UCO Bank

1.Reconciliation of entries outstanding has been drawn upto 31.03.2009
 in case of Inter-Branch Accounts and in Inter-Bank Accounts.
 Elimination of entries outstanding in Inter-Bank Accounts including
 Reserve Bank of India, State Bank of India, NOSTRO Accounts etc. and in
 Inter-Branch Accounts viz. drafts, suspense, branch adjustment,
 clearing transactions, fund transfers, telegraphic trans- fers,
 balances pertaining to advances paid for acquisition of assets, sundry
 creditors etc. is in progress. In the opinion of the bank,
 consequential effect of the above on the revenue/assets/liabilities
 will not be material.
 
 Segregation of debit and credit entries in Inter-Branch Account
 pertaining to the period upto 30.09.2008 and remaining outstanding as
 on 31.03.2009 has been done in terms of Reserve Bank of Indias
 guidelines.
 
 2.a) The Bank has during the year restructured its Capital as per
 Capital Restructuring Plan approved by the Government of India (GOI).
 In accordance with the plan a sum of Rs. 250 crore out of the equity
 shares held by GOI in the total equity capital of Rs.  799.36 crore has
 been converted into Perpetual Non-Cumulative Preferences Shares (PNCPS)
 on 22.12.2008 thereby reducing the total equity share capital of the
 Bank to Rs.549.36 crore and consequential reduction in the shares held
 by GOI from 74.98% to 63.59%.
 
 b) As per the plan, GOI will be subscribing a sum of Rs.1200 crore in
 innovative type capital instruments of the Bank in two tranches of
 Rs.450 crore and Rs. 750 crore during the years 2008-09 and 2009-10
 respectively to strengthen the capital base of the Bank. During the
 year, the Bank has received Rs.450 crore on 30.03.2009 and accordingly
 allotted PNCPS to the GOI.  PNCPS carry an annual floating coupon to
 the benchmark to Repo rate with a spread of 100 basis points to be
 reset annually
 
 c) During the year the Bank has raised subordinated debt of Rs. 275
 crore (Rs.420 crore) by issue of unsecured redeemable bonds of Rs.275
 crore (Rs. 100 crore) under Tier II Capital and unsecured redeemable
 bonds of Rs. Nil (Rs. 320 crore) under Upper Tier II Capital. This is
 in addition to Rs.3250.15 crore (Rs.2830.15 crore) raised in earlier
 years. The same (net of redemption is included under Other Liabilities
 & Provisions - Others in schedule 5 of the Balance Sheet. The Bank has
 redeemed Rs.l 50 crore (Rs.150 crore) of subordinated debt instruments
 under Tier II Capital during the year.
 
 3.a) Premises of the Bank situated outside India were revalued as on
 31.03.1995 and premises situated in India were revalued as on
 31.12.1995 on fair market value as determined by independent qualified
 valuers and an amount of Rs.363.04 crore was credited to Revaluation
 Reserve. The premises of the Bank situated in India as well as outside
 India were again revalued as on 31.03.2005 by independent qualified
 valuers at fair market value and consequently a sum of Rs. 206.80 crore
 was credited to Revaluation Reserve during the year 2005-06. As of
 01.07.2008 the Bank has once again revalued a part of the premises held
 by Singapore branch based on the valuation report of independent
 qualified valuers and credited a sum of Rs. 17.33 crore to Revaluation
 Reserve during the year 2008-09.
 
 Subsequent to revaluation, Assets valued at Rs.l 2.63 crore have been
 disposed of. Net Aggregate amount of revaluation Reserve credited on
 such revaluation after considering disposal of revalued Assets stands
 at Rs.574.54 crore as on 31.03.2009.
 
 b) Premises include Assets with Written Down Value of Rs. 3.10 crores
 (Rs. 3.28 crores) which were revalued at Rs. 24.30 crores (Rs. 24.57
 crores) in respect of which documentation / registration is pending.
 
 c) Estimated amount of contracts (net of advance) remaining to be
 executed on capital account and not provided for Rs. 13.62 crores (Rs.
 2.43 crores).
 
 d) Accounting of operating leases has been done in compliance with
 Accounting Standard (AS)-19 issued by the Institute of Chartered
 Accountants of India (ICAI) but the amount not being ascertained,
 disclosure of information as required in the Accounting Standard has
 not been done.
 
