1. TRANSACTIONS INVOLVING FOREIGN EXCHANGE
1.1 Exchange rates as notified by Foreign Exchange Dealers' Association
of India (FEDAI) are adopted.
1.2 All foreign currency transactions involving forex liabilities are
recorded by applying Weekly Average Rate (WAR), whereas all forex
assets are recorded at ongoing market rates.
1.3 All the monetary assets and liabilities are reported at the end of
the year at closing exchange rate and the resultant profit / loss is
taken to revenue.
1.4 Outstanding Forward Exchange Contracts are reported at the exchange
rates notified for specified maturities and at interpolated rates for
contracts of "in between maturities". The resultant Marked to Market
(MTM) is discounted to arrive at present value MTM by using CCIL- Zero
Coupon Yield curve (ZCYC) rates.
1.5 Contingent liabilities on account of Guarantees, Forward Contracts,
Letters of Credit, Acceptances, Endorsements and other obligations are
translated at the closing exchange rates.
1.6 Foreign Branch of the Bank is classified as "Non- Integral Foreign
a) All assets and liabilities of the foreign operations, both monetary
and non-monetary as well as contingent liabilities are translated at
closing ex- change rates.
b) Income and Expenditure are translated at quar- terly average
c) The resulting Exchange Difference arising from translation as per
AS-11 is accumulated in a "For- eign Currency Translation Reserve"
until disposal of net investment of the foreign branch.
The Investment portfolio of the Bank is classified, in accordance with
the Reserve Bank of India guidelines, into:
a) "Held to Maturity" (HTM) comprising Investments acquired with the
intention to hold them till maturity. Investments in subsidiaries,
joint ventures and associates are also categorised under Held to
b) "Held for Trading" (HFT) comprising Investments acquired with the
intention to trade by taking advantage of short term price/interest
rate movements. These are intended to be traded within 90 days from the
date of purchase.
c) "Available for Sale" (AFS) comprising Investments not covered by (a)
and (b) above i.e. those investments which do not fall under in "Held
to Maturity" or "Held for Trading" classification.
However, in the balance sheet, the investments will be disclosed as per
the existing six classifications:
(i) Government Securities
(ii) Other Approved Securities
(iv) Debentures and Bonds
(v) Subsidiaries and / or Associates (vi) Others
2.2 Acquisition Cost of Investment:
a) Brokerage, Commission, Securities Transaction Tax (STT) etc., paid
in connection with acquisition of investments are expensed upfront and
excluded from cost.
b) Broken period interest paid / received on debt instruments is
treated as interest expense/ income and is excluded from cost/sale
c) Cost of investments is determined at weighted average price method.
2.3 Method of Valuation:
a) Investments classified as HTM are carried at weighted average
acquisition cost unless it is more than the face value, in which case
the premium is amortized over the period remaining to maturity.
b) Investments in Treasury Bills, Commercial Papers and Certificates of
Deposit which have been valued at carrying cost.
c) Investments in subsidiaries and joint ventures are valued at
acquisition cost less diminution, other than temporary in nature.
d) Bank's investments in units of VCFs are classified under HTM
category for the initial period of three years and are valued at cost.
After period of three years from date of disbursement, it will be
shifted to AFS and marked-to-market as per RBI guidelines.
e) Transfer of securities from HFT/AFS category to HTM category is
carried out at the lower of acquisition cost/book value/market value on
the date of transfer. The depreciation, if any, on such transfer is
fully provided for. However, transfer of securities from HTM category
to AFS category is carried out on acquisition price/book value. After
transfer, these securities are immediately revalued and resultant
depreciation, if any, is provided.
f) Investments classified as HFT and AFS are marked-to-market
scrip-wise and the resultant net depreciation if any, in each category
disclosed in the Balance Sheet, is provided in the Profit and Loss
Account, while the net appreciation, if any, is ignored.
g) For the purpose of valuation of quoted investments in "Held for
Trading" and "Available for Sale" categories, the market rates / quotes
on the Stock Exchanges, the rates declared by Primary Dealers
Association of India (PDAI) / Fixed Income Money Market and Derivatives
Association (FIMMDA) / Foreign Exchange Dealers Association of India
(FEDAI) are used. Investments for which such rates / quotes are not
available are valued as per norms laid down by RBI, which are as under:
- Government/ On Yield to Maturity basis with Approved appropriate
spread mark-up, if Securities any.
