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PUNJAB NATIONAL BANK

30 November 2021 | 11:19

Industry >> Finance - Banks - Public Sector

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ISIN No INE160A01022 52Week High 48 Book Value (Rs.) 79.13 Face Value 2.00
Bookclosure 26/07/2021 52Week Low 31 EPS 2.33 P/E 16.31
Market Cap. 41786.80 Cr. P/BV 0.48 Div Yield (%) 0.00 Market Lot 1.00
Security Type Other

ACCOUNTING POLICY

You can view the entire text of Accounting Policy of the company for the latest year.
Year End :2021-03 

1. BASIS OF PREPARATION:

The financial statements have been prepared on historical cost basis and conform, in all material aspects, to Generally Accepted Accounting Principles (GAAP) in India unless otherwise stated encompassing applicable statutory provisions, regulatory norms prescribed by Reserve Bank of India (RBI), circulars and guidelines issued by the Reserve Bank of India (‘RBI') from time to time, Banking Regulation Act 1949, Accounting Standards (AS) and pronouncements issued by The Institute of Chartered Accountants of India (ICAI) and prevailing practices in Banking industry in India.

In respect of foreign offices, statutory provisions and practices prevailing in respective foreign countries are complied with except as specified elsewhere.

The financial statements have been prepared on going concern basis with accrual concept and in accordance with the accounting policies and practices consistently followed unless otherwise stated.

2. USE OF ESTIMATES:

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as on the date of the financial statements and the reported income and expenses 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.

Difference between the actual results and estimates is recognized in the period in which the results are known / materialized.

Any revision to the accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

3. REVENUE RECOGNITION:

3.1 Income & expenditure (other than items referred to in paragraph 3.5) are generally accounted for on accrual basis.

3.2 Income from Non- Performing Assets (NPAs), comprising of advances and investments, is recognized upon realization, as per the prudential norms prescribed by the RBI/ respective country regulators in the case of foreign offices (hereafter collectively referred to as Regulatory Authorities).

3.3 Mode of appropriation of recovery in order of priority will be as below:

(a) Recoveries in NPA accounts (irrespective of the mode / status / stage of recovery actions) shall be appropriated in the following order of priority except

for the cases covered under below mentioned points

(b) & (c):

i. Expenditure/Out of Pocket Expenses incurred for Recovery, including under SARFAESI Action (Recorded in Memorandum Dues);

ii. Thereafter towards the unrealised/accrued interest.

iii. Principal irregularities i.e. NPA outstanding in the account.

Any exceptions to the above may be considered by HOCAC-III (for proposals falling under the powers of various committee's upto HOCAC-III) & Management Committee for proposals under its vested powers.

(b) However, in case of Compromise and Resolution/ Settlement through NCLT, recovery shall be appropriated as per the terms of respective compromise/ resolution settlement.

(c) In case of suit filed/decreed accounts, recovery shall be appropriated as under:-

• As per the directives of the concerned Court.

• In the absence of specific directives from the Court, as mentioned at point (a) above.

3.4 The sale of NPA is accounted as per guidelines prescribed by RBI and as disclosed under Para 5.3.

3.5 Commission (excluding on Government Business, Insurance Business and Mutual Fund Business), exchange, locker rent and Income on Rupee Derivatives designated as “Trading” are accounted for on realization and insurance claims are accounted for on settlement. Interest on overdue inland bills is being accounted for on realization and interest on overdue foreign bill, till its crystallization is accounted for on crystallization and thereafter on realization.

3.6 In case of suit filed accounts, related legal and other expenses incurred are charged to Profit & Loss Account and on recovery the same are accounted for as such.

3.7 Income from interest on refund of income tax is accounted for in the year the order is passed by the concerned authority.

3.8 Lease payments including cost escalation for assets taken on operating lease are recognized in the Profit and Loss Account over the lease term in accordance with the AS 19 (Leases) issued by ICAI.

