SIGNIFICANT ACCOUNTING POLICIES FOR THE FY 2024-25
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 the 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 3.2 & 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) Appropriation of Recoveries in NPA accounts (irrespective
of the mode / status / stage of recovery actions) shall be
regulated in the following order of priority:
i. Expenditure/Out of Pocket Expenses incurred for
Recovery (earlier recorded in Memorandum Dues);
ii. Thereafter towards the interest irregularities / accrued
interest;
iii. Principal irregularities i.e. NPA outstanding in the account.
iv. Penal Charges
In case of borrowers who are having multiple accounts
- On receiving recovery in one account, system
appropriates recovery towards Expenditure, Interest,
Principal and penal charges. Further, surplus recovery
amount, if any, is appropriated towards Expenditure,
Interest, Principal and penal charges of another account
for same customer.
(b) However, in case of Compromise, Resolution/ Settlement
through NCLT, Technically Written Off (TWO) & Credits
received on account of CGTMSE / ECGC / GECL /
CGFMU and subsidy if any, shall be appropriated in the
order of Principal, Expenditure / out of pocket expenses
incurred for recovery (earlier recorded in Memorandum
Dues), Interest and penal charges.
(c) In case of suit filed/decreed accounts, recovery is
appropriated as under:
i. As per the directives of the concerned Court.
ii. In the absence of specific directives from the Court, as
mentioned at point (a) above.
Any exceptions to the above may be considered by
HOCAC-III (for proposals falling under the powers of
various committees upto HOCAC-III) & Management
Committee / Board for proposals under their vested
powers.
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, Mutual Fund Business, Letter of Credit and Bank
Guarantee), exchange, locker rent, Income on Rupee
Derivatives designated as ‘Trading' and Income from units
of mutual funds, alternative investment funds & other such
pooled/ collective investment funds are accounted for on
realization and insurance claims are accounted for on
settlement. Interest on overdue inland bills is 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 If Term Deposit (TD) matures and proceeds are unpaid, the
amount left unclaimed with the Bank attracts rate of interest as
applicable to savings account or the contracted rate of interest
on the matured TD, whichever is lower.
3.11 Bank recognizes dividend income on accrual basis for shares
of corporate bodies provided dividend has been declared by the
corporate body in its Annual General Meeting and the owner's
right to receive payment is established. Dividend income on
equity investments held under AFS is also recognised in the
Profit and Loss Account.
4. INVESTMENTS:
4.1 As soon as the deal is entered into (whether settled or
not) necessary vouchers are passed. For the equity
deals, transaction vouchers are passed on the deal date
and for other deals, contra vouchers are passed on deal
date and transaction vouchers in securities are passed on
the date of settlement.
4.2 Investments are classified into six categories as stipulated
in Third Schedule to the Banking Regulation Act, 1949
(Form A- Schedule 8- Investment).
4.3 Entire investment portfolio (except investments in own
subsidiaries, joint ventures and associates) has been
classified 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 subcategory within FVTPL. The
category of the investment is decided before or at the time
of acquisition.
(a) HTM: Securities fulfilling the following conditions are
classified under HTM:
(i) The security acquired with the intention and objective
of holding it to maturity, i.e., the financial assets are
held with an objective to collect the contractual cash
flows; and
(ii) The contractual terms of the security give rise to
cash flows that are solely payments of principal and
interest on principal outstanding (‘SPPI criterion') on
specified dates.
(b) AFS: Securities fulfilling the following conditions are
classified under AFS:
(i) The security 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'.
(iii) Equity shares where, at initial recognition, the
irrevocable option to classify in AFS has been
exercised.
(iv) AFS securities also include debt securities held for
asset liability management (ALM) purposes that
meet the SPPI criterion where the Bank's intent is
flexible with respect to holding to maturity or selling
before maturity.
(c) FVTPL: Securities that do not qualify for inclusion in
HTM or AFS are classified under FVTPL. These inter-alia
include:
(i) Equity shares, other than (a) equity shares of
subsidiaries, associates or joint ventures and (b)
equity shares classified under AFS.
