C SIGNIFICANT ACCOUNTING POLICIES
1 Investments
Classification:
In accordance with the RBI guidelines on investment classification and valuation, investments are classified on the date of purchase into “Held for
Trading" ('HFT), “Available for Sale" ('AFS') and “Held to Maturity" ('HTM') categories (hereinafter called “categories"). Subsequent shifting amongst
the categories is done in accordance with the RBI guidelines at the lower of the acquisition cost or carrying value and market value on the date of the
transfer, and depreciation, if any, on such transfer is fully provided.
Under each of these categories, investments are further classified under six groups (hereinafter called “group/groups") - Government Securities,
Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures and Other Investments for the purposes of
disclosure in the Balance Sheet.
The Bank follows 'Settlement Date' accounting for recording purchase and sale transactions in securities, except in the case of equity shares where
'Trade Date' accounting is followed.
Basis of classification:
Investments that are held principally for resale within 90 days from the date of purchase are classified under HFT category. As per the RBI guidelines,
HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities as on that date. Investments which the Bank intends
to hold till maturity are classified as HTM securities. The Bank has classified investments in subsidiaries, joint ventures and associates under HTM
category. Investments which are not classified in either of the above two categories are classified under AFS category.
Acquisition Cost:
The cost of investments is determined on weighted average basis. Broken period interest on debt instruments and government securities are
considered as a revenue item. The transaction costs including brokerage, commission, etc. paid at the time of acquisition of investments is recognised
in Profit and Loss Account.
Disposal of investments:
• Investments classified as HFT or AFS - Profit or loss on sale or redemption is recognised in the Profit and Loss Account.
• Investments classified as HTM - Profit on sale or redemption of investments is recognised in the Profit and Loss Account and is appropriated
to Capital Reserve after adjustments for tax and transfer to Statutory Reserve. Loss on sale or redemption is recognised in the Profit and Loss
Account.
Short Sale:
The Bank undertakes short sale transactions in Central Government dated securities in accordance with RBI guidelines. The short position is
categorised under HFT category and netted off from Investments in the Balance Sheet. The short position is marked to market and loss, if any, is
charged to the Profit and Loss Account while gain, if any, is ignored. Gain or loss on settlement of the short position is recognised in the Profit and
Loss Account.
Valuation:
The valuation of investments is performed in accordance with the RBI guidelines as follows:
a) Investments classified as HTM - These are carried at their acquisition cost. Any premium on acquisition of debt instruments / government
securities is amortised over the balance maturity of the security on a straight line basis. Any diminution, other than temporary, in the value of
such securities is provided.
b) Investments classified as HFT or AFS - Investments in these categories are marked to market and the net depreciation, if any, within each
group is recognised in the Profit and Loss Account. Net appreciation, if any, is ignored. Further, provision other than temporary diminution is
made at individual security level. Except in cases where provision other than temporary diminution is made, the book value of the individual
securities is not changed as a result of periodic valuations.
c) The market or fair value of quoted investments included in the 'AFS' and 'HFT' categories is measured with respect to the market price of the
scrip as available from the trades or quotes on the stock exchanges, SGL account transactions, price list of RBI or prices declared on Fixed
Income Money Market and Derivatives Association of India ('FIMMDA') website by Financial Benchmark India Private Limited (FBIL) as at the
year end.
d) Treasury Bills, Exchange Funded Bills, Commercial Paper and Certificate of Deposits being discounted instruments, are valued at carrying cost.
e) Market value of units of mutual funds is based on the latest net asset value declared by the mutual fund.
f) Investments in subsidiaries / joint ventures (as defined by RBI) are categorised as HTM and assessed for impairment to determine other than
temporary diminution, if any, in accordance with RBI guidelines.
