17. PROVISIONS, CONTINGENT LIABLITIES AND
CONTINGENT ASSETS: (AS 29 Provisions, Contingent
Liabilities and Contingent Assets)
As per AS 29 “Provisions, Contingent Liabilities and
Contingent Assets”, the Bank recognises provisions only
when it has a present obligation as a result of a past event
and it is probable that an 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 liability is disclosed unless the possibility of
an outflow of resources embodying economic benefit
is remote. Contingent Assets are not recognised in the
financial statements.
18. SHARE ISSUE EXPENSES
Share issue expenses are charged to Share Premium
Account in the year of issue of shares.
*On consolidated basis (including domestic operations, overseas
centres and overseas subsidiaries)
@ Disclosure as on 31.03.2025 as well as 31.03.2024 has
been done by taking simple averages of daily observations over
previous 4 quarters (i.e. average for the FY 2024-25 & FY 2023¬
24 respectively). This is as per RBI guidelines ref. no. DBR.
No.BP.BC.80 /21.06.201/2014-15 dated March 31, 2015.
Qualitative disclosures with regard to LCR
The Liquidity Coverage Ratio (LCR) is one of the Basel
Committee's key reforms to develop a more resilient banking
sector. The LCR, a global standard, is also used to measure
your Bank's liquidity position. LCR seeks to ensure that the
Bank has an adequate stock of unencumbered High-Quality
Liquid Assets (HQLA) that can be converted into cash easily and
immediately to meet its liquidity needs under a 30-day calendar
liquidity stress scenario. The LCR helps in improving the banking
sector's ability to absorb shocks arising from financial and
economic stress, whatever the source, thus reducing the risk of
spill over from the financial sector to the real economy. Based
on Basel III norms, your Bank's average LCR stood at 118.62
per cent on a consolidated basis for financial year 2024-25 as
against the regulatory threshold at 100 per cent.
The LCR standard aims to ensure that a bank maintains an
adequate level of unencumbered High Quality Liquid Assets
(HQLA) that can be converted into cash to meet its liquidity
needs for a 30 calendar day time horizon under a significantly
severe liquidity stress scenario. At a minimum, the stock of liquid
assets should enable the bank to survive until next 30 calendar
days under a severe liquidity stress scenario.
High Quality Liquid Assets (HQLA)
LCR =
Total net cash outflows over the next 30 calendar days
Liquid assets comprise of high-quality assets that can be readily
encashed or used as collateral to obtain cash in a range of
stress scenarios.
Here,
- HQLA comprises of level 1 and level 2 assets, in other
words these are cash or near to cash items which can
be easily used / discounted in the market in case of
need. While Level 1 assets are with 0% haircut, Level
2A and Level 2B assets are with 15% and 50% haircuts
respectively.
- Net cash outflows are excess of total outflow over total
inflow under stressed situation as defined by Basel / RBI.
While arriving at the net cash outflow, the inflows are
taken with pre-defined hair-cuts and the outflows are taken
at pre-defined run-off factors. In order to determine cash
outflows, the Bank segregates its deposits into various
customer segments, viz., Retail (which include deposits
from individuals), Small Business Customers (those with
deposits upto ? 7.5), and Wholesale (which would cover
all residual deposits). Within Wholesale, deposits that are
attributable to clearing, custody, and cash management
services are classified as Operational Deposits. Other
contractual funding, including a portion of other liabilities
which are expected to run down in a 30 day time frame
are included in the cash outflows. These classifications,
based on extant regulatory guidelines, are part of the
Bank's LCR framework, and are also submitted to the RBI.
- Total expected cash inflows are calculated by multiplying
the outstanding balances of various categories of
contractual receivables by the rates at which they are
expected to flow in up to an aggregate cap of 75% of total
expected cash outflows. In case stressed inflows are more
than the stressed outflows, 25% of total outflows shall be
taken as total net cash outflows to arrive at the LCR.
