A. BASIS OF ACCOUNTING:
The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated and conform to the Generally Accepted Accounting Principles, (GAAP) in India which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI) from time to time, Accounting Standards (AS) specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and current practices prevailing in the banking industry in India.
B. USE OF ESTIMATES:
The preparation of the financial statements require management to make estimates and assumptions that affect the reported amounts of assets and liabilities including contingent liabilities as of the date of the financial statements and the reported income and expenses during the reported period. The Management believes that the estimates and assumptions used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. The differences, if any between estimates and actual will be dealt appropriately in future periods.
1. The reconciliation of inter branch transactions has been completed up to 31.03.2018 and tallying of balances is ensured on an ongoing basis.
2. Issue of Shares - Right Issue:
6,39,87,006 equity shares of face value of Rs. 10 each fully paid up were issued on rights basis for a price of Rs. 122 per equity share, including share premium of Rs. 112 per equity share in all aggregating to Rs. 780.64 crore on rights basis and 5,10,149 equity shares not allotted kept in abeyance during this rights issue.
3. DISCLOSURE REQUIREMENTS
3.1.1 In respect of securities held under HTM category, premium paid of Rs. 30.90 crore (previous year Rs. 13.72 crore) has been amortized during the year and debited under “Interest received on Investments”.
3.1.2 Sale and transfers to / from HTM category:
During the year the book value of securities sold under HTM category exceeds 5% of the book value of investments held in HTM category as at the beginning of the year. The details of HTM category as on 31.03.2018 are furnished hereunder:
3.2.1 Disclosures on risk exposure in derivatives Qualitative Disclosure:
The only derivatives dealt by the bank in the foreign exchange market is Forward Contracts. Forward contracts are being used to hedge / cover the exposure in foreign exchange arising out of merchant transaction and trading positions.
a. To cover the risk arising out of the above derivatives, various limits like IGL, AGL and Stop Loss Limits have been prescribed in the Treasury Policy of the Bank, which are monitored by mid-office. The mark-to-market values are monitored on monthly basis for Foreign Exchange Forward Contracts. The operations are conducted in terms of the policy guidelines issued by RBI from time to time.
3.2.2 Shifting of securities:
For the year ended 31.03.2018, Bank has shifted securities amounting to Rs. 322.09 crore (Face Value) (Previous year Rs. 903 crore Face Value) from HTM to AFS category and no loss arose on such transfer (Previous year - no loss). Further, Bank has shifted securities amounting to Rs. 590 crore (Face Value)(Previous year Rs. NIL crore Face Value) from AFS to HTM category and loss which arose on such transfer amounting to Rs. 4.28 crore (Previous Year - No loss) has been provided during the year. Total loss during the year on account of shifting of securities is Rs. 4.28 crore (Previous Year - No loss).
3.2.3 Spreading of mark to market losses on Investments:
RBI vide circular DBR.No.BP.BC.102/21.04.048/2017-18 dated April 2, 2018 has permitted banks to spread the provisioning for mark to market (MTM) losses on investments held in AFS and HFT for the quarters ended December 31, 2017 and March 31, 2018 equally over four quarters respectively (commencing with the quarter in which the loss is incurred). Accordingly, Bank has provided Rs. 32.76 crore for depreciation of the investment portfolio for the quarter ended Mar 2018. The balance amounting to Rs. 98.29 crore will be provided in the ensuing three quarters.
3.3.1 Divergence in the asset classification and provisioning:
In terms of the RBI Circular DBR.BP.BC.No. 63/21.04.018/2016-17 dated 18th April 2017, banks are required to disclose the divergences in asset classification and provisioning consequent to RBI’s annual supervisory process in their notes to accounts wherever either a) the additional provisioning requirements assessed by RBI exceed 15% of the published net profits after tax for the reference period or b) the additional Gross NPAs identified by RBI exceed 15% of the published incremental Gross NPAs for the reference period, or both. Accordingly, divergence in Asset Classification and Provisioning for NPAs in compliance to Risk Assessment Report (RAR) of RBI for the financial year 2016-17 is reported hereunder.
C. Disclosure regarding amortization of Loss on sale of assets to ARCs
In terms of RBI guidelines, the Bank had opted to spread the net shortfall on account of sale of assets to Reconstruction companies during the financial year 2015-16 and 2016-17 over a period of 8/ 4 quarters and consequently the Bank has fully absorbed a sum of Rs. 31.29 Crore during the year ended 31st March, 2018 (by corresponding reversal of the proportionate debit made earlier to Revenue and Other Reserves). The unamortized amount as at 31st March, 2018 is Nil.
