1.SIGNIFICANT ACCOUNTING POLICIES FOR THE YEAR ENDED MARCH 31, 2016 1 BASIS OF brPARATION The financial statements have been brpared under the historical cost convention unless otherwise stated. They conform to Generally Accepted Accounting Principles (GAAP) in India, which comprises statutory provisions, regulatory/ Reserve Bank of India (RBI) guidelines, Accounting Standards/ guidance notes issued by the Institute of Chartered Accountants of India (ICAI) and the practices brvalent in the banking industry in India. In respect of foreign offices, statutory provisions and practices brvailing in respective foreign countries are complied with. 2 USE OF ESTIMATES The brparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilites (including contingent liabilites) as of date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in the brparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognised prospectively in the current and future periods unless otherwise stated. 3 INVESTMENTS 3.1 Classification The Investment portfolio of the Bank is classified, in accordance with the Reserve Bank of India guidelines, into: a. “Held to Maturity” (HTM) comprising Investments acquired with the intention to hold them till maturity. b. “Held for Trading” (HFT) comprising Investments acquired with the intention to trade. c. “Available for Sale” (AFS) comprising Investments not covered by (a) and (b) above i.e. those which are acquired neither for trading purposes nor for being held till maturity. 3.2 Acquisition Cost Cost of acquisition of Investments is net of incentives, frontend fees and commission. 3.3 Basis of Valuation Investments classified as HTM are carried at weighted average acquisition cost unless it is more than the face value, in which case the brmium is amortized over the period remaining to maturity. Investments classified as HTM includes debentures / bonds, which are deemed to be in the nature of / treated as advances (for which provision is made by applying the RBI prudential norms of assets classification and provisioning applicable to Advances). Investments in Regional Rural Banks, Treasury Bills, Commercial Papers and Certificates of Deposit, have been valued at carrying cost. Investments in subsidiaries and joint ventures (both in India and abroad) are valued at acquisition cost less diminution, other than temporary in nature. Bank’s investments in units of VCFs made after 23.08.2006 are classified under HTM category for initial period of three years and are valued at cost. After period of three years from date of disbursement, it will be shifted to AFS and marked-tomarket as per RBI guidelines. Investments classified as HFT and AFS are marked to market scrip-wise and the resultant net debrciation if any, in each category disclosed in the Balance Sheet, is recognized in the Profit and Loss Account, while the net apbrciation, if any, is ignored. However, Debrciation on the Instruments acquired by way of conversion, whether classified as Standard or NPA, is not offset against the apbrciation in any other securities held under the AFS category. Investments made by the Bank as Primary Dealer in Treasury Bills under HFT category have been valued at carrying cost. For the purpose of valuation of quoted investments in ”Held for Trading” and “Available for Sale” categories, the market rates / quotes on the Stock Exchanges, the rates declared by Primary Dealers Association of India (PDAI) / Fixed Income Money Market and Derivatives Association (FIMMDA) / Foreign Exchange Dealers Association of India (FEDAI) are used. Investments for which such rates / quotes are not available are valued as per norms laid down by RBI, which are as under: a Government / Approved securities - on Yield to Maturity basis. b Equity Shares, PSU and Trustee shares - at break-up value as per the latest Balance Sheet (not more than 12 months old), otherwise Re. 1 per company. c Preference Shares - on Yield to Maturity basis with appropriate credit sbrad mark-up. d PSU Bonds - on Yield to Maturity basis with appropriate credit sbrad mark-up. e Units of Mutual Funds - at the latest repurchase price / NAV declared by the Fund in respect of each scheme. f Venture Capital - Declared NAV or break up NAV as per audited balance sheet which is not more than 18 months old. If NAV/ audited financials are not available for more than 18 months continuously then at Re. 1/- per VCF g. Security Receipts Declared NAV by the Asset Reconstruction Company as per RBI / SEBI guideline marked-to-market (MTM) and the resulting losses, if any, are recognized in the Profit and Loss Account. Profit, if any, is ignored. Income and Expenditure relating to interest rate swaps are recognized on the settlement date. Gains/ losses on termination of the trading swaps are recorded on the termination date as income/ expenditure. For the purpose of valuation, the fair value of the total swap is computed on the basis of the amount that would be receivable or payable on termination of the transactions of the swap agreements as on the Balance Sheet date. Losses arising there from, if any, are fully provided for while the profits, if any, are ignored. Contingent Liabilities on account of derivative contracts denominated in foreign currencies are reported at closing rates of exchange notified by FEDAI at the Balance Sheet date. 4 ADVANCES 4.1 Advances in India are classified as Standard, Substandard, Doubtful or Loss assets and provision for advances are made as per the Prudential Norms of the RBI. In respect of Advances made in overseas branches, Advances are classified in accordance with Prudential Norms brscribed by the RBI or local laws of the host country in which advances are made, whichever is more stringent. 4.2 Advances are net of specific loan loss provisions, interest suspense, amount received and held in suit-filed Sundry Deposits and Claims Received. 4.3 In respect of Rescheduled / Restructured accounts, Provision for dimunition in fair value of restructured advances is measured in net brsent value terms as per RBI guidelines. 