SIGNIFICANT ACCOUNTING POLICIES ADOPTED IN brPARING FINANCIAL STATEMENTS [1] (a) Basis of Preparation: The accounts are brpared under the historical cost convention and conform to the statutory provisions and brvailing practices, except as otherwise stated. (b) Use of Estimates: The brparation of financial statements requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, expenses, income and disclosure of contingent liabilities as at the date of the financial statements. Management believes that these estimates and assumptions are reasonable and prudent. However, actual results could differ from estimates. Any revision to accounting estimates is recognized in current and future periods. [2] Foreign Currency Translation / Conversion of Foreign Currencies 2.1 Foreign currency monetary items are initially recorded at a notional rate. Foreign currency monetary items are restated at the rate published by Foreign Exchange Dealers’ Association of India (FEDAI) at the end of each quarter. Exchange difference arising on restatement of such items at the quarterly rates is recognised in Profit and Loss Account. 2.2 Transactions and balances of foreign branches are classified as non-integral foreign operations. Such transactions and balances are consolidated by the bank on a quarterly basis. Assets and Liabilities (both monetary and nonmonetary as well as contingent liabilities) are translated at the closing spot rate of exchange announced by Foreign Exchange Dealers’ Association of India (FEDAI) as at the end of each quarter. Income and Expenditure items of the foreign branches are translated at the quarterly average rate published by FEDAI in accordance with Accounting Standard (AS) 11- “The effect of Changes in Foreign Exchange rates” issued by the Institute of Chartered Accountants of India (ICAI) and as per the guidelines of Reserve Bank of India (RBI) regarding the compliance of the said standard. The resultant exchange gain/loss is credited / debited to Foreign Currency Translation Reserve. 2.3 Forward Exchange Contracts Premium or discount arising at the inception of all forward exchange contracts are amortized as expense or income over the life of the contract. Profit/ Losses arising on cancellation of forward exchange contracts, together with unamortized brmium or discount, if any, is recognized on the date of termination. Exchange differences on such contracts are recognized in the Profit & Loss account in the reporting period in which the exchange rates change. 2.4 Contingent liability in respect of outstanding forward exchange contracts, guarantees, acceptances, endorsements and other obligations are stated in the balance sheet at the closing rates published by FEDAI. [3] Investments 3.1 Classification of investments is made as per the guidelines of the RBI. The entire investment portfolio of the bank is classified under three categories viz. ‘Held to Maturity’ (HTM), ‘Available for Sale’ (AFS) and ‘Held for Trading’ (HFT). Such classification is decided at the time of acquisition of securities. Investments are disclosed in the Balance Sheet under six classifications viz: (a) Government securities (b) Other approved securities (c) Shares (d) Debentures & Bonds (e) Subsidiaries and Joint Ventures & Associates and (f) Others. 3.2. In determining the acquisition cost of investment: (a) Cost such as brokerage, commission etc., relating to securities at the time of purchase are charged to Profit & Loss Account. (b) Broken period interest on debt instruments up to the date of acquisition / disposal is treated as revenue. 3.3 The valuation of Investments is done in accordance with the guidelines issued by the RBI as under: a) HELD TO MATURITY Investments under Held to Maturity category are carried at acquisition cost, net of amortisation, if any. The excess of acquisition cost, if any, over the face value is amortized over the remaining period of maturity. Investments in Subsidiaries and Joint Ventures & Associates are valued at carrying cost. Any diminution in the value other than temporary in nature is fully provided for. Investment in sponsored Regional Rural Banks (RRB) and other Trustee Shares are valued at carrying cost. Investment in units of Venture Capital Funds (VCFs) made after 23.08.2006 are classified under HTM category for initial period of three years and valued at cost. b) AVAILABLE FOR SALE Investments classified under this category are marked to market on quarterly basis and valued as per Reserve Bank of India guidelines at the market rates available on the last day of each quarter (Balance Sheet date) from trades/quotes on the stock exchanges, prices/yields declared by the Fixed Income Money Market and Derivatives Association of India (FIMMDA). Unquoted securities are also valued as per the Reserve