3.9 Provision for Reward Points on Credit cards is made based on the accumulated outstanding points in each category.

3.10 Interest on unpaid and unclaimed matured term deposits is accounted for at savings bank rate.

3.11 Dividend (excluding Interim Dividend) is accounted for as and when the right to receive the dividend is established.

4. INVESTMENTS:

4.1 The transactions in Securities are recorded on “Settlement Date”.

4.2 Investments are classified into six categories as stipulated in form A of the third schedule to the Banking Regulation Act, 1949.

4.3 Investments have been categorized into "Held to Maturity", "Available for Sale" and "Held for Trading" in terms of RBI guidelines as under:

(a) Securities acquired by the Bank with an intention to hold till maturity are classified under "Held to Maturity".

(b) The securities acquired by the Bank with an intention to trade by taking advantages of short-term price/ interest rate movements are classified under “Held for Trading”.

(c) The securities, which do not fall within the above two categories, are classified under "Available for Sale".

4.4 Investments in subsidiaries, joint ventures and associates are classified as HTM.

4.5 Transfer of securities from one category to another is carried out at the lower of acquisition cost/ book value/ market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

However, transfer of securities from HTM category to AFS category is carried out on book value. After transfer, these securities are immediately revalued and resultant depreciation, if any, is provided.

An investment is classified as HTM, HFT or AFS at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

4.6 In determining acquisition cost of an investment

(a) Brokerage, commission, Securities Transaction Tax (STT) etc. paid in connection with acquisition of securities are treated as revenue expenses upfront and excluded from cost.

(b) Interest accrued up to the date of acquisition/sale of securities i.e. broken- period interest is excluded from the acquisition cost/sale consideration and the same is accounted in interest accrued but not due account.

(c) Cost is determined on the weighted average cost method for all categories of investments.

4.7 Investments are valued as per RBI/ FIMMDA guidelines, on the following basis:

Held to Maturity

(i) Investments under "Held to Maturity "category are carried at acquisition cost.

Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity on straight line basis. Such amortization of premium is reflected in Interest Earned under the head “Income on investments” as a deduction.

(ii) Investments in subsidiaries/joint ventures/associates are valued at carrying cost less diminution, other than temporary in nature for each investment individually.

(iii) Investments in sponsored regional rural banks are valued at carrying cost.

(iv) Investment in Venture Capital is valued at carrying cost.

(v) Equity shares held in HTM category are valued at carrying cost.

Available for Sale and Held for Trading:

(a)

Govt. Securities

I. Central Govt. Securities

At market prices/YTM as published by Fixed Income Money Market and Derivatives Association of India (FIMMDA) / Financial Benchmark India Pvt. Ltd (FBIL).

II. State Govt. Securities

On appropriate yield to maturity basis as per FIMMDA/RBI guidelines.

(b)

Securities guaranteed by Central / State Government, PSU Bonds (not in the nature of advances)

On appropriate yield to maturity basis as per FIMMDA/RBI guidelines

(c)

Treasury Bills

At carrying cost

(d)

Equity shares

At market price, if quoted, otherwise at breakup value of the Shares as per latest Balance Sheet (not more than one year old), otherwise at Re.1 per company

(e)

Preference shares

At market price, if quoted or on appropriate yield to maturity basis not exceeding redemption value as per RBI/FIMMDA guidelines.

(f)

Bonds and debentures (not in the nature of advances)

At market price, if quoted, or on appropriate yield to maturity basis as per RBI/FIMMDA guidelines.

(g)

Units of mutual funds

As per stock exchange quotation, if quoted; at repurchase price/ NAV, if unquoted

(h)

Commercial Paper

At carrying cost

(i)

Certificate of Deposits

At carrying cost

(j)

Security receipts of ARCIL

At net asset value of the asset as declared by ARCIL

(k)

Venture Capital Funds

At net asset value (NAV) declared by the VCF

(l)

Other Investments

At carrying cost less diminution in value

The above valuation in category of Available for Sale and Held for Trading is done scrip wise on quarterly basis and depreciation/appreciation is aggregated for each classification. Net depreciation for each classification, if any, is provided for

while net appreciation is ignored. On provision for depreciation, the book value of the individual security remains unchanged after marking to market.

