PROJECT ON

“BANKING REGULATION ACT 1969”

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF DEGREE OF MASTERS OF COMMERCE

(M.COM) FROM THE UNIVERSITY OF MUMBAI

SUMBITTED BYSHREERAJ HARIHARAN

M.COM PART-I (SEM-I)ROLL NO 36

2013-2014

UNDER THE GUIDANCE OFPROF. JAI KOTECHA

LORD UNIVERSAL COLLEGE,TOPIWALA MARG, OFF STATION ROAD, GOREGAON (WEST),

MUMBAI, 400062

1 | P a g e

DECLARATION

I MR SHREERAJ HARIHARAN student of LORD UNIVERSAL COLLEGE, M.com Part-I (SEM I) hereby declare that I have completed project on “BANKING REGULATION ACT 1969”, in the academic year 2013-2014.This information is true &original to best of my knowledge

Date: signature of student

2 | P a g e

Certificate

This is to certify that this project entitled BANKING REGULATION ACT 1969for subject ADVANCE FINANCIAL ACCOUNTING is done by SHREERAJ HARIHARAN seat number 36 of M.com Part I Semester I in the academic year 2013-2014 and being submitted to University of Mumbai through LORD UNIVERSAL COLLEGE, Goregaon (west)

(PROF. JAI KOTECHA)INTERNAL EXAMINER SIGNATURE

EXTERNAL EXAMINER SIGNATURE

(DR RUKI MIRCHANDANI)

Principal SIGNATURE

Acknowledgement

3 | P a g e

With deep satisfaction and immense pleasure I am presenting this project report on “BANKING REGULATION ACT 1969” in partial requirements for the M.COM course.

I would like to extend my sincere gratitude and appreciation to my project guide Prof. JAI KOTECHA who assisted me into this project. It has indeed been a great experience working under her guidance during the course of the project. I would like to thank her for his valuable advice and support throughout this project.

And last but not the least I would like to thank all the Faculty Members, staff of the institute for their help in making my project an unforgettable and great learning experience.

Date: signature of student

CONTENTS

4 | P a g e

Introduction...........................................................................................................6

History……………..............................................................................................7

DEFINITION OF BANKS………………………………….....................................9

Applicability of the Banking Regulation Act, 1949....................................................................................................................11

Banking Policy………………………………………………….......................14

Control of Management ………………………………………………………20

Bank of Baroda…………………………..........................................................22

History…...............................................................................................23

Statement of Consolidated Cash Flow for the year ended 31st March

2013.....................................................................................................24

DIRECTORS’ REPORT…................................................................................31

Financial Statement Of Bank Of Baroda............................................................33

Bibliography…………………………………………………………………..72

INTRODUCTION

5 | P a g e

The Banking companies act, presently known as banking regulation act was enacted owing to safeguard the interest of depositors, control abuse of power by some bank personnel controlling the banks in particular and to the interest of Indian economy in general.

The Banking Regulation Act was passed as the Banking Companies Act 1949 and came into force w.e.f 16.3.49. Subsequently it was changed to Banking Regulations Act 1949 wef 01.03.66.

However, it should be remembered that this act does not supersede the provision of companies act or any other law for the time being in force in respect of banking business.

HISTORY

6 | P a g e

Banking in India in the modern sense originated in the last decades of the 18th century. The first banks were Bank of Hindustan (1770-1829) and The General Bank of India, established 1786 and since defunct.

The largest bank, and the oldest still in existence, is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955. For many years the presidency banks acted as quasi-central banks, as did their successors, until the Reserve Bank of India was established in 1935.

In 1969 the Indian government nationalized all the major banks that it did not already own and these have remained under government ownership. They are run under a structure know as 'profit-making public sector undertaking' (PSU) and are allowed to compete and operate as commercial banks. The Indian banking sector is made up of four types of banks, as well as the PSUs and the state banks; they have been joined since 1990s by new private commercial banks and a number of foreign banks.

Banking in India was generally fairly mature in terms of supply, product range and reach-even though reach in rural India and to the poor still remains a challenge. The government has developed initiatives to address this through the State bank of India expanding its branch network and

7 | P a g e

through the National Bank for Agriculture and Rural Development with things like microfinance.

8 | P a g e

DEFINITION OF BANKS

In India, the definition of the business of banking has been given in the Banking Regulation Act, (BR Act), 1949. According to Section 5(c) of the BR Act, 'a banking company is a company which transacts the business of banking in India.' Further, Section 5(b) of the BR Act defines banking as, 'accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and with drawable , by cheque , draft, order or otherwise.'

This definition points to the three primary activities of a commercial bank which distinguish it from the other financial institutions. These are: (i) maintaining deposit accounts including current accounts, (ii) issue and pay cheques, and (iii) collect cheques for the bank's customer

Different provisions of Banking regulations Act

S. No. Parts Tocs

1. I Preliminary

2. II Business of Banking Companies

3. IIA Control over management

4. IIB Prohibition of certain activities in relation to banking Companies

5. IIC Acquisition of the undertakings of Banking Companies in certain cases

9 | P a g e

6. III Suspension of business and winding up of Banking Companies

7. IIIA Speedy provision for speedy disposal of winding up proceedings

8. IIIB Provision relating to certain operation of Banking Companies

9. IV Miscellaneous

10. V Application of the Act to cooperative Banks

Applicability of the Banking Regulation Act, 1949

This Act applies to following categories of Banks

Nationalized Banks

10 | P a g e

Non-Nationalized Banks

Cooperative Banks

Business of banking CompaniesSection 6(1) and 6(2) r.w. 56(b)

• Borrowing, raising or taking of money

• Giving advance

• Bills business • L/C , Bank Guarantee, Indemnity

• Foreign exchange

• Providing safe deposit vaults

• Collecting and transmitting money

• Managing, selling and realizing any property that may come into the possession of the bank in satisfaction or part satisfaction of any of its dues

• Acquiring, holding and dealing with any property or any right, title or interest in any such property that may form the security or part of the security for any loans or advances or which may be connected with such security

Undertaking and executing trusts

• Acquiring, constructing, maintaining and altering of any building for the purpose of the bank

11 | P a g e

• Acquiring and undertaking the whole or part of the business of any person or bank / company if its nature of business is as per the allowed business for the bank

• Doing all such other things as are incidental or conducive to the promotion or advancement of the business of the bank

• Any other business the Central Govt. may by notification specify as a allowed business

• Banks are prohibited to do any other business

Use of words bank, banker, banking or banking company

• No company other than a banking company shall use as part of its name 15[or, in connection with its business] any of the words bank, banker or banking and no company shall carry on the business of banking in India unless it uses as part of its name at least one of such words.

• No firm, individual or group of individuals shall, for the purpose of carrying on any business, use as part of its or his name any of the words bank, banking or banking company.

• Nothing in this section shall apply to-

(1) a subsidiary of a banking company formed for one or more of the purposes mentioned in sub-section (1) of section 19, whose name indicates that it is a subsidiary of that banking company;

12 | P a g e

(2) any association of banks formed for the protection of their mutual interests and registered under section 25 of the Companies Act, 1956 (1 of 1956).]

Applicability against other laws

• Provisions of the Banking regulation Act, 1949 are not in substitution of other laws applicable, unless otherwise expressly said (Section 2 sub 56 (b)

• Act is not applicable to – 1 Primary Agricultural Society – 2 Co-operative Land Mortgage Bank – 3 Any other co-operative society except as provided

by Sec. 56(Section 3)

Banking Policy

• “Banking Policy “means policy specified by RBI from time to time in the interest of

• -Banking system

• -Monitory stability

• -Sound economic growth

13 | P a g e

• -Interest of depositors

• -Volume of deposits and other resources of the bank • -Efficient use of the deposits and resources Section 5(ca)

Cash Reserve (CRR)Section 18 r. w. 56 (j)

• Every bank is required to keep cash reserve, with itself or by way of balance in the current account with RBI or Central / District Co-operative Bank or net balance in all such way, of minimum prescribed % amount of its DTL as of last Friday of fortnight

• A return about this has to be submitted to RBI before 15thof each month about alternate Friday

SLR(Statutory Liquidity Ratio)

Bank shall maintain unencumbered approved securities, valued not exceeding the current market price, or an amount which shall not be less than 24% of the total of its demand and time liabilities (DTL)

Restrictions on loans and advances

• (1) Notwithstanding anything to the contrary contained in section 77 of the Companies Act, 1956 (1 of 1956), no banking company shall,

14 | P a g e

• (a) grant any loans or advances on the security of its own shares, or

• (b) enter into any commitment for granting any loan or advance to or on behalf of

• (i) any of its directors,

• (ii) any firm in which any of its directors is interested as partner, manager, employee or guarantor, or

• (iii) any company [not being a subsidiary of the banking company or a company registered under section 25 of the Companies Act, 1956 (1 of 1956), or a Government company] of which 61[or the subsidiary or the holding company of which] any of the directors of the banking company is a director, managing agent, manager, employee or guarantor or in which he holds substantial interest, or

• (iv) any individual in respect of whom any of its directors is a partner or guarantor.

