Accounting Policies of Union Bank of India Company

Mar 31, 2025

Background

Union Bank of India (UBI or the Bank) is a banking and financial services statutory body engaged in providing a wide range of products and services to individuals, commercial enterprises, large corporates, public bodies, and institutional customers. The Bank is governed by the Banking Regulation Act, 1949. The following are the Significant Accounting Policies i.e., the specific accounting principles and methods of applying these principles in the preparation and presentation of financial statements of the Bank.

1.    Basis of Preparation

The financial statements have been prepared and presented under the historical cost convention, accrual basis of accounting, unless otherwise stated and following the Going Concern concept. The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by Reserve Bank of India (RBI) from time to time and the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) to the extent applicable and practices generally prevalent in the banking industry in India.

In case of foreign offices, the statutory provisions, and practices of the local laws of the respective foreign country are followed if they are more prudent.

2.    Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of Assets and Liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported Income and the Expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the financial statements are prudent and reasonable. Difference between the actual results and estimates is recognized in the period in which the results are known/materialized.

Significant Accounting Policies:

3.    Revenue Recognition

3.1. Income and Expenditure have been accounted for on accrual basis unless otherwise stated.

3.2. Income on Non-Performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by the RBI. Income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classified as NPAs during the year.

3.3. Commission on Letters of Credit (LC)/Bank Guarantee (BG), Deferred Payment Guarantee and Government Business are recognized on accrual basis proportionately over the period.

3.4.    Exchange and brokerage earned, rent on Safe Deposit Lockers, income from Aadhaar cards, Minimum balance charges etc. are accounted for on realization basis.

3.5.    Income recognized on accrual basis for the following investments:

3.5.1.Government Securities, bonds and debentures of corporate bodies, where interest rates on these securities are predetermined and provided interest is serviced regularly and is not in arrears.

3.5.2.Shares of corporate bodies provided dividend has been declared by the corporate body in its Annual General Meeting and the owner's right to receive payment is established.

3.5.3.Income from units of mutual funds, alternative investment funds and other such pooled/collective investment funds is recognized on cash basis.

3.5.4.Subject to sub-clause (3.5.2) above, dividend income on equity investments held under AFS is recognised in the Profit and Loss Account.

3.5.5. Accounting for Broken Period Interest:

Bank is not capitalizing the broken period interest paid to the seller as part of cost and treats it as an item of expenditure under Profit & Loss Account in respect of investments in securities.

3.6.    Sale of NPAs accounted in terms of extant RBI guidelines.

3.7.    Interest on Income-tax refunds is accounted for on receipt of Intimation order from the Income Tax Department.

4. Appropriation of Recovery:

Recoveries other than by way of OTS/NCLT shall be

appropriated as under:

4.1.    When there is no agreement between the debtor and creditor as to how monies paid by the debtor are required to be appropriated by the creditor, the order of appropriation is as under:

For Term Loans:

>    Towards expenses & costs etc.

>    Towards unrecovered interest reversed on the date of NPA.

>    Interest held in dummy ledger (unapplied interest).

>    Towards arrears of principal/EMI till the date of recovery.

>    Towards running ledger balance.

For Running Accounts:

>    Towards expenses & costs etc.

>    Towards interest held in dummy ledger (unapplied interest) including unrecovered interest reversed at the time of NPA.

>    Towards principal.

4.2.    In case, borrower stipulates terms of appropriation differently than above and if such different terms of appropriation are accepted by Bank then appropriation of recoveries will be as per the sanction terms.

4.3.    In case of OTS & all NCLT accounts, recovery either through resolution/liquidation:

Appropriation of recovery is done as mentioned here under or as per the sanction stipulations.

>    Towards principal.

>    Towards interest held in dummy ledger (unapplied interest) including unrecovered interest reversed at the time of NPA.

>    Towards expenses & costs etc.

4.4.    In case of Non-Performing Investments, recovery is apportioned as mentioned below:

a.    Towards expenses & costs etc.

b.    Towards unrecovered interest reversed on the date of NPI.

c.    Interest held in dummy ledger (unapplied interest).

d.    Towards arrears of principal/EMI till the date of recovery.

e.    Towards running ledger balance

5.    Cash Flow Statements:

Cash Flow statement of the Bank is prepared as per AS-3. Cash Flow statement is mainly classified as:

5.1.    Cash flow from Operating Activities: This activity includes cash flow generated from Operational activities.

5.2.    Cash Flow from Investing Activities: This activity includes cash flow generated by investments.

5.3.    Cash Flow from Financials Activities: This activity includes the cash flow generated from financial instruments.

5.4.    Cash and cash equivalents include Cash and Balances with RBI, Balances with Banks and money at call and short notice.

6.    Investments

6.1. Categorization of investments

a)    Bank classified the entire investment portfolio (except investments in their own subsidiaries, joint ventures and associates) under three categories, viz., Held to Maturity (HTM), Available for Sale (AFS) and Fair Value through Profit and Loss (FVTPL). Held for Trading (HFT) is a separate investment subcategory within FVTPL.

b)    Bank continue to present the investments in the Balance Sheet as set out in The Third Schedule to the BR Act (Form A, Schedule 8 - Investments) as under:

i.    Government securities

ii.    Other approved securities

iii.    Shares

iv.    Debentures & Bonds

v.    Subsidiaries and/or joint ventures

vi.    Others (to be specified)

c)    From the context of inputs used for valuation, the investments would be either of the following:

(i)    "Level 1" in the context of inputs used for valuation of a financial instrument are those inputs which are quoted prices (unadjusted) in active markets for identical instruments that the bank can access at the measurement date. In reference to the valuation of an instrument, it refers to a valuation that is substantively based on Level 1 inputs and does not have any significant Level 2 or Level 3 inputs.

(ii)    "Level 2" in the context of inputs used for valuation of a financial instrument are those inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. In reference to the valuation of an instrument, it refers to a valuation that is based on Level 1 and Level 2 inputs and does not have any significant Level 3 inputs.

(iii) "Level 3" in the context of inputs used for valuation of a financial instrument are unobservable inputs. In reference to the valuation of an instrument, it refers to a valuation in which there is a significant Level 3 input.

6.1.1.HTM

a)    Securities that fulfil the following conditions are classified under HTM:

(i)    The security is acquired with the intention and objective of holding it to maturity, i.e., the financial assets are held with an objective to collect the contractual cash flows; and

(ii)    The contractual terms of the security give rise to cash flows that are "solely payments of principal and interest" on principal outstanding ('SPPI criterion') on specified dates.

b)    Notwithstanding the intent with which the following securities are acquired, they would not meet the SPPI criteria and therefore would not be eligible for classification either as HTM or AFS:

(i)    Instruments with compulsorily, optionally or contingently convertible features.

(ii)    Instruments with contractual loss absorbency features such as those qualifying for Additional Tier 1 and Tier 2 under Basel III Capital Regulations.

(iii)    Instruments whose coupons are not in the nature of interest as defined in clause 4(a)(xviii) of the RBI's "Master Direction -Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023" dated 12-09-2023 hereon mentioned as "RBI MASTER CIRCULAR".

(iv)    Preference shares and Equity shares.

c)    Investments in the securitization notes, other than the equity tranche, is considered to meet the SPPI criteria if the tranche in which the investment is made meets all the following conditions:

(i)    The contractual terms of the tranche being assessed for classification (without looking through to the underlying pool of financial instruments) gives rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(ii)    The underlying pool of financial instruments meet the SPPI criteria.

(iii)    The credit risk of the tranche is equal to or lower than the credit risk of the combined underlying pool of assets.

6.1.2. AFS

(a)    Securities that meet the following conditions are classified under AFS:

(i)    The security is acquired with an objective that is achieved by both collecting contractual cash flows and selling securities; and

(ii)    The contractual terms of the security meet the 'SPPI criterion' as given in paragraph 6.1(a)(ii) of the RBI MASTER CIRCULAR.

Provided that on initial recognition, a bank may make an irrevocable election to classify an equity instrument that is not held with the objective of trading (i.e., not held for any of the purposes listed in paragraph 4 of Annex I of the RBI MASTER CIRCULAR) under AFS.

(b)    AFS securities inter-alia includes debt securities held for asset liability management (ALM) purposes that meet the SPPI criterion where the bank's intent is flexible with respect to holding to maturity or selling before maturity.

6.1.3. FVTPL:

a) Securities that do not qualify for inclusion in HTM or AFS are classified under FVTPL, and inter-alia include:

(i)    Equity shares, other than (a) equity shares of subsidiaries, associates or joint ventures and (b) equity shares where, at initial recognition, the irrevocable option to classify at AFS has been exercised.

(ii)    Investments in Mutual Funds, Alternative Investment Funds, Real Estate Investment Trusts, Infrastructure Investment Trusts, etc.

(iii)    Investment in securitisation notes which represent the equity tranche of a securitisation transaction. Investments in senior and other subordinate tranches

would need to be reviewed for their compliance with SPPI criterion explained in clause 6.1(c) of the RBI MASTER CIRCULAR.

(iv)    Bonds, debentures, etc. where the payment is linked to the movement in a particular index such as an equity index rather than an interest rate benchmark.

(v)    Securities referred to in sub-clause 6.1(b), subject to the exception for equity referred to in sub-clause (i) of the RBI MASTER CIRCULAR.

6.1.4.    HFT:

Bank create a separate sub-category called HFT within FVTPL.

6.1.5.    Investments in Subsidiaries, Associates and Joint Ventures

All investments in subsidiaries, associates and joint ventures are held sui generis i.e., in a distinct category for such investments separate from the other investment categories (viz. HTM, AFS and FVTPL).

6.2. Initial recognition

6.2.1.    All investments are measured at fair value on initial recognition. Unless facts and circumstances suggest that the fair value is materially different from the acquisition cost, it would be presumed that the acquisition cost is the fair value.

Situations where the presumption are tested include where:

a)    The transaction is between related parties.

b)    The transaction is taking place under duress where one party is forced to accept the price in the transaction.

c)    The transaction is done outside the principal market for that class of securities.

d)    Other situations, where in the opinion of the supervisor, facts and circumstances warrant testing of the presumption.

6.2.2.    In respect of government securities acquired through auction (including devolvement), switch operations and open market operations (OMO) conducted by the RBI, the price at which the security is allotted is the fair value for initial recognition purposes.

6.2.3.    Where the securities are quoted or the fair value can be determined based on market observable inputs (such as yield curve, credit spread, etc.) any Day 1 gain/loss is recognised in the Profit and Loss

Account, under Schedule 14: 'Other Income' within the sub-head 'Profit on revaluation of investments' or 'Loss on revaluation of investments', as the case may be.

6.2.4.    Any Day 1 loss arising from Level 3 investments is recognised immediately.

6.2.5.    Any Day 1 gains arising from Level 3 investments is deferred. In the case of debt instruments, the Day 1 gain is amortized on a straight-line basis up to the maturity date (or earliest call date for perpetual instruments), while for unquoted equity instruments, the gain is set aside as a liability until the security is listed or derecognized.

6.3. Subsequent Measurement

6.3.1.    HTM

(a)    Securities held in HTM are carried at cost and will not be marked to market (MTM) after initial recognition. However, they are subject to Income recognition, Asset classification and Provisioning norms as specified in Chapter X of RBI MASTER CIRCULAR.

(b)    Any discount or premium on the securities under HTM is amortised over the remaining life of the instrument. The amortised amount is shown in the financial statements under item II 'Income on Investments' of Schedule 13: 'Interest Earned' with a contra in Schedule 8: 'Investments'.

6.3.2.    AFS

(a)    The securities held in AFS are fair valued at least on a quarterly basis, if not more frequently. Any discount or premium on the acquisition of debt securities under AFS is amortised over the remaining life of the instrument. The amortised amount is shown in the financial statements under item II 'Income on Investments' of Schedule 13: 'Interest Earned' with a contra in Schedule 8:'Investments'.

(b)    The valuation gains and losses across all performing investments, irrespective of classification (i.e., Government securities, other approved securities, Bonds and Debentures, etc.), held under AFS is aggregated. The net appreciation or depreciation is directly credited or debited to a reserve named AFS Reserve without routing through the Profit & Loss Account.

(c)    Securities under AFS would be subject to income recognition, asset classification and provisioning norms as specified in Chapter X of the RBI MASTER CIRCULAR.

(d)    The AFS-Reserve would be reckoned as Common Equity Tier (CET) 1 subject to clause 28 of the RBI MASTER CIRCULAR. The unrealised gains transferred to AFS-Reserve would not be available for any distribution such as dividend and coupon on Additional Tier 1.

(e)    Upon sale or maturity of a debt instrument in AFS category, the accumulated gain/loss for that security in the AFS-Reserve is transferred from the AFS Reserve and recognized in the Profit and Loss Account under item II Profit on sale of investments under Schedule 14-Other Income.

(f)    In the case of equity instruments designated under AFS at the time of initial recognition, any gain or loss on sale of such investments are not transferred from AFS-Reserve to the Profit and Loss Account. Instead, such gain or loss is transferred from AFS-Reserve to the Capital Reserve.

6.3.3.FVTPL

(a)    The securities held in FVTPL are fair valued and the net gain or loss arising on such valuation is directly credited or debited to the Profit and Loss Account. Securities that are classified under the HFT sub-category within FVTPL are fair valued on a daily basis, whereas other securities in FVTPL are fair valued at least on a quarterly, if not on a more frequent basis.

(b)    Any discount or premium on the acquisition of debt securities under FVTPL is amortised over the remaining life of the instrument. The amortised amount is credited in the Profit & loss account of the financial statements under item II 'Income on Investments' of Schedule 13: 'Interest Earned' with a contra in Schedule 8:'Investments'.

(c)    Securities under FVTPL are subject to income recognition, asset classification and provisioning norms as specified in Chapter X of the RBI MASTER CIRCULAR.

6.3.4.Investments in Subsidiaries, Associates and Joint

Ventures

(a)    All investments (i.e., including debt and equity) in subsidiaries, associates and joint ventures are held at acquisition cost, subject to the requirements of Chapter IV of the RBI MASTER CIRCULAR.

(b)    Any discount or premium on the acquisition of debt securities of subsidiaries, associates and joint ventures is amortised over the remaining life of the instrument. The amortised amount is shown in the Profit & loss account of the

financial statements under item II 'Income on Investments' of Schedule 13: 'Interest Earned'.

(c)    In case, where there is already an investment in an entity which is not a subsidiary, associate or joint venture and subsequently the investee entity becomes a subsidiary, associate or joint venture, the revised carrying value as at the date of such investee entity becoming a subsidiary, associate or joint venture is determined as under:

(i)    Where the investment is held under HTM, the carrying value less any permanent impairment is the revised carrying value.

(ii)    Where an investment is held under AFS, the cumulative gains and losses previously recognised in AFS-Reserve is reversed and adjusted to the carrying value of the investment along with any permanent diminution in the value of the investment to arrive at the revised carrying value.

(iii)    Where an investment is held in FVTPL, the fair value as on the date of the investee becoming a subsidiary, associate or joint venture is taken as the carrying value.

(d)    When an investee ceases to be a subsidiary, associate or joint venture, the investments are reclassified to the respective category as under:

(i)    Where the investment is reclassified into HTM, there is no change in the carrying value and consequently no accounting adjustment per se is required.

(ii)    Where the investment is reclassified into AFS or FVTPL, the fair value on the date of such reclassification is the revised carrying value. The difference between the revised and previous carrying value is transferred to AFS-Reserve and Profit and Loss account in case of reclassification into AFS and FVTPL respectively.

(e)    Any gain/profit arising on the reclassification/ sale of an investment in a subsidiary, associate or joint venture is first recognised in the Profit and Loss Account and then appropriated below the line from the Profit and Loss account to the 'Capital Reserve Account'. The amount so appropriated is net of taxes and the amount is transferred to Statutory Reserves.

(f)    Bank evaluate investments in subsidiaries, associates or joint ventures for impairment at least on a quarterly, if not more frequent basis. A non-exhaustive list of indicators of potential impairment is as under:

(i)    The entity has defaulted in repayment of its debt obligations.

(ii)    The loan amount of the entity with any bank has been restructured.

(iii)    The credit rating of the entity has been downgraded to below investment grade.

(iv)    The entity has incurred losses for a continuous period of three years and the net worth has consequently reduced by 25 per cent or more.

(v)    There is a significant decline in the fair value vis-a-vis the carrying value for a period of six months or more. For the purpose of this sub-clause the term significant would be interpreted as at least 20 per cent. Banks, with the approval of their Boards, may apply even more conservative thresholds.

(vi)    Any or all of the entity's outstanding securities have been delisted, are in the process of being delisted, or are under threat of being delisted from an exchange due to noncompliance with the listing requirements or for financial reasons.

In the case of a new entity/project where the originally projected date of achieving the breakeven point has been extended i.e., the entity/project has not achieved break-even within the gestation period as originally envisaged.

(g) When the need to determine whether impairment has occurred arises in respect of a subsidiary, associate or joint venture, the bank obtains a valuation of the investment by an independent registered valuer and make provision for the impairment, if any. Such diminution is provided by recognising it as an expense in the Profit and Loss account. It may be subsequently reversed through Profit and Loss Account, if there is a reversal of the diminution.

6.4. Reclassifications between categories

6.4.1.    After transition to this framework, bank is not reclassifying investments between categories (viz. HTM, AFS and FVTPL) without the approval of their Board of Directors. Further, reclassification also require the prior approval of the Department of Supervision (DoS), RBI.

6.4.2.    The reclassification should be applied prospectively from reclassification date.

6.4.3. When bank reclassifies investments from one category to another category, the accounting treatment is as given in the table below. The bank discloses the details of such reclassification including the reclassification adjustments in the notes to the financial statements:

No.	From	To	Accounting Treatment
a	HTM	AFS	The fair value measured at the reclassification date would be the revised carrying value. Any gain or loss arising from a difference between the revised carrying value and the previous carrying value would be recognised in AFS-Reserve.
b		FVTPL	The fair value measured at the reclassification date would be the revised carrying value. Any gain or loss arising from a difference between the revised carrying value and previous carrying value of the investments would be recognised in the Profit and Loss Account under Item (III): 'Profit on revaluation of investments' under Schedule 14: 'Other Income'.
c	AFS	HTM	The investments are reclassified at its fair value at the reclassification date. However, the cumulative gain/ loss previously recognised in the AFS-Reserve would be withdrawn therefrom and adjusted against the fair value of the investments at the reclassification date to arrive at the revised carrying value. Thus, the revised carrying value would be the same as if the bank had classified the investment in HTM ab initio itself.
d		FVTPL	The investments would continue to be measured at fair value. The cumulative gain or loss previously recognised in AFS Reserve would be withdrawn therefrom and recognised in the Profit and Loss Account, under Item (III): 'Profit on revaluation of investments' under Schedule 14:'Other Income'.
e	FVTPL	HTM	The carrying amount representing the fair value at the reclassification date remains unchanged.
f		AFS

6.5. Sale of investments

6.5.1. Gain/loss on sale of investments except AFS equity investments is recognised in the profit and loss account. The realised gain or loss on AFS equity investments is recognised in AFS reserve. Further, the profit from sale of HTM investments, investments in subsidiaries, joint ventures and associates and equity AFS investments, net of taxes and transfer to statutory reserve is transferred to "Capital Reserve" in accordance with the RBI Guidelines.

6.5.2. Any sales from HTM is as per the Board approved policy. Details of sales, out of HTM, is disclosed in the notes to accounts of the financial statements in the format specified in Annex II of Master directions of RBI dated 12^th September 2023.

6.5.3.In any financial year, the carrying value of investments sold out of HTM is not exceeds five per cent of the opening carrying value of the HTM portfolio. Any sale beyond this threshold, require prior approval from DoS, RBI.

6.5.4.Sales of securities in the situations given below is excluded from the regulatory limit of five per cent prescribed in clause 20 of the RBI master directions:

a)    Sales to the RBI under liquidity management operations of RBI such as the Open Market Operations (OMO) and Government Securities Acquisition Programme (GSAP).

b)    Repurchase of Government Securities by Government of India from banks under buyback or switch operations.

c)    Repurchase of State Development Loans by respective state governments under buyback or switch operations.

d)    Repurchase, buyback or exercise of call option of non-SLR securities by the issuer.

e)    Sale of non-SLR securities following a downgrade in credit ratings or default by the counterparty.

f)    Sale of securities as part of a resolution plan under the Prudential Framework for Resolution of Stressed Assets for a borrower facing financial distress.

g)    Additional sale of securities explicitly permitted by the Reserve Bank of India.

6.5.5.Any profit or loss on the sale of investments in HTM is recognised in the Profit and Loss Account under Item II of Schedule 14 'Other Income'. The profit on sale of investments in HTM is appropriated below the line from the Profit and Loss Account

to the 'Capital Reserve Account'. The amount so appropriated is net of taxes and the amount required to be transferred to Statutory Reserve.

6.5.6.Valuation of securities is arrived at as follows:

A	Govt. of India Securities (Central Govt. Securities)	As per Quotation put out by Financial Benchmarks India Pvt Ltd (FBIL)
B	State Development Loans, State Govt. Securities, Securities guaranteed by Central/State Government, PSU Bonds	On appropriate yield to maturity basis as per FIMMDA Guidelines
C	Equity Shares	As per Market rates, if quoted, otherwise at break-up value, as per latest audited balance sheet (not more than 18 months old). In absence of both, at '1/- per company. The break-up value is computed excluding revaluation reserve.
D	Preference Shares	As per Market rates, if quoted, or on appropriate yield to maturity basis not exceeding redemption value as per FIMMDA guidelines.
E	Debentures/Bonds	As per Market rates, if quoted, otherwise on appropriate yield to maturity basis as per FIMMDA guidelines.
F	Mutual Funds (MF)	As per stock exchange quotations, if quoted. In case of unquoted units, as per latest Repurchase price declared by concerned MF. In cases where latest repurchase price is not available, as per Net Asset Value (NAV)
G	Treasury Bills/ Certificate of Deposits/ Commercial Papers	At carrying cost
H	Venture Capital Funds (VCF)	At declared NAV or Breakup NAV as per audited Balance Sheet which is not more than 18 months old. If NAV/audited financial statements are not available for more than 18 months continuously, at ' 1/- per VCF

I Security Receipts Valuation of the same will be done as per RBI Guidelines on classification, valuation and operation of Investment portfolio of commercial Banks (RBI/DOR/2021-22/81 DOR. MGR.42/21.04.141/2021-22) dated Aug 25, 2021 and as amended from time to time. "Government Guaranteed Security Receipts (SRs) shall be valued periodically by reckoning the Net Asset Value (NAV) declared by the ARC based on the recovery ratings received for such instruments as per RBI Circular no. RBI/DOR/2024-25/135 DOR.STR.REC. 72/21.04.048/2024-25 dated March 29, 2025 and as amended from time to time".

 

6.5.7.    Interbank/RBI Repo and Interbank/RBI Reverse Repo transactions are accounted for in accordance with extant RBI guidelines.

6.5.8.    Commission, brokerage, broken period interest etc. on securities is debited/credited to Profit & Loss Account.

6.5.9.    Brokerage and STT paid on purchase and sale of Equity is accounted to price of the deal.

6.5.10.    The Bank is following Weighted Average Price (WAP) for accounting of investment portfolio.

6.5.11.    As per the extant RBI guidelines, the Bank follows 'Settlement Date' for accounting of investments transactions.

6.6. Non-Performing Investments (NPI)

(a) The criterion used to classify an asset as NonPerforming Asset (NPA) as per the extant Prudential Norms on Income Recognition, Asset Classification and Provisioning (IRACP) pertaining to Advances is used to classify an investment as a Non-Performing Investment (NPI). Similarly, an NPI only be upgraded to standard when it meets the criteria specified in the IRACP norms.

(i)    In respect of debt instruments such as bonds or debentures, an NPI is one where interest/instalment (including maturity proceeds) is due and remains unpaid for more than 90 days.

(ii)    Sub-clause (a)(i) above apply, mutatis mutandis to preference shares where the fixed dividend is not paid. If the dividend on preference shares (cumulative or noncumulative) is not declared/paid in any year

 

it is treated as due/unpaid in arrears and the date of balance sheet of the issuer for that particular year is reckoned as due date for the purpose of asset classification. Such an investment can be upgraded subsequently on payment of dividend for the current period in the case of non-cumulative preference shares and payment of dividend in arrears and for current period in the case of cumulative preferences shares.

(iii)    In the case of equity shares, in the event the investment in the shares of any company is valued at '1 per company on account of the non-availability of the latest balance sheet in accordance with clause 26.3 of the RBI MASTER CIRCULAR, those equity shares are reckoned as NPI. The NPI is upgraded subsequently on receipt of audited balance sheet.

(iv)    If any credit facility availed by the issuer is NPA in the books of the bank, investment in any of the securities, including preference shares issued by the same issuer is also treated as NPI and vice versa. However, this stipulation is not applicable in cases where only the preference shares are classified as NPI, and in such cases, the investment in any of the other performing securities issued by the same issuer need not be classified as NPI and any performing credit facilities granted to that borrower need not be treated as NPA.

(v)    In case of conversion of principal and/or interest into equity, debentures, bonds, etc., such instruments are classified in the same asset classification category as the loan and provision is made as per the norms. In case of post conversion, if the classification is standard or is subsequently upgraded to standard as per IRACP norms, the investment is categorised in HTM, AFS or FVTPL (including HFT) as per the requirements of Chapter III of the RBI MASTER CIRCULAR.

(b)    Once an investment is classified as an NPI, it is segregated from rest of the portfolio and is not considered for netting valuation gains and losses.

(c)    Bank is not accruing any income on NPIs. Income is recognised only on realisation basis Further, any MTM appreciation in the security is being ignored.

(d)    Irrespective of the category (i.e., HTM, AFS or FVTPL (including HFT)) in which the investment

has been placed, the expense for the provision for impairment is always recognised in the Profit and Loss Account. The provision held on an NPI is higher of the following amounts:

(i)    The amount of provision required as per IRACP norms computed on the carrying value of the investment immediately before it was classified as NPI; and

(ii)    The depreciation on the investment with reference to its carrying value on the date of classification as NPI.

In view of the above, no additional provision for depreciation is required over and above the provision for NPI as specified above.

Provided that, in the case of an investment categorised under AFS against which there are cumulative gains in AFS-Reserve, the provision required may be created by charging the same to AFS-Reserve to the extent of such available gains.

Provided further that in the case of an investment categorised under AFS against which there are cumulative losses in AFS-Reserve, the cumulative losses are transferred from AFS-Reserve to the Profit and Loss Account.

