Schedule 17 Significant accounting policies
Background
IndusInd Bank Limited ('the Bank') was incorporated in 1994 under the Companies Act, 1956 and is licensed by the Reserve Bank of India (RBI) to operate as a commercial bank under the Banking Regulation Act, 1949. The Bank is publicly held and engaged in providing a wide range of banking products and financial services to corporate and retail clients besides undertaking treasury operations. The Bank operates in India including at the International Financial Service Centre in India (IFSC), at GIFT City, and does not have a branch in any foreign country.
1. Basis of preparation
1.1 The accompanying financial statements have been prepared and presented under the historical cost convention and accrual basis of accounting except where otherwise stated and in accordance with statutory requirements prescribed under the Banking Regulation Act 1949, circulars and guidelines issued by RBI from time to time (RBI guidelines), accounting standards referred to in Section 133 of the Companies Act, 2013 (the Act) read together with the Companies (Accounts) Rules, 2014, the Companies (Accounting Standards) Rules, 2021 and other relevant provisions of the Act in so far as they apply to the Bank and practices prevailing within the banking industry in India. Accounting policies have been consistent with the previous year except otherwise stated.
2. Use of Estimates
2.1 The preparation of the financial statements in conformity with generally accepted accounting principles in India requires Management to make estimates and assumptions that affect the reported amounts of assets, liabilities (including contingent liabilities) at the date of the financial statements, revenues and expenses during the reporting period. Management believes that the estimates and assumptions used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.
3. Transactions involving Foreign Exchange
3.1 Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
3.2 Monetary assets and liabilities of domestic and integral foreign operations (representative offices) denominated in foreign currency are translated at the Balance Sheet date at the closing rates of exchange notified by the Foreign Exchange Dealers' Association of India ('FEDAI') and the resulting gains or losses are recognised in the Profit and Loss account.
3.3 Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and all non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
3.4 Both monetary and non-monetary assets and liabilities of non-integral foreign operations are translated at the Balance Sheet date at the closing rates of exchange notified by the FEDAI and the resulting gains or losses are accumulated in the foreign currency translation reserve until disposal of the net investment at which time they are recognised in Profit and Loss Account as gains or losses.
3.5 Income and expenditure of domestic and integral foreign operations denominated in a foreign currency is translated at the rates of exchange prevailing on the date of the transaction. Income and expenditure of non-integral foreign operations is translated at daily average closing rates.
3.6 Contingent liabilities at the Balance Sheet date on account of outstanding forward foreign exchange contracts, guarantees, acceptances, endorsements and other obligations denominated in a foreign currency are stated at the closing rates of exchange notified by the FEDAI.
4. Investments
Classification and valuation of the Bank's investments are carried out in accordance with RBI Circular. Significant accounting policies in accordance with relevant RBI guidelines are as follows:
4.1 Categorisation of Investments
The Bank classifies its investment at the time of purchase into one of the following three categories:
(i) Held to Maturity (HTM) - Securities acquired with the intention to hold till maturity.
(ii) Held for Trading (HFT) - In accordance with relevant RBI guidelines securities acquired with the intention to trade are classified under HFT category. HFT securities which remain unsold for a period of 90 days are transferred to AFS category.
(iii) Available for Sale (AFS) - Securities which do not fall within the above two categories.
Subsequent shifting amongst the categories is done in accordance with relevant RBI guidelines.
4.2 Classification of Investments
For the purpose of disclosure in the Balance Sheet, investments are classified under six groups viz., (i) Government Securities,
(ii) Other Approved Securities, (iii) Shares, (iv) Debentures and Bonds, (v) Investments in Subsidiaries and Joint Ventures, and (vi) Other Investments.
4.3 Acquisition cost
(i) Broken period interest on debt instruments is treated as a revenue item.
(ii) Brokerage, commission, etc. pertaining to investments, paid at the time of acquisition is charged to the Profit and Loss account.
(iii) Cost of investments is computed based on the weighted average cost method.