- Equity Shares At breakup value as per the latest
available Balance Sheet not more than 18 months old (without
considering 'revaluation reserves', if any), otherwise Re. 1 per
company where latest balance sheet is not available.
- Preference On Yield to Maturity basis with Shares appropriate credit
spread mark- up not exceeding the redemption value.
- Bonds & On Yield to Maturity basis with Debentures appropriate credit
spread mark- up.
- Units of Mutual At the latest repurchase price / Funds NAV declared
by the Fund in respect of each scheme.
- Venture Declared NAV or break up NAV as Capital per audited balance
sheet which is not more than 18 months old. If NAV/audited fnancials
are not available for more than 18 months continuously then at Re. 1/-
- Security Declared NAV by the Asset Receipts Reconstruction Company as
per RBI /SEBI guidelines.
2.4 Disposal of Investments:
a) Profit/loss on sale of Investments classified as HTM is recognized
in the Profit and Loss Account based on the weighted average cost /
book value of the related Investments and an amount equivalent of
profit on sale of Investments in HTM classification is appropriated to
Capital Reserve Account.
b) Profit/loss on sale of Investment in AFS/HFT category is recognized
in Profit and Loss Account.
2.5 The Bank is following uniform methodology of accounting for
investments on settlement date basis.
2.6 In respect of non-performing securities, income is not recognised,
and provision is made for depreciation for such securities as per RBI
guidelines. Provision made on non-performing investments is not set off
against the appreciation in respect of other performing investments.
2.7 Floating / Fixed Rate Note and Credit Linked Note, Investments at
Foreign Branch are classified as Available for Sale' category and are
valued at nominal value or market value, whichever is lower. These
Investments are marked-to-market at quarterly intervals and where the
value of these Investments is lower than the nominal value, provision
for depreciation is created in the Balance Sheet and a corresponding
charge is recognized in the Profit and Loss Account.
2.8 Incentive received on subscriptions is deducted from the cost of
securities. Brokerage / Commission / Stamp Duty paid in connection with
acquisition of securities are treated as revenue expense.
2.9 The securities sold and purchased under Repo/ Reverse repo are
accounted as Collateralised lending and borrowing transactions.
However, securities are transferred as in case of normal outright
sale/purchase transactions and such movement of securities is reflected
using the Repo/Reverse Repo Accounts and Contra entries. The above
entries are reversed on the date of maturity. Costs and revenues are
accounted as interest expenditure/income, as the case may be. Balance
in Repo Account is classified as Borrowings and balance in Reverse Repo
account is classified as Balance with Banks and Money at Call & Short
3.1 The credit exposures for derivative transactions are monitored on
Current Credit Exposure method.
3.2 The naked hedging transactions are considered as a trading
transaction and allowed to run till maturity.
3.3 Derivative transactions are classified into hedge and non-hedge and
measured at fair value.
3.4 The transactions covered on back-to-back basis and the transactions
undertaken to hedge the risk on assets and liabilities are valued and
accounted on interest accrual basis.
3.5 Market making transactions are accounted on marked-to-market basis
at monthly intervals, while hedging transactions are accounted for on
3.6 Premium at the time of purchase, if any, is amortized over the
residual period of the transactions and profit is recognized on
maturity. Discount is held in Income Received in Advance account and
appropriated to profit and loss account on maturity.
4.1 Advances are classified into Performing and Non- Performing Assets
and provisions for losses on such advances are made as per prudential
norms issued by Reserve Bank of India from time to time. In respect of
foreign branch, asset classification and provisioning for loan losses
are made as per local requirements or as per RBI prudential norms,
whichever are more stringent.
4.2 Advances are stated net of provisions made for Non-Performing
Assets except general provisions for Standard Advances.
4.3 In case of sale of financial assets to the Asset Reconstruction
Company (ARC) / Securitization Company (SC) / Banks / FIs / NBFCs at a
price below the Net Book Value (NBV), i.e Book Value less Provision
held, the shortfall is debited to the Profit and Loss Account and in
case of sale at a value higher than the NBV, the excess provision is
reversed to Profit and Loss Account in the year in which the amounts
5. PREMISES AND OTHER FIXED ASSETS
5.1 Premises and other fixed assets are stated at historical cost
and/or revaluation value less accumulated depreciation. The premises
are revalued every three years at value determined based on the
appraisal by approved valuers. Surplus arising at such revaluation is
credited to Revaluation Reserve.
