UNITED OVERSEAS BANK LTD - MUMBAI BRANCH

Transcription

1 1 INDEPENDENT AUDITOR S REPORT To The Executive Director and Country Head United Overseas Bank Limited, Mumbai Branch Report on the Financial Statements 1. We have audited the accompanying financial statements of United Overseas Bank Limited, Mumbai Branch ( the Bank ), which comprise the Balance Sheet as at 31 March 2017, the Profit and Loss Account and the Cash Flow Statement for the period then ended, and a summary of significant accounting policies and notes to financial statements. Management s Responsibility for the Financial Statements 2. The Management of the Bank is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949, accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Amendment Rules, 2016 in so far as they apply to the Bank and the guidelines issued by the Reserve Bank of India and in conformity with form A and B (revised) of the Third Schedule to the Banking Regulation Act, 1949, as applicable. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies, making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor s Responsibility 3. Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India, as specified under section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Bank s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Bank s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion 5. In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 2013, in the manner so required for banking companies and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Bank as at March 31, 2017, its profit and its cash flows for the year ended on that date. Report on Other Legal and Regulatory Matters 6. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, As required sub section (3) of section 30 of the Banking Regulation Act, 1949 and the appointment letter dated 21 March 2017, we report that: (a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit and have found them to be satisfactory. (b) The transactions of the Bank, which have come to our notice, have been within the powers of the Bank. (c) The Bank has only one branch and therefore separate accounting returns for the purpose of preparing financial statements are not to be submitted. We have visited the Bank s Mumbai branch for the purpose of our audit. 8. Further, as required by section 143(3) of the Companies Act, 2013, we further report that: (a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; (b) In our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from our examination of those books; (c) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this Report are in agreement with the books of account; (d) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Amendment Rules, 2016; (e) Reporting requirement pursuant to Section 164 (2) of the Companies Act 2013, are not applicable considering this is a branch of United Overseas Bank incorporated in Singapore with limited liability; (f) With respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operating effectiveness of such controls, refer to our separate Report in Annexure 1 to this report; and (g) With respect to the other matters to be included in the Auditor s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended, in our opinion and to the best of our information and according to the explanations given to us: i. The Bank has disclosed the impact of pending litigations on its financial position in its financial statements Refer Schedule 12.I, Schedule 18 Note 4.11, Schedule 19 - Note 5.2 (g) to the financial statements; ii. The Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses on long-term contracts including derivative contracts Refer Schedule 18 Note 4.11, Schedule 19 Note 5.2 (g) and 5.21 to the financial statements; iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Bank; and iv. The disclosure requirement as envisaged in Notification G.S.R 308(E) dated 30th March 2017 is not applicable to the Bank Refer Schedule 19 Note 5.24 to the financial statements. For S. R. BATLIBOI & CO. LLP Chartered Accountants ICAI Firm s Registration Number: E/E Sd/- per Viren H.Mehta Place of Signature: Mumbai Partner Date: 20 June 2017 Membership Number:

2 2 ANNEXURE 1 TO THE INDEPENDENT AUDITOR S REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS OF UNITED OVERSEAS BANK MUMBAI BRANCH Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ( the Act ) To the Executive Director & Country Head United Overseas Bank - Mumbai Branch We have audited the internal financial controls over financial reporting of United Overseas Bank - Mumbai Branch ( the Bank ) as of 31 March, 2017 in conjunction with our audit of the standalone financial statements of the Bank for the period ended on that date. Management s Responsibility for Internal Financial Controls The Bank s Management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the Bank s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, Auditor s Responsibility Our responsibility is to express an opinion on the Bank s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note ) and the Standards on Auditing as specified