4.8 Investments are subject to appropriate provisioning/ de-recognition of income, in line with the prudential norms of Reserve Bank of India for NPI classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities.

If any credit facility availed by an entity is NPA in the books of the Bank, investment in any of the securities issued by the same entity would also be treated as NPI and vice versa. However, in respect of NPI preference share where the dividend is not paid, the corresponding credit facility is not treated as NPA.

In case of securities i.e. bonds, debentures, etc. where the credit facilities are availed by the borrowers, the provision has been made on the basis of YTM or IRAC norms whichever is higher.

4.9 Profit or loss on sale of investments in any category is taken to Profit and Loss account but, in case of profit on sale of investments in "Held to Maturity" category, an equivalent amount (net of taxes and amount required to be transferred to Statutory Reserve) is appropriated to "Capital Reserve Account".

4.10 Securities repurchased/resold under buy back arrangement are accounted for at original cost.

4.11 The securities sold and purchased under Repo/ Reverse Repo are accounted as Collateralized lending and borrowing transactions. However, securities are transferred as in the case of normal outright sale/purchase transactions and such movement of securities is reflected using the Repo/Reverse Repo Accounts and Contra entries. The above entries are reversed on the date of maturity. Costs and revenues are accounted as interest expenditure/income, as the case may be. Balance in Repo Account is classified under schedule 4 (Borrowings) and balance in Reverse Repo Account is classified under Schedule 7 (Balance with Banks and Money at Call & Short Notice).The same is also applicable to LAF with RBI.

4.12 The derivatives transactions are undertaken for trading or hedging purposes. Trading transactions are marked to market. As per RBI guidelines, different categories of swaps are valued as under:-

Hedge Swaps

Interest rate swaps with hedge interest bearing asset or liability are accounted for on accrual basis except the swaps designated with an asset or liability that are carried at market value or lower of cost in the financial statement.

Gain or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/ liabilities.

Trading Swaps

Trading swap transactions are marked to market with changes recorded in the financial statements.

Exchange Traded Derivatives entered into for trading purposes are valued at prevailing market rates based on rates given by the Exchange and the resultant gains and losses are recognized in the Profit and Loss Account.

4.13 Foreign Currency Options:

Foreign currency options written by the bank with a back-to-back contract with another bank are not marked to market since there is no market risk.

Premium received is held as a liability and transferred to the Profit and Loss Account on maturity/cancellation.

5. LOANS / ADVANCES AND PROVISIONS THEREON:

5.1 Advances are classified as performing and non-performing assets; provisions are made in accordance with prudential norms prescribed by RBI.

(a) Advances are classified: Standard, Sub Standard, Doubtful and Loss assets borrower wise.

(b) Advances are stated net of specific loan loss provisions, provision for diminution in fair value of restructured advances.

5.2 In respect of foreign offices, the classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent.

Loans and advances held at the overseas branches that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the host country.

5.3 Financial Assets sold are recognized as under:

(a) For Sale of financial assets sold to SCs/RCs

(i) If the sale to SCs/RCs is at a price below the Net Book Value (NBV), (i.e. Book Value less provisions held), the shortfall should be debited to the Profit & Loss account of that year. Bank can also use counter cyclical / floating provisions for meeting the shortfall on sale of NPAs i.e. when the sale is at a price below the NBV.

(ii) If the sale is for a value higher than the NBV, Bank can reverse the excess provision on sale of NPAs to its profit and loss account in the year, the amounts are received. However, Bank can reverse excess provision (when the sale is for a value higher than the NBV) arising out of sale of NPAs, only when the cash received (by way of initial consideration and/ or redemption of SRs/ PTCs) is higher than the NBV of the asset. Further, reversal of excess provision will be limited to the extent to which cash received exceeds the NBV of the asset.

(b) For Sale of financial assets sold to Other Banks/ NBFCs/FIs etc.

(i) In case the sale is at a price below the Net Book Value (NBV) i.e. Book Value less provision held, the shortfall should be debited to the Profit & Loss A/c of that year.

