4.12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
In accordance with AS-29 "Provisions, Contingent Liabilities and Contingent Assets", provision is recognised when the
Bank has a present obligation as a result of past event where it is probable that an outflow of resources will be required
to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present
value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These
are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
A disclosure of contingent liability is made when there is:
• a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non¬
occurrence of one or more uncertain future events not within the control of the Bank; or
• a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources
will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.
Contingent liabilities on account of foreign exchange contracts, letters of credit, bank guarantees and acceptances and
endorsements denominated in foreign currencies and outstanding as at the Balance Sheet date are translated at year
end rates notified by the FEDAI/FBIL.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually
and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in
the period in which the change occurs.
4.13. SEGMENT REPORTING
The Bank recognises 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 Accounting Standard 17.
Business Segment is classified into (a) Treasury, (b) Corporate and Wholesale Banking, (c) Retail Banking and (d) Other
Banking Operations and revenues /expenses allocated in accordance with the RBI guideline. Further, 'Digital Banking' has
been identified as a Sub-segment under Retail Banking as required in extant guidelines of the RBI Geographical Segment
consists only of Domestic Segment since the Bank does not have any foreign branches.
4.14. LEASE TRANSACTIONS
Leases where the lessor effectively retains substantially all the risks and benefits of ownership over the lease term are
classified as operating lease. Operating Lease payments are recognised on SLM basis as an expense in the Profit & Loss
Account, over the lease term in accordance with AS-19.
4.15. ACCOUNTING FOR DIVIDEND
As per AS-4 'Contingencies and Events occurring after the Balance Sheet date', the Bank does not account for the proposed
dividend as a liability through an appropriation from the Profit and Loss Account. The same is recognised in the year of
actual payout post approval of the shareholders. However, the Bank considers the proposed dividend in determining
capital funds in computing the capital adequacy ratio.
4.16. CASH AND CASH EQUIVALENT
Cash and cash equivalents include cash in hand, balances with the RBI, balances with other banks and money at call
and short notice.
4.17. CORPORATE SOCIAL RESPONSIBILITY
Expenditure towards Corporate Social Responsibility is recognised in the Profit and Loss Account in accordance with the
provisions of the Companies Act, 2013.
RBI vide master direction No. DOR.CAP.REC.70/21-01-002/2025-26 dated 28th November 2025, has given direction to
banks to consider Revaluation Reserve, Foreign Currency Translation Reserve and Deferred Tax Asset for purposes of
computation of Capital Adequacy as CET- I capital ratio. The Bank has exercised the option in the above computation.
ii) Draw down from Reserves
The Bank has not made any drawdown from reserves during the Financial Year 2026. During the previous financial year,
the Bank had made a drawdown of H89 crore from the Investment Fluctuation Reserve (IFR).
ii) Liquidity Coverage Ratio
Bank is computing LCR on a daily basis in line with the Reserve Bank of India (Commercial Banks - Asset Liability
Management) Directions, 2025. These guidelines ensure that banks maintain sufficient amount of High Quality Liquidity
Assets (HQLAs) to survive 30 days stress scenario so that banks can take corrective measures within such period.
The necessary system has been put in place to compute LCR and Bank's strategy would be to maintain LCR well above the
regulatory minimum levels.
The Bank during the three months ended March 31,2026, maintained average HQLA (after haircut) of H 24,647.47 Crore
(H 23,217.64 Crore as on March 31,2025). HQLA primarily includes government securities in excess of minimum statutory
liquidity ratio (SLR), 2% of NDTL under "marginal standing facility (MSF)", 16% of NDTL under "facility to avail liquidity for
LCR (FALLCR)", investments under Corporate bonds & commercial papers rated "AA- and above".
The weighted cash outflows are primarily driven by deposits from retail & small business customers, unsecured wholesale
funding which includes non-operational deposits and unsecured debt. During the three months ended March 31, 2026,
funding from "retail & small business customers" and "non-operational deposits" contributed 45.44% & 37.77% to the
total weighted cash outflows respectively. The other contingent funding obligations primarily include bank guarantees
(BGs) and letters of credit (LCs) issued on behalf of the Bank's clients.