 4.In the opinion of the Bank, there is no material impairment of
 tangible Assets of the Bank in terms of AS- 28 issued by the ICAI.
 
 5. a) The Bank has Credit Linked Notes (CLNs) aggregating to Rs.
 1047.92 crore, participated through their Overseas branches at
 Singapore and Hong Kong and classified under the category loans and
 advances and has made provisions as required for Standard Assets under
 Advances. However, in Singapore such assets need to be treated as
 financial instrument for local reporting in Singapore. Clarification on
 the issue of classification in India has been sought from RBI by the
 management which is still awaited.
 
 b) The above CLNs include Rs 101.44 crore (as per FEDAI revaluation
 rate as on 31.3.2009) issued by an overseas entity which has filed
 bankruptcy petition. The bankruptcy of the issuer of the CLN is one of
 the Events of Default and the issuer has to thereupon deliver the FCCBs
 to the CLN holder. Bank has lodged claim with the Bankruptcy Trustee
 for the underlying FCCBs issued by the reference entities which are of
 good rating and financial standing. Bank as an abundant precaution has
 made provision of Rs. 50 crore during the year against these CLN and
 continues to recognise this as Standard Advance.
 
 6. There is no material prior period item included in Profit & Loss
 account required to be disclosed as per AS 5 issued by ICAI read with
 RBI guidelines.
 
 7. As the Bank does not have Subsidiaries or controlling interest in
 Associates/Joint Ventures, AS 21 relating to Consolidated Financial
 Statements, AS 23 relating to Accounting for Investments in Associates
 in Consolidated Financial Statements and AS 27 relating to Financial
 Reporting of Interest in Joint Ventures issued by the ICAI are not
 applicable to the Bank.
 
 9. Based on various appellate decisions on identical issues / pending
 approval of Committee on Disputes for pursuing appeals, disputed demand
 of Income Tax, Penalty, Interest and Interest Tax amounting to Rs.
 362.49 crore (330.38 crore) has been shown in Schedule 1 2 under
 Contingent Liability. No provision has been considered necessary by the
 Management as the matters are pending for appeal before various
 competent Authorities and payments/adjustment of Rs.173.76 crore
 (Rs.130.18 crore) has been included in Other Assets in Schedule 11.
 
 10. During the year an amount of Rs. 6.32 crores (Net) (Rs. Nil) has
 been recognised as Deferred Tax Asset as per accounting standard AS-22.
 However, DTA on carried forward loss as per return to the extent of Rs.
 344.65 crores which have not been accepted by the IT Department and
 Bank has gone for appeal, has not been recognised on account of
 prudence.
 
 11.  a) In accordance with the Guidance Note on Accounting for credit
 available in respect of MAT under the Income Tax Act, 1 961 issued by
 the ICAI, the MAT credit for the current year amounting to Rs. 74.22
 crore (Rs 91.20 crore) has been credited to P&L Account under
 Provisions and Contingencies by debiting MAT credit entitlement
 Account since the management is of the opinion that the MAT credit can
 be set off during the specified period as per the Provisions of the
 Income Tax Act, 1961.
 
 12.1.3.3 Disclosures on risk exposure in derivatives
 
 Qualitative Disclosures
 
 i) The Structure and organization for management of risk in derivatives
 transactions.
 
 The organization structure consists of Investment Wing at the Corporate
 level which report to the Executive Director and Chairman & Managing
 Director and ultimately to the Board. Risk Management Department is
 informed of the transactions as and when they take place.
 
 The scope and nature of risk measurement, risk reporting and risk
 monitoring systems.
 
