1. BACKGROUND
DCB Bank Limited (“DCB” or “the Bank”), incorporated in Mumbai, India is a publicly held banking company engaged in providing banking and financial services and governed by the Banking Regulation Act, 1949.
2. BASIS OF PREPARATION
The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting unless otherwise stated, and comply with the Generally Accepted Accounting Principles in India (‘GAAP''''), statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (the “RBI”) from time to time and the notified Accounting Standards prescribed under Section 133 of the Companies Act 2013, to the extent applicable and the current practices prevailing within the banking industry in India.
3. USE OF ESTIMATES
The preparation of the financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon the management''''s best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognized prospectively in the current and future periods.
4. INVESTMENTS
4.1 Classification:
The investment portfolio comprising approved securities (predominantly Government Securities) and other securities (Shares, Debentures and Bonds, etc.) is classified at the time of acquisition in accordance with the RBI guidelines under three categories viz. ‘Held to Maturity7 (‘HTM''''), ‘Available for Sale'''' (‘AFS'''') and ‘Held for Trading'''' (‘HFT''''). For the purposes of disclosure in the Balance Sheet, they are classified under six groups viz. Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Subsidiaries and/or joint ventures and Other Investments.
The Bank follows ‘Settlement Date'''' accounting for recording purchase and sale transactions.
4.2 Basis of Classification:
Investments that are held principally for resale within 90 days from the date of purchase are classified as HFT securities. 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.
Investments which are not classified in the above categories are classified as AFS securities.
4.3 Transfer of Securities between Categories:
The transfer/shifting of securities between categories of investments is accounted as per the RBI guidelines.
4.4 Acquisition Cost:
Cost including brokerage, commission pertaining to investments, paid at the time of acquisition, is charged to the Profit and Loss Account. Broken period interest is charged to the Profit and Loss Account.
Cost of investments is computed based on the weighted average cost method.
4.5 Valuation:
Held for Trading and Available for Sale categories:
Investments classified under HFT and AFS are marked to market as per the RBI guidelines. These securities are valued scrip-wise and any resultant depreciation or appreciation is aggregated for each category. The net depreciation for each category within each group is provided for, whereas the net appreciation for each category is ignored. The book value of individual securities is not changed consequent to periodic valuation of investments.
Traded investments are valued based on the trades / quotes from the recognized stock exchanges, price list of RBI or prices declared by Primary Dealers Association of India (‘PDAI'''') jointly with Fixed Income Money Market and Derivatives Association (‘FIMMDA''''), periodically.
The market value of unquoted government securities which qualify for determining the Statutory Liquidity Ratio (‘SLR'''') included in the AFS and HFT categories is computed as per the Yield-to-Maturity (‘YTM'''') rates published by FIMMDA.
The valuation of other unquoted fixed income securities (viz. State government securities, Other approved securities, Bonds and debentures, Pass through Certificates) wherever linked to the YTM rates, is computed with a mark-up (reflecting associated credit and liquidity risk) over the YTM rates for government securities with similar maturity profile published by FIMMDA. Unquoted equity shares are valued at the break-up value, if the latest Balance Sheet is available or at '''' 1 as per the RBI guidelines. Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund. Treasury bills, commercial papers and certificate of deposits, being discounted instruments, are valued at carrying cost.
In the event provisions recognized on account of depreciation in the AFS or HFT categories are found to be in excess of the required amount in any year, such excess is recognized in the Profit and Loss Account and subsequently appropriated, from profit available for appropriation, if any, to Investment Reserve Account in accordance with the RBI guidelines after adjusting for income tax and appropriation to Statutory Reserve. Held to Maturity:
These are carried at their acquisition cost and are not marked to market. Any premium on acquisition is amortized over the remaining maturity period of the security on a straight-line basis. Provision is recognized for diminution other than temporary in the value of such investments for each investment individually.
Non-performing investments are identified and provision is recognized as per the RBI guidelines.
4.6 Security Receipts (SR)
Security receipts issued by the Asset Reconstruction Companies (‘ARC’) are valued at the net asset value declared by ARC and valued in accordance with the guidelines applicable to such instruments, prescribed by the RBI from time to time.
4.7 Disposal of Investments:
Profit/Loss on sale of investment under the aforesaid three categories is recognized in the Profit and Loss Account. The profit on sale of investment in HTM category, net of taxes and transfer to Statutory Reserve, is appropriated to Capital Reserve.
4.8 Repo and reverse repo transactions under Liquidity Adjustment Facility (‘LAF’):
Repo transactions under LAF with RBI are accounted for as secured borrowing/ lending transactions. Borrowing cost on repo transactions is treated as interest expense and income on reverse repo transactions is treated as interest income.
5. ADVANCES
5.1 In pursuance of guidelines issued by the RBI, advances are classified as Standard, Sub-Standard, Doubtful and Loss Assets and are stated net of specific provisions made towards NPAs and floating provisions.
5.2 Advances are net of bills rediscounted, Inter-bank participation with risk, claims realized from Export Credit Guarantee Corporation (‘ECGC’), provisions for non- performing advances, floating provisions, unrealized fees and unrealized interest held in suspense account.
5.3 Credit facility/investment, where interest and/or installment of principal has remained overdue for more than 90 days, is classified as nonperforming asset. However, in respect of Equated Monthly Installment (‘EMI’) based advances, those accounts where more than 3 EMIs are overdue are classified as NPAs.
5.4 In case of NPAs other than retail EMI loans, recoveries effected are first adjusted towards the principal amount. In case of retail EMI loans, recoveries effected are adjusted towards the EMI and within the EMI first towards the principal amount.
