11. PROVISIONS, CONTINGENT LIABILITIES AND
CONTINGENT ASSETS
11.1 In conformity with AS.29 "Provisions,
Contingent Liabilities and Contingent Assets"
issued by the Institute of Chartered Accountants of
India, the Bank recognizes provision only when:
a) It has a present obligation as a result of a
past event.
b) It is probable that an outflow of resources
embodying economic benefits will be
required to settle the obligation, and
c) A reliable estimate of the amount of the
obligation can be made.
11.2 No provision is recognized for :
i. Any possible obligation that arises from
past events and the existence of which will
be confirmed only by the occurrence or
non-occurrence of one or more uncertain
future events not wholly within the control
of the bank; or
ii. Any present obligation that arises from
past events but is not recognized because
a) It is not probable that an outflow of
resources embodying economic
benefits will be required to settle the
obligation or
b) A reliable estimate of the amount of
obligation cannot be made.
Such obligations are recorded as
Contingent Liabilities. These are
assessed at regular intervals and only
that part of the obligation for which an
outflow of resources embodying
economic benefits is probable, is
provided for, except in the extremely
rare circumstances where no reliable
estimate can be made.
11.3 Contingent Assets are not recognized in the
Financial Statements.
L2. INCOME TAX
Income Tax comprises current tax and deferred tax
for the year. The deferred tax assets / liability is
recognised in accordance with Accounting Standard
22 issued by the Institute of Chartered Accountants
of India.
13. NET PROFIT
The Net Profit disclosed in the Profit and Loss
Account is after considering :
a. Provision for taxes on income in accordance with
statutory requirements.
b. Provision for Standard Assets and Non¬
Performing Assets.
c. Provision for depreciation on Investments.
d. Other usual and necessary provisions.
14. PROPOSED DIVIDEND
In term of AS 4 - "Contingencies and Events occurring
after the Balance Sheet date" proposed dividend or
dividend declared after Balance Sheet date is not
shown as "Other Liability" in the Balance Sheet,
instead a note on the same will be included in the
Financial Statement. Such proposed dividend will be
appropriated from the "Reserves and Surplus" only
after the approval of the shareholders.
15. SPECIAL RESERVES
Revenue and other Reserve include Special Reserve
created under Section 36(i](viii] of the Income Tax
Act, 1961 with the approval of the Board of Directors
of the Bank.
16. CORPORATE SOCIAL RESPONSIBILITY
The expenditure towards Corporate Social
Responsibility in accordance with the Companies
Act, 2013 is recognised in the Profit and Loss
Account.
17. OPERATING LEASES
Leases where all the risks and rewards of ownership
are retained by the lessor are classified as 'Operating
Lease'. Operating Lease payments are recognised as
an expense in the Profit and Loss Account as per the
lease terms. Initial direct costs in respect of operating
leases such as legal costs, brokerage costs etc., are
recognised as expense in the Profit and Loss Account.
Liquidity Coverage Ratio has been prescribed by RBI
based on LCR Standards published by Basel
Committee on Banking Supervision (BCBS). The LCR
promotes short term resilience of banks to potential
liquidity disruptions by ensuring that they have
sufficient High Quality Liquid Assets (HQLAs) to
survive an acute stress scenario in the immediate 30
days period.
LCR is defined as
Stock of High Quality Liquid Assets (HQLA)
Total Net Cash Outflows over the next 30 calendar days
The LCR standard aims to ensure that a Bank maintains an
adequate level of unencumbered HQLAs that can be
converted into cash to meet its liquidity needs for the next 30
days period under a significantly severe liquidity stress
scenario specified by RBI.
The LCR guidelines was made effective from 01.01.2015
with a minimum requirement of 60% which was increased
annually by 10% to reach a level of 100% as at 01.01.2019.
