1.  Reconciliation/adjustment of inter bank/ inter branch transactions,
 branch suspense, Government Transactions, Nostro, System Suspense,
 Clearing, and Sundry Deposits is in progress on an ongoing basis. The
 impact, in the opinion of the management of the un-reconciled entries,
 if any, on the financial statements would not be material.
 
 2.  Tax paid in Advance/ Tax deducted at source includes amount
 adjusted by Income Tax Department in respect of various disputed
 demands. Based on the favorable appellate orders and interpretation of
 law, no further provision has been considered by the management in
 respect of the disputed demands.
 
 3.  Fixed Assets
 
 i) Documentation formalities are pending in respect of certain
 immovable properties held by the bank valued at Rs. 0.53 Crores
 (previous year Rs. 0.62 Crores). In respect of immovable properties
 valued at Rs. 6.84 Crores (previous year Rs. 7.60 Crores) bank holds
 agreement to sell along with the possession of the properties.
 
 ii) The Bank has also acquired certain fixed assets valued at Rs.
 319.72 lacs generating cash, parked under respective heads, for the
 promotion and development of its business.
 
 iii) The Bank has been consistently following the method of charging
 depreciation on fixed assets on diminishing balance as per the rates
 prescribed in Income Tax Rules which is higher in totality as compared
 to rates prescribed in Schedule XIV of the Companies Act, 1956.However,
 the depreciation on computers (including ATMs) along with software
 forming integral part of computers has been computed at the rate of
 33.33% on straight-line method. Further the mobile phones are
 depreciated @50% on straight line method.
 
 Government of Jammu & Kashmir holds 53.17% of equity shares of the Bank
 (previous year 53.17%)
 
 The subordinate debt of Rs. 600 Crores raised by way of Unsecured
 Redeemable Lower tier-II Bonds on 30.12.2009, maturing on 30.12.2019
 has been shown under Borrowings as per RBI guidelines.
 
 5.  Investments
 
 The Bank has made no profit on sale of HTM category securities during
 the year, as such no appropriation was made (Previous Year, Rs. Nil) to
 Capital Reserve Account.
 
 6.  The Bank has Rs. 70,00,000 as share capital and Rs. 21,40,70,800 in
 share capital deposit account in its sponsored Regional Rural Bank (J&
 K Grameen Bank).
 
 7.  The total investment of the Bank in the Met-life India Insurance Co
 Pvt. Ltd stood at Rs. 220.27 Crores as on 31.03.2011 (Previous year Rs.
 220.27 Crores). In compliance with RBI Letter No.
 DBOD.BP.07099/21.4.141/2008-09 dated 9th April, 2009, the investment
 stands transferred to AFS Category on 1st October, 2009. The valuation
 has been carried out at an average of two independent valuation reports
 obtained from Category I Merchant Bankers as per RBI guidelines & the
 consequent appreciation has been ignored in view of the Accounting
 Policy in respect of such investments
 
 11.  Derivatives
 
 11.1 No forward rate agreements / interest rate swaps were undertaken
 by the bank during the year.
 
 11.2 The bank has not entered into exchange traded interest rate
 derivatives transactions during the year
 
 11.3 Disclosures on Risk exposures in derivatives
 
 a) Qualitative Disclosures
 
 The only derivatives traded by the Bank in the foreign exchange market
 are forward contracts. Forward contracts are being used to hedge /cover
 the exposure in foreign exchange arising out of Merchant transactions
 and trading positions.
 
 To cover the risks arising out of above derivatives, various limits
 like AGL, IGL and stop loss have been prescribed which are monitored
 through VaR.
 
 Outstanding forward exchange contracts held for trading are revalued at
 the exchange rates for appropriate maturity rates as announced by FEDAI
 at the year-end exchange rates and the resultant gain/ loss is taken to
 revenue.
 
 *Including floating provision of Rs. 52.90 Crores. The Provision
 Coverage Ratio for the Bank as on 31.03.2011 is 92.71% which is
 calculated after taking into account technical write off .
 
 13.  Particulars of Accounts Restructured
 
 * For loan accounts with restructured amount up to 1 Rs.Crore,
 Diminishing Fair Value has been worked out at the rate of 5% of the
 amount restructured.
 
 For loan accounts with restructured amount exceeding Rs. 1 Crore,
 Diminishing Fair Value has been worked out as a difference in NPV of
 cash flows against pre-restructured terms and restructured terms at
 discount factor linked to PLR + Risk Premium + Term Premium.
 
 16.  Provisions on standard Assets
 
 Bank holds a provision of Rs. 138.74 Crores on standard assets
 (previous year Rs. 138.74 Crores) which has been arrived at in
 accordance with RBI guidelines. No further provision was required
 during the current year.
 
 * Working funds are the average of total of assets as reported to RBI
 in Form X.
 
 ** Assets are the total assets as at the close of the year.
 
 *** Deposits (other than inter-bank deposits) & Gross Advances are as
 at the close of the year.
 
 22.  Statement of loans & Advances secured by Intangible Assets viz.
 Rights, Licenses, Authorizations etc.
 
 The advances of the Bank as on 31st March, 2011 against intangible
 security of Rights, Licenses and Authorizations are Nil.
 
 24.  Penalty imposed by Reserve Bank of India during the year Nil
 (Previous year Nil).
 
 25.  Information in respect of Accounting Standards issued by the
 Institute of Chartered Accountants of India:
 
 25.1 Accounting Standard 5 – Net profit or loss for the period, prior
 period items and changes in accounting policies:
 
 There are no material Prior Period items included in Profit & Loss
 Account required to be disclosed as per Accounting Standard–5 read with
 RBI Guidelines.
 