Bank of India guidelines. The net debrciation under each category/ classification is fully provided for whereas the net apbrciation, if any, is ignored. The book value of the individual securities does not undergo any change after these are valued at mark to market basis. Units of Venture Capital Funds (VCF) transferred from HTM category after a period of three years (Refer paragraph 3.3(a) are valued at NAV as per the audited financial statements of Venture Capital Funds. In case such audited financial statements are not available continuously for 18 months as on the date of valuation, units are valued at Rs. 1 per VCF. c) HELD FOR TRADING Investments classified under this category are valued at rates based on market quotations, price/ yields declared by FIMMDA on a weekly basis. The net debrciation under each security held is fully provided for whereas the net apbrciation, if any, is ignored. The book value of the individual securities do not undergo any change after being marked to market. 3.4. Transfer of scrips from one category to another is carried on the following basis: (a) HTM to AFS/HFT category at acquisition price/ book value. In case the investments under HTM category are purchased at brmium originally the transfer is made at amortised cost. (b) AFS/HFT to HTM category at lower of the book value or market value. (c) AFS to HFT category or vice versa, at the carrying value. The accumulated debrciation, if any, is transferred to the provision for debrciation against HFT securities and vice versa. 3.5. Non performing Investments Security Receipts issued by Securitisation / Reconstruction Company (SC/RC) in respect of financial assets sold by the Bank to the SC/RC are valued at the lower of the redemption value of the Security Receipt and the Net Book Value of the financial asset. The Investment is carried in the books at the price determined as above until its sale or realisation and on such sale or realisation, loss or gain is dealt with as below: (a) If sale is at a price below Net Book Value (NBV), the shortfall is recognised as per Reserve Bank of India guidelines. (b) If the sale is for a value higher than NBV, the excess provision is not reversed but utilized to meet shortfall/loss on account of sale of other financial assets to SC/RC. 3.6. Securities included in any of three categories where interest/principal is in arrears for a specified period, are classified as Non performing Investment. Interest Income on such securities is not recognised and appropriate debrciation/ provision in value of Investments is made. Debrcation in respect of such Non Performing Investments is not set off against apbrciation in other performing securities. 3.7. Profit on sale of Investments Profit on sale of Investments in respect of “Available for Sale” and “Held for Trading” categories is recognized in Profit & Loss Account. Profit on sale of Investments in respect of “Held to Maturity” category is first taken to the Profit & Loss Account and an equivalent amount of Profit is appropriated to the Capital Reserve (net of taxes and amount required to be transferred to Statutory Reserve). Loss on sale of Investments in all the three categories is recognized in Profit & Loss Account. 3.8. Accounting for Repo/Reverse Repo and Liquidity Adjustment Facility (LAF) The securities purchased/sold with an agreement to repurchase / resale on the agreed terms under Repo / Reverse Repo (other than LAF) are recognized as borrowing / lending. The securities purchased/sold under LAF with RBI are debited/credited to Investment account and reversed on maturity. [4] Derivative contracts The Bank deals in Interest Rate Swaps and Currency Derivatives. The Interest Rate Derivatives dealt by the Bank are Rupee Interest Rate Swaps, Cross Currency Interest Rate Swaps and Forward Rate Agreements. Currency Derivatives dealt by the Bank are Options and Currency Swaps. Such derivative contracts are valued as under: a. Derivative contracts dealt for trading are valued on mark to market basis, net debrciation is recognized while net apbrciation is ignored. b. Derivative contracts undertaken for hedging are: i. Derivative contracts designated as hedges are not marked to market unless their underlying asset is marked to market. ii. Income / Expenditure is recognized on accrual basis for Hedging swaps. [5] ADVANCES 5.1 Advances are classified as performing and non-performing assets in accordance with the prudential norms issued by RBI. 5.2 Advances are classified into Standard, Sub Standard, Doubtful and Loss assets borrower wise. 5.3 Provisions for domestic advances are made for performing/non -performing advances in accordance with the RBI Guidelines. 