SENSEX NIFTY India | Accounting Policy > Banks - Public Sector > Accounting Policy followed by Bank Of India - BSE: 532149, NSE: BANKINDIA

Bank Of India

BSE: 532149|NSE: BANKINDIA|ISIN: INE084A01016|SECTOR: Banks - Public Sector
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Accounting Policy Year : Mar '16
 The abridged Standalone and Consolidated Financial Statements have been
 prepared from the audited Standalone and Consolidated financial
 statements of the Bank of India (''the Bank'') for the year ended 31st
 March, 2016, which are prepared based on the accounting policies
 hereinafter appearing.
 The financial statements are prepared following the going concern
 concept, on historical cost basis unless otherwise stated and conform,
 in all material aspects, to the Generally Accepted Accounting
 Principles (GAAP) in India, which encompasses applicable statutory
 provisions, regulatory norms prescribed by the Reserve Bank of India
 (RBI), Accounting Standards (AS) and pronouncements issued by The
 Institute of Chartered Accountants of India (ICAI) and accounting
 practices prevalent in the banking industry in India. In respect of
 foreign offices/branches, statutory provisions and accounting practices
 prevailing in the respective foreign countries are complied with,
 except as specified elsewhere.
 In addition to above, for preparation of the consolidated financial
 statements applicable statutory provisions and regulatory norms
 prescribed by the Insurance Regulatory and Development Authority of
 India (IRDA) and Companies Act, 2013 have been followed to the extent
 these are applicable to the Joint ventures/subsidiaries/ associates
 being consolidated.
 The preparation of financial statements requires the management to make
 estimates and assumptions considered in the reported amount of assets
 and liabilities (including contingent liabilities) as of date of the
 financial statements and the reported income and expenses for the
 reporting period.  Management believes that the estimates used in the
 preparation of the financial statements are prudent and reasonable.
 However actual results can differ from estimates. Any revision to
 accounting estimates is recognized prospectively in current and future
 3.1 Banking entities:
 (a) Income/Expenditure is recognised on accrual basis, unless otherwise
 stated. In respect of foreign offices, income is recognised as per
 local laws of host country.
 (b) Interest income is recognised on time proportion basis except
 interest on Non-performing Assets, which is recognised on realisation,
 in terms of the RBI guidelines.
 (c) Commission on issue of Bank Guarantee and Letter of Credit is
 accrued over the tenure of BG/LC.
 (d) All other Commission and Exchange, Brokerage, Fees and other
 charges are recognised as income on realisation.
 (e) Income (other than interest) on investments in Held to Maturity
 category acquired at a discount to the face value, is recognised as
 1.  On Interest bearing securities, it is recognised only at the time
 of sale/ redemption.
 2.  On zero-coupon securities, it is accounted for over the balance
 tenor of the security on a constant yield basis.
 (f) Profit or loss on sale of investments is recognised in the Profit
 and Loss account. However, in case of profit on sale of investments
 under ''Held to Maturity'' category, an equivalent amount, net of taxes
 and amount required to be transferred to Statutory Reserves, is
 appropriated to ''Capital Reserve Account''.
 (g) Dividend is recognised when the right to receive the dividend is
 (h) Interest on Income-tax refund is recognised in the year of passing
 of assessment order.
 (i) The recoveries made from NPA accounts are appropriated first
 towards unrealised interest/income debited to borrowers accounts,
 expenditure/out of pocket expenses incurred, then principal dues and
 lastly towards uncharged interest.
 3.2 Non Banking entities: Insurance
 a) Premium Income:
 Premium net of service tax is recognised as income when due. For linked
 business, premium is recognised when the associated units are created.
 Top up premiums are considered as single premium.
 Premium on lapsed policies is recognised as income when such policies
 are reinstated.
 b) Income from linked funds:
 Income from linked funds which includes policy administrative charges,
 mortality charges, fund management charges, etc.  are recovered from
 the linked funds in accordance with the terms and conditions of policy
 and recognised when recovered.
 c) Reinsurance Premium:
 Reinsurance Premium ceded is accounted for at the time of recognition
 of premium income in accordance with the terms and conditions of the
 relevant treaties with the reinsurers.
 d) Benefits paid (including claims):
 Benefits paid comprise of policy benefits & claim settlement costs, if
 Death, rider & surrender claims are accounted for on receipt of
 intimation from the policy holder. Withdrawal and surrender under
 linked policies are accounted for in the respective schemes when the
 associated units are cancelled.