(e)    Upon an account being upgraded as per IRACP norms, any provision previously recognised is reversed and symmetric recognition of MTM gains and losses can resume.

(f)    Investments in Government securities and Government guaranteed investment:

(i)    Investments in Central Government Securities and State Government Securities is classified as NPI.

(ii)    Investments in Central Government guaranteed securities is not being classified as NPI until the Central Government has repudiated the guarantee when invoked. In respect of such securities held in AFS and FVTPL, bank continue to recognise MTM gains/losses in AFS-Reserve and Profit and Loss respectively. However, any income is recognised only on realisation basis.

(iii)    Investment in State Government guaranteed securities, attracts prudential norms for identification of NPI and provisioning, when interest/instalment of principal (including maturity proceeds) or any other amount due to the bank remains unpaid for more than 90 days.

6.7.    Investment Fluctuation Reserve

(a)    Bank creates an Investment Fluctuation Reserve (IFR) until the amount of IFR is at least two per cent of the AFS and FVTPL (including HFT) portfolio, on a continuing basis, by transferring to the IFR an amount not less than the lower of the following:

i.    Net profit on sale of investments during the year.

ii.    Net profit for the year, less mandatory appropriations.

(b)    IFR is eligible for inclusion in Tier II capital. The cap applicable on recognition of General Provisions and Loss Reserves as Tier II capital is not applicable on IFR.

(c)    Bank is permitted to draw down the balance available in IFR in excess of two percent of its AFS and FVTPL (including HFT) portfolio, for credit to the balance of profit/loss as disclosed in the profit and loss account at the end of any accounting year.

(d)    In the event the balance in the IFR is less than two percent of the AFS and FVTPL (including HFT) investment portfolio, a draw down is permitted subject to the following conditions:

i.    The drawn down amount is used only for meeting the minimum CET 1/Tier 1 capital requirements by way of appropriation to free reserves or reducing the balance of loss.

ii.    The amount drawn down should not be more than the extent the MTM provisions/ losses during the aforesaid year exceed the net profit on sale of investments during that year.

6.8.    Derivatives

6.8.1. Bank complies with the requirements of the Guidance Note on Accounting for Derivative Contracts (revised 2021) issued by the Institute of Chartered Accountants of India except for paragraph 63 of the said Guidance Note. It presents their derivative asset and liabilities as separate line items under Schedule 11:'Other Assets' and Schedule 5:'Other Liabilities' respectively. Bank may make adjustments to the carrying value of their investments in compliance with the hedge accounting requirements of the said Guidance Note.

6.8.2. Bank categorize their derivatives portfolio into three fair value hierarchies viz. Level 1, Level 2, and Level 3 as defined in Clause 4 of the RBI MASTER CIRCULAR and disclose the same in the notes to accounts of

their financial statements as per template specified in disclosure template.

6.8.3. Bank does not pay dividends out of net unrealised gains recognised in the Profit and Loss Account arising on fair valuation of Level 3 derivatives assets and liabilities on their Balance Sheet. Further, such net unrealised gains on Level 3 derivatives recognised in the Profit and Loss Account is deducted from CET 1 capital.

6.9. Transition Accounting Adjustments:

6.9.1. At the time of transition to RBI directions (i.e., on April 1, 2024 Revised Framework), bank reclassified the investment portfolio as at March 31, 2024, as per the directions laid down in Chapter III of RBI Directions. The balance in provision for depreciation, as at March 31, 2024, has been reversed into the Revenue/General Reserve. The balances in Investment Reserve Account (IRA), as of March 31, 2024, has been transferred to the Revenue/General Reserve since the bank met the minimum regulatory requirements of IFR. The specific treatment for transition from the previous year to the revised framework is given in the table below:

Previous Framework	Revised Framework	Opening Accounting Adjustments on April 1, 2024
HTM	HTM	The acquisition cost adjusted for any premium/discount amortised between date of acquisition and March 31, 2024, is the revised carrying value. The difference between the revised carrying value and the previous carrying value is adjusted in Revenue/General Reserve.
Â	AFS	The difference between the revised and previous carrying value is adjusted in Revenue/ General Reserve. Further, in the case of equity instruments designated under AFS difference between the revised and previous carrying value is adjusted in AFS-Reserve.
Â	FVTPL	The fair value as at March 31,2024 is the revised carrying value. The difference between the revised carrying value and the previous carrying value is adjusted in Revenue/General Reserves.

Previous Framework	Revised Framework	Opening Accounting Adjustments on April 1, 2024
AFS	HTM	The acquisition cost adjusted for any premium/discount amortised between date of acquisition and March 31, 2024 is the revised carrying value. The difference between the revised carrying value and the previous carrying value is adjusted in Revenue/General Reserve.
Â	AFS	The difference between the revised and previous carrying value is adjusted in Revenue/ General Reserve. Further, in the case of equity instruments designated under AFS difference between the revised and previous carrying value is adjusted in AFS-Reserve.
Â	FVTPL	The fair value as at March 31,2024 is the revised carrying value. The difference between the revised carrying value and the previous carrying value is adjusted in Revenue/General Reserves.
HFT	HTM	The acquisition cost adjusted for any premium/discount amortised between date of acquisition and March 31, 2024 is the revised carrying value. The difference between the revised carrying value and the previous carrying value is adjusted in Revenue/General Reserve.
Â	AFS	The difference between the revised and previous carrying value is adjusted in Revenue/ General Reserve. Further, in the case of equity instruments designated under AFS difference between the revised and previous carrying value is adjusted in AFS-Reserve.
Â	FVTPL	The fair value as at March 31,2024 is the revised carrying value. The difference between the revised carrying value and the previous carrying value is adjusted in any Revenue/General Reserves.

6.10. Bank made suitable disclosures of the transitional adjustment made, in their notes to the financial statements for the financial year ending March 31, 2025.

7. Advances

7.1.    All advances are classified under four categories:

7.1.1 .Standard,

7.1.2.Sub-standard,

7.1.3. Doubtful and

7.1.4. Loss assets.

Provisions required on such advances are made as per the extant prudential norms issued by the RBI in terms of Master Circular RBI/2024-2025/12 DOR. STR.REC.8/21.04.048/2024-25 dated April 02, 2024 as under:

7.2.    Loans and Advances are classified as performing and non-performing, based on the guidelines issued by the RBI. Loan Assets become Non-Performing Assets (NPAs) where:

7.2.1.In respect of term loans, interest and/or instalment of principal remains overdue for a period of more than 90 days;

7.2.2.In respect of Overdraft or Cash Credit advances, the account remains "out of order", i.e.

7.2.2.1.    The outstanding balance in the CC/OD account remains continuously in excess of the sanctioned limit/drawing power for 90 days.

7.2.2.2.    The outstanding balance in the CC/OD account is less than the sanctioned limit/drawing power but there are no credits continuously for 90 days, or

7.2.2.3.    The outstanding balance in the CC/OD account is less than the sanctioned limit/drawing power but credits are not enough to cover the interest debited during the previous 90 days period.

7.2.3.    In respect of bills purchased/discounted, the bill remains overdue for a period of more than 90 days;

7.2.4.    In respect of agricultural advances for short duration crops, where the instalment of principal or interest remains overdue for two crop seasons.

7.2.5.In respect of agricultural advances for long duration crops, where the principal or interest remains overdue for one crop season.

7.2.6.A working capital borrower account will become NPA if such irregular drawings are permitted in the account for a continuous period of 90 days even though the unit may be working, or the borrower's financial position is satisfactory.

7.2.7. An account where the regular/ad hoc credit limits have not been reviewed/renewed within 180 days from the due date/date of ad hoc sanction will be treated as NPA.

7.2.8. The amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitization transaction undertaken in terms of the Reserve Bank of India (Securitization of Standard Assets) Directions, 2021

7.2.9.In respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

7.2.10. Accounts where there is erosion in the value of security/frauds committed by borrowers

7.2.10.1.    In respect of accounts where there are potential threats for recovery on account of erosion in the value of security or non-availability of security and existence of other factors such as frauds committed by borrowers it will not be prudent that such accounts should go through various stages of asset classification. In cases of such serious credit impairment, the asset should be straightaway classified as doubtful or loss asset as appropriate.

7.2.10.2.    Erosion in the value of security can be reckoned as significant when the realizable value of the security is less than 50 per cent of the value assessed by the bank or accepted by RBI at the time of last inspection, as the case may be. Such NPAs may be straightaway classified under doubtful category.

7.2.10.3.    If the realizable value of the security, as assessed by the bank/approved valuers/RBI is less than 10 per cent of the outstanding in the borrowal accounts, the existence of security should be ignored, and the asset should be straightaway classified as loss asset.

7.2.11 In respect of MSME accounts which will be restructured in terms of RBI Circular No    DOR.No.BP.BC.34/21.04.048/2019-20

February 11,2020 with reference to Circular No DBR. No.BP.BC.18/21.04.048/2018-19 dated 1^st January, 2019 and kept in standard category, the Bank shall maintain a provision of 5% in addition to the provision already held. Reversal of said provision shall be made in accordance with the said circular.

7.2.12. In terms of RBI guidelines relating to 'Covid 19 Regulatory Package' on Asset Classification and Provisioning RBI has issued circular no.DOR.No.BP. BC/3/21.04.048/2020-21 & circular no. DOR.No.BP. BC/4/21.04.048/2020-21 dated 06^th August, 2020, DoR.STR.REC.12/21.04.048/2021-22    & DoR.STR.

REC.11/21.04.048/2021-22 dated May 05^th, 2021

with reference to restructuring of Corporate & Retail Loan, Bank shall maintain necessary provision in this regard.

7.3. NPAs are classified into Sub-Standard, Doubtful and Loss Assets, based on the following criteria stipulated by RBI:

7.3.1.    Sub-standard: A loan asset that has remained nonperforming for a period less than or equal to 12 months,

7.3.2.    Doubtful: A loan asset that has remained in the sub-standard category for a period exceeding 12 months,

7.3.3.    Loss: A loan asset where loss has been identified but the amount has not been fully written off.

7.4. Provisions are made for NPAs as per the extant guidelines prescribed by the regulatory authorities, subject to minimum provisions as prescribed below:

Sub-Standard	i.	A general of 15% of the total
Assets:	Â	outstanding.
Â	ii.	Additional provision of 10% for exposures which are unsecured ab-initio;
Â	iii.	However, Unsecured Exposure, ab-initio, in respect of infrastructure loan accounts where certain safeguards such as escrow accounts are available - 20% (instead of 25% as stated above)
Doubtful Mar 31, 2024 1. Basis of Preparation The financial statements have been prepared and presented under the historical cost convention, accrual basis of accounting, unless otherwise stated and following the Going Concern concept. The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by Reserve Bank of India (RBI) from time to time and the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) to the extent applicable and practices generally prevalent in the banking industry in India. 2. Use of Estimates The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of Assets and Liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported Income and Expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the financial statements are prudent and reasonable. Difference between the actual results and estimates is recognized in the period in which the results are known / materialized. 3. Revenue Recognition 3.1. Income and Expenditure have been accounted for on accrual basis unless otherwise stated. 3.2. Income on Non-Performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by the RBI. Income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classified as NPAs during the year. 3.3. Commission on Letter of Guarantee/Letter of Credit is accounted on accrual basis. 3.4. Exchange and brokerage earned, rent on Safe Deposit Lockers, income from Aadhaar cards, Minimum balance charges etc. are accounted for on realization basis. 3.5. Income (Other than interest) on investments in "Held to Maturity" (HTM) category acquired at discount to the face value is recognized as follows: 3.5.1. On interest bearing securities, it is recognized only at the time of sale/ redemption. 3.5.2. On Zero- coupon securities, it is accounted for over the balance tenor of the securities on a constant yield basis. 3.6. Dividend is accounted on an accrual basis where the right to receive the dividend is established. 3.7. Sale of NPAs accounted in terms of extant RBI guidelines. 3.8. Interest on Income-tax refunds is accounted for on receipt of Intimation order from the Income Tax Department. 4. Appropriation of Recovery: Recoveries other than by way of OTS/NCLT shall be appropriated as under: 4.1. When there is no agreement between the debtor and creditor as to how monies paid by the debtor are required to be appropriated by the creditor, the order of appropriation is as under: For Term Loans: > Towards expenses & costs etc. > Towards unrecovered interest reversed on the date of NPA. > Interest held in dummy ledger (unapplied interest). > Towards arrears of principal/EMI till the date of recovery. > Towards running ledger balance. For Running Accounts: > Towards expenses & costs etc. > Towards interest held in dummy ledger (unapplied interest) including unrecovered interest reversed at the time of NPA. > Towards principal. 4.2. In case borrower stipulates terms of appropriation differently than above and if such different terms of appropriation is accepted by Bank then appropriation of recoveries will be as per the sanction terms. 4.3. In case of OTS & all NCLT accounts, recovery either through resolution/liquidation: Appropriation of recovery to be done as discussed here under or as per the sanction stipulations > Towards principal. > Towards interest held in dummy ledger (unapplied interest) including > unrecovered interest reversed at the time of NPA. > Towards expenses & costs etc. 4.4. In case of Non-Performing Investment recovery will be apportioned as mentioned below: a. Towards expenses & costs etc. b. Towards unrecovered interest reversed on the date of NPI. c. Interest held in dummy ledger (unapplied interest). d. Towards arrears of principal/EMI till the date of recovery. e. Towards running ledger balance 5. Cash Flow Statements: Cash Flow statement of the Bank is prepared as per AS-3. Cash Flow statement is mainly classified as: 5.1. Cash flow from Operating Activities: This activity includes cash flow generated from Operational activities. 5.2. Cash Flow from Investing Activities: This activity includes cash flow generated from investments. 5.3. Cash Flow from Financials Activities: This activity includes the cash flow generated from financial instruments. 6. Investments 6.1. In conformity with the requirements of Form A of the Third Schedule to the Banking Regulations Act, 1949, Investments are classified as under: 6.1.1. Government Securities 6.1.2. Other Approved Securities 6.1.3. Shares 6.1.4. Debentures & Bonds 6.1.5. Investments in Subsidiaries & Joint Ventures and 6.1.6. Other Investments The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines contained in Master Circular DoR.MRG.42/21.04.141 /2021-22 dated August 25, 2021 (updated March 23,2022, March 31, 2022, April 08, 2022 and December 08, 2022) into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading (HFT) 6.2. As per RBI guidelines, the following principles have been adopted for the purpose of valuation 6.2.1. Securities held in "HTM" - at acquisition cost. 6.2.1.1. The excess of acquisition cost over the face value is amortized over the remaining period of maturity and in case of discount;it is not recognized as income. 6.2.1.2. Investments in Regional Rural Banks are valued at carrying cost. 6.2.1.3. Investments in Subsidiaries and Joint Ventures are valued at carrying cost. 6.2.1.4. Diminution, other than temporary, in the value of its investment in subsidiaries/joint ventures, which are included in HTM shall be provided for. 6.2.2.Securities held in "AFS" and "HFT" categories 6.2.2.1. Securities held in "AFS" and "HFT" categories are valued classification wise and scrip-wise and net depreciation, if any, in each classification is charged to Profit & Loss account while net appreciation, if any, is ignored. 6.2.2.2. Valuation of securities is arrived at as follows: A Govt. of India Securities (Central Govt. Securities) As per Quotation put out by Financial Benchmarks India Pvt Ltd (FBIL) B State Development Loans, State Govt. Securities, Securities guaranteed by Central/ State Government, PSU Bonds On appropriate yield to maturity basis as per FIMMDA Guidelines C Equity Shares As per Market rates, if quoted, otherwise at breakup value, as per latest audited balance sheet (not more than 18 months old). In absence of both, at '' 1/-per company. The break-up value is computed excluding revaluation reserve. D Preference Shares As per Market rates, if quoted, or on appropriate yield to maturity basis not exceeding redemption value as per FIMMDA guidelines. E Debentures/Bonds As per Market rates, if quoted, otherwise on appropriate yield to maturity basis as per FIMMDA guidelines. F Mutual Funds (MF) As per stock exchange quotations, if quoted. In case of unquoted units, as per latest Repurchase price declared by concerned MF. In cases where latest repurchase price is not available, as per Net Asset Value (NAV) G Treasury Bills / Certificate of Deposits / Commercial Papers At carrying cost H Venture Capital Funds (VCF) At declared NAV or Breakup NAV as per audited Balance Sheet which is not more than 18 months old. If NAV / audited financial statements are not available for more than 18 months continuously, at '' 1/- per VCF I Security Receipts Valuation of the same will be done as per RBI Guidelines on classification, valuation and operation of Investment portfolio of commercial Banks (RBI/DOR/2021-22/81 DOR. MGR.42/21.04.141/2021-22) dated Aug 25, 2021 and as amended from time to time. 6.3. Interbank/RBI Repo and Interbank/ RBI Reverse Repo transactions are accounted for in accordance with extant RBI guidelines. 6.4. As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: 6.4.1. From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. 6.4.2. From HTM category to AFS/HFT category, 6.4.2.1. If the security is originally placed at discount in HTM category, at acquisition cost / book value. 6.4.2.2. If the security is originally placed at a premium, at amortized cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. 6.4.3. From AFS to HFT category and vice versa, at book value. 6.5. The non-performing investments are identified and depreciation / provision is made as per the extant RBI guidelines. 6.6. Profit / Loss on sale of investments & net depreciation on investment in any category are taken to the profit & loss account (net appreciation is ignored). However, in case of profit on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve account. 6.7. Commission, brokerage, broken period interest etc. on securities is debited / credited to Profit & Loss Account. 6.8. Brokerage and STT paid on purchase and sale of Equity is accounted to price of the deal. 6.9. The Amortization of premium on HTM Securities is computed using Straight-line Method. 6.10. The Bank is following weighted average Price (WAP) for accounting of investment portfolio. 6.11. As per the extant RBI guidelines, the Bank follows ''Settlement Date'' for accounting of investments transactions. 6.12. Income from the units of Mutual Fund, Venture Capital & Security Receipt shall be recognized on Cash Basis. 6.13. Derivative Contracts 6.13.1. The Interest Rate Swap which hedges interest bearing Asset or Liability are accounted for in the financial statements on accrual basis except the swap designated with an Asset or Liability that is carried at market value or lower of cost or market value. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the Asset / Liability. 6.13.2. Trading swap transactions are marked to market with changes recorded in the financial statements. (profit if any, is ignored) 6.13.3. In the case of option contracts, guidelines issued by Foreign Exchange Dealers Association of India (FEDAI) from time to time for recognition of income, premium and discount are being followed. 6.13.4. Arbitrage Income earned on forex swap transactions is accounted in Profit / Loss on Exchange Transactions category. 7. Advances 7.1. All advances are classified under four categories: 7.1.1. Standard, 7.1.2. Sub-standard, 7.1.3. Doubtful and 7.1.4. Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the RBI in terms of RBI Master Circular/RBI/2023-2024/06 DOR.STR. REC.3/21.04.048/2023-24 dated April 01,2023 as under: 7.2. Loans and Advances are classified as performing and non-performing, based on the guidelines issued by the RBI. Loan Assets become Non-Performing Assets (NPAs) where: 7.2.1. In respect of term loans, interest and/or instalment of principal remains overdue for a period of more than 90 days; 7.2.2. In respect of Overdraft or Cash Credit advances, the account remains "out of order", i.e. 7.2.2.1. the outstanding balance in the CC/OD account remains continuously in excess of the sanctioned limit/drawing power for 90 days. 7.2.2.2. The outstanding balance in the CC/OD account is less than the sanctioned limit/drawing power but there are no credits continuously for 90 days, or 7.2.2.3. the outstanding balance in the CC/OD account is less than the sanctioned limit/drawing power but credits are not enough to cover the interest debited during the previous 90 days period. 7.2.3.In respect of bills purchased/discounted, the bill remains overdue for a period of more than 90 days; 7.2.4. In respect of agricultural advances for short duration crops, where the instalment of principal or interest remains overdue for two crop seasons. 7.2.5. In respect of agricultural advances for long duration crops, where the principal or interest remains overdue for one crop season. 7.2.6. A working capital borrower account will become NPA if such irregular drawings are permitted in the account for a continuous period of 90 days even though the unit may be working or the borrower''s financial position is satisfactory. 7.2.7. An account where the regular/ ad hoc credit limits have not been reviewed/ renewed within 180 days from the due date/ date of ad hoc sanction will be treated as NPA. 7.2.8. The amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitization transaction undertaken in terms of the Reserve Bank of India (Securitization of Standard Assets) Directions, 2021 7.2.9. In respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment. 7.2.10. Accounts where there is erosion in the value of security/frauds committed by borrowers 7.2.10.1. In respect of accounts where there are potential threats for recovery on account of erosion in the value of security or non-availability of security and existence of other factors such as frauds committed by borrowers it will not be prudent that such accounts should go through various stages of asset classification. In cases of such serious credit impairment, the asset should be straightaway classified as doubtful or loss asset as appropriate. 7.2.10.2. Erosion in the value of security can be reckoned as significant when the realizable value of the security is less than 50 per cent of the value assessed by the bank or accepted by RBI at the time of last inspection, as the case may be. Such NPAs may be straightaway classified under doubtful category. 7.2.10.3. If the realizable value of the security, as assessed by the bank/ approved valuers/RBI is less than 10 per cent of the outstanding in the borrowal accounts, the existence of security should be ignored and the asset should be straightaway classified as loss asset 7.2.11. In respect of MSME accounts which will be restructured in terms of RBI Circular No DOR. No.BP.BC.34/21.04.048/2019-20 February 11, 2020 with reference to Circular No DBR.No.BP. BC.18/21.04.048/2018-19 dated 1st January, 2019 and kept in standard category, the Bank shall maintain a provision of 5% in addition to the provision already held. Reversal of said provision shall be made in accordance with the said circular. 7.2.12. In terms of RBI guidelines relating to ''Covid 19 Regulatory Package'' on Asset Classification and Provisioning RBI has issued circular no.DOR. No.BP.BC/3/21.04.048/2020-21 & circular no. DOR.No.BP.BC/4/21.04.048/2020-21 dated 06th August, 2020, DoR.STR.REC.12/21.04.048/2021-22 & DoR.STR.REC.1 1/21.04.048/2021-22 dated May 05th, 2021 with reference to restructuring of Corporate & Retail Loan, Bank shall maintain necessary provision in this regard. 7.3. NPAs are classified into Sub-Standard, Doubtful and Loss Assets, based on the following criteria stipulated by RBI: 7.3.1. Sub-standard: A loan asset that has remained nonperforming for a period less than or equal to 12 months, 7.3.2. Doubtful: A loan asset that has remained in the sub-standard category for a period exceeding 12 months, 7.3.3. Loss: A loan asset where loss has been identified but the amount has not been fully written off. 7.4. Provisions are made for NPAs as per the extant guidelines prescribed by the regulatory authorities, subject to minimum provisions as prescribed below: Sub-Standard Assets: i. A general of 15% of the total outstanding ii. Additional provision of 10% for exposures which are unsecured ab-initio; iii. However, Unsecured Exposure, ab-initio, in respect of infrastructure loan accounts where certain safeguards such as escrow accounts are available - 20% (instead of 25% as stated above) Doubtful-Secured Portion i. Up to one year - 25% ii. One to three years - 40% iii. More than three years - 100% Doubtful Unsecured Portion 100% Loss Asset 100% 7.5. Advances are stated net of specific loan loss provisions, Counter cyclical provisioning buffer and unrecovered interest held in Sundry /claims received from Credit Guarantee Trust Fund (CGTF) / Export Credit Guarantee Corporation (ECGC) relating to non-performing assets. 7.6. In respect of foreign offices, classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent. 7.7. For restructured/rescheduled assets, provisions are made in accordance with the guidelines issued by the RBI, which require that the difference between the fair value of the loan before and after restructuring is provided for, in addition to provision for NPAs. 7.8. In the case of loan accounts classified as NPAs, an account may be reclassified as a performing asset if it conforms to the guidelines prescribed by the regulators. 7.9. Amounts recovered against debts written off are recognized as revenue in the year of recovery. 7.10. The general provision on Standard Advances is held in "Other Liabilities and Provisions" reflected in schedule 5 of the Balance Sheet and is not considered for arriving at both net NPAs and net advances. Standard Assets provision to be made as per IRAC RBI/2022-2023/15 DOR.STR.REC.4/21.04.048/2022-23 dated April 01,2022 and any subsequent circular issued from time to time. 7.11. Provision on Suspense accounts entries outstanding for more than six months are made at 100% except the claim receivable from Govt./Govt. Bodies like Interest Subsidy on crop loan/export advance, Pension receivable, SDS Interest claim from RBI, Rent Deposits, capital and prepaid expenditure, deposits with Govt & other agencies, Franking stamps, Festival advance to staff etc. 8. Property, Plant and Equipment 8.1. Premises and Other Fixed Assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, eligible borrowing costs and directly attributable costs of bringing the Asset to its working condition for the intended use less trade discounts and rebates. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefits from such assets or their functional capability. Land and Buildings, if revalued are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve and the depreciation provided thereon is deducted there from and shall be credited to Revenue Reserves in terms of revised AS-10 on "Property, Plant and Equipment". 8.2. Depreciation on Fixed Assets is provided for on the Straight-Line Method at the rates prescribed in Expenditure Policy of the Bank from time to time. The applicable rates of depreciation are as under: S. No. Capital Asset Useful Life (Years) Rate in percentage 1 Immovable Property-Land Not stipulated; accordingly, no depreciation NIL 2 Building with RCC frame structure (Both Residential & Nonresidential) 60 1.67 3 Furniture 10 10.00 4 Fixtures 10 10.00 5 Air-conditioning plants (Package & water/air cooled ductable) 10 10.00 6 Split & Window Air conditioners 5 20.00 7 Electrical installation and equipments 5 20.00 8 Solar Power Equipment 15 6.67 9 Elevators & Lifts 15 6.67 10 Civil & Flooring work in leased Premises 5 20.00 11 Telephone Equipment 5 20.00 12 Motorcycles, Scooters & other mopeds 10 10.00 S. No. Capital Asset Useful Life (Years) Rate in percentage 13 Motor Cars, Motor Lorries and Electrically operated vehicles including battery powered or fuel cell powered vehicles 8 12.50 14 Mobile Phones 3 33.33 15 Generators 15 6.67 16 Office Equipment/ Appliances, 5 20.00 17 Computers & computer software forming integral part of hardware 3 33.33 18 ATM & allied items 5 20.00 19 UPS & allied items 5 20.00 20 Servers & Networks 6 16.66 21 End user devices such as desktops, laptops, i-pads, tablets, printer & Scanner, digital watches etc. 3 33.33 22. SDV lockers, Strong Room door, Cash Safe etc. (Along with Fixtures). 20 5.00 23. Items provided to staff (Furniture/Electrical and etc.) 5 20.00 8.3. Depreciation on premises is provided on composite cost, wherever the value of Land and Buildings is not separately identifiable. 8.4. Depreciation on Leased assets and Leasehold improvements is recognized on a straight-line basis using rates determined with reference to the primary period of lease. 9. Impairment of Assets Impairment losses (if any) on Fixed Assets (including revalued assets) are recognised in accordance with AS-28 on "Impairment of Assets" issued by the ICAI and charged off to Profit and Loss Account. The carrying costs of assets are reviewed at each Balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying cost of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. 10. Counter Cyclical Provisioning Buffer The Bank has a policy of creation and utilization of Counter Cyclical Provisioning Buffer separately for Advances and Investments. The quantum of provision to be created is assessed at the end of each financial year. The counter Cyclical Provisions are utilized only for contingencies under extra ordinary circumstances specified in the policy with prior permission of the RBI. 11. Transactions involving Foreign Exchange Accounting for transactions involving foreign exchange is done in accordance with AS-11 on "The Effects of Changes in Foreign Exchange Rates", issued by the ICAI. In terms of AS-11, the foreign currency operations of the Bank are classified as a) Integral Operations and b) Non Integral Operations. All overseas branches, offshore banking units, overseas subsidiaries are treated as non- integral operations and domestic operations in foreign exchange and representative offices are treated as integral operations. Accounting for Integral operations: 11.1.Monetary and Non- Monetary Assets and Liabilities are revalued at the exchange rates notified by FEDAI at the close of the year and resultant gain / loss is recognized in the Profit & Loss Account. 11.2.Income & Expenditure items are recognized at the exchange rates prevailing on the date of the transaction. 11.3.Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notified by FEDAI for specified maturities and at interpolated rates for contracts of ''in-between'' maturities. The resultant gains or losses are recognized in the Profit & Loss account. 11.4.Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notified by FEDAI at the close of the year. 12. Accounting for Non-Integral operations 12.1. Revenue Recognition Income and Expenditure are recognized / accounted for as per the local laws of the respective countries. 12.2. Asset Classification and Loan Loss Provisioning Asset classification and loan loss provisioning are made as per the local laws of the respective countries or as per RBI guidelines whichever is higher. 12.3. Fixed Assets and Depreciation 12.3.1. Fixed Assets are accounted for at historical cost. 12.3.2. Depreciation on Fixed Assets is provided as per the applicable laws of the respective countries. 12.4. Assets and Liabilities (monetary and non-monetary as well as Contingent Liabilities) are translated at the closing rates notified by FEDAI at the close of the year or Qtr. 12.5. Income & Expenditure are translated at the quarterly average closing rates notified by FEDAI at the end of respective quarters. 12.6. All resulting exchange differences are accumulated in ''Foreign Currency Translation Reserve''. 13. Employee Benefits: 13.1. Short Term Employment Benefits: The undiscounted amounts of short-term employee benefits (e.g. medical benefits) payable wholly within twelve months of rendering the services are treated as short term and recognized during the period in which the employee rendered the service. 13.2. Long term Employee Benefits: 13.2.1. Defined Contribution Plans: The Bank operates a new pension scheme (NPS) for all officers/employees joining the Bank on or after 1st April,2010, which is a defined contribution plan, such new joinees not being entitled to become members of the existing Pension Scheme. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with 14% of their basic pay plus dearness allowance as contribution from the Bank. Pending completion of registration procedures of the employees concerned, these contributions retained with the Bank. The Bank recognizes such annual contributions in the year to which they relate. Upon receipt of the Permanent Retirement Account Number (PRAN), the consolidated contribution amounts are transferred to the NPS trust. 13.2.2. Defined Benefit Plan: Gratuity, Pension and Leave Encashment are defined benefits plans. These are provided for on the basis of an actuarial valuation as per Accounting Standard-15 "Employee Benefit" issued by the Institute of Chartered Accountants of India, made at the end of each financial year, based on the projected unit credit method. Actuarial gains/losses are immediately taken to the Profit & Loss account. 14. Segment Reporting The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in the compliances with the Accounting Standard-17 "Segment Reporting" issued by the Institute of Chartered Accountants of India. Business segments are classified into 14.1. Treasury Operations, 14.2. Corporate and Wholesale Banking, 14.3. Retail Banking Operations and (w/w Digital Banking Segment) 14.4. Other Banking Operations. 15. Lease Transactions Lease payments for Assets taken on operating lease recognized as an expense in the profit and loss account on a straight-line basis over the lease term. 16. Earnings per Share The Bank reports the basic and diluted Earnings per Share in accordance with AS 20. Earnings per Share is calculated by dividing the net Profit or Loss (after tax) for the year attributable to the Equity shareholders by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if contracts to issue Equity shares were exercised or converted during the year. Diluted earnings per Equity share is calculated by using the weighted average number of Equity shares and dilutive potential Equity shares outstanding as at the year-end. 17. Taxation: This comprises of provision for Income tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) as determined in accordance with AS-22 on "Accounting for taxes on Income" issued by the ICAI. Provision for Tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rate. Deferred Tax Assets and Deferred Tax Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is ''reasonable certainty'' that sufficient future taxable income will be available against which such Deferred Tax Assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, Deferred Tax Assets are recognized only if there is "virtual certainty". 18. Provisions, Contingent Liabilities and Contingent Assets In terms of AS 29-Provisions, Contingent Liabilities and Contingent Assets issued by the ICAI, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may not be realized. 19. Share Issue Expenses: Share Issue expenses are charged to the Share Premium account in terms of Section 52 of the Companies Act, 2013. Mar 31, 2023 1. Basis of Preparation The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by Reserve Bank of India (RBI) from time to time and the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) to the extent applicable and practices generally prevalent in the banking industry in India. 2. Use of Estimates The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of Assets and Liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported Income and Expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the financial statements are prudent and reasonable. Difference between the actual results and estimates is recognized in the period in which the results are known / materialized. 3. Revenue Recognition 3.1. Income and Expenditure have been accounted for on accrual basis unless otherwise stated. 3.2. Income on Non-Performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by the RBI. Income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classified as NPAs during the year. 3.3. Commission on Letter of Guarantee/Letter of Credit is accounted on accrual basis. 3.4. Exchange and brokerage earned, rent on Safe Deposit Lockers, income from Aadhaar cards, Minimum balance charges etc. are accounted for on realization basis. 3.5. Income (Other than interest) on investments in "Held to Maturity" (HTM) category acquired at discount to the face value is recognized as follows: 3.5.1.On interest bearing securities, it is recognized only at the time of sale/ redemption. 3.5.2. On Zero- coupon securities, it is accounted for over the balance tenor of the securities on a constant yield basis. 3.6. Dividend is accounted on an accrual basis where the right to receive the dividend is established. 3.7. Sale of NPAs accounted in terms of extant RBI guidelines. 3.8. Interest on Income-tax refunds is accounted for on receipt of Intimation order from the Income Tax Department. 4. Appropriation of Recovery : Recoveries other than by way of OTS/NCLT shall be appropriated as under: 4.1. When there is no agreement between the debtor and creditor as to how monies paid by the debtor are required to be appropriated by the creditor, the order of appropriation is as under: For Term Loans: > Towards expenses & costs etc. > Towards unrecovered interest reversed on the date of NPA. > Interest held in dummy ledger (unapplied interest). > Towards arrears of principal/EMI till the date of recovery. > Towards running ledger balance. For Running Accounts: > Towards expenses & costs etc. > Towards interest held in dummy ledger (unapplied interest) including unrecovered interest reversed at the time of NPA. > Towards principal. 4.2. In case borrower stipulates terms of appropriation differently than above and if such different terms of appropriation is accepted by Bank then appropriation of recoveries will be as per the sanction terms. 4.3. In case of OTS & all NCLT accounts, recovery either through resolution/liquidation: Appropriation of recovery to be done as discussed here under or as per the sanction stipulations > Towards principal. > Towards interest held in dummy ledger (unapplied interest) including unrecovered interest reversed at the time of NPA. > Towards expenses & costs etc. 4.4. In case of Non-Performing Investment recovery will be apportioned as mentioned below: a. Towards expenses & costs etc. b. Towards unrecovered interest reversed on the date of NPI. c. Interest held in dummy ledger (unapplied interest). d. Towards arrears of principal/EMI till the date of recovery. e. Towards running ledger balance 5. Cash Flow Statements: Cash Flow statement of the Bank is prepared as per AS-3. Cash Flow statement is mainly classified as: 5.1. Cash flow from Operating Activities: This activity includes cash flow generated from Operational activities. 5.2. Cash Flow from Investing Activities: This activity includes cash flow generated from investments. 5.3. Cash Flow from Financials Activities: This activity includes the cash flow generated from financial instruments. 6. Investments 6.1. In conformity with the requirements of Form A of the Third Schedule to the Banking Regulations Act, 1949, Investments are classified as under: 6.1.1. Government Securities 6.1.2. Other Approved Securities 6.1.3. Shares 6.1.4. Debentures & Bonds 6.1.5. Investments in Subsidiaries & Joint Ventures and 6.1.6. Other Investments The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines contained in Master Circular DoR.MRG.42/21.04.141 /201-22 dated August 25, 2021 (updated March 23,2022, March 31, 2022, April 08, 2022 and December 08, 2022) into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading (HFT) 6.2. As per RBI guidelines, the following principles have been adopted for the purpose of valuation 6.2.1. Securities held in "HTM" - at acquisition cost. 6.2.1.1. The excess of acquisition cost over the face value is amortized over the remaining period of maturity and in case of discount; it is not recognized as income. 6.2.1.2. Investments in Regional Rural Banks are valued at carrying cost. 6.2.1.3. Investments in Subsidiaries and Joint Ventures are valued at carrying cost. 6.2.1.4. Diminution, other than temporary, in the value of its investment in subsidiaries/joint ventures, which are included in HTM shall be provided for. 6.2.2. Securities held in "AFS" and "HFT" categories 6.2.2.1. Securities held in "AFS" and "HFT" categories are valued classification wise and scrip-wise and net depreciation, if any, in each classification is charged to Profit & Loss account while net appreciation, if any, is ignored. 6.2.2.2. Valuation of securities is arrived at as follows: A Govt. of India Securities (Central Govt. Securities) As per Quotation put out by Financial Benchmarks India Pvt Ltd (FBIL) B State Development Loans, State Govt. Securities, Securities guaranteed by Central/ State Government, PSU Bonds On appropriate yield to maturity basis as per FIMMDA Guidelines C Equity Shares As per Market rates, if quoted, otherwise at break-up value, as per latest audited balance sheet (not more than 18 months old). In absence of both, at '' 1/- per company. The break-up value is computed excluding revaluation reserve. D Preference Shares As per Market rates, if quoted, or on appropriate yield to maturity basis not exceeding redemption value as per FIMMDA guidelines. E Debentures/Bonds As per Market rates, if quoted, otherwise on appropriate yield to maturity basis as per FIMMDA guidelines. F Mutual Funds(MF) As per stock exchange quotations, if quoted. In case of unquoted units, as per latest Repurchase price declared by concerned MF. In cases where latest repurchase price is not available, as per Net Asset Value (NAV) G Treasury Bills / Certificate of Deposits / Commercial Papers At carrying cost H Venture Capital Funds (VCF) At declared NAV or Breakup NAV as per audited Balance Sheet which is not more than 18 months old. If NAV / audited financial statements are not available for more than 18 months continuously, at ''1/- per VCF I Security Receipts Valuation of the same will be done as per RBI Guidelines on classification, valuation and operation of Investment portfolio of commercial Banks (RBI/DOR/2021-22/81 DOR. MGR.42/21.04.141/2021-22) dated Aug 25, 2021 and as amended from time to time. 6.3. Interbank/RBI Repo and Interbank/ RBI Reverse Repo transactions are accounted for in accordance with extant RBI guidelines. 6.4. As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: 6.4.1. From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. 6.4.2. From HTM category to AFS/HFT category, 6.4.2.1. If the security is originally placed at discount in HTM category, at acquisition cost / book value. 6.4.2.2. If the security is originally placed at a premium, at amortized cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. 6.4.3. From AFS to HFT category and vice versa, at book value. 6.5. The non-performing investments are identified and depreciation / provision is made as per the extant RBI guidelines. 6.6. Profit / Loss on sale of investments & net depreciation on investment in any category are taken to the profit & loss account (net appreciation is ignored). However, in case of profit on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve account. 6.7. Commission, brokerage, broken period interest etc. on securities is debited / credited to Profit & Loss Account. 6.8. Brokerage and STT paid on purchase and sale of Equity is accounted to price of the deal. 6.9. The Amortization of premium on HTM Securities is computed using Straight-line Method. 6.10. The Bank is following weighted average Price (WAP) for accounting of investment portfolio. 6.11. As per the extant RBI guidelines, the Bank follows ''Settlement Date'' for accounting of investments transactions. 6.12. Income from the units of Mutual Fund, Venture Capital & Security Receipt shall be recognized on Cash Basis. 6.13. Derivative Contracts 6.13.1. The Interest Rate Swap which hedges interest bearing Asset or Liability are accounted for in the financial statements on accrual basis except the swap designated with an Asset or Liability that is carried at market value or lower of cost or market value. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the Asset / Liability. 6.13.2. Trading swap transactions are marked to market with changes recorded in the financial statements. (profit if any, is ignored) 6.13.3. In the case of option contracts, guidelines issued by Foreign Exchange Dealers Association of India (FEDAI) from time to time for recognition of income, premium and discount are being followed. 6.13.4. Arbitrage Income earned on forex swap transactions is accounted in Profit / Loss on Exchange Transactions category. 