The average LCR of the Bank for the three months ended March 31,2026, was 165.34% (March 31,2025: 162.50%).
As of March 31,2026, top liability products/instruments and their percentage contribution to the total liabilities of the
Bank were term deposits: 55.83%, savings account deposits: 22.25% and current account deposits: 6.02%. The Bank has
consistently maintained a robust funding profile with a significant portion of funding through deposits. Top 20 depositors
constituted ~2.74% of total deposits of the Bank as of March 31,2026, indicating a healthy and stable deposit profile.
In addition to daily/ monthly LCR reporting, Bank prepares daily Structural Liquidity Statements to assess the liquidity
needs of the Bank on an ongoing basis.
Bank's Asset Liability Management Committee (ALCO) is empowered to monitor and form suitable strategies to maintain
stipulated levels of LCR by channelizing funds to target good quality asset and liability profile to meet Bank's profitability
as well as liquidity requirements. Funding strategies are formulated by the Integrated Treasury in accordance with ALCO
guidance. The objective of the funding strategy is to achieve an optimal funding mix which is consistent with prudent
liquidity, diversity of sources and servicing costs. Accordingly, Integrated Treasury estimates daily liquidity requirement.
With the help of structural liquidity statement prepared by Bank, Integrated Treasury evaluates current and future liquidity
requirement and takes necessary action.
iii) Overseas assets, NPAs and Revenue -Nil (Previous Year - Nil)
iv) Particulars of resolution plan and restructuring
There are no Borrowers requiring additional provision in terms of Reserve Bank of India master direction DOR.STR.
REC.84/21.04.048/2025-26 dated November 28, 2025. (Previous Year : Nil)
v) Divergence in asset classification and provisioning:
No disclosure on divergence in asset classification and provisioning for NPAs is required with respect to the Risk based
Supervision conducted by the Reserve Bank of India for the year ended 31st March 2026. (Previous year Nil.)
vi) Disclosure of transfer of loan exposures
The loan transferred/ acquired from/to Asset Reconstruction Companies/Permitted Transferee/ other transferees, during
the year ended March 31,2026 are given below:
a) The Bank has not transferred any stressed loan (Special Mention Account) and any loan not in default during the
year ended March 31,2026. ( Previous Year - Nil)
b) Details of Non-performing Assets (NPAs)/Technical written off Accounts (TWs) Transferred during the year ended
March 31, 2026, is given in below table.
xi) Disclosure under Resolution Framework for COVID-19 related Stress
In accordance with the COVID 19 regulatory package announced by RBI from time to time providing relief to the
borrowers, the Bank as per approved Board policy offered relief to all eligible borrowers and necessary provision has
been made for the same.
vi) Intra -group Exposure
There are no Intra Group exposures other than investment of H 1.75 crore in wholly owned non-financial Subsidiary KBL
Services Ltd. (Previous Year H 1.75 crore)
vii) Unhedged Foreign Currency Exposure
The Bank has put in place a policy on Hedging of Foreign Currency Exposure which is a part of the Loan Policy which
stipulates the guidelines on managing the risk arising out of the unhedged foreign currency exposure in line with the
iv) Disclosure on Risk exposure in derivatives
a) Qualitative Disclosure
The Bank has put in place Board approved Integrated Treasury Policy, Asset Liability Management (ALM) policy,
Market Risk Management Policy and Fund Transfer Pricing Policy for effective management of market risk in the
Bank. The objective of Integrated Treasury Policy is to assess and minimize risks associated with treasury operations
by extensive use of various risk management tools. Broadly, it encompasses Policy prescriptions for managing
systemic risk, credit risk, market risk, operational risk and liquidity risk in treasury operations.