 Survival benefit claims and maturity are accounted for when due.
 Reinsurance recoveries on claims are accounted for in the period in
 which claims are settled.
 e) Acquisition Costs:
 Acquisition costs are costs that vary with and are primarily related to
 acquisition of insurance contracts and are expensed in the period in
 which they are incurred.
 Claw back in future, if any, for the first year commission paid, is
 accounted for in the year in which it is recovered.
 f) Liability for life policies:
 Actuarial liability for life policies in force and for policies in
 respect of which premium has been discontinued but a liability exists,
 is determined by the Appointed Actuary using the gross premium method
 and in case of group business Unearned Premium Reserve Method, in
 accordance with accepted actuarial practice, requirements of Insurance
 Act, 1938, IRDA Regulations and the stipulations of the Institute of
 Actuaries of India.
 Linked liabilities comprise unit liability representing the fund value
 of policies and non-unit liability for meeting insurance claims, etc.
 This is based on an actuarial valuation carried out by the Appointed
 Non-Banking Activities - Mutual Fund
 Revenue from Operations Management fees from the scheme of mutual fund
 are accounted on an accrual basis in accordance with the investment
 management agreement and are dependent on the net asset value as
 recorded by the schemes of BOI AXA Mutual fund.
 Other Income: Interest income is recorded on accrual basis.  Profit or
 Loss on sale of investment is recognised in the P&L Account on the
 trade date and determined on weighted average basis for individual
 (a) Advances are classified into Performing and Non- Performing
 Advances (NPAs) in accordance with the applicable regulatory
 (b) NPAs are further classified into Sub-Standard, Doubtful and Loss
 Assets in terms of applicable regulatory guidelines.
 (d) In respect of foreign branches, classification of advances as NPAs
 and provision in respect of NPAs is made as per the regulatory
 requirements prevailing at the respective foreign countries or as per
 guidelines applicable to domestic branches, whichever is stringent.
 (e) Provisions in respect of NPAs, unrealised interest, ECGC claims
 settled, etc. are deducted from total advances to arrive at net
 advances as per RBI norms.
 (f) In respect of Rescheduled/Restructured advances, provision is made
 for the diminution in the fair value of restructured advances measured
 in present value terms as per RBI guidelines.  The said provision is
 reduced to arrive at Net advances.
 (g) In case of financial assets sold to Asset Reconstruction Company
 (ARC) / Securitisation Company (SC), if the sale is at a price higher
 than the NBV, the surplus is retained and utilised to meet the
 shortfall/loss on account of sale of other financial assets to SC/ARC.
 If the sale is at a price below the net book value (NBV), (i.e.
 outstanding less provision held) the shortfall is to be debited to the
 Profit and Loss account.  However, if surplus is available, such
 shortfall will be absorbed in the surplus. Any such shortfall arising
 due to sale of NPA on or after 26/02/2014 will be amortised over a
 period of two years if not absorbed in the surplus.  Excess provision
 arising out of sale of NPAs are reversed only when the cash received
 (by way of initial consideration only/or redemption of SRS/ PTC) is
 higher than the net book value (NBV) of the asset.  Reversal of excess
 provision will be limited to the extent to which cash received exceeds
 the NBV of the asset.
 (h) Provision for Standard assets, including restructured advances
 classified as standard, is made in accordance with RBI guidelines.
 (i) Provision for net funded country exposures is made on a graded
 scale in accordance with the RBI guidelines.
 The bank has a policy for creation and utilisation of floating
 provisions. The quantum of floating provisions to be created is
 assessed at the end of each financial year.  The floating provisions
 are utilised only for contingencies under extraordinary circumstances
 specified in the policy with prior permission of Reserve Bank of India
 or on being specifically permitted by Reserve Bank of India for
 specific purposes.
 Provision for reward points in relation to the debit card holders of
 the bank is provided for on actuarial estimates and Provision for
 Reward Points on Credit cards is made based on the accumulated
 outstanding points.
 A.  Transactions in Government Securities are recognised on Settlement
 Date and all other Investments are recognised on trade date.
 B.  Investments are categorised under `Held to Maturity'', ''Held for
 Trading'' and ''Available for Sale'' categories as per RBI guidelines. For
 the purpose of disclosure of investments in India, these are
 classified, in accordance with RBI guidelines, under six classification
 viz. Government Securities, Other Approved Securities, Shares,
 Debentures and Bonds, Investment in Subsidiaries and Associates and
 Others. In respect of investments outside India, these are classified,
 in accordance with RBI guidelines, under four categories viz.
