RBI vide circular no DBR.No.BP.BC.83/21.06.201/2015/16 dated March 01, 2016 has given discretion to Banks to consider Revaluation Reserve/ Foreign Currency Translation Reserve / DTA for purpose of computation of capital Adequacy as CET-1 capital ratio. The Bank has exercised the option in the above computation.
Revaluation Reserve has been recognized under CET-1 capital at the discount of 55% in accordance with extant RBI guidelines. This had resulted in increase in CET-1 capital in the previous year ending March 31,2022, besides recognition of full year profit.
b) Draw Down from Reserves
The Bank has not undertaken any drawdown from reserves during the year ended March 31,2023 and March 31,2022.
c) Set-off of Accumulated Losses
During the current year, the Bank has set off its accumulated losses of ' 45,396 crore as on April 01,2021 by utilizing the balance outstanding to the credit of Securities Premium Account of the Bank on the said date after obtaining approval from its shareholders, Reserve Bank of India and National Company Law Tribunal order dated March 29, 2023.
Qualitative disclosure around Liquidity Coverage Ratio (LCR)
In the backdrop of the global financial crisis that started in 2007, the Basel Committee on Banking Supervision (BCBS) proposed certain reforms to strengthen global capital and liquidity regulations with the objective of promoting a more resilient banking sector. In this direction BCBS published guidelines on ‘Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools' in January 2013 and the ‘Liquidity Coverage Ratio Disclosure Standards' in January 2014. Accordingly, Reserve Bank of India, vide its circular dated June 09, 2014, issued guidelines on Liquidity Coverage Ratio (LCR).
The LCR promotes short-term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days. 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 specified by supervisors.
High Quality Liquid Assets (HQLA):
Under the standard, banks must hold a Stock of unencumbered HQLA to cover the total net cash outflows over 30-day period under the prescribed stress scenario. In order to qualify as HQLA, assets should be liquid in markets during times of stress and, in most cases, be eligible for use in central bank operations. The HQLA of the Bank mainly comprise of SLR investments over and above mandatory requirement, liquidity available by way of borrowing under Marginal Standing Facility (2% of NDTL), Facility to Avail Liquidity for Liquidity Coverage Ratio (16% of NDTL) & other securities as may be permitted by Reserve Bank of India from time to time.
Total net cash outflows:
Total expected cash out flows are calculated by multiplying the outstanding balances of various categories or types of liabilities and off-balance sheet commitments by the rates at which they are expected to run off or be drawn down. Total expected cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow.
Liquidity Management:
The Bank has well organized liquidity risk management structure as enumerated in ALM Policy which is approved by the Board. The Asset Liability Management Committee (ALCO) of the Bank monitors & manages liquidity and interest rate risk in line with the business strategy. ALM activity including liquidity analysis & management is conducted through coordination between various ALCO support groups residing in the functional areas of Balance Sheet Management, Treasury Front Office, Budget and Planning etc. ALCO directives and ALM actions are implemented by the business groups and verticals.
The Bank during the quarter ended 31st March 2023, maintained average HQLA of ' 64,956 crore after factoring eligible haircuts. HQLA is mainly driven by Level 1 Assets and comprises mainly of Government securities and T-bills which constitute more than 90% of HQLA as on 31st March 2023. Bank has well diversified source of funds which mainly comprise of deposits, with top 20 depositors contributing 8.04% of total deposits as on 31st March 2023.
The average LCR for the quarter ended March 31, 2023 was at 135.66% above the present prescribed minimum requirement of 100%.
Qualitative disclosure around Net Stable Funding Ratio (NSFR)
In the backdrop of the global financial crisis that started in 2007, the Basel Committee on Banking Supervision (BCBS) proposed certain reforms to strengthen global capital and liquidity regulations with the objective of promoting a more resilient banking sector. In this direction BCBS published guidelines on ‘Basel III: The Net Stable Funding Ratio' in October 2014 and the NSFR standard to be effective from January 01, 2018. Accordingly, Reserve Bank of India, vide its circular dated May 17, 2018, issued final guidelines on Net Stable Funding Ratio (NSFR).