5.5 Provision for non-performing advances (‘NPAs’) comprising sub-standard, doubtful and loss assets is made in accordance with the RBI guidelines which prescribe minimum provision levels and encourage banks to make a higher provision based on sound commercial judgment. NPAs are identified by periodic appraisals of the loan portfolio by the management. In respect of identified NPAs in Retail portfolio, provision is recognized on the homogeneous retail loans and advances assessed at borrower level on the basis of ageing of loans in the non-performing category and in respect of identified NPAs in other cases, provision is recognized account by account. The provisioning done is at or higher than the minimum rate prescribed under the RBI guidelines.
5.6 In case of restructured/rescheduled assets, provision is made in accordance with the guidelines issued by the RBI, which require the diminution in the fair value of the assets to be provided in the Profit and Loss Account at the time of restructuring.
5.7 In addition to the above, the Bank, on a prudent basis, recognizes provisions on advances or exposures which are performing assets as per the IRAC norms, but has reasons to believe on the basis of the extant environment impacting a specific exposure or any specific information, the possible deterioration of a specific advance or a group of advances or exposures or potential exposures. These provisions are recognized as per Board approved policy and are classified as Provision for Specific Standard Assets, included under Provision for Standard Assets and reported under Other Liabilities. These provisions are not reversed to the Profit and Loss Account but are transferred as provision on the same specific advance / exposure in case the asset slips into non-performing asset, except in case of full repayment of the exposure when such provision will be reversed and recognized in the Profit and Loss Account.
5.8 The Bank maintains general provision for Standard Assets, including credit exposures computed as per the current marked to market values of foreign exchange forward contracts, at levels stipulated by the RBI from time to time. These provisions on Standard Assets are included under Other Liabilities.
5.9 The Bank estimates the inherent risk of the unhinged foreign currency exposures of its borrowers as per the regulatory guidelines stipulated by the RBI from time to time and recognizes incremental provisions on exposures to such entities as per methodology prescribed. These provisions are included in Provision for Standard Assets and reported under Other Liabilities.
5.10 The RBI guidelines further permit banks to create floating provisions on Advances up to levels as per a Board approved policy over and above the regulatory provisions required on standard assets. These floating provisions are netted from Advances. These provisions are not reversed by credit to the Profit and Loss Account without prior approvals of the Board and the RBI under specific circumstances.
6. FIXED ASSETS
Premises and other fixed assets are stated at historical cost (or revalued amounts, as the case may be), less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefit / functioning capability from / of such assets.
7. REVALUATION OF FIXED ASSETS
Portfolio of immovable properties is revalued periodically by an independent value to reflect current market valuation. All land and building owned by the Bank and used as branches or offices or god owns are grouped under “Office Premises” in the fixed assets category. Appreciation, if any, on revaluation is credited to Revaluation Reserve under Capital Reserves. Additional Depreciation on the revalued asset is charged to the Profit and Loss Account and appropriated from the Revaluation Reserves to Profit and Loss Account i.e. revenue reserves.
8. DEPRECIATION & AMORTISATION
Depreciation on fixed assets, including amortization of software, is charged over the estimated useful life of the fixed assets on a straight-line basis at the rates and in the manner prescribed in Schedule II of the Companies Act, 2013, except as mentioned below. The useful life of an asset is the period over which an asset is expected to be available for use to the Bank.
- Computer Hardware and Servers - 33.33% p.a.
- Air conditioners — 11.11% p.a.
- Application Software and System Development Expenditure - 33.33% p.a.
- Improvements (Civil) to Leased Premises and Fixed Furniture in Leased Premises such as work-stations, etc. — over the contracted period of the lease
- Vehicles — 19% p.a. over 5 years with 5% residual value.
- Cash safe and Safe Deposit Vaults — 4.75% p.a.
Assets purchased/sold during the year are depreciated on a pro-rata basis, based on the actual number of days the assets have been put to use. Assets individually costing upto '''' 5,000/- are depreciated fully over a period of one year from the date of purchase.
9. IMPAIRMENT OF ASSETS
The carrying amount of assets is reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment, depreciation is provided on the revised carrying amount of the asset over remaining useful life.
10. RECOGNITION OF INCOME AND EXPENDITURE
10.1 Revenue is recognized to the extent that it is probable that the economic benefit will flow to the Bank and the revenue can be reliably measured.
10.2 Items of income and expenditure are generally accounted on accrual basis.
10.3 Interest income is recognized in the Profit and Loss Account on accrual basis, except in the case of non-performing assets where it is recognized on receipt basis as per the RBI and Accounting Standard norms.
10.4 Interest income on investments in Pass Through Certificates (PTC) is recognized at the coupon rate, net of tax on distributed income.
10.5 Interest income on loans bought out through the direct assignment route is recognized at the effective interest rate i.e. after amortizing premium, if any, on the bought out portfolio as per Guidelines on Securitized Transactions issued by the RBI.
10.6 Processing fees on loans are recognized as income, however processing overheads on loans are expensed at the inception of the loan.
10.7 Overdue rent on safe deposit lockers is accounted for when there is certainty of receipts.
10.8 Guarantee commission, annual safe deposit locker rent fees are recognized on a straight-line basis over the period of contract. Letters of credit (‘LC’) are generally issued for a shorter tenor, typically of 90 days. The commission on such LC is recognized when due.
11. FOREIGN CURRENCYTRANSACTIONS
11.1 Initial recognition:
Foreign currency transactions are recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and foreign currency on the date of the transaction.
11.2 Conversion:
Foreign currency monetary items are reported using the closing rate notified by Foreign Exchange Dealers’ Association of India (‘FEDAI’) at the Balance Sheet date and the resulting profit or loss is recognized in the Profit and Loss Account, as per the guidelines issued by the RBI.
