*The capital infusion fund of Rs.6896.00 crore (Rupees Six thousands Eight Hundred Ninety Six crore only) was received by the Bank from GOI on 21.02.2019. The Bank is maintaining the same as “Share Application Money Pending Allotment” as on 31.03.2019. The Bank has reckoned the entire amount of capital infusion fund of Rs.6896.00 crore (Rupees six thousand eight hundred ninety six crore) received from Government of India as CET 1 capital as on 31.03.2019.The Shares have been allotted after the close of the accounting year on 24.04.2019.
i) Sale & Transfer to/from HTM category: All sales and transfers to/from HTM category during the year are within the limit of 5% of book value at the beginning of the year. The Bank has not made any sale of securities or transfer to AFS/HFT consequent upon reduction of ceiling on SLR Securities under HTM category. The Bank has one time shifted the securities having book value of Rs.1857.54 crore from HTM to AFS category during the first quarter of FY 2018-19 with the approval of Board of Directors which is permitted by RBI in terms of Master Circular No.RBI/ 2015-16/97 DBR No.BPBC.6/21.04.141/2015-16 dated July 1, 2015.
iii) On the basis of RBI Circular ref, No. RBI/2017-18/147 dated 02.04.2018 & Circular No. DBR No. BP BC. 113/ 21.04/.048/2017-18 dated June 15, 2018, the Bank has utilized the option of spreading provisioning for mark to market (MTM) losses on investment held in AFS & HFT for the quarters ended June 2018.The provisioning for each of these quarters may be spread equally over up to four quarters commencing with the quarter in which the loss is incurred. The provision for depreciation of the investment portfolio for the quarters ended June 2018 was Rs 2187.59 Cr (without spreading) & Rs 1686.39 Cr (with spreading)
1. Repo/Reverse Repo transctions:
The Bank has adopted the Uniform Accounting Procedure prescribed by the RBI for accounting of market Repo and reverse repo transaction (including the Liquidity Adjustment Facility (LAF) with the RBI vide circular no.RBI/ 2016-17/FMDO,MAOG.No.116/01.01.001/2016-17 dated 10.11.2016).Repo and Reverse Repo Transaction are treated as Collateralised Borrowing/Lending Operation 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.
1.2 Exchange Traded Interest Rate Derivatives: NIL
(Previous year: NIL)
1.3 Disclosures on risk exposure in derivatives Qualitative Disclosure:
Operation in the Treasury Branch of the Bank are segregated in three functional areas i.e. Front Office, Mid Office and Back Office, which are provided with trained officers with defined responsibilities and back up roles.
The Treasury Policy & Derivative policy of the Bank lays down the type of financial derivatives instruments, scope of usages, approval processes as also the limits like the open position limits, deal size limits and stop loss limits besides delegated power for trading in the approved instruments. The policy also allows purchase / sale of call or put options to hedge cross currency proprietary trading positions and to offer derivative products to its customers subject to back to back covering by the Bank.
The Front Office takes positions and executes the deals while the Mid Office monitors the transactions in the trading book and deviations of excesses, if any, are brought to the notice of higher authorities. The Mid office also measures the financial risk for transactions on a daily basis through measurement tools such as MTM, VAR, Convexity and Modified Durations. The figures are reported to Risk Management division, which appraises the risk profile to the Assets and Liability Management committee. The Back office settles all the deals with counter parties.
Interest Rate Swaps which hedge interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an asset or liability that is carried at lower of cost or market value in the financial statements. Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets/liabilities. Trading Swap transactions are marked to market with changes recorded in the financial statements. The counterparties to the transactions are Banks and corporate entities and deals undertaken are within the approved exposure limits only. The guidelines issued by RBI, FEDAI & FImMdA from time to time for recognition of Income, Premium and Discount are followed.
Note:
1. The single exposure limit was breached on one occasion during the year in the account M/s Uttar Pradesh Expressways Industrial Dev. Authority. The aggregate exposure of Rs.3150.00 Crore is within the discretion given to Bank by RBI (additional 5% of the capital funds over prudential limit). The breach of single exposure limit was reported by Credit Department to BOD in its meeting dt. 12.11.2018.
