1. ACCOUNTING CONVENTION
The financial statements are prepared by following the going concern
concept on historical cost convention and conform to the statutory
provisions and practices prevailing in India unless otherwise stated
and in respect of foreign branches as per statutory provisions and
practices prevailing in the respective countries.
2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE Foreign Currency
transactions of Indian operations and non- integral foreign operations
are accounted for as per Accounting Standard-11 (AS-11) issued by the
Institute of Chartered Accountants of India (ICAI).
2.1 Translation in respect of Indian operations
1. Foreign exchange transactions are recorded at the Weekly Average
Rate (WAR) notified by Foreign Exchange Dealers'' Association of India(
2. Foreign currency assets and liabilities are translated at the
closing rates notified by FEDAI at the year end.
3. Acceptances, endorsements and other obligations and guarantees in
foreign currency are carried at the closing rates notified by FEDAI at
the year end.
4. Exchange differences arising on settlement and translation of
foreign currency assets and liabilities at the end of the financial
year are recognized as income or expenses in the period in which they
5. Outstanding forward exchange contracts are disclosed at the
contracted rates, and revalued at FEDAI closing rates, and the
resultant effect is recognized in the Profit and Loss account.
2.2 Translation in respect of non-integral foreign operations.
Foreign branches are classified as non-integral foreign operations and
the financial statements are translated as follows:
1. Assets and liabilities including contingent liabilities are
translated at the closing rates notified by FEDAI at the year end.
2. Income and expenses are translated at the Quarterly Average Closing
rate notified by FEDAI at the end of the respective quarter.
3. All resulting exchange differences are accumulated in a separate
account Exchange Fluctuation Fund till the disposal of the net
3.1 The investment portfolio of the Bank is classified in accordance
with the RBI guidelines into three categories viz., 0 Held To Maturity
- Available For Sale (AFS)
- Held For Trading (HFT)
The securities acquired with the intention to be held till maturity are
classified under HTM category. The securities acquired with the
intention to trade by taking advantage of short-term price/interest
movements are classified as HFT. All other securities which do
not fall under any of the two categories are classified under AFS
3.2 Profit on sale of securities under HTM category is first taken to
Profit and Loss account and thereafter appropriated to Capital Reserve
account (net of taxes and amount required to be transferred to
statutory reserves) and loss, if any, charged to Profit & Loss account.
3.3 Investments in India are valued in accordance with RBI guidelines,
a) Securities in HTM category are valued at acquisition cost except
where the acquisition cost is higher than the face value, in which
case, such excess of acquisition cost over the face value is amortised
over the remaining period of maturity. Any diminution, other than
temporary, in value of investments in subsidiaries/joint ventures which
are included under HTM category is recognized and provided. Such
diminution is being determined and provided for each investment
b) Investments in AFS category are marked to market, scrip-wise and
classification wise, at quarterly intervals. Net depreciation, if any,
is provided for in the Profit and Loss account while net appreciation,
if any, is ignored. The book value of the individual securities does
not undergo any change after marking to market.
c) The individual scrips in the HFT category are marked to market at
daily intervals. Net depreciation, if any, is provided for in the
Profit and Loss account while net appreciation, if any, is ignored. The
Book Value of the individual securities in this category does not
undergo any change.
d) Securities in AFS and HFT categories are valued as under:
i) Central Government Securities are valued at prices / Yield To
Maturity (YTM) rates as announced by Primary Dealers Association of
India (PDAI) jointly with Fixed Income Money Market and Derivatives
Association of India (FIMMDA).
ii) State Government and other approved securities are valued applying
the YTM method by marking up 25 basis points above the yields of the
Central Government Securities of equivalent maturity put out by PDAI /
iii) Equity shares are valued at market price, if quoted. Unquoted
equity shares are valued at break-up value (without considering
revaluation reserves if any) as per the company''s latest balance sheet
(not more than one year prior to the date of valuation). Otherwise, the
shares are valued at Re. 1 per company.
iv) Preference shares are valued at market price, if quoted; otherwise
at lower of the value determined based on the appropriate YTM rates or
v) All debentures/bonds, other than those which are in the nature of
advances, are valued on the YTM basis.
vi) Treasury bills, Certificate of deposits and Commercial papers are
valued at carrying cost.
vii) Units of Mutual Funds are valued at market price, if quoted;
otherwise at lower of repurchase price or Net Asset Value (NAV). In
case of funds with a lock-in period, where repurchase price / market
quote is not available, units are valued at NAV, else valued at cost
till the end of the lock-in period.