The NSFR promotes resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding on an ongoing basis. A sustainable funding structure is intended to reduce the probability of erosion of a bank's liquidity position due to disruptions in a bank's regular sources of funding that would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR limits overreliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off- balance sheet items, and promotes funding stability.
Available Stable Funding (ASF
The amount of ASF is measured, based on the broad characteristics of the relative stability of an institution's funding sources, including the contractual maturity of its liabilities and the differences in the propensity of different types of funding providers to withdraw their funding. The amount of ASF is calculated by first assigning the carrying value of an institution's capital and liabilities to one of five categories as mentioned in RBI circular. The amount assigned to each category is then multiplied by an ASF factor, and the total ASF is the sum of the weighted amounts. Carrying value represents the amount at which a liability or equity instrument is recorded before the application of any regulatory deductions, filters or other adjustments.
Required Stable Funding (RSF)
The amount of required stable funding is measured based on the broad characteristics of the liquidity risk profile of an institution's assets and OBS exposures. The amount of required stable funding is calculated by first assigning the carrying value of an institution's assets to the categories listed in RBI circular. The amount assigned to each category is then multiplied by its associated required stable funding (RSF) factor, and the total RSF is the sum of the weighted amounts added to the amount of OBS activity (or potential liquidity exposure) multiplied by its associated RSF factor.
Liquidity Management:
The Bank has well organized liquidity risk management structure as enumerated in ALM Policy which is approved by the Board. The Asset Liability Management Committee (ALCO) of the Bank monitors & manages liquidity and interest rate risk in line with the business strategy. ALM activity including liquidity analysis & management is conducted through coordination between various ALCO support groups residing in the functional areas of Balance Sheet Management, Treasury Front Office, Budget and Planning etc. ALCO directives and ALM actions are implemented by the business groups and verticals.
Bank maintained Available Stable Funding (ASF) of ' 2,30,018 crore and Required Stable Funding (RSF) of ' 1,91,664 crore as on 31st March 2023. Available Stable Funding (ASF) is mainly driven by total regulatory capital and deposits with maturity over one year from retail customers, small business customers, non-financial corporate customers and PSUs. Required Stable Funding (RSF) is mainly driven by unencumbered government securities and assets with maturity over one year. HQLAs (High Quality Liquid Assets) after applying hair-cut constitute less than 2 % of weighted RSF, as HQLAs can be easily sold in the market or can be used as collateral for sourcing additional funds..
The NSFR of the Bank for Quarter ending March 31,2023 is at 120.01 % as against the regulatory limit of 100%.
Movement of provision is prepared on annual basis by comparing the positions as at the respective reporting period end.
Note: As per RBI circular DBR.No.BP.BC.102/21.04.048/2017-18 dated April 2, 2018 IFR is to be created with an amount which is not less than lower of net profit on sale of investments during the year or net profit for the year less mandatory appropriations until the amount of IFR is at least 2 percent of the HFT and AFS portfolio, on a continuing basis.
Bank has transferred to IFR until the amount of IFR is at least 2% of the Gross HFT and AFS portfolio as on March 31,2023.
c) Sales and transfers to/from Held to Maturity (HTM) category
During the year ended March 31,2023 (and previous year ended March 31,2022), the value of sales and transfers of securities to/from HTM category has not exceeded 5% of the book value of the investments held in HTM category at the beginning of the year.