5.4 Provisions for performing/ non-performing advances with foreign branches are made as per local regulations/ regulations of host country according to the norms brscribed by RBI, whichever is more stringent. 5.5 Advances stated in the Balance Sheet are net of provisions made for Non Performing Assets, claims received from Credit Guarantee Institutions and rediscount. 5.6 Partial recoveries in Non Performing Advances are apportioned fi rst towards charges and interest, thereafter towards principal with the exception of non performing advances involving compromise settlements/ “Loan Past Due” advances, the recoveries are fi rst adjusted towards principal. 5.7 In case of fi nancial assets sold to SC/ RC, the valuation, income recognition is being done as per RBI guidelines. [6] Fixed Assets 6.1. The brmises of the Bank include freehold and leasehold properties. All the Fixed Assets are capitalised based on the date of put to use. 6.2. Premises and other Fixed Assets are stated at historical cost except wherever revalued. The apbrciation on revaluation, if any, is credited to the ‘Revaluation Reserve’ Account. Debrciation / Amortization attributable to the enhanced value is transferred from Revaluation Reserve to the credit of Debrciation in the Profi t and Loss Account. [7] Debrciation 7.1. Fixed Assets are debrciated under Straight Line Method at the rates determined by the management on the basis of estimated useful life of the respective assets except for the Computers where as per the guidelines of RBI, debrciation is charged under straight line method at 33.33%. 7.2 5 percent residual value has been kept for all the assets except for the assets with estimated useful life of 3 years or 5 years (Eg. computer, Servers and ATMs etc), where the entire cost of the asset is amortized over the useful life 7.3 Debrciation on fi xed assets in the year of capitalization is charged for the full year if the asset is used for more than 180 days during that fi nancial year; else it is provided at 50 percent of the applicable rate. No debrciation is provided for in the year of sale/disposal. 7.4 Premium paid on leasehold properties is charged off over the lease period. 7.5 In respect of fi xed assets held at foreign offi ces, debrciation is provided as per the regulations / norms of the respective countries [8] Impairment of Assets An assessment is made at each balance sheet date whether there is any indication that an asset is impaired. If any such indication exists, an estimate of the recoverable amount is made and impairment loss, if any, is provided for. [9] Revenue Recognition 9.1. Income and expenditure are generally accounted on accrual basis, except the following: a) Interest on Non-Performing advances and non performing investments is recognized as per norms laid down by Reserve Bank of India. b) Interest on overdue bills, Commission (other than Government business), Exchange, Brokerage and rent on lockers are accounted on realization. c) Dividend Income is recognized when the right to receive the same is established. d) In case of suit filed accounts, related legal and other expenses incurred are charged to Profit & Loss Account and on recovery the same are accounted as Income. [10] Employee Benefits 10.1 Defined Contribution Plans Defined Contribution Plans such as Provident / Pension fund are recognized as an expense and charged to Profit & Loss account. 10.2 Defined Benefit Plans a. Gratuity: The employee Gratuity Fund Scheme is funded by the Bank and managed by a separate trust who in turn manages their funds as per guidelines. The brsent value of the Banks obligation under Gratuity is recognized on actuarial basis as at the year end and the fair value of the Plan assets is reduced from the gross obligation to recognize the obligation on a net basis. b. Pension: The employee Pension Fund Scheme is funded by the Bank and managed by a separate trust. The brsent value of the Banks obligations under Pension is recognized on the basis as at the year end and the fair value of the Plan assets is reduced from the gross obligation to recognize the obligation on a net basis. c. Amortization: The additional liability/ expenditure arising consequent upon the reopening of Pension Option to the employees of the bank and enhancement in gratuity limit pursuant to amendment to Payment of Gratuity Act, 1972 has been amortized equally over a period of five years beginning with the financial year 2010-11. 