under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls system over financial reporting. Meaning of Internal Financial Controls Over Financial Reporting A company s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company s assets that could have a material effect on the financial statements. Inherent Limitations of Internal Financial Controls Over Financial Reporting Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Opinion In our opinion, the Bank has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March, 2017, based on the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. Explanatory paragraph We also have audited, in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India, as specified under Section 143(10) of the Act, the standalone financial statements of the Bank, which comprise the Balance Sheet as at 31 March, 2017, and the related Profit and Loss Account and Cash Flow Statement for the period then ended, and a summary of significant accounting policies and notes to the financial statements, and our report dated 20 June 2017 expressed an unqualified opinion thereon. For S. R. BATLIBOI & CO. LLP Chartered Accountants ICAI Firm s Registration Number: E/E Sd/- per Viren H.Mehta Place of Signature: Mumbai Partner Date: 20 June 2017 Membership Number:

3 3 Balance Sheet as at 31 March 2017 As at As at Schedule 31 March 31 March (` 000s) (` 000s) CAPITAL AND LIABILITIES Capital 1 7,525,524 7,525,524 Reserves and Surplus 2 634, ,421 Deposits 3 2,419,915 4,014,637 Borrowings 4 5,722,977 3,158,738 Other Liabilities and Provisions 5 427, ,147 16,730,817 15,649,467 ASSETS Cash and balances with Reserve Bank of India 6 227, ,441 Balances with Banks and Money at Call and Short Notice 7 28, ,263 Investments 8 4,297,387 3,308,076 Advances 9 11,447,021 11,152,194 Fixed Assets 10 16,228 27,042 Other Assets , ,451 16,730,817 15,649,467 Contingent Liabilities 12 14,770,273 31,057,273 Bills for collection - - Significant Accounting Policies 18 Notes to the accounts 19 Schedules referred to herein form an integral part of the Balance Sheet. As per our report of even date attached Profit and Loss Account for the year ended 31 March 2017 Year Ended Year Ended Schedule 31 March 31 March (` 000s) (` 000s) I. INCOME Interest earned ,602 1,081,550 Other income ,912 82,426 1,047,514 1,163,976 II. EXPENDITURE Interest expended , ,084 Operating expenses , ,153 Provisions and Contingencies , , , ,490 III. PROFIT/ (LOSS) Net Profit/(Loss) for the period (After Tax) 82, ,486 Profit/(Loss) brought forward 400, , , ,337 IV. APPROPRIATIONS Transfers to / (from) Statutory Reserve 20,589 88,121 Remittable Surplus retained in India for CRAR 400,216 - Balance carried over to Balance sheet 61, , , ,337 Significant Accounting Policies 18 Notes to the Financial Accounts 19 Schedules referred to herein form an integral part of the Profit and Loss Account. As per our report of even date attached For S. R. BATLIBOI & CO. LLP For United Overseas Bank Limited - Chartered Accountants Mumbai Branch ICAI Firm Registration No E/E Sd/- Sd/- Sd/- per Viren H. Mehta P V Ananthakrishnan Girish Khushalani Partner Executive Director & First Vice President- Membership No Country Head Finance Place: Mumbai Date: June 20, 2017 For S. R. BATLIBOI & CO. LLP For United Overseas Bank Limited - Chartered Accountants Mumbai Branch ICAI Firm Registration No E/E Sd/- Sd/- Sd/- per Viren H. Mehta P V Ananthakrishnan Girish Khushalani Partner Executive Director & First Vice President- Membership No Country Head Finance Place: Mumbai Date: June 20, 2017

4 4 Cash Flow Statement for the year ended 31 March 2017 Year Ended Year Ended 31 March 31 March (` 000s) (` 000s) Cash flow from operating activities Net Profit for the year before taxes 140, ,849 Adjustments for: Depreciation on Fixed Assets charge for the year 15,554 15,853 Provision for Standard Advances/Country Risk (1,542) 12,262 Provision for Unhedged Foreign Currency Exposure 13,790 (8,372) Provision for NPA 360,871 - Operating profit before working capital changes 529, ,592 Increase/(Decrease) in Deposits (1,594,722) 2,971,333 Increase/(Decrease) in Borrowings 2,564, ,407 Increase/(Decrease) in Other liabilities and provisions 233, ,410 (Increase)/Decrease in Investments (989,311) (1,474,604) (Increase)/Decrease in Advances (655,699) (2,387,338) (Increase)/Decrease in Other Assets (196,757) (613,138) Income Tax (paid)/refund received (216,750) (274,500) Net cash flow from operating activities (325,602) 8,162 Cash flow from investing activities Purchase of fixed assets (4,740) (1,445) Sale of Fixed Assets Net cash used in investing activities (4,740) (1,445) Cash flow from financing activities Addition to Capital (Infusion/Capitalisation) - - Net cash generated from financing activities - - Net (decrease)/increase in cash and cash equivalents (330,342) 6,717 Cash and cash equivalents* as at beginning of the year (Refer note below) 585, ,987 Cash and cash equivalents* as at end of the year (Refer note below) 255, ,704 Note: Balance with RBI in Current Account (As per Schedule 6 II) 227, ,441 Balance with banks in India in Current Account (As per Schedule 7 I (i) (a)) 2,360 11,486 Balance with banks Outside India: (i) In Current Account (As per Schedule 7 II (i)) 25, ,267 (ii) In Other Deposit Accounts (As per Schedule 7 II (ii)) - - (iii) Money at call and short notice(as per Schedule 7 II (iii)) - 132,510 Cash and cash equivalents at the end of the year 255, ,704 As per our report of even date attached For S. R. BATLIBOI & CO. LLP For United Overseas Bank Limited - Chartered Accountants Mumbai Branch ICAI Firm Registration No E/E Sd/- Sd/- Sd/- per Viren H. Mehta P V Ananthakrishnan Girish Khushalani Partner Executive Director & First Vice President- Membership No Country Head Finance Place: Mumbai Date: June 20, 2017

