C SIGNIFICANT ACCOUNTING POLICIES
1 Investments
Policies applicable for the year ended 31st March, 2025:
Classification:
In accordance with Reserve Bank of India (‘RBI’) Master Direction - Classification, Valuation and Operation of Investment Portfolio of
Commercial Banks (Directions), 2023 (‘RBI Directions’) issued on 12 September 2023, the Bank classifies its 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’) is a separate investment sub-category within FVTPL.
Under each of these categories, investments are further classified under six groups - Government Securities, Other Approved Securities,
Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures, and Other Investments for the purposes of disclosure in
the Balance Sheet.
The Bank follows ‘Settlement Date’ accounting for recording purchase and sale transactions in securities, except in the case of equity
shares where ‘Trade Date’ accounting is followed.
Basis of classification
The Bank classifies its investments as subsequently measured into the above categories based on the business model for managing the
investments and the contractual cash flow characteristics of the investments.
Business model assessment
The Bank makes an assessment of the objective of a business model in which an investment is held such that it best reflects the way the
business is managed and is consistent with information provided to management. The information considered includes:
• The objectives for the portfolio, in particular, management’s strategy of focusing on earning contractual interest revenue, maintaining
a particular interest rate profile, matching the duration of the investments to the duration of the liabilities that are funding those
investments or realising cash flows through the sale of the investments;
• The frequency, volume and timing of sales in prior periods, the reasons for such sales and expectations about future sales activity.
However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Bank’s
stated objective for managing the investments is achieved and how cash flows are realised; and
• The risks that affect the performance of the business model, the investments held within that business model and how those
risks are managed.
Assessment whether contractual cashflows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the investment on initial recognition. ‘Interest’ is defined as
consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular
period of time and for other basic lending risks and costs, as well as profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Bank considers the contractual terms of
the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount
of contractual cash flows such that it would not meet this condition. In making the assessment, the Bank considers:
• Reset terms;
• Contingent events that would change the amount and timing of cash flows;
• Leverage features;
• Prepayment and extension terms;
• Terms that limit the Bank’s claim to cash flows from specified assets (e.g. non-recourse asset arrangements); and
• Features that modify consideration of the time value of money - e.g. periodical reset of interest rates.
Investments at HTM
An investment is classified at HTM only if both of the following conditions are met:
• It is held with the objective to collect the contractual cash flows; and
• The contractual terms of the investment give rise to cash flows that are Solely Payments of Principal and Interest (‘SPPI’ criterion) on
principal outstanding on the specified dates.
Investments at AFS
An investment is classified at AFS only if both of the following conditions are met:
• It is acquired with an objective that is achieved by both collecting contractual cash flows and selling investment; and
• The contractual terms of the investment meet SPPI criteria.
For equity instruments not held with the objective of trading, the Bank has an option on initial recognition to classify such instruments
under AFS. The Bank makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and
is irrevocable.
Investments at FVTPL
Any investment, which does not meet the criteria for categorization as at HTM or as AFS, is classified at FVTPL.
Investments at HFT
HFT is a separate investment sub-category within FVTPL consisting of instruments that meet the specifications for HFT instruments or are
held with the intention of trading or short-term gains is classified under HFT as set out in the RBI Circular dated 12th September, 2023.
Investments in Subsidiaries, Associates and Joint Ventures
All investments in subsidiaries, associates and joint ventures are held in a distinct category for such investments separate from the other
investment categories (viz. HTM, AFS and FVTPL).
Acquisition Cost:
The cost of investments is determined on “first-in, first-out” (‘FIFO’) basis. Broken period interest paid to seller is not capitalized but
treated as an item of expenditure under Profit and Loss Account in respect of investment in securities. The transaction costs including
brokerage, commission, etc. paid at the time of acquisition of investments is recognised in Profit and Loss Account.
Disposal of investments:
Investments classified as AFS
• Debt instruments: Upon sale or maturity, the accumulated gain/ loss in the AFS Reserve is transferred from the AFS Reserve and
recognized in the Profit and Loss Account.
• Equity instruments: Any gain or loss on sale is transferred from AFS Reserve to the Capital Reserve.
Investments classified as FVTPL/ HFT
Any gain or loss on sale of investments is recognised in the Profit and Loss Account.
Investments in subsidiaries, associates and joint ventures
Profit or loss on sale of investments is recognised in the Profit and Loss Account and profit, if any, is appropriated to the Capital Reserve
Account after adjustments for tax and transfer to Statutory Reserve.
