The LCR is designed to promote short-term resilience of a bank's liquidity risk profile by ensuring that it has sufficient high quality liquid resources to survive an acute stress scenario lasting for 30 days. As per the RBI guidelines minimum requirement of LCR for FY 2023-24 on a daily basis is 100%. The methodology for estimating the LCR is based on RBI guidelines updated on time to time.
The LCR is calculated by dividing the amount of high quality liquid unencumbered assets (HQLA) by the estimated net outflows over a 30 calendar day period. The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories of liabilities (deposits viz Retail, Small Business customers (deposits upto '7.50 crore), unsecured and secured wholesale borrowings) as well as to undrawn commitments and derivatives-related exposures partially offset by inflows from assets maturing within 30 days.
The bank during the quarter ended March 31, 2024 had maintained average HQLA (after haircut) of Rs. 1,62,688.83 crore. HQLA primarily includes SLR securities in excess of minimum Statutory Liquidity Ratio (SLR) requirement the extent allowed under the Marginal Standing Facility (MSF) and the Facility to Avail Liquidity for LCR (FALLCR). Additionally, cash balances in excess of cash reserve requirement with RBI and the overseas central banks form part of level 1 HQLA. The Daily average LCR of the Indian bank for the quarter ended March 31, 2024 was 135.01%.
The main drivers of LCR of the bank are sufficient high quality liquid assets (HQLAs) to meet liquidity needs of the bank at all times. The weighted cash outflows are primarily driven by unsecured wholesale funding which contributed 56.19% of the total weighted cash outflows. Retail deposits including deposits from small business customers contributed 18.84% of the total weighted cash outflows. The other contingent funding obligations primarily include bank guarantees (BGs) and letters of credit (LCs) issued on behalf of the Bank's clients.
Bank has no significant counterparty (Deposit / Borrowing) as on 31.03.2024. The total contribution of the top 20 largest domestic depositors as on 31.03.2024 is 5.92% of the total deposits. The significant domestic product / instruments includes Savings deposit, Current deposit and Term deposit which are 35.10%, 5.67% and 59.23% of bank's total deposits respectively, the funding from which are widely spread and there is no major concentration risk under Liquidity front for bank.
The Net Stable Funding Ratio (NSFR) is a significant component of the Basel III reforms. 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. As per the latest RBI Guidelines, NSFR is effective from October 01, 2021.
NSFR is defined as the amount of Available Stable Funding relative to the amount of Required Stable Funding.
Available Stable Funding (ASF)
----------------------------> 100%
Required Stable Funding (RSF)
Available Stable Funding (ASF)
ASF is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered (viz. up to 1 year) by the NSFR. 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
Required Stable Funding (RSF)
RSF is the amount of stable funding required based on the liquidity characteristics and residual maturities of various assets held by that institution as well as those of its off-balance sheet (OBS) exposures. RSF is computed by multiplying the outstanding amount of the specified component with the prescribed and associated RSF Factor.
The objective of NSFR is to ensure that banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. The NSFR limits over-reliance on short-term wholesale funding, encourages better assessment of funding risk across all on and off-balance sheet items, and promotes funding stability.
Bank's NSFR stands at 143.70% as on 31.03.2023 and 138.84% as on 31.03.2024. NSFR is above the minimum regulatory requirement of 100%. As on 31.03.2024, the Available Stable Funding (ASF) was Rs. 560392.56 crore and the Required Stable Funding (RSF) was Rs. 403610.99 crore.
Bank also computes Liquidity Coverage Ratio and prepares Structural Liquidity Statements on a daily basis to assess the liquidity needs of the Bank.
c. Sale and transfers to/from HTM category
The value of sales and transfers of securities to/from HTM category did not exceed 5 per cent of the book value of investments held in HTM category at the beginning of the year as per RBI guidelines.
• Loss on account of sale of securities from HTM category amounting to Rs 51.63 crores (previous year Rs 37.35 crores) has been debited from Profit and Loss Account.
