1. BASIS OF PREPARATION
The financial statements have been prepared under the historical cost
convention unless otherwise stated. They conform to Generally Accepted
Accounting Principles (GAAP) in India, which comprises statutory
provisions, regulatory/ Reserve Bank of India (RBI) guidelines,
Accounting Standards/ guidance notes issued by the Institute of
Chartered Accountants of India (ICAI) and the practices prevalent in
the banking industry in India.
2. USE OF ESTIMATES
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 date of the
financial statements and the reported income and expenses for the
reporting period. Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates. Any revision to the
accounting estimates is recognised prospectively in the current and
future periods .
3. REVENUE RECOGNITION
3.1 Income and expenditure are accounted for on accrual basis except ,
commission received / paid, locker rent, legal expenses for suit filed
accounts and recoveries there against, dividend on investments,
interest on overdue bills, insurance premium paid on Housing Loans and
interest on tax refunds are accounted for on realisation/ payment
3.2 In view of uncertainity of collection of income in cases of Non
performing Assets/Investments , such income is accounted for only on
realisation in terms of the RBI guidelines.
3.3 Interest on overdue deposits is provided for at the Saving Bank
Deposit Rate and the balance is accounted for at the time of renewal.
4.1 In accordance with RBI guidelines, investments are classified into
i. Held to Maturity (Investments intended to be held till maturity)
ii. Held for Trading (Investments held for sale within 90 days from
the date of acquisition )
iii. Available for Sale: (Investments not classified in (i) and (ii),
However, for disclosure in the Balance Sheet, Investments are
classified under the following heads. (a) Government Securities (b)
Other Approved Securities (c) Shares (d) Debentures and Bonds (e)
Subsidiaries / Joint Ventures and (f) Others.
i) Held to Maturity: -
a. Investments under Held to Maturity category are carried at
acquisition cost or amortized cost if acquired at a premium over face
value. Wherever the book value is higher than the face value /
redemption value, the premium is amortized over the remaining period of
b. Investments in joint venture are valued at carrying cost less
diminution, in value, if any, other than temporary in nature.
c. Investment in venture capital is valued at carrying cost
The above valuation in category of Available for Sale and Held for
Trading are done scrip wise and depreciation / appreciation is
aggregated for each classification. Net depreciation for each
classification, if any, is provided for while net appreciation is
4.3 Transfer of securities from one category to another is accounted
for at the least of acquisition cost / book value / market value on the
date of transfer. The Depreciation, if any, on such transfer is fully
4.4 Securities purchased/sold under Liquidity Adjustment Facility (LAF)
with RBI are debited/credited to Investment Account and reversed on
maturity of the transaction. Interest expended/earned thereon is
accounted for as expenditure/revenue.
i. Brokerage/commission received on subscription is booked in Profit
and Loss Account.
ii. Brokerage, Commission, securities transaction tax etc. paid in
connection with acquisition of investments are expensed upfront and
excluded from cost .
iii. Broken period interest paid / received on purchase / sale of
securities is recognised as interest expense / income.
iv. Prudential norms of RBI for non performing investment
Classification are applied to Investments and appropriate provisions
are made in respect of non performing securities.
v. Profit/Loss on sale of any Investment in any category is taken to
Profit and Loss Account. However, in case of profit on sale of
Investments under ''Held to Maturity'' category, an equal amount is
appropriated to Capital Reserve Account.
vi. Valuation of HFT and AFS portfolio is done on daily and quarterly
basis respectively and depreciation, if any, is provided on quarterly
4.6 The derivatives transactions are undertaken for trading or hedging
purposes. Trading transactions are marked to market. As per RBI
guidelines, different categories of swaps are valued as under:
i. Hedge swaps: Interest rate swaps which hedges interest bearing
asset or liability is accounted for on accrual basis except the swap
designated with an asset or liability that is carried at market value
or lower of cost in the financial statement.
Gain or losses on the termination of swaps are recognized over the
shorter of the remaining contractual life of the swap or the remaining
life of the asset/liability.
ii. Trading swaps: Trading swap transactions are marked to market with
changes recorded in the financial statements.
5. ADVANCES / PROVISIONS / RECOVERIES
5.1 Advances are classified as performing/ non performing assets and
provisions are made in accordance with prudential norms prescribed by
the Reserve Bank of India.