Licensing of banking companies

• 68[(1) Save as hereinafter provided, no company shall carry on banking business in India unless it holds a licence issued in that behalf by the Reserve Bank and any such licence may be issued subject of such conditions as the Reserve Bank may think fit to impose.]

• (2) Every banking company in existence on the commencement of this Act, before the expiry of six months from such commencement, and every other company before commencing banking business 69[in India], shall

15 | P a g e

apply in writing to the Reserve Bank for a licence under this section.

Power to publish information

The Reserve Bank or the National Bank, or both, if they consider it in the public interest so to do, may publish any information obtained by them under this Act in such consolidated form as they think fit.

Power of the Reserve Bank to give directions

• (1) Where the Reserve Bank is satisfied that— • (a) in the 134[public interest]; or

• 135[(aa) in the interest of banking policy; or]

• (b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or

• (c) to secure the proper management of any banking company generally,

• it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions

• (2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any

16 | P a g e

direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.

Amendments of provisions relating to appointments of managing directors, etc., to be subject to previous

approval of the Reserve Bank.

• No amendment of any provision relating to the maximum permissible number of directors.

• No appointment or re-appointment or termination of appointment of a chairman.

• Further powers and functions of Reserve Banks.

• 1.(a) caution or prohibit banking companies or any banking company in particular against entering into any particular transaction or class of transactions, and generally give advice to any banking company;

• (b) on a request by the companies concerned and subject to the provision of section 149[44A], assist, as intermediary or otherwise, in proposals for the amalgamation of such banking companies;

• (c) give assistance to any banking company by means of the grant of a loan or advance to it under clause (3) of sub-section (1) of section 18 of the Reserve Bank of India Act, 1934 (2 of 1934);

• (2) The Reserve Bank shall make an annual report to the Central Government on the trend and progress of banking

17 | P a g e

in the country, with particular reference to its activities under clause (2) of section 17 of the Reserve Bank of India Act, 1934 (2 of 1934), including in such report its suggestions, if any, for the strengthening of banking business throughout the country.

• (3) The Reserve Bank may appoint such staff at such places as it considers necessary for the scrutiny of the returns, statements and information furnished by banking companies under this Act, and generally to ensure the efficient performance of its functions under this Act.

Certain provisions of the Act not to apply to certain banking companies.

• (1) The provisions of section II, sub-section (1) of section 12, and sections 17, 18, 24 and 25 shall not apply to a banking company—

• (a) which, whether before or after the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959), has been refused a licence under section 22, or prohibited from accepting fresh deposits by a compromise, arrangement or scheme sanctioned by a court or by any order made in any proceeding relating to such compromise, arrangement or scheme, or prohibited from accepting deposits by virtue of any alteration made in its memorandum; or

• (b) whose licence has been cancelled under section 22, whether before or after the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959).

18 | P a g e

• (2) Where the Reserve Bank is satisfied that any such banking company as is referred to in sub-section (1) has repaid, or has made adequate provision for repaying all deposits accepted by the banking company, either in full or to the maximum extent possible, the Reserve Bank may, by notice published in the Official Gazette, notify that the banking company has ceased to be a banking company within the meaning of this Act, and thereupon all the provisions of this Act applicable to such banking company shall cease to apply to it, except as respects things done or omitted to be done before such notice.]

CONTROL OVER MANAGEMENT

• 36AA. Power of Reserve Bank to remove managerial and other persons from office.

• (a)36AAA. Supersession of Board of directors of a multi-State co-operative bank.

• (b)36AAB. Order of winding up of multi-State co-operative bank to be final in certain cases

19 | P a g e

• (c)Reimbursement to Deposit Insurance Corporation by liquidator or transferee bank

• 36AA. Power of Reserve Bank to remove managerial and other persons from office.

• (a)36AAA. Supersession of Board of directors of a multi-State co-operative bank.

(b)36AAB. Order of winding up of multi-State co-operative bank to be final in certain cases

• (c)Reimbursement to Deposit Insurance Corporation by liquidator or transferee bank

• 36AB. Power of Reserve Bank to appoint additional directors,

• 36AC. Part IIA to override other laws. • 36AD. Punishments for certain activities in relation to

banking companies.

SUSPENSION OF BUSINESS AND WINDING UP OF BANKING COMPANIES

• High Court defined.

• Suspension of business.

• Winding up by High Court.

• Court liquidator.

20 | P a g e

• Reserve Bank to be official liquidator.

• Application of Companies Act to liquidators.

BANK OF BARODA

Introduction

Bank of Baroda (BoB) is an Indian state-owned banking and financial services company headquartered in Baroda, or Vadodara. It offers a range of banking products and financial services to corporate and retail customers through its branches and through its specialized subsidiaries and affiliates in the areas of retail banking, investment banking, credit cards, and asset management. Its total global business

21 | P a g e

was   8,021 billion as of 31 March 2013, making it the second largest Bank in India after State Bank of India In addition to its headquarters in its home state of Gujarat, it has a corporate headquarters in the Bandra Kurla Complex in Mumbai.

Based on 2012 data, it is ranked 715 on Forbes Global 2000 list.[4][5] BoB has total assets in excess of   3.58 trillion (short scale),  3,583 billion (long scale), a network of 4283 branches (out of which 4172 branches are in India) and offices, and over 2000 ATMs.

The bank was founded by the Maharaja of Baroda, H. H. Sir Sayajirao Gaekwad III on 20 July 1908 in the Princely State of Baroda, in Gujarat. The bank, along with 13 other major commercial banks of India, was nationalized on 19 July 1969, by the Government of India and has been designated as a profit-making public sector undertaking (PSU).

HistoryIn 1996, BoB Bank entered the capital market in December with an Initial Public Offering (IPO). The Government of India is still the largest shareholder, owning 66% of the bank's equity.

In 1997, BoB opened a branch in Durban. The next year BoB bought out its partners in IUB International Finance in Hong Kong. Apparently this was a response to regulatory changes following Hong Kong’s reversion to the People’s Republic of China. The now wholly owned subsidiary became Bank of Baroda (Hong Kong), a restricted license bank. BoB also acquired Punjab Cooperative Bank in a rescue. BoB

22 | P a g e

incorporate wholly owned subsidiary BOB Capital Markets Ltd. for broking business.

In 1999, BoB merged in Bareilly Corporation Bank in another rescue. At the time, Bareilly had 64 branches, including four in Delhi. In Guyana, BoB incorporated its branch as a subsidiary, Bank of Baroda Guyana. BoB added a branch in Mauritius and closed its Harrow Branch in London.

Statement of Consolidated Cash Flow for the year ended 31st March, 2013

(000's omitted)

  Year ended 31.03.2013

Year ended 31.03.2012

A. Cash flow from operating activities:

   

Net Profit before taxes 5248,36,93 6336,03,70Adjustments for :    Depreciation on fixed assets 321,70,12 295,48,16 Depreciation on investments (including on Matured debentures)

220,55,42 238,81,36

23 | P a g e

Bad debts written-off/Provision in respect of non-performing assets

3501,01,53 1892,81,38

Provision for Standard Assets 395,21,36 449,66,42 Provision for Other items 848,50,50 523,98,03 (Profit) / loss on sale of fixed assets 1,22,56 (79,87) Payment/provision for interest on subordinated debt(treated separately)

930,27,55 914,36,03

Sub total 11466,85,97 10650,35,21Adjustments for :    (Increase)/Decrease in investments (39140,60,32) (12781,39,85) (Increase)/Decrease in advances (45049,07,56) (61884,83,95) (increase)/Decrease in other assets 1889,31,06 (3545,00,45) Increase/(Decrease) in borrowings 2852,58,41 1031,35,69 Increase/(Decrease) in deposits 90022,94,80 81012,69,61 Increase/(Decrease) in other liabilities and provisions

2981,82,56 1928,70,34

Direct taxes paid (Net of Refund) (1827,70,72) (1774,47,81) Net cash from operating activities (A)

23196,14,20 14637,38,79

B. Cash flow from investing activities :

   

Purchase of fixed assets (560,09,92) (456,14,17) Sale of fixed assets 45,94,30 40,02,44 Net cash from investing activities (B) (514,15,62) (416,11,73) C. Cash flow from financing activities :

   

Share capital 10,13,29 19,57,73Share premium 839,86,71 1625,11,20Unsecured Subordinated Bonds 102,30,00 188,37,19 Dividend (812,29,04) (753,35,20) Interest paid / payable on unsecured redeemable bonds

(930,27,55) (914,36,03)

Net cash from financing activities (790,26,59) 165,34,89

24 | P a g e

(C) Net increase in cash & cash equivalents (A)+(B)+(C)

21891,71,99 14386,61,95

Cash and cash equivalents as at the beginning of the year

65810,34,67 51423,72,72

Cash and cash equivalents as at the end of the year

87702,06,66 65810,34,67

Notes:    1 Cash & Cash equivalents includes Cash on hand, Balance with RBI & Other banks and Money at call and Short Notice.