Main Drivers of LCR: The main drivers of the LCR are
adequacy of High Quality Liquid Assets (HQLA) and lower net
cash outflow on account of higher funding sources from retail
customers. Sufficient stock of HQLA helped the Bank to maintain
adequate LCR.
Composition of HQLA: The composition of High Quality Liquid
Assets (HQLA) mainly consists of cash balances, excess SLR,
excess CRR, Securities under MSF and FALLCR (Facility to
Avail Liquidity for Liquidity Coverage Ratio).
The composition of Average HQLA for the financial year ended
Concentration of funding sources: Majority of Bank's funding
sources are from retail customers & small business customers
therefore the stressed outflows are comparatively lower.
Bank does not have significant funding concentration from
any counterparty. In the Indian context, the run-off factors for
the stressed scenarios are prescribed by the RBI, for various
categories of liabilities (viz., deposits, unsecured and secured
wholesale borrowings), undrawn commitments, derivative-
related exposures, and offset with inflows emanating from assets
maturing within the same time period. Given below is a table of
ri fo r' nre- "F/~\ r rlorirvoitc-1
Derivative Exposures and potential collateral calls: Bank
has very little exposure in derivative business which is not very
significant.
Currency mismatch in the LCR: In terms of RBI guidelines,
a significant currency is one where aggregate liabilities
denominated in that currency amount to 5 per cent or more of
the bank's total liabilities. In our case, USD is the only significant
currency.
Description of the degree of centralization of liquidity
management and interaction between the group's units:
The liquidity management of the Bank at enterprise level is a
Board level function and a separate sub-committee of the Board
(R.Com.) keeps close watch on that. The periodical monitoring
of the liquidity management is being monitored by the ALCO at
regular intervals. The entire liquidity management process of
the Bank is being governed by Global ALM Policy of the Bank.
Liquidity for the Bank's domestic banking operations is directly
managed at the Head Office. The overseas branches and
offshore unit of the Bank independently manage their liquidity
requirements with support from the Head Office. Similarly,
the Bank's subsidiaries independently manage their liquidity
requirements under guidance of the R.COM, which, along with
senior management of the subsidiaries, reviews the risk assessment of material risks at the subsidiaries. Further, the Bank maintains
suitable systems and processes to monitor liquidity requirements in other currencies as appropriate.
The average LCR based on daily average for the financial year ended March 31, 2025 was at 118.62% as against 153.12% for the
financial year ended March 31, 2024 and this is well above the present prescribed minimum regulatory requirement of 100%. The
average HQLA for the financial year ended March 31, 2025 was ? 1,77,088.23 with 100.14% being Level 1 Assets whereas Level 2A
and level 2 B assets constitute 0.56% and 0.11% respectively. The adjustment in average HQLA is (0.81%). During the financial year,
the weighted average HQLA level has increased by ? 21,503.06 primarily on account of increase in excess SLR balance. Further,
weighted average net cash outflows position has increased by ? 47,677.05 during the financial year, mainly on account of increase in
cash outflows under the head unsecured wholesale funding.
The Bank has been maintaining HQLA mainly in the form of SLR investments over and above the mandatory requirements. Retail
deposits constitute major portion of total funding sources, which are well diversified. Management is of the view that the Bank has
sufficient liquidity cover to meet its likely future commitments.
These may include, but are not limited to, items such as capital
with perpetual maturity, non-maturity deposits, short positions,
open maturity positions, non-HQLA equities, and physical traded
commodities.
The objective of the Net Stable Funding Ratio (NSFR) is to
promote the resilience of bank's liquidity risk profiles and to
incentivize a more resilient banking sector over a longer time
horizon. The NSFR guidelines ensure reduction in funding risk
over a longer term horizon by requiring banks to fund their
activities with sufficiently stable sources of funding in order to
mitigate the risk of future funding stress. The NSFR is defined as
the amount of Available Stable Funding relative to the amount of
Required Stable Funding.