For the purpose of above limit following are excluded:
Onetime transfer to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning of the accounting year, sale to RBI under pre-announced Open Market Operation (OMO) auctions, direct sales from HTM for bringing down SLR holdings, repurchase of government securities by GOI, repurchase of state development loans by respective state governments and additional shifting of securities permitted by RBI.
e) Divergence in Asset Classification and Provisioning for NPAs as per RBI Circular DBR.BP.BC.No.63/21.04.018/ 2016-17 dated April 18, 2017, RBI Circular No: RBI/2018-19/157 DBR.BP.BC.No.32/21.04.018/2018-19 dated April 01,2019 & RBI/2022-23/130 DOR.ACC.REC.No.74/21.04.018/2022-23 dated October 11, 2022
In terms of the RBI guidelines, banks are required to disclose the divergence in asset classification and provisioning consequent to RBI's annual supervisory process in their notes to accounts to the financial statements, wherever the additional provisioning assessed/ additional gross NPAs identified by RBI exceeds the threshold specified by RBI.
(g) Unhedged Foreign Currency Exposure
The Bank, as detailed in its Credit Policy, monitors the Unhedged Foreign Currency Exposure of its borrower and pursues its clients to hedge their forex exposure to minimize the losses due to adverse exchange rate fluctuation. Bank obtains information on Un-hedged Foreign Currency Exposure from its customers on a periodic basis and maintains the same in an internally developed system and follows the methodology for computation of likely loss on account of exchange rate movement. The incremental provisioning for the year ending March 31,2023 towards this exposure is ' 8 crore. (Previous year: ‘Nil'). The capital held towards the risk stood at ' 40 crore as on March 31,2023 (Previous Year - ' 69 crore as on March 31,2022).
Qualitative disclosures
(a) The structure and organization for management of risk in derivatives trading,
The Bank uses derivatives for Hedging as well as for Trading purposes. The use of such derivatives gives rise to various risks like credit risk, market risk, operational risk, legal risk etc. The Bank has a well-defined structure to manage these risks, consisting of risk policy, risk management organization, risk measurement and monitoring process, limit structure and system infrastructure. The Bank has an independent Risk Management Department, headed by Chief Risk Officer.
b) The scope and nature of risk measurement, risk reporting and risk monitoring systems
The Risk Management Group is functionally responsible for measurement, monitoring and reporting of risks like credit risk, market risk, operational risk etc. in accordance with the policies, processes, parameters and limits defined by the Board as well as the applicable regulatory guidelines. Risk is managed under the overall supervision of Asset Liability Management Committee with periodic reporting to Risk Management Committee of the Board as well as to the Board.
(c) Policies for hedging and / or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants
Risk exposures in derivatives transactions are measured/ assessed, in both quantitative and qualitative terms, to capture credit risk, market risk and operational & legal risk. Prior to the execution of derivative transaction, it is ensured that credit risk exposure to the client/counterparty, measured in terms of Loan Equivalent Risk (LER), is within the approved limit and the client/counterparty has the necessary understanding of the transaction. Market risk exposure is measured and managed in terms of positions, duration or tenor, sensitivities to market rates, gaps, greeks, stop loss etc. Physically-settled foreign exchange contracts are settled on payment versus payment (PvP) basis so as to mitigate principal risk resulting from failed trades. The Bank mitigates replacement cost risk by effective use of close-out netting agreements, exchange of margin, collaterals etc, wherever applicable. Operational risks are addressed by having adequate system infrastructure and control mechanism in place. Legal risks are taken care of by execution of necessary legal agreements and documentation.
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(d) Accounting policy for recording hedge and non-hedge transactions; recognition of income, premiums and discounts; valuation of outstanding contracts; provisioning, collateral and credit risk mitigation.
The accounting policy for derivatives has been drawn up in accordance with RBI guidelines, the details of which are contained in Schedule No.17 "Significant Accounting Policies of the Bank".
(d) Disclosure on Penalties imposed by Reserve Bank of India:
RBI in the Risk Assessment Report for FY 2020-21 had assessed divergence which trigged public disclosure and therefore malus clause was invoked in terms of the RBI guidelines dated November 4, 2019 on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers & Control Function Staff. The invocation of malus clause resulted in cancellation of outstanding deferred remuneration of the 3 WTDs aggregating ' 1.07 crore pertaining to FY 2020-21. Please refer Disclosures on Remuneration (Quantitative Disclosures) under Schedule 18 point no. A 13 (2).
