1. Sale and Transfer to / from HTM category
During the year ended 31st March, 2017, the Bank has sold Government Securities from Held to Maturity category exceeding 5% of the book value of investments held in HTM category at the beginning of the year. The profit booked out of sale of HTM securities has been transferred to Capital Reserve. The market value of investments under HTM category as on 31st March, 2017 was Rs.6,006.45 crore and as the market value was higher than the book value, the provision thereof is not required to be made.
2. Disclosures on risk exposure in derivatives
2.1 Qualitative Disclosure :
A. Structure and Organization for Management of risk in derivatives trading
Operations in the Treasury are segregated into three functional areas, namely Front office, Mid-office and Back-office, equipped with necessary infrastructure and trained officers, whose responsibilities are well defined. The Bank enters into plain vanilla Forward Contracts only to backup / cover customer transactions as also for proprietary trading purpose.
The Integrated Treasury Policy of the Bank clearly lays down the scope of usages, approval process as also the limits like the Open Position Limits, Deal Size Limits and Stop Loss Limits for trading.
The Mid Office is handled by Risk Management Department. Daily report is generated by Risk Management Department for appraisal of the risk profile to the Senior Management for Asset and Liability Management.
B. Scope and nature of Risk Measurement, Risk Reporting and Risk Monitoring Systems
Outstanding forward contracts are monitored by Risk Management Department against the limits (Counterparty, Stop Loss, Open Position, VaR, Aggregate Gap) fixed by the Board and approved by RBI (wherever applicable) and exceedings, if any, are reported to the Board for ratification.
C. Policies for hedging and / or mitigating and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants
The Bank''''s policy lays down that the transactions with the corporate clients are to be undertaken only after the inherent credit exposures are quantified and approved for customer appropriateness and suitability and necessary documents like ISDA agreements etc., are duly executed. The Bank adopts Current Exposure Method for monitoring the credit exposures.
While sanctioning the limits, the competent authority stipulates condition of obtaining collaterals / margin as deemed appropriate. The derivative limits are reviewed periodically along with other credit limits.
D. Accounting policy for recording the hedge and non-hedge transactions, recognition of Income premiums and discounts, valuation of outstanding contracts, provisioning, collateral and credit risk mitigation
Valuation of outstanding Forward Contracts are done as per FEDAI guidelines in force. Marked to Market profit & loss are taken to Profit & Loss account. MTM profit & loss calculated as per Current Exposure Method are taken into account while sanctioning forward contract limits to customers and collaterals / cash margins are prescribed for credit and market risks.
The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other Banks. The credit exposure on account of forward contracts is also considered while arriving at the total exposure of each customer / borrower. The Bank also deals with other Banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under Current Exposure Method. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.
3. Particulars of Accounts Restructured As per Annexure I.
Disclosures on the scheme for sustainable Structuring of Stressed Assets (S4A), as at 31st March, 2017
There were no accounts during the year where S4A has been applied.
Disclosures on Flexible Structuring of Existing Loans
There were no borrowers taken up for flexibility structuring during the year.
Disclosures on Strategic Debt Restructuring Sheme (accounts which are currently under the stand-still period)
There were no accounts during the year where SDR has been invoked.
Disclosures on change in Ownership outside SDR scheme (accounts which are currently under the stand-still period)
There were no accounts during the year where Bank has decided to effect change in ownership.
Disclosures on change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period)
There were no project loan accounts during the year where Bank has decided to effect change in ownership.
4. Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank
Single Borrower Limit / Group Borrower Limit has not been exceeded during the year.
5. Unsecured Advances - Advances secured by intangible securities such as Rights, licenses, authorizations, etc. - Nil
6. Penalties imposed by RBI
During the year, RBI has imposed penalty of Rs.69,000/- on discrepancies detected during Soiled Notes Remittance.
7. Disclosures as per Accounting Standards
The Bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI''''s guidelines.
i) Prior Period Items - AS 5
There are no material prior period items of Income / Expenditure during the year requiring disclosure.
ii) Revenue Recognition - AS 9
As mentioned in Accounting Policy (2) of Income / Expenditure of certain items recognized on cash basis.
iii) Employee Benefits-AS 15
The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.
The Bank and its employees contribute a defined sum every month to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.
Leave encashment benefits of employees are provided on an actuarial basis but not funded.
The summarized position of the employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard-15 (Revised) is as under - Leave Encashment:
vi). Leases –AS 19
a) Lease rent paid for operating leases are recognized as an expense in the Profit & Loss Account in the year to which it relates.
b) Future lease rents and escalation in the rent are determined on the basis of agreed terms.
c) At the expiry of initial lease term, generally the Bank has an option to extend the lease for a further pre-determined period.
d) The Bank does not have any financial lease.
viii) Consolidated Financial Statements (CFS)-AS 21
The Bank has no subsidiaries.
x) Accounting for Investments in Associates in CFS - AS 23
The Bank has no Associates.
xi) Discontinuing Operations - AS 24
The Bank has not discontinued any operations.
xii) Intangible Assets - AS 26
The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.
xiii) Impairment of Assets - AS 28
In the opinion of the management there is no impairment to the assets to which AS 28 -"Impairment of Assets" applies.
xiv) Provisions & Contingencies - AS 29
The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA''''s and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.
8. Drawdown from Reserves
The Bank has not drawn any amount from Reserves during the year.