11.3 Exchange differences:
Exchange difference arising on settlement of monetary items is recognized as income or as expense in the year in which it arises. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuations denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
Foreign exchange forward contracts not intended for trading that are entered into to establish the amount of reporting currency required or available at the settlement date of transactions, which are outstanding at the Balance Sheet date are effectively valued at the closing spot rate. The premium or discount arising at the inception of such a forward exchange contract is amortized as expense or income over the life of the contract.
11.4 Outstanding forward exchange contracts are revalued at the Balance Sheet date at the rates notified by FEDAI and at interpolated rates for contracts of interim maturities. The resultant gain/loss on revaluation is recognized in the Profit and Loss Account in accordance with the RBI/ FEDAI guidelines.
11.5 Contingent liabilities denominated in foreign currencies are disclosed in the Balance Sheet at the rates notified by FEDAI.
11.6 Forward exchange contracts and other derivative contracts which have overdue receivables remaining unpaid over 90 days or more are classified as non-performing assets and provided for as per the extant master circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning issued by the RBI.
12. EMPLOYEE BENEFITS
12.1 Defined Benefit Plan
Provision in respect of future liability for payment of gratuity is made on the basis of actuarial valuation on projected unit credit method made at the end of the year. Gratuity is funded with the Gratuity Trust duly registered under the provisions of Income tax Act, 1961. Actuarial gains/ losses are recognized immediately in the Profit and Loss Account and are not deferred.
12.2 Defined Contribution Scheme
Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the fund are due. There is no other obligation other than the contribution payable to the fund.
13. TAXES ON INCOME
13.1 Tax expense comprises current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961. Deferred Income Tax reflects the impact of current year timing differences between the taxable income and the accounting income for the year and reversal of timing differences of earlier years.
13.2 Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to taxes levied by same governing taxation laws. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. In situations where the Bank has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that they can be realized against future taxable profits.
13.3 At each Balance Sheet date, the Bank re-assesses unrecognized deferred tax assets and recognizes deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.
BACKGROUND
DCB Bank Limited( DCB or the Bank ), incorporated in Mumbai, India is a publicly held banking company engaged in providing banking
and financial services and governed by the Banking Regulation Act, 1949.
BASIS OF PREPARATION
The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting, and comply
with the Generally Accepted Accounting Principles in India (GAAP ), statutory requirements prescribed under the Banking Regulation Act,
1949, circulars and guidelines issued by the RBI from time to time and the notified Accounting Standards prescribed under Section 133 of the
Companies Act 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and the current practices prevailing
within the banking industry in India.
USE OF ESTIMATES
The preparation of the financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of
operations during the reporting period. Although these estimates are based upon the managements best knowledge of current events and
actions, actual results could differ from these estimates. Any revisions to the accounting estimates are recognised prospectively in the current and
future periods.
INVESTMENTS
Classification:
The investment portfolio comprising approved securities (predominantly Government Securities) and other securities (Sh ares, Debentures and
Bonds, etc.) is classified at the time of acquisition in accordance with the RBI guidelines under three categories viz. ‘Held to Maturity’ (‘HTM’),
Available for Sale (AFS) and Held for Trading (HFT). For the purposes of disclosure in the Balance Sheet, they are classified under six
groups viz. Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Subsidiaries and/or joint ventures and Other
Investments.
The Bank follows ‘Settlement Date’ accounting for recording purchase and sale transactions.
Basis of Classification:
Investments that are held principally for resale within 90 days from the date of purchase are classified as HFT securities. 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.
Investments which are not classified in the above categories are classified as AFS securities.
Transfer of Securities between Categories:
The transfer/shifting of securities between categories of investments is accounted as per the RBI guidelines.
Acquisition Cost:
Cost including brokerage, commission pertaining to investments, paid at the time of acquisition, is charged to the Profit and Loss Account.
Broken period interest is charged to the Profit and Loss Account.
Cost of investments is computed based on the weighted average cost method.
Valuation:
Held for Trading and Available for Sale categories:
Investments classified under HFT and AFS are marked to market as per the RBI guidelines. These securities are valued scrip-wise and any
resultant depreciation or appreciation is aggregated for each category. The net depreciation for each category is provided for, whereas the net
appreciation for each category is ignored. The book value of individual securities is not changed consequent to periodic valuation of investments.
Traded investments are valued based on the trades / quotes from the recognised stock exchanges, price list of RBI or prices declared by Primary
Dealers Association of India ( PDAI) jointly with Fixed Income Money Market and Derivatives Association ( FIMMDA’), periodically.
The market value of unquoted government securities which qualify for determining the Statutory Liquidity Ratio (‘SLR’) included in the AFS
and HFT categories is computed as per the Yield-to-Maturity (YTM ) rates published by FIMMDA.
The valuation of other unquoted fixed income securities (viz. State government securities, Other approved securities, Bonds and debentures)
wherever linked to the YTM rates, is computed with a mark-up (reflecting associated credit and liquidity risk) over the YTM rates for government
securities with similar maturity profile published by FIMMDA. Unquoted equity shares are valued at the break-up value, if the latest Balance
Sheet is available or at ' 1 as per the RBI guidelines. Units of mutual funds are valued at the latest repurchase price / net asset value declared by
the mutual fund. Treasury bills, commercial papers and certificate of deposits, being discounted instruments, are valued at carrying cost.
In the event provisions recognised on account of depreciation in the AFS or HFT categories are found to be in excess of the required amount
in any year, such excess is recognised in the Profit and Loss Account and subsequently appropriated, from profit available for appropriation, if
any, to Investment Reserve Account in accordance with the RBI guidelines after adjusting for income tax and appropriation to Statutory Reserve.
Held to Maturity:
These are carried at their acquisition cost and are not marked to market. Any premium on acquisition is amortised over the remaining maturity
period of the security on a straight-line basis. Provision is recognised for diminution other than temporary in the value of such investments for
each investment individually.
Non-performing investments are identified and provision is recognised as per the RBI guidelines.