Disclosures on Remuneration
f Qualitative disclosures
(a) Information relating to the composition and mandate of the Nomination and Remuneration Committee:
Nomination and Remuneration Committee (NRC) comprises of seven members with an Independent Director as its Chairman, and one Government Nominee Director, one LIC Nominee Director and four other Independent Directors as other members. The Committee fulfils the mandate / terms of reference provided under Section 178 of the Companies Act, 2013, Regulation 19 and Part D of Schedule II of the LODR Regulations, SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and RBI guidelines in respect of fit and proper status of Directors as under :
Formulation of the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board of Directors a policy relating to remuneration of the directors, key managerial personnel and other employees;
To specify the manner for effective evaluation of performance of the Board, its Committees and individual directors, to be carried out either by the Board, by the NRC or by an independent external agency and review its implementation and compliance;
Formulation of criteria for evaluation of performance of Independent Directors and the Board of Directors;
Devising a policy on diversity of Board of Directors;
To identify persons who are qualified to become directors and who may be appointed in senior management with the criteria laid down, and recommend to the Board of Directors their appointment and removal;
To recommend to the Board the appointment and removal of Directors in accordance with the criteria laid down in the Directors' Appointment and Evaluation Policy;
For every appointment of an independent director, the Nomination and Remuneration Committee shall evaluate the balance of skills, knowledge and experience on the Board and on the basis of such evaluation, prepare a description of the role and capabilities required of an independent director. The person recommended to the Board for appointment as an independent director shall have the capabilities identified in such description. For the purpose of identifying suitable candidates, the Committee may:
a. Use the services of external agencies, if required;
b. Consider candidates from a wide range of backgrounds, having due regard to diversity; and
c. Consider the time commitments of the candidates.
To undertake a process of due diligence to determine the suitability of any person for appointment / continuing to hold appointment as a director on the Board, based upon qualification, expertise, track record, integrity, ‘fit and proper' criteria, positive attributes and independence (if applicable) and on the basis of the report of performance evaluation of directors including independent directors and formulate the criteria relating thereto;
Formulation of Remuneration Policy for Directors, KMPs, etc.
Recommend to the Board, all remunerations, in whatever form, payable to the senior management;
To work in close coordination with Risk Management Committee to achieve effective alignment between compensation and prudent risk-taking;
To oversee the compensation system's design and operations to ensure that the system operates as intended and is also consistent with the principles outlined by the Financial Stability Board;
To oversee framing, review and implementation of compensation policy and make annual remuneration decisions for Chief Executive Officer/Whole Time Directors/Material Risk Takers plus Risk Control and Compliance staff (for ratification by the Board);
To ensure that the cost to income ratio of the Bank supports the compensation consistent with maintaining sound capital adequacy ratio;
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To have supervisory oversight regarding implementation of compensation practices and policies of the Bank. To ensure complete compliance with all disclosure norms as prescribed by the various statutes relevant to the banking sector and industry in general;
To review specific criteria for Malus and Clawback every year;
To fix performance parameters & final payout for Cash based incentives and share-based incentives every year;
To identify Material Risk Takers (MRTs) whose actions have a material impact on the risk exposure of the Bank, and who satisfy the qualitative and quantitative criteria;
To act as the Compensation Committee as prescribed under Regulation 5 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. To administer and supervise the Employee Stock Option Scheme/Employee Stock Appreciation Rights (SAR) Scheme of the Bank as mandated under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and to inter-alia approve the grades of employees to whom options/SARs could be granted as well as determine the performance level and/or any other criteria required to be adopted for grant of options/SARs;
To determine and finalize all the terms and conditions governing the Employee Stock Option Scheme/Employee Stock Appreciation Rights Scheme of the Bank including any variation thereof subject to receipt of requisite approval, if required under regulatory and/or other applicable laws;
To suggest amendments to any stock option plan or SAR scheme, provided that all amendments to such plans/schemes shall be subject to consideration and approval of the Board;
To review the Compensation Policy annually and to review the Employee Stock Option Scheme/Employee Stock Appreciation Rights Scheme of the Bank as and when required under regulatory guidelines/other laws;
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To carry out any other role as may be mandated to it under regulatory / statutory guidelines from time-to-time.
