• During the year ended on March 31,2024, Bank has raised Equity Share Capital (including Share Premium) of ?1000 crores through Qualified Institutional Placements on June 08, 2023. The Bank has issued and allotted 35,08,77,190 equity shares of ?10 each at a premium of ?18.50 per share to the investors.
• During the FY 2023-24, Bank has not redeemed any Bond.
b) Draw down from Reserves
In accordance with the Accounting Standard - 10 'Property, Plant & Equipment', depreciation of Rs.29.49 Crore (Rs. 102.46 Crore) for the year on revalued portion of fixed assets has been charged to Profit and Loss Account. Equivalent amount of Rs. 29.49 Crore (Rs. 102.46 Crore) has been transferred from Revaluation Reserve to Revenue Reserve.
The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivative-related exposures, netted by inflows from assets maturing within 30 days. Average LCR on a daily basis for the quarter ended 31st March 2024 is 128.40%, above RBI prescribed minimum requirement of 100%.
i) Main drivers of LCR:
The Bank on a consolidated basis, during the three months ended 31st March 2024, had maintained average HQLA (after haircut) of Rs.619818.52 million. The HQLA is primarily driven by Government securities in excess of minimum SLR, Government securities within mandatory SLR requirement, to the extent allowed by RBI under MSF and the facility to avail liquidity for Liquidity coverage ratio. Also, cash, excess CRR maintained with RBI are important factors for Level 1 HQLA.
Level 2 HQLAs primarily consisted of BBB- and above rated corporate bonds and commercial papers not issued by financial entities.
ii) Intra-period changes as well as changes over time:
LCR were 130.60%,126.21% and 128.64% for the months ending January 2024, February 2024 and March 2024 as against regulatory requirement of 100%.
LCR has decreased from 157.49% for year end March 2023 to 138.18% for year end March 2024 mainly due to more increase in net cash outflow as compared to increase in HQLAs. HQLAs have increased on account of increase in SLR portfolio as compared to increase in statutory reserve ratios (SLR/CRR) on account of increase in NDTL.
• In composition of HQLAs, excess SLR has increased from 19.49% for FY end 31.03.2023 to 24.35% for FY end 31.03.2024 and FALLCR has decreased from 67% for FY end 31.03.2023 to 63% for FY end 31.03.2024.
• Level 2 assets which are lower in quality as compared to Level 1 assets, constitute 1.86% of total stock of HQLA against maximum mandated level of 40%.
iv) Concentration of funding sources:
A significant counterparty is defined as a single counterparty or group of connected or affiliated counterparties accounting in aggregate for more than 1% of the bank's total liabilities.
As on 31.03.2024, there is no significant counterparty deposit as well as borrowing.
Top 20 depositors (other than Certificate of Deposits) of the Bank constitute 9.77% of our total deposits which is well within limit of 15% as per ALM Policy.
Top 10 borrowings of the bank constitute 71.05% of total borrowings.
A significant instrument/product is defined as a single instrument/ product of group of similar instruments/products which in aggregate amount to more than 1% of the bank's total liabilities. Example of funding instruments/products- wholesale deposits, certificate of deposits, long term bonds etc. Significant instrument/product as of 31st March 2024 were bulk deposits i.e. 13.50% of total liabilities, Retail term deposits i.e. 26.57% of total liabilities, Demand deposits i.e. 46.49% of total liabilities and Certificate of deposits i.e. 1.60% of total liabilities.
v) Derivative exposures and potential collateral calls:
Derivative exposure is shown as Net Derivative cash inflows within 30 days. Inflows from derivative exposure arose due to maturing forwards.
vi) Currency mismatch in the LCR;
As per the RBI guidelines while the LCR standard is required to be met on one single currency, in order to better capture potential currency mismatch the LCR in each currency needs to be monitored. Accordingly, Bank is maintaining LCR on daily basis in INR and the same is compared against the regulatory requirement. Further bank does not have exposure to any other significant currencies*, hence LCR is prepared for INR currency.
