i) Sale and transfers to / from HTM category
The value of sales and transfers of securities to / from HTM category
does not exceed 5 percent of the book value of investments held in HTM
category at the beginning of the year as per RBI guidelines.
ii) SGL Bouncing
There was one instance of SGL bouncing on technical grounds. A lenient
view has been taken in this matter and monetary penalty has been waived
iii) Depreciation on Valuation of Investments held in AFS and HFT
In terms of circular DBOD.BP.BC.41/21.04.141/2013-14 dated August 23,
2013 on "Investment Portfolio of Banks - Classification, Valuation and
Provisioning" RBI permitted banks to distribute the net depreciation on
the Available For Sale (AFS) and Held For Trading (HFT) portfolios as
on each of the valuation dates in equal installments during the
financial year 2013 - 14. The Bank amortised such depreciation during
the quarters ended September and December, 2013. In the Profit and Loss
Account for the quarter and twelve months ended March 31, 2014 the Bank
has recognised depreciation in respect of AFS and HFT portfolios in
1.1 Profit on account of sale of securities from HTM category amounting
to Rs.2,16,26,380.00 (Previous Year Rs.4,75,01,665.15) has been taken to
Profit and Loss Account and thereafter appropriated towards Capital
1.2 The amortization charges of Rs.56,21,11,965.41 (Previous Year Rs.
56,49,74,074.44) on the HTM category of securities is debited to Profit
and Loss Account and reflected in Schedule - 13, Interest Earned: Item
II - Income on Investments as a deduction as per RBI Master Circular.
1.3 Investment in Floating Rate Notes and Foreign Currency Bonds held
in London Branch are classified as Available For Sale and are valued at
closing rate. Floating Rate Notes are valued based on issuers value.
Consequently, the provision for depreciation on these investments is at
Rs. 3.20 Crores.
1) Losses have been defined as the Total Credit Exposure inclusive of
Credit and Replacement Risk.
2) Fair Value of Swaps book is the Net MTM receivable or payable on the
3) Forward Rate Agreements (FRAs) and Interest Rate Swaps (IRS) were
undertaken by the Bank to hedge its own books and for managing asset
and liability mismatches. Currency swap has been undertaken with
customers for hedging their exposures and covered back-to-back with
4) These derivative transactions are entered with counter parties
satisfying the criteria as prescribed by the Credit and Treasury
Policies. These Board approved policies prescribe various parameters /
limits to manage and monitor Credit and Market Risks.
5) The Accounting Policy for Derivatives has been drawn-up in
accordance with RBI guidelines, the details of which are presented
under Schedule 17 - Significant Accounting Policies 2013 - 2014.
2.A Exchange Traded Interest Rate Derivatives
The Bank was undertaking proprietary trading in Currency Futures in
USD/ INR on the three Exchanges. However, vide AP (DIR Series) on 8th
July 2013, RBI directed AD category - I banks not to carry out
proprietary trading in currency future transactions, hence Bank has
stopped undertaking any currency future transactions. There are no
outstanding contracts under currency future as on 31.03.2014.
2.B Disclosures on Risk Exposure in Derivatives a) Qualitative
- The Bank has a well laid-down policy for undertaking derivative
transactions approved by its Board.
- The Bank is undertaking derivative transactions for hedging risks on
its Balance Sheet as well as for trading / market-making purposes. Bank
is undertaking derivative transactions like FRAs, Interest Rate Swaps,
Currency Swaps and Currency Options, with Bank and Non-bank Counter
parties. The Bank is only undertaking proprietary trading position in
Currency Futures on the Exchanges.
- Forward contracts under past performance category are booked for
clients with Rating SYND 01 - SYND 04 only and on complying with RBI
- Currency futures have no credit risk for the Bank, as the Exchanges
guarantee the payment.
- During the year Bank undertook Interest Rate Swaps and FRA for
hedging purpose to mitigate Interest Rate Risk in Banking Book for
liabilities at London Branch.
- Cross Currency swaps are undertaken for both principal and interest,
back-to-back thus hedging both exchange rate risk and interest rate
risk without involvement of any outlays.
- Cross-currency swaps are undertaken upto a period of 10 years,
covering the same back-to-back without any open position.
- Currency swaps are undertaken for non-bank counter party with ratings
SYND 01 to 04 only.
- The Bank has set in place appropriate control system to assess the
risks associated with Derivatives and MIS is in place to monitor the
- The Bank has a system of continuous monitoring and appraisal of
Credit Risk limits of counter-parties.
- Credit exposures for derivative transactions are monitored on the
basis of Current Credit Exposure Method (CEM).
- Credit Risk is monitored by setting up counter party exposure limits
setting country risk exposure limits and mitigating settlement risk
through CCIL / CLS.
- The transactions with Counter-Party Banks and non-bank counter
parties are undertaken within the limits approved by the Board. The
transactions with non-bank counterparties are done on a back-to-back
covered basis without assuming any market risk.
