Oriental Bank of Commerce

1) Registration / Execution of documents, in favour of the bank
 is yet to be completed, in respect of certain premises costing
 Rs. 14.79 crore (previous year Rs. 15.56 crore) for which
 adequate steps have been initiated.
 
 2) In the absence of information as to the realizable value of
 securities in certain advances, the value as per records has
 been considered.
 
 3) Interest accrued but not due on term deposits has been
 included under the relevant deposits.
 
 4) PROPOSED DIVIDEND
 
 Proposed Dividend for the year ended March 31, 2009 has been
 accounted for on declaration.
 
 5) PROVISION FOR TAXATIONS
 
 The provision for income tax net of MAT credit and write back,
 for the year Rs. 91.03 crores (previous year Rs.  264.71 crores)
 has been made as per the applicable enactments, judicial
 pronouncements and legal opinions.
 
 Income Tax Liability was hitherto provided by the bank
 considering valuation of investments other than Held to
 Maturity category on bucket basis, the valuation whereof has
 been changed during the year to scrip wise with effect from the
 assessment year 2008-09. This has resulted in writing back
 income tax provision of Rs. 147.02 crore pertaining to previous
 year.
 
 Pending final outcome of the appeals filed by the bank/
 bank/income tax authorities, disputed tax liabilities (including
 interest), for various assessment years, amounting to Rs. 97.53
 crore (previous year Rs. 296.19 crore) are shown in Schedule 12
 under Contingent Liabilities. The bank believes that these
 demands are largely unsustainable and will eventually be set
 aside.  Accordingly, no provision has been made against the said
 disputed liabilities and payments/adjustments to the extent made
 against these demands have been included in Schedule 11 under
 Other Assets as Income Tax Recoverable.
 
 6) Balancing of books, confirmation /reconciliation and
 clearance of outstanding entries in Suspense, Sundries Clearing
 Adjustment, Demand Drafts, Bills for Collection, Accounts with
 other Banks including NOSTRO accounts, Exchange Houses Accounts
 and Inter Branch account are in progress. Impact, if any, shall
 be accounted / adjusted on balancing/reconciliation thereof.
 However, Inter-branch accounts have been reconciled up to the
 period specified by Reserve Bank of India.
 
 d) The amount amortized during the year is Rs. 14.70 crore
 (previous year Rs.10.99crore) and the same has been accounted
 for in Schedule No. 13 under the head Interest Earned as
 deduction from Income on Investments.
 
 e) Provision for Depreciation on Investments:
 
 Provision for depreciation on investments under Available for
 Sale category as on March 31, 2009, is Rs.169.44 crore
 (previous year Rs. 58.59 crore).
 
 f) The Bank has transferred SLR Securities aggregating to Rs.
 1958.02 crore (previous year Rs. 2047.93 crore), from Available
 for Sale category to Held to Maturity category during the
 year in accordance with RBI guidelines. The Mark to Market
 depreciation of Rs. 122.07 crore (previous yearRs. 210.00
 crore), has been debited to Profit and Loss Account.
 
 g) The bank has invested Rs. 92.00 crores (previous year Rs.46
 crores) as their 23% Capital contribution in joint venture
 company for Life Insurance Business with Canara Bank & HSBC
 under the name and style Canara HSBC Oriental Bank of Commerce
 Life Insurance Company Limited. The Bank has classified the
 same under Held to Maturity category under the head Investment
 in Joint Ventures as the intention is to hold as Joint Venture
 Investment although the holding is less than 25% as per the RBI
 norms. In the opinion of the management the impact in the value
 of the said investments on account of initial losses is not
 permanent in nature and hence no provision is considered
 necessary.
 
 h) Securities utilized under Liquidity Adjustment Facility with
 RBI are excluded from investments.
 
 7) DERIVATIVES
 
 The Bank has not undertaken any derivative transaction; during
 the year except Foreign Exchange Forward Contracts.
 
 8) CHANGES IN ACCOUNTING POLICIES
 
 The bank hitherto has been accounting for interest or, overdue
 deposits at the time of renewal. During the year the bank has
 changed the accounting of such Interest on Overdue Deposits by
 making a provision at the rate of savings bank deposits and the
 balance overdue interest is accounted for at the time of
 renewal. Due to this change the Bank has provided for Rs. 83
 Crore and consequently the profit for the year is lower by Rs.
 83 Crore.
 