5.2 Depreciation on premises has been provided on composite cost
wherever cost of land cannot be segregated. Additional depreciation on
revalued amount is adjusted to the Revaluation Reserve.
5.3 Depreciation on other fixed assets, including additions, is
provided for on the basis of written down value, except as otherwise
stated, at the following rates:
5.4 Depreciation on additions to fixed assets is provided for the whole
year except on additions to computers and operating software, which is
provided on pro- rata basis. No depreciation is provided on the assets
in the year of their disposal.
6. EMPLOYEE BENEFITS
5.1 Employee Benefits in the form of Provident Fund is a Defined
Contribution Scheme and the contributions are charged to Profit & Loss
Account in the year in which the contributions are due in respect of
employees who have opted for Provident Fund.
5.2 a. In respect of employees who have opted for
Pension Scheme, Pension Benefit is a Defined
Benefit Obligation and is provided for on the basis of actuarial
valuation made at the end of the Financial Year for the employees who
have joined the Bank up to 31st March, 2010. The Pension liability is
funded by the Bank to the Pension Fund Trust of the Bank.
b. New Pension Scheme which is applicable to employees who joined the
Bank on or after 1st April, 2010 is a Defined Contribution Scheme at
pre-determined rate and the obligation the Bank is limited to such
contribution. The Contribution is charged to Profit & Loss Account.
5.3 Gratuity liability is a Defined Benefit Plan and is provide for on
the basis of actuarial valuation made at eh end of the Financial Year.
The gratuity liability is funded to the Gratuity Fund Trust of the
5.4 Accumulated Compensated absences such as Leave Encashment are
provided for based on actuarial valuation.
6. REVENUE RECOGNITION
a) Revenue and expenses are generally accounted for on accrual basis
except in respect of fees/ commission on transactions with Mutual
Funds, income from non-banking assets, locker rent, interest on overdue
bills/tax refunds, income from non-performing assets and legal expenses
on suit filed accounts which are accounted for on cash basis.
b) Income from dividend on shares is accounted for on accrual basis
when the same is declared and the right to receive the dividend is
c) Interest on matured deposits is accounted for at the time of
renewal. However provision for interest on matured deposits is made at
the Corporate Office as per the RBI guidelines.
d) The broken period interest on sale or purchase of securities is
treated as revenue item as per RBI guidelines.
e) Expenditure in respect of application software, bonds issue,
franchises of credit card and insurance products are charged off to
f) Income from consignment sale of imported gold coins is accounted for
as other income after the sale is completed.
7. TAXES ON INCOME
7.1 Current tax is determined as per the provisions of the Income tax
7.2 Deferred Tax Assets and Liabilities arising on account of timing
differences between taxable and accounting income, is recognized
keeping in view, the consideration of prudence in respect of
Deferred Tax Assets/Liabilities in accordance with the
Accounting Standard 22 issued by ICAI.
8. COUNTRY RISK MANAGEMENT
The Bank has adopted the Country Risk Management policy in accordance
with the RBI guidelines and following the Country Risk Category
classification published by Export Credit Guarantee Corporation (ECGC).
9. UNHEDGED FOREIGN CURRENCY EXPOSURE
The Bank has framed and approved a policy for administration of credit
risk rising out of Unhedged foreign currency exposures in accordance
with extant RBI guidelines.
10. IMPAIRMENT OF ASSETS
The carrying amount of assets is reviewed at each Balance Sheet date
for any indication of impairment based on internal/external factor. An
impairment loss is recognized whenever the carrying amount of an asset
exceeds its estimated recoverable amount.
11. NET PROFIT
Net Profit is arrived at after accounting for the following under
"Provisions and Contingencies":
- Provision for Income Tax and Wealth Tax
- Provision/Write off of Non-Performing Advances
and Investments - Provision on Standard Assets - Adjustment for
Investments - Transfer to Contingencies - Other usual and necessary
12. EARNINGS PER SHARE
Earnings per Share are calculated by dividing the net profit or loss
for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. Diluted
earnings per equity share are computed using the weighted average
number of equity shares and dilutive potential equity shares
outstanding as at the end of the year.