7. Advances 7.1. All advances are classified under four categories: 7.1.1. Standard, 7.1.2. Sub-standard, 7.1.3. Doubtful and 7.1.4. Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the RBI in terms of Master Circular RBI/2022-2023/15 DOR. STR.REC.4/21.04.048/2022-23 dated April 01,2022 as under: 7.2. Loans and Advances are classified as performing and non-performing, based on the guidelines issued by the RBI. Loan Assets become Non-Performing Assets (NPAs) where: 7.2.1. In respect of term loans, interest and/or instalment of principal remains overdue for a period of more than 90 days; 7.2.2. In respect of Overdraft or Cash Credit advances, the account remains "out of order", i.e. 7.2.2.1. the outstanding balance in the CC/OD account remains continuously in excess of the sanctioned limit/drawing power for 90 days. 7.2.2.2. The outstanding balance in the CC/OD account is less than the sanctioned limit/ drawing power but there are no credits continuously for 90 days, or 7.2.2.3. the outstanding balance in the CC/OD account is less than the sanctioned limit/ drawing power but credits are not enough to cover the interest debited during the previous 90 days period. 7.2.3. In respect of bills purchased/discounted, the bill remains overdue for a period of more than 90 days; 7.2.4. In respect of agricultural advances for short duration crops, where the instalment of principal or interest remains overdue for two crop seasons. 7.2.5. In respect of agricultural advances for long duration crops, where the principal or interest remains overdue for one crop season. 7.2.6. A working capital borrower account will become NPA if such irregular drawings are permitted in the account for a continuous period of 90 days even though the unit may be working or the borrower''s financial position is satisfactory. 7.2.7. An account where the regular/ ad hoc credit limits have not been reviewed/ renewed within 180 days from the due date/ date of ad hoc sanction will be treated as NPA. 7.2.8. The amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitization transaction undertaken in terms of the Reserve Bank of India (Securitization of Standard Assets) Directions, 2021 7.2.9. In respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment. 7.2.10. Accounts where there is erosion in the value of security/frauds committed by borrowers 7.2.10.1. In respect of accounts where there are potential threats for recovery on account of erosion in the value of security or non-availability of security and existence of other factors such as frauds committed by borrowers it will not be prudent that such accounts should go through various stages of asset classification. In cases of such serious credit impairment, the asset should be straightaway classified as doubtful or loss asset as appropriate. 7.2.10.2. Erosion in the value of security can be reckoned as significant when the realizable value of the security is less than 50 per cent of the value assessed by the bank or accepted by RBI at the time of last inspection, as the case may be. Such NPAs may be straightaway classified under doubtful category. 7.2.10.3. If the realizable value of the security, as assessed by the bank/ approved valuers/RBI is less than 10 per cent of the outstanding in the borrowal accounts, the existence of security should be ignored and the asset should be straightaway classified as loss asset 7.2.11. In respect of MSME accounts which will be restructured in terms of RBI Circular No DOR. No.BPBC.34/21.04.048/2019-20 February 11, 2020 with reference to Circular No DBR.No.BP BC.18/21.04.048/2018-19 dated 1st January, 2019 and kept in standard category, the Bank shall maintain a provision of 5% in addition to the provision already held. Reversal of said provision shall be made in accordance with the said circular. 7.2.12. In terms of RBI guidelines relating to ''Covid 19 Regulatory Package'' on Asset Classification and Provisioning RBI has issued circular no.DOR.No.BPBC/3/21.04.048/2020-21 & circular no. DOR.No.BPBC/4/21.04.048/2020-21 dated 06th August, 2020, DoR.STR. REC.12/21.04.048/2021-22 & DoR.STR. REC.11/21.04.048/2021-22 dated May 05th, 2021 with reference to restructuring of Corporate & Retail Loan, Bank shall maintain necessary provision in this regard. 7.3. NPAs are classified into Sub-Standard, Doubtful and Loss Assets, based on the following criteria stipulated by RBI: 7.3.1. Sub-standard: A loan asset that has remained non-performing for a period less than or equal to 12 months, 7.3.2. Doubtful: A loan asset that has remained in the sub-standard category for a period exceeding 12 months, 7.3.3. Loss: A loan asset where loss has been identified but the amount has not been fully written off. 7.4. Provisions are made for NPAs as per the extant guidelines prescribed by the regulatory authorities, subject to minimum provisions as prescribed below: Sub-Stan dard Assets: i. A general of 15% of the total outstanding ii. Additional provision of 10% for exposures which are unsecured ab-initio; iii. However, Unsecured Exposure, ab-initio, in respect of infrastructure loan accounts where certain safeguards such as escrow accounts are available - 20% (instead of 25% as stated above) Doubtful-Se- cured Portion i. Up to one year - 25% ii. One to three years - 40% iii. More than three years - 100% Doubtful Unsecured Portion 100% Loss Asset 100% 7.5. Advances are stated net of specific loan loss provisions, Counter cyclical provisioning buffer and unrecovered interest held in Sundry /claims received from Credit Guarantee Trust Fund (CGTF) / Export Credit Guarantee Corporation (ECGC) relating to non-performing assets. 7.6. In respect of foreign offices, classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent. 7.7. For restructured/rescheduled assets, provisions are made in accordance with the guidelines issued by the RBI, which require that the difference between the fair value of the loan before and after restructuring is provided for, in addition to provision for NPAs. 7.8. In the case of loan accounts classified as NPAs, an account may be reclassified as a performing asset if it conforms to the guidelines prescribed by the regulators. 7.9. Amounts recovered against debts written off are recognized as revenue in the year of recovery. 7.10. The general provision on Standard Advances is held in "Other Liabilities and Provisions" reflected in schedule 5 of the Balance Sheet and is not considered for arriving at both net NPAs and net advances. Standard Assets provision to be made as per IRAC RBI/2022-2023/15 DOR.STR. REC.4/21.04.048/2022-23 dated April 01,2022 and any subsequent circular issued from time to time. 7.11. Provision on Suspense accounts entries outstanding for more than six months are made at 100% except the claim receivable from Govt./ Govt. Bodies like Interest Subsidy on crop loan/ export advance, Pension receivable etc. 8. Property, Plant and Equipment 8.1. Premises and Other Fixed Assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, eligible borrowing costs and directly attributable costs of bringing the Asset to its working condition for the intended use less trade discounts and rebates. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefits from such assets or their functional capability. Land and Buildings, if revalued are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve and the depreciation provided thereon is deducted there from and shall be credited to Revenue Reserves in terms of revised AS-10 on "Property, Plant and Equipment". 8.2. Depreciation on Fixed Assets is provided for on the Straight-Line Method at the rates prescribed in Expenditure Policy of the Bank from time to time. The applicable rates of depreciation are as under: S. No. Capital Asset Useful Life (Years) Rate in percentage 1 Immovable Property-Land Not stipulated; accordingly, no depreciation NIL 2 Building with RCC frame structure (Both Residential & Nonresidential) 60 1.67 3 Furniture 10 10.00 4 Fixtures 10 10.00 5 Air-conditioning plants (Package & water/air cooled ductable) 10 10.00 6 Split & Window Air conditioners 5 20.00 7 Electrical installation and equipments 5 20.00 8 Solar Power Equipment 15 6.67 9 Elevators & Lifts 15 6.67 10 Civil & Flooring work in leased Premises 5 20.00 11 Telephone Equipment 5 20.00 12 Motorcycles, Scooters & other mopeds 10 10.00 13 Motor Cars, Motor Lorries and Electrically operated vehicles including battery powered or fuel cell powered vehicles 8 12.50 14 Mobile Phones 3 33.33 15 Generators 15 6.67 16 Office Equipment/ Appliances, 5 20.00 17 Computers & computer software forming integral part of hardware 3 33.33 18 ATM & allied items 5 20.00 19 UPS & allied items 5 20.00 20 Servers & Networks 6 16.66 S. No. Capital Asset Useful Life (Years) Rate in percentage 21 End user devices such as desktops, laptops, i-pads, tablets, printer & Scanner, digital watches etc. 3 33.33 22. SDV lockers, Strong Room door, Cash Safe etc. (Along with Fixtures). 20 5.00 23. Items provided to staff (Furniture/ Electrical and etc.) 5 20.00 8.3. Depreciation on premises is provided on composite cost, wherever the value of Land and Buildings is not separately identifiable. 8.4. Depreciation on Leased assets and Leasehold improvements is recognized on a straight-line basis using rates determined with reference to the primary period of lease. 9. Impairment of Assets Impairment losses (if any) on Fixed Assets (including revalued assets) are recognised in accordance with AS-28 on "Impairment of Assets" issued by the ICAI and charged off to Profit and Loss Account. The carrying costs of assets are reviewed at each Balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying cost of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. 10. Counter Cyclical Provisioning Buffer The Bank has a policy of creation and utilization of Counter Cyclical Provisioning Buffer separately for Advances and Investments. The quantum of provision to be created is assessed at the end of each financial year. The counter Cyclical Provisions are utilized only for contingencies under extra ordinary circumstances specified in the policy with prior permission of the RBI. 11. Transactions involving Foreign Exchange Accounting for transactions involving foreign exchange is done in accordance with AS-11 on "The Effects of Changes in Foreign Exchange Rates", issued by the ICAI. In terms of AS-11, the foreign currency operations of the Bank are classified as a) Integral Operations and b) Non Integral Operations. All overseas branches, offshore banking units, overseas subsidiaries are treated as non- integral operations and domestic operations in foreign exchange and representative offices are treated as integral operations. Accounting for Integral operations: 11.1. Monetary and Non- Monetary Assets and Liabilities are revalued at the exchange rates notified by FEDAI at the close of the year and resultant gain / loss is recognized in the Profit & Loss Account. 11.2. Income & Expenditure items are recognized at the exchange rates prevailing on the date of the transaction. 11.3. Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notified by FEDAI for specified maturities and at interpolated rates for contracts of ''in-between'' maturities. The resultant gains or losses are recognized in the Profit & Loss account. 11.4. Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notified by FEDAI at the close of the year. 12. Accounting for Non-Integral operations 12.1. Revenue Recognition Income and Expenditure are recognized / accounted for as per the local laws of the respective countries. 12.2. Asset Classification and Loan Loss Provisioning Asset classification and loan loss provisioning are made as per the local laws of the respective countries or as per RBI guidelines whichever is higher. 12.3. Fixed Assets and Depreciation 12.3.1. Fixed Assets are accounted for at historical cost. 12.3.2. Depreciation on Fixed Assets is provided as per the applicable laws of the respective countries. 12.4. Assets and Liabilities (monetary and nonmonetary as well as Contingent Liabilities) are translated at the closing rates notified by FEDAI at the close of the year. 12.5. Income & Expenditure are translated at the quarterly average closing rates notified by FEDAI at the end of respective quarters. 12.6. All resulting exchange differences are accumulated in ''Foreign Currency Translation Reserve''. 13. Employee Benefits: 13.1. Short Term Employment Benefits: The undiscounted amounts of short-term employee benefits (e.g. medical benefits) payable wholly within twelve months of rendering the services are treated as short term and recognized during the period in which the employee rendered the service. 13.2. Long term Employee Benefits: 13.2.1. Defined Contribution Plans: The Bank operates a new pension scheme (NPS) for all officers/employees joining the Bank on or after 1st April,2010, which is a defined contribution plan, such new joinees not being entitled to become members of the existing Pension Scheme. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with 14% of their basic pay plus dearness allowance as contribution from the Bank. Pending completion of registration procedures of the employees concerned, these contributions retained with the Bank. The Bank recognizes such annual contributions in the year to which they relate. Upon receipt of the Permanent Retirement Account Number (PRAN), the consolidated contribution amounts are transferred to the NPS trust. 13.2.2. Defined Benefit Plan: Gratuity, Pension and Leave Encashment are defined benefits plans. These are provided for on the basis of an actuarial valuation as per Accounting Standard-15 "Employee Benefit" issued by the Institute of Chartered Accountants of India, made at the end of each financial year, based on the projected unit credit method. Actuarial gains/losses are immediately taken to the Profit & Loss account. 14. Segment Reporting The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in the compliances with the Accounting Standard-17 "Segment Reporting" issued by the Institute of Chartered Accountants of India. Business segments are classified into 14.1. Treasury Operations, 14.2. Corporate and Wholesale Banking, 14.3. Retail Banking Operations and (w/w Digital Banking Segment as and when applicable) 14.4. Other Banking Operations. 15. Lease Transactions Lease payments for Assets taken on operating lease recognized as an expense in the profit and loss account on a straight-line basis over the lease term. 16. Earnings per Share The Bank reports the basic and diluted Earnings per Share in accordance with AS 20. Earnings per Share is calculated by dividing the net Profit or Loss (after tax) for the year attributable to the Equity shareholders by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if contracts to issue Equity shares were exercised or converted during the year. Diluted earnings per Equity share is calculated by using the weighted average number of Equity shares and dilutive potential Equity shares outstanding as at the year-end. 17. Taxation: This comprises of provision for Income tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) as determined in accordance with AS-22 on "Accounting for taxes on Income" issued by the ICAI. Provision for Tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rate. Deferred Tax Assets and Deferred Tax Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is ''reasonable certainty'' that sufficient future taxable income will be available against which such Deferred Tax Assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, Deferred Tax Assets are recognized only if there is "virtual certainty". 18. Provisions, Contingent Liabilities and Contingent Assets In terms of AS 29-Provisions, Contingent Liabilities and Contingent Assets issued by the ICAI, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may not be realized. 19. Share Issue Expenses: Share Issue expenses are charged to the Share Premium account in terms of Section 52 of the Companies Act, 2013. 20. Consolidation of the Accounts: Bank is having five subsidiaries i.e. Union Asset Management Company Private Limited, Union Trustee Company Private Limited, Union Bank of India (UK) Limited, Andhra Bank Financial Services Limited and UBI Services Ltd. Bank is having three Joint Ventures i.e. Star Union Dai-Ichi Life Insurance Company Ltd., ASREC (India) Ltd. and India International Bank (Malaysia) Berhad. Bank is having one associate Chaitanya Godavari Grameen Bank. The consolidated financial statements are prepared on the basis of: 20.1. Audited Accounts of the parent bank (Union Bank of India) 20.2. Consolidation of Subsidiaries: Line by Line aggregation of the Income/Expenditure/ Assets/Liabilities of the subsidiaries with the respective line item of the parent bank, after eliminating all intra-group transactions, unrealized profits/loss in terms of AS 21 on Consolidated Financial Statements issued by Institute of Chartered Accountants of India (ICAI). 20.3. Consolidation of Associates: The Investment in Associate is accounted for consolidation as per Equity Method in terms of AS 23 on Accounting for Investments in Associates in Consolidated Financial Statement issued by Institute of Chartered Accountants of India (ICAI). 20.4. Consolidation of Joint Ventures: Line by Line consolidation is done with proportionate share in Joint Venture in terms of AS-27 on Financials Reporting in Interest of Joint Venture issued by Institute of Chartered Accountants of India (ICAI). Mar 31, 2022 1. Basis of Preparation The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by Reserve Bank of India (RBI) from time to time and the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) to the extent applicable and practices generally prevalent in the banking industry in India. 2. Use of Estimates The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of Assets and Liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported Income and the Expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the financial statements are prudent and reasonable. Difference between the actual results and estimates is recognized in the period in which the results are known / materialized. 3. Revenue Recognition 3.1. Income and Expenditure have been accounted for on accrual basis unless otherwise stated. 3.2. Income on Non-Performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by the RBI. Income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classified as NPAs during the year. 3.3. Commission on Letter of Guarantee/Letter of Credit is accounted on accrual basis. 3.4. Exchange and brokerage earned, rent on Safe Deposit Lockers, income from Aadhaar cards, Minimum balance charges etc. are accounted for on realization basis. 3.5. Income (Other than interest) on investments in "Held to Maturity" (HTM) category acquired at discount to the face value is recognized as follows: 3.5.1. On interest bearing securities, it is recognized only at the time of sale/ redemption. 3.5.2. On Zero- coupon securities, it is accounted for over the balance tenor of the securities on a constant yield basis. 3.6. Dividend is accounted on an accrual basis where the right to receive the dividend is established. 3.7. Sale of NPAs accounted in terms of extant RBI guidelines. 3.8. Interest on Income-tax refunds is accounted for on receipt of Intimation order from the Income Tax Department. 4. Appropriation of Recovery : Appropriation of recoveries from one time settlement & NCLT Resolutions shall be as per terms of sanction. Recoveries other than by way of OTS/NCLT shall be appropriated as under: 4.1. When there is no agreement between the debtor and creditor as to how monies paid by the debtor are required to be appropriated by the creditor, the order of appropriation is as under : For Term Loans: > Towards expenses & costs etc. > Towards unrecovered interest reversed on the date of NPA. > Interest held in dummy ledger (unapplied interest). > Towards arrears of principal/EMI till the date of recovery. > Towards running ledger balance. For Running Accounts: > Towards expenses & costs etc. > Towards interest held in dummy ledger (unapplied interest) including unrecovered interest reversed at the time of NPA. > Towards principal. 4.2. In case borrower stipulates terms of appropriation differently than above and if such different terms of appropriation is accepted by Bank then appropriation of recoveries will be as per the accepted terms. 4.3. In case of Non Performing Investment recovery will be apportioned as mentioned below: a. Towards expenses & costs etc. b. Towards unrecovered interest reversed on the date of NPI. c. Interest held in dummy ledger (unapplied interest). d. Towards arrears of principal/EMI till the date of recovery. e. Towards running ledger balance 5. Cash Flow Statements: Cash Flow statement of the Bank is prepared as per AS-3. Cash Flow statement is mainly classified as: 5.1. Cash flow from Operating Activities: This activity includes cash flow generated from Operational activities. 5.2. Cash Flow from Investing Activities: This activity includes cash flow generated by investments. 5.3. Cash Flow from Financials Activities: This activity includes the cash flow generated from financial instruments. 6. Investments 6.1. In conformity with the requirements of Form A of the Third Schedule to the Banking Regulations Act, 1949, Investments are classified as under: 6.1.1. Government Securities 6.1.2. Other Approved Securities 6.1.3. Shares 6.1.4. Debentures & Bonds 6.1.5. Investments in Subsidiaries & Joint Ventures and 6.1.6. Other Investments The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines contained in Master Circular DoR. MRG.42/21.04.141 /201-22 dated August 25, 2021 into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading (HFT) 6.2. As per RBI guidelines, the following principles have been adopted for the purpose of valuation 6.2.1. Securities held in "HTM" - at acquisition cost. 6.2.1.1. The excess of acquisition cost over the face value is amortized over the remaining period of maturity and in case of discount; it is not recognized as income. 6.2.1.2. Investments in Regional Rural Banks are valued at carrying cost. 6.2.1.3. Investments in Subsidiaries and Joint Ventures are valued at carrying cost. 6.2.1.4. Diminution, other than temporary, in the value of its investment in subsidiaries/joint ventures, which are included in HTM shall be provided for. 6.2.2. Securities held in "AFS" and "HFT" categories 6.2.2.1. Securities held in "AFS" and "HFT" categories are valued classification wise and scrip-wise and net depreciation, if any, in each classification is charged to Profit & Loss account while net appreciation, if any, is ignored. 6.2.2.2. Valuation of securities is arrived at as follows: A Govt. of India Securities (Central Govt. Securities) As per quotations put out by Fixed Income Money Market and Derivatives Association (FIMMDA/FBIL) B State Development Loans, State Govt. Securities, Securities guaranteed by Central/ State Government, PSU Bonds On appropriate yield to maturity basis as per FIMMDA/ FBIL guidelines C Equity Shares As per market rates, if quoted, otherwise at Break-up Value, as per latest Audited Balance Sheet (not more than 1 year old). In the absence of both, at 1/- per Company. The break-up Value is computed excluding revaluation reserve. D Preference Shares As per market rates, if quoted, or on appropriate yield to maturity basis not exceeding redemption value as per FIMMDA/FBIL guidelines E Debentures/Bonds As per market rates, if quoted, otherwise on appropriate yield to maturity basis as per FIMMDA/FBIL guidelines. F Mutual Funds(MF) As per stock exchange quotations, if quoted. In case of unquoted units, as per latest Repurchase price declared by concerned MF. In cases where latest repurchase price is not available, as per Net Asset Value (NAV) G Treasury Bills / Certificate of Deposits / Commercial Papers At carrying cost H Venture Capital Funds (VCF) At declared NAV or Breakup NAV as per audited Balance Sheet which is not more than 18 months old. If NAV / audited financial statements are not available for more than 18 months continuously, at 1/- per VCF I Security Receipts At NAV as declared by Securitization Companies Securitization Companies 6.3. Interbank/RBI Repo and Interbank/ RBI Reverse Repo transactions are accounted for in accordance with extant RBI guidelines. 6.4. As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: 6.4.1. From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. 6.4.2. From HTM category to AFS/HFT category, 6.4.2.1. If the security is originally placed at discount in HTM category, at acquisition cost / book value. 6.4.2.2. If the security is originally placed at a premium, at amortized cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. 6.4.3.From AFS to HFT category and vice versa, at book value. 6.5. The non-performing investments are identified and depreciation / provision is made as per the extant RBI guidelines. 6.6. Profit / Loss on sale of investments & appreciation/ depreciation of investment in any category are taken to the Profit & Loss account. However, in case of profit on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve account. 6.7. Commission, brokerage, broken period interest etc on securities is debited / credited to Profit & Loss Account. 6.8. Brokerage and STT paid on purchase and sale of Equity is accounted to price of the deal. 6.9. The Amortization of premium on HTM Securities is computed using Straight-line Method. 6.10. The Bank is following weighted average Price (WAP) for accounting of investment portfolio. 6.11. As per the extant RBI guidelines, the Bank follows ‘Settlement Date'' for accounting of investments transactions. 6.12. Income from the units of Mutual Fund, Venture Capital & Security Receipt is recognized on Cash Basis. 6.13. Derivative Contracts 6.13.1. The Interest Rate Swap which hedges interest bearing Asset or Liability are accounted for in the financial statements on accrual basis except the swap designated with an Asset or Liability that is carried at market value or lower of cost or market value. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the Asset / Liability. 6.13.2. Trading swap transactions are marked to market with changes recorded in the financial statements. (profit if any, is ignored) 6.13.3. I n the case of option contracts, guidelines issued by Foreign Exchange Dealers Association of India (FEDAI) from time to time for recognition of income, premium and discount are being followed. 7. Advances 7.1. All advances are classified under four categories: 7.1.1. Standard, 7.1.2. Sub-standard, 7.1.3. Doubtful and 7.1.4. Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the RBI in terms of Master Circular DoR No.STR. REC.55/21.04.048/2021-22 dated October 01, 2021 as under: 7.2. Loans and Advances are classified as performing and non-performing, based on the guidelines issued by the RBI. Loan Assets become Non-Performing Assets (NPAs) where: 7.2.1. In respect of term loans, interest and/or instalment of principal remains overdue for a period of more than 90 days; 7.2.2. In respect of Overdraft or Cash Credit advances, the account remains "out of order", i.e. 7.2.2.1. the outstanding balance in the CC/OD account remains continuously in excess of the sanctioned limit/drawing power for 90 days, or the outstanding balance in the CC/OD account is less than the sanctioned limit/drawing power but there are no credits continuously for 90 days, or 7.2.2.2. the outstanding balance in the CC/OD account is less than the sanctioned limit/drawing power but credits are not enough to cover the interest debited during the previous 90 days period. 7.2.3. In respect of bills purchased/discounted, the bill remains overdue for a period of more than 90 days; 7.2.4. In respect of agricultural advances for short duration crops, where the instalment of principal or interest remains overdue for two crop seasons. 7.2.5. In respect of agricultural advances for long duration crops, where the principal or interest remains overdue for one crop season. 7.2.6. A working capital borrowal account will become NPA if such irregular drawings are permitted in the account for a continuous period of 90 days even though the unit may be working or the borrower''s financial position is satisfactory. 7.2.7. In respect of MSME accounts where RBI dispensation benefit is passed on the Bank will adhere to Income Recognition, Asset Classification and Provisioning norms as spelt out RBI circular DBR.No.BP BC.100/21.04.048/2017-18 dated 7th February, 2018 and DBR.No.BPBC.108/21.04.048/2017/18 dated 6th June, 2018. 7.2.8. In respect of MSME accounts which will be restructured in terms of RBI Circular No DOR. No.BPBC.34/21.04.048/2019-20 February 11, 2020 with reference to Circular No DBR.No.BP. BC.18/21.04.048/2018-19 dated 1st January, 2019 and kept in standard category, the Bank shall maintain a provision of 5% in addition to the provision already held. Reversal of said provision shall be made in accordance with the said circular. 7.2.9. In terms of RBI guidelines relating to ‘Covid 19 Regulatory Package'' on Asset Classification and Provisioning dated 27th March, 2020, 17th April 2020 and 23rd May, 2020,the Bank has extended moratorium on payment of instalment and/or interest as applicable, falling due between 1st March, 2020 to 31st August, 2020 to eligible borrowers classified as standard, even if overdue, as on 29th February, 2020 without considering the same as restructuring. Further as per RBI circular no.DOR. No.BP.BC/3/21.04.048/2020-21 & circular no. DOR. No.BP.BC/4/21.04.048/2020-21 dated 06th August, 2020, DoR.STR.REC.12/21.04.048/2021-22 & DoR. STR.REC.11/21.04.048/2021-22 dated May 05th, 2021 with reference to restructuring of Corporate & Retail Loan, Bank shall maintain necessary provision in this regard. 7.3. NPAs are classified into Sub-Standard, Doubtful and Loss Assets, based on the following criteria stipulated by RBI: 7.3.1. Sub-standard: A loan asset that has remained non performing for a period less than or equal to 12 months, 7.3.2. Doubtful: A loan asset that has remained in the substandard category for a period exceeding 12 months, 7.3.3. Loss: A loan asset where loss has been identified but the amount has not been fully written off. 7.4. Provisions are made for NPAs as per the extant guidelines prescribed by the regulatory authorities, subject to minimum provisions as prescribed below: Sub-Stan dard Assets: i. A general of 15% of the total outstanding ii. Additional provision of 10% for exposures which are unsecured ab-initio; iii. However, Unsecured Exposure, ab-initio, in respect of infrastructure loan accounts where certain safeguards such as escrow accounts are available - 20% (instead of 25% as stated above) Doubtful-Se- cured Portion i. Up to one year - 25% ii. One to three years - 40% iii. More than three years - 100% Doubtful Unsecured Portion 100% Loss Asset 100% 7.5. Advances are stated net of specific loan loss provisions, Counter cyclical provisioning buffer, Provision for diminution in fair value of restructured advances and unrecovered interest held in Sundry /claims received from Credit Guarantee Trust Fund (CGTF) / Export Credit Guarantee Corporation (ECGC) relating to nonperforming assets. 7.6. In respect of foreign offices, classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent. 7.7. For restructured/rescheduled assets, provisions are made in accordance with the guidelines issued by the RBI, which require that the difference between the fair value of the loan before and after restructuring is provided for, in addition to provision for NPAs. 7.8. In the case of loan accounts classified as NPAs, an account may be reclassified as a performing asset if it conforms to the guidelines prescribed by the regulators. 7.9. Amounts recovered against debts written off are recognized as revenue in the year of recovery. 7.10. The general provision on Standard Advances is held in "Other Liabilities and Provisions" reflected in schedule 5 of the Balance Sheet and is not considered for arriving at both net NPAs and net advances. Standard Assets provision to be made as per IRAC RBI Master Circular RBI/2021-2022/104 DOR.No.STR.REC.55/21.04.048/2021-22 dated October 01,2021 and any subsequent circular issued from time to time. 7.11. Provision on Suspense accounts entries outstanding for more than six months are made at 100% except the claim receivable from Govt./ Govt. Bodies like Interest Subsidy on crop loan/ export advance, Pension receivable etc. 8. Property, Plant and Equipment 8.1. Premises and Other Fixed Assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, eligible borrowing costs and directly attributable costs of bringing the Asset to its working condition for the intended use less trade discounts and rebates. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefits from such assets or their functional capability. Land and Buildings, if revalued are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve and the depreciation provided thereon is deducted there from and shall be credited to Revenue Reserves in terms of revised AS-10 on "Property, Plant and Equipment". 8.2. Depreciation on Fixed Assets is provided for on the Straight Line Method at the rates prescribed in Expenditure Policy of the Bank from time to time. The applicable rates of depreciation are as under: S. No. Capital Asset Useful Life (Years) Rate in percentage 1 Immovable Property-Land Not stipulated; accordingly, no depreciation NIL 2 Building with RCC frame structure (Both Residential & Non residential) 60 1.67 3 Furniture 10 10.00 4 Fixtures 10 10.00 5 Air-conditioning plants (Package & water/air cooled ductable) 10 10.00 6 Split & Window Air conditioners 5 20.00 7 Electrical installation and equipments 5 20.00 8 Solar Power Equipment 15 6.67 9 Elevators & Lifts 15 6.67 10 Civil & Flooring work in leased Premises 5 20.00 11 Telephone Equipment 5 20.00 12 Motor Cycles, Scooters & other mopeds 10 10.00 S. No. Capital Asset Useful Life (Years) Rate in percentage 13 Motor Cars, Motor Lorries and Electrically operated vehicles including battery powered or fuel cell powered vehicles 8 12.50 14 Mobile Phones 3 33.33 15 Generators 15 6.67 16 Office Equipment/ Appliances, SDV lockers, Strong Room door, Cash Safe etc. 5 20.00 17 Computers & computer software forming integral part of hardware 3 33.33 18 ATM & allied items 3 33.33 19 UPS & allied items 5 20.00 20 Servers & Networks 6 16.66 21 End user devices such as desktops, laptops, i-pads, tablets, printer & Scanner, digital watches etc. 3 33.33 8.3. Depreciation on premises is provided on composite cost, wherever the value of Land and Buildings is not separately identifiable. 8.4. Depreciation on Leased assets and Leasehold improvements is recognized on a straight-line basis using rates determined with reference to the primary period of lease. 9. Impairment of Assets Impairment losses (if any) on Fixed Assets (including revalued assets) are recognised in accordance with AS-28 on "Impairment of Assets" issued by the ICAI and charged off to Profit and Loss Account. The carrying costs of assets are reviewed at each Balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying cost of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. 10. Counter Cyclical Provisioning Buffer The Bank has a policy of creation and utilization of Counter Cyclical Provisioning Buffer separately for Advances and Investments. The quantum of provision to be created is assessed at the end of each financial year. The counter Cyclical Provisions are utilized only for contingencies under extra ordinary circumstances specified in the policy with prior permission of the RBI. 11. Transactions involving Foreign Exchange Accounting for transactions involving foreign exchange is done in accordance with AS-11 on "The Effects of Changes in Foreign Exchange Rates", issued by the ICAI. In terms of AS-11, the foreign currency operations of the Bank are classified as a) Integral Operations and b) Non Integral Operations. All overseas branches, offshore banking units, overseas subsidiaries are treated as non- integral operations and domestic operations in foreign exchange and representative offices are treated as integral operations. Accounting for Integral operations: 11.1. Monetary and Non- Monetary Assets and Liabilities are revalued at the exchange rates notified by FEDAI at the close of the year and resultant gain / loss is recognized in the Profit & Loss Account. 