for the purpose of these
Directions.

ii. Other instruments: The valuation of
unquoted equity and other instruments
issued by an AIF shall be as per the
methodology specified for such instruments
above.

iii. As per RBI Circular dated 27.03.2024,
RBI/2023-24/140

DO R.STR.REC. 85/21.04.048/2023-24
Provisioning shall be required only to the extent
of investment by the Regulated entities (REs) in
the AIF scheme which is further invested by the
AIF in the debtor company, and not on the entire
investment of the RE in the AIF scheme

VIII. Conversion of principal and unpaid interest into
debt, preference or equity shares In cases of
conversion of principal and unpaid interest into debt,
preference or equity instruments bank shall follow
the requirements of the Prudential Framework for
Resolution of Stressed Assets issued vide circularDBR.
No.BP.BC.45/21.04.048/2018-19 dated June 7, 2019,
as amended from time to time.

IX. To increase consistency and comparability in fair
value measurements and related disclosures, the
bank shall categorize its investment portfolio into
three fair value hierarchies viz. Level 1, Level 2, and
Level 3 as defined in Clause 4 above. The details of
the investment portfolio shall be disclosed in their
notes to accounts of their financial statements. These
disclosure requirements shall become effective from
the audited financial statements for the financial

year ending March 31,2026, onwards.

X. Bank shall 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 shall be
deducted from CET 1 capital.

Provided that this clause shall not apply to
investments that meet the SPPI criteria and are
required to be risk weighted at 50 per cent or lower
for credit risk as per applicable regulatory instructions
on capital adequacy.

4.7 Income Recognition, Asset Classification and

Provisioning

4.7.1 Income Recognition

a) Bank shall recognize income on accrual basis for
the following investments:

i. Government Securities, bonds and
debentures of corporate bodies, where
interest rates on these securities are
predetermined and provided interest is
serviced regularly and is not in arrears.

ii. Shares of corporate bodies provided
dividend has been declared by the corporate
body in its Annual General Meeting and
the owner's right to receive payment is
established.

b) Income from units of mutual funds, alternative
investment funds and other such pooled/
collective investment funds shall be recognized
on cash basis.

c) Subject to sub-clause (a) above, dividend income
on equity investments held under AFS shall be
recognised in the Profit and Loss Account.

4.7.2 Accounting for Broken Period Interest: Bank shall
not capitalize the broken period interest paid to the
seller as part of cost and shall treat it as an item of
expenditure under Profit & Loss Account in respect of

investments in securities.

4.7.3 Non-PerformingInvestments (NPI)

a) 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 investment 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.

i. In respect of debt instruments such as
bonds or debentures, an NPI is one where
interest/ instalment (including maturity
proceeds) is due and remains unpaid for
more than 90 days.

ii. Sub-clause (a)(i) above shall apply, mutatis
mutandis to preference shares where the
fixed dividend is not paid. If the dividend
on preference shares (cumulative or non¬
cumulative) is not declared / paid in any
year it shall be treated as due / unpaid in
arrears and the date of balance sheet of
the issuer for that particular year shall be
reckoned as due date for the purpose of
asset classification. Such an investment can
be upgraded subsequently on payment of
dividend for the current period in the case
of non-cumulative preference shares and
payment of dividend in arrears and for
current period in the case of cumulative
preferences shares.

iii. In the case of equity shares, in the event the
investment in the shares of any company is
valued at ?1 per company on account of
the non-availability of the latest balance
sheet in accordance with RBI Circular-
Master Direction - Classification, Valuation
and Operation of Investment Portfolio of
Commercial Banks (Directions), 2023, those
equity shares shall be reckoned as NPI.

The NPI can be upgraded subsequently on
receipt of audited balance sheet.

iv. If any credit facility availed by the issuer is
NPA in the books of the bank, investment in
any of the securities, including preference
shares issued by the same issuer shall also
be treated as NPI and vice versa. However,
this stipulation shall not be applicable in
cases where only the preference shares
are classified as NPI, and in such cases, the
investment in any of the other performing
securities issued by the same issuer need
not be classified as NPI and any performing
credit facilities granted to that borrower
need not be treated as NPA.

v. In case of conversion of principal and / or
interest into equity, debentures, bonds,
etc., such instruments shall be classified in
the same asset classification category as
the loan and provision shall be made as per
the norms. In case of post conversion, if the
classification is standard or is subsequently
upgraded to standard as per IRACP norms,
the investment shall be categorised in HTM,
AFS or FVTPL (including HFT) as per the RBI
Circular-Master Direction - Classification,
Valuation and Operation of Investment
Portfolio of Commercial Banks (Directions),
2023.

b) Once an investment is classified as an NPI, it
should be segregated from rest of the portfolio
and not considered for netting valuation gains
and losses.

c) Bank shall not accrue any income on NPIs.
Income shall be recognised only on realisation
of the same. Further, any MTM appreciation in
the security shall be ignored.

d) Irrespective of the category (i.e., HTM, AFS or
FVTPL (including HFT)) in which the investment
has been placed, the expense for the provision
for impairment shall always be recognised in the

Profit and Loss Account. The provision to be held
on an NPI shall be the higher of the following
amounts:

i. The amount of provision required as per
IRACP norms computed on the carrying
value of the investment immediately before
it was classified as NPI; and

ii. The depreciation on the investment with
reference to its carrying value on the date
of classification as NPI.