5 5 Schedules forming part of the Balance Sheet as at 31 March 2017 As at As at 31 March 31 March (` 000s) (` 000s) Schedule 1 : Capital Head Office Account Capital remitted by Head Office 7,525,524 7,525,524 7,525,524 7,525,524 (Deposit in the form of securities at face value kept with the Reserve Bank of India under Section 11 (2) (b) of the Banking Regulation Act, 1949) 180,000 80,000 Schedule 2 : Reserves and Surplus 1 Statutory Reserve Opening balance 152,205 64,084 Additions during the year 20,589 88,121 Deductions during the year - - Closing balance 172, ,205 2 Capital Reserve Remittable Surplus retained in India for CRAR purposes 400,216-4 Profit and Loss Account Opening balance 400, ,851 Additions during the year 61, ,365 Deductions/Transfer during the year (400,216) - Closing balance 61, ,216 ( ) 634, ,421 Schedule 3: Deposits A. I Demand Deposits i) From banks 2,304 12,087 ii) From others 26,471 14,432 II Savings Bank Deposits 1,140 1,550 III Term Deposits i) From banks - 1,102,068 ii) From others 2,390,000 2,884,500 ( I + II + III) 2,419,915 4,014,637 B i) Deposits of Branches In India 2,419,915 4,014,637 ii) Deposits of Branches Outside India ,419,915 4,014,637 Schedule 4 : Borrowings I. Innovative Perpetual Debt Instruments (IPDI) and Tier II Debt A. Borrowing in India i) IPDI - - ii) Tier II Borrowings - - (A) - - B. Borrowings outside India i) IPDI - - ii) Tier II Borrowings - - (B) - - (A+B) - - II Other Borrowings A. Borrowings in India i) Reserve Bank of India - - ii) Other Banks 1,260,000 5,000 iii) Other Institutions and Agencies - - (A) 1,260,000 5,000 B Borrowings Outside India i) From banks 4,462,977 3,153,738 ii) From others - - (B) 4,462,977 3,153,738 (A+B) 5,722,977 3,158,738 ( I + II ) 5,722,977 3,158,738 Secured borrowings included in I and II above - - Schedule 5 : Other Liabilities and Provisions 1 Bills payable Inter office adjustments Branches in India (net) Interest accrued 27,078 55,944 4 Provision for Income Tax (Net) Standard Assets Provision 46,228 48,027 6 Others (including provisions) 354, , , ,147 Schedule 6 : Cash and Balances with Reserve Bank of India I Cash in Hand - - II Balances with Reserve Bank of India i) In Current Account 227, ,441 ii) In Other Accounts - - TOTAL ( I & II ) 227, ,441 Schedule 7 : Balances with Banks and Money at Call and Short Notice I. In India i) Balance with Banks (a) In current accounts 2,360 11,486 (b) In other deposit accounts - - ii) Money at Call and Short Notice (a) With Bank - - (b) With other institutions - - 2,360 11,486 II. Outside India i) In current accounts 25, ,267 ii) In other deposit accounts - - iii) Money at call and short notice - 132,510 25, ,777 (I + II ) 28, ,263 Schedule 8 : Investments I. Investments in India i) Government Securities( T-Bill) 4,297,387 3,308,076 ii) Other Approved Securities - - iii) Shares - - iv) Debentures and Bonds - - v) Subsidiaries and/or joint ventures - - vi) Others - - Investments in India 4,297,387 3,308,076 II. Investments outside India i) Government securities (including local authorities) - - ii) Subsidiaries and/or joint ventures abroad - - iii) Others - - Investments outside India - - Investment ( I + II ) 4,297,387 3,308,076 (Includes securities of Face ` 180,000 ( 000) (Previous year ` 80,000 ( 000)) kept with the Reserve Bank of India (RBI) as required under section 11(2)(b) of the Banking Regulation Act, 1949 and securities pledged with Clearing Corporation of India Limited for availing borrowing as well as clearing and funding facilities of face value ` 612,000 ( 000) (Previous year ` 700,000 ( 000)). Schedule 9 : Advances A. i) Bills purchased and discounted 323,874 1,610,093 ii) Cash credits, overdrafts and loans repayable on demand 11,123,147 9,542,101 iii) Term loans ,447,021 11,152,194 B. i) Secured by tangible assets (including book debts) 4,866,602 1,400,000 ii) Covered by Bank / Government guarantees 118,500 89,362 iii) Unsecured 6,461,919 9,662,832 11,447,021 11,152,194 C. Advances in India i) Priority sector 4,194,354 3,187,738 ii) Public sector - 1,100,000 iii) Banks - 1,610,093 iv) Others 7,252,667 5,254,363 11,447,021 11,152,194