2. The aggregate exposure of Rs.1880.00 Crore to M/s HPCL Mittal Energy Ltd is within the discretion given to Bank by RBI (additional 5% of the capital funds over prudential limit). The breach of single exposure limit was reported by Credit Department to BOD in its meeting dt. 26.03.2019.
2. AS 9 Revenue Recognition
Certain items of Income are recognized on realization basis as per accounting policy No.09. However the said income is not considered to be material.
3. AS 10 Properties ,plant and Equipment
Breakup of total depreciation for the year ended March 2019 for each class of assets.
4. AS 15 Employees Benefits
The Bank has adopted Accounting Standard 15 (Revised)-Employee Benefits, issued by The Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits, viz, Pension, Gratuity, Leave Encashment, LFC w.e.f. 1st April, 2007.
Bank's liabilities in respect of the funded/non-funded employee benefits, viz., Pension(ABEPR-1995), Gratuity, Leave Encashment and LFC are recognized on the basis of actuarial valuation carried out by approved Actuary as per
a) Principles laid down in AS 15 (Revised) issued by The Institute of Chartered Accountants of India, and
b) Guidelines GN 26 issued by The Institute of Actuaries of India.
5. Segment Reporting - Accounting Standard (AS) 17 “Segment Reporting”
Segment information is given in the Consolidated Financial Statement in terms of Para 4 of the AS-17.
6. Related Party Disclosures - Accounting Standard (AS) 18
List of Related Parties and Transactions: The names of the related parties, their relationship with the bank and transactions effected-
Expenses towards gratuity and leave encashment are determined actuarially on an overall basis annually and accordingly have not been considered in the above information.
b) Joint Venture:
i. Universal Sompo General Insurance Company Limited.
The Bank is holding 28.52% share in Universal Sompo General Insurance Company Limited amounting to Rs.105.00 Crore.
ii. ASREC (India) Ltd.
The Bank is holding 27.04% share in ASREC (India) Ltd. amounting to Rs.26.50 Crore (previous year Rs.26.50 Crore)
c) Associates:
Allahabad U.P. Gramin Bank:
The Bank is holding 35% share in Allahabad U.P Gramin Bank amounting to Rs.21.67 Crore (previous year Rs.21.67 Crore).
The Government of India vide their notification no. 7/8/2017-RRB (Uttar Pradesh II) dated 25.01.2019 has notified the amalgamation of Allahabad UP Gramin Bank and Gramin Bank of Aryawart (sponsored by Bank of India) into a single Regional Rural Bank, which shall be called as Aryavart Bank under sponsorship of Bank of India effective from 01st April, 2019. Accordingly, with effect from the 01.04.2019, our sponsored RRB Allahabad UP Gramin Bank, ceases to be in existence.
d) Transactions with Joint Venture Company namely Universal Sompo General Insurance Company Limited are as follows:
7. Leases (AS 19)
A) The Bank has various operating leases for office / residential facilities. Disclosures in this regard are as under:
i) Total of future minimum lease payments under non-cancellable operating leases for each of the following periods:
Rent payable for unexpired lease period as on 31.03.2019.
ii) The total of future minimum sublease payments expected to be received under non- cancellable subleases at the balance sheet date: NIL(Previous Year: Nil).
iii) Lease payments recognized in the statement of profit and loss for the period: Rs.214.56 Crore (previous year Rs.201.08 Crore)
iv) Sub-lease payments received (or receivable) recognised in the statement of profit and loss for the period: NIL (Previous Year: Nil).
B) Financial Lease:
Bank is not having any assets under Financial Lease.
1. Deferred Tax Assets on provision for Bad and Doubtful Debts and Provision for Taxation for earlier years have been reviewed by tax expert and based on his advice provision for taxes made in earlier years Rs.746.82 Crore has been written back.