4.4 Valuation of Investments
(i) Held to Maturity - Each security in this category is carried at its acquisition cost or amortised cost. In case securities are acquired at premium, premium on acquisition of the security is amortised over the balance period to maturity. The premium amortization is recognized in Profit and Loss Account under Interest earned - Income on investments (Item II of Schedule 13). The book value of the security is reduced to the extent of premium amortized. Other than temporary diminution is determined and provided for each investment individually.
(ii) Held for Trading - Securities are valued scripwise and depreciation / appreciation is aggregated for each classification. The book value of the individual securities is not changed as a result of periodic valuations. Net appreciation in each classification is ignored, while net depreciation is provided for.
(iii) Available for Sale - Securities are valued scrip-wise and depreciation / appreciation is aggregated for each classification. The book value of the individual securities is not changed as a result of periodic valuations. Net appreciation in each classification is ignored, except to the extent of depreciation previously provided for, while net depreciation is provided for.
(iv) Market value of government securities including SDLs (excluding treasury bills) is determined on the basis of the prices / YTM published by Financial Benchmark India Private Limited (FBIL).
(v) Treasury bills including US Treasury Bills, commercial papers and certificate of deposits are valued at carrying cost. Carrying cost is defined as acquisition cost adjusted for the discount accreted over the period till maturity at the rate prevailing at the time of acquisition.
(vi) Pass Through Certificates (PTC) are valued by using Fixed Income Money Market and Derivatives Association (FIMMDA) credit spread as applicable for the NBFC category, based on the credit rating of the respective PTC over the Government of India curve published by FBIL.
(vii) Fair value of other debt securities is determined basis traded price, Security Level valuation published by FIMMDA or based on the yield curve published by FBIL and relevant credit spreads corresponding to rating and residual maturity published by FIMMDA. Foreign Currency (FCY) bonds are valued basis the prices sourced from Bloomberg.
(viii) Quoted equity shares held under AFS and HFT categories are valued at the closing price on a recognised stock exchange, in accordance with the relevant RBI guidelines. Unquoted equity shares are valued at their break-up value or at Re. 1 per company where the latest Balance Sheet is not available continuously for more than 18 months as on the date of valuation.
(ix) Units of the schemes of mutual funds are valued at latest repurchase price / Net Asset Value (NAV) provided by the respective schemes of mutual funds.
(x) Investments in equity shares held as long-term investments and classified under HTM category are valued at cost. Provision for other than temporary diminution in the value of such long-term investments is made.
(xi) The depreciation on securities acquired by way of conversion of outstanding loans is provided in accordance with RBI guidelines.
(xii) Investments in subsidiary and associate are classified under HTM category and valued at cost. Such investments are assessed for impairment and other than temporary diminution in value is provided for.
(xiii) Security Receipts (SR) are valued at the lower of redemption value and NAV obtained from the Securitisation Company (SC) / Reconstruction Company (RC). As per RBI guideline, in respect of investments in SRs which are more than 10% of stressed assets sold by the Bank, the value is subject to a prudential floor considering the asset classification of the stressed assets, had such assets remained on the books of the Bank.
(xiv) Purchase and sale transaction in securities are recorded under Settlement Date method of accounting, except in the case of the equity shares where Trade Date method of accounting is followed.
(xv) Provision for non-performing investments is made in conformity with relevant RBI guidelines. Interest on nonperforming investments is not recognized in the profit and loss account unless received.
(xvi) Repurchase (Repo) and Reverse Repurchase (Reverse Repo) transactions with Banks or other institutions are accounted for as collateralised borrowing and lending (lending above 14 days tenor classified under advances) respectively. Repurchase (Repo) and Reverse Repurchase (Reverse Repo) with original maturity up to 14 days with RBI are accounted for as collateralised borrowing or Balance with RBI respectively. Balances held under Standing Deposit Facility (SDF) has been reported under Cash and Balances with RBI. Borrowing cost on repo transactions is accounted as interest expense and revenue on reverse repo transactions is accounted as interest income.
