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1.5 (0.58%)
2.75 (1.08%) | Notes to Accounts | Year End : Mar '12 |
1) In respect of certain premises costing Rs. 10.91 crores (previous year Rs. 11.71 crores), Registration / Execution of documents, in favour of the Bank are yet to be completed. However, adequate steps have been initiated to complete the formalities. Title deeds in respect of 3 properties costing Rs. 2.10 crores (previous year Rs2.10 crore) are yet to be collected from Registration office. 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 and saving has been included under the relevant deposits. 4) PROPOSED DIVIDEND Proposed Dividend @79% on the paid up capital has been provided for. This is subject to approval from Regulatory Authorities in pursuance of section 15 & 17 of Banking Regualation Act 1949. 5) PROVISION FOR TAXATION The provision for current income tax for the year is made on the basis of Minimum Alternate Tax (MAT) in accordance with section 115JB of the Income tax Act, 1961. Considering the future profitability and taxable position in subsequent years, the Bank has recognized MAT credit entitlement of Rs. 118 crores (Previous Year: Rs. Nil) as an asset by crediting Profit & Loss Account and disclosed under ''Other Assets''. The provision for current income tax for the year ended March 31, 2012 Rs.389.67 crores (previous year Rs. 550.94 crores) has been made considering applicable enactments, judicial pronouncements and legal opinions. Pending final outcome of the appeals filed by the bank/income tax authorities, disputed tax liabilities (including interest), for various assessment years, amounting to Rs. 389.59 crores (previous year Rs. 203.14 crores) 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. Note: - (1) Amounts reported under columns 4, 5, 6 and 7 are not mutually exclusive. (2) * Out of total investment of Rs. 2601.37 crore in Unrated securities, Rs.2514.51 crore is in exempted investment consisting of equity shares Rs. 548.51 crores, mutual fund of Rs. 37.00 crores, Rs. 1504.60 crore in certificate of Deposit, venture fund of Rs. 206.78 crore, security receipt of Rs. 33.62 crore & JV-INS Rs.184.00 crore, hence unrated investment is Rs. 86.86 crore (Rs. 71.86 crore preference share & Rs. 15.00 crore in Bonds & debenture) (3)**Total unlisted includes CD Rs. 1504.06 crore, CP Rs.72.92 crore, exempted investment (HFCL Bonds) Rs. 67.03 crore and JV Rs. 184 crore and RIDF of Rs. 7964.05 crore. (4)@ Includes RIDF Investment (Rs. 7964.05 crore in current year and Rs. 7470.64 crore in previous year respectively) d) In respect of investments under Held to Maturity category, the premium amount amortized during the year is Rs. 67.66 crores (previous year Rs. 92.97 crores) 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'' and ''Held for Trading'' categories as on March 31, 2012, is Rs. 358.89 crore (previous year Rs. 78.28 crore). f) The Bank has not transferred any Securities (previous year Rs. 1720.17 crores), from ''Available for Sale'' category to ''Held to Maturity'' category and transferred Rs. 2263.84 crores from ''Held to Maturity'' category to'' Available for Sale'' category (previous year Rs. 962.34 crores) during the year which is in accordance with the RBI guidelines. The Mark to Market depreciation on shifting of above mentioned securities was Rs. 4.53 crores (previous year Rs. 64.05 crores), and the same has been debited to Profit and Loss Account. Bank also transferred securities amounting to Rs. 0.85 crores (previous year Rs. 0.95 crores) from ''Held for Trading'' to ''Available for Sale'' category by booking depreciation of Rs. 0.20 crores (previous year Rs. 0.16 crores). g) During the financial year 2011-12 Bank has invested Rs. 23.00 crores (previous year Rs. 46.00 crores) towards capital contribution in joint venture Company for Life Insurance Business with Canara Bank and HSBC under the name and style of Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited. The total capital outstanding as on 31.03.2012 is Rs. 184.00 crores (previous year Rs. 161.00 crores), which amounts to 23% capital contribution by the bank. The said investment made by the Bank has been classified 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 required under RBI norms. In the opinion of the management the impact in the value of the said investment on account of initial losses is not permanent in nature and hence no provision is considered necessary. 