11.2. Income & Expenditure items are recognized at the exchange rates prevailing on the date of the transaction. 11.3. Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notified by FEDAI for specified maturities and at interpolated rates for contracts of ‘in-between'' maturities. The resultant gains or losses are recognized in the Profit & Loss account. 11.4. Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notified by FEDAI at the close of the year. 12. Accounting for Non-Integral operations 12.1. Revenue Recognition Income and Expenditure are recognized / accounted for as per the local laws of the respective countries. 12.2. Asset Classification and Loan Loss Provisioning Asset classification and loan loss provisioning are made as per the local laws of the respective countries or as per RBI guidelines whichever is higher. 12.3. Fixed Assets and Depreciation 12.3.1. Fixed Assets are accounted for at historical cost. 12.3.2. Depreciation on Fixed Assets is provided as per the applicable laws of the respective countries. 12.4. Assets and Liabilities (monetary and nonmonetary as well as Contingent Liabilities) are translated at the closing rates notified by FEDAI at the close of the year. 12.5. Income & Expenditure are translated at the quarterly average closing rates notified by FEDAI at the end of respective quarters. 12.6. All resulting exchange differences are accumulated in ‘Foreign Currency Translation Reserve''. 13. Employee Benefits: 13.1. Short Term Employment Benefits: The undiscounted amounts of short term employee benefits (eg medical benefits) payable wholly within twelve months of rendering the services are treated as short term and recognized during the period in which the employee rendered the service. 13.2. Long term Employee Benefits: 13.2.1. Defined Contribution Plans: The Bank operates a new pension scheme (NPS) for all officers/employees joining the Bank on or after 1st April,2010, which is a defined contribution plan, such new joinees not being entitled to become members of the existing Pension Scheme. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with 14% contribution from the Bank. Pending completion of registration procedures of the employees concerned, these contributions retained with the Bank. The Bank recognizes such annual contributions in the year to which they relate. Upon receipt of the Permanent Retirement Account Number (PRAN), the consolidated contribution amounts are transferred to the NPS trust. 13.2.2. Defined Benefit Plan: Gratuity, Pension and Leave Encashment are defined benefits plans. These are provided for on the basis of an actuarial valuation as per Accounting Standard-15 "Employee Benefit" issued by the Institute of Chartered Accountants of India, made at the end of each financial year, based on the projected unit credit method. Actuarial gains/losses are immediately taken to the Profit & Loss account. 14. Segment Reporting The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in the compliances with the Accounting Standard-17 "Segment Reporting" issued by the Institute of Chartered Accountants of India. Business segments are classified into 14.1. Treasury Operations, 14.2. Corporate and Wholesale Banking, 14.3. Retail Banking Operations and 14.4. Other Banking Operations. 15. Lease Transactions Lease payments for Assets taken on operating lease recognized as an expenses in the profit and loss account on a straight-line basis over the lease term. 16. Earnings per Share The Bank reports the basic and diluted Earnings per Share in accordance with AS 20. Earnings per Share is calculated by dividing the net Profit or Loss (after tax) for the year attributable to the Equity shareholders by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if contracts to issue Equity shares were exercised or converted during the year. Diluted earnings per Equity share is calculated by using the weighted average number of Equity shares and dilutive potential Equity shares outstanding as at the year-end. 17. Taxation: This comprises of provision for Income tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) as determined in accordance with AS-22 on "Accounting for taxes on Income" issued by the ICAI. Provision for Tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rate. Deferred Tax Assets and Deferred Tax Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is ‘reasonable certainty'' that sufficient future taxable income will be available against which such Deferred Tax Assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, Deferred Tax Assets are recognized only if there is "virtual certainty". 18. Provisions, Contingent Liabilities and Contingent Assets In terms of AS 29-Provisions, Contingent Liabilities and Contingent Assets issued by the ICAI, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may not be realized. 19. Share Issue Expenses: Share Issue expenses are charged to the Share Premium account in terms of Section 52 of the Companies Act, 2013. 20. Consolidation of the Accounts: Bank is having five subsidiaries i.e. Union Asset Management Company Private Limited, Union Trustee Company Private Limited, Union Bank of India (UK) Limited, Andhra Bank Financial Services Limited and UBI Services Ltd. Bank is having three Joint Ventures i.e. Star Union Dai-Ichi Life Insurance Company Ltd., ASREC (India) Ltd. and India International Bank (Malaysia) Berhad. Bank is having one associate Chaitanya Godavari Grameen Bank. The consolidated financial statements are prepared on the basis of: 20.1. Audited Accounts of the parent bank (Union Bank of India) 20.2. Consolidation of Subsidiaries: Line by Line aggregation of the Income/Expenditure/Assets/ Liabilities of the subsidiaries with the respective line item of the parent bank, after eliminating all intra-group transactions, unrealized profits/ loss in terms of AS 21 on Consolidated Financial Statements issued by Institute of Chartered Accountants of India (ICAI). 20.3. Consolidation of Associates: The Investment in Associate is accounted for consolidation as per Equity Method in terms of AS 23 on Accounting for Investments in Associates in Consolidated Financial Statement issued by Institute of Chartered Accountants of India (ICAI). 20.4. Consolidation of Joint Ventures: Line by Line consolidation is done with proportionate share in Joint Venture in terms of AS-27 on Financials Reporting in Interest of Joint Venture issued by Institute of Chartered Accountants of India (ICAI). SCHEDULE 18 - NOTES TO ACCOUNTS(STANDALONE):1. REGULATORY CAPITAL The Bank is subjected to Basel III capital adequacy guidelines stipulated by RBI with effect from April 1, 2013. The guidelines provide a transition schedule for Basel III implementation till Oct. 1, 2021. As per RBI Guidelines, Basel III has been completely implemented from Oct. 1,2021. As per guidelines, the Tier I capital is made up of Common Equity Tier I (CET I) and Additional Tier I Capital (AT 1). Basel III guidelines require the Bank to maintain minimum capital to Risk Weighted Assets ratio (CRAR) of 11.50% with minimum CET I of 8.00% (inclusive of Capital Conservation Buffer of 2.50%) and minimum Tier I CRAR of 9.50% as at March 31,2022. During the year, the Bank has issued additional 42,79,03,111 number of equity shares under Qualified Institutions Placement (QIP) on 21st May, 2021 and raised an amount of ''1,447.17 crore. Accordingly, the shareholding of Government of India in the Bank has reduced to 83.49% as compared to the shareholding of 89.07% as on 31st March, 2021. Further, the Bank has also issued Basel III compliant Tier-2 bonds of ''2,000 Crore & additional Tier-1 Bonds of ''5,000 crore in tranches and exercised call option for redemption of Basel III compliant Tier-2 bonds of ''2,000.00 crore & additional Tier-1 Bonds of ''3,400.00 crore. Mar 31, 2021 SINGNIFICANT ACCOUNTING POLICIES : SCHEDULE 17 1. Basis of Preparation The financial statements are prepared following the Going Concern Concept, in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by Reserve Bank of India (RBI) from time to time and the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) to the extent applicable and practices generally prevalent in the banking industry in India. 2. Use of Estimates The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of Assets and Liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported Income and the Expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the financial statements are prudent and reasonable. Difference between the actual results and estimates is recognized in the period in which the results are known / materialized. 3. Revenue Recognition 3.1 Income and Expenditure have been accounted for on accrual basis unless otherwise stated. 3.2 Income on Non-Performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by the RBI. Income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classified as NPAs during the year. 3.3 Exchange and Brokerage earned, rent on Safe Deposit Lockers, income from Aadhaar Cards etc. are Accounted for on realization basis. 3.4 Income (Other than interest) on investments in “Held to Maturity” (HTM) category acquired at discount to the face value is recognized as follows: 3.4.1On interest bearing securities, it is recognized only at the time of sale/ redemption. 3.4.2 On Zero- coupon securities, it is accounted for over the balance tenor of the securities on a constant yield basis. 3.5 Dividend is accounted on an accrual basis where the right to receive the dividend is established. 3.6 Sale of NPAs accounted in terms of extant RBI guidelines. 4. Cash Flow Statements: Cash Flow statement of the Bank is prepared as per AS-3.Cash Flow statement is mainly classified as: 4.1 Cash flow from Operating Activities: This activity includes cash flow generated from Operational activities. 4.2 Cash Flow from Investing Activities: This activity includes cash flow generated by investments. 4.3 Cash Flow from Financials Activities: This activity includes the cash flow generated from financial instruments. 5. Investments 5.1. In conformity with the requirements in form A of the Third Schedule to the Banking Regulations Act, 1949, Investments are classified as under: i. Government Securities ii. Other Approved Securities iii. Shares iv. Debentures & Bonds v. Investments in Subsidiaries & Joint Ventures and vi. Other Investments The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines contained in Master Circular DBR.No.BP BC.6/21.04.141 /2015-16 dated 1st July 2015 into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading (HFT) 5.2. As per RBI guidelines, the following principles have been adopted for the purpose of valuation i. Securities held in “HTM” - at acquisition cost. 5.2.1.1. The excess of acquisition cost over the face value is amortized over the remaining period of maturity and in case of discount; it is not recognized as income. 5.2.1.2. Investments in Regional Rural Banks are valued at carrying cost. 5.2.1.3. Investments in Subsidiaries and Joint Ventures are valued at carrying cost. 5.2.1.4. Diminution, other than temporary, in the value of its investment in subsidiaries/joint ventures, which are included in HTM shall be provided for. ii. Securities held in “AFS” and “HFT” categories 5.2.2.1. Securities held in “AFS” and “HFT” categories are valued classification wise and scrip-wise and net depreciation, if any, in each classification is charged to Profit & Loss account while net appreciation, if any, is ignored. 5.2.2 .2. Valuation of securities is arrived at as follows: A Govt. of India Securities As per quotations put out by Fixed Income Money Market and Derivatives Association (FIMMDA) B State Development Loans, Securities guaranteed by Central/ State Government, PSU Bonds On appropriate yield to maturity basis as per FIMMDA guidelines C Equity Shares As per market rates, if quoted, otherwise at Book value, as per latest Audited Balance Sheet (not more than 1 year old). In the absence of both, At '' 1/- per Company. D Preference Shares As per market rates, if quoted, or on appropriate yield to maturity basis not exceeding redemption value as per FIMMDA guidelines E Debentures/Bonds As per market rates, if quoted, otherwise on appropriate yield to maturity basis as per FIMMDA guidelines. F Mutual Funds(MF) As per stock exchange quotations, if quoted. In case of unquoted units, as per latest Repurchase price declared by concerned MF. In cases where latest repurchase price is not available, as per Net Asset Value (NAV) G Treasury Bills / Certificate of Deposits / Commercial Papers At carrying cost H Venture Capital Funds (VCF) At declared NAV or Breakup NAV as per audited Balance Sheet which is not more than 18 months old. If NAV / audited financial statements are not available for more than 18 months continuously, at '' 1/- per VCF I Security Receipts At NAV as declared by Securitization Companies 5.3. Interbank/RBI Repo and Interbank/ RBI Reverse Repo transactions are accounted for in accordance with extant RBI guidelines. 5.4. As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: i. From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. ii. From HTM category to AFS/HFT category, 5.4.2.1. If the security is originally placed at discount in HTM category, at acquisition cost / book value. 5.4.2.2. If the security is originally placed at a premium, at amortized cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. iii. From AFS to HFT category and vice versa, at book value. 5.5. The non-performing investments are identified and depreciation / provision is made as per the extant RBI guidelines. 5.6. Profit / Loss on sale of investments in any category are taken to the Profit & Loss account. However, in case of profit on sale of investments in “HTM” category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve account. 5.7. Commission, brokerage, broken period interest etc on securities is debited / credited to Profit & Loss Account. 5.8. As per the extant RBI guidelines, the Bank follows ‘Settlement Date’ for accounting of investments transactions. 5.9. Derivative Contracts i. The Interest Rate Swap which hedges interest bearing Asset or Liability are accounted for in the financial statements on accrual basis except the swap designated with an Asset or Liability that is carried at lower of cost or market value. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the Asset / Liability. ii. Trading swap transactions are marked to market with changes recorded in the financial statements. Profit if any, is ignored. iii. In the case of option contracts, guidelines issued by Foreign Exchange Dealers Association of India (FEDAI) from time to time for recognition of income, premium and discount are being followed. 6. Advances 6.1. All advances are classified under four categories: i. Standard, ii. Sub-standard, iii. Doubtful and iv. Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the RBI in terms of Master Circular DBR.BPBCNo.2/21.04.048/2015-16 dated 01st July 2015. 6.2. Loans and Advances are classified as performing and non-performing, based on the guidelines issued by the RBI. Loan Assets become Non-Performing Assets (NPAs) where: i. In respect of term loans, interest and/or instalment of principal remains overdue for a period of more than 90 days; ii. In respect of Overdraft or Cash Credit advances, the account remains “out of order”, i.e. if the outstanding balance exceeds the sanctioned limit/drawing power continuously for a period of 90 days, or if there are no credits continuously for 90 days as on the date of balance-sheet, or if the credits are not adequate to cover the interest due during the same period. iii. In respect of bills purchased/discounted, the bill remains overdue for a period of more than 90 days; iv. In respect of agricultural advances for short duration crops, where the instalment of principal or interest remains overdue for two crop seasons. v. In respect of agricultural advances for long duration crops, where the principal or interest remains overdue for one crop season. vi. In respect of MSME accounts which restructured in terms of RBI Circular No DOR. No.BPBC.4/21.04.048/2020-21 dated August 6, 2020 with reference to circular DOR. No.BPBC.34/21.04.048/2019-20 February 11, 2020 and Circular No DBR.No.BP BC.18/21.04.048/2018-19 dated 1st January, 2019 and kept in standard category, the Bank shall maintain a provision of 5% in addition to the provision already held. Reversal of said provision shall be made in accordance with the said circular. 6.3. NPAs are classified into Sub-Standard, Doubtful and Loss Assets, based on the following criteria stipulated by RBI: i. Sub-standard: A loan asset that has remained non performing for a period less than or equal to 12 months, ii. Doubtful: A loan asset that has remained in the sub-standard category for a period of 12 months, iii. Loss: A loan asset where loss has been identified but the amount has not been fully written off. 6.4. Provisions are made for NPAs as per the extant guidelines prescribed by the regulatory authorities, subject to minimum provisions as prescribed below: Sub-Standard Assets: i. A general of 15% of the total outstanding ii. Additional provision of 10% for exposures which are unsecured ab-initio; However, iii. Unsecured Exposure, ab-initio, in respect of infrastructure loan accounts where certain safeguards such as escrow accounts are available - 20% (instead of 25% as stated above) Doubtful- i. Upto one year - 25% Secured ii. One to three years - 40% Portion iii. More than three years - 100% Doubtful- 100% Unsecured Portion Loss Asset 100% 6.5. Advances are stated net of specific loan loss provisions, Counter cyclical provisioning buffer, Provision for diminution in fair value of restructured advances and unrecovered interest held in Sundry /claims received from Credit Guarantee Trust Fund (CGTF) / Export Credit Guarantee Corporation (ECGC) relating to non-performing assets. 6.6. In respect of foreign offices, classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent. 6.7. For restructured / rescheduled assets, provisions are made in accordance with the guidelines issued by the RBI, which require that the difference between the fair value of the loan before and after restructuring is provided for, in addition to provision for NPAs. 6.8. In the case of loan accounts classified as NPAs, an account may be reclassified as a performing asset if it conforms to the guidelines prescribed by the regulators. 6.9. Amounts recovered against debts written off in earlier years are recognised as revenue in the year of recovery. 6.10. The general provision on Standard Advances is held in “Other Liabilities and Provisions” reflected in schedule 5 of the Balance Sheet and is not considered for arriving at both net NPAs and net advances. Property, Plant and Equipment 7.1. Premises and Other Fixed Assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price, eligible borrowing costs and directly attributable costs of bringing the Asset to its working condition for the intended use less trade discounts and rebates. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefits from such assets or their functional capability. Land and Buildings, if revalued are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve and the depreciation provided thereon is deducted there from and shall be credited to Revenue Reserves in terms of revised AS-10 on “Property, Plant and Equipment”. 7.2. Depreciation on Fixed Assets is provided for on the Straight Line Method at the rates prescribed in Expenditure Policy of the Bank from time to time. The applicable rates of depreciation are as under: S. No Capital Asset Useful Life (Years) Rate in percentage 1 Immovable Property- Land Not stipulated; accordingly, no depreciation NIL 2 Building with RCC frame structure (Both Residential & Non residential) 60 1.67 3 Furniture 10 10.00 4 Fixtures 10 10.00 5 Air-conditioning plants (Package & water/air cooled ductable) 10 10.00 6 Split & Window Air conditioners 5 20.00 7 Electrical installments and equipments 5 20.00 8 Solar Power Equipment 15 6.67 9 Elevators & Lifts 15 6.67 10 Civil & Flooring work in leased Premises 5 20.00 11 Telephone Equipment 5 20.00 12 Motor Cycles, Scooters & other mopeds 10 10.00 13 Motor Cars,Motor Lorries and Electrically operated vehicles including battery powered or fuel cell powered vehicles 8 12.50 14 Mobile Phones 3 33.33 15 Generators 15 6.67 16 Office Equipment 5 20.00 17 Computers & computer software forming integral part of hardware 3 33.33 18 ATM & allied items 3 33.33 19 UPS & allied items 5 20.00 20 Servers & Networks 6 16.66 21 Computers-End user devices such as desktops, laptops, printer & Scanner etc. 3 33.33 7.3. Depreciation on premises is provided on composite cost, wherever the value of Land and Buildings is not separately identifiable. 7.4. Depreciation on Leased assets and Leasehold improvements is recognized on a straight-line basis using rates determined with reference to the primary period of lease. 8. Impairment of Assets Impairment losses (if any) on Fixed Assets (including revalued assets) are recognised in accordance with AS-28 on “Impairment of Assets” issued by the ICAI and charged off to Profit and Loss Account. The carrying costs of assets are reviewed at each Balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying cost of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. 9. Counter Cyclical Provisioning Buffer The Bank has a policy of creation and utilization of Counter Cyclical Provisioning Buffer separately for Advances and Investments. The quantum of provision to be created is assessed at the end of each financial year. The counter Cyclical Provisions are utilized only for contingencies under extra ordinary circumstances specified in the policy with prior permission of the RBI. 10. Transactions involving Foreign Exchange Revaluation of Foreign Currency position and booking Profits / Losses: 10.1.Monetary and Non Monetary Assets and Liabilities are revalued at the exchange rates notified by FEDAI at the close of the year and resultant gain / loss is recognized in the Profit & Loss Account. 10.2.Income & Expenditure items are recognized at the exchange rates prevailing on the date of the transaction. 10.3. Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notified by FEDAI for specified maturities and at interpolated rates for contracts of ‘in-between’ maturities. The resultant gains or losses are recognized in the Profit & Loss account. 10.4. Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notified by FEDAI at the close of the year. 10.5. Representative Offices of the Bank outside India are treated as Integral Operation Unit as per RBI guidelines. 11. Accounting for Non-Integral Foreign operations Accounting for transactions involving foreign exchange is done in accordance with AS-11 on “The Effects of Changes in Foreign Exchange Rates”, issued by the ICAI. In terms of AS-11, the foreign currency operations of the Bank are classified as a) Integral Operations and b) Non Integral Operations. Foreign branches are classified as non-integral foreign operations by: 11.1. Revenue Recognition Income and Expenditure are recognized / accounted for as per the local laws of the respective countries. 11.2. Asset Classification and Loan Loss Provisioning Asset classification and loan loss provisioning are made as per the local laws of the respective countries or as per RBI guidelines whichever is higher. 11.3. Fixed Assets and Depreciation i. Fixed Assets are accounted for at historical cost. ii. Depreciation on Fixed Assets is provided as per the applicable laws of the respective countries. 11.4. Assets and Liabilities (monetary and nonmonetary as well as Contingent Liabilities) are translated at the closing rates notified by FEDAI at the close of the year. 11.5.Income & Expenditure are translated at the quarterly average closing rates notified by FEDAI at the end of respective quarters. 11.6. All resulting exchange differences are accumulated in ‘Foreign Currency Translation Reserve’. 12. Employee Benefits A. Short Term Employment Benefits: The undiscounted amounts of short term employee benefits (eg medical benefits) payable wholly within twelve months of rendering the services are treated as short term and recognized during the period in which the employee rendered the service. B. Long term Employee Benefits: i. Defined Contribution Plans: The Bank operates a new pension scheme (NPS) for all officers/employees joining the Bank on or after 1st April,2010, which is a defined contribution plan, such new joinees not being entitled to become members of the existing Pension Scheme. As per the scheme, the covered employees contribute 10% of their basic pay plus dearness allowance to the scheme together with a matching contribution from the Bank. Pending completion of registration procedures of the employees concerned, these contributions retained with the Bank. The Bank recognizes such annual contributions in the year to which they relate. Upon receipt of the Permanent Retirement Account Number (PRAN), the consolidated contribution amounts are transferred to the NPS trust. ii. Defined Benefit Plan: Gratuity, Pension and Leave Encashment are defined benefits plans. These are provided for on the basis of an actuarial valuation as per Accounting Standard-15 “Employee Benefit” issued by the Institute of Chartered Accountants of India, made at the end of each financial year, based on the projected unit credit method. Actuarial gains/losses are immediately taken to the Profit & Loss account. 13. Segment Reporting The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in the compliances with the Accounting Standard-17 “Segment Reporting” issued by the Institute of Chartered Accountants of India. Business segments are classified into 13.1. Treasury Operations, 13.2. Corporate and Wholesale Banking, 13.3. Retail Banking Operations and 13.4. Other Banking Operations. 14. Lease Transactions Lease payments for Assets taken on operating lease are recognized as an expense in the profit and loss account on a straight line basis over the lease term. 15. Earnings per Share The Bank reports the basic and diluted Earnings per Share in accordance with AS 20. Earnings per Share is calculated by dividing the net Profit or Loss (after tax) for the year attributable to the Equity shareholders by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if contracts to issue Equity shares were exercised or converted during the year. Diluted earnings per Equity share is calculated by using the weighted average number of Equity shares and dilutive potential Equity shares outstanding as at the year-end. 16. Taxation: This comprises of provision for Income tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) as determined in accordance with AS-22 on “Accounting for taxes on Income” issued by the ICAI. Provision for Tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rate. Deferred Tax Assets and Deferred Tax Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is ‘reasonable certainty’ that sufficient future taxable income will be available against which such Deferred Tax Assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, Deferred Tax Assets are recognized only if there is “virtual certainty”. 17. Provisions, Contingent Liabilities and Contingent Assets In terms of AS 29-Provisions, Contingent Liabilities and Contingent Assets issued by the ICAI, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may not be realized. 18. Share Issue Expenses: Share Issue expenses are charged to the Share Premium account in terms of Section 52 of the Companies Act, 2013. 19. Consolidation of the Accounts: Bank is having 5 subsidiaries, 4 JVs and 1 associate. Tho Hotetilc aro etc nnH^r1- S. No. Nature Entities Stake 1 Subsidiary Union Asset Management Co Pvt Ltd 100% 2 Subsidiary Union Trustee Co Pvt Ltd 100% 3 Subsidiary Union bank of India (UK) Ltd 100% 4 Subsidiary Andhra Bank Financial Services Ltd 100% 5 Subsidiary UBI Services Ltd 100% 6 JV Star Union Dai-ichi Life Insurance Co Ltd 25.10% 7 JV ASREC (India) Ltd 26.02% 8 JV IndiaFirst Life Insurance Co Ltd 30.00% 9 JV India International Bank (Malaysia) Berhad 25.00% 10 Associate Chaitanya Godavri 35% The consolidated financial statements are prepared on the basis of: 19.1. Audited Accounts of the parent bank (Union Bank of India) 19.2. Consolidation of Subsidiaries: Line by Line aggregation of the Income/ Expenditure/Assets/Liabilities of the subsidiaries with the respective line item of the parent bank, after eliminating all intragroup transactions, unrealised profits/ loss in terms of AS 21 on Consolidated Financial Statements issued by Institute of Chartered Accountants of India (ICAI). 19.3. Consolidation of Associates: The Investment in Associate is accounted for consolidation as per Equity Method in terms of AS 23 on Accounting for Investments in Associates in Consolidated Financial Statement issued by Institute of Chartered Accountants of India (ICAI). 19.4. Consolidation of Joint Ventures: Line by Line consolidation is done with proportionate share in Joint Venture in terms of AS-27 on Financials Reporting in Interest of Joint Venture issued by Institute of Chartered Accountants of India (ICAI). Mar 31, 2019 1. Basis of Preparation The financial statements have been prepared and presented under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in accordance with Generally Accepted Accounting Principles in India (Indian GAAP), statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by Reserve Bank of India (RBI) from time to time and the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) to the extent applicable and practices generally prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in foreign countries are complied with. 2. Use of Estimates The preparation of financial statements in conformity with GAAP requires the management to make estimates and assumptions considered in the reported amount of Assets and Liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported Income and the Expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the financial statements are prudent and reasonable. Actual results can differ from these estimates. Any revision in the accounting estimates is recognized prospectively in the current and future period. 3. Revenue Recognition i) Income and Expenditure have been accounted for on accrual basis unless otherwise stated. ii) Income on Non-Performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by the RBI. Income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classified as NPAs during the year. iii) Bank commission, exchange and brokerage earned (including Third Party Product’s income), rent on Safe Deposit Lockers, commission on biometric cards, income from Aadhaar cards etc. are accounted for on realization basis. iv) Income (Other than interest) on investments in “Held to Maturity” (HTM) category acquired at discount to the face value is recognized as follows: a) On interest bearing securities, it is recognized only at the time of sale/ redemption. b) On Zero- coupon securities, it is accounted for over the balance tenor of the securities on a constant yield basis. v) Dividend is accounted on accrual basis where the right to receive the dividend is established. vi) Sale of NPAs accounted in terms of extant RBI guidelines. vii) The interest expenditure incurred towards payment of Interest of AT-1 bonds is booked through statement of Profit & Loss. Reserve Bank of India through Circular No DBR.DP.BC.No.50/21.06.201/2016-17 dated February 02, 2017. It is mentioned that “Coupons must be paid out of ‘distributable items’. In this context, coupon may be paid out of current year profits. However, the guidelines further allows that if current year profits are not sufficient, coupons may be paid subject to availability of: (i) Profits brought from previous years, and/or (ii) Reserves representing appropriation of net profits, including statutory reserves, and excluding share premium, revaluation reserve, foreign exchange currency translation reserve, investment reserve and reserves created on amalgamation. Therefore in case of insufficiency of profits of the current year, the coupons may also be paid by debit to reserves as stated above. 4. Cash and Cash equivalents Cash and Cash equivalents include Cash in hand, Balances with RBI, Balances with other Banks and Money at call and short notice. 5. Investments i) In conformity with the requirements in form A of the Third Schedule to the Banking Regulations Act, 1949, Investments are classified as under: a) Government Securities b) Other Approved Securities c) Shares d) Debentures & Bonds e) Investments in Subsidiaries, Associates & Joint Ventures and f) Other Investments The Investment portfolio ofthe Bank is further classified in accordance with the RBI guidelines contained in Master Circular DBR.No.BPBC.6/21.04.141 /2015-16 dated 1st July 2015 into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading (HFT) ii) As per RBI guidelines, the following principles have been adopted for the purpose of valuation a) Securities held in “HTM” - at acquisition cost. i) The excess of acquisition cost over the face value is amortized over the remaining period of maturity and in case of discount; it is not recognized as income. ii) Investments in Regional Rural Banks are valued at carrying cost. iii) Investments in Subsidiaries and Joint Ventures are valued at cost. iv) Diminution other than temporary, if any, in valuation of such investments is provided for. b) Securities held in “AFS” and “HFT” categories i) Securities held in “AFS” and “HFT” categories are valued classification wise and scrip-wise and net depreciation, if any, in each classification is charged to Profit & Loss account while net appreciation, if any, is ignored. ii) Valuation of securities is arrived at as follows: iii) interbank Repo/Reverse Repo transactions are accounted for in accordance with extant RBI guidelines. iv) As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: a) From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. b) From HTM category to AFS/HFT category, i) If the security is originally placed at discount in HTM category, at acquisition cost / book value. ii) If the security is originally placed at a premium, at amortized cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. c) From AFS to HFT category and vice versa, at book value. v) The non-performing investments are identified and depreciation / provision is made as per the extant RBI guidelines. vi) Profit / Loss on sale of investments in any category are taken to the Profit & Loss account. However, in case of profit on sale of investments in “HTM” category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve account. vii) Commission, brokerage, broken period interest, etc on securities is debited / credited to Profit & Loss Account. viii) As per the extant RBI guidelines, the Bank follows ‘Settlement Date’ for accounting of investments transactions. 6. Derivative Contracts a) The Interest Rate Swap which hedges interest bearing Asset or Liability are accounted for in the financial statements on accrual basis except the swap designated with an Asset or Liability that is carried at market value or lower of cost or market value. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the Asset / Liability. b) Trading swap transactions are marked to market with changes recorded in the financial statements. c) In the case of option contracts, guidelines issued by Foreign Exchange Dealers Association of India (FEDAI) from time to time for recognition of income, premium and discount are being followed. 7. Advances i) All advances are classified under four categories: a) Standard, b) Sub-standard, c) Doubtful and d) Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the RBI in terms of Master Circular DBR.BPBC No.2/21.04.048/2015-16 dated 01st July 2015 as under: ii) Loans and Advances are classified as performing and non-performing, based on the guidelines issued by the RBI. Loan Assets become Non-Performing Assets (NPAs) where: a) In respect of term loans, interest and/or installment of principal remains overdue for a period of more than 90 days; b) In respect of Overdraft or Cash Credit advances, the account remains “out of order”, i.e. if the outstanding balance exceeds the sanctioned limit/ drawing power continuously for a period of 90 days, or if there are no credits continuously for 90 days as on the date of balance-sheet, or if the credits are not adequate to cover the interest due during the same period c) In respect of bills purchased/discounted, the bill remains overdue for a period of more than 90 days; d) In respect of agricultural advances for short duration crops, where the installment of principal or interest remains overdue for two crop seasons. e) In respect of agricultural advances for long duration crops, where the principal or interest remains overdue for one crop season. f) In respect of MSME accounts where RBI dispensation benefit is passed on, the bank will adhere to income Recognition norms as spelt out in RBI Circular DBR.No.BPBC.100/21.04.048/2017-18 dated 7th February, 2018 and DBR.No.BP BC.108/21.04.048/2017-18 dated 6th June, 2018. g) In respect of MSME accounts which will be restructured in terms of RBI Circular DBR.No.BP BC.18/21.04.048/2018-19 dated 1st January, 2019 and kept in standard category, the bank shall maintain a provision of 5% in addition to the provision already held. Reversal of said provision shall be made in accordance with the said circular. iii) NPAs are classified into Sub-Standard, Doubtful and Loss Assets, based on the following criteria stipulated by RBI: a) Sub-standard: A loan asset that has remained nonperforming for a period less than or equal to 12 months, b) Doubtful: A loan asset that has remained in the sub-standard category for a period of 12 months, c) Loss: A loan asset where loss has been identified but the amount has not been fully written off. iv) Provisions are made for NPAs as per the extant guidelines prescribed by the regulatory authorities, subjectto minimum provisions as prescribed below: v) Advances are stated net of specific loan loss provisions, Counter cyclical provisioning buffer, Provision for diminution in fair value of restructured advances and unrecovered interest held in Sundry /claims received from Credit Guarantee Trust Fund (CGTF) / Export Credit Guarantee Corporation (ECGC) relating to nonperforming assets. vi) In respect of foreign offices, classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent. vii) For restructured/rescheduled assets, provisions are made in accordance with the guidelines issued by the RBI, which require that the difference between the fair value of the loan before and after restructuring is provided for, in addition to provision for NPAs. viii) In the case of loan accounts classified as NPAs, an account may be reclassified as a performing asset if it conforms to the guidelines prescribed by the regulators. ix) Amounts recovered against debts written off in earlier years are recognised as revenue in the year of recovery. x) The general provision on Standard Advances is held in “Other Liabilities and Provisions” reflected in schedule 5 of the Balance Sheet and is not considered for arriving at both net NPAs and net advances. 8. Fixed Assets, Depreciation and Amortsation i) Fixed Assets are stated at cost less accumulated depreciation as adjusted for impairment, if any. Cost includes cost of purchase and all expenditure like site preparation, installation costs and professional fees incurred on the asset before it is ready to use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefit/ functioning capability from/of such assets. Land and Buildings, if revalued are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve without routing through Profit & Loss Account. Pursuant to revised Accounting Standard 10 - Property Plant & Equipment, in respect of revalued assets, the additional depreciation consequent to revaluation is transferred from Revaluation Reserve to Revenue Reserve in the Balance Sheet. ii) Application Software is capitalized and clubbed under intangible assets. Depreciation on Computers and Software forming an integral part of Computer hardware and on ATM is provided on Straight Line Method (SLM) at the rate of 33.33% as per the guidelines of RBI. iii) Depreciation on Fixed Assets is provided for on the written down value method at the rates considered appropriate by the management as under: iv) Depreciation on additions to assets made upto 30th September of the year is provided at full rate and on additions made thereafter, at half the rate. v) Depreciation on premises is provided on composite cost, wherever the value of Land and Buildings is not separately identifiable. vi) No depreciation is provided on assets sold / disposed off during the year. vii) Depreciation on Leased assets and Leasehold improvements is recognized on a straight-line basis using rates determined with reference to the primary period of lease. 9. Impairment of Assets The carrying costs of assets are reviewed at each Balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying cost of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. 10. Counter Cyclical Provisioning Buffer The Bank has a policy of creation and utilization of Counter Cyclical Provisioning Buffer separately for Advances and Investments. The quantum of provision to be created is assessed at the end of each financial year. The counter Cyclical Provisions are utilized only for contingencies under extra ordinary circumstances specified in the policy with prior permission ofthe RBI. 11. Transactions involving Foreign Exchange Accounting for transactions involving foreign exchange is done in accordance with AS 11, (The Effects of Changes in Foreign Exchange Rates), issued by the ICAI. As stipulated in AS 11, the foreign currency operations of the Bank are classified as a) Integral Operations and b) Non Integral Operations. All Overseas Branches, Offshore Banking Units, Overseas Subsidiaries are treated as Non Integral Operations and domestic operations in foreign exchange and Representative Offices are treated as Integral Operations. a. Translation in respect of Integral Operations i) Income and Expenditure items are recognized at the exchange rates prevailing on the date of the transaction. ii) Foreign Currency Monetary and Non-Monetary Assets and Liabilities are translated at the closing spot rates notified by FEDAI at the end of each quarter. iii) Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notified by FEDAI at the close of the year iv) The resulting exchange differences are recognized as income or expenses and are accounted through Profit and Loss Account. v) Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notified by FEDAI for specified maturities and at interpolated rates for contracts of ‘in-between’ maturities. The resultant gains or losses are recognized in the Profit and Loss account. b. Translation in respect of Non Integral Operations i) Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter ii) Foreign Exchange Spot and Forwards contingent liabilities outstanding as at the balance sheet date are translated at the closing spot and forward rates respectively notified by FEDAI and at interpolated rates for contracts of interim maturities. iii) Income and Expense are translated at quarterly average rate notified by FEDAI at the end of each quarter. iv) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account “Foreign Currency Translation Reserve” till the disposal of the net investment. 12. Employee Benefits Retirement benefit in the form of Provident Fund is a defined contribution scheme. The contributions to the Provident Fund are charged to the Profit & Loss account for the year when the contributions are due. The Bank has no obligation other than the contribution payable to the Provident Fund. Gratuity, Pension and provision towards Leave are defined benefit obligations, and are provided for on the basis of an actuarial valuation as per Accounting Standard-15 (Revised) “Employee Benefit” issued by the Institute of Chartered Accountants of India, made at the end of each financial year, based on the projected unit credit method. Actuarial gains/ losses are immediately taken to the Profit & Loss account. New Pension Scheme is applicable to employees who joined the Bank on or after 01.04.2010 is a defined contribution scheme. Bank pays fixed contribution at predetermined rate and the obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit & Loss account. Employee benefits relating to employees employed at foreign offices are valued and accounted for as per the local laws/regulations of the respective countries. 13. Segment Reporting The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines. In compliance with the Accounting Standard-17 “Segment Reporting” issued by the Institute of Chartered Accountants of India. Business segments are classified into i) Treasury Operations, ii) Corporate and Wholesale Banking, iii) Retail Banking Operations and iv) Other Banking Operations. 14. Lease Transactions Lease payments for Assets taken on operating lease are amortized over the lease term. The properties taken on lease/rental basis are renewable / cancellable at the option of the Bank. The Bank’s liabilities in respect of disputes pertaining to additional rent / lease rent are recognized on settlement or on renewal. 15. Earnings per Share Earnings per Share is calculated by dividing the net Profit or Loss (after tax) for the year attributable to the Equity share holders by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if contracts to issue Equity shares were exercised or converted during the year. Diluted earnings per Equity share is calculated by using the weighted average number of Equity shares and dilutive potential Equity shares outstanding as at the year-end. 16. Taxation Provision for Tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rate and tax laws. Deferred Tax Assets and Deferred Tax Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is ‘reasonable certainty’ that sufficient future taxable income will be available against which such Deferred Tax Assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, Deferred Tax Assets are recognized only if there is “virtual certainty”. 17. Provisions, Contingent Liabilities and Contingent Assets As per AS 29 (Provisions, Contingent Liabilities and Contingent Assets) issued by the ICAI, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized. 18. Share Issue Expenses: Share Issue expenses are charged to the Share Premium account. Mar 31, 2018 SIGNIFICANT ACCOUNTING POLICIES: SCHEDULE 17 1. Accounting Convention The financial statements have been prepared and presented under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in accordance with Generally Accepted Accounting Principles in India (Indian GAAP), statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by Reserve Bank of India (RBI) from time to time and the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) to the extent applicable and practices generally prevalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices prevailing in foreign countries are complied with. 2. Use of Estimates The preparation of financial statements in conformity with GAAP requires the management to make estimates and assumptions considered in the reported amount of Assets and Liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported income and the Expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the financial statements are prudent and reasonable. Actual results can differ from these estimates. Any revision in the accounting estimates is recognized prospectively in the current and future period. 3. Revenue Recognition i) income and Expenditure have been accounted for on accrual basis unless otherwise stated. ii) income on Non-Performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by the RBI. income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classified as NPAs during the year. iii) Bank commission, exchange and brokerage earned (including Third Party Product’s income), rent on Safe Deposit Lockers, commission on biometric cards, income from Aadhaar cards etc. are accounted for on realization basis. iv) income (Other than interest) on investments in “Held to Maturity” (HTM) category acquired at discount to the face value is recognized as follows: a) On interest bearing securities, it is recognized only at the time of sale/ redemption. b) On Zero- coupon securities, it is accounted for over the balance tenor of the securities on a constant yield basis. v) Dividend is accounted on an accrual basis where the right to receive the dividend is established. 4. Cash Flow Statements Cash and Cash equivalents include Cash in hand, Balances with RBI, Balances with other Banks and Money at call and short notice. 5. Investments i) In conformity with the requirements in form A of the Third Schedule to the Banking Regulations Act, 1949, investments are classified as under: a) Government Securities b) Other Approved Securities c) Shares d) Debentures & Bonds e) investments in Subsidiaries & Joint Ventures and f) Other investments The investment portfolio of the Bank is further classified in accordance with the RBI guidelines contained in Master Circular DBR.No.BP.BC.6/21.04.141 /2015-16 dated 1st July 2015 into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading ( HFT) ii) As per RBI guidelines, the following principles have been adopted for the purpose of valuation a) Securities held in “HTM” - at acquisition cost. i) The excess of acquisition cost over the face value is amortized over the remaining period of maturity and in case of discount; it is not recognized as income. ii) investments in Regional Rural Banks are valued at carrying cost. iii) investments in Subsidiaries and Joint Ventures are valued at carrying cost. iv) Diminution other than temporary, if any, in valuation of such investments is provided for. b) Securities held in “AFS” and “HFT” categories i) Securities held in “AFS” and “HFT” categories are valued classification wise and scrip-wise and net depreciation, if any, in each classification is charged to Profit & Loss account while net appreciation, if any, is ignored. iii) Interbank Repo/Reverse Repo transactions are accounted for in accordance with extant RBI guidelines. iv) As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: a) From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. b) From HTM category to AFS/HFT category, i) If the security is originally placed at discount in HTM category, at acquisition cost / book value. ii) If the security is originally placed at a premium, at amortized cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. c) From AFS to HFT category and vice versa, at book value. v) The non-performing investments are identified and depreciation / provision is made as per the extant RBI guidelines. vi) Profit / Loss on sale of investments in any category are taken to the Profit & Loss account. However, in case of profit on sale of investments in “HTM” category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve account. vii) Commission, brokerage, broken period interest etc on securities is debited / credited to Profit & Loss Account. viii) As per the extant RBI guidelines, the Bank follows ‘Settlement Date’ for accounting of investments transactions. 6. Derivative Contracts a) The Interest Rate Swap which hedges interest bearing Asset or Liability are accounted for in the financial statements on accrual basis except the swap designated with an Asset or Liability that is carried at market value or lower of cost or market value. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the Asset / Liability. b) Trading swap transactions are marked to market with changes recorded in the financial statements. c) In the case of option contracts, guidelines issued by Foreign Exchange Dealers Association of India (FEDAI) from time to time for recognition of income, premium and discount are being followed. 7. Advances i) All advances are classified under four categories: a) Standard, b) Sub-standard, c) Doubtful and d)Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the RBI in terms of Master Circular DBR.BP.BC No.2/21.04.048/2015-16 dated 01st July 2015as under: ii) Loans and Advances are classified as performing and non-performing, based on the guidelines issued by the RBI. Loan Assets become Non-Performing Assets (NPAs) where: a) In respect of term loans, interest and/or installment of principal remains overdue for a period of more than 90 days; b) In respect of Overdraft or Cash Credit advances, the account remains “out of order”, i.e. if the outstanding balance exceeds the sanctioned limit/ drawing power continuously for a period of 90 days, or if there are no credits continuously for 90 days as on the date of balance-sheet, or if the credits are not adequate to cover the interest due during the same period c) In respect of bills purchased/discounted, the bill remains overdue for a period of more than 90 days; d) In respect of agricultural advances for short duration crops, where the installment of principal or interest remains overdue for two crop seasons. e) In respect of agricultural advances for long duration crops, where the principal or interest remains overdue for one crop season. iii) NPAs are classified into Sub-Standard, Doubtful and Loss Assets, based on the following criteria stipulated byRBI: ia) Sub-standard: A loan asset that has remained nonperforming for a period less than or equal to 12 months, b) Doubtful: A loan asset that has remained in the sub-standard categoryfora period of 12 months, c) Loss: A loan asset where loss has been identified but the amount has not been fully written off. iv) Provisions are made for NPAs as per the extant guidelines prescribed by the regulatory authorities, subject to minimum provisions as prescribed below: v) Advances are stated net of specific loan loss provisions, Counter cyclical provisioning buffer, Provision for diminution in fair value of restructured advances and unrecovered interest held in Sundry /claims received from Credit Guarantee Trust Fund (CGTF) / Export Credit Guarantee Corporation (ECGC) relating to nonperforming assets. vi) In respect of foreign offices, classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent. vii) For restructured/rescheduled assets, provisions are made in accordance with the guidelines issued by the RBI, which require that the difference between the fair value of the loan before and after restructuring is provided for, in addition to provision for NPAs. viii) In the case of loan accounts classified as NPAs, an account may be reclassified as a performing asset if it conforms to the guidelines prescribed by the regulators. ix) Amounts recovered against debts written off in earlier years are recognised as revenue in the year of recovery. x) The general provision on Standard Advances is held in “Other Liabilities and Provisions” reflected in schedule 5 of the Balance Sheet and is not considered for arriving at both net NPAs and net advances. 8. Fixed Assets and Depreciation i) Fixed Assets are stated at cost less accumulated depreciation as adjusted for impairment, if any. Cost includes cost of purchase and all expenditure like site preparation, installation costs and professional fees incurred on the asset before it is ready to use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefit/functioning capability from/of such assets. Land and Buildings, if revalued are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve and the depreciation provided thereon is deducted there from. Pursuant to revised Accounting Standard 10- Property Plant and Equipment effective from 01.04.2017, depreciation on revalued portion of the fixed assets is transferred from Revaluation Reserve to Revenue Reserve and not through Profit & Loss Account. ii) Application Software is capitalized and clubbed under Intangible assets. Depreciation on Computers and Software forming an integral part of Computer hardware and on ATM is provided on Straight Line Method (SLM) at the rate of 33.33% as per the guidelines of RBI. iv) Depreciation on additions to assets made up to 30th September of the year is provided at full rate and on additions made thereafter, at half the rate. v) Depreciation on premises is provided on composite cost, wherever the value of Land and Buildings is not separately identifiable. vi) No depreciation is provided on assets sold / disposed off during the year. vii) Depreciation on Leased assets and Leasehold improvements is recognized on a straight-line basis using rates determined with reference to the primary period of lease. 9. Impairment of Assets The carrying costs of assets are reviewed at each Balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying cost of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. 10. Counter Cyclical Provisioning Buffer The Bank has a policy of creation and utilization of Counter Cyclical Provisioning Buffer separately for Advances and investments. The quantum of provision to be created is assessed at the end of each financial year. The counter Cyclical Provisions are utilized only for contingencies under extra ordinary circumstances specified in the policy with prior permission of the RBI. 11. Transactions involving Foreign Exchange Accounting for transactions involving foreign exchange is done in accordance with AS 11, (The Effects of Changes in Foreign Exchange Rates), issued by the ICAI. As stipulated in AS 11, the foreign currency operations of the Bank are classified as a) Integral Operations and b) Non Integral Operations. All Overseas Branches, Offshore Banking Units, Overseas Subsidiaries are treated as Non Integral Operations and domestic operations in foreign exchange and Representative Offices are treated as integral Operations. a. Translation in respect of integral Operations i) income and Expenditure items are recognized at the exchange rates prevailing on the date of the transaction. ii) Foreign Currency Monetary and Non-Monetary Assets and Liabilities are translated at the closing spot rates notified by FEDAI at the end of each quarter. iii) Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notified by FEDAI at the close of the year iv) The resulting exchange differences are recognized as income or expenses and are accounted through Profit and Loss Account. v) Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notified by FEDAI for specified maturities and at interpolated rates for contracts of ‘in-between’ maturities. The resultant gains or losses are recognized in the Profit and Loss account. b. Translation in respect of Non integral Operations i) Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter ii) Foreign Exchange Spot and Forwards contingent liabilities outstanding as at the balance sheet date are translated at the closing spot and forward rates respectively notified by FEDAI and at interpolated rates for contracts of interim maturities. iii) income and Expense are translated at quarterly average rate notified by FEDAI at the end of each quarter. iv) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account “Foreign Currency Translation Reserve” till the disposal of the net investment. 12. Employee Benefits Retirement benefit in the form of Provident Fund is a defined contribution scheme. The contributions to the Provident Fund are charged to the Profit & Loss account for the year when the contributions are due. The Bank has no obligation other than the contribution payable to the Provident Fund. Gratuity, Pension and provision towards Leave are defined benefit obligations, and are provided for on the basis of an actuarial valuation as per Accounting Standard-15 (Revised) “Employee Benefit” issued by the Institute of Chartered Accountants of India, made at the end of each financial year, based on the projected unit credit method. Actuarial gains/ losses are immediately taken to the Profit & Loss account. New Pension Scheme is applicable to employees who joined the Bank on or after 01.04.2010 is a defined contribution scheme. Bank pays fixed contribution at predetermined rate and the obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit & Loss account. Employee benefits relating to employees employed at foreign offices are valued and accounted for as per the local laws/regulations of the respective countries. 13. Segment Reporting The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines. In compliance with the Accounting Standard-17 “Segment Reporting” issued by the Institute of Chartered Accountants of India. Business segments are classified into i) Treasury Operations, ii) Corporate and Wholesale Banking, iii) Retail Banking Operations and iv) Other Banking Operations. 14. Lease Transactions Lease payments for Assets taken on operating lease are amortized over the lease term. The properties taken on lease/rental basis are renewable / cancellable at the option of the Bank. The Bank’s liabilities in respect of disputes pertaining to additional rent / lease rent are recognized on settlement or on renewal. 15. Earnings per Share Earnings per Share is calculated by dividing the net Profit or Loss (after tax) for the year attributable to the Equity share holders by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if contracts to issue Equity shares were exercised or converted during the year. Diluted earnings per Equity share is calculated by using the weighted average number of Equity shares and dilutive potential Equity shares outstanding as at the year-end. 16. Taxation Provision for Tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rate and tax laws. Deferred Tax Assets and Deferred Tax Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is ‘reasonable certainty’ that sufficient future taxable income will be available against which such Deferred Tax Assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, Deferred Tax Assets are recognized only if there is “virtual certainty”. 17. Provisions, Contingent Liabilities and Contingent Assets As per AS 29 (Provisions, Contingent Liabilities and Contingent Assets) issued by the ICAI, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent Assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized. 18. Share Issue Expenses: Share Issue expenses are charged to the Share Premium account. Mar 31, 2017 SIGNIFICANT ACCOUNTING POLICIES: SCHEDULE 17 1. Accounting Convention The financial statements are prepared under the historical cost convention, on the accrual basis of accounting ongoing concern basis, unless otherwise stated and conform in all material aspects to Generally Accepted Accounting Principles (GAAP) in India, which comprise applicable statutory provisions, regulatory norms/guidelines prescribed by the Reserve Bank of India (RBI), Banking Regulation Act 1949, Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI), and the practices prevalent in the banking industry in India. In respect of foreign offices, statutory provisions of practices prevailing in respective foreign countries are complied with. 2. Use of Estimates The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of Assets and Liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported Income and the Expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the financial statements are prudent and reasonable. Difference between the actual results and estimates is recognized in the period in which the results are known / materialized. 3. Revenue Recognition i) Income and Expenditure have been accounted for on accrual basis unless otherwise stated. ii) Income on Non-Performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by the RBI. Income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classified as NPAs during the year. iii) Bank commission, exchange and brokerage earned (including Third Party Product''s income), rent on Safe Deposit Lockers, commission on biometric cards, income from Aaadhar cards etc. are accounted for on realization basis. iv) Income (Other than interest) on investments in “Held to Maturity” (HTM) category acquired at discount to the face value is recognized as follows: a) On interest bearing securities, it is recognized only at the time of sale/ redemption. b) On Zero- coupon securities, it is accounted for over the balance tenor of the securities on a constant yield basis. v) Dividend is accounted on an accrual basis where the right to receive the dividend is established. 4. Cash Flow Statements Cash and Cash equivalents include Cash in hand, Balances with RBI, Balances with other Banks and Money at call and short notice. 5. Investments i) In conformity of the requirements in form A of the Third Schedule to the Banking Regulations Act, 1949, Investments are classified as under: a) Government Securities b) Other Approved Securities c) Shares d) Debentures & Bonds e) Investments in Subsidiaries & Joint Ventures and f) Other Investments The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines contained in Master Circular DBR.No.BPBC.6/21.04.141 /2015-16 dated 1st July 2015 into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading ( HFT) ii) As per RBI guidelines, the following principles have been adopted for the purpose of valuation a) Securities held in “HTM” - at acquisition cost. The excess of acquisition cost over the face value is amortized over the remaining period of maturity and in case of discount; it is not recognized as income. b) Investments in Regional Rural Banks are valued at carrying cost. c) Investments in Subsidiaries and Joint Ventures are valued at carrying cost. d) Diminution other than temporary, if any, in valuation of such investments is provided for. e) Securities held in “AFS” and “HFT” categories are valued classification wise and scrip-wise and net depreciation, if any, in each classification is charged to Profit & Loss account while net appreciation, if any, is ignored. iii) Interbank Repo/ Reverse Repo transactions are accounted for in accordance with extant RBI guidelines. iv) As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: - From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. - From HTM category to AFS/HFT category, 0 If the security is originally placed at discount in HTM category, at acquisition cost / book value 0 If the security is originally placed at a premium, at amortized cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. - From AFS to HFT category and vice versa, at book value. v) The non-performing investments are identified and depreciation / provision is made as per the extant RBI guidelines. vi) Profit / Loss on sale of investments in any category is taken to the Profit & Loss account. However, in case of profit on sale of investments in “HTM” category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve account. vii) Commission, brokerage, broken period interest etc on securities is debited / credited to Profit & Loss Account. viii) As per the extant RBI guidelines, the Bank follows ‘Settlement Date'' for accounting of investments transactions. 6. Derivative Contracts i) The Interest Rate Swap which hedges interest bearing Asset or Liability are accounted for in the financial statements on accrual basis except the swap designated with an Asset or Liability that is carried at market value or lower of cost or market value. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the Asset / Liability. ii) Trading swap transactions are marked to market with changes recorded in the financial statements. iii) In the case of option contracts, guidelines issued by Foreign Exchange Dealers Association of India (FEDAI) from time to time for recognition of income, premium and discount are being followed. 7. Advances 7.1 All advances are classified under four categories, i.e. (a) Standard, (b) Sub-standard, (c) Doubtful and (d) Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the RBI in terms of Master Circular DBR.BPBC No.2/21.04.048/2015-16 dated 01st July 2015 as under: 7.2 Loans and Advances are classified as performing and non-performing, based on the guidelines issued by the RBI. Loan Assets become Non-Performing Assets (NPAs) where: i. In respect of term loans, interest and/or installment of principal remains overdue for a period of more than 90 days; ii. In respect of Overdraft or Cash Credit advances, the account remains “out of order”, i.e. if the outstanding balance exceeds the sanctioned limit/ drawing power continuously for a period of 90 days, or if there are no credits continuously for 90 days as on the date of balance-sheet, or if the credits are not adequate to cover the interest due during the same period iii. In respect of bills purchased/discounted, the bill remains overdue for a period of more than 90 days; iv. In respect of agricultural advances for short duration crops, where the installment of principal or interest remains overdue for two crop seasons. v. In respect of agricultural advances for long duration crops, where the principal or interest remains overdue for one crop season 7.3 NPAs are classified into Sub-Standard, Doubtful and Loss Assets, based on the following criteria stipulated by RBI: i. Sub-standard: A loan asset that has remained nonperforming for a period less than or equal to 12 months ii. Doubtful: A loan asset that has remained in the sub-standard category for a period of 12 months iii. Loss: A loan asset where loss has been identified but the amount has not been fully written off. 7.4 Provisions are made for NPAs as per the extant guidelines prescribed by the regulatory authorities, subject to minimum provisions as prescribed below: 7.5 Advances are stated net of specific loan loss provisions, Counter cyclical provisioning buffer, Provision for diminution in fair value of restructured advances and unrecovered interest held in Sundry /claims received from Credit Guarantee Trust Fund (CGTF) / Export Credit Guarantee Corporation (ECGC) relating to nonperforming assets. 7.6 In respect of foreign offices, classification of loans and advances and provisions for NPAs are made as per the local regulations or as per the norms of RBI, whichever is more stringent. 7.7 For restructured/rescheduled assets, provisions are made in accordance with the guidelines issued by the RBI, which require that the difference between the fair value of the loan before and after restructuring is provided for, in addition to provision for NPAs. 7.8 In the case of loan accounts classified as NPAs, an account may be reclassified as a performing asset if it conforms to the guidelines prescribed by the regulators. 7.9 Amounts recovered against debts written off in earlier years are recognized as revenue in the year of recovery 7.10 The general provision on Standard Advances is held in “Other Liabilities and Provisions” reflected in Schedule 5 of the Balance Sheet and is not considered for arriving at both net NPAs and net advances. Mar 31, 2015 1 Accounting Convention The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by Reserve Bank of India (RBI) from time to time and the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) to the extent applicable and practices generally prevalent in the banking industry in India. 