4.4 In case of financial assets sold to Asset Reconstruction Company (ARC)/ Securitization Company (SC), the bank is following the guidelines issued by Reserve Bank of India. At brsent, the guideline followed by the Bank is that if the sale is at a price below the net book value (NBV), (i.e. Book value less provisions held) the shortfall is debited to the profit and loss account sbrad over a period of two years. If the sale value is higher than the NBV, excess provision is reversed to profit & loss account in the year the amounts are received. 5 FIXED ASSETS 5.1 Premises and other Fixed Assets are stated at historical cost except revalued brmises which are stated at revalued amount. The apbrciation on revaluation is credited to Capital Reserve and the debrciation provided thereon is deducted there from. 5.2 Premises include land and building under construction.. 6 RESERVES AND SURPLUS Revenue and other Reserves include Statutory Reserves created by foreign branches as per applicable local laws of the respective countries. 7 REVENUE RECOGNITION 7.1 Income (other than item referred in Paragraph 7.2)/ expenditure is generally recognised on accrual basis. In case of foreign offices, income/ expenditure is recognised as per the local laws of the country in which the respective foreign office is located. 7.2 Income by way of Fees, Commission other than on Government business, Commission on Guarantees, Letter of Credits, Exchange and Brokerage and Interest on Advance Biils are accounted for on realisation basis. Dividend on shares in Subsidiaries, joint ventures and associates is accounted on realisation basis. 7.3 In view of uncertainty of collection of income in cases of Non-performing Assets/Investments, such income is accounted for only on realisation in terms of the RBI guidelines. 7.4 Lease payments including cost escalation for assets taken on operating lease are recognised in the Profit and Loss Account over the lease term in accordance with the AS 19 (Leases) issued by ICAI. 8 EMPLOYEE BENEFITS 8.1 PROVIDENT FUND Provident fund is a statutory obligation as per Bank of Baroda PF Rules as the Bank pays fixed contribution at brdetermined rates.The obligation of the Bank is limited to such fixed contribution. The contributions are charged to Profit and Loss Account. The fund is managed by Bank of Baroda Provident Fund Trust. 8.2 GRATUITY Gratuity liability is a statutory obligation as per Bank of Baroda Gratuity Fund Rules and Regulations and is provided for on the basis of an actuarial valuation made at the end of the financial year. The gratuity liability is funded by the bank and is managed by Bank of Baroda Gratuity Fund Trust. 8.3 PENSION 8.3.1 Pension liability is a defined benefit obligation under Bank of Baroda Employees Pension Regulations 1995 and is provided for on the basis of actuarial valuation made at the end of the financial year, for the employees who have joined Bank up to 31.03.2010 and opted for pension. The pension liability is funded by Bank of Baroda (Employees) Pension Fund Trust. 8.3.2 New Pension Scheme which is applicable to employees who joined bank on or after 01.04.2010 is a defined contribution scheme, Bank pays fixed contribution at br determined rate and the obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit and Loss Account. 8.4 COMPENSATED ABSENCES Accumulating compensated absences such as Privilege Leave and unavailed sick leave are provided for based on actuarial valuation. 3.4 Disposal of Investments Profit/ loss on sale of Investments classified as HTM is recognized in the Profit and Loss Account based on the weighted average cost / book value of the related Investments and an amount equivalent of profit on sale of Investments in HTM classification is appropriated to Capital Reserve Account. Profit/ loss on sale of Investment in AFS/ HFT category is recognized in Profit and Loss Account. 3.5 The Bank is following uniform methodology of accounting for investments on settlement date basis. 3.6 In respect of investments at overseas branches, RBI guidelines or those of the host countries, whichever are more stringent are followed. In case of those branches situated in countries where no guidelines are specified, the guidelines of the RBI are followed. 3.7 The transfer of a security between these categories is accounted for at the acquisition cost / book value / market value on the date of transfer, whichever is the least, and the debrciation, if any, on such transfer is fully provided for. 3.8 In respect of non-performing securities, income is not recognised, and provision is made for debrciation in the value of such securities as per RBI guidelines. 3.9 REPO / Reverse REPO The Bank has adopted the Uniform Accounting Procedure brscribed by the RBI for accounting of market Repo and Reverse Repo transactions [other than the Liquidity Adjustment Facility (LAF) with the RBI]. Repo and Reverse Repo Transactions are treated as Collaterised Borrowing / Lending Operations with an agreement to Repurchase on the agreed terms. Securities sold under Repo are continued to be shown under investments and Securities purchased under Reverse Repo are not included in investments. Costs and revenues are accounted for as interest expenditure / income, as the case may be. Securities purchased / sold under LAF with RBI are debited / credited to investment Account and reversed on maturity of the transaction. Interest expended / earned thereon is accounted for as expenditure / revenue. 