(*A significant currency is one where aggregate liabilities denominated in the currency amount to 5% or more of the bank's total liabilities).
vii) A description of the degree of centralization of liquidity management and interaction between the group's units:
The liquidity management for the bank on enterprise wide basis is the responsibility of the Board of Directors. Board of Directors has delegated its responsibilities to a Committee of the Board called as the "Risk Management Committee of Board". The committee is responsible for overseeing the inter linkages between different types of risk and its impact on liquidity.
Bank has ALM policy which provides the broad guidelines under which all the entities within the group operate in terms of liquidity and interest rate risk.
LCR is computed and monitored on daily basis by the Bank and the same is shared with Treasury/Midoffice for liquidity management and discussed in Investment committee.
Further LCR for the latest month along with comparison of previous months is placed before ALCO on monthly basis. Moreover, LCR position along with other liquidity parameters is placed before RMC/Board on quarterly basis.
viii) The inflows and outflows in the LCR calculation that are not captured in the LCR common template but which the institution considers to be relevant for its liquidity profile are as under:
Qualitative Disclosure around NSFR:
The objective of NSFR is to ensure that bank maintains a stable funding profile in relation to the composition of its assets and off-balance sheet activities. A sustainable funding structure is intended to reduce the probability of erosion of a bank's liquidity position due to disruptions in a bank's regular sources of funding that would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR limits overreliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet items, and promotes funding stability.
The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable funding" (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required ("Required stable funding") (RSF) of Bank is a function of the liquidity characteristics and residual maturities of the various assets held by Bank as well as those of its off-balance sheet (OBS) exposures.
Main drivers of NSFR:
The Bank as on 31st March 2024, had maintained ASF of Rs 209766.41 cr. ASF consists of 38% from less stable non-maturity deposits and term deposits with residual maturity of less than one year provided by retail and small business customers and 31% from Stable non-maturity (demand) deposits and term deposits with residual maturity of less than one year provided by retail and small business customers.
RSF consists of 42% from "Other unencumbered performing loans with risk weights greater than 35% under the Standardized Approach and residual maturities of one year or more, excluding loans to financial institutions" line item.
NSFR for the quarter ended 31st March 2024 is 143.54%, above RBI prescribed minimum requirement of 100%.
NSFR has decreased from 146.13% as of 31.12.2023 to 143.54% as of 31.03.2024 due to increase in overall market interest rates and resultant decrease in overall liquidity in the system.
c) Sale and transfers to/from HTM category
As per RBI guidelines, an amount of R 22.14 crore (Rs 12.29 Crore) net of taxes and statutory reserves being profit on sale of investment in 'Held to Maturity' category is transferred to Capital Reserve.
The Bank has amortized R 103.95 crore during the year (R 112.94 Crore) for securities classified under 'Held to Maturity' category, and the amount has been charged to Profit & Loss account by reducing value of the respective securities to that extent.
The value of the sales and transfer of securities to / from HTM category during the financial year 2023-24, excluding one-time transfer with the approval of the Board, sales to RBI under pre announced OMO auctions and as permitted by RBI does not exceed 5 percent of the book value of investments in HTM category at the beginning of financial year.
e) Divergence in asset classification and provisioning
Banks are required to disclose the divergences in asset classification and provisioning consequent to RBl's annual supervisory process in their notes to accounts to the financial statements, wherever either or both of the following conditions are satisfied:
(a) the additional provisioning for NPAs assessed by Reserve Bank of India as part of its supervisory process, exceeds 5 per cent of the reported profit before provisions and contingencies for the reference period and
(b) the additional Gross NPAs identified by Reserve Bank of India as part of its supervisory process exceed 5 per cent of the reported incremental Gross NPAs for the reference period.
As the divergences are within threshold limit as specified above, no disclosure on divergence in asset classification and provisioning for NPAs is required with respect to RBl's annual supervisory process for FY 2022-23.
*Till such time, as banks move over to internal rating systems, banks shall use the seven-category classification followed by Export Credit Guarantee Corporation of India Ltd. (ECGC) for the purpose of classification and making provisions for country risk exposures. ECGC shall provide to banks, on request, quarterly updates of their country classifications and shall also inform all banks in case of any sudden major changes in country classification in the interim period.
