B. BASIS OF PREPARATION

The financial statements are prepared following the going
concern concept, on historical cost basis and conform to
the Generally Accepted Accounting Principles (GAAP) in
India which encompasses applicable statutory provisions,
regulatory prescriptions and extant disclosure norms
prescribed by the Reserve Bank of India (RBI) from time
to time, notified Accounting Standards (AS) issued under
Section 133 of the Companies Act, 2013, read together
with Companies (Accounting Standards) Rules, 2021 and
current practices prevailing in the banking industry in India.
The accounting policies adopted in the preparation of
financial statements are consistent with those followed in
the previous year except in case of valuation of investments.

Use of Estimates

The preparation of the financial statements requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
including contingent liabilities as of the date of the financial
statement and the reported income and expenses during
the reported period. The Management believes that the
estimates and assumptions used in the preparation of the
financial statements are prudent and reasonable. Actual
results could differ from these estimates. The differences, if
any, between estimates and actual will be dealt appropriately
prospectively in the current and future periods.

C. PRINCIPAL ACCOUNTING POLICIES

1. Revenue Recognition

Income and Expenditure are generally accounted on
accrual basis, except otherwise stated.

Interest/other charges from loans, advances and
investments other than on non-performing assets,
are recognized on accrual basis. Interest income on
non-performing advances (NPA)/ investments (NPI),
income from funded interest term loan accounts (FITL)
are recognized upon realisation, as per prudential
norms prescribed by RBI.

The policy of income recognition shall be objective
and based on the record of recovery. No interest will
be taken into income account on any NPA or NPI.
This will apply to Government guaranteed accounts

also. However, interest on advances against Term
Deposits, National Savings Certificates (NSCs), Indira
Vikas Patras (IVPs), Kisan Vikas Patras (KVPs) and
life policies will be taken to income account on the
due date, provided adequate margin is available in
the accounts.

Accounting for recoveries made in NPA

Recoveries made in NPA are appropriated in the
order of charges, interest and principal dues unless
otherwise agreed to with the borrower in a different
sequence; in cases where the borrower requires the
recovery to be appropriated in a different sequence,
the same is undertaken accordingly. In respect of One
Time Settlement accounts, the recoveries are first
adjusted to principal balance.

In compromise settlement cases / sale to Asset
Reconstruction Companies (ARC), sacrifice on
settlement is accounted at the time of closure
of account.

Commission on bank guarantees / letters of credit,
locker rent, annual fee on cards, commission on
bancassurance and third party products, premium
on sale of Priority Sector Lending Certificate and
Commission received on Government Agency Business
are accounted on receipt basis. Processing / other
fees collected on loans approved / disbursed, along
with related loan acquisition costs are recognised at
inception / renewal of the facility. Dividend income
and interest on income tax refund is recognised when
the right to receive payment is established. Stationery
and security items are charged to the Profit and Loss
Account on consumption basis.

Bank has a loyalty program which seeks to recognise
and reward customers based on their relationship with
the Bank. Under the program, eligible customers are
granted loyalty points, redeemable in future, subject
to certain conditions. The Bank estimates the liability
based on actuarial valuations for the expense in the
Profit and Loss Account.

Goods & Service Tax input credit is accounted for in
the books within the time limit prescribed under CGST
Rules, 2017, as amended.

Classification and Valuation of Bank's Investments is
carried out in accordance with the extant RBI guidelines
and Fixed Income Money Market and Derivatives
Association (‘FIMMDA') and Financial Benchmark
Private Limited (‘FBIL') guidelines respectively,
prescribed in this regard from time to time.

All investments shall be categorized as stipulated
by RBI guidelines viz. i) Held to Maturity (HTM), ii)
Available for Sale (AFS), iii) Fair Value through Profit
and Loss (FVTPL). Held for Trading (HFT) shall be a
separate investment Sub category within FVTPL.