g) Market value of investments where current quotations are not available are determined as per the norms prescribed by the RBI as under:
• In case of unquoted bonds, debentures and preference shares where interest / dividend is received regularly (i.e. not overdue beyond 90
days), the market price is derived based on the Yield to Maturity for Government Securities as published by FIMMDA / FBIL and suitably
marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for each category and credit
rating along with residual maturity issued by FIMMDA / FBIL is adopted for this purpose;
• In case of bonds and debentures (including Pass Through Certificates) where interest is not received regularly (i.e. overdue beyond 90
days), the valuation is in accordance with prudential norms for provisioning as prescribed by the RBI. Interest on such securities is not
recognised in the Profit and Loss Account until received;
• Equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges, are valued at
break-up value (without considering revaluation reserves, if any) which is ascertained from the company's latest Balance Sheet. In case
the latest Balance Sheet is not available, the shares are valued at ' 1 per investee company;
• Units of Venture Capital Funds (VCF) held under AFS category where current valuations are not available are marked to market based on
the Net Asset Value (NAV) shown by VCF as per the latest audited financials of the fund. In case the audited financials are not available
for a period beyond 18 months, the investments are valued at ' 1 per VCF. Investment in unquoted VCF after 23rd August, 2006 are
categorised under HTM category for the initial period of three years and valued at cost as per RBI guidelines. Such investments are
required to be transferred to AFS thereafter;
• Security receipts are valued as per the Net Asset Value (NAV) obtained from the issuing Asset Reconstruction Company or Securitisation
Company or estimated recovery whichever is lower. The Bank has classified Security Receipts whose tenure has exceeded 8 years, as
“Non Performing investments".
• The Bank provides for investments in Alternate Investments Funds (AIF) in accordance with RBI circular dated 19th December, 2023 and
27th March 2024.
h) Non-performing investments are identified and depreciation / provision are made thereon based on RBI guidelines. The depreciation / provision
on such non-performing investments are not set off against the appreciation in respect of other performing securities. Interest on non¬
performing investments is not recognized in the Profit & Loss Account until received.
i) Repurchase and reverse repurchase transactions - Securities sold under agreements to repurchase (Repos) and securities purchased under
agreements to resell (Reverse Repos) are accounted as collateralised borrowing and lending transactions respectively. The difference between
the consideration amount of the first leg and the second leg of the repo is recognised as interest income or interest expense over the period of
the transaction.
2 Advances
Classification:
Advances are classified as performing and non-performing advances ('NPAs') based on RBI guidelines and are stated net of bills rediscounted, inter-bank
participation with risk, specific provisions, interest in suspense, claims received from Export Credit Guarantee Corporation and Emergency Credit Line
Guarantee Scheme (ECLGS) with respect to non-performing advances, provisions for funded interest term loan and provisions in lieu of diminution in the
fair value of restructured assets. Also, NPAs are classified into sub-standard, doubtful and loss assets as required by RBI guidelines. Interest on NPAs
remaining uncollected is transferred to an interest suspense account and not recognised in the Profit and Loss Account until received.
Amounts paid for acquiring non-performing asset(s) from other banks and NBFCs are considered as advances. Actual collections received on such
non-performing asset(s) are compared with the cash flow(s) estimated while purchasing the asset to ascertain overdue(s). If such overdue(s) is/are
in excess of 90 days, then this/these asset(s) are classified into sub-standard, doubtful or loss as required by the RBI guidelines on purchase of non¬
performing asset(s).
The Bank transfers advances through inter-bank participation with and without risk. In accordance with the 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.
Provisioning:
The Bank classifies its advances, investments and overdues from crystallised derivatives including those at overseas branches into performing and
non performing in accordance with guidelines issued by the RBI. Provision for NPAs comprising sub-standard, doubtful and loss assets is made in
accordance with RBI guidelines. In addition, the Bank considers accelerated specific provisioning that is based on past experience, evaluation of
security and other related factors. Specific loan loss provision in respect of non-performing advances are charged to the Profit and Loss Account. Any
recoveries made by the Bank in case of NPAs written off are recognised in the Profit and Loss Account.