Bank has put in place a policy for management of currency induced credit risk arising out of exposure to its constituents which inter-alia specifies the mechanism to ascertain Unhedged Foreign Currency Exposure (UFCE) and mitigate the same by pricing the exposure as well as incremental provisioning as under -
Method to ascertain the amount of Unhedged Foreign Currency Exposure (UFCE):
The amount of UFCE of the constituents is measured by obtaining the periodical information from the clients having exposure of R10.00 crore and above. For this purpose, items maturing or having cash flows over the period of next five years only are considered. Further, items which are effective hedges, financial hedge and / or natural hedge, of each other are set off. (Financial hedge through a derivative contract (e.g. Forward Cover) and Natural hedge may be considered when cash flows arising out of the operations of the company offset the risk arising out of the Foreign Currency Exposure. For the purpose of computing UFCE, an exposure may be considered naturally hedged if the offsetting exposure has the maturity/cash flow within the same accounting year).
Method to estimate the extent of likely loss:
The loss to the entity in case of movement in exchange rate is calculated using the annualised volatilities. For this purpose, largest annual volatility seen in the rates during the period of last ten years is taken as the movement of the rate in the adverse direction.
Method to estimate the riskiness of unhedged position and provide appropriately:
The likely loss / EBID so arrived at is taken as the base, as per which consolidated UFCE on behalf of the constituents is calculated, based on the model specified by the Bank. Such exposure is subjected to additional provisioning and also incremental capital requirement. Further, the pricing to such constituents is accordingly re-priced based on the risk profile of the borrower by loading an appropriate premium to cover the UFCE.
b) Concentration of advances
Advance is computed based on credit exposures. The sanctioned limits or outstanding, whichever is higher, have been considered. In case of fully drawn term loan, where there is no scope for re - drawal of any portion of the sanctioned limit, outstanding has been considered as the credit exposure.
Bank has policy guidelines in place for IRS/ FRA's. The approved ceiling for IRS / FRAs in terms of notional principal is R 2000.00 crore. As on 31st March 2024, the Bank had no outstanding swaps.
$Example of concentration could be exposures to particular industries or swaps with highly geared companies.
@If the swaps are linked to specific assets, liabilities, or commitments, the fair value would be the estimated amount that the bank would receive or pay to terminate the swap agreements as on the balance sheet date. For a trading swap the fair value would be its mark to market value.
c) Disclosures on risk exposure in derivatives
Qualitative disclosures
I. Derivative policy is approved by the Board, which includes measurement of credit & market risk.
II. Policy for hedging and processes for monitoring the same are in place.
III. The hedged transactions are undertaken for Balance Sheet management. Proper system for reporting & monitoring of risks is in place.
IV. Risk Management of derivative operations is headed by a Top Management Executive who reports to Head Office. The swaps are tracked on regular basis.
V. Accounting Policy for recording hedge and non-hedge transactions is in place, which includes recognition of income, valuation of outstanding contracts and credit risk mitigation as given in para 3.7 (ii) of Schedule 17, viz., Significant Accounting Policies.
VI. The Bank has made requisite provision on credit exposure of derivative contracts computed as per current exposure method & as per RBI guidelines.
f) Implementation of IFRS converged Indian
Accounting Standards (Ind AS)
1. The Proforma Financial Statement (PFS) are being submitted to RBI on Half yearly basis (from FY 2021-22).
2. Bank has appointed a consultant for vetting the Proforma Financial Statement (PFS) before putting to Board for approval & submission to RBI.
3. In addition to vetting, Consultant has also been given assignment to conduct training for employees of the Bank in respect of IndAS.
h) Disclosure on amortization of expenditure on account of enhancement in family pension of employees of banks
The additional liability on account of enhancement in family pension in line with Government guidelines, works out to R 217.70 Crore as per Actuarial valuation. The Bank had already recognized the said liability and charged to the Profit & Loss Account during the FY 2021-22.
i) Letter of Comfort (LOCs) issued by Bank for the purpose of Trade Credit Facility to corporate
During the current year, 138 Trade credits amounting to R 112.08 crores were sanctioned by the Bank and No Letters of Comfort issued by the branches in favor of various other Banks for arranging trade credit to corporate clients.