2. Considering the principal of Virtual Certainty of sufficient future taxable income, the bank had recognised the DTA of Rs.1118.19 Crore on carried forward losses in the F.Y. 2017-18. No further DTA has been created for losses during the year.
8. A substantial portion of the bank's assets comprise of 'financial assets' to which Accounting Standard (AS) 28 'Impairment of Assets' is not applicable. In the opinion of the management, there is no impairment of other assets of the Bank as on 31.03.2019 to any material extent requiring recognition in terms of the said standard.
9. Disclosure in terms of Accounting Standard (AS) 29 on “Provisions, Contingent Liabilities and Contingent Assets”:
10. Draw Down from Reserves:
No amount has been drawn from the Reserve during the year. (Previous year Nil).
11. Provisioning Coverage Ratio (PCR):
The provision coverage ratio as on 31.03.2019: 79.85 % (Previous Year 62.91%)
12. Income from Bancassurance business during the year:
Commission received on life & non-life insurance business: Rs.17.55 Crore (previous year Rs.27.37 Crore).
13. Concentration of Deposits, Advances, Exposures & NPAs:
On 28th June 2018, the Board of Directors approved for the closure of Overseas Branch as per the Government of India directive.
14. Off-Balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms):
NIL (Previous year: NIL).
15. Disclosures relating to Securitization:
As there is no SPVs sponsored by the Bank, the outstanding amount of securitized assets of SPVs as on date of balance sheet is Nil (Previous year: Nil)
16. Credit Default Swaps: Nil
Bank is not having any exposure in credit default swap and as such not using any internal model for pricing of credit default swaps.
17. Transfers to Depositors Education and Awareness Fund (DEAF)
Unclaimed liabilities where amount due has been transferred to DEAF during the year are as under;
18. Unhedged Foreign Currency Exposure:
Based on the available data, available financial statements and declaration from borrowers wherever received, the Bank has estimated the liability of Rs.0.67 crore up to 31st March, 2019 (previous year Rs.2.25 crore) on Unhedged Foreign Currency Exposure to their constituents in terms of RBI circular DBOD. No.BP.BC.85/21.06.200/2013-14 dated 15th January 2014 and subsequent clarification vide circular no. DBOD.No.BP.BC.116/ 21.06.200/2013-14 dated 3rd June, 2014. The entire estimated amount has been fully provided for.
19. Liquidity Coverage Ratio:
Liquidity Coverage Ratio (LCR) related information for the year ending March 31, 2019 is given as under;
19.1. LCR Disclosure:
Liquidity Coverage Ratio (LCR)-covering all the four quarters of the FY 2018-19 for the year ended 31st March, 2019 is given as under;
19.2 Qualitative disclosure around LCR:
The Liquidity Coverage Ratio (LCR) standard aims to ensure that the Bank maintains an adequate level of unencumbered High Quality Liquid Assets (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 specified by supervisors. The LCR promotes short-term resilience of Banks to potential liquidity disruptions by ensuring that they have sufficient HQLAs to survive an acute stress scenario lasting for 30 days.
Liquidity Coverage Ratio (LCR) =
Stock of high quality liquid assets (HQLAs)
Total net cash outflows over the next 30 calendar days
The LCR requirement has become effective for Banks from January 1, 2015. With a view to provide a transition time for Banks, the requirement was a minimum of 60% initially, with gradual increase of 10% every year, as specified below.
The LCR requirement was 90% during the calendar year 2018 and has now increased to 100% since 01st January 2019. The Bank was in compliance with the minimum regulatory requirement for LCR throughout the year.
Intra period changes as well as changes over time:
The LCR of the Bank has been well above the mandatory requirements throughout the year FY: 2018-19.
Main drivers of LCR:
In our Bank, the main drivers for LCR results are,
- The comfortable level of high quality liquid Govt. Securities maintained over the mandatory SLR requirement, which can be sold or repo in the secondary market to avail easy liquidity;
- Reasonable level of cash and excess CRR balances;
- Surplus liquid funds available with the Bank, lent in the overnight / term money market.