In view of the above, no additional provision for
depreciation shall be required over and above
the provision for NPI as specified above.

Provided that in the case of an investment
categorised under AFS against which there are
cumulative gains in AFS-Reserve, the provision
required maybecreatedbychargingthesametoA
FS-Reservetotheextentofsuch available gains.

Provided further that in the case of an investment
categorised under AFS against which there are
cumulative losses inAFS-Reserve, thecumulative
losses shall be transferred from AFS-Reserve to
the Profit and Loss Account.

e) Upon an account being upgraded as per IRACP
norms, any provision previously recognised shall
be reversed and symmetric recognition of MTM
gains and losses can resume.

f) Investments in Government securities and

Government guaranteed investment.

i. Investments in Central Government

Securities and State Government Securities
shall not be classified as NPI.

ii. Investments in Central Government

guaranteed securities shall also not

be classified as NPI until the Central
Government has repudiated the guarantee
when invoked. Inrespect of such securitie
sheld in AFS and FVTPL, bank shall continue
to recognise MTM gains/losses in AFS-
Reserve and Profit and Loss respectively.

However, any income shall be recognised
only on realisation basis.

iii. Investment in State Government

guaranteed securities, shall attract

prudential norms for identification of NPI
and provisioning, when interest/ instalment
of principal (including maturity proceeds) or
any other amount due to the bank remains
unpaid for more than 90 days.

4.7.4 Investment Fluctuation Reserve

a) Banks shall create an Investment Fluctuation
Reserve (IFR) until the amount of IFR is at least
two per cent of the AFS and FVTPL (including HFT)
portfolio, on a continuing basis, by transferring
to the IFR an amount not less than the lower of
the following:

i. Net profit on sale of investments during the
year.

ii. Net profit for the year, less mandatory
appropriations.

b) IFR shall be eligible for inclusion in Tier II capital.
The cap applicable on recognition of General
Provisions and Loss Reserves as Tier II capital is
not applicable on IFR.

c) Bank shall, be permitted to draw down the
balance available in IFR in excess of two percent
of its AFS and FVTPL (including HFT) portfolio, for
credit to the balance of profit/loss as disclosed
in the profit and loss account at the end of any
accounting year.

d) In the event the balance in the IFR is less than
two percent of the AFS and FVTPL (including
HFT) investment portfolio, a draw down shall be
permitted subject to the following conditions:

i. The drawn down amount is used only for
meeting the minimum CET 1/Tier 1 capital
requirements by way of appropriation to
free reserves or reducing the balance of
loss.

ii. The amount drawn down shall not be more
than the extent the MTM provisions/losses
during the aforesaid year exceed the net
profit on sale of investments during that
year.

4.7.5 Derivatives

a) Bank shall comply with the requirements of the
Guidance Note on Accounting for Derivative
Contracts (revised 2021) issued by the Institute
of Chartered Accountants of India. Bank shall
present their derivative asset and liabilities
as separate line items under Schedule 11:
'Other Assets' and Schedule 5: 'Other Liabilities'
respectively. Bank may make adjustments to the
carrying value of their investments in compliance
with the hedge accounting requirements.

b) Bank shall categorize their derivatives portfolio
into three fair value hierarchies viz. Level 1,
Level 2, and Level 3 as defined in RBI Circular-
Master Direction - Classification, Valuation and
Operation of Investment Portfolio of Commercial
Banks (Directions), 2023 and disclose the same
in the notes to accounts of their financial
statements.

c) Bank shall not pay dividends out of net
unrealised gains recognised in the Profit and
Loss Account arising on fair valuation of Level 3
derivatives assets and liabilities on their Balance
Sheet. Further, such net unrealised gains on
Level 3 derivatives recognised in the Profit
and Loss Account shall be deducted from
CET 1 capital.