6) DERIVATIVES The Bank has undertaken Derivative Transactions viz. Interest Rate Future, Currency Futures, Currency options and Interest Rate Swap (OIS) during the year. There is no outstanding in respect of Interest Rate Future and Interest Rate Swap (OIS) as on 31-3-2012. However, there is an outstanding position in currency future which is covered in interbank market as on 31-3-2012. Also, transactions under Foreign Exchange Forward Contracts have been undertaken on behalf of various clients and outstanding as on date is Rs. 38,138.88 crores (previous year Rs. 31,603.66 crores). c) Qualitative disclosure: Operations in the Treasury Department are segregated into three functional areas, i.e. Front Office, Mid Office and Back Office equipped with necessary infrastructure and trained Officers, whose responsibilities are well defined. The Treasury Policy of the Bank clearly lays down the types of financial derivative instruments, scope of usage, approval process. Derivative transactions contain interest rate risk, counterparty risk, market risk, currency risk, settlement risk, open position risk and operational risk. Treasury Policy clearly specify the internal control limits like open position limits, deal size limits, stop-loss limits, deal initiating authority for trading/hedging in approved instruments to contain the risk and maximize return on the derivative transactions. The mid office monitors the transactions in the trading books and also measures the financial risks for the transactions in the trading book on a daily basis by way of calculating Mark to market (MTM) of positions. Daily MTM position is reported to the Investment Committee. The Bank also has a policy for hedging its balance sheet exposures. The treasury policy of the Bank spells out the approval process for hedging the exposures. The hedged transactions are monitored on a regular basis. The hedging/trading transactions are recorded separately. The hedge transactions are accounted for on accrual basis. All trading contracts are market to market and resultant gross loss is accounted for ignoring the gain on a prudence basis. The Bank is Trading & Clearing Member of three exchanges viz. National Stock Exchange (NSE), MCX-SX Stock Exchange (MCX-SX), United Stock Exchange (USE) for currency futures /interest rate futures. The Bank undertakes proprietary trading in currency futures, interest rate futures & interest rate swaps. The Bank has set up the necessary infrastructure for Front, Mid and Back Office operations, daily mark to market (MTM) and margin obligations are settled with the exchanges as per guidelines issued by the regulators. Treasury Policy has been drawn up in accordance with RBI guidelines. The above figures include the effect of floating provisions of Rs. 72.00 crore made by the bank towards NPA portfolio of the Bank as on 31.03.2009 and the same is retained as on 31.03.2012. Net provision is arrived at after adjusting ECGC/DICGC claims setteled. The Provisioning Coverage Ratio (PCR) for the Bank as on 31.03.2012 is 61.52% (previous year 76.79%), which is calculated taking into account the total technical write offs . Provision includes provisions made above the prescribed rates where ever necessary. The cumulative provision towards Standard Assets held by the Bank as at the year end amounting to Rs.530.80 crores (previous year Rs. 372.80 croresj is included under Other Liabilities And Provisions in Schedule 5 to the Balance Sheet. f) Unsecured Advances: The advances amounting to Rs.1667.66 Crores as on 31.03.2012 (previous year Rs.1976.66 crores) are secured by way of charge of intangible securities such as rights, licenses, authority etc. In the views of the management, the estimated values of such intangible securities charged to the bank as collateral are at least equal to the outstanding amount. h) Off-Balance Sheet SPVs sponsored (domestic & overseas) - Nil i) In terms of RBI circular DBOD. BP. BC.80/21.04.018/ 2010- 11 dated 09.02.2011, the Bank has opted to amortise pension liability with respect to second pension optees for a period of 5 years commencing from FY 2010-11. Accordingly, out of the balance unamortized amount of Rs 683.60 crore as on 01.04.2011, the Bank has amortised Rs 170.90 crore being amount for the year ended 31.03.2012. j) RIDF deposits placed by the Bank with NABARD/SIDBI/NHB which were hitherto being grouped under Deposits with Banks (schedule 7- Balance with banks and Money at call & Short Notice at item (i)(b)) has now been regrouped under Schedule 8- Investments in the Balance Sheet at item I (vi)- Others amounting to Rs. 7964.05 crore (Previous Year Rs. 7470.64 crore) in accordance with extant RBI guidelines. Accordingly, income on said deposits which was hitherto being grouped under Schedule 13 Interest Earned at item 13(iii)- Interest on Balance with RBI & Inter Banks funds, has now been regrouped under Schedule 13 Interest Earned at item 13(ii)- Income on Investment, amounting Rs. 378.46 crores (Previous Year Rs. 322.93 crores). 7) Disclosure of Penalties imposed by RBI: During the year a sum of Rs.63,359/- has been imposed on the Bank as penalty by RBI. 8) 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: Prior period expenses included in Other Expenditure under schedule 16 is Rs.2.47 crore (previous year 7.14 Crores). Prior period income included in Other Income under schedule 14 is Rs.0.49 crore (previous year Rs.3.30 Crores). 