9. Letters of Comfort
The Bank has not issued any letters of comfort to other Banks / Branches during the year. However, letter of undertaking aggregating to Rs.163.45 crore was outstanding as on 31st March, 2017. In the Bank''''s assessment, no financial impact is likely to arise.
10. Provisioning Coverage Ratio (PCR)
The Provisioning Coverage Ratio (PCR) of the Bank as on 31st March, 2017 is 61%. (PY. 60%)
11. Bancassurance Business
Income from Bancassurance Business for the financial year 2016-17 is Rs. 6.24 cr. (PY. Rs.4.42 cr)
12. Off-Balance Sheet SPVs sponsored
The Bank has not sponsored any SPVs. (Domestic / Overseas)
13. Unamortized Pension and Gratuity Liabilities - Nil.
14. Disclosures relating to Securitization
The outstanding amount of securitized assets as per books of the SPVs sponsored by the Bank and total amount of exposures retained by the bank as on 31stMarch, 2017 - Nil.
15. Unhedged Foreign Currency Exposure
a) In terms of RBI circular No. DBOD. NO. BP. BC. 85/21.06.200/2013-14 dated 15th January, 2014 with regard to Capital and Provisioning Requirements for exposures to entities with Unhedged Foreign Currency Exposure, the Bank has a policy approved by the Board of Directors.
b) The provision required for UFC exposure as on 31st March, 2017 is Rs.0.94 crore only against which a provision of Rs.1.96 crore has already been made.
c) The incremental capital requirement for the unhedged forex exposure as on 31st March, 2017 has been determined based on the additional risk weight value of Rs.0.37 crore for the UFC exposure.
16. Liquidity Coverage Ratio
17. Credit Default Swaps
The Bank has not entered into Credit Default Swaps during the Current Financial Year.
18. Intra-Group Exposures
19. Quality Disclosure around LCR
Liquidity Coverage Ratio has been prescribed by RBI based on LCR Standards published by BCBS. The LCR promotes short term resilience of Banks to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Assets (HQLAs) to survive an acute stress scenario in the immediate 30 days period.
LCR is defined as
Stock of High Quality Liquid Assets(HQLA) > 100 % Total net cash outflows over the next 30 calendar days
The LCR standard aims to ensure that a Bank maintains an adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for the next 30 days period under a significantly severe liquidity stress scenario specified by RBI w.e.f. 1stJanuary, 2015.
While the BCBS specifies a ratio of minimum 100% for all Banks, RBI has made a graduated increase from 60% to attain 100% by 2019 as given in the schedule below:
Composition of High Quality Liquid Assets (HQLA) :
- Cash in hand.
- Excess CRR balance as on that particular day.
- Excess Government Securities in excess of minimum SLR requirement.
- Government Securities within the mandatory SLR requirement to the extent allowed by RBI under MSF (Presently to the extent of 2% of NDTL as allowed for MSF).
- Facility to avail liquidity for liquidity coverage ratio at 5% of NDTL.
- Repo Borrowings should be deducted.
- AAA rated bonds and AA- & above bonds and adding marketable securities representing claims guaranteed by sovereigns having risk weights higher than 20% but not higher than 50%.
- Common equity shares not issued by the Bank and included in NSE CNX Nifty and / or S & P BSE Sensex indices.
As regards the concentration of funding sources, the term deposits from public is the major source for the Bank.
The currency mismatch in respect of Foreign Currency Assets and Liabilities is very minimal.
20. Income Tax
Provision for Income Tax in the current year is made as per Income Computation Disclosures Standards (ICDS) after considering various judicial decisions on certain disputed issues.
In the opinion of the management, no provision is considered necessary for earlier years towards disputed tax liability since for the tax claim of Rs.525 cr (under Appeal) (previous year Rs.409 crore), the bank has to its support, appellate orders decided in its favour on similar issues.
21. Inter Branch Reconciliation
Reconciliation of Central Office accounts maintained by branches has been completed upto 31st March, 2017. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.
22. Employees Stock Option
The Bank has allotted 28,73,602 (PY. 16,23,479) equity shares during the year to its eligible employees who have exercised their options granted under ESOP of the Bank.
23. In accordance with the RBI circular DBOD. No. BPBC.2/21.06.201/2013-14 dated 1st July, 2013, Banks are required to make half yearly Pillar III disclosures under Basel III capital requirements with effect from 30thSeptember, 2013. The disclosures have been made available on the Bank''''s web site.
24. There are no dues to Micro and Small Enterprises calling for disclosure as at 31st March, 2017 as per the records available.
25. Implementation of Ind AS:
The Ministry of Corporate Affairs (MCA) has notified Accounting Standard (Ind AS) as issued by The Institute of Chartered Accountants of India (ICAI) for implementation beginning from 1st April, 2018 onwards with comparative figures of 2017.
Accordingly, the Ind AS quarterly financials of FY.2017-18 should be published with comparison from June 2018 onwards.
As advised by RBI, the Bank has submitted proforma Ind AS financial statements to RBI for the half year ended 30th September, 2016 in prescribed format.
26. Priority Sector Lending Certificates (PSLC)
During the year, PSLC purchased (SF / MF) Rs.650 cr and PSLC sold Rs.3,845 cr (Micro Enterprises Rs.1,000 cr and General Rs.2,845 cr).
27. Previous year''''s figures have been regrouped wherever necessary to conform to the current year classification.