All the investments will be presented in the Balance
Sheet as per the regulatory guidelines viz., (i)
Government Securities, (ii) Other Approved Securities,
(iii) Shares, (iv) Debentures & Bonds, (v) Subsidiaries
and / or Joint Ventures and (vi) Others- Units of
Mutual Funds, Certificate of Deposits, Commercial
Paper, Security Receipts and other investments, in
accordance with RBI guidelines.

Investments made outside India are classified under
three categories- (i) Government Securities (including
local authorities), (ii) Subsidiaries and / or Joint
Ventures abroad and (iii) Other Investments.

The category of the investment shall be decided by the
bank before or at the time of acquisition.

HTM Securities

Securities that fulfil the following conditions shall be
classified by the bank under HTM:

(i) The securities 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.

(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.

SLR & NSLR securities can be acquired in HTM subject
to fulfilling the above-mentioned Criterion and other
RBI guidelines. Any discount or premium on acquisition

of debt securities under HTM shall be amortised over
the remaining life of the instrument. The amortized
amount is netted with the interest received on
investment account and it shall be reflected in ‘Income
on Investments' of Schedule 13.

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

AFS Securities:

Securities that fulfil the following conditions shall be
classified by the bank under AFS:

(i) The securities 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'. 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. Further, on initial recognition,
bank may make an irrevocable election to classify
an equity instrument that is not held with the
objective of trading/short term resale/profit
from short term price movements/ locking in
arbitrage profits under AFS.

Any discount or premium on the acquisition of SLR/
Non-SLR debt securities under AFS shall be amortised
over the remaining life of the instrument and it shall be
reflected in ‘Income on Investments' of Schedule 13.

The securities held in AFS shall be fair valued at least
on a quarterly basis. The valuation gains and losses
across all performing investments, irrespective of
classification 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.

FVTPL (Non HFT ) Securities:

Securities that fulfil the following conditions shall be
classified by the bank under FVTPL :

Securities that do not qualify for inclusion in HTM or
AFS shall be classified under FVTPL. Securities that
do not meet SPPI criteria would need to be classified
under FVTPL. Based on the nature of the transaction
and existing RBI guidelines Bank will classify the
category as FVTPL.

Any discount or premium on the acquisition of debt
securities under FVTPL shall be amortised over the
remaining life of the instrument. The amortized
amount is netted with the interest received on
investment account and shall be reflected in Schedule
13 ‘Income on Investments'.

The securities held in FVTPL shall be fair valued at
least on a quarterly basis and the net gain or loss
arising on such valuation shall be directly credited or
debited to the Profit and Loss Account.

FVTPL (HFT) Securities

Securities that fulfil the following conditions shall be
classified by the bank under FVTPL (HFT):

Any instrument that are held for one or more of the
following purposes shall be designated as a HFT and
these instruments shall not have any legal impediment
against selling or fully hedging it:

(a) short-term resale (b) profiting from short-term
price movements (c) locking in arbitrage profits (d)
hedging risks that arise from instruments meeting
(a), (b) or (c) above (e) listed equities and any other
instruments that fulfils the conditions of RBI guidelines
shall be classified under HFT a sub-category of FVTPL.

Securities held in HFT shall be fair valued on a daily
basis and the net gain or loss arising on such valuation
shall be directly credited or debited to the Profit and
Loss Account.

Initial Recognition:

All investments shall be measured at fair value on
initial recognition. Unless facts and circumstances
suggest that the fair value is materially different from
the acquisition cost, it shall be presumed that the
acquisition cost is the fair value.

Day 1 Gain/ Losses:

Day 1 Gain/ Losses arising due to difference between
fair value and acquisition cost on the date of initial
recognition are accounted as under:

a. Day 1 gain/ loss on level 1/ level 2 instruments
shall be recognized 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.

b. 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 derecognized.

c. Day 1 loss arising from Level 3 investments shall
be recognized immediately.