As on March 31, 2023, the NRC comprised of seven members with Shri Gyan Prakash Joshi (Independent Director) as its Chairman, Shri Sushil Kumar Singh (Government Nominee Director), Shri Mukesh Kumar Gupta (LIC Nominee Director) and Shri Bhuwanchandra B Joshi, Shri N. Jambunathan, Shri Deepak Singhal & Shri T. N. Manoharan (Independent Directors) as other members.
(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:
A description of the scope of the Bank’s remuneration policy, including the extent to which it is applicable to foreign subsidiaries and branches:
The Bank has formulated its Compensation Policy based on the Reserve Bank of India guidelines issued vide Circular No.DOR.Appt.BC.No.23/29.67.001/2019-20 dated November 4, 2019. The Compensation Policy is applicable to employees appointed at Bank's domestic branches/offices and also to the employees posted at its foreign branches. It is not applicable to employees of subsidiaries of the Bank.
This category includes MD & CEO and two Deputy Managing Directors (DMDs). The remuneration structure for WTDs comprises of fixed and variable pay and variable pay is payable as a percentage of fixed pay and is linked to the Bank's performance. The compensation structure for MD & CEO and other Whole Time Directors (WTDs) of the Bank is fixed by NRC / Board and is subject to approval of Reserve Bank of India in terms of Section 35 B of the Banking Regulation Act, 1949. The payment of compensation also requires approval of the shareholders of the Bank in the General Meeting pursuant to clause 119 of Articles of Association of the Bank read with Section 197 of the Companies Act, 2013 and Section 35B (1) of Banking Regulation Act 1949.
The positions of Material Risk Takers (MRTs) & Control Function Staff are held by cadre officers of IDBI Bank and their fixed pay structure comprising of pay and allowances is equivalent to the pay & allowances being offered by IDBI Bank to the other parallel grade officers. Variable pay is payable as a percentage of fixed pay and is linked to individual and Bank's performance for the MRTs. Variable Pay of Control Function Staff is majorly linked to their individual performance; overall business performance of the Bank is reckoned only for ascertaining primary eligibility.
As per the current policy, the fixed pay structure of subordinate staff, clerical staff and officer's upto the grade of Executive Director is drawn on the lines of the Indian Banks' Association (IBA) pay scales and allowances and runs co-terminus with the industry level settlements for a period of 5 years. Variable Pay as a percentage/ proportion of fixed pay is payable to this category of employees and is linked to the individual and Bank's performance.
The Bank shall follow a compensation policy that is internally equitable and externally competitive, while complying, at all times, with the guidelines set forth by the Reserve Bank of India (RBI) and the Financial Stability Board (FSB). The compensation levels shall be designed to enable attraction & retention of the most suitable talent for delivering on the Bank's business plans.
The positions of Executive Director-Chief Risk Officer, Executive Director-Chief Compliance Officer, Executive Director-Chief Financial Officer and Executive Director-Audit, Fraud Risk Management Group & Internal Auditor are held by cadre officers of IDBI Bank and their pay scale and allowances i.e. fixed pay is equivalent to the pay scales and allowances being offered to other parallel grade officers and is finalized by the Bank with the approval of the Board. The Variable Pay is however majorly linked to their individual performance; overall business performance of the Bank is reckoned only for ascertaining primary eligibility.