6 6 Schedule 10 : Fixed Assets I. Premises Opening - - Additions during the year - - Deductions during the year - - Gross book value - - Depreciation to date - - Net book value - - II. Other Fixed Assets (including furniture and fixtures ) Opening 74,033 72,588 Additions during the year 4,740 1,445 Deductions during the year - - Gross book value 78,773 74,033 Depreciation to date (62,545) (46,991) Net book value 16,228 27,042 III. Capital Work-in-progress (including Capital Advances) - - ( I + II + III) 16,228 27,042 Schedule 11 : Other Assets I. Interest Accrued 35,565 95,776 II. Advance Tax and Tax Deducted at Source (Net) 1,311 - III. Stationery and stamps - - IV. Deferred Tax Asset (Net) 187,930 31,534 V. Non-banking assets acquired in statisfaction of claims - - VI. Others 490, , , ,451 Schedule 12 : Contingent Liabilities & Capital Commitments I. Claims against the bank not acknowledged as debts - - II. Liability for partly paid investments - - III. Liability on account of outstanding derivative and forward exchange contracts 14,564,129 30,830,013 IV Guarantees given on behalf of constituents (i) In India 12,970 - (ii) Outside India 193, ,654 V. Acceptances, endorsements and other obligations - 52,606 VI. Other items for which the Bank is contingently liable ,770,273 31,057,273 Schedules forming part of Profit & Loss Account for the year ended 31 March 2017 Year Ended Year Ended 31 March 31 March (` 000s) (` 000s) Schedule 13 : Interest earned I Interest / discount on advances / bills 621, ,099 II Income on investments 292, ,839 III Interest on balances with Reserve Bank of India and other inter-bank funds 10,746 13,517 IV Others ,602 1,081,550 Schedule 14 : Other Income I Commission, exchange and brokerage 40,820 56,960 II Profit / (Loss) on Sale of Investments (net) - - III Profit / (Loss) on revaluation of investments (net) - - IV Profit / (Loss) on Sale of Land, Buildings and Other Assets (net) - - V Profit / (Loss) on Exchange Transactions (net) 80,700 25,014 VI Miscellaneous Income ,912 82,426 Schedule 15 : Interest expended I Interest on deposits 158, ,398 II Interest on Reserve Bank of India / inter-bank borrowings 139,975 67,654 III Others (Swap Premium Amortisation) - 13, , ,084 Schedule 16 : Operating Expenses I Payments to and provisions for employees 135, ,462 II Rent, taxes and lighting 30,188 31,646 III Printing & Stationery IV Advertisement and publicity - - V Depreciation on bank s property 15,554 15,853 VI Directors fees, allowances and expenses - - VII Auditor s fees and expenses 1,752 1,548 VIII Law charges 2,483 1,991 IX Postage, telegrams and telephone etc 3,276 3,370 X Repairs and maintenance 10,625 10,326 XI Insurance 3,067 1,417 XII Other expenditure 32,707 33, , ,153 Schedule 17: Provisions and Contingencies I Taxation charge i) Current tax expense 214, ,469 ii) Deferred tax benefit (156,396) (7,106) II Provision for investments - - III Provision for Standard Assets (1,800) 12,420 IV Provision for NPA 360,871 - V Provision / (Write Back) for Country Risk 258 (158) VI Provision for Unhedged Foreign Currency Exposure 13,790 (8,372) 431, ,253 Schedule - 18 : Accounting Policies 1. Background The accompanying financial statements for the year ended March 31, 2017 comprise of the accounts of the United Overseas Bank Limited - Mumbai Branch ( The Bank ), which is incorporated and registered in Singapore with limited liability. 2. Basis of preparation The financial statements have been prepared in accordance with statutory requirements prescribed under the Banking Regulation Act, The accounting and reporting policies of United Overseas Bank Limited Mumbai Branch used in the preparation of these financial statements is the accrual method of accounting and historical cost convention and it conforms with Generally Accepted Accounting Principles in India ( Indian GAAP ), the Accounting Standards specified under section 133 of the Companies Act, 2013 read with Paragraph 7 of the Companies (Accounts) Rules, 2014 and other relevant provisions of the Companies Act, 2013 ( the 2013 act ) and the Companies (Accounting Standards) Amendment Rules 2016 in so far as they apply to banks and the guidelines issued by RBI. 3. Use of estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires the management to make estimates and assumptions that affects the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent liabilities as at the date of the financial statements. Although these estimates are based on management s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment in the carrying amounts of assets or liabilities in future periods. Any revisions to accounting estimates are recognized prospectively in the current and future periods. 4. Significant accounting policies 4.1 Transaction involving foreign exchange a) Transactions denominated in foreign currencies are recorded at the rates prevailing on the date of transactions. Exchange differences arising on foreign currency transactions settled during the period are recognized in the profit and loss account of the period. b) Monetary assets and liabilities denominated in foreign currencies as at the Balance Sheet date are restated at the closing rates notified by the Foreign Exchange Dealers Association of India (FEDAI) and the resultant exchange differences are recognised in the Profit and Loss Account. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of transaction.

