SIGNIFICANT ACCOUNTING POLICIES ON THE STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31^st MARCH, 2024

1 Basis of Preparation

The financial statements have been prepared under the historical cost convention, on the accrual basis of accounting on going concern basis, unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises statutory provisions, regulatory norms / guidelines prescribed by Reserve Bank of India (RBI), Banking Regulation Act - 1949, Accounting Standards/ guidance notes 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 and practices prevailing in respective foreign countries are complied with.

Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, expenses, income and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from estimates. Any revision to accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

2. Foreign Currency Translation / Conversion of Foreign Currencies

2.1 Foreign currency monetary items are initially recorded at a notional rate. Foreign currency monetary items are restated at the rate published by 'Foreign Exchange Dealers' Association of India (FEDAI) at the end of each quarter. Exchange difference arising on restatement of such items at the quarterly rates is recognised in Profit and Loss Account.

2.2    Transactions and balances of foreign branches are classified as non-integral foreign operations. Such transactions and balances are consolidated by the bank on a quarterly basis. Assets and Liabilities (both monetary and non-monetary as well as contingent liabilities) are translated at the closing spot rate of exchange announced by Foreign Exchange Dealers' Association of India (FEDAI) as at the end of each quarter. Income and Expenditure items of the foreign branches are translated at the quarterly average rate published by FEDAI in accordance with Accounting Standard (AS) 11 - "The effect of Changes in Foreign Exchange rates" issued by the Institute of Chartered Accountants of India (ICAI) and as per the guidelines of Reserve Bank of India (RBI) regarding the compliance of the said standard.

The resultant exchange gain / loss is credited / debited to Foreign Currency Translation Reserve.

2.3    Forward Exchange Contracts

Premium or discount arising at the inception of all forward exchange contracts are amortized as expense or income over the life of the contract. Profit/ Losses arising on cancellation of forward exchange contracts, together with unamortized premium or discount, if any, is recognized on the date of termination. Exchange differences on such contracts are recognized in the Profit & Loss account in the reporting period in which the exchange rates change.

Contingent liability in respect of outstanding forward exchange contracts, guarantees, acceptances, endorsements and other obligations are stated in the balance sheet at the closing rates published by FEDAI.

3. Investments

3.1 Investments

Classification of investments is made as per the guidelines of the RBI. The entire investment portfolio of the bank is classified under three categories viz. 'Held to Maturity' (HTM), 'Available for Sale' (AFS) and 'Held for Trading' (HFT). Such classification is decided at the time of acquisition of securities.

Investments are disclosed in the Balance Sheet under six classifications viz: (a) Government Securities (b) Other Approved Securities (c) Shares (d) Debentures & Bonds (e) Subsidiaries and Joint Ventures & Associates and (f) Others

In determining the acquisition cost of investment:-

a)    Costs such as brokerage, commission etc., relating to securities at the time of purchase are charged to Profit & Loss Account.

b)    Broken period interest on debt instruments up to the date of acquisition/ disposal is treated as revenue.

The valuation of Investments is done in accordance with the guidelines issued by the RBI as under:

A HELD TO MATURITY

Investments under Held to Maturity category are carried at acquisition cost, net of amortisation, if any. The excess of acquisition cost, if any, over the face value is amortized over the remaining period of maturity.

Investments in Subsidiaries and Joint Ventures & Associates are valued at carrying cost. Any diminution in the value other than temporary in nature is fully provided for.

Investment in sponsored Regional Rural Banks (RRB) and other Trustee shares are valued at carrying cost.

Investment in units of Venture Capital Funds (VCFs) made after 23.08.2006 are classified under HTM category for initial period of three years and valued at cost. After period of three years from date of disbursement, it will be shifted to AFS and marked-to-market as per RBI guidelines.

B. AVAILABLE FOR SALE

Investments classified under this category are mark to market on quarterly basis and valued as per Reserve Bank of India guidelines at the market rates available on the last day of each quarter (Balance Sheet date) from trades /

quotes on the stock exchanges, prices / yields declared by the Fixed Income Money Market and Derivatives Association of India (FIMMDA). Unquoted securities are also valued as per the Reserve Bank of India guidelines.