 9) During the year bank has revalued its premises including
 Freehold and lease hold land as at 30th September 2008 as per
 the valuation made by external valuers and also amount of Rs.
 987.25 crore being the appreciation on revaluation has been
 credited to the revaluation reserve and the depreciation of Rs.
 36.15 being the depreciaion for the year on the revalued assets
 has been debiteo the revaluation as at 31.03.2009. The amount of
 revaluation reserve has been considered for inclusion in the
 capital of the bank as prescribed.
 
 e) Provisions on Standard Assets:
 
 The cumulative provision towards Standard Assets held by the
 Bank as at the year end amounting to Rs.305.80 crore (previous
 year Rs. 258.80 crore) is included under Other Liabilities And
 Provisions in Schedule 5 to the Balance Sheet.
 
 f) Government of India has notified Agricultural Debt Waiver
 and Debt Relief Scheme, 2008 (scheme) for giving debt waiver to
 marginal and small farmers and relief to other farmers who have
 availed direct agricultural loans. The claim for agricultural
 debt waiver amounting to Rs.375.90 crore, lodged by the Bank
 subject to certification by statutory auditors of the Bank,
 Rs.154.12 Crore being 41% of the claim lodged has been
 reimbursed by RBI during the year ended 31st March 2009.
 
 In accordance with the scheme no effect has been given in the
 accounts in respect of the Debt relief scheme for the year ended
 31st March 2009.
 
 10) The Bank has made an adhoc provision of Rs. 110 crore during
 the year towards wage revision pending outcome of ongoing
 negotiations at industry level.
 
 11) COMPLIANCE WITH ACCOUNTING STANDARDS (AS) ISSUED BY THE
 INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA.
 
 a) Accounting Standard AS-5 - Net Profit or Loss for the Period,
 Prior Period Items and Changes in Accounting Policies:
 
 As Prior period items are not material, the same have been
 charged/accounted for in respective heads of accounts except in
 case of depreciation which is disclosed separately.
 
 b) Accounting Standard AS-9 - Revenue Recognition:
 
 As per Accounting Policy No. 1(b), certain items of income are
 recognized on cash basis on account of statutory requirements or
 materiality.
 
 c) Accounting Standard AS-15 - Employee Benefits:
 
 The Bank is following AS-15 (revised 2005) Employee Benefits.
 The defined employee benefit schemes are as under:-
 
 I.  Provident Fund
 
 The Bank pays fixed contribution to Provident Fund at
 predetermined rates to a separate trust, which invests the funds
 in permitted securities. The contribution to the fund for the
 period is recognized as expense and is charged to the profit &
 loss account. The obligation of the Bank is limited to such
 fixed contribution.
 
 II.  Gratuity
 
 (a) The Bank has a defined benefit gratuity plans for Officers
 who have joined / become Officer before 01/01/1983,
 
 (b) Other Officers and
 
 (c) Workman.
 
 Every Officer / workman who have rendered continuous services of
 five years or more is eligible for Gratuity, subject to a
 maximum of 20 months on superannuation, resignation,
 termination, disablement or on death. The scheme is funded by
 the bank and is managed by a separate trust. The liability for
 the same is recognized on the basis of actuarial valuation.
 
 III.  Pension.
 
 The bank has a defined benefit pension Plan. The plan applies to
 existing employees of the bank as on 29/09/1995 who have opted
 for the pension scheme and to all employees joining, thereafter.
 The scheme is managed by a separate trust and the liability for
 the same is recognized on the basis of actuarial valuation.
 
 IV) Other Defined Retirement Benefits (ODRB)
 
 Other Defined Retirement Benefits (ODRB) include settlement at
 home town for employees and dependents and post retirement
 medical benefit for CMD & ED These are unfunded and are
 recognized on the basis of actuarial valuation.
 
 The summarized position of various defined benefits recognized
 in the profit and loss account and balance sheet along with the
 funded status are as under:
 
 Note:
 
 1 The estimates of future salary increases considered in
 actuarial valuation, taken into account of inflation, seniority,
 promotion and other relevant factors, such as supply and demand
 in the employment market
 
 2 During the year provision has been made for LFC at Rs.19.24
 Crore (previous year Rs.8.20 crores) and Staff settlement
 expenses at Rs. 1.62 crores (previous year Rs. 1.53 crores),
 which are as per Actuarial Certificate.
 