Transfer of Securities between categories:

Transfer of Securities between categories are
accounted as per the RBI Guidelines. Banks shall not
reclassify investments between categories (viz. HTM,
AFS and FVTPL17) without the approval of their Board
of Directors. Further, reclassification shall also require
the prior approval of the Department of Supervision
(DoS), RBI.

Transfer of Scrip from HTM to AFS is made at fair
value. Any gain or loss arising from a difference
between the revised carrying value and the previous
carrying value shall be recognised in AFS-Reserve.

Transfer of Scrip from HTM to FVTPL is made at
fair value. Any gain or loss arising from a difference
between the revised carrying value and the previous
carrying value shall be recognised in the Profit and
Loss Account under Item (III): ‘Profit on revaluation of
investments' under Schedule 14: ‘Other Income'.

Transfer of Scrip from AFS to HTM is made at fair
value. The cumulative gain/loss previously recognised
in the AFS Reserve shall be withdrawn therefrom and

adjusted against the fair value of the investments
at the reclassification date to arrive at the revised
carrying value.

Transfer of Scrip from AFS to FVTPL is made at fair
value. The cumulative gain or loss previously recognised
in AFS Reserve shall be withdrawn therefrom and
recognised in the Profit and Loss Account, under
Item (III): ‘Profit on revaluation of investments' under
Schedule 14:'Other Income'.

Transfer of Scrip from FVTPL to HTM and AFS
is made at carrying value. The carrying amount
representing the fair value at the reclassification date
remains unchanged.

Valuation Process:

The Bank follows settlement date method of
accounting for purchase / sale of investments, and
weighted average cost method for determining cost
and accounting of profit on sale of investments.

Bank shall recognize the income as per the RBI
guidelines based on the nature of the instrument.

Brokerage, commission and securities transaction
tax (STT) etc., pertaining to investment, paid at the
time of acquisition are charged to the Profit and Loss
Account. Broken period interest on debt instruments
and Government securities is treated as a revenue item

The fair value of quoted government securities
which qualify for determining the Statutory Liquidity
Ratio included in the AFS and FVTPL including sub
category HFT is computed as per the prices published
by the FBIL.

Special bonds such as DICOM bonds, Uday Bonds,
etc. that does not qualify for SLR are valued at the
prices published by FBIL or as per extant FIMMDA /
RBI Guidelines.

Traded bonds investments are valued based on the
trade / quotes on the recognized stock exchanges,
or prices / yields published by a Primary Dealers
Association of India (PDAI) jointly with FIMMDA /
FBI, periodically.

In case of unquoted bonds, debentures and preference
shares where interest/dividend is received regularly

(i.e. not overdue beyond 90 days), the market price
is derived based on the Yield to Maturity (YTM) for
Government Securities as published by FIMMDA / PDAI
and suitably marked up for credit risk applicable to the
credit rating of the instrument. The matrix for credit
risk mark-up for each category and credit ratings
along with residual maturity issued by FIMMDA/FBIL
are adopted for this purpose.

Valuation of listed equity shares shall be done at the
closing price published by NSE, BSE (whichever is
lower). Equity shares, for which current quotations are
not available or where the shares are not quoted on the
stock exchanges, are valued at break-up value (without
considering revaluation reserves, if any) which is
ascertained from the company's latest balance sheet.
In case the latest balance sheet is not available, or is
more than 18 months old, the shares are valued at Re.
1/- per company.

Treasury Bills, Commercial Paper and Certificate of
Deposits, being discounted instruments, are valued at
carrying cost.

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

Units of Alternative Investment Fund (AIF) are valued
in accordance with the RBI Guidelines. Units of AIF are
marked to market based on the NAV provided by the
AIF based on the latest financial statements.

Security Receipts are valued at NAV provided by the
issuing ARC from time to time. Additional provision
required, if any, is made as per RBI guidelines, based
on the age of the underlying non-performing asset
sold to the ARC.

other investments shall be valued as per the regulatory
guidelines based on the nature/type of the instrument.