As on 31st Mar 2024, 45 Trade Credits amounting to R 36.71 crores are outstanding as against 22 Trade Credits amounting to R 20.66 crores for the year ended 31st March, 2023.
i) In accordance with the As-10 "Property, Plant and Equipment" depreciation of R29.49 Crore (R102.46 crore) for the year on revalued portion of fixed assets has been charged to Profit and Loss Account. Equivalent amount of R29.49 crore (R102.46 crore) has been transferred from Revaluation Reserve to Revenue Reserve.
ii) Certain premises of banks are stated at revalued amount. The gross amount of such revaluation included in premises at the end of the year is R1472.83 crore and net of depreciation the revaluation amounts to R1443.34 crore
iii) There are cases pending for leased premises where no contingent liability is recognized as the Bank is defending all these cases filed by landlords of Branch premises due to expiration of lease deeds. Out of these, Bank accounts for its liability to around R0.27 crore. In all other cases where landlords have filed the claims, the amount cannot be ascertained unless the court crystalizes quantum of claims.
iv) Capital work in progress comprises of the cost of fixed assets that are not yet ready for their intended use at the reporting date. Capital work in progress amounting to R9.58 Crore includes construction of building.
16) Accounting Standards:
The Bank has complied with the Accounting Standards issued by The Institute of Chartered Accountants of India (ICAI) to the extent applicable as under:
Accounting Standard 3- Cash Flow Statement: The bank prepares cash flow statement in line with requirements of AS-3 using indirect method.
Accounting Standard 5 - Net Profit or Loss for the period, prior period items and changes in accounting policies: As
prior period items of income/expenditure are not material, the same have been charged/accounted for in respective heads of accounts during the year.
Accounting Standard 9 - Revenue Recognition: As per
Accounting Policy No. 6.2, given in Schedule -17 - Significant Accounting Policies, the interest payable on overdue term deposit is provided on accrual basis at rate of interest as applicable to saving account or contracted rate of interest on the matured TD, whichever is lower from 02.07.2021.
Accounting Standard 11 - Effect of Changes in Foreign Exchange Rates: Net income on account of exchange differences credited to Profit and Loss account for the year is R 41.61 crore (R.78.04 crore).
B. Defined Benefit Plans:
a) Pension Plan- This is a post-employment benefit, which is 50% of final pay for a maximum of 33 years of pensionable service. This is a funded scheme.
b) Gratuity Plan- This is a post-employment benefit and is payable as higher of Gratuity as per Company's Rules and Gratuity under Payment of Gratuity Act 1972 as amended. This is a funded scheme.
c) Leave Encashment/ Compensated Absences- This is a post-employment benefit and is payable for a maximum limit of 240 days of accumulated leave based on final pay. This is a funded scheme.
RBI's Master Direction on Financial Statements -Presentation and Disclosures, requires to sub divide "Retail Banking" into (a) Digital Banking (as defined in RBI circular or Establishment of Digital Banking Units dated April 07, 2022) and (b) Other Retail Banking segment. Accordingly, the segmental results for retail banking segment is subdivided as below:
a) Treasury segment includes Investment, balances with Banks outside India, Interest accrued on investments and related income there from.
b) Corporate/Wholesale Banking Segments include all advances to trusts, partnership firms, companies, statutory bodies and individuals etc. which are not included in Retail Banking Segments.
c) Retail Banking Segments include exposure to entity/concern where
i. Total average annual turnover less than Rs. 50.00 crore and
ii. Aggregate exposure to one counter party does not exceed 0.2% of the overall retail portfolio of the Bank and
iii. The maximum aggregated retail exposure to one counterpart is below Rs.7.50 crore.
d) Other Banking Operations segment includes all other banking transaction not covered under segments, specified above.
e) The interest income is allocated on the basis of actual interest received from wholesale banking operations. The total interest received less interest of wholesale banking is taken to retail banking operations
f) Expenses not directly attributable are allocated on the basis of Interest income earned by the wholesale banking / retail banking segment. Expenses of treasury operations are as per the details available from treasury operations
g) Capital employed for each segment has been allocated proportionate to the assets of the respective segment.