   

2 Components of Cash & Cash Equivalents

As on 31st March 2013

As on 31st March 2012

Cash & Balance with RBI 14151,18,45 22268,34,40Balances with Banks and Money at Call and Short Notice

73550,88,21 43542,00,27

Total 87702,06,66 65810,34,67Key Financial Indicators

S.No.

Particulars (In

Percentage)

31.03.2009

31.03.2010

31.03.2011

31.03.2012

31.03.2013

1

Interest Income / Average Working Funds (AWF)

7.78% 6.86% 6.97% 7.58% 7.34%

2 Interest Expenses / AWF

5.14% 4.42% 4.16% 4.95% 4.98%

25 | P a g e

3

Net Interest Margin (NIM)

2.91% 2.74% 3.12% 2.97% 2.66%

4 Interest Spread / AWF

2.64% 2.44% 2.80% 2.64% 2.36%

5

Non-Interest Income / AWF

1.42% 1.15% 0.89% 0.87% 0.76%

6 Operating Expenses / AWF

1.84% 1.56% 1.47% 1.32% 1.24%

7 Cost Income Ratio

45.38% 43.57% 39.87% 37.55% 39.79%

8

Gross (Operating) Profit / AWF

2.22% 2.03% 2.22% 2.19% 1.88%

9 Net Profit / AWF

1.15% 1.26% 1.35% 1.28% 0.93%

10 Return on Net Worth

19.48% 22.19% 21.42% 19.11% 14.59%

11 Return on Assets

0.98% 1.10% 1.18% 1.12% 0.82%

12 Return on Average Assets

1.10% 1.21% 1.33% 1.24% 0.90%

13 Yield on 9.50% 8.55% 8.48% 9.39% 8.90%

26 | P a g e

Advances

14 Cost of Deposits

5.71% 4.90% 4.56% 5.62% 5.80%

15

Dividend Payout Ratio (including Corporate Dividend Tax)

17.22% 20.90% 17.76% 16.22% 23.65%

16 Credit -- Deposit Ratio

81.94% 84.47% 86.77% 86.86% 82.03%

17

Credit + Non SLR Investment (excluding Investments in Subsidiaries) -- Deposit Ratio

87.44% 88.74% 90.29% 90.36% 86.17%

18

Capital Adequacy Ratio (BASEL I)

12.88% 12.84% 13.02% 12.95% 12.09%

Tier - I 7.79% 8.22% 8.96% 9.56% 9.20%

Tier - II 5.09% 4.62% 4.06% 3.39% 2.89%

19 Capital Adequacy Ratio

14.05% 14.36% 14.52% 14.67% 13.30%

27 | P a g e

(BASEL II)

Tier - I 8.49% 9.20% 9.99% 10.83% 10.13%

Tier - II 5.56% 5.16% 4.53% 3.84% 3.17%

S.No..

Particulars (In

Percentage)

31.03.2009

31.03.2010

31.03.2011

31.03.2012

31.03.2013

1 Employees (number)

36838 38960 40046 42175 43108

2 Branches (number)

2974 3148 3418 3959 4336

3

Business per employee (Rs. in crore)

8.63 9.81 12.29 14.66 16.89

4

Average Business per employee (Rs in crore)

7.57 8.94 11.26 13.15 15.71

5

Gross Profit per employee (Rs. in lakhs)

11.69 12.67 17.43 20.35 20.88

6 Net Profit per

6.05 7.85 10.59 11.87 10.39

28 | P a g e

employee (Rs. in lakhs)

7

Business per branch (Rs. in crore)

112.86 132.24 156.27 169.80 184.98

8

Gross Profit per branch (Rs. in crore)

1.45 1.57 2.04 2.17 2.08

9

Net Profit per branch (Rs. in crore)

0.75 0.97 1.24 1.26 1.03

10 Earnings per share (Rupees)

61.14 83.96 116.37 127.84 108.84

11

Book Value per share (Rupees)

313.82 378.44 505.71 637.37 729.11

29 | P a g e

DIRECTORS’ REPORT

"Your Directors have pleasure in presenting the One Hundred and Fourth Annual Report of Your Bank with the audited Balance Sheet, Profit & Loss Account and the Report on Business and Operations for the year ended March 31, 2013 (FY13)."

Performance Highlights

Total Business (Deposit+Advances) increased to Rs 8,02,069 crore reflecting a growth of 19.3% (y-o-y).

Gross Profit and Net Profit were Rs 8,999.15 crore and Rs 4,480.72 crore respectively. Net Profit registered a growth of -10.5% over previous year.

Credit-Deposit Ratio stood at 82.03% as against 86.86% last year.

Retail Credit posted a growth of 6.7% constituting 16.6% of your Bank’s Gross Domestic Credit in FY13.

MSME Credit posted a growth of 30.3% constituting 19.7% Gross Domestic Credit in FY13.

Net Interest Margin (NIM) as per cent of interest earning assets in global operations was at the level of 2.66% and in domestic operations at 3.11% during FY13.

30 | P a g e

Net NPAs to Net Advances stood at 1.28% this year against 0.54% last year.

Capital Adequacy Ratio (CAR) as per Basel II stood at 13.30%.

Net Worth improved to Rs 30,714.19 crore registering a rise of 17.2%.

Book Value improved from Rs 637.37 to Rs 729.11 on year.

Business per Employee moved up from Rs 1,466 lakh to Rs 1,689 lakh on year.

31 | P a g e

Financial Statement Of Bank Of Baroda

SCHEDULE -18 NOTES ON ACCOUNTS A  Disclosure in terms of RBI requirements

A-1.   Capital

Particulars Current Year Previous Year

i) CRAR % Basel-II 14.67 % 14.52 %

ii) CRAR - Tier l Capital (%) Basel-II

10.83 % 9.99 %

iii) CRAR – Tier ll Capital (%) Basel-II

3.84 % 4.53 %

iv) Percentage of the shareholding of the Government of India

54.31 % 57.03 %

v) Amount of subordinated debt raised as Tier-II Capital

- -

vii) Amount raised by issue of IPDI

- Rs. 711.50 Crores

viii) Amount raised by issue of Upper Tier II instruments

- Rs. 1,500.00 Crores

 

32 | P a g e

A-2.  Investments (Rs. in Crores)

Particulars Current YearPrevious

Year

(1) Value of Investments    

 (i) Gross Value of Investments    

   (a) In India 79,818.80 68,137.30

   (b) Outside India, 4,094.49 3,739.46

 (ii) Provisions for Depreciation    

   (a) In India 553.80 336.96

   (b) Outside India, 150.08 143.21

 (iii) Net Value of Investments    

   (a) In India 79,265.00 67,800.34

   (b) Outside India. 3,944.41 3,596.25

2)  Movement of provisions held towards depreciation on investments

   

(i) Opening balance 480.17 527.80

(ii) Add: Provisions made during the year 343.55 112.08

(iii)  Less: Write-off / write-back of excess provisions during the year

119.84 159.71

(iv) Closing balance 703.88 480.17

 A-2.1 Repo Transactions (in face value terms)   2.1 a. Repo Transactions (LAF) with RBI

(Rs. in Crores)

 

Minimum outstanding during the

year

Maximum outstanding during the

year

Daily Average

outstanding during the

year

Outstanding as on March

2012

Securities sold under repo

       

i. 504.85 8,797.88 2,348.41 7,000.00

33 | P a g e

Government securities

ii. Corporate debt securities

- - - -

Securities purchased under reverse repo

       

i. Government securities

304.71 6,690.55 129.58 -

ii. Corporate debt securities

- - - -

 A-2.2 Non-SLR Investment Portfolio   i) Issuer composition of Non SLR investments

(Rs. in Crores)

No. Issuer Amount

Extent of Private

Placement

Extent of ‘Below

Investment Grade’

Securities

Extent of ‘Unrated’ Securitie

s

Extent of ‘Unlisted’ Securitie

s

(1) (2) (3) (4) (5) (6) (7)

(i) PSUs 1,061.36 427.06 - - 107.08

(ii) FIs 1,024.96 853.58 73.64 - 73.64

(iii) Banks 4,687.40 847.30 408.85 64.06 97.20

(iv)Private Corporate

2,339.47 1,146.50 790.66 214.80 159.05

(v)Subsidiaries /Joint Ventures

1,234.94 1,234.94 - - -

(vi) Others 4,194.55 376.30 955.33 50.88 305.25

(vii) Provision -703.88 - - - -

34 | P a g e

held towards depreciation

  Total13,838.8

04,885.68 2,228.48 329.74 742.22

   ii) Non-performing Non-SLR investments

(Rs. in Crores)

Particulars Current YearPrevious

Year

Opening balance 250.70 231.58

Additions during the year 88.85 21.71

Reductions during the year - 2.59

Closing balance 339.55 250.70

Total provisions held 290.98 227.53

 A-2.3  Derivatives A-2.3.1 Forward Rate Agreement / Interest Rate Swap

(Rs. in Crores)

  ParticularsCurrent

YearPrevious

Year

i) The notional principal of swap agreements 17,477.59 13,745.00

ii) Losses which would be incurred if counterparties failed to fulfill their obligations under the agreements

179.62 142.89

iii) Collateral required by the bank upon entering into swaps

— —

iv) Concentration of credit risk arising from the swaps

977.85 601.4

v) The fair value of the swap book 732.07 256.29

 A-2.3.2 Exchange Traded Interest Rate Derivatives:

(Rs. in Crores)

35 | P a g e

Sr. No.