Investments classified as HTM
Profit on sale or redemption of investments is recognised in the Profit and Loss Account and profit if any, on sale is appropriated to Capital
Reserve after adjustments for tax and transfer to Statutory Reserve. Loss on sale or redemption is recognised in the Profit and Loss Account.
Short Sale:
The Bank undertakes short sale transactions in Central Government dated securities in accordance with RBI guidelines. The short position
is categorised under HFT category and netted off from Investments in the Balance Sheet. The short position is marked to market and loss,
if any, is charged to the Profit and Loss Account while gain, if any, is ignored. Gain or loss on settlement of the short position is recognised
in the Profit and Loss Account.
Valuation:
The valuation of investments is performed in accordance with the RBI guidelines as follows:
a) Investments classified as HTM - These are carried at cost and not Marked-to-Market (‘MTM’) after initial recognition. Any discount
or premium on acquisition of debt instruments is amortized over the remaining life of the instrument using by straight-line method
(‘SLM’). The discount or premium amortized is reflected as a part of interest earned in the Profit and Loss Account.
b) Investments classified as AFS - These are fair valued on a quarterly basis. The valuation gains and losses are aggregated, and the
net appreciation or depreciation directly gets credited or debited to AFS reserve (net of effect of applicable taxes). Any discount or
premium on acquisition of debt instruments is amortized over the remaining life of the instrument by using straight-line method
(‘SLM’). The discount or premium amortized is reflected as a part of interest earned in the Profit and Loss Account.
c) Investments classified as FVTPL/HFT - These are fair valued and the net gain or loss arising on such valuation is directly credited/
debited to the Profit and Loss Account. Securities that are classified under the HFT sub-category within FVTPL are fair valued on
daily basis, whereas other securities in FVTPL are fair valued on a quarterly basis. Any discount or premium on acquisition of debt
instruments is amortized over the remaining life of the instrument using straight-line method ('SLM'). The discount or premium
amortized is reflected as a part of interest earned in the Profit and loss Account.
d) Investments in subsidiaries, associates and joint ventures - All investments in subsidiaries, associates and joint ventures are held
at acquisition cost. Any discount or premium on the acquisition of debt instruments of subsidiaries and associates are amortised
over the remaining life of the instrument using straight-line method ('SLM'). The discount or premium amortized is reflected as a part
of interest earned in the Profit and Loss Account. The Bank assesses these investments for impairment and provides for the same, in
accordance with RBI Directions.
e) The fair value of the quoted securities are the prices declared by the Financial Benchmarks India Private Limited (‘FBIL’). For
securities whose prices are not published by FBIL, the fair value of the quoted securities is based upon quoted price as available
from the trades/ quotes on recognised stock exchanges, reporting platforms or trading platforms authorised by RBI or Securities and
Exchange Board of India (‘SEBI’) or prices declared by the Fixed Income Money Market and Derivatives Association of India (‘FIMMDA’).
f) Non INR India linked bonds and debentures are valued at prices published by counterparty quotes.
g) Treasury Bills, Exchange Funded Bills, Commercial Paper and Certificate of Deposits being discounted instruments, are valued at
carrying cost.
h) Market value of units of mutual funds is based on the latest net asset value declared by the mutual fund.
i) Market value of investments where current quotations are not available are determined as per the norms prescribed by
the RBI as under:
• In case of unquoted bonds, debentures, Pass Through Certificates (PTCs) 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 for Government
Securities as published by FIMMDA / FBIL and suitably marked up for credit risk applicable to the credit rating of the instrument.
The matrix for credit risk mark-up for each category and credit rating along with residual maturity issued by FIMMDA / FBIL is
adopted for this purpose;
• 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 which shall not precede the date of valuation by more than 18 months In case the latest Balance Sheet is not
available, the shares are valued at H 1 per investee company;
• Security receipts are valued as per the Net Asset Value (NAV) obtained from the issuing Asset Reconstruction Company or
Securitisation Company or estimated recovery whichever is lower.
• Units of Alternate Investment Funds (AIF) are valued at the NAV published by the AIFs. If AIF fails to carry out and disclose
valuation of its investments by an independent valuer as per the frequency mandated by the SEBI regulations, the value of
units shall be treated as H 1. If the AIF is not registered under the applicable SEBI regulations and the latest disclosed valuation
of its investments by an independent valuer is not available for a period beyond 18 months, the investment shall be valued at
H 1 per unit. Further, the Bank provides for investments in Alternate Investments Funds (AIFs) in line with RBI circular dated
19th December, 2023 and 27th March, 2024.
j) Non-performing investments (NPIs) are identified and depreciation / provision are made thereon based on RBI guidelines.