The present minimum requirement of LCR as at 31st March,
2026 is 100%. The bank prepares LCR on a daily basis and
assess the liquidity position on an ongoing basis. The
LCR position is made available in Bank’s website on a
quarterly basis in prescribed format in addition to the
annual disclosure in notes to accounts. The disclosure
in prescribed format is given below:
Qualitative disclosures on LCR :
• Composition: The main drivers of the LCR is High
Quality Liquid Assets (HQLA) which can be easily
converted into cash and consists of Cash in hand,
Excess CRR balance as on that particular day,
Government Securities in excess of minimum SLR
requirement, Government Securities within the
mandatory SLR requirement to the extent allowed
by RBI under MSF (Presently to the extent of 2.00%
of NDTL as allowed for MSF), Facility to avail
liquidity for liquidity coverage ratio at 16.00% of
NDTL. Level 1 assets are main drivers of HQLA.
• Concentration of funding sources: Deposits are the
main funding sources of the bank.
• Currency mismatches in LCR: The bank does not
have any HQLA in foreign currency and accordingly
LCR is reported in single currency only.
• The bank does not have any subsidiary / associates and
does not belong to any Group.
• The Bank has a well-diversified funding portfolio. Retail
deposits, considered as stable is the major funding
source of the Bank, indicating lower dependence of the
Bank on wholesale funds.
• The Liquidity risk management in the Bank is guided by
the ALM Policy. The Bank’s Liquidity management is
centralized at Treasury, Chennai as per the
directions of ALCO.
The Bank has been maintaining the LCR above 100%
(which is the minimum requirement prescribed by
RBI). The bank has also implemented the revised RBI
guidelines on LCR dated 21.04.2025, subsequently
updated under Chapter-V of Master Direction on Asset
Liability Management dated 28.11.2025 with effect
from 01.04.2026. The LCR Disclosure Template for the
Year ended FY 2026 is given below.
RBI vide its draft circular dated May 28, 2015 has
prescribed norms for introduction of Net Stable
Funding Ratio (NSFR). The final guidelines on "Net
Stable Funding Ratio (NSFR)" under the Basel III
Framework on Liquidity Standards was issued by RBI
on May 17, 2018. Now, the NSFR is computed as per
chapter VI of Master Direction on Asset Liability
Management dated 28.11.2025.
LCR & NSFR for funding liquidity were prescribed by
the Basel Committee for achieving two separate but
complementary objectives. While LCR promotes
short-term resilience of Banks to potential liquidity
disruptions by ensuring that they have sufficient
HQLAs to survive an acute stress scenario lasting for
30 days, the NSFR promotes resilience over a longer-
term time horizon by requiring Banks to fund their
activities with more stable sources of funding on an
ongoing basis.
The NSFR is defined as the amount of Available Stable
Funding (ASF) relative to the amount of Required
Stable Funding (RSF). The Bank is maintaining NSFR
of above 100%, which is the minimum requirement
prescribed by RBI.
e) Particulars of Resolution Plan and Restructuring :
Particulars of Resolution Plan
No accounts were resolved as per 'Prudential Framework for Resolution of Stressed Assets' issued vide circular
DBR.No.BP.BC.45/21.04.048/2018-19 dated June 7, 2019.
f) Divergence in Asset Classification and Provisioning :
In terms of RBI Circular No.DOR.ACC.REC.No.86/21.04.018/2025-26 dated November 28, 2025 (Updated as on
April 1, 2026) Banks are required to disclose the Divergence in Asset Classification and Provisioning consequent to
RBI's annual supervisory review process if such divergence exceeds the threshold prescribed by the RBI. The
Inspection of Supervisory Evaluation (ISE 2025) for the position as on 31.03.2025 by RBI was completed and there
was no reportable Divergence in Asset Classification and Provisioning for NPAs.
g) Disclosures as per 'Master Direction - Reserve Bank of India' (Transfer of Loan Exposures) direction 2021
dated September 24, 2021 for the Loans Transferred / Acquired during the year ended March 31, 2026 are
given below :
g) Unhedged Foreign Currency Exposure:
(i) In terms of RBI circular No. DOR. /2025-26/157
DOR. CRE. REC.76/07-02-001/2025-26 dated
November 28, 2025 with regard to Chapter VII of
RBI Directions on Commercial Banks - Credit Risk
Management to entities with Unhedged Foreign
Currency Exposure (UFCE) to maintain adequate
provisioning / capital for the same. Bank has a
policy approved by the Board of Directors.