 Government Securities (including local authorities), Subsidiaries/
 Joint Ventures abroad and Other Investments.
 (a) Basis of categorisation
 Categorisation of an investment is done at the time of its acquisition.
 i) Held to Maturity
 These comprise investments that the Bank intends to hold till maturity.
 Investments in subsidiaries, joint ventures and associates are also
 categorised under Held to Maturity.
 ii) Held for Trading
 These comprise 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.
 iii) Available for Sale
 These comprise investments which do not fall under in Held to
 Maturity or Held for Trading classification.
 (b) Acquisition Cost of Investment
 i) Brokerage, commission, securities transaction tax etc. paid on
 acquisition of equity investments are included in cost.
 ii) Brokerage, commission, broken period interest paid/ received on
 debt investments is treated as income/ expense and is excluded from
 cost/sale consideration.
 iii) Brokerage and Commission received on subscription of investments
 is credited to Profit and Loss Account.
 iv) Cost of investments is determined at weighted average cost method.
 (c) Method of valuation
 Investments in India are valued in accordance with the RBI guidelines
 and investments held at foreign branches are valued at lower of the
 value as per the statutory provisions prevailing at the respective
 foreign countries or as per RBI guidelines issued from time to time.
 Treasury Bills and Commercial Papers are valued at carrying cost.
 i) Held to Maturity:
 1 Investments included in this category are carried at their
 acquisition cost, net of amortisation, if any. The excess of
 acquisition cost, if any, over the face value is amortised over the
 remaining period to maturity using constant yield method.  Such
 amortisation of premium is adjusted against income under the head
 interest on investments.
 2 Investments in subsidiaries, joint ventures and associates (both in
 India and abroad) are valued at historical cost except for investments
 in Regional Rural Banks, which are valued at carrying cost (i.e. book
 value). A provision is made for diminution, other than temporary, for
 each investment individually.
 ii) Held for Trading /Available for Sale
 1 Investments under these categories are individually valued at the
 market price or fair value determined as per Regulatory guidelines and
 only the net depreciation in each classification for each category is
 provided for and net appreciation is ignored. On provision for
 depreciation, the book value of the individual securities remains
 unchanged after marking to market.
 2 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) are used.  Investments for which such rates/quotes
 are not available are valued as per norms laid down by RBI, which are
 as under:
 (d) Transfer of Securities between Categories
 The transfer of securities between categories are carried out at the
 least of acquisition cost / book value /market value on the date of
 transfer. The depreciation, if any, on such transfer is fully provided
 (e) Non performing Investments (NPIs) and valuation thereof
 1. Investments are classified as performing and non-performing, based
 on the guidelines issued by the RBI in case of domestic offices and
 respective regulators in case of foreign offices.
 2. In respect of non performing investments, income is not recognised
 and provision is made for depreciation in value of such securities as
 per RBI guidelines.
 (f) Repo/Reverse Repo
 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
 The Bank presently deals in Forex Forward Contracts, interest rate and
 currency derivatives. The interest rate derivatives dealt with by the
 Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate
 Swaps, Forward Rate Agreements and Interest Rate Futures. Currency
 Derivatives dealt with by the Bank are Options, Currency Swaps and
 Currency Futures. Based on RBI guidelines, Derivatives are valued as
 (a) The hedge/non hedge (market making) transactions are recorded
 (b) Income/expenditure on hedging derivatives are accounted on accrual
 (c) Forex forward contracts are marked to market and the resultant
 gains and losses are recognized in the profit and loss account.
 (d) Interest Rate Derivatives and currency derivatives other than
 exchange traded derivatives for trading purpose are marked to market
 and the resulting losses, if any, are recognised in the Profit & Loss
 account. Net Profit if any, is ignored.
 (e) Exchange Traded Derivatives entered into for trading purposes are
 valued at prevailing market rates based on rates given by the Exchange
 and the resultant gains and losses are recognized in the Profit and
 Loss Account.
 (f) Gains/losses on termination of the trading swaps are recorded on
 the termination date as income/ expenditure. Any gain/loss on
 termination of hedging swaps are deferred and recognised over the
 shorter of the remaining contractual life of the swap or the remaining
 life of the designated assets/liabilities.
 (g) Option fees/premium is amortised over the tenor of the option
 (a) Fixed assets are stated at historic cost, except in the case of
 assets which have been revalued, which is stated at revalued amount.