Part B: Geographical Segment
Since the operations of the Bank are within India only, Geographical Segment is not applicable.
Accounting Standard 18 - Related party disclosures
The details in this regard are asunder:
Name of the Related Parties and their relationship:
a) Subsidiary of the Bank -The Maharashtra Executor & Trustee Co. Pvt. Limited
b) Associate of the Bank - Maharashtra Gramin Bank
c) Key Management Personnel- Details given in point no. 13 above
d) Sponsor Trust- Gramin Va Balak Vikas Mandal
e) Sponsor Trust- Mahabank Agricultural Research and Rural Development Foundation
f) Staff welfare Trust for Pension- Bank of Maharashtra Employees' Pension Fund
g) Staff welfare Trust for Gratuity- Bank of Maharashtra Employees' Gratuity Fund
h) Staff welfare Trust for Provident Fund - Bank of Maharashtra Employees' Provident Fund
i) Staff welfare Trust for Leave Encashment- Bank of Maharashtra Employees Privilege Leave Encashment Fund Trust
Transactions with Related parties:
No disclosure is required in respect of related parties, which are "State Controlled Enterprises" as per paragraph no 9 of Accounting Standard (AS 18). Further in terms of paragraph 5 of AS 18, transactions in the nature of Banker-Customer relationship have not been disclosed including those with Key Management Personnel and relatives of Key Management Personnel.
Accounting Standard 19 - Leases
Finance Leases: Lease under which the Bank assumes substantially all the risks and rewards of ownership are classified as finance leases. Such assets acquired are capitalized at fair value of the asset or lease payments at the inception of the lease, whichever is lower.
Operating Leases: Operating Leases are cancellable at the option of the Bank. The amount of lease expenses recognized in the Profit and Loss Account for such operating lease is R 214.15 crore for the year 2023-24 (for FY 2022-23 R 184.68 crore).
Accounting Standard 21 - Consolidated Financial
Statements: The financial results of the Associate viz. Maharashtra Gramin Bank and subsidiary viz. Maharashtra Executor & Trustee Company Private Limited have been consolidated with the parent bank in compliance with Accounting Standard 23 and Accounting Standard 21 respectively.
Accounting Standard 22 - Accounting for Taxes on Income: Based on the review by the bank and on reasonable certainty of availability of future taxable income against which timing differences arising on account of provision for accumulated losses, Bad & Doubtful Debts (NPA), employee benefits etc. can be realized, the bank has accounted for taxes on income in compliance with AS 22. Accordingly, Deferred Tax Assets and Deferred Tax Liabilities are as under:
As the bank has opted for lower tax rate permitted under section 115 BAA of the Income Tax Act 1961 from AY 2021-22, the provisions of section 115JB of the Income Tax Act are not applicable to the bank.
Accounting Standard -24- Discontinuing Operations: The
Bank, during the financial year 2023-24, has not discontinued any of its business activities/ operations which resulted in discharging of liabilities and realization of the assets and no decision has been finalized to discontinue a business activity in its entirety which will have the above effects
Accounting Standard 28- Impairment of Assets: Assets are reviewed for impairment at the end of the year whenever events or changes in circumstances warrant that the carrying amount of an asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison for the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If such an asset is considered to be impaired, the impairment to be recognized and is measured by the amount by which the carrying amount of the asset exceeds the recoverable amount of the asset. However, in the opinion of the Bank's Management, there is no indication of material impairment to the assets during the year to which Accounting Standard 28 -"Impairment of Assets" applies.
Total Contingent liabilities (as per Schedule 12) include expired Guarantees amount R 1482.68 crore (P.Y. R 1157.12 crore), which has not been cancelled because of pending completion formalities.
17) The Board has proposed dividend @14% i.e. R 1.40 per equity share (Face Value of R 10/- per share) for the Financial Year 2023-24 in Board Meeting dated April, 26 2024 subject to requisite approval from Shareholders.
18) Previous year's figures have been regrouped / reclassified wherever considered necessary to make them comparable with current year's figure.
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