1.1 Basis of Preparation of Financial Statements
The accompanying financial statements have been prepared on a
historical cost convention and conform in all material aspects to the
Generally Accepted Accounting Principles in India which encompasse
applicable accounting standards notified by the Companies (Accounting
Standards) Rules, 2006, relevant provisions of the Companies Act 1956,
the applicable guidelines issued by the Reserve Bank of India (RBI),
other statutory provisions and regulatory framework. The Company adopts
the accrual concept in the preparation of accounts. The preparation of
financial statements requires the Management to make estimates and
assumptions considered in the reported amounts of assets and
liabilities (including contingent liabilities) as of the date of the
financial statements and the reported income and expenses during the
reporting period. The Management believes that the estimates used in
preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates.
1.2 Revenue Recognition
(a) Interest and other dues are recognized on accrual basis except in
the case of income on Non-Performing Assets (NPAs) which is recognized,
as and when received, as per the prudential norms prescribed by the
(b) Front-end fee, Premium on pre-payment of loans/reduction in
interest rates and LC Commission are accounted for on realization
(c) Dividends declared by the respective Companies till the close of
the accounting period are accounted for as income, once the right to
receive is established.
(d) Rental on leased assets is accounted for from the commencement
date, as prescribed in the lease agreement entered with the lessees.
In respect of lease transactions commenced on/or before 31.03.2001,
income from leases (except in case of Non-Performing Assets) is
recognized on the basis of implicit rate in the lease to the net
investment outstanding on the lease over the primary lease period.
(e) The front-end fee/underwriting commission/commitment fee received
in respect of devolvement of underwriting and direct subscription is
reduced from the cost of related investments.
(f) Surplus on sale of investments is net of losses thereon.
(a) Investments are classified under two categories i.e. current and
long term and are valued in accordance with the RBI Guidelines as
applicable to Non-Banking Financial Companies (NBFCs) and Accounting
Standard 13 on Accounting for Investments'' as notified by the Companies
(Accounting Standards) Rules, 2006.
(i) `Long term Investments'' are carried at acquisition cost. A
provision is made for diminution other than temporary on an individual
(ii) `Current Investments'' are carried at the lower of cost or fair
value on an individual basis. However, appreciation if any, within the
category, is available for set off.
(b) Security Receipts issued by an Asset Reconstruction Company (ARC)/
Securitisation Company (SC) are valued in accordance with RBI
guidelines. Accordingly, the net asset value obtained from the ARC is
reckoned for valuation of such investments. Appreciation in the value,
if any, is ignored and depreciation is provided for.
(a) Equity Index/Stock Futures and Currency Futures are marked to
market on daily basis. Debit or Credit Balances disclosed under Current
Assets or Current liabilities respectively represent the net amount
paid or received on the basis of movement of prices in the Index/Stock
Futures and Currency Futures till the Balance Sheet date. Equity
Index/Stock Options are recognized in the books to the extent of
(b) As at the Balance Sheet date, the profit or loss on open positions
are accounted for as follows:
- The unrealized profit determined Scrip wise/Index wise, being
anticipated profit, is ignored and no credit is taken in the profit and
- The unrealized loss determined Scrip wise/Index wise, being
anticipated loss, is recognized in the profit and loss account.
- Equity Index/Stock Options are carried at cost where they are used as
an instrument for hedging.
(c) On final settlement or squaring-up of contracts for Equity
Index/Stock Futures, the profit or loss is calculated as difference
between settlement/squaring-up price and contract price. Accordingly,
debit or credit balance pertaining to the settled/squared-up contract
is recognized as profit or loss upon expiry/squaring-up of the
contracts. When more than one contract in respect of the relevant
series of Equity Index/Stock Futures contract to which the squared-up
contract pertains is outstanding at the time of the squaring-up of the
contract, the contract price of the contract so squared-up is
determined using weighted average method for calculating profit/loss on
(d) Initial and additional margin paid over and above initial margin,
for entering into contracts for Equity Index/Stock Futures, which are
released on final settlement/squaring-up of underlying contracts, are
disclosed under Current Assets.
1.5 Foreign Exchange Transactions
(a) The expenses and income in foreign exchange transactions are
accounted for at the rates prevailing on the date of transactions/at
the forward rate, if booked, for such transaction.
(b) Assets and liabilities held in foreign currencies and accrued
income and expenditure in foreign currencies are translated into Indian
Rupees at the rates advised by Foreign Exchange Dealers Association of
India (FEDAI) prevailing towards the close of the accounting period.
Gains/losses, if any, on valuation of various assets and liabilities
are taken to Profit & Loss Account.
1.6 Fixed Assets and Depreciation
(a) Fixed Assets are carried at cost (including capitalized interest)
less accumulated depreciation and impairment loss, if any. Accumulated
depreciation on assets in respect of lease transactions commenced on or
before 31.03.2001 is adjusted for the balance in the Accumulated Lease
(b) Depreciation on assets given on lease is provided on Straight Line
Method (SLM) at the rates prescribed under Schedule XIV to the
Companies Act, 1956 or over the primary period of lease of assets,
whichever is higher.
(c) Depreciation in respect of Office Building and Plant & Machinery at
Corporate Office is provided on SLM and on all other assets on the
Written Down Value (WDV) method at the rates prescribed under Schedule
XIV to the Companies Act, 1956. Assets having individual value of less
than Rs 5,000/- are charged to the Profit & Loss Account in the year of
(d) Leasehold Land is amortized over the lease period.
