1. Basis of Preparation
The accompanying financial statements have been prepared on historical
basis and conform, in all material aspects, to Generally Accepted
Accounting Principles (GAAP) in India which encompasses applicable
statutory provisions, regulatory norms prescribed by Reserve Bank of
India (RBI), Accounting Standards (AS) and prevailing practices in
2. Use of Estimates
The preparation of financial statements requires the management to
make estimates and assumptions that affect the reported amount of
assets, liabilities, expenses, income and disclosure of contingent
liabilities as at the date of the financial statements. Management
believes that these estimates and assumptions are reasonable and
prudent. However, actual results could differ from estimates. Any
revision to accounting estimates is recognized prospectively in current
and future periods.
3. Revenue Recognition
Revenue is recognized to the extent it is probable that the economic
benefits will fl ow to the Bank and the revenue can be reliably
i. Interest income and lease rentals are accrued except in the case of
non performing assets where it is recognised upon realisation as per
the prudential norms of the RBI.
ii. Commissions on LC/ guarantee are reckoned as accrued, upfront in
cases where the commission does not exceed Rs. 1 lakh and, in other
cases, accrued over the period of LC/ Guarantees.
iii. Fee based income are accrued on certainty of receipt and is based
on milestones achieved as per terms of agreement with the client.
iv. Income on discounted instruments is recognised over the tenure of
the instrument on a constant yield basis.
v. Dividend is accounted on an accrual basis when the right to receive
the same is established.
4. Advances and Provisions:
i. Advances are classified into Standard, Sub-standard, Doubtful and
Loss assets and provisions are made in accordance with the prudential
norms prescribed by RBI. Advances are stated net of provisions towards
non- performing advances.
ii. Advances are classified as ''Secured by Tangible Assets'' when
security of at least 10% of the advance has been stipulated/created
against tangible security including book debts. Security in the nature
of escrow, guarantee, comfort letter, charge on brand, license, patent,
copyright etc are not considered as ''Tangible Assets''.
In terms of extant guidelines of the RBI, the entire investment
portfolio is categorized as
i. Held To Maturity,
ii. Available For Sale and
iii. Held For Trading.
Investments under each category are further classifi ed as
i. Government Securities
ii. Other Approved Securities
iv. Debentures and Bonds
v. Subsidiaries/ Joint Ventures
vi. Others (Commercial Paper, Mutual Fund Units, etc.).
Basis of Classification:
a) Investments that the Bank intends to hold till maturity are classifi
ed as ''Held to Maturity''.
b) Investments that are held principally for resale within 90 days from
the date of purchase are classified as ''Held For Trading''.
c) Investments, which are not classified in the above two categories,
are classified as ''Available For Sale''.
d) An investment is classified as ''Held To Maturity'', ''Available For
Sale'' or ''Held For Trading'' at the time of its purchase and subsequent
shifting amongst categories and its valuation is done in conformity
with regulatory guidelines.
e) Investments in subsidiaries and joint ventures are classified as
''Held To Maturity''.
f) The debentures/ bonds/ preference shares deemed to be in the nature
of advance, are subject to the usual prudential norms of asset classifi
cation and provisioning that are applicable to advances.
In determining the acquisition cost of an investment:
a) Brokerage, commission, stamp duty and other taxes paid are included
in cost of acquisition in respect of acquisition of equity instruments
from the secondary market whereas in respect of other investments,
including treasury investments, such expenses are charged to revenue.
b) Upfront incentives received on subscription to securities are
recognized as income.
c) Broken period interest paid/ received is excluded from the
acquisition cost/ sale and treated as interest expense/ income.
d) Cost is determined on the weighted average cost method.
ii) Investments ''Held To Maturity'' are carried at acquisition cost
unless it is more than the face value, in which case the premium is
amortised on straight line basis over the remaining period of maturity.