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 The Bank has a defined benefit gratuity plans for Officers who have joined / become Officer before 01/01/1983, Other Officers and 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: The estimates of future salary increases considered in actuarial valuation, takes into account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. During the year provision has been made for LFC at Rs.1.43 crore (previous year Rs. 1.17 Crore) and Staff settlement expenses at Rs. 0.13 crore (previous year NIL), which are as per Actuarial Certificate. However, outstanding for LFC is at Rs.22.73 crore (previous year Rs. 20.96 Crore) and Staff settlement expenses at Rs.2.44 crore (previous year Rs. 1.77 crore) Plan Assets of the Pension & Gratuity fund include amounts of Rs. 591.24 crore and Rs.126.63 crore respectively invested by the trust in the Bank''s own Bonds/Deposits. d) PENSION During the Financial Year 2010-11, the Bank has reopened the pension option for its employees who had not opted for the pension scheme (II Pension option). As a result of exercise of which the bank has incurred a liability of Rs. 854.50 Crores in respect of the existing employees. The Reserve Bank of India has issued a circular no. DBOD.BP.BC.80/21.04.018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment, dated 9th February 2011. In accordance with the provisions of the said Circular, the Bank may amortise the amount of pension over a period of five years for second pension optees who are existing employees of the Bank. Accordingly, the Bank has charged the following to the profit and loss account with respect to II pension liability of the existing employees: e) Accounting Standard AS-17 - Segment Reporting: i) The Business Segments, which is the Primary Segment include: - Treasury Operations - Corporate / Wholesale Banking - Retail banking - Other banking business operations ii) The Geographical segments are recognized as the Secondary Segment. As the Bank is not carrying on any foreign operations, the only reportable geographical segment is of Domestic operations. - Treasury Operations: Treasury operations consist of dealing in securities and Money Market Operations - Corporate / Wholesale Banking: Includes all advances to trusts, partnership firms, companies and statutory bodies which are not included under Retail Banking - Retail Banking: The exposure up to Rs. 5.00 Crores 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 crores. - 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. iii) The segment revenue from treasury operations is shown after interest on average inter-segment funds used in Treasury Operations. The interest has been charged at the rate of Cost of Funds i.e. percentage of total interest expended to average working funds for the year. g) Accounting Standard AS-19 - Leases: The Bank has taken various premises under operating lease with varying lease periods. There are no potential equity shares (convertible bonds) outstanding and as such the Diluted Earning per Share is same as Basic Earning per share. i) Accounting Standard 22 -Accounting for Taxes on Income: The bank has complied with the requirements of AS 22 on Accounting for Taxes on Income issued by ICAI and accordingly deferred tax assets and liabilities are recognized. The net balance of deferred tax asset as on 31.03.2012 amounting to Rs 34.00 crores (Previous year Deferred tax asset Rs. 41.00 crores) consists of following: j) Accounting Standard - 28 Impairment of Assets: The bank''s assets substantially comprise of financial assets, which are not covered by AS-28 ''Impairment of Assets''. In the opinion of bank''s management there is no impairment in the value of its non financial assets in terms of said Accounting Standard. k) Accounting Standard - 29 on Provisions, Contingent Liabilities and Contingent Assets: Contingent Liabilities as stated in Schedule 12 [clause (i) and (vi) ]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 (vi) of said schedule. 9) Fees/ Remuneration received in respect of bancassurance business undertaken by the Bank is Rs.18.14 Crores. (previous year Rs.36.99 Crore) 10) 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 crores, a provision of Rs. 821.16 crores there against and Not Readily Realisable Assets comprising of Income-tax paid amounting to Rs 41.21 crores 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. Not Readily Realizable Assets as on 31.03.12 is Rs 10.11 crores (Advances Rs 1.03 crores, other Assets Rs 9.08 crores), previous year figures Rs 16.69 Crores (Advances Rs 7.61 crores, other Assets Rs 9.08 crores). The outstanding NRRAs are fully provided for by the Bank. Net Deficit under the scheme of amalgamation as on 31.03.12 is Rs 829.59 crores previous year figures Rs 858.70 Crores 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. 11) Previous year''s figures have been re-grouped/re- arranged/recast wherever considered necessary. |
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| Source : Dion Global Solutions Limited | |
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