(ii) In case the sale is for a value higher than the Net Book Value (NBV) i.e. Book Value less provision held, the excess provision shall not be reversed but will be utilized to meet the shortfall / loss on account of sale of other Non Performing Financial Assets.

(iii) In case there is overall surplus over and above the excess provision in any of the sale transaction that surplus amount will be taken in the Profit & loss a/c.

5.4 Restructured Assets:

For restructured/rescheduled advances, provisions are made in accordance with guidelines issued by RBI from time to time. Necessary provision for diminution in the fair value of a restructured account is made.

The bank considered a restructured account as one where the bank, for economic or legal reasons relating to the borrower's financial difficulty, grants concessions to the borrower. Restructuring would normally involve modification of terms of the advances/securities, which would generally include, among others, alteration of repayment period/ repayable amount/the amount of installments/rate of interest/ roll over of credit facilities/sanction of additional credit facility/enhancement of existing credit limits/ compromise settlements where time for payment of settlement amount exceeds three months. Restructured accounts are classified as such by the Bank only upon approval and implementation of the restructuring package.

Standard accounts classified as NPA and NPA accounts retained in the same category on restructuring by the bank are upgraded only when all the outstanding loan / facilities in the account demonstrate ‘satisfactory performance' (i.e., the payments in respect of borrower entity are not in default at any point of time) during the ‘specified period'.

‘Specified period' means the period from the date of implementation of Resolution plan (RP) up to the date by which at least 20 percent of the outstanding principal debt as per the RP and interest capitalization sanctioned as part of the restructuring, if any, is repaid. Provided that the specified period cannot end before one year from the commencement of the first payment of interest or principal (whichever is later) on the credit facility with longest period of moratorium under the terms of RP.

For the large accounts (i.e., accounts where the aggregate exposure of lenders is Rs 100 crore and above) to qualify for an upgrade, in addition to demonstration of satisfactory performance, the credit facilities of the borrower shall also be rated as investment grade (BBB- or better) as at the end of the ‘specified period' by CRAs accredited by the Reserve Bank for the purpose of bank loan ratings. While accounts with aggregate exposure of Rs 500 crore and above shall require two ratings, those below Rs 500crore shall require one rating. If the ratings are obtained from more than the required number of CRAs, all such ratings shall be investment grade to qualify for an upgrade.

In case satisfactory performance during the specified period is not demonstrated, the accounts, immediately on such default, are reclassified as per the repayment schedule that existed before the restructuring. Any future upgrade for such accounts would be contingent on implementation of a fresh RP and demonstration of

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5.5 In addition to the specific provision on NPAs, general provisions are also made for standard assets as per extant RBI Guidelines. These provisions are reflected in Schedule

5 of the Balance Sheet under the head “Other Liabilities & Provisions - Others” and are not considered for arriving at the Net NPAs.

5.6 In accordance with RBI guidelines, accelerated provision is made on non-performing advances which were not earlier reported by the Bank as Special Mention Account under “SMA-2” category to Central Repository of Information on Large Credits (CRILC).

5.7 Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized in the profit and loss account.

5.8 Provision for Country Exposure:

In addition to the specific provisions held according to the asset classification status, provisions are also made for individual country exposures (other than the home country). Countries are categorized into seven risk categories, namely, insignificant, low, moderately low, moderate, moderately high, high & very high and provisioning made as per extant RBI guidelines. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is maintained on such country exposures. The provision is reflected in Schedule 5 of the Balance Sheet under the “Other liabilities

6 Provisions - Others”.

5.9 An additional provision of 2% (in addition to country risk provision that is applicable to all overseas exposures) against standard assets representing all exposures to step down subsidiaries of Indian Corporates has been made to cover the additional risk arising from complexity in the structure, location of different intermediary entities in different jurisdictions exposing the Indian Company, and hence the Bank, to a greater political and regulatory risk. (As per RBI Cir.No. RBI/ 2015.16/279 DBR. IBD.BC No. 68/ 23.37.001/ 2015-16 dated 31.12.2015).