2 Use of Estimates The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of Assets and Liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported Income and the Expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the financial statements are prudent and reasonable. Difference between the actual results and estimates is recognized in the period in which the results are known / materialized. 3 Revenue Recognition i) Income and Expenditure have generally been accounted for on accrual basis unless otherwise stated. ii) Income on Non-Performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by the Reserve Bank of India (RBI). Income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classified as NPAs during the year. iii) Bank commission, exchange and brokerage earned, rent on Safe Deposit Lockers, commission on biometric cards, income from Aadhar cards etc. are accounted for on realization basis. iv) Income (Other than interest) on investments in "Held to Maturity" (HTM) category acquired at discount to the face value is recognized as follows: a) On interest bearing securities, it is recognized only at the time of sale/ redemption. b) On Zero- coupon securities, it is accounted for over the balance tenor of the securities on a constant yield basis. v) Dividend is accounted on an accrual basis where the right to receive the dividend is established. 4 Cash Flow Statements Cash and Cash equivalents include Cash in hand, Balances with RBI, Balances with other Banks and Money at call and short notice. 5 Investments i) In conformity of the requirements in form A of the Third Schedule to the Banking Regulations Act, 1949, Investments are classified as under: a) Government Securities b) Other Approved Securities c) Shares d) Debentures & Bonds e) Investments in Subsidiaries & Joint Ventures and f) Other Investments The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading ( HFT) ii) As per RBI guidelines, the following principles have been adopted for the purpose of valuation a) i) Securities held in "HTM" - at acquisition cost. The excess of acquisition cost over the face value is amortized over the remaining period of maturity and in case of discount; it is not recognized as income. ii) Investments in Regional Rural Banks are valued at carrying cost. iii) Investments in Subsidiaries and Joint Ventures are valued at carrying cost. Diminution other than temporary, if any, in valuation of such investments is provided for. b) i) Securities held in "AFS" and "HFT" categories are valued classification wise and scrip-wise and net depreciation, if any, in each classification is charged to Profit & Loss account while net appreciation, if any, is ignored. ii) Valuation of securities is arrived at as follows: iii) Interbank Repo/ Reverse Repo transactions are accounted for in accordance with extant RBI guidelines. iv) As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: - From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. - From HTM category to AFS/HFT category, - If the security is originally placed at discount in HTM category, at acquisition cost / book value - If the security is originally placed at a premium, at amortized cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. - From AFS to HFT category and vice versa, at book value. v) The non-performing investments are identified and depreciation / provision is made as per the extant RBI guidelines. vi) Profit / Loss on sale of investments in any category is taken to the Profit & Loss account. However, in case of profit on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve account. vii) Commission, brokerage, broken period interest etc on securities is debited / credited to Profit & Loss Account. viii) As per the extant RBI guidelines, the Bank follows ''Settlement Date'' for accounting of investments transactions. Derivative Contracts i) The Interest Rate Swap which hedges interest bearing Asset or Liability are accounted for in the financial statements on accrual basis except the swap designated with an Asset or Liability that is carried at market value or lower of cost or market value. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the Asset / Liability. ii) Trading swap transactions are marked to market with changes recorded in the financial statements. iii) In the case of option contracts, guidelines issued by Foreign Exchange Dealers Association of India (FEDAI) from time to time for recognition of income, premium and discount are being followed. 6 Advances i) All advances are classified under four categories, i.e. (a) Standard, (b) Sub-standard, (c) Doubtful and (d) Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the RBI. ii) Advances are stated net of specific loan loss provisions, Counter cyclical provisioning buffer, Provision for diminution in fair value of restructured advances and unrecovered interest held in Sundry / claims received from Credit Guarantee Trust Fund (CGTF) / Export Credit Guarantee Corporation (ECGC) relating to non-performing assets. iii) The general provision on Standard Advances is held in "Other Liabilities and Provisions" reflected in Schedule 5 of the Balance Sheet and is not considered for arriving at both net NPAs and net advances. 7 Fixed Assets and Depreciation i) Premises and Other Fixed Assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price less trade discounts and rebates, eligible borrowing costs and directly attributable costs of bringing the Asset to its working condition for the intended use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefits from such assets or their functional capability. Land and Buildings, if revalued are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve and the depreciation provided thereon is deducted there from. ii) Application Software is capitalized and clubbed under Intangible assets. Depreciation on Computers and Software forming an integral part of Computer hardware and on ATM is provided on Straight line method at the rate of 33.33% as per the guidelines of RBI. iii) Depreciation on Fixed Assets is provided for on the written down value method at the rates considered appropriate by the management as under: iv) Depreciation on additions to assets made upto 30th September of the year is provided at full rate and on additions made thereafter, at half the rate. v) Depreciation on premises is provided on composite cost, wherever the value of Land and Buildings is not separately identifiable. vi) No depreciation is provided on assets sold / disposed off during the year. vii) Depreciation on Leased assets and Leasehold improvements is recognized on a straight-line basis using rates determined with reference to the primary period of lease. 8 Impairment of Assets The carrying costs of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying cost of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. 9 Counter Cyclical Provisioning Buffer The Bank has policy for creation and utilization of Counter Cyclical Provisioning Buffer separately for Advances and Investments. The quantum of provision to be created is assessed at the end of each financial year. The counter cyclical provisions are utilized only for contingencies under extra ordinary circumstances specified in the policy with prior permission of the Reserve Bank of India. 10 Transactions involving Foreign Exchange Revaluation of Foreign Currency position and booking Profits / Losses: i) Monetary and Non Monetary Assets and Liabilities are revalued at the exchange rates notified by FEDAI at the close of the year and resultant gain / loss is recognized in the Profit & Loss Account. ii) Income & Expenditure items are recognized at the exchange rates prevailing on the date of the transaction. iii) Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notified by FEDAI for specified maturities and at interpolated rates for contracts of ''in-between'' maturities. The resultant gains or losses are recognized in the Profit & Loss account. iv) Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notified by FEDAI at the close of the year. v) Representative Offices of the Bank outside India are treated as Integral Operation Unit as per RBI guidelines. 11 Accounting for Non-Integral Foreign operations Foreign branches are classified as non-integral foreign operations by: i) Revenue Recognition Income and Expenditure are recognized / accounted for as per the local laws of the respective countries. ii) Asset Classification and Loan Loss Provisioning Asset classification and loan loss provisioning are made as per the local laws of the respective countries or as per RBI guidelines whichever is higher. iii) Fixed Assets and Depreciation a) Fixed Assets are accounted for at historical cost. b) Depreciation on Fixed Assets is provided as per the applicable laws of the respective countries. iv) Assets and Liabilities (monetary and non-monetary as well as Contingent Liabilities) are translated at the closing rates notified by FEDAI at the close of the year. v) Income & Expenditure are translated at the quarterly average closing rates notified by FEDAI at the end of respective quarters. vi) All resulting exchange differences are accumulated in ''Foreign Currency Translation Reserve''. 12 Employee Benefits Retirement benefit in the form of Provident Fund is a defined contribution scheme. The contributions to the Provident Fund are charged to the Profit & Loss account for the year when the contributions are due. The Bank has no obligation other than the contribution payable to the Provident Fund. Gratuity liability, Pension Fund and provision towards Leave are defined benefit obligations, and are provided for on the basis of an actuarial valuation as per AS 15 (Revised) made at the end of each financial year, based on the projected unit credit method. Actuarial gains/losses are immediately taken to the Profit & Loss account. New Pension Scheme is applicable to employees who joined the Bank on or after 01.04.2010 is a defined contribution scheme. Bank pays fixed contribution at predetermined rate and the obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit & Loss account. Employee benefits relating to employees employed at foreign offices are valued and accounted for as per the local laws/regulations of the respective countries. 13 Segment Reporting The Bank recognizes the Business segment as the Primary reporting segment and Geographical segment as the Secondary reporting segment, in accordance with the RBI guidelines and in the compliances with the Accounting Standard 17 issued by ICAI. Business segments are classified into (a) Treasury Operation, (b) Corporate and Wholesale Banking, (c) Retail Banking Operation and (d) Other Banking Operations. 14 Lease Transactions Lease payments for Assets taken on operating lease are amortized over the lease term. The properties taken on lease/rental basis are renewable / cancellable at the option of the Bank. The Bank''s liabilities in respect of disputes pertaining to additional rent / lease rent are recognized on settlement or on renewal. 15 Earning per Share Earnings per Share is calculated by dividing the net Profit or Loss (after tax) for the year attributable to the Equity share holders by the weighted average number of Equity shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if contracts to issue Equity shares were exercised or converted during the year. Diluted earnings per Equity share is calculated by using the weighted average number of Equity shares and dilutive potential Equity shares outstanding as at the year end. 16 Taxation Provision for Tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rate and tax laws. Deferred Tax Assets and Deferred Tax Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is ''reasonable certainty'' that sufficient future taxable income will be available against which such Deferred Tax Assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, Deferred Tax Assets are recognized only if there is "virtual certainty". 17 Provisions, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources and a reliable estimate can be made of the amount of the obligation. Contingent Assets are neither recognized nor disclosed in the financial statements. Contingent Liabilities are not provided for and are disclosed by way of notes. 18 Share Issue Expenses: Share Issue expenses are charged to the Share Premium account. Mar 31, 2014 1 Accounting Convention The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these fi nancial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by Reserve Bank of India (RBI) from time to time and the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) to the extent applicable and practices generally prevalent in the banking industry in India. 2 Use of Estimates The preparation of fi nancial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) as of the date of the fi nancial statements and the reported income and the expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the fi nancial statements are prudent and reasonable. Difference between the actual results and estimates is recognized in the period in which the results are known / materialized. 3 Revenue Recognition i) Income and Expenditure have generally been accounted for on accrual basis unless otherwise stated. ii) Income from Non-Performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by RBI. Income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classifi ed as NPAs during the year. iii) Bank commission, exchange and brokerage earned, rent on Safe Deposit Lockers (SDV), commission on biometric cards, income from aadhar cards etc. are accounted for on realization basis. iv) Income (other than interest) on investments in "Held to Maturity" (HTM) category acquired at discount to the face value is recognized as follows: a) On interest bearing securities, it is recognized only at the time of sale/ redemption. b) On zero-coupon securities, it is accounted for over the balance tenor of the securities on a constant yield basis. v) Dividend is accounted on an accrual basis where the right to receive the same is established. 4 Cash Flow Statements Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and short notice. 5 Investments i) In conformity of the requirements in form A of the Third Schedule to the Banking Regulations Act, 1949, Investments are classifi ed as under: a) Government Securities b) Other Approved Securities c) Shares d) Debentures & Bonds e) Investments in Subsidiaries & Joint Ventures, and f) Other Investments The Investment portfolio of the Bank is further classifi ed in accordance with the RBI guidelines into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading (HFT) ii) As per RBI guidelines, the following principles have been adopted for the purpose of valuation a) i) Securities held in "HTM" – at acquisition cost. The excess of acquisition cost over the face value is amortized over the remaining period of maturity and in case of discount, it is not recognized as income. ii) Investments in Regional Rural Banks are valued at carrying cost. iii) Investments in Subsidiaries and Joint Ventures are valued at carrying cost. Diminution other than temporary, if any, in valuation of such investments is provided for. b) i) Securities held in "AFS" and "HFT" categories are valued classifi cation wise and scrip-wise and net depreciation, if any, in each classifi cation is charged to Profi t and Loss Account while net appreciation, if any, is ignored. ii) Valuation of securities is arrived at as follows iii) Inter bank REPO/ Reverse REPO transactions are accounted for in accordance with extant RBI guidelines. iv) As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. From HTM category to AFS/HFT category, - If the security is originally placed at discount in HTM category, at acquisition cost/ book value - If the security is originally placed at a premium, at amortized cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. From AFS to HFT category and vice versa, at book value. v) The non-performing investments are identifi ed and depreciation/ provision is made as per the extant RBI guidelines. vi) Profi t/Loss on sale of investments in any category is taken to the Profi t and Loss Account. However, in case of profi t on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve Account. vii) Commission, brokerage, broken period interest etc on securities is debited / credited to Profi t & Loss Account. viii) As per the extant RBI guidelines, the Bank follows ''Settlement Date'' for accounting of investments transactions. c) Derivative Contracts The Interest Rate Swap which hedges interest bearing asset or liability are accounted for in the fi nancial statements on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost or market value. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability. i) Trading swap transactions are marked to market with changes recorded in the fi nancial statements. ii) In the case of option contracts, guidelines issued by Foreign Exchange Dealers Association of India (FEDAI) from time to time for recognition of income, premium and discount are being followed. 6 Advances i) All advances are classifi ed under four categories, i.e. (a) Standard, (b) Sub-standard, (c) Doubtful and (d) Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the RBI. ii) Advances are stated net of specifi c loan loss provisions, counter cyclical provisioning buffer, provision for diminution in fair value of restructured advances and unrecovered interest held in sundry / claims received from Credit Guarantee Fund Trust (CGFT)/Export Credit Guarantee Corporation (ECGC) relating to non-performing assets. iii) The general provision on standard advances is held in "Other Liabilities and Provisions" refl ected in Schedule 5 of the balance sheet and is not considered for arriving at both net NPAs and net advances. 7 Fixed Assets and Depreciation i) Premises and Other Fixed Assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises of purchase price less trade discounts and rebates, eligible borrowing costs and directly attributable costs of bringing the Asset to its working condition for the intended use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefi ts from such assets or their functional capability. Land and Buildings, if revalued are stated at revalued amount. The appreciation on revaluation is credited to Revaluation Reserve and the depreciation provided thereon is deducted there from. ii) Depreciation on Fixed Assets is provided for on the written down value method at the rates considered appropriate by the management as under iii) Application Software is capitalized and clubbed under intangible assets. Depreciation on computers and software forming an integral part of Computer Hardware and on ATM is provided on Straight Line Method at the rate of 33.33% as per the guidelines of RBI. iv) Depreciation on additions to assets made upto 30th September of the year is provided at full rate and on additions made thereafter, at half the rate. v) Depreciation on premises is provided on composite cost, wherever the value of land and buildings is not separately identifi able. vi) No depreciation is provided on assets sold / disposed off during the year. vii) Depreciation on leased assets and leasehold improvements is recognized on a straight-line basis using rates determined with reference to the primary period of lease. 8 Impairment of Assets The carrying costs of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset''s net selling price and value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and risks specifi c to the asset. After impairment, depreciation is provided on the revised carrying cost of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. 9 Counter Cyclical Provisioning Buffer The Bank has a Policy for creation and utilization of Counter cyclical provisioning buffer separately for advances and investments. The quantum of provision to be created is assessed at the end of each fi nancial year. The counter cyclical provisions are utilized only for contingencies under extra ordinary circumstances specifi ed in the policy with prior permission of the RBI. 10 Transactions involving Foreign Exchange Revaluation of Foreign Currency Position and booking Profi ts / Losses: i) Monetary and Non Monetary assets and liabilities are revalued at the exchange rates notifi ed by FEDAI at the close of the year and resultant gain / loss is recognized in the Profi t and Loss Account. ii) Income and Expenditure items are recognized at the exchange rates prevailing on the date of the transaction. iii) Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notifi ed by FEDAI for specifi ed maturities and at interpolated rates for contracts of ''in-between'' maturities. The resultant gains or losses are recognized in the Profi t and Loss Account. iv) Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notifi ed by FEDAI at the close of the year. v) Representative offi ces of the Bank outside India are treated as Integral Operation Units as per RBI guidelines. 11 Accounting for Non–Integral foreign operations Offshore Banking Units (OBU) and Foreign Branches are classifi ed as non-integral foreign operations. a) Offshore Banking Unit (OBU) i. Assets and Liabilities (both monetary and non- monetary as well as contingent liabilities) are translated at the closing rates notifi ed by FEDAI at the close of the year. ii. Income and Expenditure are translated at the quarterly average closing rates notifi ed by FEDAI at the end of respective quarters. iii. All resulting exchange differences are accumulated in ''Foreign Currency Translation Reserve''. b) Foreign Branch i) Revenue Recognition Income and Expenditure are recognized / accounted for as per the local laws of the respective countries. ii) Asset Classifi cation and Loan Loss Provisioning Asset classifi cation and loan loss provisioning are made as per the local laws of the respective countries or as per RBI guidelines whichever is higher. iii) Fixed Assets and Depreciation a) Fixed Assets are accounted for at historical cost. b) Depreciation on fi xed assets is provided as per the applicable laws of the respective countries. iv) Assets and Liabilities (both monetary and non- monetary as well as contingent liabilities) are translated at the closing rates notifi ed by FEDAI at the close of the year. v) Income and Expenditure are translated at the quarterly average closing rates notifi ed by FEDAI at the end of respective quarters. vi) All resulting exchange differences are accumulated in ''Foreign Currency Translation Reserve''. 12 Employee Benefits Retirement benefi ts in the form of provident fund is a defi ned contribution scheme. The contributions to the provident fund are charged to the Profi t and Loss Account for the year when the contributions are due. The Bank has no obligation, other than the contribution payable to the provident fund. Gratuity liability, Pension fund and provision towards leave are defi ned benefi t obligations, and are provided for on the basis of an actuarial valuation as per AS 15 (Revised) made at the end of each fi nancial year, based on the projected unit credit method. Actuarial gains/losses are immediately taken to the Profi t and Loss Account. New Pension Scheme is applicable to employees who joined the Bank on or after 01.04.2010 is a defi ned contribution scheme. Bank pays fi xed contribution at predetermined rate and the obligation of the Bank is limited to such fi xed contribution. The contribution is charged to Profi t and Loss Account. Employee benefi ts relating to employees employed at foreign offi ces are valued and accounted for as per the local laws/regulation of the respective countries. 13 Segment Reporting The Bank recognizes the Business Segment as the Primary Reporting Segment and Geographical Segment as the Secondary Reporting Segment, in accordance with the RBI guidelines and in the compliances with the Accounting Standard 17 issued by ICAI. Business Segments are classifi ed into (a) Treasury Operations, (b) Corporate and Wholesale Banking, (c) Retail Banking Operations and (d) Other Banking Operations. 14 Lease Transactions Lease payments for assets taken on operating lease are amortized over the lease term. The properties taken on lease/rental basis are renewable / cancellable at the option of the Bank. The Bank''s liabilities in respect of disputes pertaining to additional rent/lease rent are recognized on settlement or on renewal. 15 Earnings Per Share Earnings per share is calculated by dividing the net profi t or loss (after tax) for the year attributable to the equity share holders by the weighted average number of equity shares outstanding during the year. Diluted earnings per share refl ect the potential dilution that could occur if contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share is calculated by using the weighted average number of equity shares and dilutive potential equity shares outstanding as at the year-end. 16 Taxation Provision for tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rates and tax laws. Deferred Tax Assets and Deferred Ta x Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is ''reasonable certainty'' that suffi cient future taxable income will be available against which such deferred tax assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, deferred tax assets are recognized only if there is "virtual certainty". 17 Provisions, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outfl ow of resources and a reliable estimate can be made of the amount of the obligation. Contingent Assets are neither recognized nor disclosed in the fi nancial statements. Contingent Liabilities are not provided for and are disclosed by way of notes. 18 Share Issue Expenses: Share Issue expenses are charged to the Share Premium Account. Mar 31, 2013 1. Accounting Convention The accompanying financial statements are prepared by following going concern concept and on historical cost basis unless otherwise stated and conform to the statutory provisions and generally accepted accounting practices prevailing in India. 2. Use of Estimates The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and the expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the financial statements are prudent and reasonable. Difference between the actual results and estimates is recognized in the period in which the results are known / materialized. 3. Revenue Recognition i) Income and Expenditure have generally been accounted for on accrual basis unless otherwise stated. ii) Income on Non-performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by the Reserve Bank of India (RBI). Income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classified as NPAs during the year. iii) Bank commission, exchange and brokerage earned, rent on Safe Deposit Lockers, commission on biometric cards, income from aadhar cards etc. are accounted for on realization basis. iv) Income (Other than interest) on investments in "Held to Maturity" (HTM) category acquired at discount to the face value is recognized as follows: a) On interest bearing securities, it is recognized only at the time of sale/ redemption. b) On Zero- coupon securities, it is accounted for over the balance tenor of the securities on a constant yield basis. v) Dividend is accounted on an accrual basis where the right to receive the dividend is established. 4. Investments i) In conformity of the requirements in form A of the Third Schedule to the Banking Regulations Act, 1949, Investments are classified as under: a) Government Securities b) Other Approved Securities c) Shares d) Debentures & Bonds e) Investments in Subsidiaries & Joint Ventures, and f) Other Investments The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading ( HFT) ii) As per RBI guidelines, the following principles have been adopted for the purpose of valuation a) i) Securities held in "HTM" - at acquisition cost. The excess of acquisition cost over the face value is amortized over the remaining period of maturity. ii) Investments in Regional Rural Banks are valued at carrying cost. iii) Investments in Subsidiaries and Joint Ventures are valued at carrying cost. Permanent diminution, if any, in valuation of such investments is provided for. b) i) Securities held in "AFS" and "HFT" categories are valued classification wise and scrip- wise and net depreciation, if any, in each classification is charged to Profit and Loss account while net appreciation, if any, is ignored. ii) Valuation of securities is arrived at as follows iii) Inter bank REPO/ Reverse REPO transactions are accounted for in accordance with extant RBI guidelines. iv) As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: - From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. - From HTM category to AFS/HFT category, - If the security is originally placed at discount in HTM category, at acquisition cost/ book value - If the security is originally placed at a premium, at amortized cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. - From AFS to HFT category and vice versa, at book value. v) The non-performing investments are identified and depreciation/ provision is made as per the extant RBI guidelines. vi) Profit/ loss on sale of investments in any category is taken to the Profit and Loss account. However, in case of profit on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve account. vii) Commission, brokerage, broken period interest etc on securities is debited / credited to Profit & Loss Account. viii) As per the extant RBI guidelines, the Bank follows ''Settlement Date'' for accounting of investments transactions. Derivative Contracts i) The Interest Rate Swap which hedges interest bearing asset or liability are accounted for in the financial statements on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost or market value. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability. ii) Trading swap transactions are marked to market with changes recorded in the financial statements. iii) In the case of option contracts, guidelines issued by Foreign Exchange Dealers Association of India (FEDAI) from time to time for recognition of income, premium and discount are being followed. 5. Advances i) All advances are classified under four categories, i.e. (a) Standard, (b) Sub-standard, (c) Doubtful and (d) Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the RBI. ii) Certain category of standard advances such as loans for consumer durables, educational loans, loans through credit cards and other personal loans carry (except Loan against Deposits) an additional provision of 2% over and above the statutory requirement. iii) Advances are stated net of provisions and unrecovered interest held in sundry /claims received from CGTF / ECGC relating to non-performing assets. The provision on standard advances is held in "Other Liabilities and Provisions". 6. Fixed Assets and Depreciation i) Fixed Assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, If any. The cost comprises purchase price less trade discounts and rebates, eligible borrowing costs and directly attributable cost of bringing the Asset to its working condition for the intended use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefits from such assets or their functional capability. Revalued Land and Buildings are stated at revalued amount. ii) Application Software is capitalized as intangible assets. iii) Depreciation on Fixed Assets is provided for on the written down value method at the rates considered appropriate by the management as under iv) Depreciation on computers, ATM and software is provided at 33.33% on straight-line method. v) Depreciation on additions to assets made upto 30th September of the year is provided at full rate and on additions made thereafter, at half the rate. vi) Depreciation on premises is provided on composite cost, wherever the value of land and buildings is not separately identifiable. vii) No depreciation is provided on assets sold / disposed off during the year. viii) Leasehold land is amortized over the period of lease. 7. Impairment of Assets The carrying costs of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying cost of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset''s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying cost of the asset over its remaining useful life. A previously recognized impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. 8. Counter cyclical provisioning buffer The Bank has Policy for creation and utilization of Counter cyclical provisioning buffer separately for advances and investments. The quantum of provision to be created is assessed at the end of each financial year. The counter cyclical provisions are utilized only for contingencies under extra ordinary circumstances specified in the policy with prior permission of the Reserve Bank of India. 9. Transactions involving Foreign Exchange Revaluation of Foreign Currency Position and booking Profits / Losses: i) Monetary and Non Monetary assets and liabilities are revalued at the exchange rates notified by FEDAI at the close of the year and resultant gain / loss is recognized in the Profit and Loss Account. ii) Income and Expenditure items are recognized at the exchange rates prevailing on the date of the transaction. iii) Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notified by FEDAI for specified maturities and at interpolated rates for contracts of ''in-between'' maturities. The resultant gains or losses are recognized in the Profit and Loss Account. iv) Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notified by FEDAI at the close of the year. v) Representative offices of the bank outside India are treated as Integral Operation Unit as per RBI guidelines. 10. Accounting for Non-Integral foreign operations Offshore Banking Units (OBU) and foreign branches are classified as non-integral foreign operations. a) Offshore Banking Unit (OBU) & Foreign Branch i. Assets and Liabilities (both monetary and non- monetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI at the year-end. ii. Income and Expenditure are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter. iii. All resulting exchange differences are accumulated in ''Foreign Currency Translation Reserve''. b) Foreign Branch i) Revenue Recognition Income and Expenditure are recognized / accounted for as per the local laws of the respective countries. ii) Asset Classification and Loan Loss Provisioning Asset classification and loan loss provisioning are made as per local requirement or as per RBI guidelines whichever is higher. iii) Fixed Assets and Depreciation a) Fixed Assets are accounted for at historical cost. b) Depreciation on fixed assets is provided as per the applicable laws of the respective countries. 11. Employee Benefits Retirement benefit in the form of provident fund is a defined contribution scheme. The contributions to the provident fund are charged to the profit and loss account for the year when the contributions are due. The Bank has no obligation, other than the contribution payable to the provident fund. Gratuity liability, Pension Fund and provision towards Leave are defined benefit obligations, and are provided for on the basis of an actuarial valuation as per AS 15 (Revised) made at the end of each financial year, based on the projected unit credit method. Actuarial gains/losses are immediately taken to the profit and loss account. Employee benefits relating to employees employed at foreign offices are valued and accounted for as per the respective local laws/regulations. 12. Segment Reporting The bank recognizes the Business Segment as the Primary Reporting Segment and Geographical Segment as the Secondary Reporting Segment, in accordance with the RBI guidelines and in the compliances with the Accounting Standard 17 issued by ICAI. Business Segments are classified into (a) Treasury Operation, (b) Corporate and Wholesale Banking, (c) Retail Banking Operation and (d) Other Banking Operations. 