Central Bank of India

1. Capital:
 
 As at 31s1 March 2008, the Authorised Capital of the bank was divided
 into 70 Crore Equity Shares of Rs.10 each and Rs 80 crore Perpetual
 Non-Cumulative Preference Shares of Rs.10 each totaling to Rs.1500
 Crores. The Board of Directors by a resolution has restructured the
 Authorised Capital of Rs.1 500 Crores to be issued against any form of
 capital. This restructuring is subject to the approval of the
 shareholders.
 
 The paid-up Capita! of the Bank has been increased by issue of
 Perpetual Non-cumulative preference shares (PNCPS) to the tune of
 Rs.117 crore to Government of India. Bank has also increased its Tier I
 Capital by way of issue of Innovative Perpetual Debts instrument (IPDI)
 to the tune of Rs.583 crore to Government of India.
 
 2.  Balancing of Books/ Reconciliation:
 
 Reconciliation of Inter Branch Accounts is in progress Balancing of
 Subsidiary Ledgers and reconciliation with General Ledger is also in
 progress at some branches. Pending final clearance of the above, the
 overall impact, if any, on the accounts, in the opinion of the
 management will not be significant.
 
 The Bark has implemented CBS system. In some branches the system yet to
 stabilise and certain inherent bugs noticed are being sorted out by the
 service provider and the Banks IT. Department. The management is of
 the opinion that this will not have any material impact on the
 Financial Statements.
 
 The Bank is the pro-ess to implementing sound internal control
 procedures for timely review of the database of the CBS Branches and
 other MIS Reports, generated through the system.
 
 System Audit Report obtained from an independent consultant indicates
 certain areas for remedial actions for which necessary measures are
 being taken up.
 
 3.  Income Tax/ Deferred Tax
 
 3.1 Provision for Income Tax for the year is arrived at after due
 consideration of relevant statutory provisions and judicial decisions
 on disputed issues.
 
 3.2 Other Assets [Schedule 11 (ii)] includes Rs. 1356.17 crore
 (previous yea, Rs 944.43 core) towards disputed Income Tax paid by the
 Bank/ adjusted by the authorities. Provision for taxation is not
 considered necessary by the Bank in respect of above disputed demands
 based on various judicial decisions/ counsels opinion on such disputed
 issues
 
 3.3 Out of Rs  366.17 crore of tax paid under dispute disputes
 relating various Assessment Years involving tax element of Rs.  2.93
 crore have been decided by the Appellate authorities in favour of the
 Bank. The appeal effect for the same is pending.
 
 4.  Share Issue Expenses:
 
 Unamortized amount of Rs 17.52 crore towards share issue expenses are
 included in Other Assets
 
 5.  Premises:
 
 5.1 The premises of the Bank were revalued to reflect the market value
 as on 31.3.2008. The appreciation amounting to Rs 1565.97 crore have
 been credited to Revaluation Reserve Account.
 
 5.2 Premises owned by the bank include properties costing Rs.19.40
 crore revalued at Rs 394 43 crore for which registration formalities
 are still in progress.
 
 6.2 in terms of the Guidelines of Reserve Bank of India, the profit of
 Rs. 1.40.72 crore (net of taxes and statutory reserves) on sale/
 redemption of investments in the Held to Maturity category has been
 appropriated to the Investment Reserve.
 
 7.  Advances / Provisions:
 
 7.1 Advances to units which have become sick including these under
 nursing/ rehabilitation/ restructuring proyramme and other advances
 classified as doubtful/ loss assets have been considered secured/
 recoverable to the extent of estimated realizable value of securities
 carrying first or second charge based on valuers assessment of
 properties/ assets mortgaged to the Bank and other data available with
 the Bank.
 
 7.2 The Floating Provision has been treated as Tier Capital in
 conformity with the RBI guidelines and is included under the Head
 Other Liabilities and Provisions in Schedule 5 of the Balance Sheet.
 
 8.  Agricultural Debt Waiver and Debt Relief Scheme, 2008
 
 8.1 Government of India has notified Agricultural Debt Waiver & Debt
 Relief Scheme 2008 for Debt Waiver marginal and small farmers and
 Relief to other farmers, which has been implemented by the bank.
 Preliminary claims have been preferred with RBI for Agricultural Debt
 Waiver amounting to Rs.974.62 Crore. The Bank has received Rs.399.59
 crore being 41 % of the Claim amount. The claim is subject to
 verification by Statutory Central Auditors.
 
 8.2 In accordance with the guidelines issued by Reserve Bank of India,
 as per their circular dated September 22, 2008, an amount of Rs. 72.23
 crore as compiled and certified by the management representing
 uncharged/ unapplied interest, penal interest etc. up to September 30,
 2008 applied during the period of audit has been drawn from the
 Floating Provision and has been accounted as Interest Income.
 
 8.3 In terms of Government of India, Ministry of Finance, Department of
 Finance Services Notification dated October 16, 2008 and Reserve Bank
 of India circular dated November 11, 2008, interest amounting to Rs.
 15.34 crore on the amount outstanding under Agricultural Debt Waiver
 Scheme, 2008 for the period from November 2008 to March 2009 has been
 accounted in the books as Interest Income.
 
 9.  Subordinated Debt:
 
 During the year, Bank has raised Subordinated Debt to the tune of
 Rs.855.00 crore (previous year Rs.389.10 crore) by issue of Unsecured
 Redeemable Bonds under Tier II Capital and the amount is shown in
 Other Liabilities and Provisions in Schedule 5 of the Balance Sheet.
 
 Out of Rs.855.00 crore raised as Subordinated Debt during the year,
 Rs.585.00 crore is by way of Upper Tier II.
 
 Disclosures on Risk Exposure in Derivatives
 
 iii) Qualitative Disclosures
 
 - The organisation structure consists of Funds and Investment Committee
 at the corporate level which is headed by Executive Director which
 reports to Chairman & Managing Director and ultimately to the Board.
 
 - Treasury Risk Management comprehensive policy on the use of
 derivative instruments to hedge risks has been approved by the Board of
 Directors wherein transactions in Interest Rate Swap [IRS] and Forward
 Rate Agreement [FRA] are permitted.  The policy comprehensively
 provides for an efficient risk management structure and reporting
 system.
 
 - No derivative transaction is done during the year.
 
 - The Interest Rate Swap transaction by the Bank is solely done for
 hedging purpose. IRS is undertaken on the actual interest bearing
 underlying liability. The notional principal amount and maturity of the
 hedge does not exceed the value and matu- rity of underlying liability.
 
 - The risk is measured in the interest rate derivative transactions
 depending on the movement of benchmark interest rates for the remaining
 life of the interest swap contract. Risk is monitored based on the mark
 to market position of the interest rate derivative transactions.
 
 - The IRS transactions are accounted for on accrual basis. The
 measurement of credit exposure is done as per Current Exposure method.
 
 10. Disclosure of Penalties imposed by RBI
 
 RBI has not imposed any penalty on the Bank under Section 46(4) of the
 Banking Regulation Act, 1949.
 
 11.  As per the information compiled by the Management, the Vendors,
 whose services are utilized and from whom purchases were made by the
 Bank, are not registered under Micro, Small and Medium Enterprises
 Development Act, 2006. This is relied upon by the Auditors.
 
 12.  Previous year figures have been re-grouped/ re-classified wherever
 considered necessary to conform to current years classification.