Non-Performing Investments are identified and valued
based on RBI guidelines.

Investment in Security Receipts which are not
redeemed as at the end of the resolution period (i.e.,
five years or eight years as the case may be) shall be
treated as loss asset in the books and provided for.

Sale of Investments from HTM

Any profit or loss on the sale of investments in HTM
shall be recognised in the Profit and loss account
under Schedule 14 of ‘Other Income'.

The profit on sale of an investment in HTM shall be
appropriated 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.

Sale of Investments from AFS

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 Profit on sale of Investments Schedule
14-Other Income).

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.

Sale of Investments from FVTPL & FVTPL-(HFT)

Upon sale or maturity of any instrument in FVTPL &
FVTPL-(HFT) category the net gain or loss arising on
such valuation shall be directly credited or debited to
the Profit and Loss Account.

Short sales

Short sale transactions, including ‘notional' short sale,
are undertaken in Government securities as per RBI
guidelines. The short sales positions are reflected
in ‘Securities Short Sold (SSS)' A/c and categorized
under HFT category. These positions are marked-to-
market along with other securities under HFT portfolio
and resultant Mark-to-Market (MTM) gains / losses
are accounted for as per RBI guidelines.

Investment Fluctuation Reserve

As per the RBI guidelines, the Bank is required to
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.

Further, the Banks 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.

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

Repurchase (Repo) and Reverse Repurchase
(Reverse Repo) transactions

Repo and reverse repo transactions in Government
Securities and corporate debt securities including
those conducted under the Liquidity Adjustment
Facility (LAF) and Marginal Standby Facility (MSF)
with RBI are accounted as collateralized borrowing
and lending respectively. Borrowing cost on repo
transactions is accounted as interest expense and
revenue on reverse repo transactions is accounted as
interest income.

3. Advances

Advances, including bullion/metal loans, are classified
into performing and non-performing assets (NPAs)
and provisions are made as per the prudential norms
prescribed by RBI. Advances stated in the balance
sheet are net of provisions, claims received from
credit guarantee institutions and recoveries pending
appropriation and held in sundry/suspense account.

Interest on non-performing advances is transferred
to an unrealized interest account and not recognized
in the Profit and Loss Account until received. Amounts
recovered in written off accounts is recognised as
income; provisions no longer considered necessary
based on the current status of the asset, is reversed
to the Profit and Loss Account.

In respect of restructured/rescheduled assets,
provisions are made in accordance with RBI guidelines,
including diminution in the fair value of the assets
to be provided on restructuring, as applicable. In
respect of loans and advances accounts subjected to
restructuring, the asset classification is as per extant
RBI guidelines.

Acquisition and transfer of loan exposure is undertaken
as per extant RBI guidelines.

Term reverse repo of original tenor greater than 14
days will be classified under Advances.

Provision for Unhedged Foreign Currency Exposure of
borrower entities is made considering their unhedged
exposure to the Bank.

Provision for standard assets, is made in accordance
with the guidelines and at levels stipulated by RBI from
time to time.

4. Fixed Assets

Premises and other fixed assets are accounted for at
historical cost as reduced by accumulated depreciation,
amortisation and impairment loss, if any. The cost
includes cost of purchase and all expenditure such as
site preparation, installation cost, expenditure incurred
for development of software, professional fees and
GST (net of ITC). Subsequent expenditure incurred
on the assets already in use are capitalised only when
it increases the future benefits from such assets or
their functioning capacity.

Capital work-in-progress includes cost of fixed assets
that are not ready for their intended use.

5. Depreciation

Depreciation on Fixed Assets is provided on Straight
Line Method (SLM) in respect of all fixed assets other
than buildings which are depreciated on Written Down
Value (WDV) method.