The Bank considers a restructured account as one where the Bank, for economic or legal reasons relating to the borrower's financial difficulty, grants
to the borrower concessions that the Bank would not otherwise consider. Restructuring would normally involve modification of terms of the advance
/ securities, which would generally include, among others, alteration of repayment period / repayable amount / the amount of installments / rate of
interest (due to reasons other than competitive reasons).
Restructured accounts are classified as such by the Bank only upon approval and implementation of the restructuring package. Necessary provision
for diminution in the fair value of a restructured account is made.
In respect of borrowers restructured under the Resolution Framework - 1.0 and Resolution Framework 2.0 for COVID-19 related stress the Bank holds
provisions higher than the provisions as required by the RBI guidelines based on the estimates made by the Bank.
In accordance with RBI guidelines the Bank has provided general provision on standard assets including credit exposures computed as per the
current marked to market values of interest rate and foreign exchange derivative contracts, and gold at levels stipulated by RBI from time to time.
Additional standard asset provision is done for overseas stepdown subsidiaries of Indian corporates. Standard provision is also made at higher than
the prescribed rates in respect of advances to stressed sectors as per the framework approved by the Board of Directors. In case of Frauds, the Bank
makes provision for amounts it is liable for in accordance with the guidelines issued by RBI. A general provision on the entire amount outstanding
from borrowers who had an overdue on February 29, 2020 and to whom moratorium was given is also made.
Further to provisions required as per the asset classification status, provisions are held for individual country exposure (except for home country) as
per the RBI guidelines. Exposure is classified in the seven risk categories as mentioned in the Export Credit Guarantee Corporation of India Limited
('ECGC') guidelines and provisioning is done for that country if the net funded exposure is one percent or more of the Bank's total assets based on the
rates laid down by the RBI.
Provision for Unhedged Foreign Currency Exposure of borrowers is made as per the RBI guidelines.
3 Loss on Sale of Advances to Asset Reconstruction Company
Loss on sale of Advances sold to Asset Reconstruction Company are recognised immediately in the Profit and Loss Account.
4 Securitisation
The Bank enters into purchase/sale of corporate and retail loans through direct assignment/Special Purpose Vehicle ('SPV'). In most cases, post
securitisation, the Bank continues to service the loans transferred to the assignee/ SPV. The Bank also provides credit enhancement in the form of
cash collaterals and/or by subordination of cash flows to Senior Pass-Through Certificate holders. In respect of credit enhancements provided or
recourse obligations (projected delinquencies, future servicing etc.) accepted by the Bank, appropriate provision/disclosure is made at the time of
sale in accordance with AS-29, Provisions, Contingent Liabilities and Contingent Assets as specified under section 133 and the relevant provision of
the Companies Act, 2013 read with the Companies (Accounting Standards) Rules, 2021.
In accordance with the RBI guidelines on Securitisation of Standard Assets dated 24 September 2021, the profit, loss or premium on account of
securitisation of assets at the time of sale is computed as the difference between the sale consideration and the book value of the securitised asset.
Any resultant profit, loss or premium realised on account of securitisation is recognised to the Profit and Loss Account in the period in which the sale
is completed.
The Bank invests in instruments of other SPVs which are accounted for at the deal value and are classified under Investments.
5 Fixed assets (Property, Plant & Equipment and Intangible) and depreciation / amortisation
Property, Plant & Equipment and Intangible Assets have been stated at cost less accumulated depreciation and amortisation and adjusted for
impairment, if any. Cost includes cost of purchase inclusive of freight, duties, incidental expenses and all expenditure like site preparation, installation
costs and professional fees incurred on the asset before it is ready to put to use. Subsequent expenditure incurred on assets put to use is capitalised
only when it increases the future benefit / functioning capability from / of such assets. Gain or loss arising from the retirement or disposal of a
Property Plant and Equipment / Intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of
assets and recognised as income or expense in the Profit and Loss Account. Profit on sale of premises of the Bank, net of taxes and transfer to
statutory reserve is appropriated to Capital Reserve as per RBI guidelines.