3.4 Investments by Foreign Branches are valued as per the practice
prevailing in the respective countries.
3.5 Debentures and Bonds, where interest/ principal is in arrears for
more than 90 days are subject to prudential norms prescribed by RBI.
3.6 Brokerages / Commission / incentive received on subscriptions are
deducted from the cost of securities. Brokerage / Commission / Stamp
duty paid in connection with acquisition of securities are treated as
3.7 Interest Rate Swap transactions for hedging are accounted on
accrual basis and transactions for trading are marked to market at
quarterly intervals. The fair value of the total swaps is computed on
the basis of the amount that would be received/ receivable or
paid/payable on termination of the swap agreements as on the balance
sheet date. Losses arising therefrom, if any, are fully provided for,
while the profit, if any, is ignored. Gains or loss on termination of
swaps is deferred and recognised over the shorter period of the
remaining contractual life of the swap or the remaining life of the
designated asset or liability.
3.8 Exchange traded FX Derivatives i.e., Currency Futures, are valued
at the Exchange determined prices and the resultant gains and losses
are recognized in the Profit and Loss account.
3.9 Investments backed by guarantee of the Central Government though
overdue are treated as Non Performing Asset (NPA) only when the
Government repudiates its guarantee when invoked.
3.10 Investment in State Government guaranteed securities, including
those in the nature of ''deemed advances'', are subjected to asset
classification and provisioning as per prudential norms if interest /
instalment of principal (including maturity proceeds) or any other
amount due to the Bank remains unpaid for more than 90 days.
4. FINANCIAL ASSETS SOLD TO ASSET RECOVERY COMPANIES (ARC)
4.1 Security Receipts (SR) issued by ARCs in respect of financial
assets sold to them is recognized at lower of redemption value of SRs
and Net Book Value of financial assets. SRs are valued at Net Asset
Value declared by ARCs on the Balance Sheet date and depreciation, if
any, is provided for and appreciation is ignored.
4.2 The net-shortfall, if any, arising on sale of financial assets to
ARCs is charged to Profit & Loss Account.
5.1 In accordance with the prudential norms issued by RBI, advances in
India are classified into standard, sub- standard, doubtful and loss
5.2 Provisions are made for non performing advances as under:
a) Substandard category - 25% both secured and unsecured category
b) Doubtful category-1
i) 100% for secured and unsecured classified and / or categorized
ii) 25% for secured classified and / or categorized after 30.06.2011
iii) 100% for Unsecured portion.
c) Doubtful Category - 2
i) 100% for secured and unsecured classified and / or categorized
ii) 40% for secured classified and / or categorized after 30.06.2011.
iii) 100% for Unsecured portion.
d) Doubtful category-3 and Loss advances - 100 %.
5.3 Provision is made for standard advances including restructured
standard advances as per RBI directives.
5.4 In respect of foreign branches, income recognition, asset
classification and provisioning for loan losses are made as per local
requirement or as per RBI prudential norms, whichever is more
5.5 Advances disclosed are net of provisions made for non-performing
assets, DICGC/ ECGC/ CGTMSE claims received and held pending
adjustment, repayments received and kept in sundries account,
participation certificates, usance bills rediscounted and provision in
lieu of diminution in the fair value of restructured accounts
classified as standard assets.
6. FIXED ASSETS / DEPRECIATION
6.1. Premises and other fixed assets are stated at historical cost and
at revalued amount in respect of assets revalued.
6.2. Depreciation on buildings (including cost of land wherever
inseparable/not segregated) and other fixed assets (excluding items
referred in 6.3 to 6.5) in India is provided for on the straight-line
method at rates specified in Schedule XIV to the Companies Act, 1956
and at the Bank determined rates based on Residual Life in the case of
''Revalued Assets''. Depreciation relatable to revalued component is
charged against revaluation reserve.