 The Interest Rate Swap (IRS) transactions undertaken by the Bank are
 for hedging and trading purposes. Derivative as a product is also
 offered to the customer as per RBI norms. Such transactions are
 undertaken as per banks policies formulated based on RBI guidelines.
 
 The risk is measured in the interest rate derivative transactions
 depending on the movement of benchmark interest rates for the remaining
 life of the interest rate swap contracts. All interest rate derivative
 transactions are included for the purpose of risk measurement. The risk
 is evaluated and reports are placed to the CMD/ED daily and Board
 periodically. Risk is monitored based on the mark to market position of
 the interest rate derivative transactions.
 
 iii) Policies for hedging and /or mitigating risk and strategies and
 processes for monitoring the continuing effectiveness of hedges /
 mitigates.
 
 IRS is undertaken on the actual interest bearing underlying assets or
 liabilities. The notional principal amount and maturity of the hedge
 does not exceed the value and maturity of underlying asset/liability.
 The risk is monitored on the mark to market basis of the outstanding
 interest rate swap contracts and accordingly the effectiveness of the
 hedge is determined.
 
 iv) Accounting policy for recording hedge and non-hedge transactions;
 recognition of income, premiums and discounts; valuation of outstanding
 contracts; provisioning, collateral and credit risk mitigation.
 
 The IRS transactions for hedging purpose are accounted for on accrual
 basis and trading position on actual basis. Collateral required upon
 entering into IRS is Nil. Notional principal amount of IRS multiplied
 by the relevant conversion factor and the respective risk weight of the
 counter party has been taken into account for determining the capital
 requirements.
 
 Other Disclosures for Interest Rote Swaps
 
 The Bank has undertaken fixed to floating, floating to fixed and
 floating to floating interest rate derivatives on underlying assets and
 liabilities. The loss of income on the above IRS will be Rs 324.73
 crores (Rs. 50.92 crores), in case counter-parties fail to fulfill
 their obligations. There is no concentration of credit risk arising
 from IRS transactions undertaken as the counter-parties are banks and
 the exposure is within the exposure limit permitted.
 
 12.1.4.2 a) Additional disclosures regarding restructured accounts
 
 12.1.4.2 b) Out of the applications received for restructuring upto
 31st March, 2009, 41149 applications for restructuring of advances
 aggre- gating to Rs. 1895.37 crore, were pending as on the date of th
 Balance Sheet. As audit of most of the branches had been com pleted,
 these advances could not be verified in terms of RBI Circu lar dated 1
 7th April, 2009. In the opinion of the management, all these advances
 were standard as on 31st March, 2009. However, the bank has made an
 ad-hoc provision of Rs. 40 crore in respect of the above.
 
 12.1.4.6 Pursuant to RBI guidelines dated 22.08.2008, Bank has provided
 interest on Overdue Fixed Deposit Receipts (ODFDR) at Savings Bank rate
 for the overdue period amounting to Rs.37.73 crores during the year.
 
 12.1.4.7 Pending wage settlement (due from 1.11.2007) Bank has provided
 for salary arrears of Rs 150 crore during the year on provisional
 basis.
 
 12.1.7.5 Reserve Bank of India has not imposed any penalty on the Bank
 u/s 46(4) of the Banking Regulation Act, 1949.
 
 Group Borrower Limit exceeded by the Bank - NIL
 
 13.  a) During the year there was transfer of securities from Avail-
 able For Sale (AFS) to Held To Maturity (HTM) of Rs.  2536.61 crores.
 Depreciation amounting to Rs. 105.81 crore (Net of provision already
 held when in AFS cat egory) has been charged to the Profit & Loss
 Account.  During the same period securities worth Rs. 955.06 crores was
 transferred from HTM to AFS.
 
 b) During the year ended March 31, 2008, the Bank changed its
 accounting policy on amortization of premium on investments in the HTM
 category from straight line basis to effective interest method and this
 change in policy had resulted in the profits before tax being higher by
 Rs. 60.70 crores for the year ended March, 2008 and Rs. 2.09 crores for
 the year ended March, 2009. The calculations for amortizing the premium
 have been done using the quarterly compounding basis instead of daily
 compounding, impact of this is not ascertainable
 
 14.  As required by the Reserve Bank of India (RBI) general
 clarification dated Julyl 1, 2007, during the year the Bank has
 deducted the amortization of premium on investments, held in the Held
 to Maturity (HTM) category, amounting to Rs. 122.42 crores (previous
 year Rs. 44.79 crores ) from Income on Investment included in
 Interest Earned.
 