3.4.1 Details of Single Borrower Limit (SBL)/ Group Borrower Limit (GBL) exceeded by the bank.
A. SBL exceeded by the Bank for the period 01/04/2017 to 31/03/2018 NIL (PY NIL)
B. GBL exceeded by the Bank for the period 01/04/2017 to 31/03/2018 NIL (PY NIL)
3.4.2 Unsecured Advances (Amount of Advances for which, intangible securities has been taken):
3.5 Miscellaneous
3.5.1 Disclosure of Penalties imposed by RBI:
A penalty of Rs. 1,63,500/- has been imposed on account of Counterfeit Notes detected in currency chest transactions and a sum of Rs. 13,830/- by CCIL for shortfall in maintenance of margin in SGF deals.
4. Disclosure in terms of Accounting Standards:
4.1 Accounting Standard 5: Net Profit or Loss for the period, prior period items and changes in Accounting Policies:
There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as per Accounting Standard 5
There has been no change in the Accounting policies followed by the bank during the year ended 31.03.2018 as compared to those in the preceding financial year ended 31.03.2017.
4.2 Accounting Standard 9: Revenue Recognition:
Bank is following accrual method of accounting and hence no disclosure is warranted under Accounting Standard 9
4.3 Disclosure in terms of AS 10 - Fixed Assets (Revaluation of Premises):
In accordance with banks stated policy, revaluation of the premises in its fixed assets portfolio was carried out during the years 2010-11 & 2015-16 by the bank using the services of Banks approved empanelled Independent valuers. Appreciation arising out of such revaluation was accounted with corresponding credit to Revaluation Reserves. The details are as under
4.4 Accounting Standard 15 - Employee Benefits:
4.4.1 The bank is following Accounting Standard 15 (Revised 2005) “Employee Benefits” as under:
In respect of contributory plans viz. - Provident Fund and Contributory Pension Scheme, the bank pays fixed contribution at predetermined rates to a separate entity, which invests in permitted securities. The obligation of the bank is limited to such fixed contribution.
In respect of Defined Benefit Plans, viz. Gratuity and pension as well as for leave encashment, provision has been made based on actuarial valuation as per the guidelines.
The summarized position of Post-employment benefits and long term employee benefits recognized in the profit and loss account and balance sheet as required in accordance with the Accounting Standard -15 (Revised) are as under:
4.4.2 Enhancement in Gratuity Limits:
Ministry of Labour and Employment, Government of India on 29th March, 2018 enhanced the gratuity payable to an employee under Payment of Gratuity Act, 1972 to not exceed Rs. 20 lakh from earlier limit of Rs. 10 lakh. Employee cost for the quarter ended 31st March, 2018 recognises the 1/4th of impact of this change amounting to Rs. 3.75 crore. The unamortised amount on this account stood at Rs. 11.27 crore as on 31.03.2018 and will be spread over the next three quarters, as permitted by RBI vide DBR.BP.9730/21.04.018/ 2017-18 dated 27.04.2018.
4.5 Employee Stock Option Scheme:
As on 31.03.2017, number of options in force were 30,99,708. The Compensation Committee of the Board of Directors granted 32500 stock options on 22.02.2018 to top Executives of the Bank under the Lakshmi Vilas Bank Employees Stock Option Scheme 2010 - LVB ESOS 2010. As on 31st March, 2018, the options in force are 22,19,431. The Bank has provided a sum of Rs. 3.80 crore towards proportionate compensation expenses for the year ended 31st March 2018.
4.6 Accounting Standard 22 - Accounting for Taxes on Income:
The Bank has recognized net Deferred Tax Assets as on 31st March, 2018 aggregating to Rs. 464.95 crore (PY Rs. 65.22 crore) on timing differences pertaining to surplus provision for doubtful advances, Provision for Standard Advances, Leave Encashment, Special Reserve etc in accordance with Accounting Standard - 22 on “Taxes and income” issued by the Institute of Chartered Accountants of India. The major components of DTA / DTL are furnished as under:
4.7 Intangible Assets AS 26:
The Bank has followed AS 26 - Intangible asset and the guidelines issued by the RBI in this regard.
4.8 Accounting Standard 28 - Impairment of Assets:
A substantial portion of the bank’s assets comprises financial assets to which Accounting Standard 28 is not applicable. In the opinion of the bank management, there is no impairment of other assets as at 31st March 2018 requiring recognition in terms of the said standard.
5.1 Provisioning Coverage ratio:
The provision coverage ratio of the Bank as on 31.03.2018 is 55.07%.
5.2 Bancassurance Business:
Fees, remuneration received from Bancassurance business:
For the year ended 31.03.2018, the bank received Gross Commission income of Rs. 10.73 crore from Bancassurance business, of which Rs. 7.81 crore was from life insurance segment and Rs. 2.91 crore was from general insurance segment.