• Shifting of securities:
(i) In the beginning of the year, the Bank shifted:
• SLR securities for Book Value of Rs. 9593.58 crores was shifted from HTM to AFS which has resulted in no additional provision & Non-SLR VCF securities for Book Value of Rs. 4.69 crores from HTM category to AFS category and
• No SLR securities from AFS category to HTM category has been shifted during the year.
• In case of securities classified under HTM category, if acquisition cost is more than the face value, the premium is amortized over the remaining period to maturity. For the Financial Year 2023-24, a sum of Rs. 148.15 crores (previous year Rs 143.25 crores) has been amortized and the same is reflected as a deduction from 'Income on Investments'.
Acquisition of shares due to conversion of debt to equity during a restructuring process & exempted from regulatory ceilings / restrictions on Capital Market Exposures, investment in Para-Banking activities and intra-group exposure during the FY 2023-24: NIL
e. Divergence in asset classification and provisioning
In our Bank, divergence are within threshold limit specified in terms of RBI circular no DOR.ACC.REC.No. 45/21/4/018/2021-22 dated 30.08.2021 (updated on 11.10.2022), hence no disclosure on divergence in asset classification and provisioning for NPA is required with respect to RBI's annual supervisory process for FY 2023.
K. Covid Measures:
The spread of COVID-19 across the globe has resulted in declined economic activity and increased volatility in financial markets. In this situation, though the challenges continue to unfold, the Bank is gearing itself on all fronts to meet the same. The situation continues to be uncertain and the Bank is evaluating the situation on an ongoing basis. The extent to which the COVID-19 pandemic will impact the Bank's results will depend on future developments, which are highly uncertain. Major challenges for the Bank would be from extended working capital cycle and reduced cash flows. The Bank's capital and liquidity position is strong and would continue to be the focus area for the Bank during this period.
COUNTRY RISK MANAGEMENT:
The Bank has analysed its net funded exposure to various countries as on 31.03.2024 and such exposure to countries other than Singapore is well within the stipulation of 1% of the total assets of the Bank.
In respect of Singapore, which is classified under “Insignificant" risk category by ECGC Ltd, a provision of Rs.12.57 Crores (Previous year Rs.6.82 Crores) for 'Insignificant' risk category) is available.
e. Letter of comfort issued by the Bank:
During the year ended 31.03.2024 branches in India have not issued any letter of comfort for financing of imports. Outstanding as on 31.03.2024 is NIL. Hence no financial impact on outstanding LOC/LOU.
During the year ended 31.03.2024, Letter of Comfort issued by our foreign branches (Singapore and Colombo) and Gift City Branch is NIL and Outstanding as on 31.03.2024 is NIL
As per the Letter of Responsibility given by the Bank to the Monetary Authority of Singapore, the Bank to ensure that Singapore branch maintains sound liquidity and a sound financial position at all times. Accordingly, the Bank continues to maintain deposits to the extent of USD 43.00 Mio (equivalent to INR 358.64 crore) with Singapore Branch.
Bank has issued LOU for Sri Lankan branches favouring Central Bank of Sri Lanka (CBSL) as per the mandatory requirement of CBSL. Bank undertakes to provide funds as may be necessary to meet all obligations incurred in or in connection with its business in Sri Lanka. We do not anticipate any financial impact in immediate near future on account of this LOU.
Bank has issued LOC for our IBU/ FBU in IFSC, SEZ Gift City, Gujarat Favouring International Financial Service Centres Authority (IFSCA) as per the mandatory requirement of IFSCA. Bank undertakes to provide the necessary financial assistance as and when required in the form of Capital and liquidity support for our IBU/FBU in IFSC, GIFT city. Bank does not anticipate any financial impact in immediate near future on account of this LOC.
i. Unhedged foreign currency exposure
The Bank has in place a policy on managing credit risk arising out of Unhedged Foreign Currency Exposures of its borrowers. Where there is no natural hedge, forward cover is suggested to customers in respect of import/ export transactions. The forward cover will act as Unhedged risk mitigation on exchange risk. While sanctioning the facilities, Bank is ensuring that all the exposures (fund based and non-fund based including Letter of comfort/ Letter of undertaking) in foreign currencies are covered by forward cover. Request for considering waiver of forward cover if any is considered only at corporate office level. While reviewing the borrowal accounts, unhedged exposure are captured and impact is analysed in credit proposals.