 15.  Break up of provision held against non-performing advances into
 facility-wise, security-wise and sector-wise is not ascertained. The
 same is deducted on estimated basis from gross advances in the various
 categories to arrive at the balance of net advances as stated in
 Schedule 9 of the Balance Sheet.
 
 16.  Disclosure in terms of Accounting Standard 29 issued by the
 Institute of Chartered Accountants of India - Provisions, Contingent
 Liabilities and Contingent Assets
 
 b) Contingent Liabilities
 
 Such liabilities as mentioned at Serial No. (I) of Schedule 12 of
 Balance Sheet are dependent upon the judgement of court, arbitration
 award, out of court settlement, disposal of appeals, the amount being
 called up, terms of contractual obligations, devolvement and raising of
 demand by concerned parties, respectively.
 
 17. AS - 15 -Employee Benefits
 
 Provision for Employee Benefits viz. Pension, Gratuity, Leave
 Encashment, Sick Leave, LFC/LTC, Medical benefits to retired and in
 service Directors and their family members etc. has been made as per
 Revised Accounting Standard (AS) -15. In terms of Limited Revision to
 AS- 15 Employee Benefits (Revised 2005) and guidelines notes thereon,
 the Bank has decided to recognise the increase in transitional
 liability over the liability that could have been recognised as per the
 Pre Revised AS-15 as on 31.03.2007 as an expense on a straight-line
 basis over 5 years from financial year 2007-08. In addition to Rs.l
 18.07 crores (Rs.71.97 crores) charged to Profit & Loss Account towards
 current years liability, Rs.88.68 crores (Rs.88.68 crores) has been
 charged to Profit & Loss Account towards amortisation of the increase
 in liability. The un-amortised portion of the increase in liability on
 account of Revised AS-15 is Rs.266.06 crores (Rs.354.75 crores) as on
 31.03.2009.
 
 18. Agricultural Debt Waiver & Debt Relief Scheme-2008 (ADWDR-2008)
 
 In terms of the notification of Government of India for implementation
 of Agricultural Debt Waiver and Debt Relief Scheme - 2008, the Scheme
 for Debt Waiver to Small and Marginal farmers and Debt Relief to Other
 Farmers was implemented in the Bank. The preliminary claim, duly
 certified by the Central Statutory Auditors of the Bank for Rs. 525.28
 crore was lodged by the Bank with RBI.  Rs. 215.36 crore being 41% of
 the claim lodged has been reimbursed by the 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 to Other
 Farmers for the year ended 31st March, 2009.
 
 19. The bracketed figures indicate previous years figures. Previous
 years figures have been re-grouped /re-arranged/re-cast wherever
 considered necessary.
 
 Capital Structure
 
 Qualitative Disclosures
 
 (a) Summary information of all Capital instruments
 
 1. Perpetual Non-Cumulative Preference Shares (PNCPS) eligible for
 inclusion in Tier-1 Capital
 
 The Bank restructured its Capital by converting Rs.250.00 crore out of
 Govt, of Indias (GOI) total Equity holding of Rs.599.36 crore into
 PNCPS of Rs.250.00 crore w.e.f. 22.12.2008. These PNCPSs are in
 perpetual nature carrying an annual floating coupon benchmarked to Repo
 rate plus spread of 100 bps which will be reset annually based on the
 prevailing Repo rate on the relevant date.
 