Subsequent, MTM gains on NPIs are ignored. NPIs are segregated from rest of the portfolio and are not considered for netting
valuation gains and losses. Interest on non-performing investments is not recognized in the Profit & Loss Account until received. The
Bank classifies Security Receipts whose tenure has exceeded 8 years, as NPI.
k) Repurchase and reverse repurchase transactions - Securities sold under agreements to repurchase (Repos) and securities
purchased under agreements to resell (Reverse Repos) are accounted as collateralised borrowing and lending transactions
respectively. The difference between the consideration amount of the first leg and the second leg of the repo is recognised as interest
income or interest expense over the period of the transaction.
Day 1 gain/ loss on initial recognition
All investments are measured at fair value on initial recognition.
Unless facts and circumstances suggest that the fair value is materially different from the acquisition cost, it is presumed that the
acquisition cost is the fair value. Situations where the presumption is tested include:
• The transaction is between related parties.
• The transaction is done outside the principal market for that class of securities.
• The transaction is taking place under duress where one party is forced to accept the price in the transaction.
The Bank does not expect day 1 gain/ loss in case of investments which are executed through trading platforms like Recognized Stock
Exchange or through online investment platforms whereby the prices are determined in an orderly transaction between market participants
on the measurement date. Day 1 gain/ loss is tested when transactions are conducted outside the principal market or transactions are
done with related parties.
Where the securities are quoted or the fair value can be determined based on market observable inputs (such as yield curve, spread, etc.)
any day 1 gain/ loss is recognised in the Profit and Loss Account.
Any day 1 loss arising from Level 3 investments is recognised immediately in the Profit and Loss Account.
Any day 1 gains arising from Level 3 investments is deferred. In the case of debt instruments, the day 1 gain is amortized on a straight-line basis
up to the maturity date, while for unquoted equity instruments, the gain is set aside as a liability until the security is listed or derecognised.
Fair Value Hierarchy:
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants on the measurement date.
The management uses its judgment in selecting an appropriate valuation technique for financial instruments not quoted in an active
market. Valuation techniques commonly used by market participants are applied.
When measuring the fair value of an asset or a liability, the Bank uses observable market data as far as possible.
Fair values are categorized into different levels (Level 1, Level 2, or Level 3) in a fair value hierarchy based on the inputs used in the
valuation techniques. The levels are described as follows:
Level 1: The inputs used for valuation of financial instruments are quoted prices (unadjusted) in active markets for identical instruments
that the Bank can access at the measurement date.
Level 2: The valuation of financial instruments is based on inputs, other than quoted prices included within Level 1, that are observable
for the asset or liability, either directly or indirectly.
Level 3: The valuation of financial instruments is based on unobservable inputs i.e. not based on observable market data.
Transition date accounting as on 1st April, 2024
In line with the RBI Circular dated 12th September, 2023, the fair value as on 31st March, 2024 is the revised carrying value of investments.
Further, the difference between the fair value as on 31st March, 2024 and previous carrying value has been adjusted in the Revenue/
General Reserve except that in case of Equity shares in AFS book, the same is adjusted to the AFS Reserve (Refer Note 8 - Schedule 18 A).
Policies applicable for the year ended 31st March, 2024:
Classification:
In accordance with the RBI guidelines on investment classification and valuation, investments are classified on the date of purchase
into “Held for Trading” (‘HFT’), “Available for Sale” (‘AFS’) and “Held to Maturity” (‘HTM’) categories (hereinafter called “categories”).
Subsequent shifting amongst the categories is done in accordance with the RBI guidelines at the lower of the acquisition cost or carrying
value and market value on the date of the transfer, and depreciation, if any, on such transfer is fully provided.
Under each of these categories, investments are further classified under six groups (hereinafter called “group/groups”) - Government
Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures and Other Investments
for the purposes of disclosure in the Balance Sheet.
The Bank follows ‘Settlement Date’ accounting for recording purchase and sale transactions in securities, except in the case of equity
shares where ‘Trade Date’ accounting is followed.
Basis of classification:
Investments that are held principally for resale within 90 days from the date of purchase are classified under HFT category. As per the
RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date. Investments
which the Bank intends to hold till maturity are classified as HTM securities. The Bank has classified investments in subsidiaries, joint
ventures and associates under HTM category. Investments which are not classified in either of the above two categories are classified
under AFS category.
