2. Material Accounting Policies
The principal accounting policies applied in the preparation of these standalone financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
a Basis of Preparation of Standalone Financial Statements
These standalone financial statements are presented in ‘Indian Rupees', which is also the Company's functional currency
and all amounts, are rounded to the nearest Lakh, unless otherwise stated
The standalone financial statements have been prepared in accordance with the requirements of the information and
disclosures mandated by Schedule III to the Act, applicable Ind AS, other applicable pronouncements and regulations.
(i) Compliance with Ind AS and regulation
The Standalone Ind AS financial statements comply in all material aspects with Indian Accounting Standards (Ind AS)
notified under Section 133 of the Companies Act, 2013 (the ‘Act') [Companies (Indian Accounting Standards) Rules,
2015 (as amended)] and other relevant provisions of the Act and the master direction - Core Investment Companies (
Reserve Bank) Direction, 2016 issued by RBI.
(ii) Historical cost convention
The standalone financial statements have been prepared on a historical cost basis, except for the following:
• Certain financial assets and liabilities (including derivatives instruments) are measured at fair value.
• Defined benefit plans - plan assets are measured at fair value; and
• Share based payments
b Investment in subsidiaries and associates
Investments in subsidiary and associate companies are carried at cost and fair value (deemed cost) as per Ind AS -101
"First-time Adoption of Indian Accounting Standards" and 109 "Financial Instruments" less accumulated impairment losses,
if any. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down to its
recoverable amount. On disposal of investments in subsidiary companies and associate companies, the difference between
net disposal proceeds and the carrying amounts are recognised in the Statement of Profit and Loss.
When the Company ceases to control the investment in subsidiary or associate the said investment is carried at fair value
through profit and loss in accordance with Ind AS 109 "Financial Instruments".
c Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker.
d Foreign currency translation
(i) Functional and presentation currency
Items included in Standalone Financial Statements of the Company are measured using the currency of the primary
economic environment in which the Company operates (‘the functional currency'). The Standalone Financial Statements
are presented in Indian rupee (INR), which is the Company's functional and presentation currency.
(ii) Translation and balances
Transactions denominated in foreign currencies are recorded at the exchange rate prevailing at the time of the
transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the
Statement of Profit and Loss.
Monetary assets and liabilities denominated in foreign currencies at the year end are restated at year end rates.
e Financial instruments
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of
the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the
Company commits to purchase or sell the asset.
At initial recognition, the Company measures a financial asset or financial liability at its fair value plus or minus, in the case of
a financial asset or financial liability not at fair value through profit and loss, transaction costs that are incremental and directly
attributable to the acquisition or issue of the financial asset or financial liability, such as fees and commissions. Transaction
costs of financial assets and financial liabilities carried at fair value through profit and loss are expensed in Statement of Profit
and Loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets
measured at amortised cost and investments in debt instruments measured at fair value through Statement of Profit and
Loss, which results in an accounting loss being recognised in Statement of Profit and Loss.
When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity
recognizes the difference as follows:
(i) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1
input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as
a gain or loss.
(ii) In all other cases, the difference is deferred and the timing of recognition of deferred in Statement of Profit and Loss is
determined individually. It is either amortised over the life of the instrument, deferred until the instrument's fair value can
be determined using market observable inputs, or realised through settlement.
When the Company revises the estimates of future cash flows, the carrying amount of the respective financial assets or
financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are
recognised in Statement of Profit and Loss.
f Financial assets
(i) Classification and subsequent measurement
The Company has applied Ind AS 109 "Financial Instruments" and classifies its financial assets in the following
measurement categories:
• Fair value through profit and loss (FVTPL);
• Fair value through other comprehensive income (FVOCI); or
• Amortised cost.
Fair value through profit and loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at
fair value through profit and loss. A gain or loss on a debt investment that is subsequently measured at fair value through
profit and loss and is not part of a hedging relationship is recognised in Statement of Profit and Loss in the period in
which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading.
Interest income from these financial assets is included in ‘Interest income' using the effective interest rate method.
Fair value option for financial assets: The Company may also irrevocably designate financial assets at fair value
through profit and loss if doing so significantly reduces or eliminates an accounting mismatch created by assets and
liabilities being measured on different bases.
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely
payments of principal and interest, and that are not designated at FVTPL, are measured at amortised cost. The carrying
amount of these assets is adjusted by any expected credit loss allowance recognised and measured. Interest income
from these financial assets is recognised using the effective interest rate method.