10.3 The privilege leave is considered a long term benefit and is recognized based on independent actuarial valuation on ‘Projected Unit Credit method’ at each Balance Sheet date. [11] Provision for Taxation a) Provision for tax is made for both Current and & Deferred Taxes. b) Deferred Tax assets and liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and laws that have been enacted or substantively enacted as of the balance sheet date. c) Deferred tax assets are not recognized unless there is virtual certainty that sufficient future taxable income would be available against which such deferred tax assets can be recognized. [12] Net Profit 12.1 Provisions, Contingent Liabilities and Contingent Assets I. In conformity with AS 29, “Provisions, Contingent Liabilities & Contingent Assets” issued by the Institute of Chartered Accountants Of India, the bank recognizes provision only when : a. it has a brsent obligation as a result of past event. b. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and c. when a reliable estimate of the amount of the obligation can be made. II. No provision is recognized for: a. Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the bank. b. It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or c. A reliable estimate of the amount of obligation cannot be made. Such obligations are recorded as Contingent Liabilities. These are assessed at regular intervals and only that part of the obligation for which the outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made. III. Contingent Assets are not recognized in the financial Statements. 12.2 Net Profit The Net Profit in the Profit & Loss Account is after:- a) Provision for debrciation on Investments. b) Provision for Taxation. c) Provision on loan losses d) Provision on Standard Assets. e) Provision for Non Performing Investments. f) Other usual & necessary Items. [13] Earning per share: The Bank reports basic and diluted Earnings Per Share in accordance with AS 20. Basic Earnings Per Share is computed by dividing the net profi t after tax by the weighted average number of equity shares outstanding for the Year SCHEDULE 18 - NOTES ON ACCOUNTS 1. Investments: The percentage of investments under “Held to Maturity” category - SLR as on 31.03.2016 was 20.60% of Demand and Time Liability of the Bank (Previous year 22.23%), which is within the permissible limit as per RBI guidelines. 2 Inter-Branch Transactions: The initial matching of entries received at Head Office for the purpose of reconciliation under Inter- Branch transactions up to 31.03.2016 has been done. However, Bank is continuing its efforts to reconcile and reduce the remaining outstanding entries. 3 Premises: Premises include certain properties having original cost of Rs.55.46 Crore (Previous year Rs.211.35 Crore) in respect of which conveyance deeds are pending executions. 4. Disclosure on risk exposure in derivatives: I Qualitative Disclosure The Credit Risk Management Policy approved by the Board of Directors, on the use of Derivative Instruments to hedge / trade is in place. A. The Investment Portfolio of the Bank consists of assets with characteristics such as fixed interest rate, zero coupon and floating interest rates and is subject to interest rate risk. The Bank also has issued Tier I and Tier II bonds and this capital cost is at fixed rate with no exit option. The policy permits hedging the interest rate risk on this liability as well. Bank is permitted to use FRA and IRS (only plain vanilla transactions are permitted). These instruments are used not only for hedging the interest rate risk in the investment portfolio but also for market making During the year, the Bank has not undertaken Derivative Trades in IRS under the Investment portfolio. No Trading Swaps / FRAs were undertaken during the year. Bank has been undertaking derivatives trades like IRS and FRAs for the purpose of hedging the Bank’s Foreign Currency liabilities also. Options and Swaps are also undertaken on behalf of clients on back to back basis. B. The risk management policies and major control limits like stop loss limits, counterparty exposure limits, PV01, etc. approved by the Board of Directors are in place. These risk limits are monitored and reviewed regularly. MIS/Reports are submitted periodically to Risk Management Committee. The hedge effectiveness of the outstanding derivative deals are monitored in relation to the underlying asset/liability on fortnightly basis. C. Accounting Policy: Hedge Positions: • Accrual on account of interest expenses/ income on the IRS are accounted and recognized as expense/ income. • Hedge effectiveness of the outstanding derivative deals are monitored in relation to the fair value of the swap and underlying asset/liability. The Bank has used the relevant INBMK yield + sbrad as declared by FIMMDA for arriving at the fair value of the underlying Asset/Liability. If the hedge is not effective, hedge swaps is accounted as trading swaps. If swap is terminated before maturity, the MTM loss / gain and accruals till such date are accounted as expense/income under Interest Paid / received on IRS. Trading Positions • Trading swaps are marked to market at frequent intervals and changes are recorded