Depreciation on assets purchased and sold during the
year is recognised on a pro-rata basis from the date
of purchase/till the date of sale. Assets purchased less
than Rs.5000/- will be debited in operating expenses
and will not be capitalised.

In case of Non Banking assets, it is shown separately
in the Balance sheet under other assets as per RBI
guidelines. Hence, as the assets are not utilised for the
business purposes, depreciation will not be charged.

6. Foreign Exchange Transactions

As per the guidelines of Foreign Exchange Dealers
Association of India (FEDAI) and the requirements of
AS-11 - The Effects of Changes in Foreign Exchange
Rates, all foreign currency monetary assets and
monetary liabilities like Nostro balances, Foreign
Currency Non-Resident deposits, Resident Foreign
Currency deposit, Pre and Post Shipment Credit in
Foreign Currency and Foreign Currency Term Loans
are valued at the closing rates announced by FEDAI as
at the Balance Sheet date and the resultant revaluation
profit or loss, as the case may be, is taken to in the
Profit and Loss Account.

Forward contracts (excluding investment swaps)
and other forward maturity items like cheques/bills
purchased and negotiated are valued at the appropriate
Financial Benchmark India Private Limited FIBIL rates
and the resultant profit or loss is discounted using
FBIL Mumbai Interbank Offered Rate Overnight Index
Swap curve (MIBOR-OIS curve). Foreign exchange
investment swaps against foreign currency deposits /
borrowings are valued at the contracted rates and the
premium/discount thereon is recognised in the profit
and loss account on accrual basis.

Non-fund based assets like Guarantees, Letters
of Credit, Acceptances, Endorsements and other
obligations in foreign currencies are translated
at closing rates notified by FEDAI at the Balance
Sheet date.

7. Bullion Business

The Bank imports, on a back-to-back basis,
consignments of bullion, including precious metal

bars, for sale to its clients. The price quoted to the
customer is based on price quoted by the supplier. The
difference between the price paid by the customer and
the cost of bullion is accounted under other income.

The Bank also borrows and lends bullion in accordance
with RBI guidelines, which is treated as borrowings &
lending and interest paid / received is accounted on an
accrual basis.

Metal Loan Advances are valued based on the prevailing
market rate and foreign exchange rates as on the date
of Balance Sheet.

8. Derivatives

Interest rate swaps pertaining to trading position and
which are outstanding as on balance sheet date are
marked to market and net appreciation is ignored
and net depreciation is recognized in the Profit &
Loss Account. Foreign currency options and swaps
are accounted in accordance with the guidelines
issued by FEDAI.

9. Proposed Dividend

In terms of Accounting Standard (AS) 4 “Contingencies
and Events occurring after the Balance Sheet date",
proposed dividend or dividend declared after balance
sheet date is not shown as ‘other liability' in the Balance
Sheet instead a note on the same will be included in
the financial statement. Such proposed dividend will
be appropriated from the ‘Reserves & Surplus' only
after the approval of the shareholders.

10. Employee Benefits

Short-Term Employee Benefits

All employee benefits payable wholly within twelve
months of rendering the service are classified as short¬
term employee benefits and recognized in the period
in which the employee renders the related service.
The Bank recognizes the undiscounted amount of
short term employee benefits expected to be paid in
exchange for services rendered, as a liability (accrued
expense) after deducting any amount already paid.

Long-term Employee Benefits

a. Post-Employment Benefits

a1. Defined Contribution Plan

The following benefits provided to the
employees of the Bank are classified as Defined
Contribution Plan.

Provident Fund - Employees covered under
provident fund scheme are entitled for retirement
benefit in the form of provident fund. Aggregate
contributions along with interest thereon are
paid on retirement, death, incapacitation, or
termination of employment. Both the employee
and the Bank contribute at specific rates of the
salary to the provident fund account maintained
with the Karur Vysya Bank Limited Employees'
Provident Fund Trust. The contribution made
by the Bank to the Trust, administered by
the trustees, is charged to the Profit and
Loss account.