The Bank has provided a provision of ^35.10 Crore and Capital of ^ 61.32 Crore for the year ended 31st March 2024 on Unhedged Foreign Currency Exposure to their constituents in terms of RBI circular dated October 11, 2022
c) Disclosures on risk exposure in derivatives
i) Qualitative disclosures
Bank's policy permits hedging of asset as well as liability using IRS. The hedging transactions are to be accounted on an accrual basis. Swaps, which hedge interest bearing asset / liability, are accounted for as the asset or liability hedged. Outstanding swap contracts are marked to market.
All swap deals shall be based on the guidelines of International Swaps Dealers' Association. Bank has adequate control systems and also internal approvals prior to concluding transactions. There exists a clear functional segregation between (i) trading (Dealing) (ii) back office (settlement, monitoring and control) and (iii) accounting sections.
In the derivatives segment, the bank's policy permits doing proprietary trading in Overnight Index Swaps (OIS). The activities in this segment are governed by the Derivatives Policy approved by the Bank's Board.
The gain or loss in OIS transactions is booked in the Profit and Loss account on the maturity or unwinding of the deal whichever is earlier. For the purpose of valuation of outstanding OIS deals, the fair value of the total swap is computed on the basis of the amount that would be receivable or payable on termination of the swap as on the balance sheet date. Losses arising there from, if any, are fully provided for while the profits, if any, are ignored.
Exchange traded FX Derivatives i.e. Currency Futures, are valued at the Exchange determined prices and the resultant gains and losses are recognized in the Profit and Loss account.
12.1 Disclosure of penalties imposed by the RBI:
During the year RBI has imposed a penalty of
• Rs.0.26 Cr (187 instances), of which Rs.0.08 Cr (102 instances) is related to discrepancies in soiled notes remittances, Rs. 0.03 Cr (6 instances) is due to delayed/wrong reporting in eKuber and Rs.0.11 Cr (56 instances) is due to irregularities observed in RBI inspection at currency chests and 0.04 Cr (23 instances) is due to irregularities observed in incognito visit of branches by RBI.
• Rs 0.02 crore (no of instances: 23) of which 0.02 crore is related to Cash Out ATM.
• Rs. 1.62 crore on the Bank for non-compliance with certain directions issued by RBI on 'Loans and Advances - Statutory and Other Restrictions', 'RBI [ Know Your Customer (KYC)] Directions, 2016' and 'RBI (Interest Rate on Deposits) Directions, 2016.
• Rs. 0.55 crore for non- compliance with the directions issued by Reserve Bank on 'Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016.
(Penalty imposed by RBI in previous year: Rs 1.05 Cr.)
During the year, Govt has imposed penalty of 1.24 Cr (19 instances - pertaining to period 2005- 2023) related to delay in remittances to Govt accounts. Representations submitted to respective Ministries for waiver / reduction of penal interest amount. Hence the provision has not been made in the account for the year.
(Penalty imposed by GOI in previous year: Rs 0.11 Cr.)
i. Defined Contribution Plans:
Provident fund is a statutory obligation and in the case of Contributory Provident Fund Optees, the Bank pays fixed contribution at pre-determined rates. The obligation of the Bank is limited to such fixed contribution. The contributions are charged to Profit and Loss Account. The fund is managed by Indian Bank Staff Provident Fund Trust. During the financial year 2023-24, the Bank has contributed 1.07 crores (previous year ^ 0.91 crores).
