1 Capital
1.1 Capital Adequacy Ratio
a) During the year the Bank allotted 67,300 PNCPS of Rs. 1,00,000 each
on receipt of subscription aggregating to Rs. 673 Crores from
Government of India. As on 31.03.2011 Government of India holds
1,82,300 PNCPS of Rs. 1,00,000 each aggregating to Rs. 1823 Crores.
These PNCPS carry an annual floating coupon to be benchmarked to Repo
Rate with a spread of 100 basis points to be reset annually based on
the prevailing Repo rate on the relevant date. These PNCPS are part of
Tier I Capital.
b) During the year, Bank received contribution of Rs. 940 Crores
towards equity share capital from Government of India and allotted
7,81,57,479 equity shares of Rs. 10/- each at issue price of Rs.
120.27. Out of Rs. 940 crore, Rs. 78.16 crore is transferred to Share
Capital Account and Rs. 861.84 crore towards Share Premium Account.
2.3 Non-SLR Investment Portfolio
* An amount of Rs. 9.77 crores of Central Government Non SLR Bond is
included in Govt Securities in Schedule 8.
During the financial year 2010-11 there was transfer of securities from
Available for Sale (AFS) to Held to Maturity (HTM) category of Rs.
3116.95 Crores. Depreciation amounting to Rs. 172.28 crores on account
of such transfer has been charged to profit and loss account.
3.3 Disclosures on risk exposure in derivatives
Qualitative Disclosures
i) The Structure and organization for management of risk in derivatives
trading:
The organization structure consists of Investment Wing at the Corporate
level which report to the Executive Directors and Chairman & Managing
Director and ultimately to the Board. Risk Management Department is
informed of the transactions as and when they take place.
ii) The scope and nature of risk measurement, risk reporting and risk
monitoring systems:
a) 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 policies of the bank formulated based on RBI
guidelines.
b)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/
mitigants:
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.
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.
c) Other Disclosures for Interest Rate Swaps
The Bank has undertaken fixed to floating and floating to fixed
interest rate swaps on underlying assets and liabilities. The loss of
income on the above IRS will be Rs. 10.51 Crore (Rs. 97.68 Crore), 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.
8.2 Disclosure of penalties imposed by RBI.
Reserve Bank of India has not imposed any penalty on the Bank u/s 46(4)
of the Banking regulation Act, 1949
9.0. Disclosures Requirement as per Accounting Standards:
9.1 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.
9.2 Revenue Recognition
Commission earned on Letter of Credit and Guarantees issued are
recognised on realization basis as per Banks accounting policy which
is not in accordance with AS-9. However, the amount is insignificant.
9.3 AS - 15 –Employee Benefits
Provision for Employee Benefits viz. Pension, Gratuity, Leave
Encashment, Sick Leave, LFC/LTC, medical benefits to self and family
members of retired Directors and Directors in service 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 recognised 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 over 5 years from
financial year 2007-08. Accordingly, Rs. 88.68 crores (Rs. 88.68
crores) has been charged to Profit & Loss Account towards amortisation
of the increase in transitional liability. The un-amortised portion of
the increase in transitional liability on account of Revised AS-15 is
Rs. 88.69 crore (Rs. 177.37 crore) as on 31.03.2011.
During the year, the Bank reopened the pension option for such of its
employees who had not opted for the pension scheme earlier. As a result
of exercise of which by 10563 number of employees, the Bank has
incurred a pension liability of Rs. 507.84 crore (Rs. Nil). Further,
during the year, the limit of gratuity payable to the employees of the
Bank was also enhanced pursuant to the amendment to the Payment
of Gratuity Act, 1972. As a result, the gratuity liability of the Bank
has increased by Rs. 292.51 crore (Rs. Nil).
In terms of the requirements of the Revised Accounting Standard (AS)
15, Employee Benefits, the entire amount of Rs. 800.35 crores (ie. Rs.