Diminution, other than temporary, in the value of investments in
subsidiaries/ joint ventures under this category is provided for each
investment individually. Profits on sale of investments in this
category is first credited to Profit and Loss Account and thereafter
appropriated net of applicable taxes to the Capital Reserve Account at
the year/period end. Loss on sale is recognized in the Profit and Loss
iii) Investments ''Held For Trading'' and Available For Sale'' are marked
to market scrip-wise and the resultant net depreciation, if any, in
each category is recognized in the Profit and Loss account, while the
net appreciation, if any, is ignored.
a) Treasury Bills, commercial papers and certificates of deposit being
discounted instruments are valued at carrying cost,
b) In respect of traded/ quoted investments, the market price is taken
from the trades/ quotes available on the stock exchanges. Government
Securities are valued at market prices or prices declared by Primary
Dealers Association of India (PDAI) jointly with Fixed Income Money
Market and Derivative Association of India (FIMMDA)
c) The unquoted shares/ units are valued at break-up value/ repurchase
price or at Net Asset Value if the latest balance sheet is available,
else, at Rs. 1/- per company, as per relevant RBI guidelines. The
unquoted fixed income securities (other than government securities)
are valued on Yield to Maturity (YTM) basis with appropriate mark-up
over the YTM rates for Central Government securities of equivalent
maturity. Such mark- up and YTM rates applied are as per the relevant
rates published by FIMMDA.
d) Profit or Loss on sale of investments is credited/ debited to Profi
t and Loss Account (Sale of Investments).
iv) Investments are shown net of provisions.
v) Investments are shown net of securities given against borrowing and
include securities received against lending under Repo/ Reverse Repo
6. Derivative Transactions:
i. In Transactions designated as ''Hedge'':
a. Net interest payable/ receivable on derivative transactions is
accounted on accrual basis.
b. On premature termination of Hedge swaps, any profit/ losses are
recognised over the remaining contractual life of the swap or the
residual life of the asset/ liability whichever is lesser.
c. Re designation of hedge swaps by change of underlying liability is
accounted as the termination of one hedge and acquisition of another.
d. Hedge contracts are not marked to market unless the underlying is
also marked to market. In respect of hedge contracts that are marked to
market, changes in the market value are recognized in the profit and
ii. In Transactions designated as ''Trading'':
Outstanding derivative transactions designated as ''Trading'', which
includes interest rate swaps, cross currency swaps, cross currency
options and forward rate agreements, are measured at their fair value.
The resulting profits/ losses are included in the profit and loss
account. Premium on options is recorded as a balance sheet item and
transferred to Profit and Loss Account on maturity/ cancellation.
7. Fixed Assets and depreciation:
i. Fixed assets are carried at historical cost (inclusive of
installation cost) except wherever revalued. The appreciation on
revaluation, if any, is credited to the ''Revaluation Reserve'' Account.
In respect of revalued assets, the additional depreciation consequent
to revaluation is transferred from Revaluation Reserve to the Profit
and Loss account.
ii. Fixed assets individually costing less than Rs. 5000 are fully
depreciated in the year of addition.
iii. Depreciation is provided on Straight Line Method (SLM) from the
date of addition. The rates of depreciation prescribed in Schedule XIV
of the Companies Act, 1956 are considered as the minimum rates. If the
management''s estimate of the useful life of a fixed asset at the time
of acquisition of the asset or of the remaining useful life on a
subsequent review is shorter, depreciation is provided at a higher rate
based on management''s estimates of the useful life/ remaining useful
life. Pursuant to this policy, depreciation has been provided using the
iv. Depreciation on additions/ sale of fixed assets during the year is
provided for the actual period.
v. Leasehold land is amortised over the period of lease.
vi. Computer Software (non-integral) individually costing more than Rs.
2.50 lakh is capitalised and depreciated over its useful life, not
exceeding 5 years.
8. Assets given on lease
Assets given on finance lease by the Bank on or before March 31, 2001
are classified as Leased Assets under Fixed Assets. Depreciation
thereon is provided on SLM basis at the rates prescribed under Schedule
XIV of the Companies Act, 1956. The amount of Lease Equalisation
representing the difference between the annual lease charge and the
depreciation is adjusted in the Profit & Loss Account.
ii. Assets given under finance lease after March 31, 2001 are
accounted in accordance with the provisions of AS 19 and included under
9. Securitisation Transactions:
Securitisation of various loans result in sale of these assets to
Special Purpose Vehicles (''SPVs''), which, in turn issue securities to
investors. Financial assets are partially or wholly derecognised when
the control of the contractual rights in the securitised assets is
lost. The Bank accounts for any loss arising on sale immediately at the
time of sale and the profit/ premium arising on account of sale is
amortised over the life of the securities issued or to be issued by the
SPV to which the assets are sold.
