Development Credit Bank

1.  SHARE CAPITAL & RESERVES
 
 1.1 Investment Reserve Account:
 
 As per RBI Guidelines, excess provision of Rs. 0.87 crores on account
 of depreciation in the Available for Sale and Held For Trading
 category has been credited to the Profit & Loss Account and an amount
 of Rs. 0.87 crores has been appropriated to Investment Reserve Account.
 
 1.2 Disclosures on risk exposure in derivatives: a) Qualitative
 Disclosures:
 
 Management of Risk in Derivatives Trading:
 
 The Banks market risk unit plays a key role in sanctioning of the
 limits, and laying down of the risk assessment and monitoring methods.
 The policies of the Bank include setting limits upon the notional
 principle value of product specific gaps, maximum tenor, overall
 outstanding and also the setting-up of counter party-wise, tenor-wise
 limits.
 
 All limits are monitored on a daily basis by the Banks Treasury and
 Settlements Department. Exposure reports are submitted to the Treasurer
 as well as the Head-Market Risk and any limit excesses are brought to
 the notice of the management immediately for further action.
 
 Policies for Hedging Risk:
 
 All transactions undertaken by the Bank for trading purposes are
 classified under the Trading Book. All other transactions are
 classified as a part of the Banking Book. The Banking Book includes
 transactions concluded for the purpose of providing structures to
 customers on a back to back basis. It also consists of transactions in
 the nature of hedges based on identification of supporting trades, with
 appropriate linkages done for matching amounts and tenor within the
 approved tolerance limits.
 
 2.  COMPLIANCE WITH ACCOUNTING STANDARDS, READ WITH RBI GUIDELINES:
 
 2.1 Segment Reporting:
 
 Part A: Business Segments
 
 Pursuant to the Guidelines issued by the Reserve Bank of India on
 Accounting Standard 17 (Segment Reporting) - Enhancement of disclosures
 dated April 18, 2007, effective March 31, 2008, the additional segments
 of Corporate Banking and Retail Banking have been included for the
 period from March 31, 2008. The figures for year ended March 31,2008
 have not been reclassified and therefore, are not comparable.
 
 The Bank has revised its transfer pricing mechanism in the current
 year. In the prior periods segment revenue reflected the net transfer
 pricing impact, and hence are not comparable.
 
 Treasury operations includes all financial markets activities
 undertaken on behalf of the Banks customers, proprietary trading,
 maintenance of reserve requirements and resource mobilisation from
 other banks and financial institutions.
 
 Corporate Banking includes lending, deposit taking and other services
 offered to corporate customers.
 
 Retail Banking includes lending, deposit taking and other services
 offered to retail customers.
 
 Other Banking Operations includes para banking activities like third
 party product distribution, merchant banking etc.
 
 2.2 Related Party Transactions:
 
 i.  Related Party Transactions in terms of AS-18 on Related Party
 Disclosures issued by the ICAI are disclosed below: List of Related
 Parties and details of transactions entered into with them during the
 year: Associate
 
 Platinum Jubilee Investments Ltd.
 
 As per para 4.5 of the Master circular on Disclosure in Financial
 Statements - Notes to Accounts dated 1st July, 2008, where there is
 only one entity in any
 
 category of related party, banks need not disclose any details
 pertaining to that related party other than the relationship with that
 related party.
 
 Since Platinum Jubilee Investments Ltd. is the only entity in the
 category of associates, details pertaining to the same are not
 disclosed.
 
 ii.  Details of transactions entered into with the Key Management
 Personnel of the Bank are as under: Mr. Gautam Vir - Managing Director
 (till January 15, 2009) Managerial Remuneration - Rs. 1.03 crores
 (previous year Rs. 1.34 crores).
 
 2.3 Deferred Tax:
 
 i) In accordance with AS-22 on Accounting for Taxes on Income issued
 by the Institute of Chartered Accountants of India, the Bank has
 recognised Deferred Tax Assets on such timing differences where there
 is a virtual certainty based on contracts and arrangements in place
 that such deferred tax assets can be reversed. Deferred Tax Assets have
 been recognised on unabsorbed depreciation to the extent of deferred
 tax liability arising on account of timing difference arising between
 book depreciation and tax depreciation.
 