6.3. Depreciation on computers (hardware and software) and
Uninterrupted Power Supply Systems (UPS) is provided at the rate of
33.33% per annum on Straight Line Method (SLM).
6.4. The rate of depreciation on motor car is 20 % on straight line
6.5. 100% depreciation is provided on all cell phones and on small
value items costing upto Rs.5000/- .
6.6. Depreciation on fixed assets acquired on or before 30th September
is charged at 100% of the prescribed rates and at 50% of the prescribed
rates on the fixed assets acquired thereafter. No depreciation on the
fixed assets is provided for in the year of sale / disposal.
6.7. Premium on leasehold land is capitalised in the year of
acquisition and amortized over the period of lease.
6.8. Depreciation in respect of fixed assets at foreign branches is
provided as per the practice prevailing in the respective countries.
6.9. In respect of Non Banking Assets, no depreciation is charged.
7. REVENUE RECOGNITION
7.1 Income and expenditure are generally accounted for on accrual
basis, unless otherwise stated.
7.2 Income from non-performing assets, Central Government guaranteed
assets (where it is overdue beyond 90 days), dividend income, insurance
claims, commission on letters of credit/guarantees issued (other than
those relating to project finance), income from bancassurance products,
income from wealth management, additional interest/ overdue charges on
bills purchased, locker rent, finance charges on credit cards, income
on Bank''s right to recompense, etc. are accounted for on realisation.
7.3 In case of overdue foreign bills, interest and other charges are
recognised till the date of crystallisation as per FEDAI guidelines.
8. CREDIT CARD REWARD POINTS
Reward points earned by card members on use of Card facility is
recognized as expenditure on such use.
9. NET PROFIT / LOSS
The result disclosed in the Profit and Loss Account is after
- Provision for Non-Performing Advances and / or Investments.
- General provision on Standard Advances
- Provision for Restructured Advances
- Provision for Depreciation on Fixed Assets
- Provision for Depreciation on Investments
- Transfer to/ from Contingency Fund
- Provision for direct taxes
- Usual or/and other necessary provisions
10. STAFF RETIREMENT BENEFITS
10.1 Annual contributions to Pension Fund and Gratuity Fund are
determined and provided for:
(i) on the basis of actuarial valuation and
(ii) as per the local laws in respect of foreign branches.
10.2 Leave encashment benefit for employees is accounted for on
10.3 Transitional liability relating to employee benefits determined as
per actuarial valuation is written- off over a period of five years in
terms of Revised Accounting Standard 15 (AS -15) - Employee
Benefits, issued by ICAI.
10.4 Liability determined in respect of pension (second option) for
existing employees and gratuity is amortised equally over a period of
five years in accordance with RBI Guidelines.
11. CONTINGENT LIABILITIES AND PROVISIONS
11.1 Contingent liability: Past events leading to, possible or present
obligations are recognised as contingent liability in the following
instances where :
(a) The existence of such obligations has not been confirmed
(b) no outflow of resources are required to settle such obligations
(c) a reliable estimate of the amount of the obligations cannot be made
(d) such amounts are not material
11.2 (a) Provision is recognized in case of present obligations where a
reliable estimate can be made and/or where there are probable outflow
of resources embodying foregoing of economic benefits to settle the
obligations, excluding frivolous claims.
(b) Provision for Market Risk, Country Risk, etc., are made in terms of
extant instructions of RBI.
(c) Floating provision as identified by the Bank Management is provided
12. IMPAIRMENT OF ASSETS
Impairment losses, if any, are recognised in accordance with the
Accounting Standard 28 issued in this regard by the Institute of
Chartered Accountants of India (ICAI).
13. TAXES ON INCOME
13.1 Provision for tax is made for both Current Tax and Deferred Tax.
13.2 Current tax is measured at the amount expected to be paid to the
taxation authorities, using the applicable tax rates, tax laws and
favourable judicial pronouncements / legal opinion.
13.3 Deferred Tax Assets and Liabilities arising on account of timing
differences and which are capable of reversal in subsequent periods are
recognised using the tax rates and tax laws that have been enacted or
substantively enacted till the date of the Balance Sheet. Deferred Tax
Assets are not recognised unless there is virtual certainty that
sufficient future taxable income will be available against which such
deferred tax assets will be realised.