Particulars Amount

(i)

Notional principal amount of exchange traded interest rate derivatives undertaken during the year (instrument-wise)A. Interest Rate Future (IRF)

445.37

(ii) Notional principal amount of exchange traded interest rate derivatives outstanding as on 31st March 2012 (instrument-wise)

NIL

(iii) Notional principal amount of exchange traded interest rate derivatives outstanding and not "highly effective" (instrument-wise)

NIL

(iv) Mark-to-market value of exchange traded interest rate derivatives outstanding and not "highly effective" (instrument-wise)

NIL

A-2.3.3 Disclosures on risk exposure in derivatives

(i) Qualitative Disclosure

The Treasury Policy of the bank lays down the types of financial derivative instruments, scope of usages, approval procedures and the limits like open position limits, stop loss limits and counter party exposure limits for undertaking derivative transactions.

The Bank uses financial derivative transactions for hedging, its on or off balance sheet exposures as well as for market making. Basically, these products are used for hedging risk, reducing cost and increasing the yield in such transactions and for proprietary trading.

The types of risk to which the bank is exposed to are credit risk, market risk, country risk and operational risk, The Bank has risk management policies (approved by Board of Directors of the Bank), which is designed to measure the financial risks for transactions in the trading book on a regular basis, by way of MTM, VaR and PV01, and to set appropriate risk limits. These are monitored by means of reliable and up to date Management Information Systems by the Risk Management

36 | P a g e

Department of the Bank from time to time who, in turn, appraises the risk profile to the Risk management Committee of Directors, which is presided over by the Bank’s Chairman and Managing Director.

The counter parties to the transactions are banks and corporate entities. The deals are done under approved exposure limits. The bank has adopted the current exposure method prescribed by Reserve Bank of India for measuring Credit Exposure on Derivative products as per which the bank sums the total replacement cost (obtained by mark to market of all its contracts with positive value i.e. when the bank has to receive money from the counter party) and an amount for potential future changes in credit exposure calculated on the basis of the total notional principal amount of the contract multiplied by the relevant credit conversion factors according to the residual maturity as detailed herein under:-

Conversion factor to be applied on notional principal amount

Residual Maturity Interest Rate ContractExchange Rate

Contract

Less than one year 0.50% 2.00%

One year and above 1.00% 10.00%

Over five years 3.00% 15.00%

The hedge/non-hedge (market making) transactions are recorded separately. Hedging derivatives are accounted for on an accrual basis. Trading derivative positions are marked-to-market (MTM) and the resulting losses, if any, are recognized in the Profit and Loss Account. Profit, if any is not recognized. Income and Expenditure relating to interest rate swaps are recognized on the settlement date. Gains/losses on termination of the trading swaps are recorded on the termination date as income/expenditure.

(ii) Quantitative Disclosures (Rs. in Crores)

37 | P a g e

Sr. No.

ParticularsCurrency

DerivativesInterest rate Derivatives

(i) Derivatives (Notional Principal Amount) 422.78 17,177.27

a) For hedging 300.34 9,228.38

b) For trading 122.44 7,948.89

(ii) Marked to Market Positions (1) 22.11 604.84

a) Asset (+) 26.89 724.9

b) Liability (-) -4.78 -120.06

(iii) Credit Exposure (2) 32.75 963.43

(iv) Likely impact of one percentage change in interest rate (100*PV01)

0.44 452.05

a) On hedging derivatives -0.02 275.61

b) On trading derivatives 0.46 176.44

(v) Maximum and Minimum of 100*PV01 observed during the year

1.61&0.46 256.01&172.33

a) On hedging - 100.29&53.19

b) On trading 1.61&0.46 189.21&122.24

A-2.4  Asset Quality

A-2.4.1   Non-Performing Asset A.   Movement of NPAs

(Rs. in Crores)

 Current

YearPrevious

Year

Gross NPAs as on 1st April 2011 (Opening Balance)

3,152.50 2,400.69

Additions (Fresh NPAs) during the year 3,443.31 1,897.01

  Sub-Total (A) 6,595.81 4,297.70

  Less : -

(i) Upgradations 335.55 189.17

(ii)Recoveries (excluding recoveries made from upgraded accounts)

580.46 455.49

(iii) Write-offs 1,215.05 500.54

  Sub-total (B) 2,131.06 1,145.20

38 | P a g e

 Gross NPAs as on 31st March 2012 (closing balance) (A-B)

4,464.75 3,152.50

B)   Non-Performing Assets (Rs. in Crores)

  ParticularsCurrent

YearPrevious

Year

(i) Net NPAs to Net Advances (%) 0.54 0.35

(ii) Movement of NPAs (Gross)

  (a) Opening balance 3,152.50 2,400.69

(b) Additions during the year 3,443.31 1,897.01

  (c) Reductions during the year 2,131.06 1,145.20

  (d) Closing balance 4,464.75 3,152.50

(iii) Movement of Net NPAs

  (a) Opening balance 790.88 602.32

  (b) Additions during the year 1,988.72 718.15

(c) Reductions during the year 1,235.96 529.59

  (d) Closing balance 1,543.64 790.88

(iv)Movement of provisions for NPAs (excluding provisions on standard assets)

  (a) Opening balance 2,361.62 1,798.37

  (b) Provisions made during the year 1,836.42 1,178.86

  (c) Write-off/ write-back of excess provisions 1,276.93 615.61

  (d) Closing balance 2,921.11 2,361.62

C)   Sector-wise NPAs

Sl. No.

Sector

Percentage of NPAs to Total

Advances in that sector

Current Year

Previous Year

1 Agriculture & allied activities 3.99 3.47

2 Industry (Micro & small, Medium and Large) 1.12 1.76

3 Services 2.72 1.22

39 | P a g e

4 Personal Loans 3.66 1.72

D)   Overseas Assets, NPAs and Revenue

(Rs.in Crores)

Particulars Current Year Previous Year

Total Assets 12,7861.71 90,767.70

Total NPAs 582.92 366.27

Total Revenue 4,032.74 2,951.23

 A- 2.4.2 Particulars of Accounts Restructured.

(Rs. in Crores)

   CDR

MechanismSME Debt

Restructuring Others

Standard advancesrestructured

No. of Borrowers16(3)

277(203)

9,620(9,786)

Amount outstanding1,534.03(166.01)

505.76(487.22)

6,813.28(2,189.38)

Sacrifice (diminution in the fair value)

262.81(11.06)

4.27(4.91)

33.67(52.74)

Sub standardadvancesrestructured

No. of Borrowers-

(1)6

(22)2042(129)

Amount outstanding-

(154.24)17.04(12.9)

5.09(4.42)

Sacrifice (diminution in the fair value)

-(4.5)

0.07(0.16)

0.19(0.1)

Doubtfuladvancesrestructured

No. of Borrowers-

(-)2

(13)40

(109)

Amount outstanding-

(-)1.93

(0.01)2.06

(11.91)

Sacrifice (diminution in the fair value)

-(-)

-(0.01)

0.1(0.12)

TOTALNo. of Borrowers

16(4)

285(238)

11702(10024)

Amount outstanding 1,534.03 524.73 6,820.43

40 | P a g e

(320.25) (500.13) (2,205.71)

Sacrifice (diminution in the fair value)

262.81(15.56)

4.34(5.08)

33.96(52.96)

 Figures in bracket denote previous year numbers

* In respect of one restructured account, the bank shall amortize the provision towards diminution in fair value of the said advance and the additional provision required for restructured standard asset over a period of 8 quarters starting from the first quarter of financial year 2012-2013 as per the directives from Reserve Bank of India vide their letter dated 2nd April 2012.