Acquisition Cost:
The cost of investments is determined on weighted average basis. Broken period interest on debt instruments and government securities
are considered as a revenue item. The transaction costs including brokerage, commission, etc. paid at the time of acquisition of investments
is recognised in Profit and Loss Account.
Disposal of investments:
• Investments classified as HFT or AFS - Profit or loss on sale or redemption is recognised in the Profit and Loss Account.
• Investments classified as HTM - Profit on sale or redemption of investments is recognised in the Profit and Loss Account and is
appropriated to Capital Reserve after adjustments for tax and transfer to Statutory Reserve. Loss on sale or redemption is recognised
in the Profit and Loss Account.
Short Sale:
The Bank undertakes short sale transactions in Central Government dated securities in accordance with RBI guidelines. The short position
is categorised under HFT category and netted off from Investments in the Balance Sheet. The short position is marked to market and loss,
if any, is charged to the Profit and Loss Account while gain, if any, is ignored. Gain or loss on settlement of the short position is recognised
in the Profit and Loss Account.
Valuation:
The valuation of investments is performed in accordance with the RBI guidelines as follows:
a) Investments classified as HTM - These are carried at their acquisition cost. Any premium on acquisition of debt instruments /
government securities is amortised over the balance maturity of the security on a straight line basis. Any diminution, other than
temporary, in the value of such securities is provided.
b) Investments classified as HFT or AFS - Investments in these categories are marked to market and the net depreciation, if any,
within each group is recognised in the Profit and Loss Account. Net appreciation, if any, is ignored. Further, provision other than
temporary diminution is made at individual security level. Except in cases where provision other than temporary diminution is
made, the book value of the individual securities is not changed as a result of periodic valuations.
c) The market or fair value of quoted investments included in the ‘AFS’ and ‘HFT’ categories is measured with respect to the market
price of the scrip as available from the trades or quotes on the stock exchanges, SGL account transactions, price list of RBI or prices
declared on Fixed Income Money Market and Derivatives Association of India (‘FIMMDA’) website by Financial Benchmark India
Private Limited (FBIL) as at the year end.
d) Treasury Bills, Exchange Funded Bills, Commercial Paper and Certificate of Deposits being discounted instruments, are valued
at carrying cost.
e) Market value of units of mutual funds is based on the latest net asset value declared by the mutual fund.
f) Investments in subsidiaries / joint ventures (as defined by RBI) are categorised as HTM and assessed for impairment to determine
other than temporary diminution, if any, in accordance with RBI guidelines.
g) Market value of investments where current quotations are not available are determined as per the norms prescribed by
the RBI as under:
• 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 for Government Securities as published by FIMMDA
/ FBIL and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up
for each category and credit rating along with residual maturity issued by FIMMDA / FBIL is adopted for this purpose;
• In case of bonds and debentures (including Pass Through Certificates) where interest is not received regularly (i.e. overdue
beyond 90 days), the valuation is in accordance with prudential norms for provisioning as prescribed by the RBI. Interest on
such securities is not recognised in the Profit and Loss Account until received;
• 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, the shares are valued at H 1 per investee company;
• Units of Venture Capital Funds (VCF) held under AFS category where current valuations are not available are marked to market
based on the Net Asset Value (NAV) shown by VCF as per the latest audited financials of the fund. In case the audited financials
are not available for a period beyond 18 months, the investments are valued at H 1 per VCF. Investment in unquoted VCF
after 23rd August, 2006 are categorised under HTM category for the initial period of three years and valued at cost as per RBI
guidelines. Such investments are required to be transferred to AFS thereafter;
• Security receipts are valued as per the Net Asset Value (NAV) obtained from the issuing Asset Reconstruction Company or
Securitisation Company or estimated recovery whichever is lower. The Bank has classified Security Receipts whose tenure has
exceeded 8 years, as “Non Performing investments”.
• The Bank provides for investments in Alternate Investments Funds (AIF) in accordance with RBI circular dated 19th December,
2023 and 27th March, 2024.
h) Non-performing investments are identified and depreciation / provision are made thereon based on RBI guidelines. The depreciation
/ provision on such non-performing investments are not set off against the appreciation in respect of other performing securities.
Interest on non-performing investments is not recognized in the Profit & Loss Account until received.
i) Repurchase and reverse repurchase transactions - Securities sold under agreements to repurchase (Repos) and securities
purchased under agreements to resell (Reverse Repos) are accounted as collateralised borrowing and lending transactions
respectively. The difference between the consideration amount of the first leg and the second leg of the repo is recognised as interest
income or interest expense over the period of the transaction.