In order to align remuneration with the risk and the time horizons over which they could emerge, a substantial portion of the senior management remuneration including that of MD & CEO and Deputy Managing Directors is under variable pay arrangement. The variable compensation is payable in the form of cash and non-cash components and is deferred over a period of 3 years or more. The impact of remuneration adjustments is linked to actions taken by employees and/or business units, and their impact on the level of risk taken on by the bank. At higher level of responsibility, the proportion of variable pay is higher. The amount of variable pay can even be reduced to zero depending on the financial performance of the Bank. In addition, variable pay is subject to the malus and clawback provisions of the Compensation Policy of the Bank.
The Variable Pay shall be a mix of cash and share-linked instruments with proper balance between cash and share linked components in keeping with the RBI guidelines. The focus of share-based LTI will be on long-term shareholder value creation. In view of the same, share-based LTI shall be granted as a part of Variable Pay and it shall be fair valued on the date of grant by using the Black-Scholes Model or any other model as may be directed by the Regulator(s). Only in cases where the compensation by way of share-linked instruments is not permitted by statute/regulations, the entire variable pay can be in the form of cash.
The assessment of variable pay is based on achievement of Bank-wide performance parameters for Whole Time Directors. For Material Risk Takers (MRTs) and other employees the assessment of variable pay is based on achievement of individual as well as Bank-wide performance parameters. For Control Function staff the assessment of variable pay is majorly linked to their individual performance; overall business performance of the Bank is reckoned only for ascertaining primary eligibility.
If deferral period is 3 years, not more than 33.33 % of the total granted Share-based LTI shall vest at the end of first year. Further, not more than 33.33 % of total granted Share-based LTI shall vest at the end of second year. Similarly, in case deferral arrangement is four years, not more than 25% of total granted Share-based LTI shall vest in each of the first three years. Additionally, vesting shall not take place more frequently than on a yearly basis to ensure a proper assessment of risks before the application of ex-post adjustments.
Malus & Clawback provisions on variable pay (cash based & share-based LTI) would enable the NRC to reduce or cancel unvested awards and recover previously paid compensation in certain situations viz. divergence in Bank's provisioning for NPAs, subdued or negative financial performance, misconduct or any other parameter deemed relevant by the NRC. Malus can be invoked in all the situations and clawback can be invoked in case of misconduct or any other parameter deemed relevant by the NRC. Invocation of Malus provisions would imply cancellation of partial or full deferred annual cash incentive and/or unvested LTI awards as on the date of discovery of applicable trigger. The clawback arrangement would imply recovery of annual cash incentives paid and LTI awards vested over the last five years from the date of discovery of the applicable trigger.
The Variable Pay shall be a mix of Cash & Share-based Long Term Incentive (LTI). Share-based LTI shall be granted as a part of Variable Pay and it shall be fair valued on the date of grant by using the Black-Scholes Model or any other model as may be directed by the Regulator(s). Share-based LTI shall be governed by the terms & conditions of the applicable scheme of the Bank, as amended from time-to-time. The employee category-wise target Variable Pay as a percentage of Annual Fixed Pay (subject to regulatory guidelines) shall be as recommended by the Nomination and Remuneration Committee and approved by the Board.
The Ministry of Corporate Affairs (MCA) had notified IFRS-converged Indian Accounting Standards (Ind AS) vide Notification dated February 16, 2015 and had also notified (vide press release dated January 18, 2016) the roadmap for applicability of Ind AS for Banks, Insurance companies and NBFCs from FY 2018-19. RBI advised all scheduled commercial banks to prepare financial statements for accounting periods beginning from April 1,2018 onwards in accordance with Ind AS and prescribed a timeframe for transition towards Ind AS. Consequent to this, IDBI had commenced implementation of Ind AS in preparation of financial results. RBI subsequently decided to defer the implementation of Ind AS for banking industry till further notice vide its Circular No. DBR.BP.BC. No. 29/21.07.001/2018-19 dated March 22, 2019. Further, RBI vide its communication dated August 08, 2021 decided to reduce the frequency of Pro-forma Ind AS Financial Statement submission from quarterly to half yearly. Accordingly Bank is submitting Ind AS Proforma Financial Statements on half yearly basis to RBI within the stipulated time.