7 7 c) Contingent liabilities on account of foreign exchange contracts, guarantees denominated in foreign currencies are disclosed at the closing exchange rates notified by FEDAI. 4.2 Accounting for derivative transactions Derivative transactions comprise of forward exchange contracts. The Bank undertakes derivative transactions for trading in Banking book and hedging on-balance sheet assets and liabilities. All trading transactions are marked to market on a periodic basis and the resultant unrealized gains/losses are recognized in the profit and loss account. Derivative transactions that are undertaken for hedging are accounted for on an accrual basis except for the transaction designated with an asset or liability that is carried at market value or lower of cost or market value in the financial statements,which are accounted similar to the underlying asset or liability. The requirement for collateral and credit risk mitigation on derivative contracts is assessed based on internal credit policy. Overdues if any, on account of derivative transactions are accounted in accordance with extant RBI guidelines. As per the RBI guidelines on Prudential Norms for Off-balance Sheet Exposures of Banks a general provision is made on the current gross MTM gain of the contract for all outstanding foreign exchange derivative transactions. 4.3 Investments The classification and valuation of investments is in accordance with RBI master circular DBR.No.BP.BC.6/ / dated July 1, Accounting and Classification As per the guidelines for investments laid down by RBI, Investments are classified under Held to Maturity, Available for Sale and Held for Trading categories. Valuation Investments classified under Held to Maturity are carried at acquisition cost unless it is more than the face value in which case, the premium is amortised over the period remaining to maturity. Investments other than Treasury Bills classified under Available for Sale and Held for Trading are valued at lower of cost or market value, in aggregate for each balance sheet classification and net depreciation in aggregate for each balance sheet classification is recognised in the Profit and Loss Account. Treasury Bills are valued at carrying cost. Market value, in case of Government and other approved securities, for which quotes are not available, is determined on the basis of the yield to maturity rates indicated by Primary Dealers Association of India (PDAI) jointly with the Fixed Income Money Market and Derivatives Association of India (FIMMDA). Investments where interest/dividend is not serviced regularly are classified in accordance with prudential norms for classification, valuation and operation of Investment Portfolio by Banks prescribed by RBI. Accounting for repos/reverse repo transactions Repo/Reverse repo transactions (including under Liquidity Adjustment Facility) are accounted for as collateralized borrowing/lending transactions in accordance with RBI guidelines and correspondingly the expense and income thereon are treated as interest. 4.4 Advances and Provisions Advances are classified into performing and non-performing in terms of prudential norms on asset classification laid down by the RBI. Specific provision for Non Performing Advances is made on the basis of provisioning requirement under the prudential norms as laid down by the RBI, and is deducted from Advances. General provision on standard advances, provision for country risk and provision for Unhedged Foreign Currency Exposure is made as per guidelines prescribed by RBI and included under Other Liabilities and Provisions. 4.5 Fixed Assets and Depreciation a) Fixed Assets are stated at acquisition cost less accumulated depreciation less impairment provision. Cost comprises the purchase price and other attributable costs of bringing the asset to its working condition and for its intended use. b) Depreciation is provided on a straight line basis over the estimated useful life of the asset as given below which is in accordance with Schedule 2 of Companies Act, 2013: Assets Useful life of fixed assets Office equipments 5 years Leasehold improvements Tenure of lease Computers and Software 3 years Furniture & fittings 10 years c) The Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired and provides for impairment loss, if any, in the profit and loss account. 4.6 Impairment of Assets The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is greater of asset s net selling price and value in use. After impairment depreciation is provided on the revised carrying amount of the assets over its remaining useful life. 4.7 Lease Transactions Assets taken on lease are accounted in accordance with provisions of AS- 19 Leases. Lease payments for assets taken under non-cancelable operating lease are recognized as an expense in the Profit and Loss Account on a straight line basis over the lease term. 4.8 Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured. a) Interest income other than on Non-Performing Assets, is recognised in profit and loss account on accrual basis. b) For the year ended March 31, 2017 commission on guarantees issued by the Bank is recognized as income over the period of the guarantee. Till March 31, 2016 the Bank used to amortize