Security Receipts (SR)
Security receipts issued by the asset reconstruction companies are valued at the net asset value declared by and valued in accordance with the
guidelines applicable to such instruments, prescribed by the RBI from time to time.
Disposal of Investment:
Profit/Loss on sale of investment under the aforesaid three categories is recognised in the Profit and Loss Account. The profit on sale of
investment in HTM category, net of taxes and transfer to Statutory Reserve, is appropriated to Capital Reserve.
Repo and reverse repo transactions under Liquidity Adjustment Facility ( LAF ):
Repo transactions under LAF with RBI are accounted for as secured borrowing/ lending transactions.
ADVANCES
In pursuance of guidelines issued by the RBI, advances are classified as Standard, Sub-Standard, Doubtful and Loss Assets and are stated net of
specific provisions made towards NPAs and floating provisions.
Advances are net of bills rediscounted, claims realised from Export Credit Guarantee Corporation (ECGC ), provisions for non- performing
advances, floating provisions, unrealised fees and unrealised interest held in suspense account.
Credit facility/investment, where interest and/or instalment of principal has remained overdue for more than 90 days, is classified as non-
performing asset. However, in respect of Equated Monthly Instalment (EMI) based advances, those accounts where more than 3 EMIs are
overdue are classified as NPAs.
In case of NPAs other than retail EMI loans, recoveries effected are first adjusted towards the principal amount. In case of retail EMI loans,
recoveries effected are adjusted towards the EMI and within the EMI first towards the principal amount.
Provision for non-performing advances (NPAs) comprising sub-standard, doubtful and loss assets is made in accordance with the RBI
guidelines which prescribe minimum provision levels and encourage banks to make a higher provision based on sound commercial judgement.
NPAs are identified by periodic appraisals of the loan portfolio by the management. In respect of identified NPAs in Retail portfolio, provision
is recognised on the homogeneous retail loans and advances assessed at borrower level on the basis of ageing of loans in the non-performing
category and in respect of identified NPAs in other cases, provision is recognised account by account. The provisioning done is at or higher than
the minimum rate prescribed under the RBI guidelines.
In case of restructured/rescheduled assets, provision is made in accordance with the guidelines issued by the RBI, which require the diminution
in the fair value of the assets to be provided in the Profit and Loss Account at the time of restructuring.
In addition to the above, the Bank, on a prudent basis, recognises provisions on advances or exposures which are performing assets, but has
reasons to believe on the basis of the extant environment impacting a specific exposure or any specific information, the possible deterioration
of a specific advance or a group of advances or exposures or potential exposures. These provisions are recognised as per Board approved policy
and are classified as Provision for Specific Standard Assets, included under Provision for Standard Assets and reported under Other Liabilities.
These provisions are not reversed to the Profit and Loss Account but are transferred as provision on the same specific advance/ exposure in case
the asset slips into non-performing asset, except in case of full repayment of the exposure when such provision will be reversed and recognised
in the Profit and Loss Account.
The Bank maintains general Provision for Standard Assets, including credit exposures computed as per the current marked to market values of
foreign exchange forward contracts, at levels stipulated by RBI from time to time. These provisions on standard assets are included under Other
Liabilities.
The Bank estimates the inherent risk of the unhedged foreign currency exposures of its borrowers as per the regulatory guidelines stipulated by
the RBI from time to time and recognises incremental provisions on exposures to such entities as per methodology prescribed. These provisions
are included in Provision for Standard Assets and reported under Other Liabilities.
The RBI guidelines further require banks to create floating provisions on Advances up to levels as per a Board approved policy over and above
the regulatory provisions required on standard assets. These floating provisions are netted from Advances. These provisions are not reversed by
credit to the Profit and Loss Account without prior approvals of the Board and the RBI under specific circumstances.
FIXED ASSETS
Premises and other fixed assets are stated at historical cost (or revalued amounts, as the case may be), less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its
intended use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit / functioning capability
from / of such assets.
REVALUATION OF FIXED ASSETS
Portfolio of immovable properties is revalued periodically by an independent valuer to reflect current market valuation. All land and building
owned by the Bank and used as branches or offices or godowns are grouped under Office Premises in the fixed assets category. Appreciation,
if any, on revaluation is credited to Revaluation Reserve under Capital Reserves.
DEPRECIATION & AMORTISATION
Depreciation on fixed assets, including amortisation of software, is charged over the estimated useful life of the fixed assets on a straight line
basis at the rates and in the manner prescribed in Schedule II of the Companies Act, 2013, except as mentioned below. The useful life of an asset
is the period over which an asset is expected to be available for use to the Bank.
Computer Hardware and Servers - 33.33% p.a.
Air conditioner — 11.11% p.a.
Application Software and System Development Expenditure - 33.33% p.a.
Improvements (Civil) to Leased Premises and Fixed Furniture in Leased Premises such as work-stations, etc. — over the contracted period of the
lease
Vehicles — 19% p.a. over 5 years with 5% residual value.
Cash safe and Safe Deposit Vault — 4.75% p.a.
Assets purchased/sold during the year are depreciated on a pro-rata basis, based on the actual number of days the assets have been put to use.
Assets individually costing upto ' 5,000/- are depreciated fully over a period of one year from the date of purchase.
IMPAIRMENT OF ASSETS
The carrying amount of assets is reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors.
An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater
of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. After impairment,
depreciation is provided on the revised carrying amount of the asset over remaining useful life.
RECOGNITION OF INCOME AND EXPENDITURE
Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Bank and the revenue can be reliably measured.
Items of income and expenditure are generally accounted on accrual basis.
Interest income is recognised in the Profit and Loss Account on accrual basis, except in the case of non-performing assets where it is recognised
on receipts as per the RBI and Accounting Standard norms.
Interest income on investments in Pass Through Certificates (PTC) is recognised at the coupon rate net of tax on distributed income.