New Pension Scheme (NPS) is applicable to employees who joined bank on or after 01.04.2010 and it is a defined contribution scheme. Under NPS the Bank pays fixed contribution at pre-determined rate and the obligation of the Bank is limited to such fixed contribution. The contribution is charged to Profit and Loss Account. During the financial year 2023-24, the Bank has contributed 353.34 crores (previous year ^ 288.87 crores)
ii. Defined Benefit Plans:
The summarized position of Post-employment benefits and long term employee benefits recognised in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard-15 (Revised) are as under:
The following table sets out the basis of the Defined Benefit Pension Plan and Gratuity Plan as per the actuarial valuation by the independent Actuary appointed by the Bank
The estimates of future salary increases are considered taking into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market and in tandem with Funding Guidelines for Superannuation Schemes communicated by IBA. Such estimates are very long term and are not based on limited past experience / immediate future. Empirical evidence also suggests that in very long term, consistent high salary growth rates are not possible.
The liabilities of leave encashment are unfunded.
Amount of ^ 41.96 crore (previous year ^ 73.65 crore) has been provided towards Long Term Employee Benefits as per the actuarial valuation by the independent Actuary appointed by the Bank and is included under the head “Payments to and Provisions for Employees" in Profit and Loss Account.
15. Property, Plant and Equipment (AS-10)
15.1 The premises of the Bank include land and building are stated at revalued amount. The Bank revalued its premises in the financial year 2021-22 at fair market value determined by the approved external valuers. There is an increase of Rs. 599.48 Crore in the amount of revaluation of premises, which has been credited to “Revaluation Reserve Account." For the year 2023-24, depreciation amounting to Rs. 105.56 Crore (previous year Rs. 110.87 Crore) was charged under expenditure and depreciation on revalued portion amounting to Rs. 98.79 Crore (previous year Rs. 104.12 Crore) is adjusted against the “Revaluation Reserve Account.". Also Rs. 7.50 Crore was transferred from Revaluation Reserve to Revenue Reserve on account of Sale of Premises. As per AS 10, depreciation on revalued assets amounting to Rs. 104.12 Crore was also charged under expenditure for the year 2022-23. The same was adjusted against revaluation reserve to the credit of Revenue Reserve account.
15.2 Premises include 9 (7 2*) properties original costing Rs. 8.38 crores having revalued book value of Rs. 63.71 crores (Previous year Rs. 65.98 Crores), net of depreciation of Rs. 0.44 Crore (Previous year Rs.0.76 crore) for which registration formalities are pending
*Property at Hyderabad costing Rs.1.61 Crore, where clearance is pending before ULC authority at Govt of Telangana for regularization where interim stay has been granted by DRAT and at Chennai costing Rs.2.32 Crore, where interim stay has been granted by DRT.
16. Lease (AS 19)
A) The properties taken on lease / rental basis are renewable / cancellable at the option of the Bank.
B) The leases entered into by the Bank are for agreed period with an option to terminate the leases even during the currency of lease period by giving agreed calendar month notice in writing.
C) Lease rent paid for operating leases are recognized as an expense in the Profit & Loss account in the year to which it relates. The lease rent recognized during the year is Rs. 426.22 Crore. (Previous year Rs. 399.08 Cr).
D) Finance lease
An asset acquired on finance lease comprises land and building. The leases have a primary period, which is fixed and non-cancellable. The bank has an option to renew the lease for a secondary period.
17. Indian Bank Trust for Rural Development
IBTRD has been set up by the Bank on 22.09.2008 to pay focused attention on Rural Development initiatives. As per GoI notification, erstwhile Allahabad Bank has been amalgamated with Indian Bank w.e.f. 01.04.2020, and the process of amalgamation of IBTRD and Allahabad Bank Rural Development Trust (ABRDT) is under progress and all the assets and liabilities of ABRDT will be transferred to IBTRD. The focus area of the Trust has been self-employment training and imparting Financial Literacy at both district and block level.