- Liquidity facilities available from RBI under Marginal Standing Facility (MSF) and Facility to avail Liquidity for Liquidity Coverage Ratio (FALLCR); as also surplus funds lent in the overnight/term money market;
- Majority of deposits from retail customers which are expected to have low run-offs under stressed conditions.
Composition of HQLA:
Major portion of the Bank's HQLAs constitute of Level 1 Assets viz. most liquid in nature. Such assets include- Cash, excess CRR balances, excess SLR investments, liquidity facilities available from RBI such as MSF, FALLCR, etc. Level 2 Assets constitute of high credit rated Corporate Bonds and Equity Investments after considering stringent haircuts.
Concentration of Funding Sources:
Bank's source of funding are comfortably spread with major reliance on small deposits rather than large wholesale funds. There were no significant counterparties in terms of concentration of funding sources. Thus, there is no undue concentration in any one source.
Derivative Exposures, Potential Collateral Calls and Currency Mismatch:
The Bank has negligible uncovered exposure to Derivatives during the year. Exposure to foreign currencies is also not significant and currency gaps are within its internal prudential limits and have been accounted for in the LCR computation. Any significant impact on liquidity on account of this is least expected.
Liquidity Management:
The Treasury is in charge of the liquid assets of the Bank and manages the fund position of the Bank. The Assets Liability Management Cell, which monitors the liquidity position of the Bank at the corporate level, remains in constant touch with the Treasury. Apart from day-to-day monitoring of liquidity position by the top functionaries, separate Board level and top executive level committees monitor distinct liquidity parameters and provide strategic guidance to the functionaries.
Other Relevant Major Cash Flows:
Bank has sizeable investments in bonds of Public Sector Entities and Corporate which are excluded from LCR computation on account of being in the financial sector. The Bank believes that, even under stressed conditions, these investments can serve as a reliable source of liquidity, albeit with appropriate haircuts. All outflows that the Bank considers to be sizeable or bearing an impact on its liquidity are accounted for in the LCR computation.
20. Provision on account of Wage Revision:
To meet the probable load on the Bank on account of wage revision of employees (11th bipartite settlement) which is under discussion with IBA and due from November, 2017, the Bank has made an adhoc provision of Rs.292.52 Crore during the current financial year.
21. Other Notes
21.1 The reconciliation of various inter-branches, inter-bank accounts, National and Local Clearing accounts (including NACH), Nostro accounts, Vostro accounts, Branch System Suspense account and ATM transactions is an ongoing process and is under progress. The impact of the above, if any, on the financial results for the year ended 31st March, 2019, in the opinion of the management will not be significant.
21.2 (i) Certain premises were revalued on the basis of the reports of the approved valuers in earlier years and current year. An upward revision amounting to Rs.3025.03 Crore (including Rs.428.24 Crore for current year) upto 31.03.2019 had been credited to Revaluation Reserve. Depreciation of Rs.41.49 Crore for the year on Revalued portion has been transferred from the Revaluation Reserve Account to “Revenue & Other Reserves” [Schedule No.2 item (iv)].
(ii) Depreciation is charged on composite cost of Land and Building, where separate cost of land is not available.
(iii) Premium on leasehold land is amortized over the period of lease, based on cost or written down value, where original cost is not available.
(iv) Registration formalities are yet to be completed for the following properties:
a. Two (2) residential properties purchased during the year 1990 & 1998 at Kolkata & Bhubaneswar consisting of 29 & 10 flats respectively with total original cost of Rs.0.86 Crore.
b. Property at Hyderabad costing Rs.1.61 crore, where Clearance is pending before ULC authority and at Chennai costing Rs.2.32 crore, where interim stay has been granted by DRAT.
c. Renewal of lease of residential plots of land measuring 17520 sq.ft area at Paradeep, Odisha having 24 residential flats w.e.f. 02.04.2013 has been taken up with Paradeep Port Trust (PPT) and is under their consideration.
(v) Other Assets include intangible Assets, details of which are as under;
21.3 (i) In respect of Investments of face value of Rs.0.44 Crore (Previous year Rs.0.44 Crore), the Bank is yet to receive scrips/certificates.