Available Amount of Stable Funding (ASF)
NSFR = >100%
Required Amount of Stable Funding (RSF)
RBI issued the regulations on the implementation of the Net
Stable Funding Ratio in May 2018 with minimum requirement
of equal to at least 100%. The implementation is effective from
1st October, 2021. NSFR is computed at Bank's standalone and
consolidated level.
Available Stable Funding (ASF) is defined as the portion of
capital and liabilities expected to be reliable which is determined
by various factors / weights according to the nature and maturity
of liabilities viz. liabilities having maturity of 1 year or more
receiving 100% weight.
Required Stable Funding (RSF) is defined as the portion of on
balance sheet and off-balance sheet exposures which requires
to be funded on an ongoing basis. The amount of such stable
funding required is a function of the liquidity characteristics and
residual maturities of the various assets held.
Brief about NSFR of the Bank
The main drivers of the Available Stable Funding (ASF) are the
capital base, retail deposit base, and funding from non-financial
companies and long-term funding from institutional clients.
The capital base formed around 14%, retail deposits (including
deposits from small sized business customers) formed 56%
and wholesale funding formed 13% of the total Available Stable
Funding, after applying the relevant weights.
The Required Stable Funding primarily comprised lending
to corporates, retail clients and financial institutions which
constituted 68% of the total RSF after applying the relevant
weights. The stock of High-Quality Liquid Assets which majorly
includes cash and reserve balances with the RBI, government
debt issuances attracted no or low amount of stable funding
due to their high quality and liquid characteristic. Accordingly,
the HQLA constituted only 1% of the Required Stable Funding
after applying the relevant weights. Other assets and Contingent
funding obligations, such as committed credit facilities,
guarantees and letters of credit constituted 31% of the Required
Stable Funding.
Bank's NSFR comes to 124.72% at consolidated basis as on 31st
March 2025 and is above the minimum regulatory requirement
of 100% set out by RBI. As on 31st March 2025, the weighted
Available Stable Funding (ASF) position stood at ? 7,01,086.93
and weighted Required Stable Funding (RSF) position stood at ?
5,62,128.09.
(i) Government Securities (Face Value) amounting to ?
54,267.64 (previous year ? 35,489.39) are kept as margin
with RBI, CCIL, Clearing House and Exchange towards
margin/security settlement.
(ii) Bank's Joint Venture Star Union Dai-Ichi Life Insurance
Company Limited has issued 1,82,72,424 fully paid equity
shares, face value of ? 10 each at premium of ? 291 per
share on right basis to existing shareholders. However,
the Bank did not subscribe to any additional shares, which
has resulted in reduction of Bank's stake from 28.96% to
27.48%. Accordingly, Bank's share in the reserves of said
joint venture has reduced by ? 22.10.
(iii) During the year ended March 31, 2025, the Bank has
been allotted proportionate equity share capital by one
of its existing associate Regional Rural Bank, namely
Aryavart Bank of ? 152.04 against pending share
application money made in FY 2022-23.
(iv) Bank was also allotted shares for the additional investment
of ? 49.46 in one of its wholly owned subsidiary, namely,
Bank of India (Uganda) Limited.
(b) Movement of Provisions for Depreciation and
Investment Fluctuation Reserve
*In Compliance with RBI Master Directions on Classification,
Valuation and Operation of Investment portfolio of Commercial
Bank (Directions) 2023, the Depreciation held in books as on
31.03.2024 has been transferred to General Reserve during
reclassification of Investment portfolio.
(c) Sale and transfers to/from HTM categories during the
financial year 2024-25:
The total value of sale of securities from HTM category
during April 1, 2024 to March 31, 2025 has not exceeded
5% of the opening carrying value of investments held
in HTM category as on April 1, 2024 in compliance with
RBI Master Directions on Classification, Valuation and
Operation of Investment Portfolio of Commercial Banks
(Directions) 2023 dated September 12, 2023.
Further as per the above Master Directions, Banks shall
not reclassify investments between categories without
approval of their Board of Directors and subsequent
approval from Department of Supervision, RBI.