The net depreciation under each category / classification is fully provided for whereas the net appreciation, if any, is ignored. The book value of the individual securities does not undergo any change after these are valued at mark to market basis.

Units of Venture Capital Funds (VCF) transferred from HTM category after a period of three years (Refer paragraph 3.3(a) are valued at NAV as per the audited financial statements of Venture Capital Funds. In case such audited financial statements are not available continuously for 18 months as on the date of valuation, units are valued at '1 per VCF.

C. HELD FOR TRADING

Investments classified under this category are valued at rates based on market quotations, Price / yields declared by FIMMDA on a weekly basis.

The net depreciation under each security held is fully provided for whereas the net appreciation, if any, is ignored. The book value of the individual securities does not undergo any change after marked to market.

Transfer of scrips from one category to another is carried on the following basis:

a.    HTM to AFS / HFT category at acquisition price / book value. In case the investments under HTM category, originally placed at premium than the transfer is made at amortised cost and security shall be immediately revalued consequent to the transfer and resultant depreciation; if any, shall be provided.

b.    AFS / HFT to HTM category at lower of the book value or market value.

c. AFS to HFT category or vice versa, at the carrying value. The accumulated depreciation, if any, to be transferred to the provision for depreciation against HFT securities and vice versa.

Non-performing Investments Security Receipts issued by Securitisation / Reconstruction Company (SC / RC) in respect of financial assets sold by the Bank to the SC / RC are valued at the lower of the redemption value of the Security Receipt and the Net Book Value of the financial asset. The investment is carried in the books at the price determined as above until its sale or realisation and on such sale or realisation, loss or gain is dealt with as below:

a.    If sale is at a price below Net Book Value (NBV), the shortfall is recognised as per Reserve Bank of India guidelines.

b.    If the sale is for a value higher than NBV, the excess provision is not reversed but utilized to meet shortfall / loss on account of sale of other financial assets to SC / RC.

Securities included in any of three categories where interest / principal is in arrears for a specified period, are classified as Non-Performing Investment. Interest Income on such securities is not reckoned and appropriate depreciation/ provision in value of Investments is made. Deprecation in respect of such Non-Performing Investments is not set off against appreciation in other performing securities.

Profit on Sale of Investments

Profit on Sale of Investments in respect of "Available for Sale" and "Held for Trading" categories is recognized in Profit & Loss Account.

Profit on Sale of Investments in respect of "Held to Maturity" category is first taken to the Profit & Loss Account and an equivalent amount of Profit is appropriated to the Capital Reserve (net of taxes and amount required to be transferred to Statutory Reserve).

Loss on Sale of Investments in all the three categories is recognized in Profit & Loss Account.

Accounting for Repo / Reverse Repo and Liquidity Adjustment Facility (LAF)

Securities sold / purchased with an agreement to repurchase / resale on the agreed terms under Repo / Reverse Repo including LAF with RBI are recognized as Borrowing / Lending.

Securities sold under Repo are continued to be shown under investments and Securities purchased under Reverse Repo are not included in investments. Costs and revenues are accounted for as interest expenditure / income, as the case may be.

Forward Exchange Contracts

Premium or discount arising at the inception of all forward exchange contracts are amortized as expense or income over the life of the contract. Profit / Losses arising on cancellation of forward exchange contracts, together with unamortized premium or discount, if any, is recognized on the date of termination. Exchange differences on such contracts are recognized in the Profit & Loss account in the reporting period in which the exchange rates change.

Contingent liability in respect of outstanding forward exchange contracts, guarantees, acceptances, endorsements and other obligations are stated in the balance sheet at the closing rates published by FEDAI.