Interest income on loans bought out through the direct assignment route is recognised at their effective interest rate i.e. after amortising
premium, if any, on the bought out portfolio as per Guidelines on Securitised Transactions issued by the RBI.
Processing fees on loans are recognised as income and processing overheads on loans are expensed at the inception of the loan.
Overdue rent on safe deposit lockers is accounted for when there is certainty of receipts.
Guarantee commission, annual safe deposit locker rent fees are recognised on a straight-line basis over the period of contract. Letters of credit
(‘LC’) are generally issued for a shorter tenor, typically of 90 days. The commission on such LC is recognised when due.
FOREIGN EXCHANGE TRANSACTIONS
Initial recognition:
Foreign currency transactions are recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the
reporting currency and foreign currency on the date of the transaction.
Conversion:
Foreign currency monetary items are reported using the closing rate notified by Foreign Exchange Dealers’ Association of India (‘FEDAI’) at
the Balance Sheet date and the resulting profit or loss is recognised in the Profit and Loss Account, as per the guidelines issued by the RBI.
Exchange differences:
Exchange difference arising on settlement of monetary items, is recognised as income or as expense in the year in which it arises. Non-monetary
items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the
transaction and non-monetary items which are carried at fair value or other similar valuations denominated in a foreign currency are reported
using exchange rates that existed when the values were determined.
Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting currency required or
available at the settlement date of transaction and are outstanding at the Balance Sheet date, are effectively valued at the closing spot rate. The
premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract.
Outstanding forward exchange contracts are revalued on the Balance Sheet date at the rates notified by FEDAI and at interpolated rates for
contracts of interim maturities.The resultant gain/loss on revaluation is recognised in the Profit and Loss Account in accordance with the RBI/
FEDAI guidelines.
Contingent liabilities denominated in foreign currencies are disclosed in the Balance Sheet at the rates notified by FEDAI.
Forward exchange contracts and other derivative contracts which have overdue receivables remaining unpaid over 90 days or more are classified
as non-performing assets and provided for as per the extant master circular on Prudential Norms on Income Recognition, Asset Classification
and Provisioning issued by the RBI.
RETIREMENT BENEFITS OF EMPLOYEES
Defined Benefit Plan
Provision in respect of future liability for payment of gratuity is made on the basis of actuarial valuation on projected unit credit method made
at the end of the year. Gratuity is funded with the Gratuity Trust duly registered under the provisions of Income tax Act, 1961. Actuarial gains/
losses are recognised immediately in the Profit and Loss Account and are not deferred.
Defined Contribution Scheme
Retirement benefit in the form of provident fund is a defined contribution scheme and the contributions are charged to the Profit and Loss
Account of the year when the contributions to the fund are due. There is no other obligation other than the contribution payable to the fund.
TAXES ON INCOME
Tax expense comprises current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. Deferred Income Tax reflects the impact of current year timing differences between the taxable
income and the accounting income for the year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date. Deferred tax assets
and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred
tax assets and deferred tax liabilities relate to taxes levied by same governing taxation laws. Deferred tax assets are recognised only to the extent
that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In
situations where the Bank has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual
certainty supported by convincing evidence that they can be realised against future taxable profits.
At each Balance Sheet date, the Bank re-assesses unrecognised deferred tax assets and recognises deferred tax asset to the extent that it has
become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such
deferred tax assets can be realised.
ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
Provisions are recognised in terms of Accounting Standard 29 on Provisions, Contingent Liabilities and Contingent Assets , when there is a
present legal or statutory obligation as a result of past events leading to probable outflow of resources, where a reliable estimate can be made of
the amount required to settle the obligation.
Contingent Liabilities are recognised only when there is a possible obligation arising from past events due to occurrence or non-occurrence
of one or more uncertain future events, not wholly within the control of the Bank, or where there is a present obligation arising from a past
event which is not recognised as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of
the amount of the obligation cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood of
outflow of resources is remote, no provision or disclosure is made.
Contingent assets are not recognised in the financial statements.
EMPLOYEE SHARE BASED PAYMENTS
Measurement and disclosure of employee share-based employment plans is done in accordance with the Securities and Exchange Board of
India ( Share Based Employee Benefits) Regulations, 2014 / Guidance Note on Accounting for the Employee Share-based Payments issued by
The Institute of Chartered Accountants (ICAI) of India. The Bank measures compensation cost relating to employee stock options using the
intrinsic value method. Compensation expense is amortised over the vesting period.
EARNINGS PER SHARE
Basic and diluted earnings per share are computed in accordance with Accounting Standard 20 — Earnings per share. Basic earnings per share
is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted
average number of shares outstanding during the year are adjusted for the effect of dilutive potential equity shares.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand and ATMs, balances with the Reserve Bank of India, balances with other banks and money at
call and short notice (including effect of changes in exchange rates on cash and cash equivalents in foreign currency).
LEASES
Leases where the Bank effectively retains substantially all risks and benefits of ownership of the leased item 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.
SEGMENT REPORTING
As per the RBI guidelines on Segment Reporting, the Bank has classified its activity into Treasury Operations, Corporate/Wholesale Banking,
Retail Banking and Other Banking Operations.
Treasury Operations includes all financial markets activities undertaken on behalf of the Bank s customers, proprietary trading, maintenance
of reserve requirements and resource mobilisation from other banks and financial institutions.
Corporate/Wholesale Banking includes lending, deposit taking and other services offered to corporate customers.
Retail Banking includes lending, deposit taking and other services offered to retail customers.
Other Banking Operations includes para banking activities like third party product distribution, merchant banking, etc.
1. BACKGROUND
DCB Bank Limited ("DCB" or "the Bank"), incorporated in Mumbai,
India is a publicly held banking company engaged in providing banking
and financial services and governed by the Banking Regulation Act,
1949.