For market risk arising out of various products in treasury and its business activities, the Bank has set regulatory/
internal limits and ensures the adherence thereof. Migration of ratings is tracked regularly.Limits for exposures
to counter-parties, industries and countries are monitored and the risks are controlled through Stop Loss Limits,
Overnight limit, Daylight limit, Aggregate Gap limit, Individual gap limit, Value at Risk (VaR) limit for Forex, Inter-Bank
dealing and various investment limits. For the Market Risk Management the Bank has a Mid Office. The functions of
Mid Office are handled by Risk Management Department.
The Board, Risk and Capital Management Committee & Asset -Liability Committee are overseeing the market risk
management of the Bank, procedures thereof, implementing risk management guidelines issued by regulator, best
risk management practices followed globally and ensures that internal parameters, procedures, practices/policies
and risk management prudential limits are adhered to.
Liquidity risk of the Bank is assessed through daily gap analysis for maturity mismatch based on residual maturity in
different time buckets as well as various liquidity ratios and management of the same is done within the prudential
limits fixed thereon. Advance techniques such as Stress testing, simulation, sensitivity analysis etc. are conducted on
regular intervals to draw the contingency funding plan under different liquidity scenarios.
Fund Transfer Pricing Policy lays down methodology/assumptions on which profitability of the branches/products/
customers is measured .
v) Credit Default Swaps
The Bank has not entered into any Credit Default Swaps (Previous year : Nil)
8. Disclosures relating to securitisation:
The Bank has not sponsored any SPVs for securitisation transactions during the year. ( Previous Year- Nil)
vi) Implementation of IFRS converged Indian Accounting Standards (Ind AS)
The Reserve Bank of India (RBI) has deferred implementation of Ind AS for all Scheduled Commercial Banks till further
notice. Bank has been submitting the Proforma Ind AS financials to RBI every half year as per the RBI guidelines. Also,
as a prudent measure, Bank is preparing Proforma Ind AS financials on quarterly basis and the estimated impact along
with latest update on the Ind AS implementation in the Bank is placed to the Audit Committee of the Board. Towards
effective implementation of the Standards, Bank has also endeavored and onboarded - Oracle Financial Services
Analytical Application (OFSAA)which includes IFRS-9 Module to compute Effective Interest Rate (EIR) and Expected Loan
Loss Provisioning (ECL) through the Core Banking System. With respect to the notified RBI directions on-ECL and EIR
Framework , Bank has done a preliminary assessment and has already initiated steps towards implementation within the
regulatory guideline of 1st April 2027.
viii) Disclosure on amortisation of Expenditure on account of Enhancement in family pension of Employees
The Bank had already recognized the full expenditure for enhancement of Family pension in the FY 2021-22 itself.
ix) Disclosure of Letters of Comfort (LoCs) issued by banks- Nil
There were no LoCs outstanding (Previous year Nil).
x) Portfolio-level information on the use of funds raised from green deposits.
The bank has raised no funds from the Green Deposits during the year ending 31 March 2026. (Previous Year - Nil)
xi) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection
Fund (Previous year- Nil)
15. Accounting Standards
In compliance with the guidelines issued by the Reserve Bank of India and other regulatories, various regulatory disclosures are
provided below:
i) Accounting Standard 5 - Net Profit or Loss for the period, Prior Period Items and Changes in Accounting
Policies
There are no material prior period items.
In the preparation of these Standalone and Consolidated financial results for the year ended March 31, 2026, the Bank
has followed the same significant accounting policies and generally accepted practices as adopted in the preparation of
audited Standalone and Consolidated financial statements for the year ended March 31st 2025
ii) Accounting Standard 9 - Revenue Recognition
Revenue is recognized on accrual basis as per Bank's Accounting Policy ( Schedule 17) to the financial statements except
for certain items mentioned therein and same is not material.
iii) Accounting Standard 11-The Effects of Changes in Foreign Exchange Rates
The Bank has complied with the guidelines issued by the RBI and the FEDAI to ensure adherence to the applicable
requirements under AS 11. Accordingly, foreign exchange transactions are accounted for in accordance with the Bank's
accounting policy, as detailed in Schedule 17.
iv. Accounting Standard 15 - Employee Benefits Various Benefits made available to the Employees
i) Pension: The Bank has a defined benefit plan under Pension Trust to cover employees who have joined employment
up to 31st March 2010 and who have opted for Pension Scheme, provided they have completed 20 years of service.
