Note: *Appreciation / Reduction in rupee valuation of Investments is
due to fluctuation in USD/INR rates.
Face Value of non performing FCCB's USD 0.250 Mio on which provision of
USD 0.250 Mio was made as on 31-03-2013.
i) Sale and transfer 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 (excluding exempted category) at the beginning of the year as
per RBI guidelines.
Note: All Forward Rate Agreements and Interest Rate Swaps undertaken
are against Banks to hedge Balance Sheet gaps. During the financial
year, Bank has raised the Fixed Interest rate MTN fund of USD 500.00
Mio. The fixed interest rate liability was converted into Floating
rates by entering into Interest Rate Swaps of matching maturity
(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 above Swaps.
(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 2012 - 2013.
1.A Exchange Traded Interest Rate Derivatives Currency Futures:
The Bank undertakes proprietary trading in Currency Futures in USD/INR
on the three Exchanges. There are no outstanding contracts under
Currency future as at 31-03-2013.
1.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 in place to monitor the same.
- 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 counterparty exposure limits
setting country risk exposure limits and mitigating settlement risk
through CCIL / CLS.
- The transactions with our Counter-Party Banks and non-bank
counterparty 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 P&L account on maturity.
- Adequate provision is made for transactions undertaken for hedging
purpose, which became naked resulting in mark-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.
- 89.87% of Derivatives fall under the short tenure of less than one
year of remaining Maturity.
c) Country Risk Management
The Bank has analysed its net funded exposures to various countries as
on 31-03-2013 and such exposures to countries is well within the
stipulation of 1% of total assets of the Bank.
a) Minimum Alternate Tax (MAT):
Provision for Income Tax for the current year of Rs. (-)441.01 crore
(PY Rs. 74.64 crore) is made net off DTA / DTL and adjustment for
earlier years on the basis of Minimum Alternate Tax (MAT) in accordance
with Section 115JB of the Income Tax Act 1961. Considering the future
profitability and taxable position of the Bank in subsequent years, the
bank management has recognised MAT credit entitlement of Rs. 573.59
crore (Previous Year: NIL) as other assets (Schedule - 11) by crediting
to Profit & Loss, since in the opinion of the bank management based on
Tax Consultants Opinion, MAT credit can be set-off during specified
period as per the provisions of the Income Tax Act 1961.
3. 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.
ii) 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
iii) Effects of changes in Foreign Exchange Rate (AS 11):
a) The net profit for the year includes an amount of Rs. 19.54 crore,
(Rs. 13.54 Cr. Loss for the previous year) being the loss booked under
difference in Exchange on account of AS-11 valuation of FX Assets &
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
iv) Employee Benefits (AS 15):
In accordance with the RBI guidelines, the Bank has amortised 1/5th
(Rs. 145.38 crore) of the enhanced liability of Rs. 726.90 crore from
the year 2010 - 11 in respect of pension and gratuity liabilities
relating to continuing employees. Accordingly, the Bank has charged Rs.
145.38 crore to the current year profit and loss account and the
balance amount of Rs. 290.76 crore will be absorbed in future years.
In expectation of wage revision with effect from 1st November, 2012,
Bank has made adhoc provision of Rs. 100 crore during the current year.
A reconciliation of Opening and Closing Balances of the present value
of the defined benefit obligation and the effects during the period
attributable to each of the following is as under:
v) Related Party Disclosures (AS 18):
(A) Names of Related Parties and their relationship:
Syndbank Services Limited
Karnataka Vikas Grameena Bank
Andhra Pragathi Grameena Bank
North Malabar Gramin Bank Gurgaon Gramin Bank
vi) Consolidated Financial Statements (AS 21):
The consolidated financial statements for the year ended 31st March
2013 have been prepared in accordance with AS 21 and on the basis of
the audited financial statements of the subsidiary of the Bank, M/s.
Syndbank Services Ltd.
vii) Accounting for Taxes on Income (AS 22):
The Bank has complied with the requirements of AS 22. The Net balance
of DTA / DTL as on 31st March, 2013 amounting to Rs. 268.16 crore
consists of the following:
viii) Impairment of Assets (AS 28):
In the opinion of the Management of the Bank, there is no impairment of
assets of the Bank.
c) Draw down from reserves:
The Bank has not made any draw down from the Reserves during the year.
e) Letters of comfort issued by the Bank
(a) Letters of Comfort issued in favour of overseas branch at LONDON by
International Division, Mumbai & 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 FSA U.K.
International Division; Mumbai issued Letter of Comfort amounting to
USD 75 Mio and also issued a letter of commitment amounting to USD
100.00 Mio (valid upto 31-12-2013) with approval from the Board of
Directors of the Bank.
(b) Letters of Comforts 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 favour of SyndicateBank; London Branch for providing
Buyer's Credit, to the extent of Rs. 27.31 crore as on 31-03-2013.
Letters of Comfort issued by the Branches for the purpose of providing
buyers credit facility to corporate clients, in favour of various
Foreign Banks and Indian Banks' Branches outside India, is Rs. 1,743.12
crore as on 31-03-2013.
The Outstanding Gross Amount of Letters of Comfort issued by our
Branches as at 31-03-2013 stands at Rs. 1,770.43 crore.
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
f) Provision Coverage Ratio:
The provision coverage ratio for the financial Year 2012-13 is 83.41%
g) Bancassurance Business:
Income from the Bancassurance Business during the year 2012 -13 is Rs.
565.09 Lakhs as against Rs. 749.33 Lakhs in the previous year.
(i) 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 at London has been revalued on a desk top basis
during the year 2012 - 13 at value determined, based on the appraisal
by valuer. Surplus arising on such valuation aggregating to Rs. 1.32
crore is credited to revaluation reserves. Additional depreciation
aggregating to Rs. 30.93 crore on revalued domestic assets and Rs. 0.04
crore on revalued premises at London have been adjusted to the
(a) Profit on account of sale of securities from HTM category amounting
to Rs. 475,01,665.15 has been taken to Profit and Loss Account and
thereafter appropriated towards Capital Reserve Account.
(b) The amortization charges of Rs. 56,49,74,074.44 (previous year Rs.
58,1 7,27,342.62) 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
(iii) Details of Bonds Issue
During the year, the Bank has issued Bonds of Rs. 1,000 crore as
subordinated debts to strengthen the Tier II Capital of the Bank. The
Bank has also raised USD 500 Mio through its London Branch during the
financial year for funding its London Branch business.
(iv) Credit Default Swaps
During the financial year, the Bank has not traded in Credit Default
(v) 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. 3.08 Crs.
(vi) 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.
(vii) Previous year figures
Previous year figures have been regrouped / rearranged wherever
considered necessary to conform to the current year's classification.