(ii) The provision required for UFCE as on
31.03.2026 is ' 2.02 crore against which a
provision of ' 2.72 crore is already held.
(iii) The incremental capital requirement for
the UFCE as on 31.03.2026 is ' 0.79 Crore,
since no additional risk weight is required
to be included.
h) Loans against Gold and Silver Collaterals:
As per RBI/DOR/2025-26/154 - DOR.CRE.REC.73/07-01-001/2025-26 dated November 28, 2025 on the Reserve
Bank of India (Commercial Banks - Credit Facilities) Directions, 2025, the disclosures with respect to Loans against
gold and silver collateral and auctions - the bank has decided to carry out the operations from 1st April 2026.
Hence, there is no requirement of any disclosure in this regard for the year ended 31.03.2026.
d) Disclosures on Risk Exposure in Derivatives :
i) Qualitative Disclosure
1. Structure and Organisation for
Management of risk in derivatives
trading.
Operations in the Treasury are segregated
into three functional areas, namely Front
office, Mid-office and Back-office, equipped
with necessary infrastructure and trained
officers, whose responsibilities are well
defined. The Bank enters into plain vanilla
forward contracts only to backup/cover
customer transactions as also for
proprietary trading purpose. The Bank also
enters into trades in exchange traded
currency futures for proprietary trading
purpose.
The Integrated Treasury policy of the Bank
clearly lays down the scope of usages,
approval process as also the limits like the
open position limits, deal size limits and
stop loss limits for trading.
The Mid Office is handled by Risk
Management Department. Daily report is
generated by Risk Management department
for appraisal of the risk profile to the senior
management for Asset and Liability
management.
2. Scope and nature of risk measurement,
risk reporting and risk monitoring
systems.
Outstanding forward contracts are
monitored by Risk Management
D e p a rtm en t a ga i n s t th e l i m i ts
(Counterparty, Stop Loss, Open Position, VaR,
Aggregate Gap) fixed by the Board and approved
by RBI (wherever applicable) and exceedings, if
any, are reported to the Appropriate Authority /
Board for ratification.
3. Policies for hedging and / or mitigating and
strategies and processes for monitoring the
continuing effectiveness of hedges /
mitigants.
The Bank's policy lays down that the
transactions with the corporate clients are to be
undertaken only after the inherent credit
exposures are quantified and approved for
customer appropriateness and suitability and
necessary documents like ISDA agreements etc.
are duly executed. The Bank adopts Current
Exposure Method for monitoring the credit
exposures.
While sanctioning the limits, the competent
authority stipulates condition of obtaining
collaterals / margin as deemed appropriate. The
derivative limits are reviewed periodically along
with other credit limits.
4. Accounting policy for recording the hedge
and non-hedge transactions, recognition of
Income premiums and discounts, valuation
of outstanding contracts, provisioning,
collateral and credit risk mitigation.
Valuation of outstanding forward contracts are
done as per FEDAI guidelines in force. Marked to
market profit & loss are taken to Profit & Loss
account. MTM profit & loss calculated as per
Current Exposure method are taken into
account while sanctioning forward contract
limits to customers and collaterals/cash
margins are prescribed for credit and market
risks. Exchange traded Currency futures are
market to market on daily basis and MTM
gain/losses to Profit and Loss account.
The Bank undertakes foreign exchange forward
contracts for its customers and hedges them
with other banks. The credit exposure on
account of forward contracts is also considered
while arriving at the total exposure of each
customer/borrower and counter party banker.
The bank also deals with other banks in
proprietary trading duly adhering to risk limits
permitted by RBI, set in the policy and is
monitored by mid office. The Marked to Market
values are monitored on monthly basis for
foreign exchange forward contracts. The credit
equivalent is computed under current exposure
method. The operations are conducted in terms
of the policy guidelines issued by Reserve Bank
of India from time to time and as approved by
the Board of the Bank.