 GOI further agreed to subscribe a sum of around Rs.1200.00 crore in
 innovative Tier-1 Capital instruments of the Bank in two tranches of
 Rs.450.00 crore and Rs.750.00 crore during the years 2008-09 and
 2009-10 to strengthen the Banks Capital Base.  Accordingly Bank has
 received Rs.450.00 crore on 30.3.2009 and allotted PNCPS to GOI. These
 instruments are perpetual in nature and carry an annual floating coupon
 benchmarked to Repo rate plus spread of 100 bps which will be reset
 annually based on the prevailing Repo rate on the relevant date.
 
 2. Innovative Perpetual Debt Instruments eligible for inclusion in
 Tier-1 Capital
 
 The Bank has so far raised Unsecured Non-Convertible Subordinated
 Perpetual Bonds in the nature of Promissory Notes to the tune of Rs.
 380.00 crores for augmenting the Tier-1 Capital for strengthening the
 Capital Adequacy and enhancing long-term resources of the Bank. The
 Bonds were issued in Dematerialized Form and rated by two rating
 agencies and presently carry AA- except one rating agency who has
 assigned A rating. Face Value and Issue Price per bond is Rs.
 10,00,000/- and minimum application size was one bond and in multiples
 of one bond thereafter. There was no put option, but call option is
 there at par at the end of 10th year from the deemed dates of allotment
 with the prior approval of RBI and step up coupon after ten years if
 call option is not exercised at the end of 10th year from the deemed
 date of allotment. The interest is to be paid semi-annually subject to
 RBI norms. These are listed on the Wholesale Debt Market (WDM) segment
 of the National Stock Exchange of India Limited (NSE).
 
 3. Subordinated Upper Tier-2 Debt Instruments eligible for inclusion in
 Tier-2 Capital
 
 The Bank has so far raised Unsecured Redeemable Non-Convertible
 Subordinated Upper Tier-2 Bonds in the nature of Promissory Notes to
 the tune of Rs. 1,120.00 crore for augmenting the Tier-2 Capital for
 strengthening the Capital Adequacy and enhancing long term resources of
 the Bank. The Bonds were issued in Dematerialized Form and rated by two
 rating agencies and presently carry AA- except one rating agency who
 has assigned A rating. Face Value and Issue Price per bond is Rs.
 10,00,000/- and minimum application size was one bond and in multiples
 of one bond thereafter. There was no put option, but call option is
 there at par at end of 10th year from the deemed date of allotment. The
 interest is to be paid semi-annually subject to RBI norms. The Upper
 Tier-2 instruments are subjected of progressive discount for capital
 adequacy purposes as they approach maturity as in the case of long term
 subordinated debt over the last five years of their tenor. These are
 listed on the Wholesale Debt Market (WDM) segment of the National Stock
 Exchange of India Limited (NSE).
 
 4.  Subordinated (Lower Tier-2) Debt Instruments eligible for inclusion
 in Tier-2 Capital
 
 The Bank has so far raised Unsecured Non-Convertible Subordinated
 Tier-2 Bonds in the nature of Promissory Notes to the tune of Rs.
 2025.15 crores for augmenting the Tier-2 Capital for strengthening the
 Capital Adequacy and enhancing long term resources of the Bank. The
 first three series aggregating Rs.450.15 have already been redeemed
 (Rs.150.15 crore Series I redeemed on 30.6.2006, Rs.150.00 crore
 Series-ll redeemed on 7.4.2007 and Rs.150.00 crore Series-Ill redeemed
 on 8.5.2008 respectively). The outstanding bonds are in Dematerialized
 Form only. Of these subordinated bonds, one series was rated by only
 one rating agency and all other series were rated by two rating
 agencies and presently carry AA rating except one rating agency who
 has assigned A. There was no put option and no call option. The
 interest is to be paid on annual basis in case of first three series
 outstanding and for the remaining series interest is to be paid
 semi-annually. These carry fixed maturity and as they approach maturity
 they are subjected to progressive discount. Instruments with an initial
 maturity of less than five years or with a remaining maturity of one
 year are not to be included as part of Tier-2 Capital. These are listed
 on the Wholesale Debt Market (WDM) segment of the National Stock
 Exchange of India Limited (NSE).
 