 A-2.4.3  Details of financial assets sold to Securitization / Reconstruction Company or Asset Reconstruction

(Rs. in Crores)

  ParticularsCurrent

YearPrevious

Year

(i) No. of accounts 3 3

(ii) Aggregate value (net of provisions) of accounts sold to SC / R C

- -

(iii) Aggregate consideration 6.52 5.05

(iv) Additional consideration realized in respect of accounts transferred in earlier years

- -

(v) Aggregate gain / (loss) over net book value 6.52 5.05

 A-2.4.4   Details of non-performing financial assets purchased/sold A.  Details of non-performing financial assets purchased:

(Rs. in Crores)

Particulars Current Year Previous Year

1. (a) No. of accounts purchased during the year

- -

(b) Aggregate outstanding - -

41 | P a g e

2.  (a) Of these, number of accounts restructured during the year

- -

(b) Aggregate outstanding - -

 B.   Details of non-performing financial assets sold:

(Rs. in Crores)

Particulars Current Year Previous Year

1. No. of accounts sold 3 3

2. Aggregate outstanding 68.33 8.07

3. Aggregate consideration received

6.52 5.05

 A-2.4.5  Provisions on Standard Asset

(Rs. in Crores)

ItemCurrent

YearPrevious

Year

Provisions towards Standard Assets as per RBI norms

1,390.06 911.35

 A.2.5   Business Ratios

(Rs. in Crores)

  ParticularsCurrent

YearPrevious

Year

(i) Interest Income as a percentage to Average Working Funds

7.58 6.97

(ii) Non-interest income as a percentage to Average Working Funds

0.87 0.89

(iii) Operating Profit as a percentage to Average Working Funds

2.19 2.22

(iv) Return on Assets 1.24 1.33

(v) Business (Core Deposits plus advances) per employee (Rs in Crores)

14.66 12.29

(vi) Profit per employee (Rs. in Crores) 0.12 0.11

 

42 | P a g e

A. 2.6  Maturity pattern of certain items of assets and liabilities (As compiled by the management and relied upon by the auditors)

(Rs. in Crores)

 1 day

2 to 7

days

8 to 14

days

15 to 28 days

29 days to 3

months

Over 3

months & up to

6 mont

hs

Over 6

months & up to

1 year

Over 1

year & up to 3 year

s

Over 3

years &

up to 5

years

Over 5

years

Total

Deposits

2925.19(6810.06)

21239.74(156

85.48)

11003.69(141

59.61)

14329.7

(11574.86

)

57524.98(350

87.6)

46899.67(318

80.74)

101186.09(787

69.36)

69782.9

(58293.15

)

14480.81(104

17.81)

45498.33(427

60.81)

384871.11

(305439.48

)

Advances

2219.76(3189.22)

6010.72

(4055.21)

8268.23

(4719.87)

6769.28

(5165.89)

37969.99(270

56.95)

31238.21(292

23.81)

30909.28(301

60.55)

89550.2

(43314.63

)

31298.26(289

91.24)

43143.37(527

98.99)

287377.29

(228676.36

)

Investments

 419.65(308.78)

1186.93

(1021.37)

290.33

(261.94)

764.51

(473.73)

5737.41

(2888.74)

1231.49

(1077.89)

1633.1

(1994.7)

12828.27(7301.1)

10593.25(139

21.93)

48524.47(420

10.44)

83209.4

(71260.63)

Borrowings

61.03(324.42)

508.8(451.

79)

39.32(71.9

2)

25.44(293.

75)

1751.06

(1543.06)

2387.02

(2305.3)

2042.77

(46.24)

1399.66

(2739.36)

4729.69

(1862.08)

10628.26(126

69.91)

23573.05

(22307.85)

Foreign Currency asset

8545.19

(9641.29

)

10212.72(507

7.95)

4883.32

(2778.3)

6054.54

(5353.27)

29164.67(230

54.09)

23826.91(167

15.24)

15119.83(161

87.12)

18048.4

(10677.74

)

12170.83(106

88.62)

5106.43

(6636.2)

133132.84

(106809.82

)

43 | P a g e

s

Foreign Currency liabilities

1737.17

(9591.3)

17556.76(892

8.37)

5960.54

(3231.94)

5852.08

(6057.93)

27105.95(160

73.17)

22690.71(180

28.63)

21937.97(134

64.97)

4997.56

(11483.17

)

16567.48(118

53.45)

8926.66

(10247.89

)

133332.88

(108960.83

)

• Figures in bracket denote previous year numbers• The distribution of Assets and Liabilities has been done as per the “Asset Liability Management and Group Risk Policy-2011” of the Bank • The Distribution of provisions and other deductions, while arriving at the net advances, has been done in proportion to the gross Standard Advances.• Distribution of provision on foreign currency liabilities has been done in proportion to the distribution of the parent liability.

 A-2.7 Exposures A-2.7.1  Exposure to Real Estate Sector

(Rs. in Crores)

Category Current YearPrevious

Year

a) Direct exposure    

(i) Residential Mortgages –

Lending fully secured by mortgages on residential property that is or will be occupied by the borrower or that is rented;

15,729 13,085.20

Of which Individual housing loans eligible for inclusion in priority sector

(9,880.57) (8,074.83)

(ii) Commercial Real Estate – 5,834.96 6,082.45

Lending secured by mortgages on commercial real estates (office buildings, retail space, multi-purpose commercial premises, multi-family residential buildings, multi-tenanted commercial premises, industrial or warehouse space, hotels, land

   

44 | P a g e

acquisition, development and construction, etc.). Exposure would also include non-fund based (NFB) limits;

(iii) Investments in Mortgage Backed Securities (MBS) and other securitised exposures –

   

a. Residential, 0.41 17.84

b. Commercial Real Estate. 13.13 43.54

b) Indirect Exposure    

Fund based and non-fund based exposures

   

(i) National Housing Bank (NHB) 83.18 10.00

(ii) Housing Finance Companies (HFCs) 5,496.72 4,618.91

Total Exposure to Real Estate Sector 27,157.40 23,857.95

 A-2.7.2  Exposure to Capital Market

(Rs. in Crores)

  ItemsCurrent

YearPrevious

Year

(i)

Direct investment in equity shares, convertible bonds, convertible debentures and units of equity-oriented mutual funds the corpus of which is not exclusively invested in corporate debt;

1,846.09 1,361.79

(ii)

Advances against shares/bonds/ debentures or other securities or on clean basis to individuals for investment in shares (including IPOs/ESOPs), convertible bonds, convertible debentures, and units of equity-oriented mutual funds;

70.60 12.16

(iii)

Advances for any other purposes where shares or convertible bonds or convertible debentures or units of equity oriented mutual funds are taken as primary security;

12.57 4.80

(iv) Advances for any other purposes to the 116.39 5.37

45 | P a g e

extent secured by the collateral security of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds i.e. where the primary security other than shares/convertible bonds/convertible debentures/units of equity oriented mutual funds Rs does not fully cover the advances

(v) Secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers

159.72 206.46

(vi)

Loans sanctioned to corporates against the security of shares / bonds/debentures or other securities or on clean basis for meeting promoter’s contribution to the equity of new companies in anticipation of raising resources;

- 123.74

(vii) Bridge loans to companies against expected equity flows/issues;

- 0.13

(viii)

Underwriting commitments taken up by the banks in respect of primary issue of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds;

0.60 -

(ix) Financing to stockbrokers for margin trading 1.90 150.11

(x) All exposures to Venture Capital Funds (both registered and unregistered)

731.52 741.88

  Total Exposure to Capital Market 2,939.39 2,606.44

 The exposure to Capital Market of Rs. 2,939.39 Crores is within the limit of Rs. 7,900.25 Crores (i.e. 40% of Bank’s Net worth Rs.19,750.63 Crores as on 31.03.2011). The direct exposure to Capital Market is Rs. 2,663.28 Crores and is within 20% of the Bank’s Net Worth (Rs.3,950.12 Crores).

A-2.7.3  Risk Category wise Country Exposure (Rs. in Crores)

46 | P a g e

Category

Exposure (net) as at 31st March

2012

Provision held as at

31st March 2012

Exposure (net) as at 31st March

2011

Provision held as at 31st March

2011

Insignificant 16,820.37 8.78 11,525.14 5.19

Low 13,082.91 13.85 11,681.36 12.22

Moderate 479.44 - 769.28 -

High 62.23 - 337.49 -

Very High 1,577.95 - 1,212.04 -

Restricted 22.05 - 6.66 -

Off-credit 0.38 - 0.06 -

Total 32,045.33 22.63 25,532.03 17.41

 A-2.7.4  Single Borrower Limit (SBL)/ Group Borrower Limit (GBL) exceeded by the bank.

(Rs. in Crores)

YearName of the

borrowerSingle Borrower Exposure Limit

Total Limit Sanctioned

Balance as on 31st March

2012

2011-12

- - - -

2010-11

- - - -

 

YearName of the

borrowerGroup Borrower Exposure Limit

Total Limit Sanctioned

Balance as on 31st March

2011

2011-12

- - - -

2010-11

- - - -

 A-2.7.5   Amount of Unsecured Advances

The amount of advances, for which intangible securities, such as

47 | P a g e

charge over the rights, licenses, authority etc. have been taken as security is Rs. 1033.30 Crores and the same has been classified as unsecured, forming part of unsecured advances as reflected in schedule 9 of the balance sheet. Such advances to total unsecured advances are 2.20 %.