(ii) Total Investments made in shares, convertible debentures and units of equity linked mutual funds/ venture capital funds and also advances against shares aggregate to Rs.2093.13 Crore (Previous year Rs.2298.42 Crore).
(iii) During the year, the Bank sold certain securities under Held to Maturity category and earned profit of Rs.16.24 Crore (Previous Year Rs.22.66 Crore). Due to net loss during the year, no appropriation has been made to 'Capital Reserve Account-Investment'.
(iv) In respect of 'Held to Maturity' category as stated in significant Accounting Policy No. 4(iv)(a), the excess of acquisition cost over the face value of the security amortized during the year amounting to Rs.84.85 Crore (Previous year Rs.98.64 Crore) has been netted-off from Income on Investment shown under the head “Interest Earned” of Profit and Loss Account in terms of the RBI guidelines.
21.4. Contingent Liabilities:
Such liabilities as mentioned at Sl. No.(I) to (VI) in schedule 12 of Balance Sheet are dependent upon the outcome of court / arbitration / out of court settlement, disposal of appeals, the amount being called up, terms of contractual obligations, devolvement and raising of demand by concerned parties respectively.
21.5. Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of advance) is Rs.14.28 Crore (Previous Year Rs.82.36 Crore).
21.6. Tax paid in advance/ Tax deducted at source appearing under “other assets” schedule-11, includes Rs.3240.55 Crore (previous year Rs.1691.76 crore) disputed amount adjusted by department/ paid by bank in respect of tax demands for various assessment years. No provision is considered necessary in respect of disputed income tax demands of Rs.3240.55 crore (previous year Rs.1691.76 Crore) as in bank's view, duly supported by expert opinion and/or decisions in bank's own appeals on same issues, additions/ disallowances made are not sustainable (shown in Contingent Liability).
21.7. Sector wise break-up of provision held under nonperforming advances is deducted on estimated basis from gross advances to arrive at the balance of net advances as stated in the Schedule-9 of the Balance Sheet.
21.8 In accordance with RBI circular DBOD.No.BP.BC.2/ 21.06.201/2015-16 dated 1st July, 2015, on 'Basel III capital Regulation' read together with RBI circular DBR.No.BP.BC.80/21.06.201/2014-15 dated March 31,2015 on 'Prudential Guidelines on Capital Adequacy and Liquidity Standard Amendments' requires banks to make applicable Pillar 3 disclosures including leverage ratio and liquidity coverage ratio under the Basel III Framework. These disclosures are being made available on Bank's website www.allahabadbank.in.
21.9 Up to the financial year 2018-19, three hundred twenty two (322) number of operational fraud cases were reported involving a total amount of Rs.70.54 crore. Out of these accounts, the Bank has recovered a total amount of Rs.13.68 crore and reverse provision for balance amount of Rs.8.53 crore during the year. The quantum of unamortized provision debited from 'Other Reserves' as at the end of year amounts to ' NIL crore in pursuance to RBI circulars DBR.No.BP.BC.83/21.04.048/2014-15 dated April 1, 2015 and DBR.No. BP.BC.92/21.04.048/ 2015-16 dated April 18, 2016 as the provision for fraud can be amortized over a period of four quarters.
21.10 During the financial year 2018-19, the entire outstanding AT 1 perpetual Bonds (Series I to IV) aggregating to Rs.1500 crore were repaid by the Bank on 07.05.2018 (both principal and due interest) through exercise of Regulatory Call (the Bank placed under PCA framework of RBI). Further, the Bank also exercised Call Option on its Upper Tier 2 Series I Bonds aggregating to Rs.500.00 crore and IPDI Bonds Series I aggregating to Rs.150.00 crore and repaid both principal and due interest on 19.03.2019 and 30.03.2019 respectively.
21.11 In terms of the provisions of Section 10B of the Banking Companies (Acquisition and transfer of Undertakings) Act, 1970(Inserted on 16.10.2006) and in terms of directives issued by the Government of India, Ministry of Finance vide their letter No.F.No.7/93/2013-BOA dated 21.05.2014, the unpaid and unclaimed dividends of the Bank for the FY 2010-11 have been transferred to Investors Education & Protection Fund (IEPF) established by the Central Government.