on straight-line basis over the period of the LCs / Guarantees except commission up to ` 100,000, which was recognized upfront in the year of issuance. Had the Bank followed the earlier method of amortization of guarantee commission, the profit after tax for the current year would have been higher by ` 152 thousands. c) All other fees are accounted for as and when they become due. 4.9 Employee Benefits Provident Fund: The Bank contributes an amount equal to the Employees contribution on a monthly basis to the Regional Provident Fund Commissioner. The Bank has no liability for future provident fund benefits apart from its monthly contribution which is debited to the Profit and Loss Account. Gratuity: The Bank operates a Gratuity Fund Scheme and the contributions are remitted to the Trust established for this purpose. The trust in turn deploys the funds with the Life Insurance Corporation of India, which also administers the scheme and determines the contribution premium required to be paid by the Bank. The Bank provides for gratuity to all its employees. The benefit is in the form of lump sum payments to vested employees on retirement, resignation, death while in employment or on termination of employment for an amount equivalent to 15 days basic salary payable for each completed years of service. Vesting occurs on completion of five years of service. The Bank accounts for the liability for future gratuity benefits based on an actuarial valuation. The net present value of the Bank s obligation towards the same is actuarially determined by independent actuary based on the projected unit credit method as at the Balance Sheet date. Actuarial gains and losses are immediately recognised in the Profit and Loss Account. Leave encashment and availment: Provision for Leave encashment including availment is accrued and provided for on the basis of unavailed accumulated leave of employees as at the date of Balance Sheet on a full liability basis in accordance with the rules of the Bank. The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service Taxes on Income Tax expenses comprise current and deferred taxes. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, Deferred income taxes reflect the impact of the current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier year. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised only if there is reasonable certainty that they can be realized against future taxable profits. Deferred tax asset in respect of unabsorbed depreciation and carried forward losses are recognized only if there is a virtual certainty supported by convincing evidence of realization of such assets. At each balance sheet date the Bank re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised Provisions, Contingent Assets and Contingent Liabilities The Bank creates a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. A disclosure for contingent liability is made when there is a possible obligation or a present obligation that may but probably will not require an outflow of resources embodying economic benefit. When there is a possible obligation or a present

8 8 obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed. Contingent assets are not recognised in the financial statements Cash and Cash Equivalents Cash and cash equivalents include cash in hand, balances with Reserve Bank of India, balances with other banks/ institutions and money at call and short notice Other Expenses incurred on stationery and stamps are charged off to the Profit and Loss account at the time of purchases. Schedule - 19 : Notes to the Accounts 5. Notes to Accounts 5.1 Statutory disclosures (a) Capital adequacy ratio The capital adequacy ratio of the Bank, calculated as per RBI guidelines (New Capital Adequacy Framework) generally referred to as Basel III is set out below: Sr Particulars No i. Common Equity Tier 1 capital ratio (%) ii Tier 1 Capital ratio (%) iii Tier 2 Capital ratio (%) iv Capital ratio (CRAR %) v Percentage of the shareholding of the Government of India in public sector banks NA NA vi Amount of Equity Capital raised - - vii Amount of additional Tier 1 capital raised; - - of which a PNCPS - - b PDI - - viii Amount of Tier 2 capital raised - - of which a Debt Capital Instruments - - b Preference Share Capital Instruments/ Perpetual cumulative preference shares/ Redeemable non- cumulative preference shares / Redeemable cumulative preference shares - - (b) Investments (` 000) Particulars As at31 As at31 March, 2017 March, 2016 (1) of investments (i) Gross value of investments (a) In India 4,297,387 3,308,076 (b) Outside India - - (ii) Provision for depreciation (a) In India - - (b) Outside India - - (iii) Net value of investments (a) In India 4,297,387 3,308,076 (b) Outside India - - (Investments consists of Treasury Bills) (` 000) Particulars As at31 As at31 March, 2017 March, 2016 (2) Movement of provisions held towards depreciation on investments (i) Opening balance - - (ii) Add : Provision made during the period - - (iii) Less : Write-off/write-back of excess provisions during the year - - (iv) Closing balance - - (c) Repo Transactions (in face value terms) (` 000) (i) PSUs (-) (-) (-) (-) (-) (ii) FIs (-) (-) (-) (-) (-) (iii) Banks (-) (-) (-) (-) (-) (iv) Private Corporate (-) (-) (-) (-) (-) (v) Subsidiaries / Joint Ventures (-) (-) (-) (-) (-) (vi) Others (-) (-) (-) (-) (-) (vii) Provision held towards - depreciation (-) (-) (-) (-) (-) (-) Previous years figures are shown in brackets. (e) Non-performing Non-SLR investments The Bank did not have any Non-performing Non-SLR investments as at March 31, 2017 (2016: Nil). (f) Sale and transfers to/from HTM category During the year, the Bank did not have investments in the HTM category and the Bank did not sell or transfer any investments to/from the HTM category during the year ended March 31, 2017 (2016: Nil). (g) Interest rate swaps and forward rate agreements ( FRA ) The Bank has not entered into any interest rate swaps or forward rate agreements during the year ended March 31, 2017 (2016: Nil). (h) Exchange traded interest rate derivatives The Bank did not deal in any exchange traded interest rate derivatives during the year ended 31 March 2017 (2016: Nil). There is no notional principal outstanding in respect of exchange traded interest rate derivatives as at 31 March 2017 (2016: Nil). (i) Particulars Minimum Outstanding during the year Maximum Outstanding during the year Daily Average Outstanding as at year end Outstanding during the year Securities sold under repos i Government securities 250, ,000 37,973 - (156,000) (520,000) (36,826) (-) ii. Corporate Debt securities (-) (-) (-) (-) Securities purchased under Reverse repos i. Government securities 10,000 2,259, ,571 - (10,200) (1,310,400) (179,627) (-) ii. Corporate Debt securities (-) (-) (-) (-) Includes only Liquidity Adjustment Facility with Reserve Bank of India. Nil outstanding on any day is ignored for reckoning minimum outstanding.previous years figures are shown in brackets. (d) Issuer composition of Non-SLR investments: No Issuer Amount Extent of Private Place ment Extent of 'Below Investment Grade' Securities Extent of 'Unrated' Securities Extent of 'Unlisted' Securities Disclosure on Risk exposure in derivatives The Bank has exposure to derivatives in the form of forward foreign exchange contracts. Qualitative Disclosures: 1) Structure and organization for management of risk in derivatives trading: Treasury operations are segregated into three different departments viz. front office, mid office and back office. The primary role of the front office is to book the trades and execute it. It handles the needs of the Bank and its clients with respect to

9 9 hedging and financing. The mid office function is to ensure control and processing of the transactions, limit monitoring and regulatory compliance. The primary function of the back office is to confirm/process/settle/reconcile the transactions. The Bank has a Risk Management Committee which reviews/approves policies and procedures and reviews adherence to various risk parameters and prudential limits. 2) Scope and nature of risk measurement, risk reporting and risk monitoring systems: a) Risk Measurement: For forward foreign exchange contracts, risk is measured through a daily report called, at Risk (VaR), which computes VaR on the forex gaps. b) Risk Reporting and Risk monitoring systems: The Bank has the following reports/systems in place which are reviewed by the top management: i. VaR ii. Net open position iii. AGL iv. Stop loss limits v. Bankline limits 3) Policies for hedging and/or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/mitigants: The Bank has the following policy papers in place, approved by Local management and Head Office a) Market Risk policy and b) Forex Policy. For derivative contracts in the banking book designated as hedge, the Bank documents at the inception of the relationship between the hedging instrument and the underlying exposure, the risk management objective for undertaking the hedge and ALCO monitors all outstanding hedges on a periodical basis. 4) Accounting policy: All outstanding derivative transactions are booked as Off Balance Sheet items. The trading positions are revalued on a Marked to Market basis whereas the hedging deals follow the accrual basis of accounting. Quantitative Disclosure: Sr Particulars Currency Derivatives # No Derivatives (Notional Principal Amount) a) For hedging - - b) For trading 14,564,129 30,830,013 2 Marked to Market Positions a) Asset (+) 259, ,885 b) Liability (-) (259,316) (218,077) 3 Credit Exposure ## 550, ,486 4 Likely impact of one percentage change in interest rate (100*PV01) a) on hedging derivatives - - b) on trading derivatives (24.02) 5 Maximum and Minimum of 100*PV01 observed during the year a) on hedgingminimummaximum b) on trading Minimum - (676.75) Maximum # Currency Derivatives includes foreign exchange contracts only. ## The credit exposure is computed based on the current exposure method specified in the RBI Norms. (j) Non-Performing Assets The Bank has following non-performing assets for the year ended March 31, ( : Nil). 