As per the direction of Ministry of Rural Development (MoRD), GoI, our Bank has established Rural Self-Employment Training Institutes (RSETIs) in the name of Indian Bank Self-Employment Training Institutes (INDSETIs) through the Trust to impart self-employment training to rural youth
18. Legal
Contingent liabilities include an A/c M/s Nimbus Communication Ltd., Guarantees were issued by Consortium Banks favouring BCCI aggregating to Rs.1602.44 Crore. BCCI filed suit against Consortium Banks claiming guarantee liability wherein claim aggregating to Rs.406.47 Cr was made against the Bank during FY 2011-12. In the suit, conditional leave to defend was granted on making payment of Rs.400 crores, wherein our Bank's share is Rs.100 crores. Remittance of our Bank's share of Rs.100 crores was made during FY 2012-13 with the Prothonotary and Senior Master of the Hon'ble High Court of Bombay. The summary suit is pending adjudication before Hon'ble High Court of Bombay. The said remittance of Rs. 100 Crore was made by the Bank has been adjusted during the year by debiting the current account and FD account (Rs. 84.09 Crore) of M/s Nimbus Communication Ltd leaving O/s balance as on 31.03.2024 of Rs. 15.94 Crore.
For this claim against the Bank by BCCI, Bank is having total provision of Rs. 31.26 Crore (previous year Rs. 31.26 Crore).
19. Accounting standard-17 "Segment Reporting”
1. Segment Identification
I. Primary (Business Segment)
The following are the primary segments of the Bank:
- Treasury
- Corporate / Wholesale Banking
- Retail Banking*
- Other Banking Business.
* Further, the Retail Banking segment has been sub-divided into Digital Banking and Other Retail Banking Segment in terms of RBI Circular DOR.AUT.REC.12/22.01.00l/2022-23 dated April 7, 2022.
The present accounting and information system of the Bank does not support capturing and extraction of the data in respect of the above segments separately. However, based on the present internal, organisational and management reporting structure and the nature of their risk and returns, the data on the primary segments have been computed as under:
i. Treasury -
The Treasury Segment includes the entire investment portfolio and trading in foreign exchange contracts and derivative contracts. The revenue of the treasury segment primarily consists of fees and gains or losses from trading operations and interest income on the investment portfolio.
ii. Corporate / Wholesale Banking -
The Corporate / Wholesale Banking segment comprises the lending activities of Corporate Accounts Group, Commercial Clients Group and Stressed Assets Resolution Group. These include providing loans and transaction services to corporate and institutional clients and further include non-treasury operations of foreign offices.
iii. Retail Banking -
(i) Digital Banking - In compliance with the RBI Circular dated April 7, 2022, the bank has commenced operations at three DBUs during the year ended March 31, 2023. The segment information pertains to the said DBUs' operations.
(ii) Other Retail Banking - This Segment comprises of retail branches, which primarily includes Personal Banking activities including lending activities to corporate customers having banking relations with these branches. This segment also includes agency business and ATMs.
iv. Other Banking business —
Segments not classified under (i) to (iii) above are classified under this primary segment.
II. Secondary (Geographical Segment)
i. Domestic Operations - Branches/Offices having operations in India
ii. Foreign Operations - Branches/Offices having operations outside India and off-shore Banking units
having operations in India.
III. Allocation of Expenses, Assets and Liabilities
Expenses incurred at Corporate Centre establishments directly attributable either to Corporate / Wholesale and Retail Banking Operations or to Treasury Operations segment, are allocated accordingly. Expenses not directly attributable are allocated on the basis of the ratio of segment assets in each segment/ratio of directly attributable expenses. The Bank has certain common assets and liabilities, which cannot be attributed to any segment, and the same are treated as unallocated.