The benefits under this plan are based on last drawn salary and the tenure of employment. The liability for the
pension is determined and provided on the basis of actuarial valuation and is covered by purchase of annuity from
LIC. The employees who have joined employment after 31st March 2010 are covered under contributory pension
scheme. Bank has recognized H 61.79 crore under defined contribution plan during the year ended March 31,2026.
( Previous Year :57.78 crore)
ii) Gratuity: In accordance with the applicable Indian Laws including the Bank's policy, the Bank provides for defined
benefit retirement plan ('the Gratuity Plan') covering eligible employees. This plan provides for a lump sum payment
to the eligible employees on retirement, death,incapacitation or termination of employment of amounts that are
based on the last drawn salary and tenure of employment. Liabilities with regard to the gratuity plan are determined
by actuarial valuation and contributed to the gratuity fund trust. Trustees administer the contribution made to the
trust and invest in specific designated securities as mandated by law, which generally comprise of Central and State
Government Bonds and debt instruments of Government owned corporations.
iii) Compensated Absences: The liability for compensated absences is determined and provided on the basis
of actuarial valuation. For the current financial year, Bank has provided an amount of H 16.45 crore. ( Previous
Year :H86.20 crore)
iv) Provident Fund: The Bank pays fixed contribution to Provident Fund at predetermined rates to a separate trust,
which invests the funds in permitted securities. The obligation of the Bank is limited to such contributions. As on 31st
March 2026, there was no liability due and outstanding to the Fund by the Bank. (Previous Year: Nil)
V) The summarised position of post-employment benefits and employees' long term benefits are recognized in the
financial statements in accordance with Accounting Standard - 15 and are as under
v) Accounting Standard 17 - Segment Reporting:
Accounting Standard 17 - Segment Reporting:
Business Segment:
For the purpose of segment reporting in terms of AS 17 and as prescribed in the RBI guidelines, the business of the Bank
has been classified into 4 segments i.e.
(a) Treasury
(b) Corporate/Wholesale Banking
(c) Retail Banking (includes Digital Banking Unit (DBU) and Other Retail Banking )
(d) Other Banking Operations.
Geographical Segment
The Bank does not have any overseas branch thus reporting under geographic segment does not arise. Segment assets
have been identified and segment liabilities have been allocated on the basis of segment assets.
(Previous year's figures have been regrouped/rearranged wherever necessary.)
vi) Accounting Standard 18 - Related Party Disclosures
In terms of the aforesaid RBI Master Direction, the Key Managerial Personnel (KMP) of the Bank comprise the Whole¬
time Director and the Chief Executive Officer (CEO). The Bank has only one subsidiary entity. Further, the Key Managerial
Personnel as defined under "Accounting Standard 18 - Related Party Disclosures" and required to be disclosed under
Regulation 23(9) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, are as under:
Key Managerial Personnel:
Mr. Raghavendra Srinivas Bhat was appointed as MD & CEO with effect from July 16, 2025 in accordance with the approval
received from the RBI in terms of Banking Regulation Act, 1949.
Shri Srikrishnan Harihara Sarma, former Managing Director & CEO was a related party from June 09, 2023 to July 15, 2025.
Mr. Sekhar Rao, former Executive Director was a related party from February 01,2023 to July 31,2025.
Subsidiary:
KBL Services Ltd. is a Wholly Owned Non-Financial Subsidiary of the Bank in respect of which the approval of the Reserve
Bank of India has been obtained in terms of "Master Direction- Reserve Bank of India (Financial Services provided by
Banks) Directions, 2016".