- The Bank is not having any exposure in complex derivatives nor has it
any direct exposure to the sub-prime assets.
- The Bank has not crystallized and written off any account nor
incurred any loss on account of undertaking derivative transactions.
- The segregation of Front Office, Mid Office and Back Office is
ensured to avoid conflict of interests and to mitigate the degree of
risk. The Mid Office is directly reporting to Risk Management
Department at Corporate Office, Bangalore.
- ISDA agreements are executed / exchanged with every counter party
banks and non-bank clients as per RBI guidelines.
- Mid Office measures and monitors the risk arising out of trading
- The transactions are undertaken within the overall Aggregate Gap
Limits and Net Overnight Open position limits sanctioned by the Board /
- Any transaction undertaken for hedging purpose, if it becomes naked,
is treated as a trading transaction and allowed to run till maturity.
- The transactions are separately classified as hedge or non- hedge
transactions and measured at fair value.
- The transactions covered on back-to-back basis and the transactions
undertaken to hedge the risks on Bank assets and liabilities are valued
as per the valuation prescribed and Interest is accounted on accrual
- Premium at the time of purchase, if any, is amortized over the
residual period of the transaction. Profit is recognized on maturity.
Discount is held in Income Received in Advance account and appropriated
to Profit and Loss Account on maturity.
- Adequate provision is made for transactions undertaken for hedging
purpose, which become naked resulting in marked- to-market losses.
- Provision is also made for net funded country exposures, where the
exposure is 1% or more of the bank's assets.
- Transactions for market making purposes are marked-to-market at
fortnightly intervals and those for hedging purposes are accounted for,
on accrual basis.
- Collaterals are also obtained depending on the terms of sanction.
- 92.07% of Derivatives fall under the short tenure of less than one
year of remaining maturity.
3. TAX PROVISIONS
a) Income Tax Provision
Provision for Income Tax for the current year of Rs. (-) 69.56 Crores
(Previous Year Rs. (-) 441.01 Crores) is made net of DTA / DTL on the
basis of Regular Tax, as in the opinion of the Management, based on the
opinion of Tax Consultant, Minimum Alternate Tax (MAT) in accordance
with Section 115JB of the Income Tax Act, 1961 is not applicable to the
public sector banks.
4. DISCLOSURE IN TERMS OF ACCOUNTING STANDARDS (AS)
The disclosures under Accounting Standards issued by the Institute of
Chartered Accountants of India (ICAI) (to the extent applicable) are
i) Net Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies (AS 5):
There were no material prior period income / expenditure items
requiring disclosure under AS - 5.
iii) Revenue Recognition (AS 9):
As per Accounting Policy No. 8, given in schedule - 17, Significant
Accounting Policies, certain items of income are recognised on
realisation basis on account of statutory requirement or on account of
iv) Effects of changes in Foreign Exchange Rate (AS 11):
a) The net profit for the year includes a loss of Rs.43.76 Crores (Rs.19.54
Crores Loss for the previous year) being the loss booked for the
difference in exchange rate on valuation of Forex Assets and
b) In terms of regulatory directives, Accounting Standard (AS 11) in
respect of Forex Assets and Liabilities has been implemented to ensure
a fair and true disclosure of the value of the same in the Balance
v) Employee Benefits (AS 15):
In accordance with the RBI guidelines, the Bank has amortised 1/5th
(Rs.145.38 Crores) of the enhanced liability of Rs.726.90 Crores from the
year 2010 - 11 in respect of pension and gratuity liabilities relating
to continuing employees. Accordingly the Bank has charged Rs. 145.38
Crores to the current year Profit and Loss Account and the balance
amount of Rs.145.38 Crores will be absorbed in future years.
Pending finalisation of wage revision with effect from November 1,
2012, Bank has made provision of Rs.240 Crores during the current year on
A reconciliation of Opening and Closing Balances of the present value
of the defined benefit obligations and the effects during the period
attributable to each of the following is as under:
vii) Related Party Disclosures (AS 18):
(A) Names of Related Parties and their Relationship:
Syndbank Services Limited
b) Associates: Prathama Bank
Karnataka Vikas Grameena Bank
Andhra Pragathi Grameena Bank
The Bank has reversed Deferred Tax Liability of Rs.109.30 Crores created
on claim of marked to market loss of investments in tax computation and
has also not recognized the same in the current year, as in the Bank's
opinion, the difference arising out of the treatment as per books and
the Income Tax Act, 1961 is a permanent difference. Pursuant to the
Opinion of the Expert Advisory Council of the Institute of Chartered
Accountants of India on the subject, the matter is being referred to
the Indian Banks Association for their guidance on the matter
Treatment of Deferred Tax Liability on Special Reserve:
Pursuant to RBI Circular No. DBOD NO. BP.BC.77/21.04.018/2013-14 dated
20.12.2013, Deferred Tax Liability of Rs. 270.28 Crores on Special
Reserve under section 36(1)(viii) of the Income Tax Act, 1961 has been
created directly through Revenue Reserves on the amount outstanding as
During the current year, Rs. 280 Crores have been transferred to Special
Reserve under section 36 (1) (viii) of the Income Tax Act, 1961 and
Deferred Tax liability of Rs. 95.17 Crores has been provided on the same
by debiting to the Profit and Loss account.
x) Interim Financial Reporting (AS 25):
The Bank is adopting the format prescribed by the RBI for the purpose
of quarterly return of its accounts as per RBI Circular No.: DBS.ARS.