 Capital Adequacy
 
 Qualitative Disclosure
 
 (a) Board is apprised periodically of Banks plan for raising different
 Capital instruments needed for supporting current activities and future
 activities. This is also reviewed periodically by the Board.
 
 Credit Risk: General Disclosures
 
 1) Post Due and Impaired Accounts (for accounting purpose) :
 
 In terms of Banks NPA Management Policy duly approved by the Board of
 Directors, an asset is treated as Past due/impaired asset where
 
 (i) Interest and/or instalment of principal remain overdue for a period
 of more than 90 days in respect of a term loan.
 
 (ii) The account remains out of order for a period of more than 90
 days as given in para below, in respect of an overdraft/ cash credit
 (OD/CC).
 
 (iii) The bill remains overdue for a period of more than 90 days in the
 case of bills purchased and discounted.
 
 (iv) The instalment of principal or interest thereon remains overdue
 for two crop seasons for short duration crops.
 
 (v) The instalment of principal or interest thereon remains overdue for
 one crop season for long duration crops.
 
 An account is considered out of order when -
 
 i. The outstanding balance remains continuously in excess of the
 sanctioned limit/drawing power.
 
 ii. The balance outstanding is less than the sanctioned limit/drawing
 power but there are no credits continuously for 90 days or the credits
 are not sufficient to cover the interest debited.
 
 2. Banks Credit Risk Management Policy :
 
 Banks Credit Risk Management practices are based on policy directives
 duly approved by the Board which, inter-alia, encompass the following :
 
 i) Credit Risk acquisition - strategies & policies
 
 ii) Credit approval processes
 
 iii) Credit Administrative measurement and monitoring processes
 
 iv) Credit Risk control processes
 
 Board of Directors has over all responsibility for management of Credit
 risk and Risk Management Committee of the Board is responsible for
 settina up auidelines for Credit Risk management and reporting,
 ensuring that Credit Risk Management processes conform to the basis.
 
 Credit Risk Management Department of the Bank enforces and monitors
 compliance of the risk parameters and prudential limits set by the
 Bank. They also lay down risk assessment system, monitor quality of
 loan portfolio, identify problems and correct deficiencies, develop MIS
 for the purpose including portfolio evaluation. Credit Risk Management
 Department is independent of Credit Processing & Credit Administration
 Departments.
 
 Assessment of Credit Risk is done through rating of credit accounts.
 The bank has a system of rating all accounts (excepting those under
 schematic lending) having exposure of Rs.25 lacs and above. Bank tracks
 rating migration and has developed internal default rates across
 rating. The mapping of default rates is also carried out with default
 rate of established rating agencies.
 
 The bank makes all possible efforts to mitigate risks associated with
 credit accounts through suitable collaterals or guarantors wherever it
 is considered feasible and desirable. In addition to that, terms and
 conditions under which credit is sanctioned also go a long way to
 mitigate risks associated with credit. Regular monitoring and control
 of accounts also add to the risk mitigation. In order to mitigate risk,
 the Bank has taken necessary cover for eligible accounts from Export
 Credit Guarantee Corporation and Credit Guarantee Fund Trust for Micro
 and Small Enterprises.
 
 TABLE DF-5
 
 Credit rating accorded by the following credit rating agencies has been
 used in assigning credit rating to our credit accounts under
 standardized approach:
 
 1) CARE
 
 2) CRISIL
 
 3) FITCH
 
 4) ICRA
 
 Listed in alphabetical order)
 
 There has been no change in the credit rating agencies used for the
 purpose.
 
 Rating agencies have rated corporate exposures.
 
 In assigning rating to accounts based on public issue rating given by
 the abovementioned rating agencies, bank has followed the guidelines of
 Reserve Bank of India communicated under their communication dated 27th
 April, 2007.
 