(d) Particulars of resolution plan and restructuring
As per RBI Circular No.DBR.No.BP.BC.45/21.04.048/2018-19 dated June 7, 2019 on Prudential Framework for Resolution of
Stressed Assets, as on March 31, 2025, Bank holds Provision of ? 1,537.16 in respect of 12 borrower accounts (exposure ?
5,467.11), where the viable Resolution Plan has not been implemented within 180 days / 365 days of review period.
(e) Divergence in asset classification and provisioning:
As per RBI Master Direction No. RBI/DOR/2021-22/83/DOR.ACC.REC.No.45 /21.04.018/2021-22 dated August 30, 2021
(updated as on 01.04.2024) on Financial statements - Presentation and Disclosures, divergence in the asset classification and
provisioning, Banks should disclose divergences, if either or both of the following conditions are satisfied:
(a) the additional provisioning for non-performing assets (NPAs) assessed by RBI as part of its supervisory process, exceeds
5% of the reported profit before provisions and contingencies for the reference period, and
(b) the additional Gross NPAs identified by the RBI as part of its supervisory process exceeds 5% of reported incremental
Gross NPAs for the reference period.
Divergences are within threshold limits in the Bank as specified above. Hence, no disclosure is required with respect to
Divergence in Asset Classification and Provisioning for NPAs with respect to RBI's supervisory process for the year ended March
31, 2024.
There was no default and penalty imposed by Reserve
Bank of India in Repo/Reverse Repo transactions and in
RRC Account with RBI during the Financial year 2024-25.
(c) Disclosures on risk exposure in derivatives
i. Qualitative Disclosure
The Bank enters into derivative contracts such
as interest rate derivatives, currency swaps and
currency options to hedge on balance sheet assets
and liabilities or to meet client requirements as well
as for trading purpose as per policy approved by
the Board. These products are used for hedging
risk, reducing cost and increasing the yield. In such
transactions, the types of risks to which the bank is
exposed to, are credit risk, market risk, operational
risk etc.
Risk management is an integral part of bank's
business management. Bank has risk management
policies designed to identify and analyse risks, to set
appropriate risk limits and to monitor these risks and
limits on an on-going basis by means of reliable and
up to date management information systems. The
risk management policies and major control limits
are approved by the Board of Directors and they are
monitored and reviewed regularly. The organization
of the Bank is conducive to managing risks. There
is sufficient awareness of the risks and the size
of exposure of the trading activities in derivative
operations.
The Bank has a Risk Management Committee of
Directors presided over by the Chairman.
The hedge/non-hedge (market making) transactions
are recorded separately. Income/expenditure on
hedging derivatives is accounted on accrual basis.
Forex forward contracts are marked to market and
the resultant gains and losses are recognized in the
profit and loss account.
Interest rate derivatives and currency derivatives
other than exchange traded derivatives for trading
purpose are marked to market and the resulting
losses, if any, are recognised in the Profit and Loss
account. Net Profit, if any, is ignored.
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 & Loss account.
Gains/losses on termination of the trading swaps
are recorded on the termination date as income/
expenditure. Any gain/loss on termination of hedging
swaps are deferred and recognised over the shorter
of the remaining contractual life of the swap or the
remaining life of the designated assets/liabilities.
Option fees/premium is amortised over the tenor of
the option contract.
Bank has a proper system of submitting periodical
reports to Senior and Top Management and Board
as well as regulatory authorities as required by RBI
and/or as per operational requirements. Bank has
clearly spelt derivative guidelines on various aspects
approved by the Board of Director. The derivative
transactions are subject to concurrent, internal,
statutory and regulatory audits.
The counter parties to the transactions are banks,
primary dealers and corporate entities. The deals
are done under approved exposure limits. The
Bank has adopted the Current Exposure Method
prescribed by Reserve Bank of India for measuring
Credit Exposures arising on account of interest
rate and foreign exchange derivative transactions.
Current exposure method is the sum of current
credit exposure and potential future exposure of
these contracts.