5.2 Advances are net of provisions and technical write-offs made for
5.3 Provision for performing Assets is shown under the head Other
Liabilities and Provisions in terms of RBI guidelines.
5.4 Recoveries in Non-Performing Assets are appropriated first towards
principal and thereafter towards interest.
6. FIXED ASSETS AND DEPRECIATION
6.1 Premises and other Fixed Assets are stated at historical cost
except revalued premises which are stated at revalued amount. The
appreciation on revaluation is credited to Revaluation Reserve and the
incremental depreciation attributable to the revalued amount is
6.2 Premises include cost of land.
6.3 Fixtures and fittings in rented premises are treated as Temporary
6.4 Depreciation on Fixed assets including premises where value of land
is not separable (other than those referred in para 6.5 given below) ,
is provided on the Written Down Value at the rates prescribed in the
Income Tax Rules, 1962;
6.5 Depreciation on Computers and ATMs is provided on Straight line
Method at the rate of 33.33% per annum as per the guidelines of RBI
.Computers softwares not
forming an integral part of hardware is charged directly to Profit and
6.6. No depreciation is provided in the year of sale/disposal.
Depreciation on additions during the period upto 180 days is provided
for full year otherwise for half year.
6.7 Premium paid on leasehold land is amortised over the period of
7. FOREIGN EXCHANGE TRANSACTIONS
7.1 Monetary assets and liabilities are revalued at exchange rates
advised by Foreign Exchange Dealers Association of India (FEDAI) at the
close of the financial year and the resultant gain/loss is taken to
7.2 Income and expenditure items are accounted for at the exchange
rates prevailing on the date of the transaction.
7.3 Forward exchange contracts and bills are translated at the exchange
rates prevailing on the date of commitment. Outstanding foreign
exchange contracts and bills are revalued as per FEDAI rates and the
resultant gain/loss is taken to revenue.
7.4 Foreign currency guarantees, acceptances, endorsements and other
obligations are stated at FEDAI rates at the close of the financial
8. EMPLOYEE BENEFITS
8.1 Provident fund is a defined contribution as the bank pays fixed
contribution at predetermined rates. The obligation of the bank is
limited to such fixed contribution.The Contributions are charged to
Profit and Loss account.
8.2 Gratuity and pension liability are defined benefit obligation and
are provided for on the basis of Actuarial Valuation made at the end of
the financial year. The schemes are funded by the Bank and are managed
by separate trusts. New Pension Scheme which is applicable to
employees who have joined bank on or after 01.04.2010 is a defined
contribution scheme. Bank pays fixed contribution at pre determined
rate. The obligation of the bank is limited to such fixed contribution.
The contribution is charged to Profit and Loss Account.
8.3 Other Employee benefits such as leave encashments, leave fare
concessions and sick leave are provided for based on actuarial
8.4 Short term employee benefits are recognized as an expense in the
profit and loss account of the year in which the related services are
9. TAXES ON INCOME
Income tax expense is the aggregate amount of current tax and deferred
Current tax is determined on the amount of tax payable in respect of
taxable income for the year and accordingly provision for tax is made.
Deferred Tax Assets and Liabilities arising on account of timing
differences and which are capable of reversal in subsequent periods are
recognized using the tax rates and the tax laws that have been enacted
or substantively enacted by the Balance Sheet date. Deferred tax assets
are recognised only if there is virtual certainty of realisation of
such assets in future.
10. IMPAIRMENT OF ASSETS
Impairment losses, if any, on Fixed Assets including Revalued Assets,
are recognized in accordance with Accounting Standard 28 Impairment of
Assets issued in this regard by the Institute of Chartered
Accountants of India and charged to Profit and Loss Account.
11. PROVISIONS,CONTINGENT LIABILITIES AND CONTINGENT ASSETS
11.1 In conformity with Accounting Standard 29 Provisions,
Contingent Liabilities and Contingent Assets issued by the Institute
of Chartered Accountants of India, 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.
11.2 Contingent Assets are not recognized in the financial statements
since this may result in the recognition of income that may never be
12. EARNINGS PER SHARE
The bank reports basic and diluted earnings per equity share in
accordance with the AS 20 (Earnings Per Share) issued by the ICAI.
Basic earnings per equity share has been computed by dividing net
income by the weighted average number of equity shares outstanding for
the period. Diluted earnings per equity share has been computed using
the weighted average number of equity shares and dilutive potential
equity shares outstanding during the period.