 TABLE DF-6
 
 Credit Risk Mitigation
 
 Qualitative disclosure:
 
 (a) Policies and processes for collateral valuation and Management
 
 As a banker we are concerned with market value of the property that can
 be expected from a buyer if the property is put to sale. So valuation
 is made by Asset Valuation Methodology which takes into consideration
 the market value of tangible assets taken as security.
 
 Method of valuation of various types of securities :
 
 (i) Valuation of Land and Building
 
 All landed properties must be valued by registered valuers who are in
 the current empanelled list of bank. The value of the land will be
 assessed separately and would be compared with valuation on record by
 Govt. Authorities including Municipal Bodies. Construction on the said
 land would be valued separately and compared with value of insurance
 taken to cover the said property.
 
 i) Nature of construction
 
 ii) Age of the building and its present strength
 
 iii) Rental yield
 
 iv) Tax amount assessed/paid
 
 v) Area of land and building
 
 vi) Cost of construction
 
 vii) Value of site
 
 Where 1he valuation of property exceeds Rs. 50 lakhs, a confirmation of
 second valuer should be obtained.
 
 The immovable properties charged to the bank should be got valued once
 in 3 years by registered valuers who are in the current empanelled list
 of bank.
 
 The properties mortgaged to the bank should be got adequately insured
 with Bank clause against the risk fire, riot and other probable hazards
 
 (ii) Valuation of Movable Properties:
 
 In valuation of hypothecated/pledged assets, basis of valuation is
 invoice price or market price whichever is lower.
 
 (iii) Valuation of Shares :
 
 Market value is calculated as below :
 
 a) Current market price of the share
 
 b) Average of high and low prices of security during last 52 weeks
 whichever is lower. In case of units of mutual funds (only Master Share
 has been included in the approved list) Net Asset Value
 (NAV)/Repurchase price or the market price, whichever is less, has to
 be taken.
 
 (iv) Valuation of LIC Policy:
 
 Present surrender value of the policy.
 
 Whatever security is obtained, care should be taken to see that it is
 adequately charged and all necessary legal formalities are completed so
 that it can be realized without any difficulty, whenever an emergency
 arises. Moreover, during the lifetime of an advance constant watch over
 the security is necessary.
 
 (b) Main types of collateral taken by Bank are -
 
 Equitable Mortgage/ Registered Mortgage of immovable properties like
 land and building.
 
 ii) Hypothecation of movable fixed assets like plant & machinery
 furniture/fixtures.  Pledge of shares/debentures/equities/units of
 Mutual Funds
 
 iv) Assignment of LIC Policies
 
 v) Lien over Banks own Fixed Deposit receipts
 
 vi) Pledge of NSCs / KVPs
 
 
 (c) The main types of guarantor counterparty and their credit
 worthiness Normally Bank insists on following types of guarantor
 counterparty-
 
 i) Personal guarantee of partners/non-professional directors/third
 parties,
 
 ii) Corporate Guarantee
 
 iii) Guarantees of State Government
 
 The bank may also obtain guarantees at its discretion from
 parent/holding company when credit facilities are extended to borrowing
 units in the same group.
 
 When personal guarantees are warranted, they should bear reasonable
 proportion to the estimated worth of the person.
 
 (d) Information about credit risk concentrations within the mitigation
 taken -
 
 In order to mitigate the credit risks, exposures are collateralized in
 whole or in part by cash, securities, deposits from the same
 counterparty, guarantee of a third party.
 
 Market risks arise from movements in market prices which are mitigated
 through sales contracts, consumer financing, buy back clause and
 deficiency agreement.
 
 Quantitative disclosure:
 
 Total exposure covered by eligible financial collaterals after
 application of haircut under Standardized Approach - Rs. 7,780 crore
 
 TABLE DF-8
 
 Market Risk in Trading Book
 
 Qualitative Disclosure :
 
 1.  Objective & Policies:
 
 To limit the market risk in Investment and Forex Instruments. For this
 the Bank adopted policies approved by the Board for Domestic as well as
 Overseas Branches.
 