 The appreciation on revaluation is credited to Revaluation Reserve.
 (b) Cost includes cost of purchase and all expenditure such as site
 preparation, installation costs, professional fees etc.  incurred on
 the asset before it is put to use. Subsequent expenditure incurred on
 assets put to use is capitalised only when it increases the future
 benefits from such assets or their functioning capability.
 (c) Cost of premises includes cost of land, both freehold and
 a.  Depreciation on assets is charged on the Written Down Value at the
 rates determined by the Bank, except in respect of computers where it
 is calculated on the Straight Line Method, at the rates prescribed by
 b.  In respect of additions, depreciation is provided for the full
 year, irrespective of the date on which the assets were put to use
 whereas, depreciation is not provided in the year of sale/disposal of
 an asset.
 c.  Depreciation on the revalued portion of assets is adjusted against
 the Revaluation Reserve.
 d.  Where the cost of land and building cannot be separately
 ascertained, depreciation is provided on the composite cost, at the
 rate applicable to buildings.
 e.  Premium paid on leasehold land is amortised over the period of
 g. Depreciation on fixed assets outside India is provided based on the
 estimated useful life determined by each centre.
 Transactions involving foreign exchange are accounted for in accordance
 with AS 11, The Effect of Changes in Foreign Exchange Rates.
 a) Translation in respect of Integral Foreign operations:
 Foreign currency transactions of Indian branches have been classified
 as integral foreign operations and foreign currency transactions of
 such operations are translated as under:
 i) Foreign currency transactions are recorded on initial recognition in
 the reporting currency by applying to the foreign currency amount the
 exchange rate between the reporting currency and the foreign currency
 on the daily closing rate as available from Cogencis/Reuter''s page.
 ii) Foreign currency monetary items are reported using the FEDAI
 closing spot rates.
 iii) Foreign currency non-monetary items, which are carried in terms of
 historical cost, are reported using the exchange rate at the date of
 the transaction.
 iv) Contingent liabilities denominated in foreign currency are reported
 using the FEDAI closing spot rates.
 v) Outstanding foreign exchange spot and forward contracts held for
 trading are revalued at the exchange rates notified by FEDAI for
 specified maturities, and the resulting profit or loss is recognised in
 the Profit and Loss account.
 vi) Outstanding Foreign exchange forward contracts which are not
 intended for trading are valued at the closing spot rate. The premium
 or discount arising at the inception of such a forward exchange
 contract is amortised as expense or income over the life of the
 vii) Exchange differences arising on the settlement of monetary items
 at rates different from those at which they were initially recorded are
 recognised as income or as expense in the period in which they arise.
 viii) Gains/Losses on account of changes in exchange rates of open
 position in currency futures trades are settled with the exchange
 clearing house on daily basis and such gains/ losses are recognised in
 the Profit and Loss account.
 b) Translation in respect of Non-Integral Foreign operations:
 Transactions and balances of foreign branches are classified as
 non-integral foreign operations and their financial statements are
 translated as follows:
 i) Assets and Liabilities (monetary and non- monetary as well as
 contingent liabilities) are translated at the closing rates notified by
 ii) Income and expenses are translated at the quarterly average closing
 rates notified by FEDAI.
 iii) All resulting exchange differences are accumulated in a separate
 account ''Foreign Currency Translation Reserve'' till the disposal of the
 net investments by the bank in the respective foreign branches.
 iv) The Assets and Liabilities of foreign offices in foreign currency
 (other than local currency of the foreign offices) are translated into
 local currency using spot rates applicable to that country.
 i.  Short Term Employee Benefit:
 The undiscounted amount of short-term employee benefits, such as
 medical benefits etc. which are expected to be paid in exchange for the
 services rendered by employees are recognised during the period when
 the employee renders the service.
 ii.  Post Employment Benefit: A.  Defined Benefit Plan
 a) Gratuity
 The Bank provides gratuity to all eligible employees. The benefit is in
 the form of lump sum payments to vested employees on retirement, on
 death while in employment, or on termination of employment, for an
 amount equivalent to 15 days basic salary payable for each completed
 year of service, subject to a maximum prescribed as per The Payment of
 Gratuity Act, 1972 or BOI (Employee) Gratuity Regulation, whichever is
 higher.  Vesting occurs upon completion of five years of service. The
 Bank makes periodic contributions to a fund administered by trustees
 based on an independent external actuarial valuation carried out
 b) Pension
 The Bank provides pension to all eligible employees. The benefit is in
 the form of monthly payments as per rules and payments to vested
 employees on retirement, on death while in employment, or on
 termination of employment. Vesting occurs at different stages as per
 rules. The Bank makes monthly contribution to the pension fund at 10%
 of pay in terms of BOI (Employees) Pension regulations. The pension
 liability is reckoned based on an independent actuarial valuation
 carried out annually and Bank makes such additional contributions
 periodically to the Fund as may be required to secure payment of the
 benefits under the pension regulations.