2. BASIS OF PREPARATION
The financial statements have been prepared and presented under the
historical cost convention on the accrual basis of accounting, and
comply with the Generally Accepted Accounting Principles in India
(''GAAP''), statutory requirements prescribed under the Banking
Regulation Act, 1949, circulars and guidelines issued by the RBI from
time to time and the notified Accounting Standards prescribed under
Section 133 of the Companies Act 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014 to the extent applicable and the
current practices prevailing within the banking industry in India.
3. USE OF ESTIMATES
The preparation of the financial statements in conformity with GAAP
requires the management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the
results of operations during the reporting period. Although these
estimates are based upon the management''s best knowledge of current
events and actions, actual results could differ from these estimates.
Any revisions to the accounting estimates are recognised prospectively
in the current and future periods.
4. INVESTMENTS
4.1 Classification:
The investment portfolio comprising approved securities (predominantly
Government Securities) and other securities (Shares, Debentures and
Bonds, etc.) is classified at the time of acquisition in accordance
with the RBI guidelines under three categories viz. ''Held to
Maturity5 (''HTM''), ''Available for Sale'' (''AFS'') and ''Held
for Trading'' (''HFT''). For the purposes of disclosure in the
Balance Sheet, they are classified under six groups viz. Government
Securities, Other Approved Securities, Shares, Debentures and Bonds,
Subsidiaries and/or joint ventures and Other Investments.
The Bank follows ''Settlement Date'' accounting for recording
purchase and sale transactions.
4.2 Basis of Classification:
Investments that are held principally for resale within 90 days from
the date of purchase are classified as HFT securities. 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.
Investments which are not classified in the above categories are
classified as AFS securities.
4.3 Transfer of Securities between Categories:
The transfer/shifting of securities between categories of investments
is accounted as per the RBI guidelines.
4.4 Acquisition Cost:
Cost including brokerage, commission pertaining to investments, paid at
the time of acquisition, is charged to the Profit and Loss Account.
Broken period interest is charged to the Profit and Loss Account.
Cost of investments is computed based on the weighted average cost
method.
4.5 Valuation:
Heldfor Trading and Available for Sale categories:
Investments classified under HFT and AFS are marked to market as per
the RBI guidelines. These securities are valued scrip-wise and any
resultant depreciation or appreciation is aggregated for each category.
The net depreciation for each category is provided for, whereas the net
appreciation for each category is ignored. The book value of individual
securities is not changed consequent to periodic valuation of
investments.
Traded investments are valued based on the trades / quotes from the
recognised stock exchanges, price list of RBI or prices declared by
Primary Dealers Association of India (''PDAI'') jointly with Fixed
Income Money Market and Derivatives Association (''FIMMDA''),
periodically.
The market value of unquoted government securities which qualify for
determining the Statutory Liquidity Ratio (''SLR'') included in the
AFS and HFT categories is computed as per the Yield-to-Maturity
(''YTM'') rates published by FIMMDA.
The valuation of other unquoted fixed income securities (viz. State
government securities, Other approved securities, Bonds and debentures)
wherever linked to the YTM rates, is computed with a mark-up
(reflecting associated credit and liquidity risk) over the YTM rates
for government securities with similar maturity profile published by
FIMMDA. Unquoted equity shares are valued at the break-up value, if the
latest Balance Sheet is available or at Rs. 1 as per the RBI guidelines.
Units of mutual funds are valued at the latest repurchase price / net
asset value declared by the mutual fund. Treasury bills, commercial
papers and certificate of deposits, being discounted instruments, are
valued at carrying cost.
In the event provisions recognised on account of depreciation in the
AFS or HFT categories are found to be in excess of the required amount
in any year, such excess is recognised in the Profit and Loss Account
and subsequently appropriated, from profit available for appropriation,
if any, to Investment Reserve Account in accordance with the RBI
guidelines after adjusting for income tax and appropriation to
Statutory Reserve. Held to Maturity:
These are carried at their acquisition cost and are not marked to
market. Any premium on acquisition is amortised over the remaining
maturity period of the security on a straight-line basis. Provision is
recognised for diminution other than temporary in the value of such
investments for each investment individually.
Non-performing investments are identified and provision is recognised
as per the RBI guidelines.
4.6 Security Receipts (SR)
Security receipts issued by the asset reconstruction companies are
valued at the net asset value declared by and valued in accordance with
the guidelines applicable to such instruments, prescribed by the RBI
from time to time.
4.7 Disposal of Investment:
Profit/Loss on sale of investment under the aforesaid three categories
is recognised in the Profit and Loss Account. The profit on sale of
investment in HTM category, net of taxes and transfer to Statutory
Reserve, is appropriated to Capital Reserve.
4.8 Repo and reverse repo transactions under Liquidity Adjustment
Facility (''LAF''):
Repo transactions under LAF with RBI are accounted for as secured
borrowing/ lending transactions.
5. ADVANCES
5.1 In pursuance of guidelines issued by the RBI, advances are
classified as Standard, Sub-Standard, Doubtful and Loss Assets and are
stated net of specific provisions made towards NPAs and floating
provisions.
5.2 Advances are net of bills rediscounted, claims realised from Export
Credit Guarantee Corporation (''ECGC''), provisions for non-
performing advances, floating provisions, unrealised fees and
unrealised interest held in suspense account.
5.3 Credit facility/investment, where interest and/or installment of
principal has remained overdue for more than 90 days, is classified as
non- performing asset. However, in respect of Equated Monthly
Instalment (''EMI'') based advances, those accounts where more than 3
EMIs are overdue are classified as NPAs.
5.4 In case of NPAs other than retail EMI loans, recoveries effected
are first adjusted towards the principal amount. In case of retail EMI
loans, recoveries effected are adjusted towards the EMI and within the
EMI first towards the principal amount.