2 Advances
Classification:
Advances are classified as performing and non-performing advances (‘NPAs’) based on RBI guidelines and are stated net of bills rediscounted,
inter-bank participation with risk, specific provisions, interest in suspense, claims received from Export Credit Guarantee Corporation and
Emergency Credit Line Guarantee Scheme (ECLGS) with respect to non-performing advances, provisions for funded interest term loan and
provisions in lieu of diminution in the fair value of restructured assets. Also, NPAs are classified into sub-standard, doubtful and loss assets as
required by RBI guidelines. Interest on NPAs remaining uncollected is transferred to an interest suspense account and not recognised in the
Profit and Loss Account until received.
Amounts paid for acquiring non-performing asset(s) from other banks and NBFCs are considered as advances. Actual collections received
on such non-performing asset(s) are compared with the cash flow(s) estimated while purchasing the asset to ascertain overdue(s). If such
overdue(s) is/are in excess of 90 days, then this/these asset(s) are classified into sub-standard, doubtful or loss as required by the RBI
guidelines on purchase of non-performing asset(s).
The Bank transfers advances through inter-bank participation with and without risk. In accordance with the RBI guidelines, in the case
of participation with risk, the aggregate amount of the participation issued by the Bank is reduced from advances and where the Bank
is participating, the aggregate amount of the participation is classified under advances. In the case of participation without risk, the
aggregate amount of participation issued by the Bank is classified under borrowings and where the Bank is participating, the aggregate
amount of participation is shown under advances.
Provisioning:
The Bank classifies its advances, investments and overdues from crystallised derivatives including those at overseas branches into
performing and non performing in accordance with guidelines issued by the RBI. Provision for NPAs comprising sub-standard, doubtful
and loss assets is made in accordance with RBI guidelines. In addition, the Bank considers accelerated specific provisioning that is based
on past experience, evaluation of security and other related factors. Specific loan loss provision in respect of non-performing advances
are charged to the Profit and Loss Account. Any recoveries made by the Bank in case of NPAs written off are recognised in the Profit
and Loss Account.
The Bank considers a restructured account as one where the Bank, for economic or legal reasons relating to the borrower’s financial
difficulty, grants to the borrower concessions that the Bank would not otherwise consider. Restructuring would normally involve
modification of terms of the advance / securities, which would generally include, among others, alteration of repayment period / repayable
amount / the amount of installments / rate of interest (due to reasons other than competitive reasons).
Restructured accounts are classified as such by the Bank only upon approval and implementation of the restructuring package. Necessary
provision for diminution in the fair value of a restructured account is made.
In respect of borrowers restructured under the Resolution Framework - 1.0 and Resolution Framework 2.0 for COVID-19 related stress the
Bank holds provisions higher than the provisions as required by the RBI guidelines based on the estimates made by the Bank.
In accordance with RBI guidelines the Bank has provided general provision on standard assets including credit exposures computed as per
the current marked to market values of interest rate and foreign exchange derivative contracts, and gold at levels stipulated by RBI from
time to time. Additional standard asset provision is done for overseas stepdown subsidiaries of Indian corporates. Standard provision is
also made at higher than the prescribed rates in respect of advances to stressed sectors as per the framework approved by the Board of
Directors. In case of Frauds, the Bank makes provision for amounts it is liable for in accordance with the guidelines issued by RBI. A general
provision on the entire amount outstanding from borrowers who had an overdue on 29th February, 2020 and to whom moratorium was
given is also made.
Further to provisions required as per the asset classification status, provisions are held for individual country exposure (except for
home country) as per the RBI guidelines. Exposure is classified in the seven risk categories as mentioned in the Export Credit Guarantee
Corporation of India Limited (‘ECGC’) guidelines and provisioning is done for that country if the net funded exposure is one percent or
more of the Bank’s total assets based on the rates laid down by the RBI.
Provision for Unhedged Foreign Currency Exposure of borrowers is made as per the RBI guidelines.
3 Loss on Sale of Advances to Asset Reconstruction Company
Loss on sale of Advances sold to Asset Reconstruction Company are recognised immediately in the Profit and Loss Account.