22. Accounting for taxes on income (AS 22):
a) Current Tax: Provision for income tax for domestic operations made during the current year amounts to Rs. 3357.18 Crore including provision for tax relating to earlier years made in the current year amounts to Rs. 8.26 Crores. Provision for income tax made in foreign branches during the current year amounts to Rs. 18.08 Crore. The current tax has been calculated in accordance with the provisions of Income Tax Act 1961.
b) Deferred Tax: The Bank has a net DTA of Rs. 4921.62 Crore (Previous year net DTA of Rs 4434.56 Crore), which comprises of Deferred Tax Liabilities (DTL) of Rs. 1116.56 Crore (Previous year Rs. 1025.40 Crore) and Deferred Tax Assets (DTA) of Rs. 6038.18 Crore (Previous Year Rs. 5459.96 Crore). The major components of DTA and DTL (including foreign branches) is given below:
The disputed income tax demand paid as at 31.03.2024 was Rs. 3953.36 crore (previous year 3953.36 Crore). The same has also been included under contingent liabilities relating to Income Tax of Rs 9761.82 Crore (previous year Rs. 8846.59 Crores) relating to disputed tax matters as at 31.03.2024. No provision is considered necessary for the said disputed demands on account of judicial pronouncements and favorable decisions in Bank's own case.
c) Marketing and distribution
The Bank does not undertake marketing and/or distribution of any product of other entities (other than products under Bancassurance Business). Therefore, the Bank has not earned any fees/remuneration from the stated activities.
f) Implementation of IFRS converged Indian Accounting Standards (Ind AS)
i) As per the directions of RBI vide their letter DBR.BP.BC.No.76/21.07.001/2015-16 dated 11.02.2016, Banks shall comply with Ind AS for standalone and consolidated financial statements for accounting periods beginning from April 1, 2018 onwards with comparative figures for the preceding period ending March 31, 2018
ii) RBI also advised the Banks to prepare Proforma Financial Statements as per Ind AS for the half year ended 30.09.2016 with transition date as 01.04.2016 and the same was prepared and submitted to RBI. Similarly, proforma Ind AS financials for the quarter ended 30.06.2017 was also submitted to RBI.
iii) Subsequently, RBI advised that Banks shall submit Ind AS proforma financial statement for every quarter starting from quarter ending 30th June 2018 onwards. The same has been duly complied with.
iv) From F.Y. 2021-22 onwards, RBI advised to reduce the frequency of Ind AS proforma financial statement submission from quarterly to half yearly. The same has been complied with. The Audit Committee of the Board and Board of Directors have been periodically apprised the progress in this regard.
v) As per RBI notification DBR.BP.BC.No.29/21.07.001/2018-19 dated 22nd March 2019, implementation of Ind AS in Banks has been deferred till further notice. However, submission of proforma Ind AS financials to RBI has been continued and the Bank is complying with the same.
k) Reconciliation and Adjustments
I. Reconciliation of Inter Branch Account is completed up to 31.03.2024 except few old entries. The Bank through various effective steps has achieved reduction in the outstanding.
II. In view of the net credit position in respect of un-reconciled entries in the Inter Branch Account outstanding for more than 6 months as on 31.03.2024, no provision is required. However, the bank is maintaining 100% provisions on the gross debit balance in inter branch account amounting to Rs. 263.79 Crore (Rs 35.78 Crore during the year 2023-24)
III. Old outstanding entries, in drafts payable, clearing adjustment, sundries receivable, sundry deposit accounts, etc. and in bank reconciliation relating to Reserve Bank of India and other banks are being regularly reviewed for appropriate adjustments.
IV. Balancing of subsidiary/ ledgers, registers and reconciliation with general ledgers are in progress at some branches. In the opinion of the management, consequential financial impact of the above on the accounts will not be significant.
V. Dividend of Rs. 12.00 per equity share i.e. 120% to the paid up capital is proposed by the Bank for FY 202324.
VI. As per information available with the Bank, there is no outstanding dues payable by the Bank to MSME units identified by the Bank, which is pending beyond the time limit prescribed under MSMED Act, 2006 and there have been no reported cases of accepted liability of delayed payments of principal amount or interest thereon for such parties during the year.
VII. Previous year's figures have been regrouped / reclassified, wherever necessary, to conform to current year's figures.
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