Accounting Convention
The accounts are prepared under the historical cost convention and
conform to the statutory provisions and prevailing practices, except as
 Foreign Currency Translation / Conversion of Foreign Currencies
2.1. In respect of Foreign Branches, Assets and Liabilities (both
monetary and non-monetary as well as contingent liabilities) are
translated at the closing spot rate of exchange announced by Foreign
Exchange Dealers'' Association of India (FEDAI) and Income and
Expenditure items of the foreign branches are translated at the
quarterly average closing rate published by FEDAI in accordance with
Accounting Standard (AS) 11 issued by the Institute of Chartered
Accountants of India (ICAI) and as per the guidelines of Reserve Bank of
India (RBI). The resultant exchange gain/loss is credited/debited to
Foreign Currency Translation Reserve.
2.2. In respect of Domestic Branches, Assets and Liabilities in foreign
currency, Forward Exchange Contracts, Guarantees, Acceptances,
Endorsements and Obligations are evaluated at the closing spot rate /
forward rate for the residual maturity of the contract in accordance with AS
11 issued by ICAI and as per the guide lines of RBI.
Income and Expenditure items are accounted for at the exchange rates
prevailing on the date of transactions.
The gain or loss on such evaluation of outstanding Forward Exchange
Contracts is taken to Profit & Loss Account.
3.1. Classification of investments is made as per the guidelines of the
RBI. The entire investment portfolio of the bank is classified under
three categories viz. ''Held to Maturity'', ''Available for sale''
and ''Held for Trading'', which is decided at the time of acquisition
of securities. Transfer of scrips, if any, from one category to another is
done at the lowest of acquisition cost / book value / market value on
the date of transfer and the depreciation, if any, on such transfer is
fully provided for. Investments are disclosed in the Balance Sheet
under six classifications viz: (a) Government securities (b) Other
approved securities (c) Shares (d) Debentures & Bonds (e) Subsidiaries,
Joint Ventures & Associates and (f) Others.
3.2. The valuation of Investments is done in accordance with the
guidelines issued by the RBI as under:
a) HELDTO MATURITY
Investments under Held to Maturity category are carried at acquisition
cost, net of amortisation, if any. The excess of acquisition cost, if
any, over the face value is amortized over the remaining period of
Investments in Subsidiaries, Joint Ventures and Associates are valued
at carrying cost. Any diminution in the value other than temporary in
nature is fully provided for.
Investment in sponsored Regional Rural Banks (RRB) and other Trustee
Shares are carried at cost.
Profit on sale of Investments in this category is first taken to the
Profit and Loss Account and thereafter appropriated to the Capital
Reserve Account net of taxes and Statutory Reserve. No amortisation is
effected for securities sold during the year. Loss on sale is
recognized in the Profit and Loss Account.
b) AVAILABLE FOR SALE
The individual securities under Available for Sale'' category are
marked to market.
Central Government Securities are valued at market prices as per prices
declared by Fixed Income Money Market and Derivatives Association of
State Government securities and other approved securities are valued by
applying the YTM method by marking it up by 25 basis points above the
yields of Central Government securities of equivalent maturity put out
Non SLR securities such as Debentures / Bonds (other than Debentures /
Bonds which are in the nature of advance) are valued at market prices,
if available, and if not, are valued applying YTM method by marking it
up by additional basis points based on credit rating above the yields
of Central Government Securities of equivalent maturity as put out by
FIMMDA and the methodology suggested by FIMMDA.
Preference Shares are valued at lower of YTM rates / redemption values.
Quoted Shares are valued at market prices.
Unquoted Shares are valued at break up value ascertained from the
latest Balance Sheet not earlier than one year or otherwise at Re 1 per
Treasury Bills and Commercial Papers are valued at carrying cost.
Units of Mutual Funds are valued at market rate or repurchase price or
net asset value in that order depending on their availability.
Securities are valued scrip wise and depreciation /appreciation
Under each sub category is aggregated.
Based on the above valuation, net appreciation if any, in each sub
category is ignored while the net depreciation is fully provided for.
The individual securities under Held for Trading category are valued
periodically as per RBI guidelines, at market prices as available from
the trades/quotes or as per prices declared by FIMMDA. In respect of
each classification under this category, net depreciation is provided
for and net appreciation is ignored.
3.3 Cost such as brokerage, commission etc., relating to securities at
the time of purchase are charged to Profit
& Loss Account.
3.4. Broken period interest on debt instruments up to the
Date of acquisition/disposal is treated as revenue.
3.5. Security Receipts issued by Securitisation/Reconstruction Company
(SC/RC) in respect of financial assets sold by the Bank to the SC/RC are
valued at the lower of the redemption value of the Security Receipt and
the Net Book Value of the financial asset. The Investment is carried in
the books at the price determined as above and the sale/realisation, if
any, is reduced from investment and the net book value is shown.
The valuation, classification and other norms applicable to Investment
in Non-SLR securities prescribed by RBI is applied to Bank''s
investment in Security Receipts issued by SC/RC.