One account with unsecured loan of Rs.277.23 Crores has intangible collateral valued at Rs. 1099.28 Crores as per valuation report dated 23.04.2010. In respect of other accounts for unsecured outstanding of Rs. 756.07 Crores, the estimated value of intangible security is not taken. A-2.7.6  Concentration of Deposits, Advances, Exposures and NPAs

2.7.6. a) Concentration of Deposits

(Rs. in Crores)

Current Year

Previous Year

Total Deposits of twenty largest depositors 36,576.98 30,464.99

Percentage of Deposits of twenty largest depositors to Total Deposits of the bank

9.50 9.97

2.7.6. b) Concentration of Advances

(Rs. in Crores)

Current Year

Previous Year

Total Advances to twenty largest borrowers 42,897.70 36,312.71

Percentage of Advances to twenty largest borrowers to Total Advances of the bank

10.22 11.19

2.7.6. c) Concentration of Exposures

(Rs. in Crores)

Current Year

Previous Year

Total Exposure to twenty largest 44,872.71 38,237.82

48 | P a g e

borrowers/customers

Percentage of Exposures to twenty largest borrowers/customers to Total Exposure of the bank on borrowers/customers

8.99 9.73

2.7.6. d) Concentration of NPAs

(Rs. in Crores)

Current YearPrevious

Year

Total Exposure to top four NPA accounts 709.92 383.89

2.7.6. e) Provision Coverage Ratio

(Rs. in Crores)

Current YearPrevious

Year

PCR to Gross NPA (including technical write-off)

80.05% 85.00%

 A-2.8 Miscellaneous A-2.8.1  Amount of Provisions for Taxation during the year

(Rs. in Crores)

  Current YearPrevious

Year

Provision for Tax including Wealth tax & deferred tax

1,443.98 1,652.91

Less reversal of Tax provisions relating to previous years

425.14 244.27

Net Provision for tax 1,018.84 1,408.64

 A-2.8.2  Disclosure of penalties imposed by RBI

During the financial year 2011-12, the bank has not been subjected to any penalty for contravention or non-compliance with any requirement of the Banking Regulation Act, 1949, or any rules or conditions specified by the Reserve Bank of India in accordance with the said Act. 

49 | P a g e

A-2.8.3  Off-balance sheet SPVs sponsored (which are required to be consolidated as per accounting norms)

Name of the SPV sponsored

Domestic Overseas

NIL NIL

 A-3. SLR Investments:

(Rs. in Crores)

Current Year Previous Year

 Book Value

Market Value

Book Value

Market Value

Govt. sec SLR(CG,SG & TB)*

69,207.34 69207.34 59404.47 59404.47

Approved sec-SLR 163.26 163.26 540.70 536.28

*incl. SLR Securities kept with CCIL/ MCX / USE / NSE A-4.  Break up of Provisions and Contingencies

A-4.1  The break-up of provisions and contingencies appearing in Profit & Loss Account is as under:

(Rs. in Crores)

ParticularsCurrent

YearPrevious

Year

Provision for depreciation on investment 236.33 9.01

Bad debts written off / Provision made towards NPA

1,568.87 1,055.47

Provision for standard assets 448.17 223.85

Provision for taxes (including deferred taxes, and Wealth tax)

1,018.84 1,408.64

Other Provision and Contingencies    

Provision towards sacrifice of interest in restructured standard and sub-standard accounts

296.32 -4.87

Provision for Country Risk Management 5.22 2.06

50 | P a g e

Provision for staff welfare expenses 25.00 15.00

Others -25.08 30.76

Total 3,573.67 2,739.92

 A-4.2 Floating Provisions – Comprehensive Disclosures

(Rs. in Crores)

ParticularsCurrent

YearPrevious

Year

a. Opening balance in the floating provisions account

850.35 550.35

b. The quantum of floating provisions made in the accounting year

- 300.00

c. Amount of draw down made during the accounting year

- -

d. Closing balance in the floating provisions account.

850.35 850.35

 A-4.3 Draw Down from Reserves

During the financial year 2011-12, there has been no draw down from Reserves. A-5. Disclosure of complaints

I. Customer Complaints

ParticularsCurrent

YearPrevious

Year

(a) No. of complaints pending at the beginning of the year

160 91

(b) No. of complaints received during the year

11365 6239

(c) No. of complaints redressed during the year

10889 6170

(d) No. of complaints pending at the end of the year

636* 160

51 | P a g e

* out of these 525 complaints are pending for less than 30 days. II. Awards passed by the Banking Ombudsman

ParticularsCurrent

YearPrevious

Year

(a) No. of unimplemented Awards at the beginning of the year

01 02

(b) No. of Awards passed by the Banking Ombudsman during the year

12 21

(c) No. of Awards implemented during the year 09 22

(d) No. of unimplemented Awards at the end of the year

04 01

 A-6.  Status of Letters of Comfort

I   Letters of Comfort (LOC’s) issued during the Current Financial Year.

During the current financial year Bank has not issued any Letter of Comfort to meet the requirements of the overseas/domestic regulators while seeking their approval for establishing subsidiaries / opening of branches.

II  Cumulative position of LOC’s outstanding on 31.03.2012

The Bank has issued the following Letter of Comforts

(i) During financial year 2008-09 to meet the requirements of the overseas/ domestic regulators while seeking their approval for establishing subsidiaries/ opening of branches, the Letter of Comfort was issued to Reserve Bank of New Zealand for the Bank’s subsidiary in that country As per audited accounts as on 31.03.2012, the deposits of the subsidiary are Rs. 80.90 Crores and outside liabilities are Rs.0.46 Lacs The LOC issued by Bank of Baroda covers this entire amount of Rs. 81.36 Crores i.e. deposit and outside liabilities. However, the net worth of the subsidiary is Rs.170.33 Crores and as such there is no liability arising on account of operations of the subsidiary for the period ended 31st March 2012.

52 | P a g e

(ii) During financial year 2010-11, the Bank has issued Letter of comfort to the Bank of Negara Malaysia to the extent of the Bank’s 40% shareholding in the joint venture Bank – India International Bank (Malaysia) Bhd’ (IIBMB)- The Bank is yet to commence operations and therefore no financial liabilities arise to Bank of Baroda.  A-7 Income earned for marketing third party products

(Rs. in Crores)

Nature of Income Current Year Previous Year

For selling life insurance policies 19.30 23.42

For selling non life insurance policies 11.33 11.50

For selling mutual fund projects 1.73 1.82

Equity broking product 0.46 0.82

Bancassurance Business 0.21 2.48

 A-8  Sale of Investment held under Held to Maturity (HTM) Category in excess of 5% of the Book value of the investment held in HTM category at the beginning of the year

Opening Bal. of investment

(HTM) 01.04.2011

Sale/ transfer

during the year

AdditionClosing Bal. of

Investment (HTM) 31.03.12

Market value of investment

(HTM) category 31.03.12

- - - - -

 A-9  Disclosure on imposition of penalty for bouncing of SGL forms

Year ended Date of bouncing SGL form Amount Remarks

2012 - - - -

2011 - - - -

 B. Disclosure in terms of Accounting Standards (AS) issued by the Institute of Chartered Accountants of India:

53 | P a g e

B-1. Employee Benefits (AS-15)

B- 1.1  The Bank has adopted the Accounting Standard (AS-15) issued by ICAI, effective from 07.12.2006. The standard has been revised and notified on 17.12.2007. The provisions contained in AS-15 give option to the bank, to charge the transitional liability as an expense in its Profit and Loss Account spread over a period of 5 years. Bank has exercised this option and accordingly made an incremental provision for employee benefits such as pension, gratuity, leave encashment and other retirement benefits to the extent of 1/5th of the total transitional liability commencing from financial year 2007-08, which is crystallized on Actuarial valuation at Rs.901.00 Crores, which has been fully provided as on March 31, 2012

B-1.2 GRATUITY

The Bank pays gratuity to employees who retire or resign from Bank’s service, after initial service period of five years. Accordingly, the Bank makes contributions to an in-house trust, towards funding this gratuity, payable every year. In accordance with the gratuity fund’s rules, actuarial valuation of gratuity liability is calculated based on certain assumptions regarding rate of interest, salary growth, mortality and staff attrition as per the projected unit credit actuarial method.

The investment of the funds is made according to investment pattern prescribed by the Government of India. The gratuity payable is worked out by way of 3 different schemes and the entitlement is based on what is most beneficial to employees.

B- 1.3 PENSION

B. 1.3.1  Bank of Baroda pays pension, a defined benefit plan covering the employees who have opted for pension and also to the employees joining the bank’s service on or after 29.9.1995 but before 01.04.2010. The plan provides for a pension on a monthly basis to these employees on their cessation from Bank’s service in terms of Bank of Baroda (Employees’) Pension Regulations, 1995. Employees covered under Bank of Baroda (Employees’) Pension Regulations, 1995 are not

54 | P a g e

eligible for Bank’s contribution to Provident fund.

B. 1.3.2  New Pension Scheme

In terms of Bipartite Settlement and Joint Note dated 27.04.2010 between IBA and Employees Organisations’ on extending another option for pension, employees joining the services of the Bank on or after 01.04.2010 are eligible for the Defined Contributory Pension Scheme, which is introduced by the Bank in terms of the Joint Note / Settlement dated 27.04.2010, similar to the one governed by the provisions of New Pension Scheme introduced for the employees of Central Government w.e.f. 01.01.2004 and as modified from time to time. Hence they are not eligible for becoming members of Bank’s Provident Fund Scheme and Pension Scheme. In respect of the employees of the Bank who have joined the services of the Bank on or after 01.04.2010, deduction towards New Pension Scheme at the rate of 10% of the pay and Dearness Allowance from the salary with a matching contribution by Bank is being made.

B-1.3.3   Prudential Regulatory treatment (reopening of Pension)

During the year 2010-11, the Bank had reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of which by 18,989 employees, the Bank had incurred a liability of Rs.1829.90 Crores.