(e) Depreciation on increase in value of Leasehold Land & Building due
to revaluation is provided on straight-line basis over the balance
useful life of asset and adjusted out of revaluation reserve.
(f) Leasehold Improvements are amortized over the lease period.
(g) Mobile phones are fully depreciated in the year of acquisition
1.7 Impairment of Assets
Impairment loss is provided to the extent the carrying amount of assets
exceeds their recoverable amounts. Recoverable amount is the higher of
an asset''s net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise from the
continuing use of the asset and from its disposal at the end of its
useful life. Net selling price is the amount obtainable from sale of
the asset in an arm''s length transaction between knowledgeable, willing
parties, less the costs of disposal. If at the balance sheet date there
is an indication that a previously assessed impairment loss no longer
exits, then such loss is reversed and the asset is restated to the
extent of the carrying value of the asset that would have been
determined (net of amortization/depreciation), had no impairment loss
1.8 Provisions/Write off against Loans and Other Credit Facilities
(a) All credit exposures are classified into performing and
non-performing assets (NPAs) as per the RBI Guidelines. Further, NPAs
are classified into sub-standard, doubtful and loss assets based on the
criteria stipulated by RBI. Provisions are made on standard, sub-
standard and doubtful assets at rates prescribed by RBI. Loss assets
and unsecured portion of doubtful assets are provided/written off as
per the extant RBI guidelines. Additional provisions are made against
specific non-performing assets over and above what is stated above, if
in the opinion of the management, increased provisions are necessary.
(b) For restructured/rescheduled assets, provision is made in
accordance with the guidelines issued by RBI.
(c) Recovery against debts written off/provided for is credited to
revenue. Income is recognized where amounts are either recovered and/
or adjusted against securities/properties or advances there-against or
are considered recoverable in terms of RBI Guidelines.
(d) Provision in respect of purchase and sale of NPAs is accounted as
per guidelines prescribed by RBI.
1.9 Grants received from Government of India Under Interest
Differential Fund (IDF)
Grants received from Government of India under Interest Differential
Fund (IDF) is of a capital nature and to be utilized for specified
purposes for promotional activities of Industrial Development.
Accordingly, the money so received, net of expenditure for the approved
purposes is shown under ''Reserves and Surplus'' in the Balance Sheet.
The amounts invested and loans made out of the fund for approved
purposes are shown under ''Investments'' and ''Loans'' respectively.
1.10 Borrowing Cost
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalized as part of the cost
of such assets.
A qualifying asset is one that necessarily takes a substantial period
of time to get ready for its intended use. All other borrowing costs
are charged to revenue.
1.11 Miscellaneous Expenditure
(a) Expenses on issue of Shares and Debentures are charged to
Securities Premium Reserve in accordance with Section 78 of Companies
(b) Voluntary Retirement Scheme (VRS) expenses are charged off as and
1.12 Employee Benefits
(a) Monthly contributions to the Retirement Funds viz. Provident Fund
and Pension Fund being in the nature of defined contribution is charged
against revenue. The Provident Fund is administered through duly
constituted and approved administrators. The administration of Pension
Fund in respect of existing employees opting for the same has been
entrusted by Trustees to Life Insurance Corporation of India (LIC) by
entering into a Group Superannuation Cash Accumulation Scheme. The
existing pension optees, however, continue to be governed by the
provisions of the scheme in operation at the time of their retirement
and are accordingly entitled to DA relief and family pension as and
when due. The contribution made on account of same is charged to
Accounts as and when due.
(b) The Company has a defined benefit employees scheme in the form of
Gratuity. The Trustees of the scheme have entrusted the administration
of related fund to LIC. Expense for the year is determined on the basis
of actuarial valuation of the Company''s year- end obligation in this
regard and the value of year end assets of the scheme. Contribution is
deposited with LIC based on intimation received by the Company.
(c) The Company has a post retirement medical benefit scheme for
employees and their dependants subject to certain limits for
hospitalization and normal medical treatment. The same is charged
against revenue as and when incurred.
1.13 Employee Stock Option Plan
The Company has formulated Employee Stock Option Schemes (ESOS) in
accordance with the SEBI (Employee Stock Option Scheme and Employee
Stock Purchase Scheme) Guidelines, 1999. The Schemes provide for grant
of options to employees (including employees deputed in
subsidiaries/associates/joint ventures) to acquire equity shares of the
Company that vest in a graded manner and that are to be exercised
within a specified period. In accordance with the SEBI Guidelines, the
excess, if any, of the closing market price on the day prior to the
grant of the options under ESOS over the exercise price is amortised on
a straight-line basis over the vesting period.
Tax Expense comprises of current & deferred income tax. Current income
tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Income Tax Act. Deferred Tax is
recognized, subject to consideration of prudence, on timing
differences, being difference between taxable income and accounting
income/expenditure that originate in one period and are capable of
reversal in one or more subsequent year(s). Deferred taxes are reviewed
for their carrying values at each balance sheet date.
1.15 Provisions and Contingencies
Provisions are recognized when the Company has a legal and constructive
obligation as a result of a past event, for which it is probable that
cash outflow will be required and a reliable estimate can be made of
the amount of the obligation. Contingent liabilities are disclosed when
the Company has a possible or present obligation where it is not
probable that an outflow of resources will be required to settle it.
Contingent assets are neither recognized nor disclosed.