13. Lease Transactions The properties taken on lease / rental basis are renewable / cancelable at the option of the Bank. The Bank''s liabilities in respect of disputes pertaining to additional rent/lease rent are recognized on settlement or on renewal. 14. Earning per share Earnings per share is calculated by dividing the net profit or loss for the year attributable to the equity share holders by the weighted average number of equity shares outstanding during the year. Diluted Earnings per equity share is calculated by using the weighted average number of equity shares and dilutive potential equity shares outstanding as at the year end. 15. Taxation Provision for Tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rate and tax laws. Deferred Tax Assets and Deferred Tax Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is ''reasonable certainty'' that sufficient future taxable income will be available against which such deferred tax assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, deferred tax assets are recognized only if there is "virtual certainty". 16. Provisions, contingent liabilities and contingent assets Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources and a reliable estimate can be made of the amount of the obligation. Contingent Assets are neither recognized nor disclosed in the financial statements. Contingent Liabilities are not provided for and are disclosed by way of notes. 17. Share Issue Expenses: Share Issue expenses are charged to the Share Premium Account. Mar 31, 2012 1 Accounting Convention The accompanying financial statements are prepared by following going concern concept and on historical cost basis unless otherwise stated and conform to the statutory provisions and generally accepted accounting practices prevailing in India. 2. Use of Estimates The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and the expenses during the reporting period. Management believes that the estimates wherever used in the preparation of the financial statements are prudent and reasonable. Difference between the actual results and estimates is recognized in the period in which the results are known / materialized. 3. Revenue Recognition i) Income and Expenditure have generally been accounted for on accrual basis unless otherwise stated. ii) Income on Non-performing Assets (NPAs) is recognized to the extent realized as per the prudential norms prescribed by the Reserve Bank of India (RBI). Income accounted for in the preceding year and remaining unrealized is derecognized in respect of assets classified as NPAs during the year. iii) Bank commission, exchange and brokerage earned, rent on Safe Deposit Lockers, commission on bio matrix card, etc. are accounted for on realization basis. 4. Investments i) In conformity of the requirements in form A of the Third Schedule to the Banking Regulations Act, 1949, Investments are classified as under: a) Government Securities b) Other Approved Securities c) Shares d) Debentures & Bonds e) Investments in Subsidiaries & Joint Ventures, and f) Other Investments The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading ( HFT) ii) As per RBI guidelines, the following principles have been adopted for the purpose of valuation a) i) Securities held in "HTM" - at acquisition cost. The excess of acquisition cost over the face value is amortized over the remaining period of maturity. ii) Investments in Regional Rural Banks are valued at carrying cost. iii) Investments in Subsidiaries and Joint Ventures are valued at carrying cost. Permanent diminution, if any, in valuation of such investments is provided for. b) i) Securities held in "AFS" and "HFT" categories are valued classification wise and scrip-wise and net depreciation, if any, in each classification is charged to Profit and Loss account while net appreciation, if any, is ignored. ii) Valuation of securities is arrived at as follows iii) Inter bank REPO/ Reverse REPO transactions are accounted for in accordance with extant RBI guidelines. iv) As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: - From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. - From HTM category to AFS/HFT category, - If the security is originally placed at discount in HTM category, at acquisition cost/ book value - If the security is originally placed at a premium, at amortized cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. - From AFS to HFT category and vice versa, at book value. v) The non-performing investments are identified and depreciation/ provision is made as per the extant RBI guidelines. vi) Profit/ loss on sale of investments in any category is taken to the Profit and Loss account. However, in case of profit on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve account. vii) Commission, brokerage, broken period interest etc on securities is debited / credited to Profit & Loss Account. viii) As per the extant RBI guidelines, the Bank follows 'Settlement Date' for accounting of investments transactions. Derivative Contracts i) The Interest Rate Swap which hedges interest bearing asset or liability are accounted for in the financial statements on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost or market value. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability. ii) Trading swap transactions are marked to market with changes recorded in the financial statements. iii) In the case of option contracts, guidelines issued by Foreign Exchange Dealers Association of India (FEDAI) from time to time for recognition of income, premium and discount are being followed. 5. Advances i) All advances are classified under four categories, i.e. (a) Standard, (b) Sub-standard, (c) Doubtful and (d) Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the RBI. ii) Certain category of standard advances such as loans for consumer durables, educational loans, loans through credit cards and other personal loans carries an additional provision of 2% over and above the statutory requirement. iii) Advances are stated net of provisions and unrecovered interest held in sundry /claims received from CGTF / ECGC relating to non-performing assets. The provision on standard advances is held in "Other Liabilities and Provisions". 6. Fixed Assets and Depreciation i) Fixed Assets are stated at historical cost. Revalued Land and Buildings are stated at revalued amount. ii) Software systems are capitalized as intangible assets. iii) Depreciation on Fixed Assets is provided for on the written down value method at the rates considered appropriate by the management as under iv) Depreciation on computers and software is provided at 33.33% on straight-line method. v) Depreciation on additions to assets made upto 30th September of the year is provided at full rate and on additions made thereafter, at half the rate. vi) Depreciation on premises is provided on composite cost, wherever the value of land and buildings is not separately identifiable. vii) No depreciation is provided on assets sold / disposed off during the year. viii) Leasehold land is amortized over the period of lease. 7. Impairment of Assets Impairment losses, if any, are recognized in accordance with the Accounting Standard 28 issued in this regard by the Institute of Chartered Accountants of India (ICAI). 8. Counter cyclical provisioning buffer In accordance with the RBI guidelines, the Bank has an approved policy for counter cyclical provisioning buffer. 9. Transactions involving Foreign Exchange Revaluation of Foreign Currency Position and booking Profits / Losses: i) Monetary assets and liabilities are revalued at the exchange rates notified by FEDAI at the close of the year and resultant gain / loss is recognized in the Profit and Loss Account. ii) Income and Expenditure items are recognized at the exchange rates prevailing on the date of the transaction. iii) Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notified by FEDAI for specified maturities and at interpolated rates for contracts of 'in-between' maturities. The resultant gains or losses are recognized in the Profit and Loss Account. iv) Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notified by FEDAI at the close of the year. v) Representative offices of the bank outside India are treated as Integral Operation Unit as per RBI guidelines. 10. Accounting for Non-Integral foreign operations Offshore Banking Units (OBU) and foreign branches are classified as non-integral foreign operations. a) Offshore Banking Unit (OBU) & Foreign Branch i. Assets and Liabilities (both monetary and non- monetary as well as contingent liabilities) are translated at the closing rates notified by FEDAI at the year-end. ii. Income and Expenditure are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter. iii. All resulting exchange differences are accumulated in 'Foreign Currency Translation Reserve'. b) Foreign Branch i) Revenue Recognition Income and Expenditure are recognized / accounted for as per the local laws of the respective countries. ii) Asset Classification and Loan Loss Provisioning Asset classification and loan loss provisioning are made as per local requirement or as per RBI guidelines whichever is higher. iii) Fixed Assets and Depreciation a) Fixed Assets are accounted for at historical cost. b) Depreciation on fixed assets is provided as per the applicable laws of the respective countries. 11. Employee Benefits Annual contribution to Gratuity Fund, Pension Fund and provision towards leave encashment are accounted for on the basis of actuarial valuation contribution to the Provident Fund is charged to Profit and Loss Account. Net actuarial gains and losses are recognized during the year. 12. Segment Reporting The bank recognizes the Business Segment as the Primary Reporting Segment and Geographical Segment as the Secondary Reporting Segment, in accordance with the RBI guidelines and in the compliances with the Accounting Standard 17 issued by ICAI. Business Segments are classified into (a) Treasury Operation, (b) Corporate and Wholesale Banking, (c) Retail Banking Operation and (d) Other Banking Operations. 13. Lease Transactions The properties taken on lease / rental basis are renewable / cancelable at the option of the Bank. The Bank's liabilities in respect of disputes pertaining to additional rent/lease rent are recognized on settlement or on renewal. 14. Earning per share Earnings per share is calculated by dividing the net profit or loss for the year attributable to the equity share holders by the weighted average number of equity shares outstanding during the year. Diluted Earnings per equity share is calculated by using the weighted average number of equity shares and dilutive potential equity shares outstanding as at the year end. 15. Taxation Provision for Tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rate and tax laws. Deferred Tax Assets and Deferred Tax Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is 'reasonable certainty' that sufficient future taxable income will be available against which such deferred tax assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, deferred tax assets are recognized only if there is "virtual certainty". 16. Provisions, contingent liabilities and contingent assets Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources and a reliable estimate can be made of the amount of the obligation. Contingent Assets are neither recognized nor disclosed in the financial statements. Contingent Liabilities are not provided for and are disclosed by way of notes. Mar 31, 2011 1 Accounting Convention The accompanying financial statements are prepared by following going concern concept and on historical cost basis unless otherwise stated and conform to the statutory provisions and generally accepted accounting practices prevailing in India. 2 Revenue Recognition i) Income and Expenditure is generally accounted for on accrual basis unless otherwise stated. ii) Income on Non-performing Assets (NPAs) is recognised to the extent realised as per the prudential norms prescribed by the Reserve Bank of India. Income accounted for in the preceding year and remaining unrealized is derecognised in respect of assets classifed as NPAs during the year. iii) Commission, exchange and brokerage earned, rent on Safe Deposit Lockers and commission on bio matrix card are accounted for on realization basis. 3 Investments i) In conformity of the requirements in form A of the Third Schedule to the Banking Regulations Act, 1949, investments are classifed as under: a) Government Securities b) Other Approved Securities c) Shares d) Debentures & Bonds e) Investments in Subsidiaries & Joint Ventures, and f) Other Investments The Investment portfolio of the Bank is further classifed in accordance with the Reserve Bank of India guidelines into three categories viz., a) Held to Maturity (HTM) b) Available for Sale (AFS) c) Held for Trading ( HFT) ii) As per Reserve Bank of India guidelines, the following principles have been adopted for the purpose of valuation: a) i) Securities held in "Held to Maturity" – at acquisition cost. The excess of acquisition cost over the face value is amortised over the remaining period of maturity. ii) Investments in Regional Rural Banks are valued at carrying cost. iii) Investments in Subsidiaries and Joint Ventures are valued at carrying cost. Permanent diminution, if any, in valuation of such investments is provided for. b) i) Securities held in "Available for Sale" and "Held for Trading" categories are valued classifcation- wise and scrip-wise and net depreciation, if any, in each classifcation is charged to Profit and Loss account while net appreciation, if any, is ignored. ii) Valuation of securities is arrived at as follows: i Govt. of India Securities As per quotations put out by Fixed Income Money Market and Derivatives Association (FIMMDA) ii State Development Loans, Securities guaranteed by Central / State Government, PSU Bonds On appropriate yield to maturity basis as per FIMMDA iii Equity Shares As per market rates, if quoted, otherwise at Book value as per latest Audited Balance Sheet (not more than 1 year old). In the absence of both at Re 1/- per company. iv Preference Shares As per market rates, if quoted, if quoted, or on appropriate yield to maturity basis not exceeding redemption value as per FIMMDA guidelines v Debentures/Bonds As per market rates, if quoted, otherwise on appropriate yield to maturity basis as per FIMMDA guidelines. vi Mutual Funds As per stock exchange quotations, if quoted. In case of unquoted units, as per latest Repurchase price declared by MF. In cases where latest repurchase price is not available, as per Net Asset Value (NAV) vii Treasury Bills / Certifcate of Deposits / Commercial papers At carrying cost viii Venture Capital Funds At declared NAV or Break-up NAV as per audited Balance sheet which is not more than 18 months old. If NAV / audited financial statements for more than 18 months continuously are not available, at Re.1/- per VCF ix Security Receipts At NAV as declared by Securitisation companies iii) Inter bank REPO/ Reverse REPO transactions are accounted for in accordance with extant RBI guidelines. iv) As per the extant RBI guidelines, the shifting of securities from one category to another is accounted for as follows: - From AFS/HFT categories to HTM category, at lower of book value or market value as on the date of shifting. Depreciation, if any, is fully provided for. - From HTM category to AFS/HFT category, - If the security is originally placed at discount in HTM category, at acquisition cost/ book value - If the security is originally placed at a premium, at amortised cost. The securities so shifted are revalued immediately and resultant depreciation is fully provided for. - From AFS to HFT category and vice versa, at book value. v) The non-performing investments are identifed and depreciation/ provision is made as per RBI guidelines. vi) Profit/ loss on sale of investments in any category is taken to the Profit and Loss account. However, in case of Profit on sale of investments in "Held to Maturity" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve account. vii) Commission, brokerage, broken period interest etc on securities are debited/credited to Profit & Loss Account. viii) As per the extant RBI guidelines, bank follows Settlement Date for accounting of investments transactions. Derivative Contracts i) The Interest Rate Swap which hedges interest bearing asset or liability are accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost or market value in the financial statement. Gains or losses on the termination of swaps are recognized over the shorter of the remaining contractual life of the swap or the remaining life of the asset/liability. ii) Trading swap transactions are marked to market with changes recorded in the financial statements. iii) In the case of option contracts, guidelines issued by FEDAI from time to time for recognition of income, premium and discount are being followed. 4 Advances i) All advances are classifed under four categories, i.e. (a) Standard, (b) Sub-standard, (c) Doubtful and (d) Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the Reserve Bank of India. ii) Certain category of standard advances such as loans for consumer durables, educational loans, loans through credit cards and other personal loans carries an additional provision of 2% over and above the statutory requirement. iii) Advances are stated net of provisions and unrecovered interest held in sundry / claims received from CGTF / ECGC relating to non-performing assets. The provision on standard advances is held in "Other Liabilities and Provisions". 5 Floating Provisions In accordance with the Reserve Bank of India guidelines, the Bank has an approved policy to set apart 1% of gross NPAs as foating provisions for advances till the coverage comes up to 100% of the gross NPAs. 6 Fixed Assets i) Fixed Assets are stated at historical cost. Revalued Land and Buildings are stated at revalued amount. ii) Software systems are capitalized as intangible assets. iv) Depreciation on computers and software is provided at 33.33% on straight-line method. v) Depreciation on additions to assets made upto 30th September of the year is provided at full rate and on additions made thereafter, at half the rate. vi) Depreciation on premises is provided on composite cost, wherever the value of land and buildings is not separately identifable. vii) No depreciation is provided on assets sold / disposed off during the year. viii) Leasehold land is amortised over the period of lease. 7 Transactions involving Foreign Exchange Revaluation of Foreign Currency Position and booking Profits / Losses: i) Monetary assets and liabilities are revalued at the exchange rates notifed by FEDAI at the close of the year and resultant gain / loss is recognized in the Profit and Loss Account. ii) Income and Expenditure items are recognised at the exchange rates prevailing on the date of the transaction. iii) Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notifed by FEDAI for specifed maturities and at interpolated rates for contracts of in-between maturities. The resultant gains or losses are recognised in the Profit and loss account. iv) Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notifed by FEDAI at the close of the year. v) Representative offces of the bank outside India are treated as Integral Operation Unit as per RBI guidelines. 8 Accounting for Non – Integral foreign operations Offshore Banking Units (OBU) and foreign branches are classifed as non- integral foreign operations. a) Offshore Banking Unit (OBU) & Foreign Branch: i. Assets and Liabilities (both monetary and non- monetary as well as contingent liabilities) are translated at the closing rates notifed by FEDAI at the year-end. ii. Income and expenses are translated at the quarterly average closing rate notifed by FEDAI at the end of respective quarter. iii. All resulting exchange differences are accumulated in Foreign Currency Translation Reserve. b) Foreign Branch: i) Revenue Recognition Income and expenditure are recognized / accounted for as per the local laws of the respective countries. ii) Asset Classifcation and Loan loss Provisioning Asset classifcation and loan loss provisioning are made as per local requirement or as per RBI guidelines whichever is more stringent. iii) Fixed Assets and Depreciation a) Fixed Assets are accounted for at historical cost b) Depreciation on fixed assets of foreign branch is provided as per the applicable laws of the respective countries. 9 Employee benefits Annual contribution to Gratuity Fund, Pension Fund and provision towards leave are accounted for on the basis of actuarial valuation and contribution to the Provident Fund is charged to Profit and Loss Account. Net actuarial gains and losses are recognized during the year. 10 Taxation Provision for Tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rate and tax laws. Deferred Tax Assets and Deferred Tax Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is reasonable certainty that suffcient future taxable income will be available against which such deferred tax assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, deferred tax assets are recognized only if there is "virtual certainty". 11 Provisions, contingent liabilities and contingent assets Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources and a reliable estimate can be made of the amount of the obligation. Contingent Assets are neither recognized nor disclosed in the financial statements. Contingent liabilities are not provided for and are disclosed by way of notes. Mar 31, 2010 1. Accounting Convention The accompanying fi nancial statements are prepared by following going concern concept and on historical cost basis unless otherwise stated and conform to the statutory provisions and generally accepted accounting practices prevailing in India. 2. Revenue Recognition i) Income and Expenditure is generally accounted for on accrual basis unless otherwise stated. ii) Income on Non-performing Assets (NPAs) is recognised to the extent realised as per the prudential norms prescribed by the Reserve Bank of India. Income accounted for in the preceding year and remaining unrealized is derecognised in respect of assets classifi ed as NPAs during the year. iii) Commission, exchange and brokerage earned, rent on Safe Deposit Lockers and commission on bio matrix card are accounted for on realization basis. 3. Investments i) The Investment portfolio of the Bank is classifi ed in accordance with the Reserve Bank of India guidelines into three categories viz.: a) Held to Maturity (HTM), b) Available for Sale (AFS), c) Held for Trading (HFT). ii) As per Reserve Bank of India guidelines, the following principles have been adopted for the purpose of valuation: a) i) Securities held in "Held to Maturity" category - at acquisition cost. The excess of acquisition cost over the face value is amortised over the remaining period to maturity. ii) Investments in Regional Rural Banks are valued at carrying cost. c) i) Securities held in "Held for Trading" category - At market price based on quotations of Government Securities put out by FIMMDA. ii) Inter bank REPO Reverse REPO transactions are accounted for in accordance with extant RBI guidelines. iii) Investments in "Available for Sale Held for Trading" are valued category-wise and scrip- wise. Net depreciation, if any, in each category is charged to Profi t and Loss Account while net appreciation, if any, is ignored. iv) The shifting of Securities from one category to another category is carried out at lower of acquisition cost book value market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for. v) The non-performing investments are identifi ed and depreciation provision is made as per RBI guidelines. vi) Profi t loss on sale of investments in any category is taken to the Profi t and Loss Account. However, in case of profi t on sale of investments in "Held to Maturity" category, an equivalent amount (net of taxes if any, and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve Account. vii) Commission, brokerage, broken period interest etc. on Securities are debited credited to Profi t and Loss Account. d. Derivative Contracts i) The Interest Rate Swap which hedges interest bearing asset or liability are accounted for on accrual basis except the swap designated with an asset or liability that is carried at market value or lower of cost or market value in the fi nancial statement. Gains or losses on the termination of swaps are recognised over the shorter of the remaining contractual life of the swap or the remaining life of the asset liability. ii) Trading swap transactions are marked to market with changes recorded in the fi nancial statements. iii) In the case of option contracts, guidelines issued by FEDAI from time to time for recognition of income, premium and discount are being followed. 4. Advances i) All advances are classifi ed under four categories, i.e. (a) Standard, (b) Sub-standard, (c) Doubtful and (d) Loss assets. Provisions required on such advances are made as per the extant prudential norms issued by the Reserve Bank of India. Certain category of standard advances such as loans for consumer durables, educational loans, loans through credit cards and other personal loans carries an additional provision of 2% over and above the statutory requirement. ii) Advances are stated net of provisions and unrecovered interest held in sundry claims received from CGTF ECGC relating to non-performing assets. The provision on standard advances is held in “Other Liabilities and Provisions”. 5. Floating Provisions In accordance with the Reserve Bank of India guidelines, the Bank has an approved policy to set apart a minimum of 1% of gross NPAs as fl oating provisions for advances over and above the existing fl oating provisions till the coverage comes up to 100% of the gross NPAs. 6. Fixed Assets i) Fixed Assets are stated at historical cost. Revalued Land and Buildings are stated at revalued amount. ii) Software systems are capitalized as intangible assets. iv) Depreciation on computers and software systems is provided at 33.33% on straight-line method. v) Depreciation on additions to assets made upto 30th September of the year is provided at full rate and on additions made thereafter, at half the rate. vi) Depreciation on premises is provided on composite cost, wherever the value of land and buildings is not separately identifi able. vii) No depreciation is provided on assets sold disposed off during the year. viii) Leasehold land is amortised over the period of lease. 7. Transactions involving Foreign Exchange Revaluation of Foreign Currency Position and booking Profi ts Losses: i) Monetary assets and liabilities are revalued at the exchange rates notifi ed by FEDAI at the close of the year and resultant gain loss is recognized in the Profi t and Loss Account. ii) Income and Expenditure items are recognised at the exchange rates prevailing on the date of the transaction. iii) Forward exchange contracts are recorded at the exchange rate prevailing on the date of commitment. Outstanding forward exchange contracts are revalued at the exchange rates notifi ed by FEDAI for specifi ed maturities and at interpolated rates for contracts of ‘in-between maturities. The resultant gains or losses are recognised in the profi t and loss account. iv) Contingent liabilities on account of guarantees, acceptances, endorsements and other obligations are stated at the exchange rates notifi ed by FEDAI at the close of the year. v) Representative offi ces of the bank outside India are treated as Integral Operation Unit as per RBI guidelines. 8. Accounting for Non – Integral foreign operations Offshore Banking Units (OBU) and foreign branches are classifi ed as non- integral foreign operations. a) Offshore Banking Unit (OBU): i. Assets and Liabilities (both monetary and non- monetary as well as contingent liabilities) are translated at the closing rates notifi ed by FEDAI at the year-end. ii. Income and expenses are translated at the quarterly average closing rate notifi ed by FEDAI at the end of respective quarter. iii. All resulting exchange differences are accumulated in Foreign Currency Translation Reserve. b) Foreign Branch: i) Revenue Recognition Income and expenditure are recognized accounted for as per the local laws of the respective countries. ii) Asset Classifi cation and Loan loss Provisioning Asset classifi cation and loan loss provisioning are made as per local requirement or as per RBI guidelines whichever is more stringent. iii) Fixed Assets and Depreciation a) Fixed Assets are accounted for at historical cost b) Depreciation on fi xed assets of foreign branch is provided as per the applicable laws of the respective countries. iv) Translation of the Assets and Liabilities and the Income and Expenses for foreign branches is done as per 8(a)(i,ii,iii) above. 9. Employee Benefi ts Annual contribution to Gratuity Fund, Pension Fund and provision towards leave are accounted for on the basis of actuarial valuation and contribution to the Provident Fund is charged to Profi t and Loss Account. Net actuarial gains and losses are recognized during the year. 10. Taxation Provision for Tax is made for both current and deferred taxes. Current tax is provided on the taxable income using applicable tax rate and tax laws. Deferred Tax Assets and Deferred Tax Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognized unless there is reasonable certainty that suffi cient future taxable income will be available against which such deferred tax assets will be realized. In case of carry forward of unabsorbed depreciation and tax losses, deferred tax assets are recognized only if there is “virtual certainty”. 11. Provisions, contingent liabilities and contingent assets Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outfl ow of resources and a reliable estimate can be made of the amount of the obligation. Contingent Assets are neither recognized nor disclosed in the fi nancial statements. Contingent liabilities are not provided for and are disclosed by way of notes. Disclaimer: This is 3rd Party content/feed, viewers are requested to use their discretion and conduct proper diligence before investing, GoodReturns does not take any liability on the genuineness and correctness of the information in this article IFSC Code Currency Select Bank Select State Select City Select Branch From INR - Indian Rupee USD - United States Dollar EUR - Euro GBP - British Pound Sterling AED - United Arab Emirates Dirham SAR - Saudi Riyal AUD - Australian Dollar OMR - Omani Rial MYR - Malaysian Ringgit CAD - Canadian Dollar CHF - Swiss Franc ZAR - South African Rand SGD - Singapore Dollar JPY - Japanese Yen BHD - Bahraini Dinar KWD - Kuwaiti Dinar QAR - Qatari Riyal BMD - Bermudian Dollar ARS - Argentine Peso AWG - Aruban Florin BAM - Bosnia and Herzegovina convertible mark BBD - Barbadian Dollar BDT - Bangladeshi Taka BGN - Bulgarian Lev BOB - Bolivian Boliviano BRL - Brazilian Real BSD - Bahamian Dollar BWP - Botswana Pula CLP - Chilean Peso CNY - Chinese Yuan COP - Colombian Peso CZK - Czech Koruna DKK - Danish Krone DOP - Dominican Peso EGP - Egyptian Pound FJD - Fijian Dollar GHS - Ghana Cedi GMD - Gambian Dalasi GTQ - Guatemalan Quetzal HKD - Hong Kong Dollar HRK - Croatian Kuna HUF - Hungarian Forint IDR - Indonesian Rupiah ILS - Israeli Sheqel IRR - Iranian Rial ISK - Icelandic Krona JMD - Jamaican Dollar JOD - Jordanian Dinar KES - Kenyan Shilling KHR - Cambodian Riel KRW - South Korean Won LAK - Lao Kip LBP - Lebanese Pound LKR - Sri Lankan Rupee MAD - Moroccan Dirham MDL - Moldovan Leu MGA - Malagasy Ariary MKD - Macedonian Denar MUR - Mauritian Rupee MVR - Maldivian Rufiyaa MXN - Mexican Peso NAD - Namibian Dollar NGN - Nigerian Naira NOK - Norwegian Krone NPR - Nepalese Rupee NZD - New Zealand Dollar PAB - Panamanian Balboa PEN - Peruvian Sol PHP - Philippine Peso PKR - Pakistani Rupee PLN - Polish Zloty PYG - Paraguayan Guaraní RON - Romanian Leu RSD - Serbian Dinar RUB - Russian Rouble SCR - Seychellois Rupee SEK - Swedish Krona SYP - Syrian Pound THB - Thai Baht TND - Tunisian Dinar TRY - Turkish Lira TTD - Trinidad and Tobago Dollar TWD - Taiwanese Dollar UAH - Ukraine Hryvnia UGX - Ugandan Shilling UYU - Uruguayan Peso VES - Venezuelan Bolívar VND - Vietnamese Dong XAF - Central African Franc XCD - East Caribbean Dollar XOF - West African Franc XPF - CFP Franc To INR - Indian Rupee USD - United States Dollar EUR - Euro GBP - British Pound Sterling AED - United Arab Emirates Dirham SAR - Saudi Riyal AUD - Australian Dollar OMR - Omani Rial MYR - Malaysian Ringgit CAD - Canadian Dollar CHF - Swiss Franc ZAR - South African Rand SGD - Singapore Dollar JPY - Japanese Yen BHD - Bahraini Dinar KWD - Kuwaiti Dinar QAR - Qatari Riyal BMD - Bermudian Dollar ARS - Argentine Peso AWG - Aruban Florin BAM - Bosnia and Herzegovina convertible mark BBD - Barbadian Dollar BDT - Bangladeshi Taka BGN - Bulgarian Lev BOB - Bolivian Boliviano BRL - Brazilian Real BSD - Bahamian Dollar BWP - Botswana Pula CLP - Chilean Peso CNY - Chinese Yuan COP - Colombian Peso CZK - Czech Koruna DKK - Danish Krone DOP - Dominican Peso EGP - Egyptian Pound FJD - Fijian Dollar GHS - Ghana Cedi GMD - Gambian Dalasi GTQ - Guatemalan Quetzal HKD - Hong Kong Dollar HRK - Croatian Kuna HUF - Hungarian Forint IDR - Indonesian Rupiah ILS - Israeli Sheqel IRR - Iranian Rial ISK - Icelandic Krona JMD - Jamaican Dollar JOD - Jordanian Dinar KES - Kenyan Shilling KHR - Cambodian Riel KRW - South Korean Won LAK - Lao Kip LBP - Lebanese Pound LKR - Sri Lankan Rupee MAD - Moroccan Dirham MDL - Moldovan Leu MGA - Malagasy Ariary MKD - Macedonian Denar MUR - Mauritian Rupee MVR - Maldivian Rufiyaa MXN - Mexican Peso NAD - Namibian Dollar NGN - Nigerian Naira NOK - Norwegian Krone NPR - Nepalese Rupee NZD - New Zealand Dollar PAB - Panamanian Balboa PEN - Peruvian Sol PHP - Philippine Peso PKR - Pakistani Rupee PLN - Polish Zloty PYG - Paraguayan Guaraní RON - Romanian Leu RSD - Serbian Dinar RUB - Russian Rouble SCR - Seychellois Rupee SEK - Swedish Krona SYP - Syrian Pound THB - Thai Baht TND - Tunisian Dinar TRY - Turkish Lira TTD - Trinidad and Tobago Dollar TWD - Taiwanese Dollar UAH - Ukraine Hryvnia UGX - Ugandan Shilling UYU - Uruguayan Peso VES - Venezuelan Bolívar VND - Vietnamese Dong XAF - Central African Franc XCD - East Caribbean Dollar XOF - West African Franc XPF - CFP Franc 1 USD = 96.725 (USD to INR) 1 EUR = 112.249 (EUR to INR) 1 GBP = 129.617 (GBP to INR) More Period 7-14 Days 15-30 Days 31-45 Days 46-90 Days 4-6 Months 7-12 Months 1-2 Years 2-5 Years 5-10 Years >10 Years More Information on Union Bank of India Union Bank of India Tools Bulk Deals Block Deals Union Bank of India Company Details Company Profile Company History Management Team Capital Structure Product Mix Banker/Auditor/Registrar Company History BSE Price History NSE Price History Union Bank of India Key Financial Ratios Ratios Union Bank of India Results Quarterly Results Half Yearly Results Nine Months Results Annual Results Union Bank of India Financial Data Audited Results Cash Flow Balance Sheet Union Bank of India Reports Accounting Policies Auditors Report Directors Report Notes To Account Union Bank of India Corporate Announcements Book Closure Dividend Board Meetings News Stock Market Outlook, 19 May: Sensex, Nifty Likely to Stay Volatile Amid Crude Surge, Inflation & Weak Rupee Stock Market Outlook Today, 18 May 2026: Sensex, Nifty Likely to Stay Cautious; Pharma Stocks in Focus Stock Market Outlook Today, 15 May 2026: Sensex, Nifty Likely to Extend Pullback Rally; US-China Talk in Focus Stock Market Outlook Today, 14 May 2026: Sensex, Nifty May Remain Under Pressure as Crude Prices Weigh On Stock Market Outlook Today, 13 May 2026: Sensex, Nifty Likely To Stay Under Pressure Amid Rising Oil Prices Stock Market Closing: Rs 12 Lakh Cr MCap Wiped Out! 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