1. BASIS OF PREPARATION:
1.1 The Bank's financial statements have been prepared
under the historical cost convention on the accrual
basis of accounting and ongoing concern basis, unless
otherwise stated. They conform to Generally Accepted
Accounting Principles (GAAP) in India, which comprises
applicable statutory provisions, regulatory/Reserve
Bank of India (RBI) guidelines, Accounting Standards/
Guidance Notes issued by the Institute of Chartered
Accountants of India (ICAI) and practices prevalent
in the banking industry in India. In respect of foreign
offices, statutory provisions and practices prevailing in
respective foreign countries are complied with.
Use of Estimates
1.2 The preparation of financial statements requires the
Management to make estimates and assumptions which
are considered in the reported amounts of assets and
liabilities (including Contingent Liabilities) as of the date
of the financial statements and the reported income and
expense for the reporting period. Management believes
that the estimates used in the preparation of the financial
statements are prudent and reasonable. Future results
could differ from these estimates.
2. REVENUE RECOGNITION AND EXPENSE
ACCOUNTING
2.1 Income is recognized on accrual basis on
performing assets.
Recovery in case of Non-Performing Assets is first
appropriated towards principal and the balance, if any,
towards interest and charges.
Recovery in case of Suit Filed Accounts shall be
appropriated towards principal or as per the directives
of the court concerned.
Recovery under One Time Settlement (OTS) shall be
appropriated towards principal and excess over principal
shall be adjusted towards interest.
If any borrower account is classified as NPA from back
date, any recovery till such present date of classification
is first appropriated towards interest and the balance,
if any, towards principal. Subsequent recovery made
in such Non-Performing Assets is first appropriated
towards principal and the balance, if any, towards
interest and charges.
In case of assets sold to Asset Reconstruction Companies
(ARCs), the income is recognized to the extent of cash
component of the Sale Consideration received, where
the sale consideration is over and above Net Book Value
(i.e. Book outstanding less Provisioning).
NCLT admitted accounts shall be treated as suit filed
accounts and the appropriation of recovery in these
NCLT accounts whether it is from the process initiated
against the corporate debtor or guarantors shall be done
as in suit filed accounts.
Recovery by way of debentures/equity/other debt
or equity or quasi equity instruments etc in the NCLT
approved resolution plan amount as cash recovery to
be appropriated in the same manner as is done in suit
filed accounts i.e. first towards principal and remaining
amount towards interest.
2.2 Interest on bills purchased/Mortgage Backed
Securities, Commission (except on Letter of Credit/
Letter of Guarantee/Government Business/Insurance),
Exchange, Locker Rent and Dividend are accounted for
on realization basis.
2.3 Income from consignment sale of precious metals is
accounted for as Other Income after the sale is complete.
2.4 Expenditure is accounted for on accrual basis, unless
otherwise stated.
2.5 In respect of Inoperative Savings Bank Accounts,
unclaimed Savings Bank accounts and unclaimed Term
Deposits, interest is accrued as per RBI guidelines.
2.6 Legal expenses in respect of Suit Filed Accounts are
charged to Profit and Loss Account. Such amount when
recovered is treated as income.
2.7 In respect of foreign branches, Income and Expenditure
are recognized/accounted for as per local laws of the
respective countries.
3. FOREIGN CURRENCY TRANSACTIONS
3.1 Accounting for transactions involving foreign exchange
is done in accordance with Accounting Standard (AS)
11, "The Effects of Changes in Foreign Exchange
Rates”, issued by The Institute of Chartered Accountants
of India.
3.2 Transactions in respect of Treasury (Foreign):
a) Foreign Currency transactions, except foreign
currency deposits and lending, are recorded
on initial recognition in the reporting currency
by applying to the foreign currency amount the
exchange rate between the reporting currency
and the foreign currency on the date of transaction.
Foreign Currency deposits and lendings are initially
accounted at the then prevailing FEDAI weekly
average rate.
b) Closing Balances in NOSTRO and ACU Dollar
accounts are stated at closing rates. All foreign
currency deposits and lendings including contingent
liabilities are stated at the FEDAI weekly average
rate applicable for the last week of each quarter.