6. PROPERTY, PLANT & EQUIPMENT:

6.1 Property, Plant & Equipment are stated at historical cost less accumulated depreciation/amortization, wherever applicable, except those premises, which have been revalued. The appreciation on revaluation is credited to revaluation reserve and incremental depreciation attributable to the revalued amount is deducted there from.

6.2 Software is capitalized and clubbed under Intangible assets.

6.3 Cost includes cost of purchase and all expenditure such as site preparation, installation costs and professional fees incurred on the asset till the time of capitalization. Subsequent expenditure/s incurred on the assets are capitalized only when it increases the future benefits from such assets or their functioning capability.

6.4 DEPRECIATION:

A. Depreciation on assets (including land where value is not separable) is provided on straight-line method based on estimated life of the asset, except in respect of computers where it is calculated on the straight-line method, at the rates prescribed by RBI.

B. Depreciation on assets has been provided at the rates furnished below:-

Particulars

Rate of Depreciation

PREMISES

Freehold Properties

Land

NIL

Depreciation to be provided on Construction Cost where the land cost is segregated and on total cost where the land cost is not ascertainable and cannot be segregated.

2.5% (40 years Straight Line Method or remaining life whichever is lower)

Land acquired on perpetual lease where no lease period is mentioned

NIL

Land acquired on lease where lease period is mentioned

Over lease period

Building

Constructed on free hold land and on leased land, where lease period is above 40 years

2.50%

Constructed on leased land where lease period is below 40 years.

Over lease period

FIXED ASSETS EXCEPT PREMISES

Furniture and fixtures- Steel articles

5.00%

Furniture and fixtures-wooden articles

10.00%

Mattresses

20.00%

Mobile Phone Instruments

33.33%

Machinery, electrical and miscellaneous articles

15.00%

Motor cars and cycles

15.00%

Computers, ATMs and related items, laptop, i pad etc:-Servers, Network, Equipment & Automated Teller Machines (Including software forming an integral part of computer hardware)

33.33%

Items of office fixed assets (excepts to staff) amount less than Rs. 25000.00 and / or having useful life of less than 12 months from the date of acquisition should be recognized as expense. Cost of Application Software / Operating System / Data base amounting upto Rs. 25000.00 are charged to revenue.

C. Depreciation on fresh additions to assets other than bank's own premises is provided from the day in which the assets are capitalized and in the case of assets sold/disposed off during the year, up to the date in which it is sold/ disposed off i.e. daily basis.

D. The depreciation on bank's own premises existing at the close of the year is charged for full year. The construction cost is depreciated only when the building is complete in all respects. Where the cost of land and building cannot be separately ascertained, depreciation is provided on the composite cost, at the rate applicable to buildings.

E. In respect of leasehold premises, the lease premium, if any, is amortized over the period of lease and the lease rent is charged in the respective year(s).

F. The Revalued assets is depreciated over the balance useful life of the asset as assessed at the time of revaluation.

7. IMPAIRMENT OF ASSETS:

The carrying costs of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors.

An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.

After impairment, if any, depreciation is provided on the revised carrying cost of the asset over its remaining useful life.

A previously recognized impairment loss is increased or reversed depending on changes in circumstances.

However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

8. EMPLOYMENT BENEFITS:PROVIDENT FUND:

Provident fund is a defined contribution scheme as the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit & Loss A/c.

GRATUITY:

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

PENSION:

Pension liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation. The scheme is funded by the bank and is managed by a separate trust.

The Bank operates a New Pension Scheme (NPS) for all officers/ employees joining the Bank on or after 01.04.2010. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with a matching contribution from the Bank. Pending completion of the registration procedures of the employees concerned, these contributions are retained. The Bank recognizes such annual contributions as an expense in the year to which they relate. Upon the receipt of the Permanent Retirement Account Number (PRAN), the consolidated contribution amounts are transferred to the NPS Trust.

COMPENSATED ABSENCES:

Accumulating compensated absences such as Privilege Leave (PL) and Sick Leave (including unavailed casual leave) are provided for based on actuarial valuation.