Derivative contracts

The Bank deals in Interest Rate Swaps and Currency Derivatives. The Interest Rate Derivatives dealt by the Bank are Rupee Interest Rate Swaps, Cross Currency Interest Rate Swaps and Forward Rate Agreements. Currency Derivatives dealt by the Bank are Options and Currency Swaps. Such derivative contracts are valued as under:

a. Derivative contracts dealt for trading are valued on mark to market basis, net depreciation is recognized while net appreciation is ignored.

b. Derivative contracts undertaken for hedging are:

i.    Derivative contracts designated as hedges are not marked to market unless their underlying asset is marked to market.

ii.    Income / Expenditure is recognized on accrual basis for hedging swaps.

4 ADVANCES

1.    Advances are classified as performing and non-performing assets in accordance with the prudential norms issued by RBI.

2.    Advances are classified into Standard, Sub-Standard, Doubtful and Loss Assets borrower wise.

3.    Provisions for domestic advances are made for performing / non-performing advances in accordance with the RBI Guidelines.

4.    Provisions for performing / non-performing advances with foreign branches are made as per regulations of host country or according to the norms prescribed by RBI, whichever is more stringent.

5.    Advances stated in the Balance Sheet are net of provisions made for Non-Performing Assets, claims received from Credit Guarantee Institutions and bill rediscount.

6.    Recoveries in Non-Performing Advances are apportioned first towards charges and interest, thereafter towards principal.

Recovery in NPA accounts in case of One Time Settlement (OTS) / National Company Law Tribunal (NCLT) / Technically Written Off (TWO) & Accounts covered by Government Guarantees such as CGTMSE / ECGC / GECL / CGFMU and Subsidy if any, shall be appropriated in the order of Principal, Charges and Interest.

Recovery in suit filed/ decreed accounts shall be appropriated in the manner as per specific directives from the Court/ DRT, in case the same is other than the one mentioned above.

7.    In case of financial assets sold to SC / RC, the valuation, income recognition etc., are done as per RBI guidelines.

8.    In addition to the specific provision on NPAs, general provisions are also made for standard assets as per extant RBI guidelines.

5. Fixed Assets

i.    The premises of the Bank include freehold and leasehold properties. All the Fixed Assets are capitalized based on the date of put to use.

ii.    Land and Premises are stated at revalued cost and other fixed assets are stated at historical cost. The appreciation on revaluation, if any, is credited to the 'Revaluation Reserve' Account. Depreciation / Amortization attributable to the enhanced value have been debited to the Profit & Loss account. Equivalent amount has been transferred from Revaluation Reserve to Revenue Reserve.

Depreciation

1.    Depreciation method is on Straight Line Method, for all Assets based on lifespan of the assets.

2.    The lifespan of the assets is defined as per Part C Schedule II of the Companies Act, 2013 other than Software / Intangibles, Servers, Electrical Equipment's and Motor Vehicles.

3.    Estimated lifespan of the assets adopted by the bank for different class of assets is as under:

The change in rates (based on lifespan) of depreciation is applied effective from 01-04-2020.

4.    Software / Intangible Assets are amortized over 5 years.

5.    If the item is put to use for 180 days and above in the year of acquisition, 100% depreciation will be charged for the concerned financial year. If the asset is put to use for less than 180 days in the year of acquisition, 50% depreciation is be charged for the concerned financial year.

6.    5% of the Original cost price will be residual value in case of the assets having useful life 8 years and above. '5/- of the Original cost price is residual value for other assets.

7.    Premium paid on leasehold properties is charged off over the lease period or lifespan of relevant asset whichever is earlier. Cost of leasehold land and leasehold improvements are amortised over the period of lease or lifespan of relevant assets, whichever is lower.

8.    In respect of fixed assets held at foreign offices, depreciation is provided as per the regulations / norms of the respective countries.

9.    Lease payments including cost escalation for assets taken on operating lease are recognised in the Profit and Loss Account over the lease term in accordance with the AS 19 (Leases) issued by ICAI.

Impairment of Assets

An assessment is made at each balance sheet date whether there is any indication that an asset is impaired. If any such indication exists, an estimate of the recoverable amount is made and impairment loss, if any, is provided for and charged off to Profit and Loss Account.