Other assets, liabilities and outstanding forward
contracts denominated in foreign currencies are
stated at the rates on the date of transaction.
c) The resultant profit or loss on revaluation of all
assets, liabilities and outstanding forward exchange
contracts including contingent liabilities at year-
end exchange rates advised by FEDAI is taken to
revenue with corresponding net adjustments to
"Other Liabilities and Provisions”/”Other Asset
Account” except in case of NOSTRO and ACU
Dollar accounts where the accounts stand adjusted
at the closing rates.
d) Income and expenditure items are translated at the
exchange rates ruling on the date of incorporating
the transaction in the books of accounts.
3.3 Translation in respect of overseas branches:
a) As stipulated in Accounting Standard 11, all overseas
branches are treated as Non Integral Operations.
b) Assets and Liabilities (including contingent
liabilities) are translated at the closing spot rates
notified by FEDAI at the end of each quarter.
c) Income and Expenses are translated at quarterly
average rate notified by FEDAI at the end of
each quarter.
d) The resulting exchange differences are not
recognized as income or expense for the period
but accumulated in a separate account "Foreign
Currency Translation Reserve” till the disposal of
the net investment.
4. INVESTMENTS
4.1 In line with the RBI Guidelines, Banks shall classify their
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) and Fair Value through Profit and Loss
(FVTPL). Held for Trading (HFT) shall be a separate
investment sub-category within FVTPL.
The premium/discount, if any, of acquisition cost in
comparison the face value of each security (other than
NPI) is amortized/accrued on straight line method, over
the remaining period of maturity.
Disclosures of Investments are made under six
classifications viz.,
a) Government Securities
b) Other Approved securities including those issued
by local bodies,
c) Shares,
d) Bonds & Debentures,
e) Subsidiaries/Joint Ventures and
f) Others (to be specified).
4.2 Interest on Investments, where interest/principal is in
arrears for more than 90 days and income from Units of
Mutual Funds, is recognized on realization basis as per
prudential norms.
4.3 Valuation of Investments is done in accordance with the
guidelines issued by RBI as under:
4.3.1. Individual securities under "Fair Value through
Profit & Loss "(FVTPL)” and "Available for Sale”
categories are marked to market at quarterly
intervals. Individual securities under HFT are
marked to market on daily basis.
The performing 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.
Central Government securities and State
Government securities are valued at
market rates declared by FBIL (Financial
Benchmarks India Pvt Ltd). Securities of State
Government, other Approved Securities and
Bonds & Debentures are valued as per the
yield curve, credit spread rating-wise and
other methodologies suggested by FIMMDA
(Fixed Income Money Market and Derivatives
Association of India). Quoted equity shares
are valued at market rates, Unquoted equity
shares and units of Venture Capital Funds are
valued at book value/NAV ascertained from
the latest available balance sheets, otherwise
the same are valued at Re. 1/- per company/
Fund.
Treasury Bills, Commercial Papers and
Certificate of Deposits are valued at carrying
cost. Units held in Mutual fund schemes are
valued at Market Price or Repurchase price
or Net Asset Value in that order depending
on availability.
Valuation of Preference shares is made on YTM
basis with appropriate mark-up over the YTM
rates for Central Government Securities put
out by the PDAI (Primary Dealers Association
of India)/FBIL periodically.
Based on the above valuations, 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
appreciation or depreciation shall be directly
credited or debited to a reserve named AFS-
Reserve after netting of applicable taxes.
The book value of individual securities would
undergo change due to valuation at the
prescribed intervals in the books of account.
4.3.2. "Held to Maturity”: Such investments are
carried at acquisition cost/amortized cost/
carrying value.
Investments in subsidiaries, associates and
sponsored institutions are valued at carrying
cost after testing for impairment.
4.4 Investments are subject to appropriate provisioning/de
-recognition of income, in line with the prudential norms
prescribed by RBI for NPA classification. Bonds and
Debentures in the nature of advances are also subject
to usual prudential norms and accordingly provisions
are made, wherever applicable.
4.5 Profit/Loss on Sale of Investments in any category
(viz. Held for Trading, Available for Sale and FVTPL)
is taken to Profit & Loss account as per the extant RBI
Master Directions.
In case of Profit on Sale of Investments in "Held to
Maturity” category, Profit net of taxes and the amount
required to be transferred to Statutory Reserves is
appropriated to "Capital Reserve Account”.
Upon sale or maturity of a debt instrument in AFS
category, the accumulated gain/loss for that security
in the AFS-Reserve and Deferred Tax Liability (DTL)
shall be transferred from the AFS-Reserve along with
DTL if applicable and recognized in the Profit and
Loss Account.