21.12 During the FY 2018-19, Bank has assigned financial assets having a net book value of Rs.62.54 crore to Assets Reconstruction Companies for a consideration of Rs.116.16 crore. These financial assets sold for value higher than Net Book value on the date of sale, the excess provision has not been taken to Profit and Loss account except where consideration received in cash.
21.13 As per RBI directions for initiating Insolvency Process -Provisioning Norms vide letter no. DBR.No. BP:15199/ 21.04.048/2016-17 dated 23rd June, 2017 in respect of accounts covered under provisions of insolvency and Bankruptcy Code (IBC), the Bank made additional provision of Rs.749.51 crores as at 31st March 2018. During the current year ended 31.03.2019, no additional provisioning was required to be made on account of above RBI guidelines. However, an amount of Rs.666.48 crore was additionally provided on account of ageing and variation in security value.
21.14 In terms of RBI directions vide letter No. DBR.No.BP.BC. 1841/21.04.048/2017-18 dated 28th August, 2017 in respect of accounts covered under provisions of insolvency and Bankruptcy Code (IBC), the Bank made additional provision of Rs.656.14 crore as at 31st March 2018. During the current year ended 31.03.2019, no additional provisioning was required to be made on account of above RBI guidelines. However, an amount of Rs.1003.27 crore was additionally provided on account of ageing and variation in security value.
21.15 Pursuant to RBI guidelines the Bank has recalculated the diminution in the fair value of restructured advances and has written back provision of Rs.12.30 crore during the year 2018-19.
21.16 In compliance with RBI directives, accounts shown under Annex III of Asset Quality Review (AQR) wherein restructuring was failed due to performance issues or non fulfillment of certain conditions and necessary provisions was held in those accounts in terms of RBI directives, have been reviewed as on 31st March 2019 and has now being classified and provision has been made as per the IRAC norms.
21.17 In terms of RBI circular FIDD.CO.Plan.BC.23/04.09..01/ 2015-16 dated April 7, 2016 Bank has sold total PSLC to the tune of Rs.11705 crore (Rs.10283 crore in previous year) out of which PSLC General to the tune of Rs.5800 crore (Rs.5255 crore in previous year), PSLC Micro to the tune of Rs.1950 crore (Rs.1080 crore in previous year), PSLC SF/MF to the tune of Rs.3955 crore(Rs.3948 crore in previous year) and purchased PSLC Agril to the tune of Rs.2555 crore (Rs.4048 crore in previous year) for a consideration of income of Rs.56.372 crore (Rs.81.91 crore in previous year) for the year ended March 31, 2019.
21.18 During the year 2018-19, Bank has spent Rs.9.23 crore on CSR as against allocation of Rs.16.17 crore. The various activities undertaken and expenditure incurred there on has been furnished as under:-
- Welfare of the Girl Child (Stipend extended to girl child for schooling): Rs.0.44 crore.
- Financial Assistance to 21 Rural Self Employment Training Institute (RSETIs) and 19 Financial Literacy Centre (FLCs) & CFL : Rs.8.72 crore.
- Others Rs.0.07 crore.
21.19 RBI vide circular No. DBR No. BP. BC. 108/21.04.048/ 2017-18 dated June 6, 2018 permitted banks to continue the exposures to MSME borrowers to be classified as standard assets where the dues between September 1, 2017 and December 31, 2018 are paid not later than 180 days from their respective original due dates.
Accordingly, Bank has retained advances of Rs.250.16 crore as standard asset as on March 31, 2019. In accordance with the provisions of the circular, the Bank has not recognized interest income of Rs.7.62 crore and is maintaining a standard asset provision of Rs.12.13 crore as on March 31, 2019 in respect of such borrowers.
22. Figures of previous year have been regrouped or reclassified wherever considered necessary to make them comparable with that figures of the current year.
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