in the income statements. • Accrual on account of interest expenses/ income on the IRS are accounted and recognized as expense / income. • Gains or losses on termination of swaps are recorded as immediate income or expense under the above head 4.1 Risk Category-wise Country Exposure: In respect of the Country for which the Bank’s net funded exposure is 1% or more of its total assets, the Bank is required to make provision for Country Risk. As on 31.03.2016 in the case of United Kingdom (Insignificant Risk – A1) & Hong Kong (Low Risk category –A2) the Net funded exposure exceeds 1% of the total assets, for which the required provision is made 4.2 Disclosure of Penalties imposed by RBI: During the financial year 2015-16, there is no penalty in terms of Section 47A(1) of the Banking Regulation Act, 1949 for non – compliance of the Reserve Bank of India instructions. Bank has paid penalty amount of Rs.0.10 Crore to Reserve Bank of India during the brvious year. 5. Accounting Standards: In compliance with the guidelines issued by the RBI regarding disclosure requirements of the various Accounting Standards issued by Institute of Chartered Accountants of India (ICAI), the following information is disclosed: 5.1 Accounting Standard 5 – Net Profit/Loss for the period, prior period items and changes in accounting policies: 5.1There are no material prior period items 5.2 Effect of Changes in Accounting Policies - Debrciation Policy on Fixed Assets. During the year the method of debrciation on Fixed Assets has been changed to straight line method (SLM), on the basis of useful life determined by management, as against WDV method being used hitherto. Bank has also adopted a policy of charging debrciation in the year of capitalisation at 100 percent of the normal rate of assets ready for use for 180 days or more and at 50 percent of the normal rate of assets ready for use for less than 180 days during that financial year. The earlier policy of the Bank was to charge debrciation at 100 percent of the normal rate during the year of capitalisation irrespective of the number of days the assets was ready for use. The changes have been done to make more appropriate brsentation of financial statements and have been effected from 01.04.2015 onwards and debrciation has been calculated accordingly. Consequent to the change, debrciation of prior period amounting to Rs.171.39 crores has been found to be in excess and debrciation charged for the year is higher by Rs.72.46 crores. As a result, the fi xed assets and the profit before tax are higher by Rs.243.85 Crores. 5.3 Change in Accounting Estimates: During the year, useful life of some of the assets has been changed. For those assets, unamortized debrciable amount has been amortized prospectively over the remaining useful life of the assets. 5.4 Accounting Standard 15 – Employee Benefits: The actuarial assumptions in respect of gratuity, pension and privilege leave, for determining the brsent value of obligations and contributions of the bank, have been made by fixing various parameters for Salary escalation by taking into account inflation, seniority, promotion and other factors mentioned in Accounting Standard 15(Revised) issued by ICAI. - Attrition rate by reference to past experience and expected future experience and includes all types of withdrawals other than death but including those due to disability. - Provision towards sick leave has not been made in the books of account due to the reason that the same is not encashable, no additional staff being provided when an employee avails sick leave and there will not be any pay out on account of sick leave 5.5 Accounting Standard-18 - Related Party Disclosures: Names of Related parties and their relationship with the Bank - Parent - Canara Bank 5.6 Key Management Personnel – i) Shri. Rakesh Sharma, Managing Director & Chief Executive Officer ii) Shri. Pradyuman Singh Rawat, Executive Director iii) Shri. Hardeesh Kumar B, Executive Director iv) Shri. Dinabandhu Mohapatra, Executive Director ( from 22.01.2016) v) Shri. V S Krishnakumar, Executive Director (Till 30.04.2015 5.4.2 Parenti) Canara Bank 5.7 Subsidiaries – i) Canbank Financial Services Ltd. ii) Canbank Venture Capital Fund Ltd. iii) Canbank Factors Ltd. iv) Canara Robecco Asset Management Company Ltd. v) Canbank Computer Services Ltd. vi) Canara Bank Securities Ltd. (formerly GILT Securities Trading Corpn. Ltd) vii) Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd 5.8 Joint Ventures i) Commercial Indo Bank LLC., Moscow (formerly Commercial Bank of India LLC., Moscow ) 5.4.5 Associates – i) Canfin Homes Ltd. ii) Commonwealth Trust (India) Ltd. iii) Regional Rural Banks sponsored by the Bank a) Pragati Krishna Gramin Bank (Erstwhile Pragati Gramin Bank) b) Kerala Gramin Bank (Erstwhile South Malabar Gramin Bank) 5.9 Disclosure about transactions with Key Management Personnel is as under: i) Remuneration to Key Management Personnel Rs. 0.68 Crore (Previous Year: Rs.0.88 Crore) (ii) Staff Housing Loan to Shri P S Rawat (Executive Director) Rs.0.41 Crore (Previous Year Rs.0.05 Crore) In terms of paragraph 5 of AS 18, transactions in the nature of Banker-Customer relationship including those with Key Management Personnel and relatives of Key Management Personnel have not been disclosed 5.10 Accounting Standard 27 - Financial Reporting of Interests in Joint Ventures Investments include Rs.73.22 Crore (at the exchange rate of the transaction date) in the Commercial Indo Bank LLC (Incorporated in Russia) wherein the Bank owns 40% of the equity. As required by AS 27 the aggregate amount of the assets, liabilities, income and expenses (Bank’s interest @ 40% in jointly controlled entity) is disclosed as under: 5.11 Accounting Standard 28 - Impairment of Assets: In the opinion of the Management, there is no indication of impairment of any of its Fixed Asset as at 31.03.2016 requiring recognition in terms of Accounting Standard 28 issued by the Institute of Chartered Accountants of India. 6. Issuance of Letter of Comfort: Bank has issued 3361 No. of Letters of Comfort to the tune of Rs.33422.21 Crore during the fi nancial year. The cumulative outstanding position of 838 No. of LOC as on 31.03.2016 is Rs.7480.61 Crore. Apart from this, Bank has also issued Letter of Comfort to the following regulators during brvious years Overseas: LOC issued during the year 2015-16: • NIL LOC issued in the past: • China Banking Regulatory Commission, China (on behalf of our Shanghai Branch) – vide order dated 29.03.2008 • Central Bank of the UAE (on behalf of our Rebrsentative office, Sharjah) – Vide order dated 04.06.2009 • Central Bank of Bahrain (on behalf of our Manama branch, Bahrain) – Vide order dated 15.01.2010 and • South African Reserve Bank (on behalf of our Johannesburg branch, South Africa) – Vide order dated 19.11.2011 Financial Impact: The financial impact on issue of LOC/undertaking by the Bank exists in case of LOCs issued on behalf of the subsidiaries or Joint Ventures (JVs) of the Bank. Bank has so far not issued any LOC on behalf of subsidiaries or JV. With regard to branches the assets and liabilities of overseas branches are merged with the domestic operation and a consolidated Balance Sheet is drawn for the Bank as a whole. The total liability of overseas branches forms part of the liabilities of the Banks annual balance sheet. Hence, there is no additional financial impact of LOCs issued on behalf of branches. In respect of rebrsentative Office, there are no commercial operations undertaken and hence no financial impacts of LOC issued to host country regulators. As at 31st March 2016, there is no financial impact of LOCs issued favoring the overseas Regulators for our Bank since the same are issued on behalf of branches and Rebrsentative off ces. In terms of RBI guidelines, we propose to disclose the details of LOCs issued by the Bank so far and “NIL” financial impact on account of such LOCs, under “Notes to Accounts” in the Balance Sheet as at March 2016. 6.1 Provision Coverage Ratio is 50.11% as on 31.03.2016 (Previous Year 57.29%): Qualitative disclosure around LCR The liquidity coverage ratio (LCR) is to promote the short term resilience of the liquidity risk profile of the banks. During the Financial Year 2015-16, the Bank maintained LCR above the minimum requirement of 60% (applicable for calendar year 2015) and 70% (applicable for calendar year 2016) respectively. LCR ensures the Bank maintains an adequate stock of unencumbered High Quality Liquid Assets (HQLA) that can be converted easily and immediately into cash to meet liquidity needs (net cash outflows) for a 30 calendar day liquidity stress scenario. HQLA comprises of Level 1, Level 2A and Level 2B assets. Level 1 assets attracts 0% Hair-cut (constituting 95.10% of total HQLA) and comprises of cash, excess CRR, excess SLR securities, Government Securities to the extent allowed by RBI, under Marginal Standing Facility (MSF) [brsently 2% of the Bank’s NDTL] and under Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) [brsently 8% of the Bank’s NDTL]. Level 2A assets attracts 15% Hair-cut (constituting 4.70% of total HQLA) and comprises of Sovereign Guaranteed Marketable Securities, Corporate Bonds or Commercial Papers which are rated AA+ and are issued other than by Financial Institutions. Level 2B assets attract 50% Hair-cut and include investment in Common Equity Shares included in NSE CNX NIFTY and / or S&P BSE Sensex Indices. The Prime variable which impacts the LCR is the level of excess CRR and excess SLR securities and forms