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
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
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
(1) Amounts reported under columns 4, 5, 6 and 7 are not mutually
(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
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.
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
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
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
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
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.
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
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
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:
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
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.
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
g) Accounting Standard AS-19 - Leases:
The Bank has taken various premises under operating lease with varying
There are no potential equity shares (convertible bonds) outstanding
and as such the Diluted Earning per Share is same as Basic Earning per
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 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
10) Amalgamation of erstwhile Global Trust Bank Ltd. with Oriental Bank
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
11) Previous year''s figures have been re-grouped/re- arranged/recast
wherever considered necessary.