Interest income
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets,
except for:
(i) Purchased or originated credit impaired (POCI) financial assets, for which the original credit-adjusted effective
interest rate is applied to the amortised cost of that financial asset.
(ii) Financial assets that are not ‘POCI' but have subsequently become credit-impaired (or ‘stage 3'), for which interest
revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of the expected credit
loss provision).
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the
expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised
cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider
expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that
are integral to the effective interest rate, such as origination fees. For FVOCI financial assets - assets that are credit-
impaired at initial recognition - the Company calculates the credit-adjusted effective interest rate, which is calculated
based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the impact of
expected credit losses in estimated future cash flows.
Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, instruments
that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets.
The Company subsequently measures all equity investments at fair value. Where the company's management has
elected to present fair value gains and losses on equity investments in other comprehensive income, there is no
subsequent reclassification of fair value gains and losses to profit and loss following the derecognition of the investment.
Changes in the fair value of financial assets at fair value through profit and loss are recognised in net gain/loss on fair
value changes in the Statement of Profit and Loss. Impairment losses (and reversal of impairment losses) on equity
investments measured at FVOCI are not reported separately from other changes in fair value.
Gains and losses on equity investments at FVTPL are included in the Statement of Profit and Loss.
(ii) Impairment
The Company assesses on a forward looking basis the expected credit losses (ECL) associated with its debt instruments
carried at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee
contracts. The Company recognizes a loss allowance for such losses at each reporting date.
The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about
past events, current conditions and forecasts of future economic conditions.
The measurement of the ECL allowance is an area that requires the use of complex models and significant assumptions
about future economic conditions and credit behavior (e.g. the likelihood of customers defaulting and the resulting
losses).
(iii) Write-off policy
The Company writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has
concluded there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery
include (i) ceasing enforcement activity and (ii) where the Company's recovery method is foreclosing on collateral and
the value of the collateral is such that there is no reasonable expectation of recovering in full.
(iv) Derecognition other than on a modification
Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the
assets have expired, or when they have been transferred and either (i) the Company transfers substantially all the risks
and rewards of ownership, or (ii) the Company neither transfers nor retains substantially all the risks and rewards of
ownership and the Company has not retained control. The Company directly reduces the gross carrying amount of a
financial asset when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof.
g Financial liabilities
The overall obligations and liabilities have been determined in terms of Approved Resolution Plan and shall be accounted
upon implementation of Approved Resolution Plan. Therefore, all financial liabilities will be dealt in accordance with the
provisions of the Code.
(i) Classification and subsequent measurement
In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost,
except for:
Financial liabilities at fair value through profit and loss: this classification is applied to derivatives and financial liabilities
held for trading and other financial liabilities designated as such at initial recognition. The Company has issued certain
non-convertible debentures, the rate of interest on which is linked to performance of specified indices (Market linked
debentures-MLD) over the period of the debentures. The Company has opted to designate the entire hybrid contract
at FVTPL as the embedded derivative significantly modifies the cash flows that otherwise would be required by the
contract. The Company hedges its interest rate risk on MLD by taking positions in future & options based on specified
indices. Any gain / loss on these hedge positions is recognised in Statement of Profit and Loss.
(ii) Derecognition
Financial liabilities are derecognised when they are extinguished i.e. when the obligation specified in the contract is
discharged, cancelled or expires).
The exchange between the Company and its original lenders of debt instruments with substantially different terms, as
well as substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment
of the original financial liability and the recognition of a new financial liability. If an exchange of debt instruments or
modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the
gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs
or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified
liability.
h Financial guarantee contracts
Financial guarantee obligation is obligation that require the issuer to make specified payments to reimburse the holder for a
loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans,
overdrafts and other banking facilities.
For financial guarantee obligation, the loss allowance is recognised as a provision.
i Repossessed collateral
Repossessed collateral represents financial and non-financial assets acquired by the Company in settlement of overdue
loans. The assets are initially recognised at fair value when acquired and included in premises and equipment, other financial
assets, investment properties within other assets depending on their nature and the Company's intention in respect of
recovery of these assets, and are subsequently remeasured and accounted for in accordance with the accounting policies
for these categories of assets.
j Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date on which the derivative contract is entered into and are
subsequently remeasured at fair value. All derivatives are carried as assets when fair value is positive and as liabilities when
fair value is negative.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated and qualifies
as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives that are not designated as hedges
The Company enters into certain derivative contracts to hedge risks which are not designated as hedges. Such contracts are
accounted for at fair value through profit and loss and are included in Statement of Profit and Loss.
k Revenue Recognition
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognised when (or as) the
Company satisfies a performance obligation by transferring a promised good or service to a customer.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price
(excluding estimates of variable consideration) that is allocated to that performance obligation.