As it is a beginning of transition to new set of Accounting Standards and awaiting notification of Financial Statements format by RBI as well as clarifications on applicability of various existing RBI Circulars under Ind AS environment, the Bank is required to formulate various policies papers (viz. Risk Management, Investments Policies), operational process setup and IT integration based on final guidelines to be issued by RBI, which will be continuously updated/modified/ evolved over a period of time. The key impact areas during the implementation of Ind AS for the Bank include effective interest rate accounting, fair valuation inputs, methodologies and assumptions, specific valuation considerations in many instruments, expected credit losses, employee stock options and implementation of technology systems.
During the year ended March 31, 2023, there were no breaches in respect of Single borrowers and Group of Connected Counterparties exposures of the Bank under LEF guidelines of RBI. Exposures to single counterparty borrower and group of connected counterparties were within the prudential exposure limits of 20% and 25% of eligible capital base i.e. Tier I Capital.
During the year ended March 31, 2022, there were no breaches in respect of single borrowers and group of connected counterparties exposures of the Bank. Exposures to single counterparty borrower and group of connected counterparties were within the prudential exposure limits of 20% and 25% of eligible capital base i.e. Tier I Capital as prescribed under the Large Exposure norms (net accounting value concept) of RBI.
During the previous FY 2021-22, the Bank had re-valued its Premises including leasehold / Freehold Lands & Residential/ Office buildings based on valuations made by independent valuers, using methodologies such as discounted cash flow, cost approach method, comparable sales method. An increase of ' 2,409 crore in carrying value of properties, arising on account of revaluation was credited directly to the Revaluation reserve. Similarly, a decrease of ' 73 crore in the carrying value of some properties, arising on account of revaluation was charged to profit and loss account. The WDV cost of fixed assets revalued during FY 2021-22 was ' 6,602 crore before revaluation.
The Bank's employees, excluding those who have opted for pension, who have joined Bank before March 31,2008 are covered by Provident Fund Scheme (PFS). The Bank makes a defined contribution measured as a fixed percentage of basic salary to the PFS. The Provident Fund Scheme is managed by “The Board of Trustees of IDBI Bank Employees' Provident Fund Trust (Trust)”. In respect of employees of IDBI Home Finance
Limited (IHFL) and IDBI Gilts Limited (IGL), provident fund contributions were made to Regional Provident Fund Commissioner up to May 2011 and thereafter contributions have been made to the aforementioned Fund. During the FY 2022-23'7 crore (Previous FY 2021-22 ' 15 crore) has been contributed to PFS and charged to Profit and Loss Account.
The Bank's employees who have joined after April 1,2008 are covered by IDBI Bank Ltd. New Pension Scheme (IBLNPS) to which Bank makes a defined contribution as a fixed percentage of Pay and Dearness Allowance. During the FY 2022-23, ' 177 crore (Previous FY 2021-22 ' 174 crore) has been contributed to IBLNPS and charged to Profit and Loss Account.
Business Segments have been identified and reported taking into account the target customer profile, the nature of products and services, the differing risks and returns, the organisation structure, the internal business reporting system and the guidelines prescribed by the RBI. Vide its circular dated April 7, 2022 on establishment of Digital Banking Units (DBUs), the RBI has prescribed reporting of Digital Banking Segment as a sub-segment of Retail Banking Segment. The proposed DBUs of the Bank have not commenced operations and having regard to the discussions of the DBU Working Group formed by Indian Banks' Association (IBA) (which included representatives of banks and RBI), reporting of Digital Banking as a separate sub-segment of Retail Banking Segment will be implemented by the Bank based on the decision of the DBU Working Group.