No.BC. 17/08.91.001/2002-03 dated June 5, 2003.
xi) Impairment of Assets (AS 28):
In the opinion of the Management of the Bank, there is no impairment of
assets of the Bank.
xii) Provisions, Contingent Liabilities and Contingent Assets (AS 29):
Movement of provisions (excluding provisions for other)
(Rs. in crores)
Legal Cases/ Contingencies
Particulars Current Year Previous Year
Opening Balances 12.47 6.32
Provided during the year 1.95 6.15
Amount used during the year - -
Closing Balance 14.42 12.47
Timing of Outflow/ uncertainties Outflow on settlement /
Prepared by the management and relied upon by the Auditors.
As permitted by Reserve Bank of India vide its circular no. RBI/2013-
14/485/DBOD No.BP.95/21.04.048/2013-14 dated 07-02-2014 and also
pursuant to Bank's Board approved policy, the Bank has during the year
utilised a sum of Rs. 102.21 Crores from Floating Provisions / Counter
Cyclical Provisioning buffer towards specific provision for Non
c) During the year no penalty was imposed by RBI on the Bank under
section 46 (4) of the Banking Regulation Act, 1949. (Previous Year
i) Letters of comfort issued by the Bank
(a) Letters of Comfort issued in favour of overseas branch at London by
International Division, Mumbai and Branches: The Bank has given an
undertaking to FSA (Financial Services Authority) of U.K. with approval
from the Board of Directors / RBI, that it will make available
liquidity resources at all times to its London Branch (if needed) in
connection with application made for "Whole form liquidity
modification" of the London Branch under the new liquidity regime of
Treasury and International Banking Division; Mumbai issued Letters of
Comfort amounting to USD 75.00 Mio and also issued a Letter of
Commitment amounting to USD 100.00 Mio valid up to 31-12-2014 (Previous
Year USD 100.00 Mio) with the approval from the Board of Directors of
(b) Letters of Comfort issued by our Branches for the purpose of
providing Buyer's Credit facility to Corporate Clients:
Branches have issued Letters of Comfort on behalf of their corporate
customers in favor of Syndicate Bank; London Branch for providing
Buyers Credit, to the extent of Rs. 16.94 Crores as on 31-03-2014 .
(Previous Year Rs. 27.31 Crores).
Amount of Letters of Comfort issued by the Branches for the purpose of
providing buyers' credit facility to corporate clients, in favor of
various Foreign Banks and Indian Banks' Branches outside India, is Rs.
1,573.77 Crores as on 31-03-2014 (Previous Year Rs. 1,743.12 Crores).
The outstanding gross amount of Letters of Comfort issued by Banks'
Branches as on 31-03-2014 stands at Rs. 1,590.72 Crores (Previous Year Rs.
The financial impact on account of letters of comfort issued may not be
significant when the quality of Letters of Comfort, Credit
Ratings/World Rankings, Securities, Collaterals and Counter Guarantees
available of/from the underlying reference entities are taken into
5 Bancassurance Business
The total income from the Bancassurance Business during the year 2013 -
14 is Rs. 1,054.95 Lakhs as against Rs. 565.09 Lakhs in the previous year.
This comprises of Rs. 486.78 Lakhs (PY Rs. 497.99 Lakhs) from Life
Insurance business and Rs. 568.17 Lakhs (Rs. 67.10 Lakhs) from Non Life
6 The disclosures relating to Securitisation is not applicable since
the Bank has not sponsored any SPVs.
7 Fixed Assets
In respect of certain premises of the Bank, documentation formalities
as to transfer of title are yet to be completed. However the Bank holds
documents to prove its title as per the legal opinions obtained.
The bank owned premises have been revalued during the year 2011-12
(last revaluation done in the year 2006-07) at value determined based
upon the appraisal by the approved values. Additional depreciation
for the year aggregating to Rs. 29.18 Crores on the revalued assets has
been adjusted to the revaluation reserves.
8) Inter Branch transactions, clearing and other adjustment accounts,
including with other Banks, which being an on-going process are at
various stages of reconciliation. In the opinion of the management,
there will not be any material impact on the financial statements
arising out of such reconciliation.
9) Previous year figures
Previous year figures have been regrouped / rearranged wherever
considered necessary to conform to the current year's classification.