(ii) Investments in Mutual Funds, Alternative Investment
Funds, Real Estate Investment Trusts, Infrastructure
Investment Trusts, etc.
(iii) Investment in securitisation notes which do not meet
SPPI criterion.
(iv) Bonds, debentures, etc. where the payment is linked
to the movement in a particular index such as an
equity index rather than an interest rate benchmark.
HFT: Separate sub-category called HFT is created within
FVTPL and it consists of all instruments set out in the
following -
• short-term resale;
• profiting from short-term price movements;
• locking in arbitrage profits; or
• hedging risks that arise from instruments meeting
above.
• instruments that would give rise to a net short credit
or equity position in the banking book.
• Any financial instrument when there is no legal
impediment against selling or fully hedging it.
4.4 Investments in Subsidiaries, Associates and Joint Ventures.
All investments in subsidiaries, associates and joint ventures
are held in a distinct category separate from the other
investment categories.
4.5 In case of Reclassification of investments from one category to
another category, the accounting treatment is as given in the
table below:
The reclassification is applied prospectively from reclassification
date and details of such reclassification including the reclassification
adjustments is provided as disclosure in the notes to the financial
statements, if the case persists.
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 as interest accrued but not due.
(c) Cost is determined on the weighted average cost method
for all categories of investments.
(d) 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. In other cases, following treatment is done:
> Where the securities are quoted or the fair value
is determined based on market observable inputs
(such as yield curve, credit spread, etc.) any Day
1 gain/ loss is recognised in the Profit and Loss
Account, under Schedule 14: ‘Other Income' within
the subhead ‘Profit on revaluation of investments' or
‘Loss on revaluation of investments'.
> Any Day 1 loss arising from Level 3 investments is
recognised immediately.
> 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 (or earliest call date for perpetual
instruments), while for unquoted equity instruments,
the gain is set aside as a liability until the security is
listed or derecognised.
4.7 Investments are valued as per RBI/ FIMMDA guidelines, on
the following basis:
I. Held to Maturity
Securities held in HTM are carried at cost and are not
marked to market (MTM) after initial recognition.
II. AFS
The securities held in AFS are fair valued on daily basis. The
valuation gains and losses across all performing investments,
irrespective of classification (i.e., Government securities, Other
approved securities, Bonds and Debentures, etc.), held under
AFS are aggregated and net appreciation or depreciation, is
directly credited or debited to AFS Reserve without routing
through the Profit and Loss account.
III. FVTPL
The securities held in FVTPL are fair valued and the net gain
or loss arising on such valuation is credited or debited to the
Profit and Loss Account. Out of above, Securities that are
classified under the HFT sub-category within FVTPL are fair
valued on daily basis and other securities under FVTPL on
daily basis.
IV. Investments in Subsidiaries, Associates and Joint
Ventures
All investments (i.e., including debt and equity) in subsidiaries,
associates and joint ventures are held at acquisition cost.
Investments in subsidiaries, associates or joint ventures are
evaluated for impairment on quarterly basis and if required,
on more frequent basis. In case of impairment, valuation of
the investment is being done by an independent registered
valuer and provision for impairment is made from Profit and
Loss Account. It can be subsequently reversed through Profit
and Loss Account, if there is a reversal of the diminution.
V. Amortization/ Accretion
Any discount or premium on the acquisition of debt securities
in HTM/ AFS/ FVTPL/ Subsidiaries, Associates and Joint
Ventures category is amortised over the remaining life of
the instrument. The amortised amount is reflected in the
financial statements under item II ‘Income on Investments' of
Schedule 13: ‘Interest Earned' with a contra in Schedule 8:
‘Investments'. For amortization and accretion of investments,
the Bank continues to follow the ‘straight line method'.
Fair Value of Investments:
The fair value for the purpose of initial recognition and periodical
valuation of Investments is determined as per table below:
4.8 When principal and/or interest are converted into equity,
debentures, bonds, etc., such instruments are categorised
in HTM, AFS or FVTPL (including HFT) at the time of
initial recognition. Further, the asset classification of such
instruments are same as the loan and provision are made as
per the relevant norms.