17 Litigations and claims
A sum of H957.92crore (Previous year H 1365.82 crore) is outstanding on account of demands raised by the Income Tax
Department in the earlier years, out of which an amount of H756.43 Crore (Previous year H 892.98 Crore) has been paid under
protest by debit to Sundry Assets - Protested Tax Account and for the balance of H 201.49 crore (Previous year H472.84 Crore)
stay from collection of demand has been granted. In addition to the above, the Income Tax Department has gone on appeal on
various issues wherein Appellate Authority has given decisions in favour of the Bank to the extent of H388.24 crore (Previous
year H 388.24 crore).
The Bank has preferred appeal against certain service tax demands to the extent of H186.44 crore (Previous year H 193.15
crore) and paid pre deposit of H 0.56 crore (Previous year H 1.06 crore) by debit to Sundry Assets - Service Tax Paid under
Protest. In addition to above, the department has gone on appeal in respect of certain matters wherein appellate authority has
given decision in favour of the Bank to extend of H22.07 crore. ( Previous Year - H 17.49 Crore)
The Bank has also preferred appeal against certain GST demands to the extent of H15.53 crore (Previous year H3.46 crore) and
paid pre deposit of H 0.54 crore (Previous year H0.35 crore) by debit to Sundry Assets - Service Tax Paid under Protest. The
Bank has been advised by its Tax Consultants and Experts that there are good chances of success in these appeals, considering
legal provision favourable judicial pronouncements and / or appellate orders on identical issues for earlier years.
Hence, the Bank does not consider it necessary to make any provision or include the same under Schedule 12 - Contingent
Liability, to the Balance sheet. All pending litigations which may have an impact on its financial position have been estimated
and provided for. In respect of other pending litigations, no provision is required since these pending litigations have no impact
on its financial position.
18 Description of Contingent Liabilities
i) Claims against the Bank not acknowledged as debts:
These represent claims filed against the Bank in the normal course of business relating to various legal cases
currently in progress.
ii) Liability on account of forward exchange:
The Bank presently enters into forward exchange contracts which are committed to buy or sell foreign currency at a future
date at the contracted rate. The notional amounts of such foreign exchange contracts provide a basis for comparison with
instruments recognized on the balance sheet but do not necessarily indicate the amounts of future cash flows involved
or the current fair value of the instruments and, therefore, do not indicate the Bank's exposure to credit or price risks.
The fluctuation of market rates and prices cause fluctuations in the value of these contracts and the contracted exposure
become favourable (assets) or unfavourable (liabilities).
iii) Guarantees given on behalf of constituents
As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing.
Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to
fulfil its financial or performance obligations.
iv) Acceptances, endorsements and other obligations
These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank's customers
that are accepted or endorsed by the Bank.
v) Other items for which the bank is contingently liable
Includes amount transferred to RBI under the Depositor Education and Awareness Fund (DEAF) also claims settled. (Refer
schedule 12 for amounts relating to contingent liability.)
19 Employee Stock Option
"The shareholders of the Bank, on July 21, 2018, have approved 'KBL Employee Stock Option Scheme-2018' (ESOS-2018) with
a total of 50,00,000 stock options available for grant, each of which is convertible into one equity share. The scheme has been
framed in accordance with SEBI (Share Based Employee Benefits) Regulations, 2014 as amended from time to time. Further, to
give effect to the corporate action by way of Bonus issue in the ratio of 1:10, additional 1,07,147 options have been accounted
and hence, the total available options under the scheme stand increased to 51,07,147 stock options.
The options granted under ESOS 2018 would vest after one year from the date of grant of such options in a graded manner
over a period of three years (i.e. 40%, 30% & 30% respectively on completion of 1st, 2nd & 3rd year), as determined by the
Nomination & Remuneration Committee (NRC), a committee of the Board of Directors, subject to continued employment with
the Bank on the date of vesting.