(xvii) In respect of the short sale transactions in Central Government dated securities, the short position is covered by outright purchase of an equivalent amount of the same security within a maximum period of three months including the day of trade. The short position is reflected as the amount received on sale in a separate account and is classified under 'Investments'. The short position is categorized under the HFT portfolio and is accounted for accordingly.
(xviii) Profit or loss in respect of sale of investments is included in the Schedule 14 under Profit on Sale of Investments(net). In respect of profit from sale of investments under HTM category, an equivalent amount (net of taxes, if any, and net of transfer to Statutory Reserves as applicable to such profits) is appropriated from the Appropriations account to Capital Reserve account.
(xix) In the event, provisions created on account of depreciation in the AFS or HFT categories are found to be in excess of the required amount in any year, the excess is credited to the Profit and Loss account and an equivalent amount (net of taxes, if any, and net of transfer to Statutory Reserves as applicable to such excess provisions) is appropriated to an Investment Reserve Account (IRA).
The balance in IRA account is used to meet provision on account of depreciation in AFS and HFT categories by transferring an equivalent amount to the Profit and Loss Appropriation account as and when required.
(xx) Out of net profits earned during the year, transfer is made to Investment Fluctuation Reserve, for an amount not less than the lower of the (a) net profit on sale of investments during the year or (b) net profit for the year less mandatory appropriations, till the balance in such Investment Fluctuation Reserve reaches a level of at least 2% of the aggregate HFT and AFS portfolio. Draw down, if any, from the Investment Fluctuation Reserve shall be in accordance with the applicable RBI guidelines.
(xxi) Investments in unquoted units of Alternative Investment Funds (AIFs) are categorised under HTM category for an initial period of three years and valued at cost as per relevant RBI guidelines. Depreciation, if any on the units based on NAV is provided at the time of shifting the investment in the AFS category from HTM category and also on subsequent valuation based on the NAV received from the category I and II AIF. In case the audited financials are not available for a period beyond 18 months, the investments are valued at Re. 1 per AIF, as the case may be.
(xxii) Infrastructure Investment Trusts (InvITs) are valued at book value till it is listed. Post listing and till receipt of Quarterly NAV report, quoted price is considered for valuation if traded else the Book Value is considered for valuation. Post receipt of quarterly NAV report, if InvIT is traded on exchange, then quoted price is considered for valuation else the NAV based on the registered valuer's quarterly statement is considered for valuation.
5. Foreign Exchange and Derivative Contracts
5.1 All trading forward exchange contracts outstanding at the Balance Sheet date are re-valued based on the exchange rates notified by FEDAI for specified maturities and at interpolated rates for contracts of interim maturities and the resulting gains or losses are recognised on present value basis in the Profit and Loss account. The contracts of longer tenor maturities / or currencies where exchange rates are not notified by FEDAI are revalued based on the forward exchange rates quoted in the market or implied by the swap curves in respective currencies and the resulting gains or losses are recognised on present value basis in the Profit and Loss account.
5.2 Swap Cost arising on account of foreign currency swap contracts to convert foreign currency funded liabilities and assets into rupee liabilities and assets is amortised to the Profit and Loss account under the head 'Interest Expended-Others' over the life of swap contracts.
Derivative contracts are designated as hedging or trading and accounted for as follows:
5.3 The hedging contracts comprise of Forward Rate Agreements, Interest Rate Swaps, and Currency Swaps undertaken to hedge interest rate and currency risk on certain assets and liabilities. The net interest receivable or payable is accounted on an accrual basis over the life of the swaps. However, where the hedge is designated with an asset or liability that is carried at market value or lower of cost and market value, then the hedging instrument is also marked to market with the resulting gain or loss recorded as an adjustment to the market value of designated assets or liabilities. Gains or losses on the termination of hedge swaps is accounted in accordance with relevant RBI guidelines.