3.10 Derivatives The Bank brsently deals in interest rate and currency derivatives. The interest rate derivatives dealt with by the Bank are Rupee Interest Rate Swaps, Foreign Currency Interest Rate Swaps and forward rate agreements. Currency Derivatives dealt with by the Bank are Options and Currency swaps. Based on RBI guidelines, Derivatives are valued as under: The hedge/ non-hedge(market making) transactions are recorded separately. Derivative contracts designated as hedges are not marked to market unless their underlying asset is marked to market. Trading derivative positions are marked-to-market (MTM) and the resulting losses, if any, are recognized in the Profit and Loss Account. Profit, if any, is ignored. Income and Expenditure relating to interest rate swaps are recognized on the settlement date. Gains/ losses on termination of the trading swaps are recorded on the termination date as income/ expenditure. For the purpose of valuation, the fair value of the total swap is computed on the basis of the amount that would be receivable or payable on termination of the transactions of the swap agreements as on the Balance Sheet date. Losses arising there from, if any, are fully provided for while the profits, if any, are ignored. Contingent Liabilities on account of derivative contracts denominated in foreign currencies are reported at closing rates of exchange notified by FEDAI at the Balance Sheet date. 4 ADVANCES 4.1 Advances in India are classified as Standard, Substandard, Doubtful or Loss assets and provision for advances are made as per the Prudential Norms of the RBI. In respect of Advances made in overseas branches, Advances are classified in accordance with Prudential Norms brscribed by the RBI or local laws of the host country in which advances are made, whichever is more stringent. 4.2 Advances are net of specific loan loss provisions, interest suspense, amount received and held in suit-filed Sundry Deposits and Claims Received. 4.3 In respect of Rescheduled / Restructured accounts, Provision for dimunition in fair value of restructured advances is measured in net brsent value terms as per RBI guidelines. 4.4 In case of financial assets sold to Asset Reconstruction Company (ARC)/ Securitization Company (SC), the bank is following the guidelines issued by Reserve Bank of India. At brsent, the guideline followed by the Bank is that if the sale is at a price below the net book value (NBV), (i.e. Book value less provisions held) the shortfall is debited to the profit and loss account sbrad over a period of two years. If the sale value is higher than the NBV, excess provision is reversed to profit & loss account in the year the amounts are received. 5 FIXED ASSETS 5.1 Premises and other Fixed Assets are stated at historical cost except revalued brmises which are stated at revalued amount. The apbrciation on revaluation is credited to Capital Reserve and the debrciation provided thereon is deducted there from. 5.2 Premises include land and building under construction.. 6 RESERVES AND SURPLUS Revenue and other Reserves include Statutory Reserves created by foreign branches as per applicable local laws of the respective countries. 7 REVENUE RECOGNITION 7.1 Income (other than item referred in Paragraph 7.2)/ expenditure is generally recognised on accrual basis. In case of foreign offices, income/ expenditure is recognised as per the local laws of the country in which the respective foreign office is located. 7.2 Income by way of Fees, Commission other than on Government business, Commission on Guarantees, Letter of Credits, Exchange and Brokerage and Interest on Advance Biils are accounted for on realisation basis. Dividend on shares in Subsidiaries, joint ventures and associates is accounted on realisation basis. 7.3 In view of uncertainty of collection of income in cases of Non-performing Assets/Investments, such income is accounted for only on realisation in terms of the RBI guidelines. 7.4 Lease payments including cost escalation for assets taken on operating lease are recognised in the Profit and Loss Account over the lease term in accordance with the AS 19 (Leases) issued by ICAI. 8 EMPLOYEE BENEFITS 8.1 PROVIDENT FUND Provident fund is a statutory obligation as per Bank of Baroda PF Rules as the Bank pays fixed contribution at brdetermined rates .The obligation of the Bank is limited to such fixed contribution. The contributions are charged to Profit and Loss Account. The fund is managed by Bank of Baroda Provident Fund Trust. 8.2 GRATUITY Gratuity liability is a statutory obligation as per Bank of Baroda Gratuity Fund Rules and Regulations and is provided for on the basis of an actuarial valuation made at the end of the financial year. The gratuity liability is funded by the bank and is managed by Bank of Baroda Gratuity Fund Trust. 8.3 PENSION 8.3.1 Pension liability is a defined benefit obligation under Bank of Baroda Employees Pension Regulations 1995 and is provided for on the basis of actuarial valuation made at the end of the financial year, for the employees who have joined Bank up to 31.03.2010 and opted for pension. The pension liability is funded by Bank of Baroda (Employees) Pension Fund Trust. 8.3.2 New Pension Scheme which is applicable to employees who joined bank on or after 01.04.2010 is a defined contribution scheme, Bank pays fixed contribution at br determined rate and the obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit and Loss Account. 8.4 COMPENSATED ABSENCES Accumulating compensated absences such as Privilege Leave and unavailed sick leave are provided for based on actuarial valuation. 8.5 OTHER EMPLOYEE BENEFITS Other Employee benefits such as Leave Encashment, Leave Fare Concession and Additional Retirement Benefit on Retirement are provided for based on actuarial valuation. In respect of overseas branches and offices, the benefits in respect of employees other than those on deputation are valued and accounted for as per laws brvailing in the respective territories. 9 DEbrCIATION 9.1 Debrciation on Fixed Assets in India [other than those referred in Paragraph 9.3 and 9.4] is provided on the written down value method in accordance with Schedule II to the Companies Act, 2013, except in case of revalued assets, in respect of which higher debrciation is provided on the basis of estimated useful life of these revalued assets. 9.2 Debrciation on Fixed Assets outside India [other than those referred to in Para 9.3 below] is provided as per local laws or brvailing practices of the respective territories. 