@ ^ Out of the total credit exposure of '454.78 crore
(FY:24-25 ' 323.07 crore), exposure to the tune of
' 362.47 crore (FY:24-25'276.28 crore) is accepted
for guaranteed settlement by Clearing Corporation of
India (CCIL) and exposure to the tune of ' 70.52 crore
(FY:24-25'18.79 crore) are other Inter-Bank deals
not guaranteed by CCIL. Balance of ' 21.79 crore
(FY:24-25 '28.00 crore) is out of forward contracts
outstanding with customers.
Derivatives includes forward contracts booked for Non
Resident Customers for hedging their FCNR (B)
Deposits. While the forward contracts are marked to
market on monthly basis as per FEDAI guidelines and
the MTM gains/losses are accounted in Profit and Loss
accounts, the interest expenses on FCNR (B) deposits
are accounted on accrual basis up to the end of the
relevant account period.
e) Credit Default Swaps :
The bank has not entered into Credit Default Swaps during the current Financial Year.
12. Disclosure of penalties imposed by the
Reserve Bank of India :
a) In terms of RBI Master Direction ref. DCM
(CC) No.G-1/03.44.01/2025-26 dated April
01, 2025 "on Scheme of Penalties for bank
branches and Currency Chests for deficiency
in rendering customer service to the
members of public", RBI has levied a total
penalty amount of '20,500/- on various
dates during the FY 2025-26.
b) During the year, RBI has imposed penalty of
'50,000/- under Scheme of penalty for Non¬
replenishment of ATMs DCM (RMMT) No.
S153/11.01.01/2021-22) dated August
10,2021.
14. Disclosure on remuneration to Non Executive
Directors :
All the Non-Executive Directors are paid remuneration
by way of sitting fees for attending meeting of the Board
and its committees. Further, they are eligible for Profit
Linked Commission (PLC) pursuant to the extant
Reserve Bank of India (Commercial Banks -
Governance) Directions, 2025 dt.28.11.2025, the
Companies Act, 2013 and the Compensation Policy of
the Bank. For FY 2026, an amount of ' 1.28 crore was
paid as Sitting fees and for FY 2025, an amount of ' 1.42
crore was paid during the year as PLC (on pro-rata
basis) to the Non-Executive Directors of the Bank. In the
previous year an amount of '1.29 crore and '1.20 crore
was paid as Sitting fees and PLC respectively.
III) Marketing and Distribution:
The Bank has received fees of ' 1.45 crore for the FY 2025-26 (Previous year-FY 2024-25: ' 1.37 crores) with
respect to marketing and distribution function (excluding bancassurance business).
IV) Disclosures regarding Priority Sector Lending Certificates (PSLCs) :
During the year, there was purchase of PSLC on various days totaling to ' 2774 Cr (Agri ' 1475 Cr and Small &
Marginal Farmer ' 1299 Cr). PSLC has been sold ' 1140 Cr (Small & Marginal Farmer).
VI) Implementation of IFRS converged Indian Accounting Standards (Ind AS)
RBI notification DBR.BP.BC.No.29/21.07.001/2018-19 dated 22nd March 2019 has deferred the
implementation of Ind AS until further notice.
VIII) Disclosure on amortisation of expenditure on account of enhancement in family pension of
employees of Banks (Unamortized Pension & Gratuity liabilities) :
The Bank is not having any liability on account of family pension scheme since it is covered under defined
contribution.
IX) Letters of Comfort :
The Bank has not issued any letters of comfort to other Banks / Branches during the Year.
X) Port-folio level of information on the use of funds raised from Green Deposits :
The Bank has not raised any Green Deposits in the Financial Year 2025-26.