5.4 The trading contracts comprise of trading in Forward Contracts, Interest Rate Swaps, Cross Currency Interest Rate Swaps, Forward Rate Agreements, Interest Rate Futures, Currency Futures, Currency Options, Swaption etc. The gain or loss arising on unwinding or termination of the contracts, is accounted for in the Profit and Loss account. Trading contracts outstanding as at the Balance Sheet date are re-valued at their fair value and resulting gains or losses are recognised in the Profit and Loss account.
5.5 Premium paid and received on currency options is accounted when due in the Profit and Loss Account.
5.6 Fair value of derivative is determined with reference to market quotes or by using valuation models. Where the fair value is calculated using valuation models, the methodology is to calculate the expected cash flows under the terms of each specific contract and then discount these values back to the present value. The valuation takes into consideration all relevant market factors (e.g. prices, interest rate, currency exchange rates, volatility, liquidity, etc.). Most market parameters are either directly observable or are implied from instrument prices. The model may perform numerical procedures in the pricing such as interpolation when input values do not directly correspond to the most actively traded market trade parameters.
5.7 Pursuant to RBI guidelines, any receivables under derivative contracts which remain overdue for more than 90 days and mark-to-market gains on all derivative contracts with the same counter-parties are reversed through the profit and loss account.
6. Advances
6.1 Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with RBI guidelines.
6.2 A general provision on standard assets is made in accordance with relevant RBI guidelines for the funded outstanding on global portfolio basis. In respect of stressed advances which are not yet classified as non-performing, contingent provisions are made prudentially. Provision made against standard assets is included in 'Other Liabilities and Provisions - Others'. The general provision also includes provision for stressed sector exposures and provision for incremental exposure of the banking system to a specified borrower beyond Normally Permitted Lending Limit (NPLL) in proportion to bank's funded exposure to specified borrower. Provision made on positive mark to market of derivative contracts also forms part of general provision. Further, provision requirement under various Restructure scheme of RBI along with provision for the cases where viable resolution plan has not been implemented within timeline prescribed by RBI, from the date of default, also forms part of general provision. Such, General provisions are included in Schedule 5 - 'Other liabilities & provisions - Others'.
6.3 Unhedged Foreign Currency Exposures (UFCE) of Clients are subject to incremental provisions basis assessment of estimated risk in line with relevant RBI guidelines. Provision made towards UFCE and consequent further capital held under Basel III Capital regulations are disclosed separately. The provision forms a part of provision on standard assets.
6.4 Specific provisions for non-performing advances and floating provisions are made in conformity with relevant RBI guidelines. In addition, the Bank considers accelerated provisioning based on past experience, and other related factors including underlying securities.
6.5 For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires the diminution in the fair value of the assets to be computed as the fair value of loans before and after restructuring. The restructured accounts are classified in accordance with relevant RBI guidelines.
6.6 Advances are disclosed in the Balance Sheet, net of specific provisions and interest suspended for non- performing advances, and floating provisions.
6.7 Advances exclude derecognised securitised advances, inter-bank participation certificates issued and bills rediscounted.
6.8 NPA accounts are Written off in accordance with the Bank's NPA management and recovery policy. Amounts recovered during the year against bad debts written off in earlier years are recognised in the Profit and Loss account. Provision no longer considered necessary in the context of the current status of the borrower as a performing asset, are written back to the Profit and Loss account to the extent such provisions were charged to the Profit and Loss account earlier.
6.9 Further to the provisions held according to the asset classification status, provision is held in accordance with relevant RBI guidelines for individual country exposures (other than for home country exposure), where the net funded exposure of a country is one percent or more of the total assets. Provision held for country risk is included under 'Other Liabilities and Provisions'.
6.10 The Bank makes floating provision as per the Board approved policy, which is in addition to the specific and general provisions made by the Bank. The floating provision is utilised, with the approval of Board and RBI, if required. The floating provision is netted-off from advances.
7. Securitisation transactions, direct assignments and other transfers
7.1 The Bank transfers its loan receivables both through Direct Assignment route as well as transfer to Special Purpose Vehicles ('SPV').