New Pension Scheme (NPS) - In respect of
employees who are covered under NPS, the Bank
contributes certain percentage of the sum of
basic salary and dearness allowance of employees
to the aforesaid scheme, which is managed and
administered by pension fund management
companies and regulated by Pension Fund
Regulatory and Development Authority (PFRDA).
NPS contributions are recognised in the Profit
and Loss Account in the period in which they
accrue. The Bank has no liability other than its
contribution, and recognises such contributions
as an expense in the year incurred.

a2. Defined Benefit Plan

The defined benefit obligations recognized in
the Balance Sheet represent the present value
of the obligation to its employees as reduced by
the fair value of the plan assets, if applicable. Any
defined benefit asset (negative defined benefit
obligations resulting from this calculation)
is recognized representing the present value
of available refunds and reductions in future
contributions of the plan.

All expenses represented by current service cost,
past service cost, if any and net interest on the
defined benefit liability / asset together with
the re-measurements of the net benefit liability
/ asset comprising of actuarial gains and losses
and return on the plan assets (excluding the
amount included in the net interest on the net
defined benefit liability / asset) are recognized
in the Profit and Loss Account.

Gratuity - All employees of the Bank are entitled for
gratuity benefit. The Bank makes contributions to
The Karur Vysya Bank Employees' Gratuity Fund
Trust, which is administered and managed by the
Trustees whose funds are managed by insurance
companies. Liabilities with regard to the gratuity
plan are determined by an independent actuary
as on the Balance Sheet date, based upon which,
the Bank contributes all the ascertained liabilities
to the said Trust. The contribution is made by the
Bank to the said Trust. The actuarial calculations
entails assumptions about demographics, early
retirement, salary increases and interest rates.

Pension Fund - Employees covered under pension
scheme are entitled to get pension benefits. The
Bank contributes at specific rates of the salary to
the Karur Vysya Bank Limited Pension Trust set
up by the Bank and administered by the Trustee.
Additional amount being the liability shortfall
as ascertained by an independent actuary,
contributed to the said Trust, is determined on
actuarial basis on projected unit credit method
as on the Balance Sheet date. The contribution
is made by the Bank to the Trust. At the time
of retirement or death of the pension eligible
employee, the pension trust purchases annuity
from insurance company out of the contributions
made by the Bank. Employees covered by the
pension plan are not eligible for employers'
contribution under the provident fund plan.

Other Long Term Employee Benefits

Compensated absences, comprising of Medical

Leave Privilege Leave and Un-availed Casual Leave

are recognized when they accrue to the employees.

These are not expected to occur wholly within twelve

months after the end of the period in which the
employees render the related services. These liabilities
are determined by an independent actuary as on the
Balance Sheet date using the Projected Unit Credit
Method. Liability towards compensated absences
is unfunded.

Employee Share Based Payments

The Bank's Employee Stock Options Schemes (ESOS)
are in accordance with the Securities and Exchange
Board of India (Share Based Employee Benefits)
Regulations, 2021 (‘SEBI share-based employee
benefits regulation'). The Scheme provides for grant
of options on equity shares to its employees including
its Key Managerial Personnel / Material Risk Takers,
to acquire the equity shares of the bank that vest in a
graded manner and that are to be exercised within a
specified period.

Hitherto (till 31^st March 2021), in accordance with
the SEBI share-based employee benefits regulation
and the Guidance note on accounting for employee
share-based payments, issued by the Institute of
Chartered Accountants of India the cost of equity
settled transactions is measured using the intrinsic
value method. The intrinsic value, being the excess, if
any, of the fair market price of the share under ESOS
over the exercise price of the option is recognised
as deferred employee compensation with a credit to
Employees' Stock Option outstanding account. The
fair market price is the latest available closing price,
preceding the date of grant of the option, on the stock
exchange on which the shares of the Bank are listed.