XI) Disclosures as per Accounting Standards
The Bank has complied with the Accounting
Standards (AS) issued by the Institute of
Chartered Accountants of India and the
following disclosures are made in accordance
with RBI's guidelines.
a) Prior Period Items - AS 5
There are no material prior period items of
Income / Expenditure during the year
requiring disclosure.
b) Revenue Recognition - AS 9
As mentioned in the Accounting Policy of
Income / Expenditure of certain items are
recognized on cash basis.
c) Effects of changes in Foreign Exchange
Rates - AS 11
The Bank is revaluing foreign currency
transactions consistently at the weekly
average rate of the last week, prescribed by
FEDAI, instead of the rate at the date of the
transaction as per AS 11. The management is
of the view that there is no material impact
on the accounts for the year.
d) Employee Benefits - AS 15
The liability towards Gratuity is met through
annual premium payments determined on
actuarial valuation by Life Insurance
Corporation of India under their Group
Gratuity Life Assurance Scheme.
The Bank and its employees contribute a
defined sum every month to City Union Bank
Employees Pension Fund Superannuation
Scheme of Life Insurance Corporation of
India / National Pension Scheme to meet the
post retirement annuity payments of its
employees.
Leave Encashment benefits of employees
are provided on an actuarial basis and is not
funded.
The summarized position of the employee
benefits recognized in the Profit & Loss
Account and Balance Sheet as required in
accordance with Accounting Standard -15
(Revised) is as under - Leave Encashment :
g) Leases-AS 19
i) Lease rent paid for operating leases are
recognized as an expense in the Profit & Loss
Account in the year to which it relates.
ii) Future lease rents and escalation in the rent are
determined on the basis of agreed terms.
iii) At the expiry of initial lease term, generally the
Bank has an option to extend the lease for a
further pre-determined period.
iv) The Bank does not have any financial lease.
k) Accounting for Investments in Associates in CFS
- AS 23
The Bank has no Associates. Hence reporting under
CFS - AS 23 is not applicable.
l) Discontinuing Operations - AS 24
The Bank has not discontinued any of its
operations. Hence reporting under CFS - AS 24 is
not applicable.
m) Interim Financial Reporting - AS 25
Quarterly review have been carried out as per
extant RBI and SEBI guidelines and prescribed
formats.
n) Intangible Assets - AS 26
The Bank has followed AS 26 - "Intangible Asset"
issued by ICAI and the guidelines issued by RBI.
o) Financial Reporting of Interests in Joint
Ventures - AS 27 - NIL
p) Impairment of Assets - AS 28
In the opinion of the management there is no
impairment to the assets to which AS 28 -
"Impairment of Assets" applies.
q) Provisions & Contingencies - AS 29
The details of the provisions and contingencies,
contingent liabilities, the movement of provisions
on NPA's and depreciation on investments which
are considered material are disclosed elsewhere
under the appropriate headings as per RBI
guidelines.
16. ADDITIONAL DISCLOSURES
1) Disclosure on Micro, Small and Medium Enterprises (MSME) sector - Restructuring of Advances
(RBI/DBR.BP.BC.No.18/21.04.048/2018-19 dated 01.01.2019) and RBI/DBR.BP.BC.No.
34/21.04.048/2019-20 dated 11.02.2020 and (RBI/DOR. No.BP.BC/4/ 21.04.048/2020-21 dated
06.08.2020) and (RBI/DOR.STR. REC.12/21.04.048/2021-22 dated 05.05.2021) Micro, Small and
Medium Enterprises (MSME) sector- Restructuring of Advances as on 31.03.2026.
5) Details of Single Borrower Limit (SBL) / Group
Borrower Limit (GBL) exceeded by the Bank
Single Borrower Limit / Group Borrower Limit has
not been exceeded during the year.
6) Guarantees for Trade Credits
The bank has issued guarantee on behalf of its
customers for availing Trade Credits for Import of
Goods into India and outstanding as of 31st March
2026 was ' 105.00 crore.
7) Income Tax and GST
Provision for income tax in the current year is
made as per Income Computation Disclosures
Standards (ICDS) after considering various judicial
decisions on certain disputed issues.
In the opinion of the management, based on the
opinion / Appellate orders decided in its favour on
similar issues, no provision is considered
necessary for earlier years towards disputed tax
liability for Income Tax amounting to ' 730.55cr
(under Appeal) (previous year ' 1083.09 cr) and
for Service Tax/GST amounting to ' 49.17 cr
(previous year ' 44.30 cr).