Depreciation / Amortisation - Depreciation is provided on a pro-rata basis on a Straight Line Method over the estimated useful life of the assets at
rates which are equal to or higher than the rates prescribed under Schedule II of the Companies Act, 2013 in order to reflect the actual usage of the
assets. The estimated useful lives of assets based on technical evaluation by management are as follows:
Used assets purchased are depreciated over the residual useful life from the date of original purchase.
Items costing less than ' 5,000 are fully depreciated in the year of purchase.
6 Cash and cash equivalents
Cash and cash equivalents include cash in hand, balances with Reserve Bank of India and Balances with Other Banks / institutions and money at Call
and Short Notice (including the effect of changes in exchange rates on cash and cash equivalents in foreign currency).
7 Bullion
The Bank imports bullion including precious metal bars on a consignment basis for selling to its wholesale customers. The difference between the
sale price to customers and actual price quoted by supplier is reflected under other income.
The Bank also borrows and lends gold, which is treated as borrowings or lending as the case may be in accordance with the RBI guidelines and the
interest paid or received is classified as interest expense or income and is accounted on an accrual basis.
8 Revenue recognition
Interest income is recognised on accrual basis.
Interest income in respect of retail advances is accounted for by using the internal rate of return method to provide a constant periodic rate of return.
Interest income on investments in PTCs and loans bought out through the direct assignment route is recognised at their effective interest rate.
Interest income on discounted instruments is recognised over the tenure of the instruments so as to provide a constant periodic rate of return.
Service charges, fees and commission income are recognised when due except for guarantee commission and letter of credit which is recognised
over the period of the guarantee / letter of credit. Syndication / arranger fee is recognised as income as per the terms of engagement.
Upon an asset becoming NPA the income accrued gets reversed, and is recognised only on realisation, as per RBI guidelines.
Penal interest is recognised as income on realisation other than on running accounts where it is recognised when due.
Other fees are recognised when due, where the Bank is reasonably certain of ultimate collection.
Dividend income is accounted on an accrual basis when the Bank's right to receive the dividend is established.
Gain on account of securitisation of assets is amortised over the life of the securities issued in accordance with the guidelines issued by the RBI. Loss
on account of securitisation of assets is recognised immediately in Profit and Loss account.
In respect of non-performing assets acquired from other Banks / FIs and NBFCs, collections in excess of the consideration paid at each asset level
or portfolio level is treated as income in accordance with RBI guidelines and clarifications.
Fees received on sale of Priority Sector Lending Certificates is considered as Miscellaneous Income, while fees paid for purchase is recognised as
expense under other expenses in accordance with the guidelines issued by the RBI.
9 Employee benefits
Defined Contribution Plan
Provident Fund
Contribution as required by the statute made to the government provident fund or to a fund set up by the Bank and administered by a board of trustees
is debited to the Profit and Loss Account when an employee renders the related service. The Bank has no further obligations.
Superannuation Fund
The Bank makes contributions in respect of eligible employees, subject to a maximum of ' 0.01 crore per employee per annum to a Fund administered
by trustees and managed by Life Insurance Companies. The Bank recognises such contributions as an expense in the year when an employee renders
the related service. The Bank has no further obligations.
New Pension Scheme
The Bank contributes up to 10% of eligible employees' salary per annum, to the New Pension Fund administered by a Pension Fund Regulatory
and Development Authority (PFRDA) appointed pension fund manager. The Bank recognises such contributions as an expense in the year when an
employee renders the related service.
DIFC Employee Workplace Savings Scheme (DEWS)
The Bank's branch in Dubai International Financial Centre (DIFC) contributes up to 8.33% of eligible branch employees' salary per annum to the DIFC
Employee Workplace Savings Scheme (DEWS). The Bank recognises such contributions as an expense in the year when an employee renders the
related service. The Bank has no further obligation.
Defined Benefit Plan
Gratuity
The Bank provides for Gratuity, covering employees in accordance with the Payment of Gratuity Act, 1972, service regulations and service awards
as the case may be. The Bank's liability is actuarially determined (using Projected Unit Credit Method) at the Balance Sheet date. The Bank makes
contribution to Gratuity Funds administered by trustees and managed by Life Insurance Companies.