9.3 Debrciation on Computers and Software forming an integral part of Computer Hardware, in and outside India is provided on Straight Line Method at the rate of 33.33% p.a., as per the guidelines of RBI. Computer software not forming part of an intergral part of hardware is charged directly to Profit and Loss Account. 9.4 Debrciation on ATMs is provided on Straight Line Method at the rate of 20% p.a. 9.5 Debrciation on additions is provided proportionately from the date of purchase/put to use. 9.6 Cost of leasehold land and leasehold improvements are amortised over the period of lease. 10 IMPAIRMENT OF ASSETS Impairment losses (if any) on Fixed Assets (including revalued assets) are recognised in accordance with AS 28 (Impairment of Assets) issued by the ICAI and charged off to Profit and Loss Account. 11 FOREIGN CURRENCY TRANSACTIONS: 11.1 Accounting for transactions involving foreign exchange is done in accordance with AS 11, (The Effects of Changes in Foreign Exchange Rates), issued by the ICAI. 11.2 As stipulated in AS 11, the foreign currency operations of the Bank are classified as a) Integral Operations and b) Non Integral Operations. All Overseas Branches, Offshore Banking Units, Overseas Subsidiaries are treated as Non Integral Operations and domestic operations in foreign exchange and Rebrsentative Offices are treated as Integral Operations. 11.3 Translation in respect of Integral Operations a) The transactions are initially recorded on weekly average rate as advised by FEDAI. b) Foreign Currency Assets and Liabilities (including contingent liabilities) are translated at the closing spot rates notified by FEDAI at the end of each quarter. c) The resulting exchange differences are recognized as income or expenses and are accounted through Profit and Loss Account. Any reversals / payment of foreign currency assets and liabilities is done at the weekly average closing rate of the brceding week and the difference between the outstanding figure and the amount for which reversal / payment is made, is reflected in Profit and Loss Account. d) Foreign exchange spot and forward contracts outstanding as at the balance sheet date and held for trading, are marked to market at the closing spot and forward rates respectively notified by FEDAI and at interpolated rates for contracts of interim maturities. The MTM values thus obtained are discounted to arrive at brsent value of MTM. This MTM is used to revalue the spot and forward transactions on PV basis. The resulting Forward Valuation profit or loss is included in the Profit & Loss Account. 11.4 Translation in respect of Non Integral Operations a) Assets and Liabilities are translated at the closing spot rates notified by FEDAI at the end of each quarter. b) Foreign Exchange Spot and Forwards contingent liabilities outstanding as at the balance sheet date are translated at the closing spot and forward rates respectively notified by FEDAI and at interpolated rates for contracts of interim maturities. c) Income and Expense are translated at quarterly average rate notified by FEDAI at the end of each quarter. d) The resulting exchange differences are not recognized as income or expense for the period but accumulated in a separate account “Foreign Currency Translation Reserve” till the disposal of the net investment. 11.5 Forward Exchange Contracts In accordance with the guidelines of FEDAI and the provisions of AS 11, Foreign exchange spot and forward contracts outstanding as at the balance sheet date and held for trading, are revalued at the closing spot and forward rates respectively notified by FEDAI and at interpolated rates for contracts of interim maturities. The resulting forward valuation profit or loss is included in the Profit and Loss Account. 12 TAXES ON INCOME This comprise of provision for Income tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) as determined in accordance with AS 22 (Accounting for taxes on Income) issued by ICAI. Deferred tax is recognised subject to consideration of prudence in respect of items of income and expenses those arise at one point of time and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the timing differences are expected to be reversed. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in the income statement in the period of enactment of the change. 13 EARNINGS PER SHARE The bank reports basic and diluted earnings per equity share in accordance with the AS 20 (Earnings Per Share) issued by the ICAI. Basic earnings per equity share has been computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share has been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period. 14 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS As per AS 29 (Provisions, Contingent Liabilities and Contingent Assets) issued by the ICAI, the Bank recognises provisions only when it has a brsent obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent liability is disclosed unless the possibility of an outflow of resources embodying economic benefit is remote. Contingent Assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised. A-2.6.3 Disclosures on risk exposure in derivatives (i) Qualitative Disclosure The Treasury Policy of the bank lays down the types of financial derivative instruments, scope of usages, approval procedures and the limits like open position limits, stop loss limits and counter party exposure limits for undertaking derivative transactions. The Bank uses financial derivative transactions for hedging; it’s on or off balance sheet exposures as well as for market making. Basically, these products are used for hedging risk, reducing cost and increasing the yield in such transactions and for proprietary trading. The types of risk to which the bank is exposed to are credit risk, market risk, country risk and operational risk, The Bank has risk management policies (approved by Board of Directors of the Bank), which is designed to measure