The current credit exposure is the sum of positive
mark to market value of these contracts i.e. when
the Bank has to receive money from the counter
party.
Potential future credit exposure is determined by
multiplying the notional principal amount of these
contracts irrespective of whether the contract has
zero, positive or negative mark to market value by
the relevant add-on factors as under according to
the nature and residual maturity of the instruments.
(f) Implementation of IFRS converged Indian Accounting
Standards (Ind AS):
RBI vide its circular DBR.BP.BC.No.29/21.07.001/2018-19
dated March 22, 2019, deferred implementation of Ind AS
till further notice as the legislative amendments in Banking
Regulation Act, 1949 as recommended by RBI are under
consideration of the Government of India. However, RBI
requires all banks to submit Proforma Ind AS Financial
Statements (PFS) every half year. Accordingly, the Bank
has been preparing and submitting to RBI Proforma Ind
AS Financial Statements (PFS) half-yearly with effect
from September-2021, after seeking approval of Steering
Committee formed for monitoring of implementation
of Ind-AS in the Bank. The PFS are also presented to
Audit Committee of Board and Board for information and
reporting.
(h) Facilities granted to Directors and their relatives:
Applicable only to UCBs
(i) Disclosure on amortisation of expenditure on account
of enhancement in family pension of employees of
banks
Reserve Bank of India vide its Circular No. RBI/2021-
22/105 DOR.ACC.REC.57/21.04.018/2021-22 dated
October 4, 2021, permitted Banks to amortise the
additional liability on account of revision in family pension
over a period not exceeding five years beginning with
the financial year ending March 31, 2022, subject to
a minimum of 1/5th of the total amount being expensed
every year. The Bank recognised the additional liability
on account of revision in family pension amounting to ?
612.09 and has opted to amortise the said liability over a
period not exceeding five years, beginning financial year
ending March 31, 2022.
Accordingly, Bank has recognised ? 41.21 (Previous Year
? 142.42) as an expense in the Profit and Loss account,
for the year ended March 31, 2025 towards the said
additional liability and the unamortised amount of family
pension liability as on the date is ? Nil (Previous Year
?41.21).
(j) In accordance with RBI circular no.DBRNo.
BP.BC.18/21.04.048/2018-19 dated January 1, 2019, on
(p) In respect of RBI referred NCLT accounts (List 1 & 2) as on March 31, 2025, Bank holds 100% provision of the outstanding
value of ? 3,033.86.
(q) In terms of Bank's approved revaluation policy, during the year ended March 31, 2025 the immovable properties are revalued
based on the revaluation reports of Bank's approved valuers and the surplus arising from revaluation amounts to ?1,580.24
(Domestic ? 1,449.27 and Foreign ? 130.97) has been added to “Revaluation Reserve”.
(r) Other Income includes commission and brokerage income, profit/loss on sale of assets, profit/loss on revaluation of investments
(net) (including depreciation on performing investments), earnings from foreign exchange and derivative transactions, recoveries
from accounts previously written off, dividend income, etc.
(s) The Board of Directors has recommended a dividend of ? 4.05 per equity share (40.50%) for the year ended March 31, 2025
subject to requisite approvals.
(t) Balancing of Subsidiary Ledger Accounts, confirmation/reconciliation of balances with foreign branches, Inter-office accounts,
NOSTRO Accounts, Suspense, Draft Payable, Clearing Difference, other office accounts, etc. is in progress on an on-going
basis. In the opinion of the management, the overall unadjusted impact on the financial statements, if any, of pending final
clearance/adjustment of the above, is not likely to be significant.
6.1 Accounting Standard - 5 Net Profit / loss for the period, Prior Period Items and changes in accounting policies:
(i) Prior Period Items:
During the year, there were no material prior period income / expenditure items.