Pension Scheme
In respect of pension payable to certain erstwhile ING Vysya Bank Limited ("eIVBL”) employees under Indian Banks' Association ("IBA”) structure, the
Bank contributes 10% of basic salary to a pension fund and the difference between the contribution and the amount actuarially determined by an
independent actuary is trued up based on actuarial valuation conducted as at the Balance Sheet date. The Pension Fund is administered by the Board
of Trustees and managed by Life Insurance Company. The present value of the Bank's defined pension obligation is determined using the Projected
Unit Credit Method as at the Balance Sheet date.
Employees covered by the pension plan are not eligible for employer's contribution under the provident fund plan.
The contribution made to the Pension fund is recognised as planned assets. The defined benefit obligation recognised in the Balance Sheet represents
the present value of the defined benefit obligation as reduced by the fair value of the plan assets.
Actuarial gains or losses in respect of all defined benefit plans are recognised immediately in the Profit and Loss Account in the year in which they are
incurred.
Compensated Absences - Other Long-Term Employee Benefits
The Bank accrues the liability for compensated absences based on the actuarial valuation as at the Balance Sheet date conducted by an independent
actuary which includes assumptions about demographics, early retirement, salary increases, interest rates and leave utilisation. The net present value
of the Banks' obligation is determined using the Projected Unit Credit Method as at the Balance Sheet date. Actuarial gains / losses are recognised in
the Profit and Loss Account in the year in which they arise.
Other Employee Benefits
As per the Bank's policy, employees are eligible for an award after completion of a specified number of years of service with the Bank. The obligation
is measured at the Balance Sheet date on the basis of an actuarial valuation using the Projected Unit Credit Method.
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised
during the period when the employee renders the service. These benefits include performance incentives.
Employee share based payments
Equity-settled scheme:
The Employee Stock Option Schemes (ESOSs) of the Bank are in accordance with SEBI (Share Based Employee Benefits and Sweat Equity)
Regulations, 2021. The schemes provide for grant of options to employees of the Group to acquire the equity shares of the Bank that vest in cliff
vesting or in a graded manner and that are to be exercised within a specified period.
RBI, vide its clarification dated 30th August, 2021 on Guidelines on Compensation of Whole Time Directors / Chief Executive Officers / Material Risk
Takers and Control Function Staff, advised Banks that the fair value of share-linked instruments on the date of grant should be recognised as an
expense for all instruments granted after the accounting period ending 31st March, 2021.
In accordance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and the Guidance Note on “Accounting for
Employee Share-based payments" issued by The Institute of Chartered Accountants of India, the cost of equity-settled transactions is measured
using the intrinsic value method for all options granted on or before 31st March, 2021. The intrinsic value being the excess, if any, of the fair market
price of the share under ESOSs over the exercise price of the option is recognised as deferred employee compensation with a credit to Employee's
Stock Option (Grant) Outstanding account.
The Bank has changed its accounting policy from intrinsic value method to fair value method for all share-linked instruments granted after 31st March,
2021 in accordance with the RBI guidance. The fair value of the option is estimated on the date of grant using Black-Scholes model and is recognised
as deferred employee compensation with a credit to Employee's Stock Option (Grant) Outstanding account.
The deferred employee compensation cost is amortised on a straight-line basis over the vesting period of the option. The cumulative expense
recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and
the number of equity instruments that are outstanding.
The options that do not vest because of failure to satisfy vesting condition are reversed by a credit to employee compensation expense in “Payment
to and provision for employee", equal to the amortised portion of the cost of lapsed option and credit to deferred employee compensation equal to
the unamortised portion. In respect of the options which expire unexercised the balance standing to the credit of Employee's Stock Option (Grant)
Outstanding account is transferred to General Reserve. The fair market price is the latest available closing price, preceding the date of grant of the
option, on the stock exchange on which the shares of the Bank are listed.