 2.  Strategies and Processes:
 
 Policy provides various limits on exposures. Local ALCO Committee of
 overseas centers takes care of strategies and processes as per approved
 policy for overseas centers.
 
 3.  Structure and organization of the relevant risk management
 function:
 
 Investment decisions are taken by Corporate Investment Committee
 comprising of Executive Director, General Managers of Flagship
 Corporate Credit, Mid Corporate, Finance and Treasury Branch, Mumbai.
 At overseas centers local committee under Chief Execu- tives of the
 Centres takes decision as per guidelines approved by the Board. The
 bank has front office, mid office and back office for strict functional
 segregation. Risk Management Department at Head Office performs the
 function of mid office for overall portfolio.  
 
 4. Periodic Reporting of full details of Banks exposure undertaken by
 the domestic and overseas branches are sent to Head Office.  Quarterly
 reporting with evaluation of risks are also made. Any breaches from
 various prudential and other limits fixed by the Bank are also referred
 to H.O for necessary approval.
 
 5. Policies for hedging and/or mitigating risk and strategies and
 processes for monitoring the continuing effectiveness of hedge/s
 mitigants:
 
 The Banks policy is to maintain near square position in forex. However
 various limits like daylight, overnight in respective currencies as
 well as overnight open position limit in Indian rupees for the bank as
 a whole have been fixed and the same is monitored through periodic
 reporting.
 
 TABLE DF - 9
 
 Operational Risk
 
 Qualitative disclosure :
 
 The Bank has put in place systems, processes and monitoring mechanism
 for -
 
 Identification and assessment of operational risks inherent in all
 material products, activities, processes and systems, Monitoring
 operational risk profiles and material exposure to losses and reporting
 pertinent information to Senior Management and Board of Directors.
 
 - Framing policies, processes and procedures to control and mitigate
 material operational risk.
 
 The Organizational set up for operational risk management is as follows:
 
 - The Board of Directors
 
 - Risk Management Committee of the Board (RMCB) 
 - Committee for Operational Risk Management (CORM) 
 - Operational Risk Management Cell (ORMC) 
 - Business Operational Risk Managers (BORM) 
 - Operational Risk Management Specialists (ORMS)
 - Risk Management Department
 
 Board of Directors approves Operational Risk Management framework and
 implementation, policies, processes and procedures for managing
 operational risk in all products, activities, processes and systems.
 
 In order to provide independent assessment of adequacy of and
 compliance with, banks established policies and procedures adequate
 internal audit coverage is in place as a part of ongoing monitoring.
 The Audit committee of the Board ensures the scope and frequency of the
 audit programme. The Inspection department develops and oversees the
 internal audit function.
 
 All financial departments/business units have been informed to keep the
 RMD fully informed of new developments, initiatives, products and
 operational changes to identify all associated risks at an early stage.
 
 The Bank has commenced collection of relevant data under different loss
 event types as also different business lines (as per Basel-ll) under
 the framework to develop a model to estimate capital requirement on
 account of operational risk.
 
 For operational risk capital assessment the Bank used Basic Indicator
 approach as envisaged by Reserve Bank of India in their communication
 dated 27th April, 2007 on the subject Prudential guidelines on capital
 adequacy and market discipline - Implementation of New Capital Adequacy
 Framework.
 
 TABLE DF-10
 
 Interest Rate Risk in the Banking Books (IRRBB)
 
 Qualitative disclosure:
 
 Bank has in place Asset Liability Management policy that addresses
 issues related to Interest Rate Risk in Banking Books. Bank draws every
 month statement of Interest Rate sensitivity in accordance with the
 guidelines given by Reserve Bank of India for the purpose and estimates
 of Earnings at Risk (EaR) for the remaining period of the current
 financial year and as well as over one year horizon. Bank also draws
 every month statement of Modified Duration in accordance with the
 guidelines given for this purpose by Reserve Bank of India and
 estimates Equity VaR. Both the statements are reviewed by Banks Asset
 Liability Management Committee/ Risk management Committee of the Board.