507.84 crores + Rs. 292.51 crores) is required to be charged to the
Profit and Loss Account. However, 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 would
amortise the amount of Rs. 800.35 over a period of five years.
Accordingly, Rs. 160.07 crore (representing one-fifth of Rs. 800.35
crore) has been charged to the Profit and Loss Account. In terms of the
requirements of the aforesaid RBI circular, the balance amount carried
forward, i.e., Rs. 640.28 crore (Rs. 800.35 crore – Rs.160.07 crore)
does not include any amount relating to separated / retired employees.
Had such a circular not been issued by the RBI, the profit of the Bank
would have been lower by Rs. 640.28 crore pursuant to application of
the requirements of Revised AS 15.
In addition to Rs. 160.07 crore (Rs. Nil), an amount of Rs. 461.84
crore (Rs. 265.06 crore), which includes full liability for the retired
/ separated employees towards second option for pension and liability
for other employee benefits, has been charged to Profit & Loss Account
towards current years liability.
Investment Details:
a) Investment with LIC of India for Gratuity Fund – 100%
b) Major Categories of Plan assets as percentage of Fair Value in
respect of Pension Fund
9.5 Related Party Disclosures:
a) Key Management Personnel
i) Chairman and Managing Director
Shri S.K. Goel (Till 30.06.2010)
Shri Arun Kaul (From 01.09.2010)
ii) Executive Directors
Shri V.K. Dhingra (Till 30.4.2010)
Shri Ajai Kumar (From 07.12.2009)
Shri N.R. Badrinarayanan (From 01.9.2010)
b) Transactions with Key Management Personnel
c) Associates
Regional Rural Banks sponsored by the Bank are as under:
i) Jaipur Thar Gramin Bank
ii) Kalinga Gramya Bank
iii) Bihar Kshetriya Gramin Bank
iv) Mahakaushal Gramin Bank
v) Paschim Banga Gramin Bank
d) The transactions with Associates have not been disclosed in view of
Para -9 of the AS-18, Related Party Disclosure which exempts State
Controlled Enterprises from making any disclosures pertaining to their
transactions with other related parties, which are also State
Controlled Enterprises
9.6 . EARNINGS PER SHARE (EPS):
Basic & Diluted EPS after Extra-ordinary item: Rs. 14.29 per share
9.7 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.
9.8 Taxes on Income
a) During the year net amount of Rs. 30.51 crore (Rs. 77.60 Crore) 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.
371.27 Crore (Rs. 202.27 Crore) has gone for appeal, has not been
recognised on account of prudence.
b) In accordance with the Guidance Note on Accounting for credit
available in respect of MAT under the Income Tax Act, 1961 issued by
the ICAI, the MAT credit for the current year amounting to Rs. 286.10
crore (Rs.160.64 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.
9.9 Intangible assets
Fixed Assets include computer software, which has been considered as
intangible assets as per AS-26 issued by the ICAI. The movement in
software asset is given below:
9.10 Impairment of Assets
In view of the absence of the indication of material impairment within
the meaning of clause 5 to clause 13 of Accounting Standard-28
Impairment of Assets, no impairment of fixed assets is required in
respect of current financial year.
10.0 Additional disclosures:
10.2 Contingent Liabilities
a) 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 and necessary provision is
made where claim against the Bank is tenable.
b) 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.
10.66 crore (Rs.96.39 crore) has been shown in Schedule 12 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. 10.65 crore (Rs.
40.65 crore) has been included in Other Assets in Schedule 11.
10.3 Floating Provisions Nil
10.4 Draw Down From Reserves
There is no draw down from Reserves.
10.7 Provisioning Coverage Ratio
The provision coverage Ratio of the Bank with reference to Gross NPA
position as on 30.09.2010 is 70%. As per RBI Circular No.
DBOD.No.BPBC.87/21.04.048/2010-11 dated 21.04.2011 an amount of Rs.
210.32 Crore has been kept under an account styled as counter cyclical
provisioning buffer representing a surplus of provision under PCR vis a
vis as required under prudential norms. The provision coverage as on
31.03.2011 works out to 51.60%
10.14 Off-balance Sheet SPVs sponsored
Bank has not sponsored any SPVs.