8) Inter Branch Reconciliation
Reconciliation of Central Office accounts
maintained by branches has been completed upto
31.03.2026.
9) Employees Stock Option
The Bank has allotted 20,61,528 (P.Y. 3,13,830)
equity shares during the year to its eligible
employees who have exercised their options
granted under ESOP of the Bank.
11) Disclosure under rule 11(e) of the Companies
(Audit & Auditors) rules, 2014
The Bank, as part of its normal business, grants
loans and advances to Non-Banking Finance
Company/ies, real estate promoters/developers,
makes investment, provides guarantees (including
against margin/guarantees received from third
parties/banks) and accepts deposits and
borrowings from its customers, other entities and
persons. Also, the Bank, as part of its normal
business, avails refinance from financial
institutions and other entities wherein the
proceeds are applied to a category of customers
with specific profile parameters. These
transactions are part of Bank's authorised normal
business, which is conducted in adherence to
extant regulatory requirements.
Other than the transactions described above -
i) No funds have been advanced or loaned or
invested (either from borrowed funds or share
premium or any other sources or kind of funds)
by the Bank to or in any other person(s) or
entity(ies), including foreign entities
("Intermediaries") with the understanding,
whether recorded in writing or otherwise, that
the Intermediary shall lend to or invest in other
persons or entities identified by or on behalf of
the Bank ("Ultimate Beneficiaries") or provide
any guarantee, security or like on behalf of the
Ultimate Beneficiaries.
ii) The Bank has not received any funds from any
person(s) or entity(ies) ("Funding Party") with
the understanding, whether recorded in writing
or otherwise, that the Bank shall, whether,
directly or indirectly, lend to or invest in other
persons or entities identified by or on behalf of
the Funding Party ("Ultimate Beneficiaries") or
provide any guarantee, security or the like on
behalf of the Ultimate Beneficiaries.
12) In accordance with RBI instruction, the Bank has
made a provision of 5% amounting to ' 2.32 cr
against exposure in the long-term food credit
advance to Punjab State Government.
13) As per the extant RBI guidelines, Banks are
required to make Pillar III disclosures
including leverage ratio, liquidity coverage ratio,
Net Stable Funding Ratio (NSFR) under the BASEL
III framework along with publication of financial
results. Accordingly, such applicable disclosures
under Basel III capital regulation is being made
a v a i l a b l e o n t h e B a n k ' s w e b s i t e
(www.cityunionbank.bank.in). These disclosures
have not been subjected to Audited by the Joint
Statutory Central Auditors.
14) Other Income relates to income from non-fund
based banking activities including commission,
fees, gains from securities transactions including
profit / loss on revaluation of Investments, ATM
sharing fees, recoveries from accounts written off
and other miscellaneous income.
15) On November 21,2025, the Government of lndia
notified four Labour Codes - the Code on Wages,
2019, the lndustrial Relations Code, 2020, the code
on Social Security, 2020, and the occupational
safety, Health and working conditions code 2020,
collectively referred to as 'New Labour Codes',
consolidating 29 existing labour laws. The Bank
has recognised an estimated provision of ' 500
Lakhs under 'Employees cost' as on March 31,
2026. The Bank continues to monitor the
developments relating to implementation of the
New Labour Code / Rules and will review the
estimation on an ongoing basis.
16) The Board of directors recommended a Dividend of
' 2 per share on face value of ' 1 per equity share
@ 200% for the year ended March 31,2026
(Previous year 200%) subject to approval of
members in the ensuing Annual General Meeting.
In accordance with Accounting Standards 4 -
Contingencies and Events Occurring after the
Balance Sheet date, the proposed dividend has not
been shown as an appropriation from the Profit
and Loss account for the year ended March 31,
2026 and correspondingly not reported under
Other Liabilities and Provisions as at March 31,
2026. However, capital adequacy ratio has been
computed by reducing the proposed dividend.
17) Previous year's figures have been regrouped
wherever necessary to conform to the current year
classification.
|