7.2 The securitization transactions are without recourse to the Bank. The transferred loans and such securitized receivables are de-recognized as and when these are sold (true sale criteria being fully met) and the consideration has been received by the Bank. Gains or losses are recognized in accordance with relevant RBI guidelines.
7.3 In accordance with RBI guidelines on Securitisation of Standard Assets, any loss, profit or premium realised at the time of the sale is accounted in the Profit & Loss Account for the accounting period during which the sale is completed. However, in case of unrealised gains arising out of sale of underlying assets to the SPV, the profit is recognised in Profit and Loss Account only when such unrealised gains associated with such income is redeemed in cash.
7.4 In case of sale of non-performing assets through securitization route to Securitisation Company or Asset Reconstruction Company by way of assignment of debt against issuance of Security Receipts (SR), the recognition of sale and accounting of profit and loss thereon is done in accordance with applicable RBI guidelines. Generally, the sale is recognized at the lower of redemption value of SR and the Net Book Value (NBV) of the financial asset sold, and the surplus is recognized in the Profit and Loss Account on realisation; shortfall if any, is charged to the Profit and Loss account subject to regulatory forbearance, if any, allowed from time to time. Profit or loss realized on ultimate redemption of the SR is recognized in the Profit and Loss Account.
7.5 The Bank transfers advances through inter-bank participation with and without risk. In accordance with the relevant RBI guidelines, in the case of participation with risk, the aggregate amount of the participation issued by the Bank is reduced from advances and where the Bank is participating, the aggregate amount of the participation is classified under advances. In the case of participation without risk, the aggregate amount of participation issued by the Bank is classified under borrowings and where the Bank is participating, the aggregate amount of participation is shown as due from banks under advances.
8. Property, Plant and Equipment
8.1 Fixed assets are stated at cost (except in the case of premises which were re-valued based on values determined by approved valuers) less accumulated depreciation and impairment, if any. Cost includes incidental expenditure incurred on the assets before they are ready for intended use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit / functioning capability from / of such assets.
8.2 The existing revaluation reserve in respect of some of revalued asset is carried on reducing balance basis till the related properties are depreciated over their remaining useful lives. In case of revalued assets, depreciation is provided over the remaining useful life of the assets with reference to the gross carrying value.
Depreciation, including amortisation of intangible assets, is provided over the useful life of the assets, pro rata for the period of use, on a straight-line method. The useful life estimates prescribed in Part C of Schedule II to the Companies Act, 2013 are generally adhered to, except in respect of asset classes where, based on technical evaluation, a different estimate of useful life is considered suitable. Pursuant to this policy, the useful life estimates in respect of the following assets are as follows:
(a) Computers at 3 years;
(b) Application software and perpetual software licences at 5 years;
(c) Printers, Scanners, Routers, Switch at 5 years;
(d) ATMs at 7 years;
(e) Network cabling, Electrical Installations, Furniture and Fixtures, Other Office Machinery at 10 years;
(f) Vehicles at 5 years;
(g) Buildings at 60 years.
Fixed assets costing less than ?5,000 individually are fully depreciated in the year of purchase.
The useful life of an asset class is periodically assessed taking into account various criteria such as changes in technology, changes in business environment, utility and efficacy of an asset class to meet with intended user needs, etc. Whenever there is a revision in the estimated useful life of an asset, the unamortised depreciable amount is charged over the revised remaining useful life of the said asset.
Non-banking assets:
Non-Banking Assets (NBAs) acquired in satisfaction of claims are carried at lower of net book value and net realisable value. Further, the Bank creates provision on non-banking assets as per specific RBI directions.
8.3 The carrying amount of fixed assets is reviewed at the Balance Sheet date to determine if there are any indications of impairment based on internal / external factors. In case of impaired assets, the impairment loss i.e. the amount by which the carrying amount of the asset exceeds its recoverable value is debited from revaluation reserve (to the extent available) and balance charged to the Profit and Loss account.