4 Securitisation
The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose Vehicle (‘SPV’). In most
cases, post securitisation, the Bank continues to service the loans transferred to the assignee/ SPV. The Bank also provides credit
enhancement in the form of cash collaterals and/or by subordination of cash flows to Senior Pass-Through Certificate holders. In
respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing etc.) accepted by the Bank,
appropriate provision/disclosure is made at the time of sale in accordance with AS-29, Provisions, Contingent Liabilities and Contingent
Assets as specified under section 133 and the relevant provision of the Companies Act, 2013 read with the Companies (Accounting
Standards) Rules, 2021.
In accordance with the RBI guidelines on Securitisation of Standard Assets dated 24 September 2021, the profit, loss or premium on
account of securitisation of assets at the time of sale is computed as the difference between the sale consideration and the book value
of the securitised asset. Any resultant profit, loss or premium realised on account of securitisation is recognised to the Profit and Loss
Account in the period in which the sale is completed.
The Bank invests in instruments of other SPVs which are accounted for at the deal value and are classified under Investments.
5 Fixed assets (Property, Plant & Equipment and Intangible) and depreciation / amortisation
Property, Plant & Equipment and Intangible Assets have been stated at cost less accumulated depreciation and amortisation and
adjusted for impairment, if any. Cost includes cost of purchase inclusive of freight, duties, incidental expenses and all expenditure like
site preparation, installation costs and professional fees incurred on the asset before it is ready to put to use. Subsequent expenditure
incurred on assets put to use is capitalised only when it increases the future benefit / functioning capability from / of such assets. Gain or
loss arising from the retirement or disposal of a Property Plant and Equipment / Intangible asset are determined as the difference between
the net disposal proceeds and the carrying amount of assets and recognised as income or expense in the Profit and Loss Account. Profit
on sale of premises of the Bank, net of taxes and transfer to statutory reserve is appropriated to Capital Reserve as per RBI guidelines.
Depreciation / Amortisation - Depreciation is provided on a pro-rata basis on a Straight Line Method over the estimated useful life of the
assets at rates which are equal to or higher than the rates prescribed under Schedule II of the Companies Act, 2013 in order to reflect the
actual usage of the assets. The estimated useful lives of assets based on technical evaluation by management are as follows:
Used assets purchased are depreciated over the residual useful life from the date of original purchase.
Items costing less than H 5,000 are fully depreciated in the year of purchase.
6 Cash and cash equivalents
Cash and cash equivalents include cash in hand, balances with Reserve Bank of India and Balances with Other Banks / institutions and
money at Call and Short Notice (including the effect of changes in exchange rates on cash and cash equivalents in foreign currency).
7 Bullion
The Bank imports bullion including precious metal bars on a consignment basis for selling to its wholesale customers. The difference
between the sale price to customers and actual price quoted by supplier is reflected under other income.
The Bank also borrows and lends gold, which is treated as borrowings or lending as the case may be in accordance with the RBI guidelines
and the interest paid or received is classified as interest expense or income and is accounted on an accrual basis.
8 Revenue recognition
Interest income is recognised on accrual basis.
Interest income in respect of retail advances is accounted for by using the internal rate of return method to provide a constant periodic
rate of return.
Interest income on investments in PTCs and loans bought out through the direct assignment route is recognised at their effective interest rate.
Interest income on Treasury Bills, Exchange Funded Bills, Commercial Paper and Certificate of Deposits is recognised over tenure of the
instrument on a straight line basis. Interest income on other discounted instruments is recognised over the tenure of the instruments so
as to provide a constant periodic rate of return.
Service charges, fees and commission income are recognised when due, where the Bank is reasonably certain of ultimate collection.
Commission on Guarantees and letter of credit are recognised over the period of the guarantee / letter of credit. Syndication / arranger fee
is recognised as income as per the terms of engagement.
Upon an asset becoming NPA the income accrued gets reversed, and is recognised only on realisation, as per RBI guidelines.
Penal interest/charges on products where applicable is recognised as income on realisation other than on running accounts where it is
recognised to the extent of limits available in the account.
Dividend income is accounted on an accrual basis when the Bank’s right to receive the dividend is established.
Gain on account of securitisation of assets is amortised over the life of the securities issued in accordance with the guidelines issued by
the RBI. Loss on account of securitisation of assets is recognised immediately in Profit and Loss account.
In respect of non-performing assets acquired from other Banks / FIs and NBFCs, collections in excess of the consideration paid at each
asset level or portfolio level is treated as income in accordance with RBI guidelines and clarifications.
Fees received on sale of Priority Sector Lending Certificates is considered as Miscellaneous Income, while fees paid for purchase is
recognised as expense under other expenses in accordance with the guidelines issued by the RBI.