In terms of the requirements of AS 15 - Employee Benefits, the entire amount of Rs.1829.90 Crores was required to be charged to the Profit and Loss Account. However, the RBI had issued a circular no. DBOD.BP.BC.80/21.04.018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits – Prudential Regulatory Treatment, dated February 9, 2011. In accordance with the provisions of the said Circular, the Bank has charged an amount of Rs.731.96.Crores (representing two-fifth of Rs.1829.90 Crores) upto March 31, 2012. The unrecognised balance amount of Rs.1097.94 Crores shall be accounted for and charged off over the balance period stipulated in the said circular. This amount does not include any employees relating to separated/ retired employees.

55 | P a g e

B- 1.4  Provident Fund

The Bank is statutorily required to maintain a provident fund as a part of its retirement benefits to its employees who joined Bank’s service on or before 31.03.2010. This fund is administered by a Bank managed trust. Each employee contributes 10% of their basic salary and eligible allowances and the Bank contributes an equal amount to the fund. The investment of the fund is made according to investment pattern prescribed by the Government of India.

B- 1.5 LEAVE ENCASHMENT

An employee is entitled to encash privilege leave standing to his/her credit subject to a maximum of 240 days on the date of superannuation/Voluntary Retirement/death.

However, on resignation, an employee is entitled to get encashment to the tune of 50% of the privilege leave standing to the credit subject to a maximum of 120 days.

B- 1.6 ADDITIONAL RETIREMENT BENEFIT

The scheme for additional retirement benefit provides that an officer on his Retirement/ Voluntary retirement/ Death shall be eligible for additional retirement benefit, provided he had completed-25-years of service in Bank.

In the same manner, award staff member on Retirement/ Voluntary Retirement/ Death shall be eligible for additional retirement benefit, provided he had completed – 30-years of service in Bank.

However, in case of dismissal, discharge, termination, compulsory retirement and resignation additional retirement benefit shall not be payable, irrespective of any number of years of service

B- 1.7 Disclosures Principal Actuarial Assumptions [Expressed as Weighted Averages]

56 | P a g e

(Rs. in Crores)

TYPE OF PLAN

  PENSIONLEAVE

ENCASHMENTGRATUITY ARB

Discount rate 8.75% 8.50% 8.50% 8.50%

Salary Escalation Rate 4.00% 4.00% 4.00% 4.00%

Attrition Rate 2.00% 2.00% 2.00% 2.00%

Expected Rate of Return on plan Assets

8.00% - 8.00% -

 Reconciliation of opening and closing balance of liability

(Rs. in Crores)

TYPE OF PLAN

PENSIONLEAVE

ENCASHMENTGRATUITY ARB

a) PVO as at 01.04.2011

6654.04 559.91 1327.35 441.52

b) Add- Interest Cost 563.82 48.43 111.95 37.28

c) Add- Current Service Cost

146.39 33.9 53.96 12.25

d) Less- Benefits Paid 334.44 48.16 128.45 30.47

e) Add- Actuarial loss/gain(-) on obligation

3.74 -28.07 52.04 -13.96

f) PVO as at 31.03.2012

7033.55 566.01 1416.85 446.62

 Reconciliation of opening & closing balance of fair value of plan assets

(Rs. in Crores)

  TYPE OF PLAN

  PENSION Gratuity

a) Fair Value of plan assets as on 01-04-2011 4388.57 906.86

b) Add- Expected Return on Plan Assets 431.11 101.05

57 | P a g e

c) Ad- Contributions 1167.53 420.5

d) Add- transfer from other trust and members 97.58 -

e) Less- Benefits Paid 334.44 128.45

f) Add- Actuarial gain/(-)loss -10.06 8.88

g) Fair Value of Plan Assets as on 31.03.2012 5740.29 1308.84

 Amount recognized in the Balance Sheet

(Rs. in Crores)

TYPE OF PLAN

  PENSIONLEAVE

ENCASHMENTGRATUITY ARB

a) PV of obligation 7033.55 566.01 1416.85 446.62

b) Fair value of plan assets

5740.29 - 1308.84 -

c) Difference 1293.26 566.01 108.01 446.62

d) Unrecognised transitional liability

1097.94 - - -

e) Liability Recognised in the BS

195.32 566.01 108.01 446.62

 Amount recognized in the P & L Account

(Rs. in Crores)

TYPE OF PLAN

  PENSIONLEAVE

ENCASHMENTGRATUITY ARB

a) Current Service Cost 146.39 33.90 53.96 12.25

b) Interest Cost 563.82 48.43 111.95 37.28

c) Expected Return on Plan Assets

-431.11 - -101.05 -

d) Net Actuarial Loss/gain(-)

13.80 -28.07 43.17-

13.96

e) Transitional liability recognised in the year

378.98 39.20 37.60 45.40

Expenses Recognised 671.88 93.46 145.63 80.97

58 | P a g e

in P&L

 Expected contribution for next period (2012-13)

(Rs. in Crores)

Particulars Pension Gratuity

Expected contribution 401.57 136.01

 Investment Pattern

(Rs. in Crores)

Particulars Pension Gratuity

Central Government Securities 23.91 % 20.33 %

State Government Securities 20.74 % 21.56 %

Corporate (PSU) 34.69 % 29.41 %

Corporate (Private) 3.05 % 2.12 %

Others 17.61 % 26.58 %

Total 100.00 % 100.00 %

 B.2. Segment Reporting (AS-17) Part A -Business Segments

(Rs. in Crores)

Business

Segment

TreasuryCorporate / Wholesale Banking

Retail Banking

Other Banking

OperationsTotal

Particulars

Current Yr

Prev Year

Current Yr

Prev Year

Current Yr

Prev Year

Current Yr

Prev Year

Current Yr

Prev Year

Revenue

7325.07

5597.84

13132.6

9840.82

8488.31

5983.4

4150.07

3273.04

33096.05

24695.1

Result887.7

2882.5

1965.8

71702.

312782.

371341.

072959.

732750.

617595.

696676.

5

Unallocated Expen

1569.89

1026.18

59 | P a g e

se

Operating Profit

6025.80

5650.32

Income taxes

1018.84

1408.64

Extra-ordinary Profit/loss

- -

Net Profit

5006.96

4241.68

Other Information

- -

Segment Assets

103694.34

85948.22

140207.90

116375.42

63161.52

53954.06

135618.27

99218.99

442682.03

355496.69

Unallocated Assets

4639.44

2900.49

Total Assets

447321.47

358397.18

Segment Liabilities

97324.89

80901.71

131595.59

109542.36

59281.81

50786.11

127287.87

93393.28

415490.16

334623.46

Unallocated Liabilities

4354.46

2730.18

Total Liabilities

419844.62

337353.64

Capital 6369. 5046. 8612. 6833. 3879. 3167. 8330. 5825. 27191 20873

60 | P a g e

employed

46 51 31 07 71 95 39 71 .87 .24

Unallocated

284.98

170.3

Total Capital

27476.85

21043.54

 Part B - Geographic Segments

(Rs. in Crores)

Segments

Domestic International Total

Particulars

Current Yr

Prev. YrCurrent

YrPrev. Yr

Current Yr

Prev. Yr

Revenue 29,063.31 21,743.87 4,032.742,951.2

333,096.05 24,695.10

Assets3,19,459.

762,67,629.

481,27,861.

7190,767.

704,47,321.

473,58,397.

18

 Notes on Segment Reporting :

1.  As per guidelines of RBI on compliance with Accounting Standards AS-17, The Bank has adopted “Treasury Operations”, Wholesale, Retail and “Other Banking Operations” as Primary business segments and “Domestic” and “International” as secondary / geographic segments for the purpose of compliance with AS-17 on segment Reporting issued by ICAI.

2. Segment revenue represents revenue from external customers.

3. In determining the segment results, the funds transfer price mechanism followed by the bank has been used.

4.  Capital employed for each segment has been allocated proportionate to the assets of the segment.

5.  Results, Revenue and Capital Employed of International operations is included in other banking operations.

61 | P a g e

 B-3. Related Party disclosures (AS - 18) Names of the Related Parties and their relationship with the Bank: (a) Subsidiaries

i. BOB Capital Markets Limited ii. BOB Cards Limited iii. The Nainital Bank Limited iv. Bank of Baroda (Botswana) Limited v. Bank of Baroda (Kenya) Limited vi. Bank of Baroda (Uganda) Limited vii. Bank of Baroda (Guyana) Inc. viii. Bank of Baroda (UK) Limited ix. Bank of Baroda (Tanzania) Limited x. Baroda Capital Markets (Uganda) Limited. (Subsidiary of Bank of

Baroda Uganda Ltd.) xi. BOB Trinidad & Tobago Ltdxii. Bank of Baroda (Ghana) Ltd. xiii. Bank of Baroda (New Zealand) Ltd.