9. Revenue Recognition
9.1 Interest and discount income on performing assets is recognised on accrual basis. Interest and discount income on non-performing assets is recognised on realisation.
9.2 Interest on Government securities, debentures and other fixed income securities is recognised on a period proportion basis. Income on discounted instruments is recognised over the tenor of the instrument on a Constant Yield to Maturity method.
9.3 Dividend income is accounted on accrual basis when the right to receive dividend is established.
9.4 Commission Exchange and Brokerage are recognised on a transaction date and net of directly attributable expenses.
9.5 Fees are recognised on an accrual basis when binding obligation to recognise the fees has arisen as per agreement, except in cases where the Bank is uncertain of realisation.
9.6 Income from distribution of third party products is recognised on the basis of business booked.
9.7 The Bank in accordance with RBI circular FIDD.CO.Plan. BC.5/04.09.01/2020-21 dated September 04, 2020, trades in priority sector portfolio by selling or buying PSLC. There is no transfer of risks or loan assets in these transactions. The fee paid for purchase of the PSLC is treated as an 'Other Expenditure' and the fee received from the sale of PSLCs is treated as 'Other Income'.
9.8 Gain / loss on sell down of loans is recognised in line with the extant RBI guidelines.
10. Operating Leases
10.1 Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease rental obligations in respect of assets taken on operating lease are charged to the Profit and Loss account on a straight-line basis over the lease term.
10.2 Assets given under leases in respect of which all the risks and benefits of ownership are effectively retained by the Bank are classified as operating leases. Lease rentals received under operating leases are recognized in the Profit and Loss account on a straight-line basis over the lease term.
11. Employee Benefits
11.1 The Gratuity scheme of the Bank is a defined benefit scheme and the expense for the year is recognized on the basis of actuarial valuation at the Balance Sheet date. The present value of the obligation under such benefit plan is determined based on independent actuarial valuation using the Projected Unit Credit Method which recognizes each period of service that gives rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. Payment obligations under the Group Gratuity scheme are managed through purchase of appropriate policies from insurers.
11.2 Provident Fund contribution, under defined benefit plan is made to trusts separately established for the purpose, when an employee covered under the scheme renders the related service. The rate at which the annual interest is payable to the beneficiaries by the trusts is being administered by the government. The Bank has an obligation to make good the shortfall, if any, between the return from the investments of the trusts and the notified interest rates. Actuarial valuation of this Provident Fund interest shortfall is done as per the guidance note on Valuation of Interest Rate Guarantees on Exempt Provident Funds under AS 15 (Revised) issued by the Institute of Actuaries of India, and such shortfall, if any, is provided for.
Provident Fund contribution, under defined contribution plan, is made to the scheme administered by Regional Provident Fund Commissioner (RPFC) and is debited to the Profit and Loss Account, when an employee renders the related service. The Bank has no further obligations.
In respect of employees who opted for contribution to the National Pension System (NPS) regulated by the Pension Fund Regulatory and Development Authority (PFRDA), the Bank contributes certain percentage of the basic salary, under a defined contribution plan, to identified pension fund management companies. The Bank has no liability other than its contribution, and recognises such contributions as an expense in the year in which it is incurred.
11.3 Provision for compensated absences is made on the basis of actuarial valuation as at the Balance Sheet date. The actuarial valuation is carried out using the Projected Unit Credit Method.
11.4 The Employee Stock Option Scheme (ESOS) of the Bank is in accordance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.The Bank has followed
intrinsic value method for share-linked instruments granted under ESOS till March 31, 2021. The Bank has changed its accounting policy from the intrinsic value method to the fair value method for all share-linked instruments granted after March 31, 2021 in accordance with relevant RBI guidelines. Under Intrinsic value method, options cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date. The fair market price is the closing price on the stock exchange with highest trading volume of the underlying shares, immediately prior to the grant date. Under revised accounting policy, fair value of share-linked instruments on the date of grant are recognised as an expense for all instruments granted after the accounting period ending March 31, 2021. The fair value of the stock-based compensation is measured on the date of grant using Black-Scholes option pricing model and is recognised as compensation expense over the vesting period.