(ii) Change in accounting policy:
There is no change in the Significant Accounting Policies followed during the year ended March 31, 2025 as compared to
those followed in the previous financial year ended March 31,2024 except the following:
(a) The RBI, vide its Master Direction dated September 12, 2023 issued revised norms for the classification, valuation
and operation of the investment portfolio of banks, which became applicable from April 01, 2024. While hitherto the
investment portfolio was classified under the held to maturity (HTM) , available for sale (AFS) and held for trading
(HFT) categories, the revised norms bring in a principle-based classification of investment portfolio and a symmetric
treatment of fair value gains and losses. In accordance with the revised norms and the Bank's Board approved
policy, the Bank has classified its investment portfolio as on April 01, 2024, under the categories of held to maturity
(HTM), available for sale (AFS), fair value through profit and loss (FVTPL) and held for trading (HFT) as a sub
category of FVTPL, and from that date, measures and values the investment portfolio under the revised framework.
On transition to the framework on April 01, 2024, the Bank has recognised a net gain of ? 127.46, net of taxes,
(including transfer of Investment Reserve ? 406.56), which has been credited to revenue reserve in accordance with
the said norms. The impact of the revised framework for the previous period (FY 2023-24) is not ascertainable and
as such the profit or loss from the investments for the year ended March 31, 2025 are not comparable with that of
the previous year.
(b) In terms of RBI circular No. RBI/DOR/2024-25/135 DOR.STR.REC.72 /21.04.048/2024-25 dated March 29, 2025
on revised norms for Government Guaranteed Security Receipts (SRs), banks are permitted to reverse any excess
provision to the profit and loss Account in the year of transfer of loan to Asset reconstruction company (ARC) for the
value higher than the net book value (NBV), provided the consideration consists solely of cash and SRs guaranteed
by the Government of India. Such SRs shall be valued periodically by reckoning the Net Asset Value (NAV) declared
by the ARC based on the recovery ratings received for such instruments. On account of the same, appreciation to
the extent of bank's share amounting to ? 397.76 towards unrealized MTM Gain and the excess provision has been
reversed to P&L account during the year ended 31.03.2025.
The Bank has recognised Business Segments as Primary reporting segment and Geographical Segments as Secondary segment in
line with RBI guidelines in compliance with Accounting Standard 17.
Primary Segment: Business Segments
a) Treasury: ‘Treasury' segment includes the entire investment portfolio i.e. dealing in Government and other Securities, Money
Market Operations and Forex Operations including Derivative contracts.
b) Wholesale Banking: Wholesale Banking includes all lending activities which are not included under Retail Banking.
c) Retail Banking: Retail Banking segment comprises of Digital Banking and Other Retail Banking.
Digital Banking includes digital banking products acquired by DBUs.
Other Retail Banking includes all housing loan accounts and borrower accounts having exposure up to ? 7.50.
Pricing of Inter-Segmental transfers
Retail Banking Segment is a Primary resource mobilising unit and Wholesale Segment and Treasury Segment compensates
the Retail banking segment for funds lent by it to them taking into consideration the average cost of deposits and borrowings
incurred by it.
Allocation of Costs:
a) Expenses directly attributed to particular segment are allocated to the relative segment.
b) Expenses not directly attributable to specific segment are allocated in proportion to number of employees/business
managed.
Secondary Segment: Geographical Segments
a) Domestic Operations
b) International Operations
6.5 Accounting Standard 18 - Related Party Transactions (As compiled by the management and relied upon by the Auditors):
I) List of Related Parties:
a. Key Managerial Personnel :
Managing Director & CEO : Shri Rajneesh Karnatak
Executive Directors : Shri P R Rajagopal
Shri M. Karthikeyan (superannuated on 31.03.2025)
Shri Subrat Kumar
Shri Rajiv Mishra
*Excluding provisions for others
B. Contingent Liabilities:
Such liabilities are dependent upon, the outcome of court order/arbitration/out of court settlement, disposal of appeals and
the amount being called up, terms of contractual obligations, devolvement and raising of demand by concerned parties, as
the case may be. No reimbursement is expected in such cases.
7. Figures of the previous period have been regrouped / reclassified, wherever considered necessary to conform to the current
period's classification.
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