6.    Revenue Recognition

Income and expenditure are generally accounted on accrual basis, except the following:

a.    Interest on non-performing advances and non-performing investments is recognized on receipt basis as per norms laid down by Reserve Bank of India.

b.    Interest on Overdue Bills, Commission (other than Government business & Commission for LC BG), Exchange, Brokerage and rent on lockers is accounted on realization.

c.    Dividend Income is recognized when the right to receive the same is established.

d.    In case of suit filed accounts, related legal and other expenses incurred are charged to Profit & Loss Account and on recovery the same are accounted as Income.

7.    Employee Benefits Defined Contribution Plans

Defined Contribution to Plans such as Provident/ Pension fund are recognized as an expense and charged to Profit & Loss account.

The Bank operates a New Pension Scheme (NPS) for all officers / employees joining the Bank on or after 01-04-2010, which is a defined contribution Pension Scheme, 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 contribution from the Bank equivalent to 14% of the basic pay plus dearness allowance. The Bank recognizes such annual contributions as an expense in the year to which they relate.

Defined Benefit Plans

a.    Gratuity: The employee Gratuity Fund Scheme is funded by the Bank and managed by a separate trust which in turn manages its funds as per guidelines. The present value of the Bank's obligation under Gratuity is recognized on actuarial basis as at the year end and the fair value of the Plan assets is reduced from the gross obligation to recognize the obligation on a net basis.

b.    Pension: The employee Pension Fund Scheme is funded by the Bank and managed by a separate trust. The present value of the Bank's obligations under Pension is recognized on the basis of actuary's report as at the year end and the fair value of the Plan assets is reduced from the gross obligation to recognize the obligation on a net basis.

The privilege leave is considered as a long-term benefit and is recognized based on independent actuarial valuation.

The cost of providing long-term benefits under defined benefit Plans is determined using the projected unit credit method with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains/ losses are immediately recognised in the Profit and Loss Account and are not deferred.

8. Provision for Taxation

a)    Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - "Accounting for Taxes on Income" respectively after taking into account taxes paid at the foreign offices, which are based on the tax laws of respective jurisdictions.

b)    Deferred Tax adjustments comprise of changes in the deferred tax assets or liabilities during the year. Deferred Tax assets and liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and laws that have been enacted or substantively enacted as of the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognised in the profit and loss account.

c)    Deferred tax assets are recognised and reassessed at each reporting date, based upon management's judgement as to whether their realisation is considered as reasonably certain or virtual certain as the case may be.

d)    Deferred Tax Assets are recognised on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realised against future profits. Deferred tax assets on the items other than above are recognized on the basis of reasonable certainty.

9 Net Profit

Provisions, Contingent Liabilities and

Contingent

In conformity with AS 29, "Provisions, Contingent

Liabilities & Contingent Assets" issued by the

Institute of Chartered Accountants of India, the

Bank recognizes provision only when:

a.    It has a present obligation as a result of past event.

b.    It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and

c.    A reliable estimate of the amount of the obligation can be made.

No provision is recognized:

a.    For any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the bank.

b.    Where it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or

c.    When a reliable estimate of the amount of obligation cannot be made.

Such obligations are recorded as Contingent Liabilities. These are assessed at regular intervals and only that part of the obligation for which the outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

i. Contingent Assets are not recognized in the financial Statements.

Net Profit

The Net Profit in the Profit & Loss Account is after:

(a)    Provision for depreciation on Investments

(b)    Provision for Taxation

(c)    Provision on Non-Performing Advances

(d)    Provision on Standard Assets

(e)    Provision for Non-Performing Investments

(f)    Provision for other usual & necessary Items

10. Earnings Per Share

The Bank reports basic and diluted Earnings per Share in accordance with AS - 20 "Earnings per Share", issued by ICAI. Basic Earnings per Share is computed by dividing the net profit after tax attributable to equity shareholders by the weighted average number of equity shares outstanding for the year.

11.    Cash Flow Statement

Cash flow Statement is reported by using indirect method.

12.    Segment Reporting

The Bank recognises 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 AS-17 issued by ICAI.