Where the terms of an equity-settled award are modified, the minimum expense recognised in 'Payments to and provision for employees' is the
expense as if the terms had not been modified. An additional expense is recognised for any modification which increases the total intrinsic/ fair value
of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.
In respect of options granted to employees of subsidiaries, the Bank recovers the related compensation cost from the respective subsidiaries.
Cash-settled scheme:
The cost of cash-settled transactions, stock appreciation rights (SARs) having grant date on or before 31st March 2021 is measured initially using
intrinsic value method at the grant date taking into account the terms and conditions upon which the instruments were granted. Similar to Equity
settled options, SARs granted after 31st March, 2021 are measured on fair value basis.
The intrinsic / fair value is amortised on a straight-line basis over the vesting period with a recognition of corresponding liability. This liability is
remeasured at each balance sheet date up to and including the vesting date with changes in intrinsic / fair value recognised in the profit and loss
account in 'Payments to and provision for employees'. The SARs that do not vest because of failure to satisfy vesting conditions are reversed by a
credit to employee compensation expense, equal to the amortised cost in respect of the lapsed portion.
10 Foreign currency transactions
Foreign currency monetary assets and monetary liabilities are translated as at the Balance Sheet date at rates notified by the Foreign Exchange
Dealers' Association of India (FEDAI) and the resultant gain or loss is accounted in the Profit and Loss Account.
Income and Expenditure items are translated at the rates of exchange prevailing on the date of the transactions except in respect of representative
office (which are integral in nature) expenses, which are translated at monthly average exchange rates.
Outstanding forward (other than deposit and placement swaps) and spot foreign exchange contracts outstanding at the Balance Sheet date are
revalued at rates notified by FEDAI for specified maturities and at the interpolated rates of interim maturities. In case of forward contracts of greater
maturities where exchange rates are not notified by FEDAI, are revalued at the forward exchange rates implied by the swap curves in respective
currencies. The forward profit or loss on the forward contracts are discounted using discount rate and the resulting profits or losses are recognised
in the Profit and Loss Account as per the regulations stipulated by the RBI.
Foreign exchange swaps "linked" to foreign currency deposits and placements are translated at the prevailing spot rate at the time of swap. The
premium or discount on the swap arising out of the difference in the exchange rate of the swap date and the maturity date of the underlying forward
contract is amortised over the period of the swap and the same is recognised in the Profit and Loss Account.
Contingent liabilities on account of letters of credit, bank guarantees and acceptances and endorsements outstanding as at the Balance Sheet date
denominated in foreign currencies and other foreign exchange contracts are translated at year-end rates notified by FEDAI.
The financial statements of IBU and DIFC which are in the nature of non-integral overseas operations are translated on the following basis: (a) Income
and expenses are converted at the average rate of exchange during the period and (b) All assets and liabilities are translated at closing rate as on
Balance Sheet date. The exchange difference arising out of year end translation is debited or credited as "Foreign Currency Translation Reserve"
forming part of "Reserves and Surplus".
11 Derivative transactions
Notional amounts of derivative transactions comprising of swaps, futures and options are disclosed as off Balance Sheet exposures. The Bank
recognises all derivative contracts (other than those designated as hedges) at fair value, on the date on which the derivative contracts are entered
into and are re-measured at fair value as at the Balance Sheet or reporting date. Derivatives are classified as assets when the fair value is positive
(positive marked to market) or as liabilities when the fair value is negative (negative marked to market). Changes in the fair value of derivatives other
than those designated as hedges are recognised in the Profit and Loss Account.
Outstanding derivative transactions designated as "Hedges" are accounted in accordance with hedging instrument on an accrual basis over the life
of the underlying instrument. Option premium paid or received is recognised in the Profit and Loss Account on expiry of the option. Option contracts
are marked to market on every reporting date.
12 Lease accounting
Leases where all the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease payments are
recognised as an expense in the Profit and Loss Account on a straight-line basis over the lease term. Initial direct costs in respect of operating leases
such as legal costs, brokerage costs, etc. are recognised as expense immediately in the Profit and Loss Account.
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