the financial risks for transactions in the trading book on a regular basis, by way of MTM, Value at Risk (VaR) and PV01, and to set appropriate risk limits. These are monitored by means of reliable and up to date Management Information Systems by the Risk Management Department of the Bank from time to time who, in turn, appraises the risk profile to the Risk management Committee of Directors, which is brsided over by the Bank’s Chairman and Managing Director. The counter parties to the transactions are banks and corporate entities. The deals are done under approved exposure limits. The bank has adopted the current exposure method brscribed by Reserve Bank of India for measuring Credit Exposure on Derivative products as per which the bank sums the total replacement cost (obtained by mark to market of all its contracts with positive value i.e. when the bank has to receive money from the counter party) and an amount for potential future changes in credit exposure calculated on the basis of the total notional principal amount of the contract multiplied by the relevant credit conversion factors according to the residual maturity as detailed herein under The hedge/non-hedge (market making) transactions are recorded separately. Hedging derivatives are accounted for on an accrual basis. Trading derivative positions are marked-to-market (MTM) and the resulting losses, if any, are recognized in the Profit and Loss Account. Profit, if any is not recognized. Income and Expenditure relating to interest rate swaps are recognized on the settlement date. Gains/ losses on termination of the trading swaps are recorded on the termination date as income/expenditure A.2.6.4 Credit Default Swaps (CDS) As per RBI guidelines on CDS dated 23rd May, 2011 the Banks are required to value their CDS contracts by using daily CDS curve published by FIMMDA or any other proprietary model if it results in a more conservative valuation. Our Bank uses the FIMMDA curve for valuing our CDS positions; Bank does not use any internal proprietary model for CDS valuation. A-2.10.5 Amount of Unsecured advances The amount of advances, for which intangible securities, such as charge over the rights, licenses, authority etc. have been taken as tangible security is Nil as per RBI Circular No. DBR.BP.BC No.23/21.04.018/2015-16 dated 01st July 2015. A-2.11.2 Disclosure of penalties imposed by RBI / Overseas Regulators During the year penalty of Rs 8,38,337/- was levied by Reserve Bank of India on Currency Chests for soiled/ forged notes in the packets, penalty of Rs. 2,89,350/- was levied by Banking Ombudsman. In addition to above, a penalty of Rs. 3,00,000/- was imposed by “Financial Intelligence Unit – India” for failure in reporting attempted suspicious transactions. In overseas Operations, various penalties aggregating to Rs. 34.17 lacs were paid to Central Bank of Oman for delay in Euro, Master Visa up-gradation project and for violating terms of giving credit, Rs. 0.17 lac to Govt. dept UAE for not responding to Govt. dept in respect of application submitted, Rs. 0.10 lacs to Central Bank of UAE for delay in response beyond cut off time for ICCS/DDS/FTS and Rs 0.72 lacs to Ministry of Labour, RAK for delayed cancellation of Labour contract of an employee. The Bank has not brpared any policy with regard to Currency induced Credit Risk. However, the Bank is following regulatory guideline issued by the Reserve Bank of India. As on 31.03.2016, the amount of bank’s credit exposure against Unhedged Foreign Currency exposure of borrowers attracting 80 bps provisions was Rs. 8191.31 crores. The additional RWA on this exposure is Rs. 1722.24 crores against this additional minimum capital requirement is Rs. 165.77 crores. A-3.4 Draw Down from Reserves During the Financial Year 2015-16, there has been no draw down from the reserves A-5. Status of Letters of Comfort I Letters of Comfort (LOC’s) issued during the Current Financial Year During the current financial year, the Bank has not issued any Letter of Comfort to meet the requirements of the overseas/domestic regulators while seeking their approval for establishing subsidiaries / opening of branches. II Cumulative position of LOC’s outstanding as on 31.03.2016 The Bank has issued the following Letter of Comforts (i) During financial year 2008-09 to meet the requirements of the overseas/ domestic regulators while seeking their approval for establishing subsidiaries/ opening of branches, the Letter of Comfort was issued to Reserve Bank of New Zealand for the Bank’s subsidiary in that country. As per audited accounts as on 31.03.2016, the deposits of the Subsidiary are Rs. 184.86 Crores and outside liabilities are Rs. 3.00 Crores. The LOC issued by Bank of Baroda covers this entire amount of Rs 187.86 Crores i.e. deposit and outside liabilities. However, the net worth of the Subsidiary as on 31.03.2016 is Rs. 207.70 Crores and therefore it covers the entire deposits and outside liabilities. (ii) During financial year 2010-11, the Bank has issued Letter of comfort to the Bank Negara Malaysia to the extent of the Bank’s 40% shareholding in the joint venture Bank – India International Bank (Malaysia) Bhd’ (IIBMB). As on 31.03.2016, the deposits of the Bank are Rs. 215.96 Crores and other liabilities are Rs. 4.98 Crores i.e. total of Rs. 220.94 Crores. The net worth of the Subsidiary as on 31.03.2016 is Rs. 543.92 crores. A-8.2 Qualitative Disclosure: From 1st January 2015, the bank has implemented guidelines on Liquidity Coverage Ratio (LCR) of the Reserve Bank of India. 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 a 30 calendar day time horizon under a significantly severe liquidity stress scenario. The LCR and monitoring tools are applicable for Indian banks at whole bank level only i.e. on a stand-alone basis including overseas operations through branches. The LCR has two components: (i) The value of the stock of high-quality liquid assets (HQLA) in stressed conditions –the numerator. (ii) Total net cash outflows : The term “Total net cash outflows” is defined as “Total expected cash outflows” minus “Total expected cash inflows” in the specified stress scenario for the subsequent 30 calendar days (the stressed period).