5.5 Provision for non-performing advances (''NPAs'') comprising
sub-standard, doubtful and loss assets is made in accordance with the
RBI guidelines which prescribe minimum provision levels and encourage
banks to make a higher provision based on sound commercial judgement.
NPAs are identified by periodic appraisals of the loan portfolio by the
management. In respect of identified NPAs in Retail portfolio,
provision is recognised on the homogeneous retail loans and advances
assessed at borrower level on the basis of ageing of loans in the
non-performing category and in respect of identified NPAs in other
cases, provision is recognised account by account. The provisioning
done is at or higher than the minimum rate prescribed under the RBI
guidelines.
5.6 In case of restructured/rescheduled assets, provision is made in
accordance with the guidelines issued by the RBI, which require the
diminution in the fair value of the assets to be provided in the Profit
and Loss Account at the time of restructuring.
5.7 In addition to the above, the Bank, on a prudent basis, recognises
provisions on advances or exposures which are performing assets, but
has reasons to believe on the basis of the extant environment impacting
a specific exposure or any specific information, the possible
deterioration of a specific advance or a group of advances or exposures
or potential exposures. These provisions are recognised as per Board
approved policy and are classified as Provision for Specific Standard
Assets, included under Provision for Standard Assets and reported under
Other Liabilities. These provisions are not reversed to the Profit and
Loss Account but are transferred as provision on the same specific
advance / exposure in case the asset slips into non-performing asset,
except in case of full repayment of the exposure when such provision
will be reversed and recognised in the Profit and Loss Account.
5.8 The Bank maintains general Provision for Standard Assets, including
credit exposures computed as per the current marked to market values of
foreign exchange forward contracts, at levels stipulated by RBI from
time to time. These provisions on standard assets are included under
Other Liabilities.
5.9 The Bank estimates the inherent risk of the unhedged foreign
currency exposures of its borrowers as per the regulatory guidelines
stipulated by the RBI from time to time and recognises incremental
provisions on exposures to such entities as per methodology prescribed.
These provisions are included in Provision for Standard Assets and
reported under Other Liabilities.
5.10 The RBI guidelines further require banks to create floating
provisions on Advances up to levels as per a Board approved policy over
and above the regulatory provisions required on standard assets. These
floating provisions are netted from Advances. These provisions are not
reversed by credit to the Profit and Loss Account without prior
approvals of the Board and the RBI under specific circumstances.
6. FIXED ASSETS
Premises and other fixed assets are stated at historical cost (or
revalued amounts, as the case may be), less accumulated depreciation
and impairment losses, if any. Cost comprises the purchase price and
any attributable cost of bringing the asset to its working condition
for its intended use. Subsequent expenditure incurred on assets put to
use is capitalised only when it increases the future benefit /
functioning capability from / of such assets.
7. REVALUATION OF FIXED ASSETS
Portfolio of immovable properties is revalued periodically by an
independent valuer to reflect current market valuation. All land and
building owned by the Bank and used as branches or offices or godowns
are grouped under "Office Premises" in the fixed assets category.
Appreciation, if any, on revaluation is credited to Revaluation Reserve
under Capital Reserves.
8. DEPRECIATION & AMORTISATION
Depreciation on fixed assets, including amortisation of software, is
charged over the estimated useful life of the fixed assets on a
straight line basis at the rates and in the manner prescribed in
Schedule II of the Companies Act, 2013, except as mentioned below. The
useful life of an asset is the period over which an asset is expected
to be available for use to the Bank.
? Computer Hardware and Servers - 33.33% p.a.
? Air conditioner ? 11.11% p.a.
? Application Software and System Development Expenditure - 33.33%
p.a.
? Improvements (Civil) to Leased Premises and Fixed Furniture in
Leased Premises such as work-stations, etc. ? over the contracted
period of the lease
? Vehicles ? 19% p.a. over 5 years with 5% residual value.
? Cash safe and Safe Deposit Vault ? 4.75% p.a.
Assets purchased/sold during the year are depreciated on a pro-rata
basis, based on the actual number of days the assets have been put to
use. Assets individually costing upto '' 5,000/- are depreciated fully
over a period of one year from the date of purchase.
9. IMPAIRMENT OF ASSETS
The carrying amount of assets is reviewed at each Balance Sheet date if
there is any indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset''s net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and risks
specific to the asset. After impairment, depreciation is provided on
the revised carrying amount of the asset over remaining useful life.
10. RECOGNITION OF INCOME AND EXPENDITURE
10.1 Revenue is recognised to the extent that it is probable that the
economic benefit will flow to the Bank and the revenue can be reliably
measured.
10.2 Items of income and expenditure are generally accounted on accrual
basis.
10.3 Interest income is recognised in the Profit and Loss Account on
accrual basis, except in the case of non-performing assets where it is
recognised on receipts as per the RBI and Accounting Standard norms.
10.4 Interest income on investments in Pass Through Certificates (PTC)
is recognised at the coupon rate net of tax on distributed income.
10.5 Interest income on loans bought out through the direct assignment
route is recognised at their effective interest rate i.e. after
amortising premium, if any, on the bought out portfolio as per
Guidelines on Securitised Transactions issued by the RBI.
10.6 Processing fees on loans are recognised as income and processing
overheads on loans are expensed at the inception of the loan.
10.7 Overdue rent on safe deposit lockers is accounted for when there
is certainty of receipts.
10.8 Guarantee commission, annual safe deposit locker rent fees are
recognised on a straight-line basis over the period of contract.
Letters of credit (''LC'') are generally issued for a shorter tenor,
typically of 90 days. The commission on such LC is recognised when due.
11. FOREIGN EXCHANGE TRANSACTIONS
11.1 Initial recognition:
Foreign currency transactions are recorded in the reporting currency by
applying to the foreign currency amount the exchange rate between the
reporting currency and foreign currency on the date of the transaction.