(b) Associates i. Baroda Uttar Pradesh Gramin Bank ii. Nainital-Almora Kshetriya Gramin Bank iii. Baroda Rajasthan Gramin Bank iv. Baroda Gujarat Gramin Bank v. Jhabua-Dhar Kshetriya Gramin Bank vi. Baroda Pioneer Asset Management Co. Ltd. vii. Indo Zambia Bank Limited

(c) Joint Ventures i. India First Life Insurance Company Ltd. ii. India International Bank (Malaysia) Bhd.

 (D) Key Management Personnel:

S.No Name Designation Remuneration

  Current Previous

62 | P a g e

Year Year

1 Shri M.D.MallyaChairman & Managing Director

25,37,459 21,87,200

2Shri Rajiv Kumar Bakshi

Executive Director 21,97,317 18,37,145

3 Shri N.S.Srinath Executive Director 21,22,495 13,57,347

 * Amount includes arrears on account of VI pay commission and incentives.

The transactions with the Subsidiaries and Associate Banks have not been disclosed in view of para 9 of the (AS) – 18 Related Parties Disclosure, which exempts state controlled enterprises from making any disclosure pertaining to their transactions with other related parties which are also state controlled.  B-4.   Earning Per Share (AS-20)

Particulars Current Year Previous Year

Net profit after tax (Rs. In Crores) 5006.96 4241.68

Number of Shares (weighted) 39,16,53,059 36,44,90,716

Basic & Diluted earning per share 127.84 116.37

Nominal value per share Rs. 10.00 Rs. 10.00

 B-5.   Accounting for Taxes on Income (AS-22) The Bank has complied with the requirements of AS 22 on Accounting for Taxes on Income issued by ICAI and accordingly deferred tax assets and liabilities are recognized. The net balance of deferred tax liabilities as on 31st March 2012 amounting to Rs.255.97 Crores consists of the following: 

(Rs. in Crores)

  31.03.2012 31.03.2011

  Asset Liability Asset Liability

Difference between book depreciation and Depreciation under Income Tax

- 89.93 - 52.29

63 | P a g e

Act on fixed assets

Deduction under section 36 (1) (viii) of the Income-Tax Act, 1961

- - - -

Depreciation on HTM Securities - 426.45 - 216.56

Amount disallowed U/S 40 (a) (ia) of the IT Act

9.84 - 9.70 -

Provision for leave encashment 174.43 - 158.86 -

Provision for doubtful debts and advances (foreign)

76.14 - - -

Total: 260.41 516.38 168.56 268.85

Net Deferred Tax Liabilitiy 255.97 - 100.29

 B-6.  Discontinuing operations (AS 24)

During the financial year 2011-12 the bank has not discontinued the operations of any of its branches, which resulted in shedding of liability and realization of the assets and no decision has been finalized to discontinue an operation in its entirety, which will have the above effect.

B-7.  Impairment of Assets (AS-28)

In view of the absence of indication of material impairment within the meaning of clause 5 to clause 13 of AS 28 Impairment of Assets, no impairment of fixed assets is required in respect of current financial year.

B-8. Provisions, Contingent Liabilities and Contingent Assets (AS-29)

B-8.1 Movement of provisions for Liabilities (excluding provisions for others)

(Rs. in Crores)

ParticularsLegal Cases / contingencies

Current Year Previous Year

Balance as on 1st April 2011 8.70 4.75

Provided during the year 1.31 3.95

Balance as on 31st March 2012 10.01 8.70

64 | P a g e

Timing of outflow / uncertainties Outflow on settlement/crystallization

 The Bank has provided for claims against the bank which have not been acknowledge as debt as per the policy framed by it.

B-8.2 Contingent Liabilities

Such liabilities as mentioned at Serial No (I) to (VI) of 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, development and raising of demand by concerned parties respectively. No reimbursement is expected in such cases.

C. Other Notes to Accounts

C-1. Balancing of Books and Reconciliation

Initial matching of debit and credit outstanding entries in various heads of accounts included in Inter office Adjustments has been completed upto 31.03.2012, the reconciliation of which is in progress.  C-2. Capital

During the year, the Bank has allotted 1,95,77,304 equity shares of Rs. 10/- each at a premium of Rs. 830.10 per share to Life Insurance Corporation of India as determined by the Board in accordance with regulation 76 (1) of SEBI Issue of Capital and Disclosures Requirements Regulation on preferential basis. The total amount of capital received by the Bank on this account is Rs.1644.69 Crores.

C-3. Capital Reserves

Capital Reserve includes appreciation arising on revaluation of immovable properties and amount subscribed by Government of India under the World Bank’s Scheme for Export Development Projects for small / medium scale industries.

C-4. Investments

65 | P a g e

C-4.1 In terms of RBI Guidelines, during the year, the bank has transferred a portion of Government Securities (SLR) kept in “Available for Sale” category to “Held to Maturity” category. The resultant depreciation of Rs.49.01 Crores (previous year Rs.75.80 Crores) has been charged to the Profit & Loss Account.

C-4.2 Profit on sale of investments held under “Held to maturity” category amounting to Rs. 44.20 Crores has been taken to the Profit and Loss Account and thereafter an amount of Rs. 22.40 Crores has been appropriated to the Capital Reserve, net of taxes and amount transferred to Statutory Reserve under section 17 of the Banking Regulation Act, 1949.

C-5 Provision for Taxes

C-5.1 Provision for Taxes has been arrived at after due consideration of decisions of the appellate authorities and advice of counsels.

C-5.2 Tax paid in advance /tax deducted at source appearing under “Other Assets” amounting to Rs.1993.11 Crores (previous year Rs.1316.28 Crores) represents amounts adjusted by the department / paid by the Bank in respect of disputed tax demands for various assessment years. No provision is considered necessary in respect of the said demands, as in the bank’s view, duly supported by counsels opinion and / or judicial pronouncements, additions / disallowances made by the Assessing Officer are not sustainable.

C-5.3 The Bank has claimed deduction under section 36(1) (viii) of the Income-tax Act,1961 in respect of the eligible business as specified in the said section and has accordingly transferred a sum of Rs. 533.85 Crores to the corresponding Special Reserve account and reported under Other Reserve.

C-6. Premises

C-6.1 Execution of conveyance deeds is pending in respect of certain properties at Rs. 78.37 Crores (Previous Year Rs.88.63 Crores) – (Original Cost).

C-6.2 Certain properties of the Bank are stated at revalued amounts.

66 | P a g e

The gross amount of the revaluation included in premises as at the year Rs.1777.43 Crores (including Rs.30.55 Crores at overseas offices) and net of depreciation the revaluation amounts to Rs.1173.68 Crores (Previous Year Rs.1242.49 Crores).

C-6.3 Premises include assets under construction/acquisition amounting to Rs. 51.87 Crores (Previous Year Rs. 43.77 Crores).

C-7. BOB Fiscal Services Limited (BOBFSL), erstwhile wholly owned subsidiary of Bank of Baroda, had passed a special resolution for voluntary winding up of the company on 24.09.1990 and the liquidator was appointed for the same.

BOBFSL entered into an agreement with Bank of Baroda pursuant to which entire assets and liabilities of BOBFSL were transferred to BOB as a going concern / as sale in liquidation of the entire business w.e.f. 28.2.1991. As the company could not be liquidated due to pending legal cases; a decision to merge BOBFSL with Bank of Baroda was taken in the Annual General Meeting of BOBFSL held on 30th March 2007.

The Bank has approved the merger of BOBFSL with Bank of Baroda in its Board meeting on 28.01.2009 and authorized Bank to file necessary petition for merger of BOBFSL with BOB before the High Court.

C-8. The Bank has taken over specified Assets & Liabilities of The Memon Co-operative Bank Ltd on 18th April, 2011 as per approval granted by RBI vide letter no. UBD.CO.MEROER No. 7814/09.16.901/2010.11 dated 04th March, 2011. Out of the deficit of Rs.149.25 Crores on account of the said take over, the Bank has proportionately charged Rs. 49.75 Crores of the said deficit to the Profit and Loss Account during the year ended March 31, 2012. The balance amount of Rs.99.50 Crores will be charged proportionately during the remaining period till Financial Year 2013-14, as approved by RBI vide letter no. DBOD.No.BP.1311/21.04.048/2010-11 dated 25th July, 2011.

C-9. The Bank has made provision @ 20% on the Secured Sub-standard Advance as against the Regulatory requirement of 15%.

Further the Bank has made an additional ad-hoc provision of Rs.

67 | P a g e

342.79. Crores for the year ended March 31, 2012 (previous year Rs. 320.08 Crores) in certain non performing domestic advance accounts.

C-10. The Board of Directors has proposed dividend of Rs.17/- per share (on face value of Rs.10/-) which is subject to compliance of Section 15 of Banking Regulation Act, 1949 and consequential notification to be issued to this effect by the Government of India under Section 53 of Banking Regulation Act, 1949 and approval of the shareholders.

C-11. Previous Year figures have been regrouped/ rearranged wherever considered necessary to conform current year presentation.

BIBLIOGRAPHY

WWW.GOOGLE.COMWWW.SCRIB.COMwww.bankofbaroda.co.in

SHREERAJ HARIHARAN ROLL NO 36

M.COM PART- ISEMESTER- I

68 | P a g e

69 | P a g e