Effective from 1^st April 2021, consequent to the RBI's
clarification dated August 30, 2021 on Guidelines
on compensation to Whole Time Directors / Chief
Executive Officers / Material Risk Takers and Control
Function Staff which advised the banks to fair value
share-linked instruments on the date of grant using
Black-Scholes Model, the Bank has changed its
accounting policy from intrinsic value method to fair
value method for all employee stock options granted
after March 31, 2021 The Fair Value of the stock-
based compensation is estimated on the date of grant
using Black-Scholes model.

The deferred employee compensation cost is amortised
on a straight line basis over the vesting period of
the option. The cumulative expense recognised for
equity-settled transactions at each reporting date
until the vesting date reflects the extent to which the
vesting period has expired and the number of equity
instruments that are outstanding.

The options that do not vest because of failure to
satisfy vesting conditions are reversed by a credit to
employee compensated expense in ‘Payment to and
provision for employee cost' equal to the amortised
portion of value of lapsed portion. In respect of the
options which expire unexercised the balance standing
to the credit of Employees' stock option outstanding
account is transferred to ‘General Reserve'. The
options granted are also subject to clawback clause
wherein under circumstances specified at the time of
grant of employee stock option the option grantee
shall relinquish any benefit that accrued to or return
any benefit that is received to the Bank.

Where the terms of an equity-settled award are
modified, the minimum expense recognised in
‘Payments to and provision for employees' is the
expenses as if the terms had not been modified. An
additional expense is recognised for any modification
which increases the total intrinsic value of the share
based payment arrangement or is otherwise beneficial
to the employee as re-measured as at the date
of modification

11. Segment Reporting

The Bank recognises the business segment as the
primary reporting segment and geographical segment
as the secondary reporting segment, in accordance
with RBI guidelines and in compliance with AS 17.

Business Segment is classified into (a) Treasury (b)
Corporate and Wholesale Banking, (c) Retail Banking

* and (d) Other Banking Operations.

* Retail banking is sub-divided into (i) Digital Banking
and (ii) Other Retail Banking segments. The business
involving digital banking products acquired by Digital
Banking Units (DBUs) or existing digital banking

products would qualify to be clubbed under ‘Digital
Banking' Segment.

12. Earnings per Share

Basic Earnings per Share is calculated by dividing
the net profit or loss for the year attributable to the
equity share-holders by the weighted average number
of equity shares outstanding during the year.

Diluted Earnings per Share is computed by using the
weighted average number of equity shares and dilutive
potential equity share outstanding as at the year end.

13. Income Tax

Income Tax expense comprises of current tax
provision made after due consideration of the judicial
pronouncements and legal opinion (i.e. the amount of
tax for the period determined in accordance with the
Income Tax Act, 1961, the rules framed thereunder
and considering the material principles set out in
Income Computation and Disclosure Standards) and
the net change in the deferred tax asset or liability
during the year.

Deferred income taxes recognizes timing differences
between taxable income and accounting income that
originate in one period and are capable of reversal
in one or more subsequent periods. Deferred tax
assets are recognized only if there is virtual certainty
supported by convincing evidence that there will be
sufficient future taxable income available to realize the
assets. Deferred Tax Liabilities are recognized fully in
the year of accrual.

Deferred tax is measured based on the tax rates and
the tax laws enacted or substantively enacted at the
Balance Sheet date.

14. 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 exceeds their estimated recoverable amount.
In case the asset is carried at revalued amount, any
impairment loss of the revalued asset is treated as a

reduction in revaluation to the extent a revaluation
reserve is available for that asset.

When there is indication that an impairment loss
recognised for an asset (other than a revalued asset)
in earlier accounting periods no longer exists or may
have decreased, such reversal of impairment loss is
recognised in the Profit and Loss Account, to the
extent the amount was previously charged to the
Profit and Loss Account. In case of revalued assets
such reversal is not recognised.