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.
4.6 Broken period interest, Incentive/Front-end fees,
brokerage, commission etc. received on acquisition of
securities are taken to Profit and Loss account. Broken
Period interest does not arise in case of Treasury Bills.
Income is accounted based on the difference between
the holding cost and the face value i.e. discount income.
4.7 Repo/Reverse Repo transactions are accounted as per
RBI guidelines.
4.8 Investments held by overseas branches are classified
and valued as per guidelines issued by respective
overseas Regulatory Authorities.
4.9 All the investments are held by adopting the Weighted
Average Pricing Method
4.10 All the investments are held in the book on settlement
date basis only
4.11 Dividend income on investments is accounted on
cash basis
4.12Investments are shown in the Balance Sheet at net off
provision held in respect of Non Performing Investments
4.13 Investments matured for payment are shown under
"Other Assets” and underlying provisions held for Non
Performing Investments is also netted off from the
said investments.
4.14 As per RBI Circular no. RBI/2017-18/147 DBR No. BP BC.
102/21.04.0489/2017-18 dated April 2, 2018, from the
year 2018-19 an Investment Fluctuation Reserve (IFR)
is to be created to build up adequate reserves to protect
the bank against increase in yields in future.
The Transfer to Investment Fluctuation Reserve (IFR) is
to be the lower of the following:
a) Net Profit on sale of investments during the year or
b) Net profit for the year less mandatory appropriations,
until the amount of IFR is at least 2% of the HFT and AFS
Portfolio, on a continuing basis.
4.15 As per RBI circular ref no: RBI/DOR/2024-25/135
DOR.STR.REC.72/21.04.04 8/2024-25 dated
March 29, 2025, Revised norms for Government
Guaranteed Security Receipts (SRs), the accounting of
Government guaranteed Security Receipts to be done
as follows:
If a loan is transferred to an ARC for a value higher than
the net book value (NBV), the excess provision to be
reversed to the Profit and Loss Account in the year of
transfer if the sale consideration comprises only of cash
and SRs guaranteed by the Government of India.
Govt Guaranteed SRs shall be valued periodically by
reckoning the Net Asset Value (NAV) declared by the
ARC based on the recovery ratings received for such
instruments. However, any unrealized gains recognized
in the Profit and Loss Account on account of fair
valuation of such investments shall be deducted from
CET 1 capital, and no dividends will be paid out of such
unrealized gains.
Any SRs outstanding after the final settlement of the
government guarantee or the expiry of the guarantee
period, whichever is earlier, will be valued at one
rupee (?1).
5. ADVANCES:
5.1 Advances in India have been classified as 'Standard',
'Sub-standard', 'Doubtful' and 'Loss assets' and
provisions for losses on such advances are made as
per prudential norms issued by Reserve Bank of India
from time to time. In case of overseas branches, the
classification and provision is made based on the
respective country's regulations or as per norms of
Reserve Bank of India whichever is higher.
5.2 Advances are stated net of provisions, except general
provisions for standard advances.
5.3 For Restructured/Rescheduled Assets, provisions are
made in accordance with the guidelines issued by
the RBI, which require that the difference between
the fair value of the loans/advance before and after
restructuring is provided for,
in addition to provision for the respective loans/advances. The
Provision for Diminution in Fair Value and interest sacrifice,
if any, arising out of the above is reduced from advances.
In the case of loan accounts classified as NPAs, an account
may be reclassified as performing asset if it conforms to the
guidelines prescribed by the Regulators
6. DERIVATIVES
6.1 The Bank enters into Derivative Contracts in order
to hedge interest bearing assets/liabilities, and for
trading purposes.
6.2 In respect of derivative contracts which are entered
for hedging purposes, the net amount receivable/
payable is recognized on accrual basis. Gains or losses
on termination of such contracts are deferred and
recognized over the remaining contractual life of the
derivatives or the remaining life of the assets/liabilities,
whichever is earlier. Such derivative contracts are
marked to market and the resultant gain or loss is not
recognized, except where the derivative contract is
designated with an asset/liability which is also marked
to market, in which case, the resulting gain or loss is
recorded as an adjustment to the market value of the
underlying asset/liability.