 3 The effect of one percentage point change has not been
 disclosed since the material costs trend rates are not
 available,
 
 4 Impact of Employee benefits on the provision of Wage Revision
 has not been considered in the Actuarial Valuation However
 ad-hoc provision of Rs. 40 Crores on this account has been made
 for the year 2008-09.
 
 d) Accounting Standard AS-17 - Segment Reporting:
 
 i) The Bank has recognized Business segments as primary
 reporting segment and Geographical segments as secondary segment
 in line with RBI guidelines on compliance with Accounting
 Standard 17.
 
 I.  Primary Segments: Business segments.
 
 a) Treasury Operations
 
 b) Corporate / Wholesale Banking
 
 c) Retail banking
 
 d) Other banking business operations
 
 II.  Secondary Segments: Geographical segments.
 
 As the Bank is not carrying on any foreign operations, the only
 reportable geographical segment is of Domestic operations.
 
 a.  Treasury Operations: Treasury operations consist of dealing
 in securities and Money Market Operations
 
 b.  Corporate/Wholesale Banking : Includes all advances to
 trusts, partnership firms, companies and statutory bodies which
 are not included under Retail Banking
 
 c.  Retail Banking : The exposure upto Rs. 5.00 Crore to
 individual , HUF, Partnership firm ,Trust, Private Ltd.
 Companies, Public Ltd. Companies , Co-operative societies etc.
 or to a small business is covered under retail banking .Small
 business is one where average of last three years annual
 turnover (Actual for existing & projected for new entities) is
 less than Rs.50 crore.
 
 d.  Other banking business operations: Includes all other
 Banking operations not covered under Treasury, Wholesale Banking
 and Retail banking Segments.  Other banking business is the
 residual category.
 
 e) Accounting Standard AS-19 - Leases:
 
 a.  Finance Lease:
 
 The finance lease given prior to 1-4-2001 by the Bank costing
 Rs. 34.84 Lacs as at 1-4-2008 ceased to exist upon one time
 settlement of dues by the lessees during the year.
 
 b.  Operating Lease:
 
 The bank has taken various premises under operating lease with
 varying lease periods.
 
 h) Accounting Standard - 28 Impairment of Assets:
 
 The banks assets substantially comprise of financial assets,
 which are not covered by AS-28 Impairment of Assets. In the
 opinion of banks management there is no impairment in the value
 of its non financial assets in terms of said Accounting
 Standard.
 
 i) Accounting Standard - 29 on Provisions, Contingent
 Liabilities and Contingent Assets:
 
 Contingent Liabilities as stated in Schedule 12 to the accounts
 are dependent on the outcome of court cases / disposal of
 appeals filed before various authorities / out of court
 settlement and other development if any. No reimbursement is
 expected in respect of items Nos. (i) and (iv) of said schedule.
 
 k) Floating provisions
 
 The bank has made a floating provision of Rs. 72.00 crore at its
 discretion as per RBI guidelines.
 
 12) Amalgamation of erstwhile Global Trust Bank Ltd. with
 Oriental Bank of Commerce:
 
 The erstwhile Global Trust Bank Ltd. (eGTB) was amalgamated with
 the Bank as per the scheme of amalgamation notified by the
 Government of India, Ministry of Finance, Dept. of Economic
 Affairs (Banking Division) the Scheme. As per the Scheme, the
 business, properties, assets and liabilities of eGTB stand
 transferred to the Bank with effect from August 14, 2004, the
 prescribed date.
 
 The Bank has incorporated gross Not Readily Realisable
 Advances of Rs. 1,285.26 crore, a provision of Rs. 821.16 crore
 there against and Not Readily Realisable Assets comprising of
 Income-tax paid amounting to Rs 41.21 crore against disputed
 demands, in the books of the Bank along with assets and
 liabilities of eGTB as valued and determined in terms of the
 Scheme. The Bank has decided to maintain memorandum records for
 ascertaining the ultimate realization against the Not Readily
 Realizable Assets taken over. In the event of the ultimate
 realization from the Not Readily Realizable Assets, over and
 above the value at which they are taken over, exceeding the
 Excess of liabilities over assets taken over, the surplus after
 adjustment of expenses, etc. will be distributed to the
 erstwhile shareholders of eGTB after a period of twelve years or
 earlier as prescribed under the scheme.
 
 13.  Previous years figures have been re-grouped/re-arranged/
 recast wherever considered necessary.