 25.2 Accounting Standard 9- Revenue Recognition
 
 There are no material items of income, which are required to be
 disclosed as per Accounting Standard–9, read with the RBI guidelines.
 
 25.3 Accounting Standard 15 – Retirement Benefit
 
 a) In view of Accounting Standard-15 (Revised 2005) issued by The
 Institute of Chartered Accountants of India, the Bank in respect of its
 Defined Benefit Plans (Pension, Gratuity, and Leave Encashment) on
 first adopting this statement as on 01-04-2007, has a transitional
 Liability of Rs. 149.70 Crores as per Actuarial Valuation. The 1/5th of
 this liability on a straight-line basis amounting to Rs. 29.94 Crores
 has been recognized as an expense during the year 2010-11(4th year) and
 the remaining unrecognized amount of Rs. 29.94 Crores is carried
 forward to next year.
 
 b) The disclosure required under Accounting Standard 15 “Employee
 Benefits- issued by the Institute of Chartered Accountants of India are
 as under”:
 
 Defined Contribution Plan
 
 Consequent upon the change of the option by the employees from Defined
 Provident Fund Contribution plan to Defined Pension Benefit Plan, the
 balance of the employer’s contribution to Provident Fund to the tune of
 Rs. 6,13,00,890/- has been transferred to the Pension Fund for the
 employees. In respect of employees who still hold the option of
 provident fund matching contribution has been made.
 
 Defined Benefit Plans
 
 The Employee’s Gratuity Fund Scheme, Pension Fund and Leave Encashment
 are defined benefit plans. The present value of obligation is
 determined based on Actuarial Valuation using the Projected Unit Credit
 Method, which recognizes each period of service as giving rise to
 additional unit of employee benefit entitlement and measures each unit
 separately to build up the final obligation.
 
 * Key Managerial Personnel
 
 25.6 Accounting standard 19 – Leases
 
 The Bank has taken premises only on rental basis and has no long-term
 operating leases taken/given and hence reporting under AS-19 is not
 considered necessary.
 
 25.8 Accounting Standard –21 (Consolidated Financial Statements)
 
 The Bank has a fully owned subsidiary company “JKB Financial Services
 Ltd.” in terms of the approval of Reserve Bank of India vide its letter
 No DBOD.FSD.No./1124/24.01.001/2007-08 dated 31st July, 2007. The
 investment towards the capital of subsidiary company is Rs. 5.00
 Crores. The consolidated financial statements are placed accordingly in
 terms of AS 21 issued by the Institute of Chartered Accountants of
 India.
 
 25.10 Accounting Standard 26-Intangible Assets
 
 The Bank has incurred an amount of Rs. 0.55 Crores on Brand names
 bifurcated into two heads namely Business Unit Signage and Brand
 Strategy Project. Expenditure on Business Unit Signage amounting to Rs.
 0.32 Crores has been debited under the head Furniture & Fixture,
 whereas, Brand strategy project expenses amounting to Rs. 0.23 Crores
 has been charged to Profit & Loss account treating it as a Revenue
 expenditure for the reason that the Bank cannot declare dividend to
 shareholders without writing it off completely in view of the
 provisions of the Banking Regulation Act, 1949. Accordingly, the Bank
 has not evaluated useful life of this Brand strategy project over which
 the expenses could be amortized.
 
 25.11 Accounting Standard 28 – Impairment of Assets
 
 Majority of Fixed Assets of the Bank are considered as Corporate Assets
 and not cash generating assets and in the opinion of Management there
 is no material impairment in these Fixed Assets. Regarding other Fixed
 Assets generating cash there is no material impairment. As such no
 provision is required as per AS-28 issued by ICAI.
 
 25.12 Accounting Standard 29- Provisions, Contingent Liabilities and
 Contingent Assets
 
 In respect of Contingent Liabilities under each class shown as per
 Schedule 12, in the opinion of the Management, the possibility of any
 out flow in settlement is remote. However, a provision of Rs. 49.24
 lacs is outstanding as on 31.03.2011 to meet certain claims decreed
 against the Bank but still not acknowledged as debts owing to the
 appeal filed by the bank before the court of competent jurisdiction,
 pending adjudication. .
 
 25.13 Letter of comfort (LOC’s) issued by the Bank. (Nil)
 
 26.  Other Disclosures
 
 Foreign Exchange
 
 a) The net funded exposure of the Bank in respect of Foreign Exchange
 transactions with each country is within 1% of the Total Assets of the
 Bank and hence no Provision and Disclosure is required to be made as
 per the RBI Circular No.  96/21.04.103/2003 dated: 17.06.2004.
 
 Claims pending with ECGCI amounts to Rs. 37.93 Crores (Previous year
 Rs. 22.53 Crores)
 
 b) Concentration of Deposits, Advances, Exposures & NPA’s
 
 30.  The Bank follows policy of providing interest on overdue time
 deposits at Saving Bank interest rates in conformity with guidelines of
 Reserve Bank of India. In CBS Business units of the Bank the system
 itself takes care of providing interest on overdue time deposits at the
 gross root/individual constituent level.
 
 30.1 Payments to and Provisions for employees include arrears of wage
 revision of Rs. 49 Crores Previous year (Rs. 75.92 Crores)
 
 31.  The Principal Accounting Policies (Schedule 17) and Notes on
 Accounts (Schedule 18) form an integral part of these Accounts.
 
 32.  Previous year figures have been regrouped / rearranged where ever
 necessary and possible to conform to current year figures. In cases
 where disclosures have been made for the first time in terms of RBI
 guidelines, previous year’s figures have not been given.