11.2 Conversion:
Foreign currency monetary items are reported using the closing rate
notified by Foreign Exchange Dealers'' Association of India
(''FEDAI'') at the Balance Sheet date and the resulting profit or
loss is recognised in the Profit and Loss Account, as per the
guidelines issued by the RBI.
11.3 Exchange differences:
Exchange difference arising on settlement of monetary items, is
recognised as income or as expense in the year in which it arises.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction and non-monetary items which are carried
at fair value or other similar valuations denominated in a foreign
currency are reported using exchange rates that existed when the values
were determined.
Foreign exchange forward contracts not intended for trading, that are
entered into to establish the amount of reporting currency required or
available at the settlement date of transaction and are outstanding at
the Balance Sheet date, are effectively valued at the closing spot
rate. The premium or discount arising at the inception of such a
forward exchange contract is amortised as expense or income over the
life of the contract.
11.4 Outstanding forward exchange contracts are revalued on the Balance
Sheet date at the rates notified by FEDAI and at interpolated rates for
contracts of interim maturities. The resultant gain/loss on revaluation
is recognised in the Profit and Loss Account in accordance with the
RBI/ FEDAI guidelines.
11.5 Contingent liabilities denominated in foreign currencies are
disclosed in the Balance Sheet at the rates notified by FEDAI.
11.6 Forward exchange contracts and other derivative contracts which
have overdue receivables remaining unpaid over 90 days or more are
classified as non-performing assets and provided for as per the extant
master circular on Prudential Norms on Income Recognition, Asset
Classification and Provisioning issued by the RBI.
12. RETIREMENT BENEFITS OF EMPLOYEES
12.1 Defined Benefit Plan
Provision in respect of future liability for payment of gratuity is
made on the basis of actuarial valuation on projected unit credit
method made at the end of the year. Gratuity is funded with the
Gratuity Trust duly registered under the provisions of Income tax Act,
1961. Actuarial gains/ losses are recognised immediately in the Profit
and Loss Account and are not deferred.
12.2 Defined Contribution Scheme
Retirement benefit in the form of provident fund is a defined
contribution scheme and the contributions are charged to the Profit and
Loss Account of the year when the contributions to the fund are due.
There is no other obligation other than the contribution payable to the
fund.
13. TAXES ON INCOME
13.1 Tax expense comprises current and deferred taxes. Current income
tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Income Tax Act, 1961. Deferred
Income Tax reflects the impact of current year timing differences
between the taxable income and the accounting income for the year and
reversal of timing differences of earlier years.
13.2 Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the Balance Sheet date. Deferred
tax assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to taxes levied by same governing taxation laws.
Deferred tax assets are recognised only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised. In
situations where the Bank has unabsorbed depreciation or carry forward
tax losses, all deferred tax assets are recognised only if there is
virtual certainty supported by convincing evidence that they can be
realised against future taxable profits.
13.3 At each Balance Sheet date, the Bank re-assesses unrecognised
deferred tax assets and recognises deferred tax asset to the extent
that it has become reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be available against
which such deferred tax assets can be realised.
14. ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT
ASSETS
Provisions are recognised in terms of Accounting Standard 29 on
"Provisions, Contingent Liabilities and Contingent Assets", when
there is a present legal or statutory obligation as a result of past
events leading to probable outflow of resources, where a reliable
estimate can be made of the amount required to settle the obligation.
Contingent Liabilities are recognised only when there is a possible
obligation arising from past events due to occurrence or non-occurrence
of one or more uncertain future events, not wholly within the control
of the Bank, or where there is a present obligation arising from a past
event which is not recognised as it is not probable that an outflow of
resources will be required to settle the obligation or a reliable
estimate of the amount of the obligation cannot be made. When there is
a possible obligation or a present obligation in respect of which the
likelihood of outflow of resources is remote, no provision or
disclosure is made.
Contingent assets are not recognised in the financial statements.
15. EMPLOYEE SHARE BASED PAYMENTS
Measurement and disclosure of employee share-based employment plans is
done in accordance with the SEBI (Employee Stock Option Scheme and
Employee Stock Purchase Scheme) Guidelines, 1999 / Guidance Note on
Accounting for the Employee Share-based Payments issued by The
Institute of Chartered Accountants (''ICAI'') of India. The Bank
measures compensation cost relating to employee stock options using the
intrinsic value method. Compensation expense is amortised over the
vesting period.
16. EARNINGS PER Share
Basic and diluted earnings per share are computed in accordance with
Accounting Standard 20 ? Earnings per share. Basic earnings per share
is calculated by dividing the net profit or loss for the year
attributable to equity shareholders (after deducting attributable
taxes) by the weighted average number of equity shares outstanding
during the year.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effect of dilutive potential equity shares.
17. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand and ATMs, balances with
the Reserve Bank of India, balances with other banks and money at call
and short notice (including effect of changes in exchange rates on cash
and cash equivalents in foreign currency).
18. LEASES
Leases where the Bank effectively retains substantially all risks and
benefits of ownership of the leased item 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.
19. SEGMENT REPORTING
As per the RBI guidelines on Segment Reporting, the Bank has classified
its activity into Treasury Operations, Corporate/Wholesale Banking,
Retail Banking and Other Banking Operations.
Treasury Operations includes all financial markets activities
undertaken on behalf of the Bank''s customers, proprietary trading,
maintenance of reserve requirements and resource mobilisation from
other banks and financial institutions.
Corporate/Wholesale Banking includes lending, deposit taking and other
services offered to corporate customers.
Retail Banking includes lending, deposit taking and other services
offered to retail customers.
Other Banking Operations includes para banking activities like third
party product distribution, merchant banking, etc.