5.3.1 Priority Sector Lending Certificates (PSLCs):
The amount of PSLCs sold/purchased during the year (category-wise) is required to be disclosed as per RBI/2015-16/366 FIDD.CO.Plan.BC.23/ 04.09.01/2015-16 dated: April 7, 2016.
During the year 2017-18, Bank has only purchased Priority Sector Lending Certificates (PSLCs) as detailed below:
5.4 Resolution Plan implemented for Stressed Asset:
The Banks are required to disclose resolution plan implemented for stressed assets as per the RBI Circular RBI/2017-18/131, DBR No.BP.BC.1010/21.04.048/2017-18 dated 12th February 2018 and is furnished as under:
@ The details furnished above excludes the borrower entities in respect of which specific instructions have already been issued by Reserve Bank of India to the banks for reference under IBC
5.4.1 Acquisition of Non-SLR securities due to conversion of debt during Restructuring process:
As per RBI Circular RBI/2017-18/131, DBR No.BP.BC.1010/21.04.048/2017-18 dated 12th February 2018, disclosure is made as under:-
Bank has acquired and held shares for an amount of Rs. 116.16 crore by way of conversion of debt to equity during various restructuring process implemented by the bank. This amount is not considered for the calculation of regulatory ceilings / restrictions on Capital Market Exposures, Investment in Para Banking activities and intra-Group exposure. However, there is no implication on compliance of the provisions of Section 19(2) of the Banking Regulation Act.1949.
5.4.2 Revised framework for resolution of stressed assets
The Reserve Bank of India vide its circular dated February 12, 2018 issued a revised framework for resolution of stressed assets, which superseded the existing guidelines on SDR, S4A etc., with immediate effect. Accordingly, the Bank has revoked the stand-still benefits for accounts where any of these schemes had been invoked but not yet implemented and classified them as per the extant RBI Guidelines on Income Recognition and Asset Classification, as given here below
5.5 Unhedged Foreign Currency Exposure:
Based on the declaration received from borrowers, the bank has estimated and provided towards the liability for Unhedged Foreign Currency Exposure (UFCE) of their constituents in terms of RBI Circular No. DBOD.NO.BP.BC.85/21.06.200/2013-14 dated 15th January 2014 and the total provision held as of 31st March 2018 is Rs. 2.03 crore.
5.6 Details of Frauds occurred and Provision made during the year:
As per RBI Circular No.DBR. No. BP.BC.92/21.04.048/2015-16 dated April 18, 2016 required details are furnished:
In terms of RBI guidelines, the bank had opted to spread the provision required for the outstanding balances in advance related fraud accounts over a period of four quarters and consequently bank has fully absorbed the unamortised amount of Rs. 49.21 crore during the quarter ended 31st March 2018 (by corresponding reversal of the proportionate debit made earlier to Revenue and Other Reserves). The unamortized amount as at 31st March, 2018 is Nil.
6.1 Qualitative disclosure around LCR
Based on RBI guidelines issued during June, 2014 and also other circulars subsequently thereon, the Bank has been computing the Liquidity Coverage Ratio with effective from 01st January, 2015. As per these guidelines, the Bank has high quality liquid assets (HQLA) into Level 1 and Level 2A/2B. As on 31.03.2018, the Bank has Rs. 4554.10 Cr of HQLAs, of which, the main contribution is from Level - 1 type of assets with Rs. 4329.07 Cr. The Level - 1 asset are in the form of surplus SLR investments / Excess CRR and Cash in Hand.
As on 31.03.2018, after applying the respective haircuts as mentioned by RBI guidelines on LCR, the Bank has total amount of Rs. 2668.90 Cr of cash outflows and Rs. 1224.67 Cr of cash inflows over the next 30 days period. Of this total amount of Rs. 2668.90 Cr of cash outflows, the major component is in the form of contingent funding liabilities and of the total Rs. 1224.67 Cr of cash inflows, the major cash inflows are in the form of amounts to be received from Non - Financial wholesale counterparties.
7. The disputed Income Tax demand outstanding as on 31.03.2018 amounts to Rs. 94.61 crore (previous year Rs. 100.43 crore) and is included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of the disputed liabilities in view of favorable decisions by various appellate authorities on similar issues.
8. The financial statement of the Bank includes Advances (net of provisions) of Rs. 25768 crore after adjustment of third party deposits amounting to Rs. 794 crore. The Bank has received legal notice questioning the said adjustment. As per legal opinion received by the Bank, the adjustment of deposits against loan is lawful.
In the process of adjustment of the deposits as mentioned above, there was a resultant shortfall in the maintenance of CRR for a short period. The Bank has already notified RBI of the same.
No legal or regulatory proceedings are pending against the Bank on account of the above.
9. Previous year’s figures have been regrouped / reclassified wherever considered necessary to confirm to the current year’s classification.
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