4.9 Accounting Treatment on sale/ maturity of investments:
I. HTM: Any profit or loss on the sale of investments in
HTM is being recognised in the Profit and Loss Account
under Item II of Schedule 14: ‘Other Income'. The profit
on sale of an investment in HTM is appropriated from the
Profit and Loss Account to the ‘Capital Reserve Account'.
The amount so appropriated will be net of taxes and the
amount to be transferred to Statutory Reserve.
II. AFS:
a. In the case of equity instruments designated under
AFS at the time of initial recognition, any gain or loss
on sale of such investments is transferred from AFS-
Reserve to the Capital Reserve.
b. On sale or maturity of a debt instrument in AFS
category, the accumulated gain/ loss for that security
in the AFS-Reserve is transferred from the AFS
Reserve and recognized in the Profit and Loss
Account under item II Profit on sale of investments
under Schedule 14-Other Income.
III. FVTPL: Any profit or loss on the sale is recognised directly
through Profit and Loss Account including HFT securities.
IV. Subsidiaries, Associates and Joint Ventures: Any gain/
profit arising on the reclassification/ sale of an investment
in a subsidiary, associate or joint venture is first recognised
in the Profit and Loss Account and then appropriated
from the Profit and Loss Account to the ‘Capital Reserve
Account'. The amount so appropriated will be net of taxes
and the amount to be transferred to Statutory Reserves.
All other guidelines of RBI Master Direction on
Classification, Valuation and Operation of Investment
Portfolio of Commercial Banks (Directions), 2023 dated
September 12, 2023, and other subsequent guidelines/
clarifications are adhered to.
4.10 Securities repurchased/resold under buy back arrangement
are accounted for at original cost.
4.11 Investments are subject to appropriate provisioning/ de¬
recognition of income, in line with the prudential norms
of Reserve Bank of India for NPI classification. Once an
investment is classified as an NPI, it is segregated from rest
of the portfolio and not considered for netting valuation gains
and losses.
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 is also 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. the provision
is made as higher of the following amounts -
(i) The amount of provision required as per IRACP norms
computed on the carrying value of the investment
immediately before it was classified as NPI; and
(ii) The depreciation on the investment with reference to its
carrying value on the date of classification as NPI.
Upon an account being upgraded as per IRACP norms, any
provision previously recognised is reversed and symmetric
recognition of MTM gains and losses will be resumed.
In the case of investment in the unquoted shares of any
company which are valued at ?1 per company on account of
the non-availability of the latest balance sheet, those equity
shares are reckoned as NPI. The NPI may be upgraded
subsequently on receipt of audited balance sheet.
Provisions for investments classified under AFS (Available for
Sale) are managed as follows:
• When there are cumulative gains in the AFS-Reserve, the
required provision may be created by charging the AFS-
Reserve up to the amountof these gains.
• When there are cumulative losses in the AFS-Reserve,
these losses are transferred from the AFS-Reserve to the
Profit and Loss Account.
4.12 Securities sold or purchased with an agreement to repurchase
or resell under Repo or Reverse Repo transactions, including
those under the Liquidity Adjustment Facility (LAF) with the
RBI, shall be recorded as borrowings or lending. Securities sold
under Repo agreements remain classified under investments,
while securities purchased under Reverse Repo agreements
shall not be included in investments. The associated costs and
revenues shall be accounted for as interest expenditure or
income, respectively.
4.13 The derivative 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 lower of
market value or 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.
4.14 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) Prudential norms for the transfer transactions to
ARCs:
When the stressed loan is transferred to ARC at a price
below the NBV at the time of transfer, the Bank has
debited the shortfall to the profit and loss account for the
year in which the transfer has taken place. Banks are
permitted to use countercyclical or floating provisions for
meeting any shortfall on transfer of stressed loan when
the transfer is at a price below the NBV.