6.3 Derivative contracts entered for trading purposes
are marked to market as per the generally accepted
practices prevalent in the industry and the changes
in the market value are recognized in the profit and
loss account. Income and expenses relating to these
contracts are recognized on the settlement date. Gain
or loss on termination of the trading derivative contracts
are recorded as income or expense.
7. FIXED ASSETS (PROPERTY, PLANTAND EQUIPMENT)
7.1 Fixed Assets, except revalued premises, are stated at
historical cost.
7.2 Depreciation is provided on straight-line method at
the rates considered appropriate by the Management
as under:
Depreciation on revalued portion of the fixed assets is
charged to the profit and loss account, and equivalent
amount is transferred from Revaluation reserve
to Revenue Reserves. The revalued premises are
depreciated over the remaining useful life of the asset as
assessed at the time of revaluation subject to maximum
prescribed as above.
7.3 Capitalization of the furniture/fixtures can be done in
view of the nature and use of the items.
7.4 Depreciation of the assets is provided for the full year
irrespective of the date of acquisition/revaluation.
(Under straight line method)
7.5 Depreciation of the assets is allowed only if the assets
is put to use in the year of purchased.
7.6 If the value of single asset is less than or equal to
?1000/-, Bank will not capitalize the asset and treat the
assets as a revenue expenditure. So, in this case ,asset
will not eligible for capitalization .
7.7 If the value of single asset is more than ?1000/- but
less than ?5000/-, it will be eligible for capitalization.
However, depreciation will be applicable to the extent of
100% of value of asset at the end of the financial year.
Thereafter, it will carry ?!/- in the books.
7.8 Depreciation is provided on Land and Building as a
whole where separate costs are not ascertainable.
7.9 In respect of leasehold properties, premium is amortized
over the period of lease.
7.10 Depreciation on Fixed Assets of foreign branches is
provided as per the applicable laws/practices of the
respective countries.
8. STAFF BENEFITS
8.1 Contribution to Provident Fund and National Pension
System is charged to Profit and Loss Account.
8.2 Provision for gratuity and pension liability is made on
actuarial basis and contributed to approved Gratuity
and Pension Funds. Provision for encashment of
accumulated leave payable on retirement is made based
on actuarial valuation at the year-end.
8.3 In respect of overseas branches gratuity is accounted
for as per laws prevailing in the respective countries.
9. TAXES ON INCOME
Income tax expense is the aggregate amount of current tax
and deferred tax expense incurred by the Bank. The current
tax expense and deferred tax expense are determined in
accordance with the provisions of the Income Tax Act, 1961
and as per Accounting Standard 22 - "Accounting for Taxes
on Income” respectively after taking into account taxes paid
at the foreign offices, which are based on the tax laws of
respective jurisdictions. Deferred Tax adjustments comprises
of changes in the deferred tax assets or liabilities during
the year. Deferred tax assets and liabilities are recognized
by considering the impact of timing differences between
taxable income and accounting income for the current year,
and carry forward losses. Deferred tax assets and liabilities
are measured using tax rates and tax laws that have been
enacted or substantively enacted at the balance sheet date.
The impact of changes in deferred tax assets and liabilities is
recognized in the profit and loss account. Deferred tax assets
are recognized and re-assessed at each reporting date, based
upon management's judgment as to whether their realization
is considered as reasonably certain. Deferred Tax Assets are
recognized on carry forward of tax losses only if there is
virtual certainty supported by convincing evidence that such
deferred tax assets can be realized against future profits.
10. EARNINGS PER SHARE
The Bank reports basic and diluted earnings per equity share
in accordance with Accounting Standard - 20, "Earnings Per
Share”, issued by The Institute of Chartered Accountants of
India. Basic earnings per equity share has been computed
by dividing net profit for the year by the weighted average
number of equity shares outstanding for the period. Diluted
earnings per share reflect the potential dilution that could
occur if securities or other contracts to issue equity shares
were exercised or converted during the year. Diluted earnings
per equity share have been computed using the weighted
average number of equity shares and dilutive potential equity
shares outstanding at the year-end except where the results
are anti-dilutive.
11. 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 in the Profit and Loss Account to the
extent the carrying amount of assets exceed their estimated
recoverable amount.
12. SEGMENT REPORTING
The Bank recognizes the business segment as the primary
reporting segment and geographical segment as the
secondary reporting segment in accordance with the RBI
guidelines and in compliance with the Accounting Standard
17 issued by Institute of Chartered Accountants of India.
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