12. Segment Reporting
The disclosure relating to segment information is in accordance with AS-17, Segment Reporting and as per guidelines issued by RBI. The Bank has adopted Segment Reporting as under:
(a) Treasury includes all investment portfolios, Profit / Loss on sale of Investments, Profit / Loss on foreign exchange transactions, equities, income from derivatives and money market operations. The expenses of this segment consist of interest expenses on funds borrowed from external sources as well as internal sources and depreciation (other than temporary)/ amortisation of premium on Held to Maturity category investments.
(b) Corporate / Wholesale Banking includes lending to and deposits from corporate customers and identified earnings and expenses of the segment.
(c) Retail Banking includes lending to and deposits from retail customers and identified earnings and expenses of the segment.
(d) Other Banking Operations includes all other operations not covered under Treasury, Corporate / Wholesale Banking and Retail Banking.
(e) Unallocated includes Capital and Reserves, Employee Stock Options (Grants) Outstanding and other unallocable assets, liabilities, income and expenses.
13. Debit and Credit Card reward points liability
The liability towards Credit Card reward points is computed based on an actuarial valuation and the liability towards Debit Card reward points is computed on the basis of management estimates considering past trends. Actuarial valuation is determined based on certain assumptions regarding mortality rate, discount rate, cancellation rate and redemption rate.
14. Bullion
14.1 The Bank imports bullion including precious metal bars on a consignment basis for selling to its customers. The imports are on a back-to-back basis and are priced to the customer based on the prevailing price quoted by the supplier and the local levies related to the consignment like customs duty, etc. The profit earned is included in commission income.
14.2 The Bank sells gold coins to its customers. The difference between the sale price to customers and purchase price is reflected under commission income.
15. Income-tax
15.1 Tax expenses comprise of current and deferred taxes. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred taxes reflect the impact of timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.
15.2 Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date.
15.3 Deferred tax assets are recognized, only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.
15.4 In case of unabsorbed depreciation and/or carry forward of losses under tax laws, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax asset can be realized against future taxable income.
15.5 Deferred tax assets unrecognized of earlier years are reassessed and recognised to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax assets can be realized. At each Balance Sheet date, the Company re-assesses unrecognised deferred tax assets, if any.
16. Earnings per share
The Bank reports Basic and Diluted earnings per share in accordance with AS 20 - Earnings per Share. Earnings per share is calculated by dividing the Net Profit or Loss for the period attributable to 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 securities or other contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding as at end of the year.
17. Provisions, contingent liabilities and contingent assets
17.1 A provision is recognized when there is a present obligation as a result of past event, and it is probable that an outflow of resources will be required to settle the obligation, and in respect of which a reliable estimate can be made. Provisions are not discounted to their present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
17.2 A disclosure of contingent liability is made when there is:
(a) A possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non-occurrence of one or more uncertain future events not within the control of the Bank; or
(b) A present obligation arising from a past event which is not recognized as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
17.3 When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
17.4 Contingent assets are not recognized or disclosed in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the assets and related income are recognized in the period in which the change occurs.
18. Accounting of Dividend
In accordance with AS-4 'Contingencies and Events occurring after the Balance sheet date' as notified by the
Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank does not account for proposed dividend as a liability through appropriation from the profit and loss account. The same is recognised in the year of actual payout post approval of shareholders.
19. Share Issue Expenses
Share issue expenses are deducted from Share Premium Account in terms of Section 52 of the Companies Act, 2013.
20. Impairment of Assets
The Bank assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided to the extent the carrying amount of assets exceeds their estimated recoverable amount.
21. Cash and Cash equivalents
Cash and cash equivalents comprises of Cash in Hand and Balances with RBI and Balances with Banks and Money at Call and Short Notice.
22. Corporate Social Responsibility
Expenditure towards corporate social responsibility obligations in accordance with provision of Companies Act, 2013, is recognised in the Profit and Loss Account.
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