During the current year 2025-26, no modifications were made to the terms and conditions of ESOS - 2018 as approved by the NRC.
The Shareholders of the Bank on March 30, 2023 have approved 'KBL Employee Stock Option Scheme-2023' (ESOS-2023) with
a total of 15,00,000 Stock options available for grant each of which is convertible into one equity share catering partially towards
the disbursal of share linked portion of variable pay as per RBI guidelines relating to compensation payable to MD & CEOs/
Whole Time Directors/Material Risk Takers (MRTs) in banks vide DOR.HGG.GOV.No.68/29.67.001/2025-26 dated November
28,2025. The Scheme, which is in lieu of ESOS-2018, has been framed in accordance with Securities and Exchange Board of
India (Share Based Employee Benefits & Sweat Equity)
Regulations, 2021. The old Scheme ESOS 2018 will continue to be operative for the limited purpose of permitting exercise of
already granted options.
The Options granted under ESOS 2023 would vest one year after the date of grant of such options in a graded manner over a
period of three years (i.e. 30%, 30% & 40% respectively on completion of 1st, 2nd & 3rd year), as determined by the Nomination
& Remuneration Committee (NRC), a committee of the Board of Directors.
During the current year 2025-26, no modifications were made to the terms and conditions of ESOS - 2023 as approved by the NRC.
To ascertain the ESOP compensation cost at fair value for the purpose of accounting/ disclosures in the financial statements, Bank
has adopted Black Scholes Valuation Methodology. Black Scholes model is a mathematical formula used to estimate the value of
stock options based on several factors. Some of the key factors that are considered when computing the fair market value of an
ESOP under the Black Scholes model are stock price, exercise price, time to expiry, volatility, risk-free interest rate, dividend yield, etc.
20 Dividend
The Board of Directors of the Bank have proposed a dividend of H 5 per Equity share of H 10/- each (50% of Equity share Capital)
for the year ended March 31,2026 (Previous year H 5 per Equity share of H. 10 each), subject to the approval of the members
at the ensuing Annual General Meeting. In terms of Accounting Standard (AS) 4 Contingencies and Events occurring after the
Balance Sheet date, the Bank has not appropriated proposed dividend aggregating to H 189.09 crore from the Profit and loss
account for the year ended March 31,2026. However, the effect of the proposed dividend has been reckoned in determining
capital funds in the computation of Capital adequacy ratio as on March 31,2026.
21 Reconciliation of Branch Adjustments and Balancing of Subsidiary Ledgers
a) Balancing of Subsidiary Ledgers is completed at all the Branches/Offices
b) Reconciliation of Branch Adjustments/Inter Branch accounts has been completed up to March 31, 2026 and steps are
being taken to give effect to consequential adjustments of pending items.
22 Disclosure under Rule 11(e) of the Companies (Audit & Auditors) Rules, 2014
The Bank, as part of its normal business, grants loans and advances (including loans against third party deposits or Non¬
Banking Finance Company or Real estate promoters / developers loan, other margins / security), makes investment, provides
guarantees (including against margin / guarantees received from third parties / banks) to and accepts deposits and borrowings
from its customers, other entities and persons. These transactions are part of Bank's authorised normal business, which is
conducted ensuring adherence to regulatory requirements.
In the course of the transactions carried out as described above
(a) 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 whether directly or indirectly
lend or invest in other persons or entities identified by in any manner whatsoever by or on behalf of the Bank ("Ultimate
Beneficiaries") or provide any guarantee, security or like on behalf of the Ultimate Beneficiaries.
(b) The Bank has not received any funds (except from SIDBI amounted to H 427 crore and NABARD amounted to H140.35
crore) from any person(s) or entity(ies) including foreign entity(ies) ("Funding Party") with the understanding, whether
recorded in writing or otherwise, that the Bank shall, whether, directly or indirectly, lend or invest in other persons or
entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any
guarantee, security or the like on behalf of the Ultimate Beneficiaries.
|