Sale of financial assets to Securitization Companies/ Reconstruction
Sale of financial assets to Securitisation Companies (SCs)/
Reconstruction Companies (RCs) is reckoned at the lower of the
redemption value of Security Receipts (SRs)/ Pass Through Certificates
(PTCs) received and the net book value of the financial asset. Gains
arising on such sale or realisation are not recognised in the profit
and loss account but earmarked as provisions for meeting the losses/
shortfall arising on sale of other financial assets to SCs/ RCs or
sale/ realisation of other SRs/ PTCs. Losses arising on such sale or
realisation are first set off against balance of provisions, if any,
created out of earlier gains and residual amount of losses are charged
to profit and loss account. The PTCs are carried at the value as
determined above, till their sale or realisation. The SRs are carried,
in the aggregate, at book value or at latest NAV, whichever is lower.
11. Foreign Currency Transactions:
i. Foreign currency transactions, on initial recognition are recorded
at the exchange rate prevailing on the date of transaction. Monetary
foreign currency assets and liabilities are translated at the closing
rates prescribed by Foreign Exchange Dealers Association of India
(FEDAI) and the resultant gain or loss is recognised in the profit and
loss account. Exchange differences arising on the settlement of
monetary items are recognised as income or expense in the period in
which they arise.
Premium or discount arising at the inception of Forward Exchange
Contracts which are not intended for trading or speculation is
amortised as expense or income over the life of the contract. Premium
or discount on other Forward Exchange Contracts is not recognised.
iii. Outstanding Forward Exchange Contracts which are not intended for
trading or speculation are revalued at closing FEDAI rates. Other
outstanding Forward Exchange Contracts are revalued at rates of
exchange notified by FEDAI for specified maturities or at
interpolated rates for in-between maturities. The resultant profit/
losses are included in the profit and loss account.
iv. Profit/ losses arising on premature termination of Forward
Exchange Contracts, together with unamortized premium or discount, if
any, is recognised on the date of termination.
v. Contingent liability in respect of outstanding forward exchange
contracts is calculated at the contracted rates of exchange and in
respect of guarantees, acceptances, endorsements and other obligations
are calculated at the closing FEDAI rates.
vi. Operations of foreign branch are classified as ''Integral Foreign
Operations'' and are translated using the same principles and procedures
as those of the bank.
12. Employee Benefits
i. Post-employment benefit plans
a) Payments to defined contribution schemes are charged as expense as
they fall due.
b) For defined benefit schemes, the cost of providing benefits is
determined using the Projected Unit Credit Method, with actuarial
valuations being carried out at each Balance Sheet date. Actuarial
gains or losses are recognized in full in the profit and loss account
for the period in which they occur. Past Service cost is recognized
immediately to the extent that the benefits are already vested and
otherwise is amortised on a straight-line basis over the average period
until the benefits become vested.
ii. Short-term employee Benefit:
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognized
during the period when the employee renders the service.
iii. Transitional Liability
The Bank has adopted Accounting Standard-15 (Revised 2005), ''Employee
Benefits'' with effect from April 1, 2007. The transitional liability
arising on such adoption is amortised over a period of five years
commencing from the financial year 2007-08 in accordance with the
provisions of AS-15.
iv. The intrinsic value of options under Employee Stock Option Plan
(ESOP) is expensed on a straight-line basis over the vesting period of
13. Income Tax
Tax expense comprises of current and deferred tax.
Minimum Alternate Tax (MAT) credit is recognized as an asset only when
and to the extent there is convincing evidence that the Bank will pay
normal income tax during the specified period.
Deferred tax for timing differences between the book and tax profits
for the year is accounted for, using the tax rates and laws that have
been substantively enacted as of the balance sheet date. Deferred tax
assets arising from timing differences are recognized to the extent
there is reasonable certainty that these would be realized in future.
iv. Deferred tax assets in case of unabsorbed losses are recognized
only if there is virtual certainty that such deferred tax asset can be
realized against future taxable profits.
Disputed taxes not provided for including departmental appeals are
included under Contingent Liabilities.
14. Earnings Per Share:
i. The Bank reports basic and diluted Earnings Per Share in accordance
with AS 20. Basic Earnings Per Share is computed by dividing the net
profit after tax by the weighted average number of equity shares
outstanding for the year.
Diluted Earnings Per Share reflect the potential dilution that could
occur if securities or other contracts to issue equity shares were
exercised or converted during the period. Diluted Earnings Per Share is
computed by dividing the net profit after tax by the sum of the
weighted average number of equity shares and dilutive potential equity
shares outstanding at the year end.