10.15 Agricultural Debt Waiver & Debt Relief Scheme-2008 (ADWDR- 2008)
1. Under Agricultural Debt Waiver and Debt Relief Scheme
(ADWDRS)-2008, last date of payment of 75% of the overdue amount in
default by the Others Farmers has expired on 30.06.2010.
2. In terms of RBI guidelines, 7333 accounts of other farmers
amounting to Rs. 141.63 crore were classified as NPA as on
30.09.2010 with 100% provision. Bank has received full reimbursement of
claim of Rs. 536.33 crore against Debt Waiver and Rs. 42.46 crore
against Debt Relief submitted up to the period 31.03.2010.
3. During, 01.10.2010 to 31.03.2011, the Bank has recovered Rs. 23.54
crore from 1951 Nos. of Other Farmers relating to ADWDRS-2008. With a
view to recover from these NPA accounts, a special OTS scheme has been
introduced by the Bank where all ADWDRS accounts declared as NPA up to
30.09.2010 will be covered. As per provision of this OTS scheme Bank
has a provision for fresh lending to such Borrowers after One Time
Settlement.
4. As on 31.03.2011 Bank has submitted claim duly audited by the
Statutory Central Auditors as below:- a) Debt Waiver – Rs. 1.38 Crore
against Small and Marginal Farmers b) Debt Relief – Rs. 9.00 Crore
against 5079 Other Farmers.
10.16 Reconciliation:
Reconciliation of entries outstanding has been drawn upto 31.03.2011 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 transfers, balances
pertaining to advances paid for acquisition of assets, sundry creditors
etc. is in progress. In the opinion of the management, consequential
effect of the above on the revenue/assets/liabilities will not be
material.
10.17 Fixed Assets
a) Bank had revalued on few occasions in the past, its premises by
independent qualified valuers and the excess of fair market value over
the original cost was credited to revaluation reserve. As on date
aggregate amount of revaluation reserve (net of revaluation relating to
assets disposed of) is Rs. 584.06 Crore (Rs. 576.80 Crore) and
depreciation on the revalued portion charged to the above revaluation
reserve (net of depreciation relating to assets disposed of) is
Rs.149.12 Crore(Rs.173.98 crore).
b) Premises include Assets with written down value of Rs. 2.58 Crores
(Rs. 2.58 Crore ) which were revalued at Rs. 23.03 Crore (Rs. 23.03
Crore) 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. 6.36 Crore (Rs.
15.22 Crore)
10.18. 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.
10.19. In the light of RBIs clarification dated 17th September 2010,
Credit Linked Notes (CLNs) amounting to Rs. 415.10 crore has been
classified under Investment Category, which were hitherto grouped under
Loans and Advances resulting in Marked to Market (MTM) loss of Rs. 9.03
crore which has been provided in the Profit & loss Account for the year
ended 31st March, 2011. On the same analogy, the MTM loss of Rs. 4.23
crore on Credit Default Swaps of Rs. 89.19 crore has been provided in
the Profit & loss Account for the year ended 31st March, 2011.
10.20 Note on Revised Balance Sheet.
The Financial Statements were approved by the Board of Directors on
29.04.2011 proposing a dividend at the rate of Rs. 2/- per equity
share. Subsequently, on receiving directives from GOI reiterating to
pay a minimum dividend of 20% on equity or 20% of post tax profit
whichever is higher, the Dividend on equity shares has been proposed at
Rs. 3/- per share and the Financial Statements as on 31.03.2011 have
been revised to include an amount of Rs. 219.52 crores towards proposed
Dividend of Rs. 3/- per equity share and tax thereon which have been
duly approved by the Board of Directors at its meeting held on
17.05.2011.
10.21. The bracketed figures indicate previous years figures.
Previous years figures have been re-grouped / re-arranged/re-casted
wherever considered necessary.
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