-the denominator. LCR = Stock of High Quality Liquid Assets/Total Net Cash Outflows over the next 30 calendar days >=100% As per the RBI guidelines dated 31st March 2015, we have made LCR disclosure on solo basis for the financial year ending March 2016. In terms of extant guideline disclosure on consolidated basis is applicable to Indian banking system from 1st January 2016 and onwards. We have therefore brpared consolidated disclosure for the fourth quarter ending March 2016. Composition of HQLA Borrowing facility within the mandatory portion of SLR (Marginal Standing facility and Facility to avail liquidity under LCR) is the largest component of HQLA constituting nearly 43.63% followed by excess SLR at 30.59%. Level 1 Assets constitute 98.40% of HQLA against minimum 60% mandated by the Reserve Bank Of India. Level 2 assets which are lower in quality as compared to level 1 asset as HQLA constitute 1.60% of total HQLA, against the maximum mandated level of 40%. Intra-period changes as well as changes over time: The composition of excess SLR was less as on March 16 as compared to brvious months. Excess CRR was higher in the month of January 2016 as compared to other months. The LCR was maximum at 145.36% as on August 2015 and minimum at 83.27% as on 30th September 2015. Concentration of funding sources There has been no undue concentration of funding sources and no counterparty is significant in terms of concentration risk in sources of funds. No counterparty contributes more than 1% of the bank’s total liabilities. 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. Similarly no instrument/product constitutes more than 1% of the bank’s total liabilities. 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, certificates of deposits, long term bonds, etc. Top 10 depositors of the bank on solo basis constitute 4.19 % of our total deposits 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. We have a Group ALM Policy which provides the broad guidelines under which all the entities within the Group operate in terms of liquidity and interest rate risk. The bank’s entities operating in foreign countries manage their operational liquidity or liquidity in the short-term on their own on an ongoing basis. The monitoring of liquidity and interest risk management of the overseas operations of the bank is being done by the Risk Management Department of the bank. The guidelines of the Group ALM policy, unless otherwise specifically exempted, apply to overseas operations as well. All the legal entities of the bank i.e.-subsidiaries, joint ventures and associates manage their operational liquidity on an ongoing basis at their own according to their business models and liquidity requirement. As to the legal entities carrying out banking business, they have their own ALM Policy in line with the host country guidelines as well as RBI guidelines whichever is more stringent B. Disclosure in terms of Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI). B-1 AS-5 Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies B-1.1 During the year, bank has reviewed its policy of charging the net debrciation on instruments acquired by way of conversion, whether classifies as Standard or NPA, in AFS category to Profit & Loss Account. Consequently, now the debrciation on such securities is not set off against the apbrciation in any other securities held under the AFS category. Impact of same, is insignificant. B-1.2 Bank is providing for employee benefits in accordance with the accounting standard (AS) -15 issued by ICAI. The same is calculated by actuarial valuation. The bank has during the year as a matter of prudence, decided to change one of the assumptions for actuarial calculation by shifting mortality rate table from LICI 1994-96 to IALM 2006-08. Due to this change, an additional provision of Rs. 1563.70 crore is provided during the quarter ended March 2016. B-2 AS-15 Employee Benefits B-2.1 The Bank has adopted the Accounting Standard (AS- 15) issued by ICAI, effective from 07.12.2006. The standard has been revised and notified on 17.12.2007. B-2.2 Gratuity The Bank pays gratuity to employees who retire or resign from Bank’s service, after initial service period of five years. Accordingly, the Bank makes contributions to an in-house trust, towards funding this gratuity, payable every year. In accordance with the rule of Gratuity Fund, actuarial valuation of gratuity liability is calculated based on certain assumptions regarding rate of interest, salary growth, mortality and staff attrition as per the Projected Unit credit actuarial method. The investment of the funds is made according to investment pattern brscribed by the Government of India. The gratuity payable is worked out by way of three different schemes and the entitlement is based on what is most beneficial to employees. B-2.3 Pension B-2.3.1Bank pays pension, a defined benefit plan covering the employees who have opted for pension and also to the employees joining the bank’s service on or after 29.9.1995 but before 01.04.2010. The plan provides for a pension on a monthly basis to these employees on their cessation from service of the Bank in terms of Bank of Baroda (Employees’) Pension Regulations, 1995. Employees covered under Bank of Baroda (Employees’) Pension Regulations, 1995 are not eligible for Bank’s contribution to Provident fund. B-2.3.2 New Pension Scheme In terms of Bipartite Settlement and Joint Note dated 27.04.2010 between IBA and Employees Organizations’ on extending another option for pension, employees joining the services of the Bank on or after 01.04.2010 are eligible for the Defined Contributory Pension Scheme, which was introduced by the Bank in terms of the Joint Note / Settlement dated 27.04.2010, similar to the one governed by the