4.7.6 Transition and Repeal Provisions

a) At the time of transition to these directions (i.e.,
on April 1, 2024), Bank shall re- classify their
investment portfolio as at March 31,2024, as per
the directions laid down in RBI Directions. The
balance in provision for depreciation, as at March
31, 2024, shall be reversed into the Revenue/
General Reserve. The balances in Investment
Reserve Account (IRA), if any, as of March 31,

Circular, RBI advised that the difference between
the revised and previous carrying value shall
be adjusted in Revenue/General Reserve rather
than AFS-Reserve. However, in the case of equity
instruments designated under AFS difference
between the revised and previous carrying value
shall be adjusted in AFS-Reserve.

• Accounting for Repo/Reverse Repo transactions:

All types of repo/reverse repo transactions with
RBI including LAF, variable rate term operations,
Long term Repo operations (LTRO), MSF and also
Market Repo transactions are accounted as per RBI
guidelines.

The securities sold and purchased under Repo/
Reverse Repo are accounted as Triparty Repo
wherein securities are transferred as in the case of
normal outright sale/purchase transactions and such
movement of securities is reflected using the Repo/
Reverse Repo Accounts and Contra entries. 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)
and balance in Reverse Repo Account is classified as
under:

(a) All type of reverse repos with the Reserve Bank of
India 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'.

(b) 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 'Balances
with banks and money at call and short notice'.

(c) Reverse repos with banks and other institutions
having original tenors more than 14 days shall
be classified under Schedule 9 - 'Advances'
under the following heads:

i. A.(ii) 'Cash credits, overdrafts and loans
repayable on demand'

ii. B.(i) 'Secured by tangible assets'

iii. C.(I).(iii) Banks (iv) 'Others' (as the case
may be)

5. FINANCIAL ASSETS SOLD TO RECONSTRUCTION
COMPANIES (RC)

5.1 Security Receipts (SR) issued by SCs/RCs in respect of

financial assets sold to them is recognized at lower
of redemption value of SRs and Net Book Value of
financial assets. SRs are valued at:

(a) SRs issued by SCs/RCs prior to 01.04.2017 at Net
Asset Value declared by SCs/RCs on the Balance
Sheet date and depreciation, if any, is provided
for and appreciation is ignored.

(b) As per amended guidelines issued by RBI
with effect from April 01,2017, provisioning
requirement on SRs will be higher of

(i) provisioning rate in terms of Net Asset
Value declared by the SCs/RCs

(ii) provisioning rate as applicable to the
underlying loans, assuming that the loans
notionally continued in the books of the
bank

5.2 In case of financial assets sold to RC, the valuation
and, income recognition is being done as per RBI
Guidelines. If the sale is for value lower than the
Net Book Value (NBV) (i.e, book value less provisions
held), the shortfall is debited to the Profit and Loss
account or met out of utilisation of Floating provision
held, as per extant RBI guidelines

If the cash received (by way of initial consideration
and /or redemption of security receipts) is higher
than the Net Book value of the Non-Performing Asset
(NPA) sold to RC, then excess provision is reversed to
the profit and Loss account. The quantum of excess
provision reversed to profit and loss account is
limited to the extent to which cash received exceeds
the NBV of the NPA sold.

6. ADVANCES

6.1 In accordance with the prudential norms issued by
RBI, advances in India are classified into Standard,
Sub-Standard, Doubtful and Loss assets borrower-
wise.

6.2 Provisions are made for non-performing advances
as under:

a) Sub Standard:

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

ii) Additional provision of 10% for exposure
which are unsecured ab-initio (ie., where
realizable value of securities is not more
than 10% ab-initio)

b) Doubtful category-1

i) 25 % for Secured portion.

ii) 100% for Unsecured portion.

c) Doubtful Category - 2

i) 40 % for Secured portion.

ii) 100% for Unsecured portion.

d) Doubtful category-3 and Loss advances - 100 %.

• Provision is made for standard advances
including Restructured / Rescheduled
standard advances as per RBI directives.

• In respect of foreign branches, income
recognition, asset classification and
provisioning for loan losses are made as per
local requirement or as per RBI prudential
norms, whichever is more stringent.

Further, if an asset in the overseas books
of the Bank requires to be classified as NPA
at any point of time in terms of regulations
issued by Reserve Bank of India, then
all the facilities granted by the bank to
the borrower and investment in all the
securities issued by the borrower will be
classified as NPAs/NPIs.

However, accounts classified as Non-
performing/Impaired assets (NPAs) by host
regulators for reasons other than record of
recovery, would be classified as NPAs at the
time of consolidating financial statements
in India and provided for, as required;
whereas asset classification of other credit
exposures to the same counterparties in
other jurisdictions (including India) will
continue to be governed by the extant
guidelines in the respective jurisdictions.

• Advances disclosed are net of provisions
made for non-performing assets, DICGC/
ECGC/ CGTMSE claims received and held
pending adjustment, repayments received
and kept in sundries account, participation
certificates, usance bills rediscounted.