OTHER EMPLOYEE BENEFITS:

Other Employee Benefits such as Leave Fare Concession (LFC), Silver Jubilee Award, etc. are provided for based on actuarial valuation.

In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws prevailing in the respective countries.

9. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS & BALANCES:

Transactions involving foreign exchange are accounted for in accordance with AS 11, “The Effect of Changes in Foreign Exchange Rates”.

9.1 Except advances of erstwhile London branches which are accounted for at the exchange rate prevailing on the date of parking in India, all other monetary assets and liabilities, guarantees, acceptances, endorsements and other obligations are translated in Indian Rupee equivalent at the exchange rates prevailing as on the Balance Sheet date as per Foreign Exchange Dealers' Association of India (FEDAI) guidelines.

9.2 Non-monetary items other than fixed assets which are carried at historical cost are translated at exchange rate prevailing on the date of transaction.

9.3 Outstanding Forward exchange spot and forward contracts are translated as on the Balance Sheet date at the rates notified by FEDAI and the resultant gain/loss on translation is taken to Profit & Loss Account.

Foreign exchange spot/forward contracts/deals (Merchant and Inter-bank) which are not intended for trading/Merchant Hedge and are outstanding on the Balance Sheet date, are reverse re-valued at the closing FEDAI spot/forward rate in order to remove revaluation effect on exchange profit. The premium or discount arising at the inception of such a forward exchange contract is amortized as interest expense or income over the life of the contract.

9.4 Income and expenditure items are accounted for at the exchange rate prevailing on the date of transaction.

Exchange differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognized as income or as expense in the period in which they arise.

Gains/Losses on account of changes in exchange rates of open position in currency futures trades are settled with the exchange clearing house on daily basis and such gains/ losses are recognized in the Profit and Loss Account.

9.5 Offices outside India / Offshore Banking Units:

(i) Operations of foreign branches and off shore banking unit are classified as "Non-integral foreign operations" and operations of representative offices abroad are classified as "integral foreign operations".

(ii) Foreign currency transactions of integral foreign operations and non-integral foreign operations are accounted for as prescribed by AS-11.

(iii) Exchange Fluctuation resulting into Profit / loss of non-integral operations is credited /debited to Exchange Fluctuation Reserve.

10. TAXES ON INCOME

Income tax expense is the aggregate amount of current tax including Minimum Alternate Tax (MAT), wherever applicable and deferred tax expense incurred by the Bank. The current tax and deferred tax 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.

MAT credit is recognized as an asset only when and to the extend there is convincing evidence that there will be payment of normal income tax during the period specified under the income Tax Act, 1961,

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/virtually certain.

11. Earnings per Share:

The Bank reports basic and diluted earnings per share in accordance with AS 20 -‘Earnings per Share' issued by the ICAI. Basic Earnings per Share are computed by dividing the Net Profit after Tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding for the year.

12. Provisions, Contingent Liabilities and Contingent Assets:

In conformity with AS 29, “Provisions, Contingent Liabilities and Contingent Assets”, issued by the Institute of Chartered Accountants of India, the Bank recognises provisions only when it has a present obligation as a result of a past event, and would result in a probable outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

Contingent Assets are not recognised in the financial statements.

13. Bullion Transactions:

The Bank imports bullion including precious metal bars on a consignment basis for selling to its customers. The imports are typically on a back-to-back basis and are priced to the customer based on price quoted by the supplier. The Bank earns a fee on such bullion transactions. The fee is classified under commission income. The Bank also accepts deposits and lends gold, which is treated as deposits/advances as the case may be with the interest paid / received classified as interest expense/income.

14. 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 ICAI.

15. The Bank, in accordance with RBI Circular FIDD.CO.Plan. BC.23/ 04.09.01/ 2015-16 dated April 7, 2016, trades in Priority Sector portfolio by selling or buying PSLC. There is no transfer of risks or loan assets in these transactions. The fee paid for purchase of the PSLC is treated as an ‘Expense' and the Fee received from sale of PSLCs is treated as ‘Other Income'.