During year ended March 31,2023, bank has made provision of ' 1,426 crore (Previous Year: Nil) under treasury portfolio for security receipts received against assignment of NPA loans. There is a corresponding reversal of provision of equivalent amount under corporate portfolio.
B. Long term contracts
The Bank has a process whereby periodically all long term contracts including derivative contracts are assessed for material foreseeable losses. At the year end, the Bank has reviewed and ensured that adequate provision as required under any law/ accounting standards for material foreseeable losses on such long term contracts including derivative contracts has been made in the books of account.
C. Pending litigations
The Bank's pending litigations comprise of claims against the Bank primarily by the borrowers, customers and proceedings pending with Income Tax authorities. The Bank has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements.
During the year ended March 31,2023, Bank has written off SASF securities to the extent of ' 1500 crore on March 24, 2023, after obtaining concurrence of Government of India, Ministry of Finance, Department of Financial Services (DFS). As on March 31,2023, the balance SASF stands fully provided with aggregate provision of ' 879 crore.
Pursuant to the provisions of Micro, Small and Medium Enterprises Development Act, 2006, certain disclosures are required to be made relating to micro, small & medium enterprise. The Bank is in the process of compiling relevant information from its suppliers about their coverage under the said Act. In view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of this Act is not expected to be material.
(a) The COVID-19 virus, a global pandemic affected the world's economy over the last two to three years. The extent to which new wave of COVID-19 pandemic will impact the Bank's operations and asset quality will depend on ongoing as well as future developments, which are uncertain at this stage. The management of the Bank is closely monitoring the developments in this regard, including the likelihood of rise in customer defaults, corresponding increase in provisioning requirements and taking necessary steps to mitigate the same.
(b) As at March 31,2023, the Bank held aggregate COVID-19 related provision of ' 116 crore (other than provisions held for restructuring under COVID-19 norms). During the Quarter ended March 31,2022, the Bank had reversed COVID-19 related provision of ' 747 crore in view of extant RBI guidelines.
(c) In terms of RBI's circular on Resolution Framework 1.0 and Resolution Framework 2.0, Bank continues to hold regulatory provision aggregating to ' 315 crore as on March 31,2023. In addition, as on March 31,2023, Bank held contingency provision of ' 1836 crore for retail borrowers restructured under COVID RF 1, RF 2 and MSMER OTR framework.
The Bank has Board approved limit for Net Overnight Open Position (NOOP) fixed at ' 300 crore w.e.f. May 26, 2022. During the year the open position was within the approved limit and the average utilization was ' 127 crore (Prev. Year ' 78 crore). The maximum utilization during the year was at ' 223 crore on September 30, 2022. (Prev. Year ' 146 crore on April 15, 2021).
During the year ended March 31, 2023, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Bank to or in any other persons or entities, including foreign entities (“Intermediaries”) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Bank (Ultimate Beneficiaries). Further, The Bank has not received any fund from any parties (Funding Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Bank (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
IDBI Asset Management Ltd., IDBI MF Trustee Company Ltd., LIC Mutual Fund Asset Management Ltd. and LIC Mutual Fund Trustee Private Ltd. entered into Scheme Transfer Agreement on December 29, 2022 for transfer of IDBI mutual fund schemes
to LIC MF. Competition Commission of India and Securities Exchange Board of India approval for the proposed transfer of AUM has been received on March 23, 2023 and April 03, 2023 respectively. The transaction is likely to be concluded during June 2023. As the transfer is pending, there is no impact on financial results for the Year ended March 31,2023.
Figures of the previous year, are disclosed in brackets and are regrouped/ rearranged, so as to confirm with the presentation made for the current year and also pursuant to the requirement of Master Direction on financial results - Presentation and disclosure issued by Reserve Bank of India dated August 30, 2021 (updated as on February 20, 2023), as amended and wherever considered necessary.
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