15. Impairment of Assets
Fixed Assets are reviewed for impairment whenever events or changes in
circumstances warrant that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to the estimated
current realizable value. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the asset exceeds estimated current realizable value
of the asset.
16. Provisions, Contingent Liabilities and Contingent Assets
i. In conformity with AS 29, Provisions, Contingent Liabilities and
Contingent Assets, the Bank recognizes provisions only when it has a
present obligation as a result of a past event, 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.
Provisions are not discounted to its present value and are determined
based on best estimate required to settle the obligation at the balance
iii. Reimbursement expected in respect of expenditure required to
settle a provision is recognised only when it is virtually certain that
the reimbursement will be received.
iv. Contingent Assets are not recognized.
A Disclosure Requirements as per Accounting Standards
1. PREMISES (AS-10)
Premises include Leasehold Land (revalued) of Rs. 1339,70,11 Thousand (Rs.
1339,70,11 Thousand) which was revalued in the year 2006-07.
Bank has revalued its Freehold Land & Residential/ Office building
based on valuations made by independent valuers during the financial
year 2006-07. The net appreciation of Rs. 2063,91,00 Thousand arising on
revaluation, being the difference between the net book value of Rs.
529,02,00 Thousand and revalued amount of Rs. 2592,93,00 Thousand as on
March 31, 2007, was credited to Revaluation Reserve.
2. EMPLOYEE BENEFITS (AS-15) (REVISED)
i. Transitional Liability
The transitional liability arising on account of adoption of Accounting
Standard-15 (Revised 2005) on Employee Benefits is Rs. 63,22,00
Thousand (Pension - Rs. 31,09,00 Thousand, Gratuity - Rs. 16,41,00
Thousand, Disability Assistance - Rs. 13,28,00 Thousand and Leave
encashment - Rs. 2,44,00 Thousand) (Rs. 63,22,00 Thousand) is to be charged
to revenue over the period of five years. The remaining balance of Rs.
12,50,00 Thousand (Rs. 12,50,00 Thousand) has been charged to Profit &
Loss Account being the fifth year.
ii. Defined Contribution Schemes
Bank''s employees are covered by Provident Fund to which the Bank makes
a defined contribution measured as a fixed percentage of basic
salary. The Provident Fund plan is administered by the Administrators
of ''IDBI Bank Employees Provident Fund Trust''. In respect of employees
of erstwhile IHFL and IGL, provident fund contributions were made to
Regional Provident fund commissioner up to May, 2011 and thereafter the
contributions have been made to aforementioned trust. During the year
an amount of Rs. 4,54,73 Thousand (Rs. 4,26,73 thousand) has been charged
to Profit and Loss Account.
The Bank''s employees joined after April 1, 2008 are covered by Defined
Contribution Pension Scheme (DCPS) to which Bank makes a defined
contribution as a fixed percentage of Pay and Dearness Allowance.
During the year an amount of Rs. 3,20,476 Thousand (Rs. 1,52,526 Thousand)
has been charged to Profit and Loss Account.
iii. Defined Benefit Schemes
a. The Bank makes contributions for the gratuity liability of the
employees, to the ''IDBI Bank Employees Gratuity Fund Trust''. The
Gratuity Fund of employees of erstwhile IHFL and erstwhile IGL is
continued with LIC under Group Gratuity Scheme.
b. Some of the employees of the Bank are also eligible for Pension
which is administered by the ''IDBI Pension Fund Trust''.
The present value of these defined benefit obligations and the
related current service cost are measured using the Projected Unit
Credit Method with actuarial valuation being carried out at each
balance sheet date.
iv. Other long term benefits
Employees of the Bank are entitled to accumulate their earned/
privilege leave up to a maximum of 180 days for officers and 300 days
for other staff. A maximum of 15 days leave is eligible for encashment
in each year. Some of the employees are eligible for Disability
Assistance and Voluntary Health Scheme which is borne by the Bank as
and when the disability/liability events occur.
In respect of erstwhile IHFL the employees are entitled to accumulate
leave upto maximum of 180 days/240 days based on their cadre and in
respect of employees of erstwhile IGL leave upto 240 days can be
Actuarial valuation of these benefits have been carried out using the
Projected Unit Credit Method and an amount of Rs. 51,07,18 Thousand (Rs.
39,54,98 Thousand) has been charged to Profit and Loss Account during