part of HQLA. The net cash outflows under stress may be reduced with increase in percentage of Retail Deposits (considered to be well diversified in terms of number, geography, amount and tenor) and reducing the dependency on Wholesale Deposits The proportion of Retail Deposits of the Bank has grown and constitutes around 50% of the total domestic deposits. Bank has considerably reduced its dependency on bulk deposits including Certificate of Deposits (Unsecured Debts) over the past one year in order to improve its LCR. For High value Deposits, the Bank has introduced separate product with no brmature withdrawal clause (non-callable) in order to limit major funds outflows caused due to any Bank or market specific liquidity stress scenarios. The expected net cash outflows under stress during the FY 2015-16 (all the four quarters of FY) has shown a decline as compared to FY 2014-15 (only the last quarter Jan15 to March 15) due to increase in the share of Retail Term Deposits, increase in non-callable deposits and reduce dependency on unsecured debts. The level of HQLA maintained by the Bank during the FY 2015-16 remain adequate to meet the LCR requirement. The impact of Derivative Exposure, potential collateral calls and currency mismatch on the LCR of the Bank remained insignificant. 6.2 Fresh Issue of Equity Share Capital: During the year Bank had issued and allotted Equity Shares to the following parties: i) 40000000 Equity shares of face value of Rs. 10 each for cash at an issue price of Rs.380.08 including brmium of Rs.370.08 to the Life Insurance Corporation of India (LIC)/Schemes of LIC on brferential basis on 12.05.2015 with the consent of the Shareholders of the Bank by way of Special Resolution passed in the Extraordinary General Meeting of the Bank held on 30.04.2015 ii) 27794083 Equity shares of face value of Rs.10 each for cash at an issue price of Rs.340.72 including brmium of Rs.330.72 to the Government of India (GOI) on brferential basis on 30.09.2015 with the consent of the Shareholders of the Bank by way of Special Resolution passed in the Extraordinary General Meeting of the Bank held on 29.09.2015 6.3 The Financial results for the quarter ended 31st March 2016 have been arrived at after considering provision for Loan Losses in accordance with the extant guidelines and directions of RBI on Prudential Norms for ‘Income Recognition, Asset Classification and Provisioning’ and Provision for Income Tax and Deferred Tax, Debrciation on Investments and Fixed Assets, provision for exposure to entities with unhedged foreign currency and other necessary provisions. The Bank has made additional provision of Rs.1486 Crore being 5% on the liability of the Sub-standard Advances and 10% on the liability of Doubtful II category. 6.4 During the year, as a part of Asset Quality Review, RBI has advised the Bank to revise Classifi cation/ provisions in respect of certain advance accounts over the two quarters ending 31.12.2015 and 31.03.2016 which the Bank has implemented accordingly. 6.19 In compliance to the RBI letter DBR.BNP. NO.11643/21.04.132/2015-16 dated 17.03.2016 on Ujwal Discom Assurance Yojna (UDAY) scheme, the Bank has made a provision of Rs.399.36 Crore in respect of segment not envisaged to be converted into SDL in F.Y 2016-17 and Rs.131.01 Crore for diminution in the fair value of loan / Discom Bonds. 6.5 In accordance with the RBI letter dated 12.04.2016, the Bank has provided a sum of Rs.335.08 Crore being 15% of the outstanding amount of Rs.2233.86 Crore as on 31.03.2016 under food credit availed by State Government of Punjab. As per the RBI direction, 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 full required provision in March 2016 quarter. 7. Figures of the brvious year have been regrouped / rearranged / reclassified wherever necessary M SWAMINATHAN: DIVISIONAL MANAGER V SUKUMAR: DIVISIONAL MANAGER V RAMACHANDRA: DEPUTY GENERAL MANAGER N SELVARAJAN : GENERAL MANAGER DINABANDHU MOHAPATRA: EXECUTIVE DIRECTOR HARIDEESH KUMAR B EXECUTIVE DIRECTOR P S RAWAT EXECUTIVE DIRECTOR RAKESH SHARMA MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER T N MANOHARAN CHAIRMAN UMA SHANKAR DIRECTOR G V MANIMARAN DIRECTOR SUNIL HUKUMCHAND KOCHETA DIRECTOR MOCHERLA SAIRAM BHASKAR DIRECTOR RAJINDER KUMAR GOEL DIRECTOR SANJAY JAIN DIRECTOR AS PER OUR REPORT OF EVEN DATE For S C VASUDEVA & Co. Chartered Accountants For VINAY KUMAR & Co. Chartered Accountants For RAM RAJ & Co. Chartered Accountants For V K NIRANJAN & Co. Chartered Accountants For J L SENGUPTA & Co. Chartered Accountants For J SINGH & ASSOCIATES Chartered Accountants SANJAY VASUDEVA Partner VINAY KUMAR AGRAWAL Partner P KARUNAKARA NAIDU Partner NIRANJAN V K Partner P PARTHASARATHY Partner J SINGH Partner Place : Bengaluru Date : MAY 27,2016 |