9 Employee benefits
Defined Contribution Plan
Provident Fund
Contribution as required by the statute made to the government provident fund or to a fund set up by the Bank and administered by a board
of trustees is debited to the Profit and Loss Account when an employee renders the related service. The Bank has no further obligations.
Superannuation Fund
The Bank makes contributions in respect of eligible employees, subject to a maximum of H0.01 crore per employee per annum to a Fund
administered by trustees and managed by Life Insurance Companies. The Bank recognises such contributions as an expense in the year
when an employee renders the related service. The Bank has no further obligations.
New Pension Scheme
The Bank contributes up to 10% of eligible employees’ salary per annum, to the New Pension Fund administered by a Pension Fund
Regulatory and Development Authority (PFRDA) appointed pension fund manager. The Bank recognises such contributions as an expense
in the year when an employee renders the related service.
DIFC Employee Workplace Savings Scheme (DEWS)
The Bank’s branch in Dubai International Financial Centre (DIFC) contributes up to 8.33% of eligible branch employees’ salary per annum
to the DIFC Employee Workplace Savings Scheme (DEWS). The Bank recognises such contributions as an expense in the year when an
employee renders the related service. The Bank has no further obligation.
Defined Benefit Plan
Gratuity
The Bank provides for Gratuity, covering employees in accordance with the Payment of Gratuity Act, 1972, service regulations and service
awards as the case may be. The Bank’s liability is actuarially determined (using Projected Unit Credit Method) at the Balance Sheet date.
The Bank makes contribution to Gratuity Funds administered by trustees and managed by Life Insurance Companies.
Pension Scheme
In respect of pension payable to certain erstwhile ING Vysya Bank Limited (“elVBL”) employees under Indian Banks’ Association (“IBA”)
structure, the Bank contributes 10% of basic salary to a pension fund and the difference between the contribution and the amount
actuarially determined by an independent actuary is trued up based on actuarial valuation conducted as at the Balance Sheet date. The
Pension Fund is administered by the Board of Trustees and managed by Life Insurance Company. The present value of the Bank’s defined
pension obligation is determined using the Projected Unit Credit Method as at the Balance Sheet date.
Employees covered by the pension plan are not eligible for employer’s contribution under the provident fund plan
The contribution made to the Pension fund is recognised as planned assets. The defined benefit obligation recognised in the Balance
Sheet represents the present value of the defined benefit obligation as reduced by the fair value of the plan assets.
Actuarial gains or losses in respect of all defined benefit plans are recognised immediately in the Profit and Loss Account in the year in
which they are incurred.
Compensated Absences - Other Long-Term Employee Benefits
The Bank accrues the liability for compensated absences based on the actuarial valuation as at the Balance Sheet date conducted by
an independent actuary which includes assumptions about demographics, early retirement, salary increases, interest rates and leave
utilisation. The net present value of the Banks’ obligation is determined using the Projected Unit Credit Method as at the Balance Sheet
date. Actuarial gains / losses are recognised in the Profit and Loss Account in the year in which they arise.
Other Employee Benefits
As per the Bank’s policy, employees are eligible for an award after completion of a specified number of years of service with the Bank. The
obligation is measured at the Balance Sheet date on the basis of an actuarial valuation using the Projected Unit Credit Method.
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is
recognised during the period when the employee renders the service. These benefits include performance incentives.
Employee share based payments
Equity-settled scheme:
The Equity Stock Option Schemes (ESOSs) and the Performance Linked restricted Stock Unit Scheme (PRSU) of the Bank are in accordance
with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. The schemes provide for grant of options and restricted
stock units to employees of the Group to acquire the equity shares of the Bank that vest as per the vesting schedule and that are to be
exercised within a specified period.
RBI, vide its clarification dated 30th August, 2021 on Guidelines on Compensation of Whole Time Directors / Chief Executive Officers /
Material Risk Takers and Control Function Staff, advised Banks that the fair value of share-linked instruments on the date of grant should
be recognised as an expense for all instruments granted after the accounting period ending 31st March, 2021.
In accordance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 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 for all options granted on or before 31st March, 2021. The intrinsic value being the excess, if any,
of the fair market price of the share under ESOSs over the exercise price of the option is recognised as deferred employee compensation
with a credit to Employee’s Stock Option (Grant) Outstanding account.
The Bank has changed its accounting policy from intrinsic value method to fair value method for all share-linked instruments granted after
31st March, 2021 in accordance with the RBI guidance. The fair value of the option is estimated on the date of grant using Black-Scholes
model and is recognised as deferred employee compensation with a credit to Employee’s Stock Option (Grant) Outstanding account.