On the other hand, when the stressed loan is transferred
to an ARC for a value higher than the NBV at the time
of transfer, lenders shall reverse the excess provision
on transfer to the profit and loss account in the year
the amounts are received and only when the sum of
cash received by way of initial consideration and / or
redemption or transfer of Security Receipts (SR) / Pass
Through Certificates (PTCs)/ other securities issued by
ARCs is higher than the NBV of the loan at the time of
transfer. Further, such reversals are limited to the extent
to which cash received exceeds the NBV of the loan at
the time of transfer.
As per RBI/DOR/2024-25/135 DOR.STR.
REC.72/21.04.048/2024-25 dated March 29, 2025, with
a view to adopting a differentiated approach in respect
of SRs guaranteed by the Government of India, the
prudential treatment relating to valuation of such SRs
is such that if a loan is transferred to an ARC for a
value higher than the net book value (NBV), the excess
provision is reversed to the Profit and Loss Account in the
year of transfer if the sale consideration comprises only
of cash and SRs guaranteed by the Government of India.
However, the non-cash component in the form of SRs is
deducted from CET 1 capital, and no dividends are paid
out of this component.
(b) Prudential norms for the transfer transactions to
transferee(s) other than ARCs - Provisioning norms:
(i) When the bank transfers its NPAs to
transferee(s) other than ARCs, the same are
removed from the books on receipt of the entire
transfer consideration.
(ii) If the transfer to transferee(s) other than ARCs
is at a price below the net NBV at the time of
transfer, the shortfall is debited to the profit and
loss account of the year in which transfer has
taken place.
(iii) If the sale consideration is for a value higher
than the NBV at the time of transfer, the excess
provisions has been reversed.
(c) The excess amount received, if any, over & above
memoranda dues is credited proportionately to the
respective heads of Income Interest on Loans and
Advances say Income Interest on CC/ Term Loan,
etc.
In case, the excess amount is to be returned
subsequently due to, e.g., DRT/Court orders or any
other eventuality, the same head is debited to refund
the excess amount recovered.
j.4 Restructured Assets:
For restructured/rescheduled advances, provisions are made
in accordance with guidelines issued by RBI from time to time.
Provision for diminution in fair value of restructured advances is
measured at net present value terms as per RBI guidelines for
accounts where total dues to the bank are Rupees One Crore
and above. For other accounts, the provision for diminution in
fair value is computed notionally at 5% of total exposure to the
bank as per RBI guidelines.
j.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.
j.6 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.
5.7 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 and 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 & Provisions - Others'.
5.8 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).
5.9 Floating Provision:
The Bank has a policy for creation and utilisation of floating
provision. The floating provision, so created can be utilised
only for contingencies under extraordinary circumstances
specified in the policy after obtaining Bank's Board approval
and with prior permission of Reserve Bank of India. Floating
provision is netted off from advances to the extent it is not
treated as Tier 2 capital.
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 in terms
of Bank's policy, i.e., every three years. 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.
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 are 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.
Impairment loss, if any, in respect of non-banking assets
acquired in satisfaction of claims is recognized as an expense
in the statement of profit and loss immediately and carrying
value of Non-Banking Assets is adjusted.
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 who have joined 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 contribution of 14% of their basic pay
plus dearness allowance 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 - Superannuation) and Sick Leave (including unavailed
casual leave) are provided for based on actuarial valuation.
The scheme for Privilege Leave (PL - Superannuation) is
funded by the Bank and is managed by a separate trust.
Privilege Leave (PL) encashment other than superannuation
are being paid from Bank expenditure account directly.
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
accounted for as per laws prevailing in the respective countries.
The valuation method used for defined benefit obligations for
employee benefits is ‘Projected Unit Credit Method'.
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 Foreign 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.
Funding Swaps that are outstanding on the Balance Sheet
date is out of purview of FEDAI revaluation guidelines. 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
extent 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 is 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.
Diluted Earnings per Share reflects the potential dilution that
could occur if securities or other contracts to issue equity
shares were exercised or converted during the year. Diluted
Earnings per Share is computed using the weighted average
number of equity shares and dilutive potential equity shares
outstanding.
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