3.6. Non-Performing Investments (NPI) are identified as stated
below, as per the guide lines issued by RBI:
[a] Securities/Preference Shares where interest / fixed dividend
/instalment (including maturity proceeds) is due and remains unpaid for
more than 90 days.
[b] Equity Shares valued at Re.l per company, where the latest Balance
Sheet is not available or the Net worth of the Company is negative.
[c] If any credit facility availed by the issuer from the Bank is a
non-performing advance, investment in any of the securities issued
by the same issuer is also treated as NPI.
3.7 Accounting for Repo/Reverse Repo and Liquidity Adjustment Facility
[a] The securities purchased/sold with an agreement to repurchase on
the agreed terms under Repo / Reverse Repo (other than LAF) are
accounted as borrowing/lending.
[b] The securities purchased/sold under LAF with RBI are
debited/credited to Investment account and reversed on maturity.
 Derivative contracts
The Bank deals in Interest Rate Swaps and Currency Derivatives. The
Interest Rate Derivatives dealt by the Bank are Rupee Interest Rate
Swaps, Cross Currency Interest Rate Swaps and Forward Rate Agreements.
Currency Derivatives dealt by the Bank are Options and Currency Swaps.
Based on RBI guidelines
a. Derivatives used for trading are marked to market and net
depreciation is recognized while net appreciation is ignored.
b. Derivatives used for hedging are
i. Marked to market in case where the underlying Assets/Liabilities
are marked to market.
ii. Income / Expenditure is accounted on accrual basis for Hedging
5.1 Advances are classified as performing and non- performing assets
and provisions are made in accordance with the prudential norms
prescribed by RBI.
5.2 Advances are stated net of write off, provision for non-performing
assets, claims received from credit guarantee institutions and
5.3 In case of financial assets sold to the SC / RC, if the sale is at
a price below the Net Book Value (NBV), the shortfall is debited to the
Profit & Loss Account. If the sale is for a value higher than the NBV,
the excess provision held in the account is not reversed but held till
redemption of the Security Receipt, wherever applicable.
 Fixed Assets
6.1. The premises of the Bank include freehold and leasehold
properties. Land and Buildings are capitalised based on conveyance /
letters of allotment / agreement to lease, deposit made on long term
leasehold properties and / or physical possession of the property.
6.2. Premises and other Fixed Assets are stated at historical cost
except wherever revalued. The appreciation on revaluation, if any, is
credited to the ''Revaluation Reserve'' Account. Depreciation /
Amortization attributable to the enhanced value is transferred from
Revaluation Reserve to the credit of Depreciation in the Profit and Loss
7.1. Fixed Assets excluding Computers are depreciated under Written
Down Value Method at the rates determined by the management on the
basis of estimated useful life of the respective assets. As per the
guidelines of RBI, depreciation on Computers is charged at33.33%on
7.2. Premium paid on leasehold properties is charged off over the lease
7.3. Depreciation on Assets given on Lease is charged on Written Down
Value Method as per Schedule XIV to the Companies Act,
7.4. Depreciation on additions to fixed/leased assets is charged for
the full year irrespective of the date of acquisition. No depreciation
is provided for in the year of sale/disposal.
 Impairment of Assets
Impairment losses on Fixed Assets, if any, are recognized in Profits
Loss Account in accordance with AS 28 issued by ICAI.
 Revenue Recognition
9.1. Income and expenditure are generally accounted on accrual basis.
9.2. In the case of Non-Performing Assets including Investments, income
is recognised to the extent of realisation, in accordance with the
prudential norms prescribed by RBI. In respect of Loans Past Due
accounts, recoveries are appropriated first towards principal.
9.3. Commission, Exchange, Brokerage, Dividends and Locker Rent are
accounted for as income on receipt basis.
9.4. Interest income on tax refund is accounted based on the assessment
 Employee Benefits
Provision for Pension, Gratuity and Privilege Leave is made based
On the actuarial valuation at the year-end as per the AS -15(Revised)
Issued by ICAI. Net actuarial gains/losses are recognized in Profit & Loss
Provision for Income Tax is made after due consideration of the
judicial pronouncements and legal opinion. Disputed taxes, not provided
for, are included under Contingent Liabilities.
Tax expenses for the year comprise of Current Tax and Deferred Tax.
Deferred Tax recognizes, subject to the consideration of prudence in
respect of Deferred Tax Assets, timing differences being the difference
between taxable income and accounting income that originate in one
period and are capable of reversal in one or more subsequent periods.
 Net Profit
12.1 Provisions, Contingent Liabilities and Contingent Assets
The Bank recognizes provisions only when it has a present obligation as
a result of a past event and it is probable that an outflow of
resources will be required to settle the obligation and when a
reasonable estimate of the amount of the obligation can be made.
Contingent Assets are not recognized since this may result in the
recognition of Income that may never be realized.
12.2 Net Profit is arrived at after accounting for the following
Provisions and Contingencies:
- Depreciation on Investments
- Provision for Income Tax and Wealth Tax
- Provision for loan losses
- Write off of certain Non-Performing Advances / Investments
- Provision for Standard Assets
- Other usual and necessary provisions
- Transfer to contingencies