(i) Interest income
Interest income is recognised using the effective interest rate.
(ii) Dividend income
Dividend income is recognised when the right to receive payment is established.
(iii) Income from investments
Profit / (Loss) earned from sale of securities is recognised on trade date basis. The cost of securities is computed based
on weighted average basis.
(iv) Discount on investments
The difference between the acquisition cost and face value of debt instruments is recognised as interest income over
the tenor of the instrument on straight-line basis.
(v) Management fee income
Management fee income towards support services is accounted as and when services are rendered and it becomes due
on contractual terms with the parties.
(vi) Rental income
Lease rental income is recognized in the Statement of Profit and Loss on a straight-line basis over the lease term.
(vii) Income from trading in Derivatives
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into, and are subsequently
re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in the
statement of profit and loss immediately. Brokerage and other payments made in connection with the acquisition of
derivatives are added to the cost of acquisition.
l Income Tax
The income tax expense or credit for the period is the tax payable on the current period's taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
(i) Current Taxes
Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income
Tax Act, 1961. Minimum Alternative Tax (MAT) credit entitlement is recognised where there is convincing evidence that
the same can be realised in future.
(ii) Deferred Taxes
The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax
rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised
only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is
unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is
reasonable certainty of realisation of such assets. Deferred tax assets are reviewed as at each balance sheet date and
written down or written up to reflect the amount that is reasonably certain (as the case may be) to be realised.
m Leases
(i) As a lessee
The Company lease assets primarily consists of office premises which are of short term lease with the term of twelve
months or less and low value leases. For these short term and low value leases, the Company recognizes the lease
payments as an expense in the Statement of Profit and Loss on a straight line basis over the term of lease.
(ii) As a Lessor
Leases for which the Company is a lessor is classified as finance lease or operating lease. Whenever the terms of
the lease transfer substantially all the risks and rewards of ownership to the lessee, the lease contract is classified as
finance lease. All other leases is classified as operating lease.
For Operating Lease, lease rentals are recognised on a straight line basis over the term of lease.
n Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value,
and bank overdrafts. Bank overdrafts are shown within borrowings in liabilities in the balance sheet.
o Property, plant and equipment
All items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can
be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when
replaced. All other repairs and maintenance are charged to profit and loss during the reporting period in which they are
incurred.
Depreciation methods, estimated useful lives & residual value
Depreciation on Property, Plant and Equipment is provided in accordance with the provisions of Schedule II of the Companies
Act, 2013. Tangible assets are depreciated on straight line basis method over the useful life of assets, as prescribed in Part
C of Schedule II of the Companies Act, 2013.
The estimated useful lives for the different types of assets are :
(i) Furniture and Fixtures -10 years
(ii) Office Equipments - 5 years
(iii) Computers - 3 years
(iv) Vehicles - 8 years
(v) Plant & Machinery given on lease - 8 years
(vi) Data processing machineries given on lease - 3 years
(vii) Vehicles given on lease - 8 years
(viii) Buildings - 60 years
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised in the
Statement of Profit and Loss.
p Intangible assets
Intangible assets are recognised where it is probable that the future economic benefit attributable to the assets will flow to
the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated
amortisation.
Intangible Assets are amortised on straight-line basis over the useful life of the asset up to a maximum of 5 years commencing
from the month in which such asset is first installed.
The Company provides pro-rata depreciation from the day the asset is put to use and for any asset sold, till the date of sale.
q Investment properties
An investment property is accounted for in accordance with cost model. The cost of any shares in a co-operative society or a
company, the holding of which is directly related to the right to hold the investment property, is added to the carrying amount
of the investment property.
Depreciation on Investment Property is depreciated under the straight line method as per the rates and the useful life
prescribed as per Schedule II of the Companies Act.
r Borrowing costs
Borrowing costs, which are directly attributable to the acquisition / construction of property plant and equipment, till the time
such assets are ready for intended use, are capitalised as part of the cost of the assets. Other borrowing costs are recognised
as an expense in the year in which they are incurred. Brokerage costs directly attributable to a borrowing are expensed over
the tenure of the borrowing.
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