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 condition are reversed by a credit to employee compensation expense
in “Payment to and provision for employee”, equal to the amortised portion of the cost of lapsed option and credit to deferred employee
compensation equal to the unamortised portion. In respect of the options which expire unexercised the balance standing to the credit of
Employee’s Stock Option (Grant) Outstanding account is transferred to General Reserve. 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.
Where the terms of an equity-settled award are modified, the minimum expense recognised in ‘Payments to and provision for employees’
is the expense as if the terms had not been modified. An additional expense is recognised for any modification which increases the
total intrinsic/ fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date
of modification.
In respect of options granted to employees of subsidiaries, the Bank recovers the related compensation cost from the respective
subsidiaries.
Cash-settled scheme:
The cost of cash-settled transactions, stock appreciation rights (SARs) having grant date on or before 31st March, 2021 is measured initially
using intrinsic value method at the grant date taking into account the terms and conditions upon which the instruments were granted.
Similar to Equity settled options, SARs granted after 31st March, 2021 are measured on fair value basis.
The intrinsic / fair value is amortised on a straight-line basis over the vesting period with a recognition of corresponding liability. This
liability is remeasured at each balance sheet date up to and including the vesting date with changes in intrinsic / fair value recognised in
the profit and loss account in ‘Payments to and provision for employees’. The SARs that do not vest because of failure to satisfy vesting
conditions are reversed by a credit to employee compensation expense, equal to the amortised cost in respect of the lapsed portion.
10 Foreign currency transactions
Foreign currency monetary assets and monetary liabilities are translated as at the Balance Sheet date at rates notified by the Foreign
Exchange Dealers’ Association of India (FEDAI) and the resultant gain or loss is accounted in the Profit and Loss Account.
Income and Expenditure items are translated at the rates of exchange prevailing on the date of the transactions except in respect of
representative office (which are integral in nature) expenses, which are translated at monthly average exchange rates.
Outstanding forward (other than deposit and placement swaps) and spot foreign exchange contracts outstanding at the Balance Sheet
date are revalued at rates notified by FEDAI for specified maturities and at the interpolated rates of interim maturities. In case of forward
contracts of greater maturities where exchange rates are not notified by FEDAI, are revalued at the forward exchange rates implied by
the swap curves in respective currencies. The forward profit or loss on the forward contracts are discounted using discount rate and the
resulting profits or losses are recognised in the Profit and Loss Account as per the regulations stipulated by the RBI.
Foreign exchange swaps “linked” to foreign currency deposits and placements are translated at the prevailing spot rate at the time of
swap. The premium or discount on the swap arising out of the difference in the exchange rate of the swap date and the maturity date of
the underlying forward contract is amortised over the period of the swap and the same is recognised in the Profit and Loss Account.
Contingent liabilities on account of letters of credit, bank guarantees and acceptances and endorsements outstanding as at the Balance
Sheet date denominated in foreign currencies and other foreign exchange contracts are translated at year-end rates notified by FEDAI.
The financial statements of IBU and DIFC which are in the nature of non-integral overseas operations are translated on the following basis:
(a) Income and expenses are converted at the average rate of exchange during the period and (b) All assets and liabilities are translated
at closing rate as on Balance Sheet date. The exchange difference arising out of year end translation is debited or credited as “Foreign
Currency Translation Reserve” forming part of “Reserves and Surplus”.
11 Derivative transactions
Notional amounts of derivative transactions comprising of swaps, futures and options are disclosed as off Balance Sheet exposures.
The Bank recognises all derivative contracts (other than those designated as hedges) at fair value, on the date on which the derivative
contracts are entered into and are re-measured at fair value as at the Balance Sheet or reporting date. Derivatives are classified as assets
when the fair value is positive (positive marked to market) or as liabilities when the fair value is negative (negative marked to market).
Changes in the fair value of derivatives other than those designated as hedges are recognised in the Profit and Loss Account.
Outstanding derivative transactions designated as “Hedges” are accounted in accordance with hedging instrument on an accrual basis
over the life of the underlying instrument. Option premium paid or received is recognised in the Profit and Loss Account on expiry of the
option. Option contracts are marked to market on every reporting date.
12 Lease accounting
Leases where all the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease payments
are recognised as an expense in the Profit and Loss Account on a straight-line basis over the lease term. Initial direct costs in respect of
operating leases such as legal costs, brokerage costs, etc. are recognised as expense immediately in the Profit and Loss Account.
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