1) Net NPAs to Net Advances % Net NPAs to Net Advances % 3.85% - 2) Movement in NPAs (Gross) Opening Balance - - Additions (Fresh NPAs) during the year 801,936 - Sub-total (A) 801,936 - Less: Reductions : i. Upgradations - - ii. Recoveries (excluding recoveries made - - from upgraded accounts) iii. Technical / Prudential Write offs - - iv. Write-offs other than those under (iii) above - - Sub-total (B) - - Gross NPAs as on 31st March (Closing Balance) (A-B) 801,936-3) Movement of Net NPAs v. Opening balance - - vi. Additions during the year 441,065 - vii. Reductions during the year - - viii. Closing balance 441,065-4) Technical / Prudential Write-offs Opening Balance of Technical/Prudential Writeoffs accounts as on April Add: Technical/ Prudential Write offs during the year - - Sub-total (A) - - Less: Recoveries made from previously technical / prudential written-off accounts during the year (B) - - Closing Balance as on March 31 (A-B) - - 5) Movement of Provisions for NPAs (excluding provisions on standard assets) (a) Opening balance - - (b) Provisions made during the year 360,871 - (c) Write off/write back of excess provisions - - (d) Closing balance 360,871 - (k) Details of financial assets sold to securitization/reconstruction company for Asset Reconstruction There were no instances of sale of financial assets to securitization/reconstruction company for asset reconstruction during the year ended 31 March, 2017 (2016: Nil). Also there were no realizations during the year ended 31 March, 2017 (2016: Nil). (l) Details of non performing financial assets purchased/sold There has been no purchase /sale of non-performing assets during the year ended 31 March, 2017 (2016: Nil). (m) Provision on standard assets Provision towards standard assets included in Schedule 5 Other Liabilities and Provisions of the Financials is: Particulars As at As at Provision for Standard Assets 46,228 48,027

10 (n) Details of loan assets subjected to restructuring Sr Type of Restructuring Others No Asset Classification Standard Sub Standard Doubtful Loss Details 1 Restructured Accounts as on April 1, 2016 No of borrowers Amount outstanding Provision thereon Fresh restructuring during the year No of borrowers Amount outstanding Provision thereon Upgradations to restructured standard category during No of borrowers Amount outstanding Provision thereon Restructured standard advances which cease to attract higher provisioning and / or additional risk weight at the end of the FY and hence need not be shown as restructured standard advances at the beginning of No of borrowers Amount outstanding Provision thereon Downgradations of restructured accounts during No of borrowers Amount outstanding Provision thereon Write-offs of restructured accounts during the FY No of borrowers Amount outstanding Provision thereon Restructured Accounts as on March 31, 2017 No of borrowers Amount outstanding Provision thereon There was no account restructured under CDR Mechanism or SME Debt Restructuring Mechanism or any other method. (o) Details of Book value of Investments in Security Receipts Particulars Current year Previous Year i. Backed by NPAs sold by the banks as underlying - - ii. Backed by NPAs sold by other banks/financial institutions/ non-banking financial companies as underlying (p) Business ratios/ information Particulars For the year ended For the year ended March 31, 2017 March 31, 2016 Interest income as percentage to working funds % 7.39% Non - interest income as percentage to working funds % 0.56% Operating profits as percentage to working funds % 4.26% Return on assets % 2.41% Business (deposits plus advances) per employee 3 602, ,986 Profit per employee 3 3,581 15,325 Notes:- 1. Working funds are taken as average of total assets (excluding accumulated losses, if any) as reported to RBI in Form X under Section 27 of the Banking Regulation Act, 1949, during the 12 months of the financial year. 2. Return on Assets is with reference to average working funds (i.e. total of assets excluding accumulated losses, if any). 3. For computation of the above ratios, Deposits, Advances and number of employees as at the year-end has been considered and Interbank Deposits are excluded from Deposits. (q) Asset Liability Management - Maturity pattern As at March 31, 2017 Particulars Day 1 2 to 7 8 to to days Over Over Over Over Over As at days days days to 3 months 3 months 6 months 1 year to 3 years 5 years March 31, to 6 months to 1 year 3 years to 5 years 2017 Advances 1,066,602 2,658,580 66,000 1,733,060 4,363,214-1,118, ,065-11,447,021 Investments 3,023, ,552 23, , ,083-15, ,297,387 Deposits 4, , ,280,000 1,000,000-25, ,419,915 Borrowings - 2,116, ,750 2,634, ,722,977 Foreign Currency Assets 28, ,540-94,212 2,738, , ,155 3,406,845 Foreign Currency Liabilities - 856, ,991 2,639, ,967 6, ,735,910 As at March 31, 2016 Particulars Day 1 2 to 7 8 to to days Over Over Over Over Over As at days days days to 3 months 3 months 6 months 1 year to 3 years 5 years March 31, to 6 months to 1 year 3 years to 5 years 2016 Advances 4, ,000 95,000 5,537,650 3,030,182 1,784, ,152,194 Investments 1,513, ,871-21, , ,395 5, ,308,076 Deposits 28,069 1,732, , ,000 1,149,500 24, ,014,637 Borrowings - 5, ,987,650 1,166, ,158,738 Foreign Currency Assets 185, , ,987,650 1,160, ,387 3,618,334 Foreign Currency Liabilities 13, ,988,871 1,167, ,169,776 Management has made certain estimates and assumptions in respect of behavioral maturities of non-term assets and liabilities while compiling their maturity profile which has been relied upon by the auditors. 10