provisions of New Pension Scheme introduced for the employees of Central Government w.e.f. 01.01.2004 and as modified from time to time. Hence they are not eligible for becoming members of Bank’s Provident Fund Scheme and Pension Scheme. In respect of the employees of the Bank, who have joined the services of the Bank on or after 01.04.2010, deduction towards New Pension Scheme at the rate of 10% of the basic pay and dearness allowance from the salary with a matching contribution by the Bank is being made. B-2.3.3 Prudential Regulatory treatment (reopening of Pension) During the financial year 2010-11, the Bank had reopened the Pension Option for such of its employees who had not opted for the Pension Scheme earlier. As a result of exercise of such option by 18989 numbers of employee, the Bank had incurred a liability of Rs. 1829.90 Crores. In terms of the requirements of AS 15 - Employee Benefits, the entire amount of Rs. 1829.90 Crores was required to be charged to the Profit and Loss Account. However, the RBI had issued a circular no. DBOD.BP.BC.80/21.04.018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits – Prudential Regulatory Treatment, dated February 9, 2011, by which such pension amount can be amortized over a period of five year from FY 2010-11 to FY 2014-15. Bank has already charged the full liability of Rs. 1829.90 crores on account of Pension option to profit and loss account. This amount does not include any employee relating to separated/ retired employees. B-2.4 Provident Fund The Bank is statutorily required to maintain a provident fund as a part of its retirement benefits to its employees who joined Bank’s service on or before 31.03.2010. This fund is administered by a trust managed by the Bank. Each employee contributes 10% of their basic salary and eligible allowances and the Bank contributes an equal amount to the fund. The investment of the fund is made according to investment pattern brscribed by the Government of India. B-2.5 Leave Encashment An employee is entitled to encash privilege leave standing to his/her credit subject to a maximum of 240 days on the date of superannuation/Voluntary Retirement/death. However, on resignation, an employee is entitled to get encashment to the tune of 50% of the privilege leave standing to the credit subject to a maximum of 120 days. B-2.6 Additional Retirement Benefit The scheme for additional retirement benefit provides that an officer on Retirement/ Voluntary retirement/ Death shall be eligible for additional retirement benefit, provided the officers satisfy the conditions mentioned in BOB officer’s service regulations. In the same manner, award staff member on Retirement/ Voluntary Retirement/ Death shall be eligible for additional retirement benefit, provided the staff member had completed thirty-years of service in Bank. However, in case of dismissal, discharge, termination, compulsory retirement and resignation, additional retirement benefit shall not be payable irrespective of any number of years of service. B-6 AS-22 Accounting for Taxes on Income The Bank has complied with the requirements of AS 22 on Accounting for Taxes on Income issued by ICAI and has accordingly revalued assets and liabilities @ 34.608% i.e. the rate as per enacted Finance Bill 2015. The net balance of deferred tax Asset as on 31st March 2016 amounting to Rs. 3248.71 Crores consists of the following: B-7 AS-24 Discontinuing operations During the financial year 2015-16 the Bank has not discontinued the operations of any of its branches, which resulted in shedding of liability and realization of the assets and no decision has been finalized to discontinue an operation in its entirety, which will have the above effect. B-8 AS-28 Impairment of Assets In view of the absence of indication of material impairment within the meaning of clause 5 to clause 13 of AS 28 Impairment of Assets, no impairment of fixed assets is required in respect of current financial year. B-9.2 Contingent Liabilities Such liabilities as mentioned at Serial No (I) to (VI) of Schedule 12 of Balance Sheet are dependent upon the outcome of court judgement / arbitration awards / out of court settlement/disposal of appeals, the amount being called up, terms of contractual obligations, development and raising of demand by concerned parties respectively. No reimbursement is expected in such cases. C. Other Notes to Accounts C-1 Balancing of Books and Reconciliation Initial matching of debit and credit outstanding entries in various heads of accounts included in Inter office Adjustments has been completed up to 31.03.2016, the reconciliation of which is in progress. C-2 Capital During the year, the Bank has allotted 9,26,63,692 equity shares of Rs. 2/- each at a cash brmium of Rs. 190.74 per share (total issue price of Rs. 192.74 per share) to Government of India as determined by the Board in accordance with regulation 76 (1) of SEBI Issue of Capital and Disclosures Requirements Regulation on brferential basis. The total amount of capital received by the Bank on this account is Rs 1786.00 Crores. The resolution in this regard was duly passed in Extra Ordinary General Meeting held on 28th September 2015. C-3 Capital Reserves Capital Reserve includes apbrciation arising on revaluation of immovable properties and amount subscribed by Government of India under the World Bank’s Scheme for Export Development Projects for small / medium scale industries. C-4 Investments C-4.1 In terms of RBI Guidelines, the bank has transferred a portion of Government Securities (SLR) kept in “Available for Sale” category to “Held to Maturity” category during the year. The resultant debrciation of Rs 11.05 Crores (brvious year Rs. 10.79 Crores) has been charged to the Profit & Loss Account. C-4.2 Profit on sale of investment held under “Held to Maturity” category amounting to Rs. 296.25 Crores, which has been transferred to Profit and Loss account initially and thereafter an amount of Rs 193.72 Crores net of tax & transfer to