 3. STAFF RETIREMENT BENEFITS:
 
 The contribution to employees Providend Fund amounted to Rs. 4.37
 crores for the year ended March 31, 2009 (Previous year Rs. 3.25
 crores).
 
 The Company has a gratuity trust approved by Income Tax namely
 Development Credit Bank Ltd. Staff Gratuity Fund. Every employee who
 has completed 5 years or more of service gets gratuity on departure at
 half months last drawn salary for each completed year of service,
 subject to a cap of Rs. 3.50 lakhs for employees joined after
 01.04.2006.
 
 4. DETAILS OF SINGLE BORROWER LIMIT (SBL), GROUP BORROWER LIMIT (GBL)
 EXCEEDED BY THE BANK
 
 During the year ended March 31,2009, the Bank had no single borrower
 and group borrower, which exceeded the prudential exposure limits
 prescribed by RBI.
 
 4.1 Disclosure of Penalties imposed by RBI
 
 No penalties have been imposed by the RBI on the Bank.
 
 4.2 Employees Stock Options
 
 The Shareholders of the Bank had approved an ESOP plan Phase I in
 November 2005, enabling the Board and/or the Nomination Committee to
 grant such number of equity shares and/or equity linked instruments
 including options of the Bank not exceeding 4% of the Issued Capital or
 60,00,000 Equity Shares of the Bank. The Shareholders, at the Annual
 General Meeting held in September 2006, had approved an additional 3%
 of the Issued Capital, aggregating the total Equity Share Capital
 reserved for all ESOPs to 7% ofthe Issued Capital from timeto time. As
 the shares of the Bankwere subsequently listed, confirmation of
 Shareholders was obtained at the Extra-Ordinary General Meeting held on
 15th December, 2006, in line with the guidelines of the Securities &
 Exchange Board of India. Pursuant thereto, during the year the
 Nomination Committee of the Bank granted 3,45,000 options under Sub
 Plan 1 and 5,02,500 options under Sub Plan 2 at a price of Rs. 115.25
 per option on April 1, 2008,2,02,500 options under Sub Plan 2 at a
 price of Rs. 115.25 per option on May 6,2008,4,00,000 options under Sub
 Plan 1 and 2,83,550 options under Sub Plan 2 at a price of Rs. 48.80
 per option on July 16,2008,3,25,000 options under Sub Plan 1 and
 1,52,050 options under Sub Plan 2 at a price of Rs. 23.65 per option on
 October 31,2008 and 94,050 options under Sub Plan 2 at a price of Rs.
 18.80 per option on January 29,2009.
 
 Under the stock option scheme, options vest in a graded manner over a 5
 year period, with 40% at the end of the 3rd year from the date of
 grant, 30% at the end of the 4th year from the date of the grant and
 30% at the end of the 5th year from the date of the grant for Sub Plan
 1 & 30% at the end of the 2nd year from the date of grant, 30% at the
 end of the 3rd year from the date of the grant, 20% at the end of the
 4th year from the date of the grant and 20% at the end of the 5th year
 from the date of the grant for Sub Plan 2.
 
 5.  FIXED ASSETS
 
 The Fixed Assets (premises) has been revalued by an external valuer on
 31st March, 2009 adopting Fair Market Value basis. The revalued amount
 of Rs. 83.42 crores has been substituted for historical costs of Rs.
 31.41 crores.
 
 6.  DRAW DOWN FROM RESERVES
 
 The Bank has not undertaken any draw down from reserves during the
 current year.
 
 7.  Net overnight open position outstanding as on March 31,2009 is Rs.
 1.20 crores (Previous year Rs. 4.69 crores).
 
 8.  Previous years figures have been regrouped/reclassified, wherever
 considered necessary, in order to make them comparable with figures for
 the current year.
 
 9.  The figures of previous year were audited by a firm of Chartered
 Accountants other than S. R. Batliboi & Co. These are the Notes
 appended to and forming part of the Financial Statements for the year
 ended March 31,2009.