7. FIXED ASSETS / DEPRECIATION

7.1 Fixed assets are carried at cost / revalued amount
less accumulated depreciation / amortization

7.2 Cost includes cost of purchase and all expenditure
such as site preparation, installation costs and
professional fees incurred on the asset before it
is put to use. Subsequent expenditure(s) incurred
on the assets put to use are capitalized only when
it increases the future economic benefits from such
assets on their functioning capacity.

7.3 Depreciation on buildings (including cost of land
wherever inseparable / not segregated) and other
fixed assets in India will be provided for on the
straight-line method at the rates / useful life, as
specified below:

7.4 In respect of assets sold / acquired during the year,
depreciation will be charged on proportionate basis
for the number of days the assets have been put to
use / from the Date of capitalization during the year.

7.5 Assets costing upto 5000/- will be fully depreciated in
the year of purchase.

7.6 The revalued asset will be depreciated over the
balance useful life of the asset as assessed at the
time of revaluation.

The increase in Net Book Value of the asset due
to revaluation will be credited to the Revaluation
Reserve Account without routing through the
Profit and Loss Account. Depreciation relatable to
revalued component will be charged against revenue
expenditure and an equivalent amount will be
charged straight away against revaluation reserve
and credited to the revenue reserve, as per revised
AS 10 issued by ICAI.

7.7 In respect of Assets where subsidy is received
from Government, the same will be credited to the
respective asset account and depreciation will be
charged accordingly.

7.8 Premium on leasehold land will be capitalized in the
year of acquisition and amortized over the period of
lease.

7.9 Depreciation in respect of fixed assets at foreign
branches will be provided as per the practice
prevailing in the respective countries.

7.10 In respect of Non-Banking Assets, no depreciation
will be charged.

8. REVENUE RECOGNITION

8.1 Income and expenditure are generally accounted for
on accrual basis, unless otherwise stated.

8.2 Income from non-performing assets, Central
Government guaranteed assets (where it is overdue
beyond 90 days), dividend income, insurance claims,
commission on letters of credit / guarantees issued
(other than those relating to project finance), income
from wealth management, additional interest
/ overdue charges on bills purchased, finance
charges on credit cards, income on Bank's right to
recompense, AMC charges on debit cards, all other
commission / fee income are accounted for on
realisation basis and locker rent received, income
from Bancassurance products are accounted on
accrual basis. Commission / Fees Income earned on
sale of PSLCs are accounted on accrual basis and
recognized proportionately during the quarter over
the remaining period of PSLCs.

8.3 In case of overdue foreign bills, interest and other
charges are recognised till the date of crystallisation
as per FEDAI guidelines.

8.4 Any Recovery in NPA accounts should be first
appropriated to Book Balance (Principal) and then
to Unpaid Legal Expenses (MLE), Unpaid Other
Expenses (MOX), Unpaid Charges and thereafter
to Unpaid Interest (MOI). However, in the case of
restructured NPA accounts where, as per sanction
terms, interest is to be serviced immediately and the
principal repayment to start at a later date, recovery
of interest made in such accounts should be taken
to income account and not to be treated as principal
repayment.

In case of subsequent changes in NPA management
policy with regard to appropriation of recovery in NPA

accounts, the same will be a part of the Significant
Accounting policy of Bank.

9. CREDIT CARD REWARD POINTS

Reward points earned by card members on use of
Card facility is recognized as expenditure on such
use.

10. NET PROFIT / LOSS

The result disclosed in the Profit and Loss Account is
after considering:

- Provision for Non-Performing Advances and / or
Investments.

- General provision on Standard Advances

- Provision for Restructured Advances

- Provision for Depreciation on Fixed Assets

- Provision for Depreciation on Investments

- Transfer to/ from Contingency Fund

- Provision for direct taxes

- Provision for Unhedged Foreign Currency
Exposure

- Usual or/and other necessary provisions

11. STAFF RETIREMENT BENEFITS

i) PROVIDENT FUND

Provident fund is a statutory obligation and in the
case of Contributory Provident Fund Optees, the
Bank pays fixed contribution at pre-determined
rates. The obligation of the Bank is limited to
such fixed contribution. The contributions are
charged to Profit and Loss Account. The fund is
managed by Indian Bank Staff Provident Fund
Trust.

ii) GRATUITY

Gratuity liability is a statutory obligation as per
Indian Bank Employees' Gratuity Fund Rules and
Regulations and is provided for on the basis of
an actuarial valuation made at the end of the
financial year. The gratuity liability is funded
by the Bank and is managed by Indian Bank
Employees Gratuity Fund Trust.