statutory reserve has been appropriated to the Capital Reserve. C-4.3 FCNR (B) Swap with RBI RBI introduced a US Dollar-Rupee concessional swap window for fresh FCNR(B) funds mobilized in any permitted currency for a minimum tenor of three years and above. Bank has swapped USD 1710 Million mobilized with RBI for the corresponding tenor. As the Swaps done with RBI were at 3.5 % against the then brvailing interest rate of 8 %, there would have been a distortion in profits on the first year as well as on maturity date. To avoid this inherent distortion, and as brscribed by RBI, we have adopted the method of amortization of swap points to even out expenses throughout the tenor of swaps C-5 Provision for Taxes C-5.1 Provision for Taxes has been arrived at after due consideration of decisions of the appellate authorities and advice of counsels. C-5.2 Tax paid in advance /tax deducted at source appearing under “Other Assets” amounting to Rs. 5360.77 Crores (brvious year Rs. 5555.52 Crores) is inclusive of Rs. 3616.78 (brvious year Rs. 4687.25 Crores) crores which rebrsents amount adjusted by the Department / paid by the Bank in respect of disputed tax demands for various assessment years. No provision is considered necessary in respect of the said demands, as in the bank’s view, duly supported by counsels opinion and / or judicial pronouncements, additions / disallowances made by the Assessing Officer are not sustainable. C-5.3 During the year in compliance of ICDS, the unrealized gain for the year on translation of foreign currency items of non integral operations of bank amounting to Rs. 562.89 Crores, credited to FCTR account, has been offered for tax. As this being a timing difference with reasonable certainty being repatriation of foreign currency funds / foreign currency movement and is capable of full reversal in future, the bank has created the Deferred tax Assets amounting to Rs. 194.80 Crores on the same and the same has been credited to profit and loss account as per Accounting Standard-22. C-5.4 During the year the Bank has created DTA of Rs 848 crores on account of difference in provision requirement at UAE which in the opinion of the Bank is fully reversible. Out of this Rs. 540.73 crores pertains to earlier years, which was credited to past reserves. C-6 Premises C-6.1 Execution of conveyance deeds is pending in respect of certain properties amounting to Rs. 64.97 Crores (Previous Year Rs. 43.54 Crores). C-6.2 Premises include assets under construction/ acquisition amounting to Rs. 336.09 Crores (Previous Year Rs. 98.73 Crores). C-6.3 Certain properties of the Bank are stated at revalued amounts. The gross amount of revaluation included in cost of brmises as at end of the year is Rs. 5015.08 Crores (brvious year Rs. 1773.77 crores) including Rs. 27.34 Crores at overseas offices (brvious year Rs 32.85 crores). The revalued amount net of debrciation is Rs. 4098.87 crores (Previous Year Rs. 987.30 Crores). These brmises are revalued based on the reports of bank’s approved valuers and the surplus arising from revaluation amount to Rs. 3241.31 crore has been added to “Revaluation Reserve” during current year. C-7 Other income for the current year includes Rs. 302.97 crores on account of exchange gain on repatriation of funds from foreign offices. C-8 In accordance with UDAY (Ujwal Discom Assurance Yojna) Scheme of GOI, Ministry of Power for operational and financial turnaround of Power Distribution Companies (DISCOMs) during the FY 2015-16, the bank has subscribed to Non SLR SDL Bond of Government of Rajasthan (GoR) and Government of UP (GoUP) amounting to Rs. 1976.66 crores & Rs. 297.16 crores respectively. In compliance to the RBI letter No. DBR. BP.NO.11657/21.04:132/2015-16 dated 17th March 2016 bank has made the provision as under: i) Rs. 121.63 crores in respect of segment not envisaged to be converted into SDL in FY 2016- 17 @15% on Rs 810.86 crores and classified as standard assets. ii) Rs. 25.31 crores for diminution in the fair value of loan / DISCOM bonds. C-9 In compliance to the RBI letter no. DBR. O.BP.13018/21.04.048/2015-16 dated 12.04.2016, Bank has provided a sum of Rs 289.45 crore being 15% of the existing outstanding of Rs 1962.02 Crore as on 31.03.2016 under food credit availed by a State Government. As per RBI’s directives, said provision was required to be made in two quarters i.e 7.5% in March, 2016 and 7.5% in June, 2016. However bank has decided to make the full required provision in March 2016 quarter. C-10 BOB Fiscal Services Limited (BOBFSL), erstwhile wholly owned subsidiary of Bank of Baroda (BOB), had passed a special resolution for voluntary winding up of the Company on 24.09.1990 and the Liquidator was appointed for the same. BOBFSL had entered into an agreement with BOB pursuant to which entire assets and liabilities of BOBFSL were transferred to BOB as a going concern / as sale in liquidation of the entire business w.e.f. 28.2.1991. As the Company could not be liquidated due to pending legal cases, a decision to merge BOBFSL with BOB was taken in the Annual General Meeting of BOBFSL held on 30th March 2007. The Board of Directors of BOB has approved the merger of BOBFSL with BOB in its Board meeting on 28.01.2009 and authorized the Management to file necessary petition for merger of BOBFSL with BOB before the Bombay High Court. C-11 During the year, as a part of Asset Quality Review (AQR) conducted by RBI, the bank has been advised to reclassify / make additional provisions in respect of certain advance accounts over two quarters ending December 2015 and March 2016. The Bank has accordingly implemented the RBI direction. C-12 The Bank has made provision @ 20% on the Secured Sub-standard Advance as against the Regulatory requirement of 15%. However on unsecured sub standard advances, the bank has made provision @25% as per regulatory requirement. C-13 Figures of brvious year have been regrouped/ rearranged wherever considered necessary to conform to current year’s brsentation. |