Bank Of India

1.  During the year, the Bank annulled the forfeiture in respect of 500
 (previous year 400) equity shares of face value of Rs. 10 each.
 Consequently, an amount of Rs. 5000 (previous year Rs. 4000) has been
 transferred from Forfeited Shares Account to paid up capital.
 
 2.  Balancing of Subsidiary Ledger Accounts and confirmation /
 reconciliation of balances with foreign branches and NOSTRO Accounts,
 and adjustment of entries in Suspense, Drafts Payable, Clearing
 Difference, etc. is in progress on an on-going basis. Pending final
 clearance / adjustment of the above, the overall impact, if any, on the
 accounts, in the opinion of the management, is not likely to be
 significant.
 
 Initial matching of debit & credit outstanding entries in various heads
 of accounts included in Inter office Adjustments has been completed up
 to 15.03.2009 for the purpose of reconciliation, which, is in progress.
 Pending final clearance / adjustment of the above, the overall impact,
 if any, on the accounts, in the opinion of the management, is not
 likely to be significant.
 
 3.  Out of 250 properties owned in India, the bank had, during last
 year revalued 98 selected high value properties (with original cost of
 Rs. 353.36 crore) constituting 78% of the total value of the properties
 owned in India. The revaluation had been done on the basis of the value
 determined by the approved valuer and the resultant appreciation of Rs.
 1668.69 crore was credited to revaluation reserve.
 
 (a) Risk Exposure in Derivatives
 
 (i) Qualitative Disclosure
 
 The Bank enters into derivative contracts such as interest rate swaps,
 currency swaps and currency options to hedge on balance sheet assets
 and liabilities, to meet client requirements or for trading purpose.
 These products are used for hedging risk, reducing cost and increasing
 the yield. In such transactions the types of risks to which the bank is
 exposed to, are credit risk, market risk, operational risk etc.
 
 Risk management is an integral part of bank’s business management. Bank
 has risk management policies designed to identify and analyse risks, to
 set appropriate risk limits and to monitor these risks and limits on an
 ongoing basis by means of reliable and up to date management
 information systems. The risk management policies and major control
 limits are approved by the Board of Directors and they are monitored
 and reviewed regularly. The organization of the Bank is conducive to
 managing risks. There is sufficient awareness of the risks and the size
 of exposure of the trading activities in derivative operations.
 
 The Bank has a Risk Management Committee of Directors presided over by
 the Chairman and Managing Director.
 
 Hedging derivatives are accounted for on an accrual basis.  Trading
 derivative positions are marked to market (MTM) and the resulting
 losses, if any, are recognised in the profit and loss account. Profit,
 if any, is not recognised. Income and expenses relating to the
 derivative contracts are recognised on the settlement date.
 
 Bank has a proper system of submitting periodical reports to Senior and
 Top Management and Board as well as regulatory authorities as required
 by RBI and/or as per operational requirements. Bank has clearly spelt
 derivative guidelines on various aspects approved by the Board of
 Directors. The derivative transactions are subject to concurrent,
 internal, statutory and regulatory audits.
 
 The counter parties to the transactions are banks and premier
 corporates. The deals are done under approved exposure limits.  The
 Bank has adopted the Current Exposure method prescribed by Reserve Bank
 of India for measuring Credit Exposures arising on account of the
 interest rate and foreign exchange derivative transactions. Current
 Exposure Method is the sum of current credit exposure and potential
 future exposure of these contracts.
 
 The current credit exposure is the sum of positive mark to market value
 of these contracts i.e. when the bank has to receive money from the
 counter party.
 
 Potential future credit exposure is determined by multiplying the
 notional principal amount of these contracts irrespective of whether
 the contract has zero, positive or negative mark to market value by the
 relevant add on factors as under according to the nature and residual
 maturity of the instrument.
 
 (b) Disclosures of Penalties imposed by RBI: During the year, no
 penalty has been imposed by the RBI on the bank.
 
 (c) Provision for wage revision:
 
 Pending outcome of negotiations on wage revision between Indian Bank
 Association on behalf of member banks and union of workmen/ officers,
 an estimated provision of Rs. 186.85 crore (previous year Rs.120.75
 Crore) has been made for the year.
 
 (d) Draw down from reserves:
 
 During the year, the bank has drawn down an amount of Rs. 0.93 crore
 from special reserve currency swaps in terms of RBI guidelines
 
 (aa) Agriculture Debt Waiver & Debt Relief scheme
 
 In terms of Reserve Bank of India guidelines, the bank has implemented
 the Agriculture Debt Waiver & Debt Relief scheme 2008 and an amount of
 Rs.646.72 crore has been waived for which, preliminary claim was
 preferred with Reserve Bank of India. An amount of Rs. 265.16 crore
 i.e. 41% of claim amount has been reimbursed by the RBI on 24.12.2008.
 The claims under waiver has since been verified and certified by
 Statutory Central Auditors and necessary adjustments have been made in
 the final claim to be submitted to RBI. Further, an amount of Rs.
 222.62 crore is eligible for relief under the said scheme and claims in
 this regard will be submitted by September 30, 2009.
 
 (ab)Adoption of International Financial Reporting standards (IFRS):
 
 The Institute of Chartered Accountants of India has expressed that the
 IFRS may be adopted in India by all Listed and Large entities w.e.f.
 01.04.2011. Banks of India has formed project steering committee headed
 by Bank’s Executive Directors to ensure smooth transition to IFRS. We
 shall shortly be commencing process for appointment of consultants and
 auditors for IFRS project.
 
 (ac) Income Tax:
 
 i) Claims against the bank not acknowledged as debt under contingent
 liabilities (Schedule 12) include disputed income tax/ interest tax
 liabilities of Rs. 245.86 crore which has been paid/ adjusted and
 included under Other Assets (schedule 11).  In respect of these claims,
 provision for tax is not considered necessary based on various judicial
 decisions for past assessments on such disputes. Management does not
 envisage any liability in respect of such disputed issues.
 
 ii) Provision for income tax for the year is arrived at after due
 consideration of the various judicial decisions on certain disputed
 issues.
 
 (ad) Letter of comfort issued by Bank
 
 During the year ended 31.03.2009, 12 letters of comforts have been
 issued by the bank amounting to Rs. 3499.59 crore. The letters of
 comfort outstanding as on 31.03.2009 are 12 amounting to Rs.  3499.59
 crore.
 
 (e) Accounting for Taxes on Income (AS 22):
 
 (i) Deferred tax assets are recognised for future tax consequences of
 temporary differences arising between the carrying values of assets and
 liabilities and their respective tax bases and operating carry forward
 losses. Deferred tax assets are recognised only after giving due
 consideration to prudence.  Deferred tax assets and liabilities are
 measured using tax rates and tax laws that have been enacted or
 substantively enacted by the Balance Sheet date. The impact on deferred
 tax assets and liabilities on account of a change in the tax rates is
 also recognised in the income statement.
 
 ii) During the year, an amount of Rs. 361.52 crore (net) has been
 debited [Previous year Rs. 8.46 crore (net) credited] to the Profit and
 Loss account by way of adjustment to Provision for deferred tax.
 
 B.  Contingent Liabilities
 
 Such Liabilities as mentioned at Sl. No. (I to VI) of Schedule 12 of
 Balance Sheet are dependent upon, the outcome of court , arbitration,
 out of court settlement, disposal of appeals, the amount being called
 up, terms of contractual obligations, devolvement and raising of demand
 by concerned parties respectively. No reimbursement is expected in such
 cases.