 B.  Defined Contribution Plan:
 a.  Provident Fund
 The Bank operates a Provident Fund scheme.  All eligible employees are
 entitled to receive benefits under the Bank''s Provident Fund scheme.
 The Bank contributes monthly at a determined rate (currently 10% of
 employee''s basic pay plus eligible allowance).  These contributions are
 remitted to a trust established for this purpose and are charged to
 Profit and Loss Account. The bank recognises such annual contributions
 as an expense in the year to which it relates.
 b.  Pension
 All Employees of the bank, who have joined from 1st April, 2010 are
 eligible for contributory pension. Such employees contribute monthly at
 a predetermined rate to the pension scheme. The bank also contributes
 monthly at a predetermined rate to the said pension scheme. Bank
 recognises its contribution to such scheme as expenses in the year to
 which it relates. The contributions are remitted to National Pension
 System Trust. The obligation of bank is limited to such predetermined
 iii.  Other Long term Employee Benefit:
 a) Leave encashment benefit, which is a defined benefit obligation, is
 provided for on the basis of an actuarial valuation in accordance with
 AS 15 - Employee Benefits.
 b) Other employee benefits such as Leave Fare Concession, Milestone
 award, resettlement benefits, sick leave etc. which are defined benefit
 obligations are provided for on the basis of an actuarial valuation in
 accordance with AS 15 - Employee Benefits.
 c) In respect of overseas branches and offices the benefits in respect
 of employees other than those on deputation are valued and accounted
 for as per laws prevailing in the respective territories.
 a) Basic and Diluted earnings per equity share are reported in
 accordance with AS 20 Earnings per share. Basic earnings per equity
 share are computed by dividing net profit after tax by the weighted
 average number of equity shares outstanding during the period.
 b) Diluted earnings per equity share are computed using the weighted
 average number of equity shares and dilutive potential equity shares
 outstanding at the end of the period.
 a) Income Tax comprises the current tax provision and net change in
 deferred tax assets or liabilities during the year, in accordance with
 AS 22 Accounting for Taxes on Income. Current taxes are determined in
 accordance with the provisions of Accounting Standard 22 and tax laws
 prevailing in India after taking into account taxes of foreign offices,
 which are based on the tax laws of respective jurisdiction.  Deferred
 tax adjustments comprise of changes in the deferred tax assets or
 liabilities during the period.
 b) Deferred Tax is recognised subject to consideration of prudence in
 respect of items of income and expenses those arise at one point of
 time and are capable of reversal in one or more subsequent years.
 c) Deferred tax assets and liabilities are measured using the tax rates
 and tax laws that have been enacted or substantively enacted by the
 balance sheet date.
 d) Deferred tax assets are recognised and reassessed at each reporting
 date, based upon management''s judgement as to whether realisation is
 considered reasonably certain. Deferred tax assets are recognised on
 carry forward of unabsorbed depreciation and tax losses, only if there
 is virtual certainty that such deferred tax assets can be realised
 against future profits.
 Impairment losses, if any on Fixed Assets (including revalued assets)
 are recognised and charged to Profit and Loss account in accordance
 with AS 28 Impairment of Assets. However, an impairment loss on a
 revalued asset is recognised directly against any revaluation surplus
 for the asset to the extent that the impairment loss does not exceed
 the amount held in the revaluation surplus for that same asset.
 As per AS 29 Provisions, Contingent Liabilities and Contingent
 Assets, the Bank recognises provisions only when it has a present
 obligation as a result of a past event and it is probable that an
 outflow of resources embodying economic benefits will be required to
 settle the obligation and when a reliable estimate of the amount of the
 obligation can be made.
 Contingent liability is disclosed unless the possibility of an outflow
 of resources embodying economic benefit is remote.
 Contingent Assets are not recognised in the financial statements since
 this may result in the recognition of income that may never be
 Share issue expenses are charged to the Profit and Loss Account in the
 year of issue of shares.
Source :
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