1.1 Reconciliation of entries under Inter Branch/ Inter Bank transactions, Nominal Account and old entries is an ongoing process. Balances with Reserve Bank/ Other Banks have been reconciled except certain entries which are under process of reconciliation. Consequential impact of pending reconciling items as stated above is not ascertainable. However provision there against has been made as per RBI guidelines.
1.2 Provision on standard assets has been given effect in the accounts according to revised RBI guidelines as under:
i. 0.25% of the outstanding in Farm Credit to Agriculture activities and small and Micro Enterprises (SME) Sectors.
ii. 1.00% of the outstanding in Commercial Real Estate [CRE] sector and also in cases where commencement date of operations is extended.
iii. 0.75% on advances to Commercial Real Estate-Residential Housing (CRE-RH) Sector.
iv. 2.00% of the outstanding in Housing Loans @ teaser rates.
v. 0.40% of the outstanding in all other advances [i.e. except
vi. 5% for the period covering the period of moratorium allowed as per the restructuring package and 2 years thereafter, in restructured standard accounts.
vii. Higher provision has been made @ 10% and 15% on certain Standard Assets in compliance with the RBI directive.
viii. 5% for MSME borrowers availing benefit of GST
ix. Additional Provision against FCI exposure on Govt. of Punjab and Telangana as per RBI Directives
1.3 Classification of advances and provisioning there-against in case of 1022 unaudited branches have been incorporated as certified by the Branch Managers.
1.4 During the year, Bank has incurred loss ofRs.1923.15 cr (Previous yearRs.863.62 cr) which has been carried forward to Profit & Loss Account under Schedule-2 “Reserve & Surplus”. In view of this, Bank has not appropriated any amount to any of the Reserves including Capital Reserves.
1.5 Disclosures in terms of RBI guidelines are as under:
a. Capital:
During the financial year 2017-18,
1) Bank has issued 112,81,95,628 equity shares having face value ofRs.10/- each to Government of India (GOI) at a price ofRs.26.99 per share (including premium ofRs.16.99 per share), on preferential basis in accordance with Chapter VII of SEBI (ICDR) Regulations, 2009 aggregating toRs.3,045 cr.
2) Bank has issued 13,74,18,819 equity shares having face value ofRs.10 each at a price ofRs.29.20 per share (including premium ofRs.19.20 per share), under Qualified Institutions Placement (QIP) in accordance with the provisions of SEBI (ICDR) Regulations, 2009 aggregating toRs.401.26 cr.
3) Bank had received Share Application Money pending allotment of equity shares, aggregating toRs.792.33 cr. in financial year 2016-17 against which the Bank has allotted 15,62,09,320 equity shares to Govt. of India, 4,48,65,702 equity shares to LIC of India and 52,06,977 equity shares to GIC of India, having face value ofRs.10/- each at a price ofRs.38.41 per share (including premium ofRs.28.41 per share), on preferential basis in accordance with Chapter VII of SEBI (ICDR) Regulations, 2009, during the financial year 2017-18 after receipt of approval from GOI, vide their letter F.No.7/38/2014-BOA dated 4th August 2017.
4) Bank has repaid borrowings towards Unsecured, Subordinated, Non-convertible Basel III compliant Additional Tier I bonds, aggregating toRs.1,400 cr. after exercising Regulatory Call Option.
Sale and Transfers to/ from HTM Category
i. The value of sales and transfer of securities to/from HTM category did exceed 5% of the Book Value of investments held in HTM category at the beginning of the year. Bank had sold securities having book value ofRs.2,118.74 cr (8.19%) from HTM. Bank’s HTM portfolio as of 1st April 2017 wasRs.25,872.85 cr. Book value & Market value of HTM portfolio as on 31-03-2018 isRs.25,459.05 cr &Rs.25,233.66 cr respectively. Book value is in excess byRs.225.39 cr from market value for which provision is not made, being the HTM portfolio.
ii. The Bank has amortized premium ofRs.73.13 cr during the year (Previous yearRs.62.15 cr) for securities classified under “Held to Maturity” category in terms of Accounting Policy as stated at para 17.3, and the said amount has been charged to Profit and Loss Account by reducing value of the respective securities to that extent.
iii. In accordance with the guidelines issued by RBI, the Bank has shifted securities from one category to another during the year. The consequential depreciation on account of shifting securities from “Available for Sale” and “Held for Trading” category to “Held to Maturity” category has been charged to Profit & Loss Account by reducing book value of these securities, amounted toRs.376.87 cr (previous yearRs.10.21cr) out of the total sum ofRs.376.87 cr an amount ofRs.226.32 cr which was already provided as depreciation as on March 2017 has been adjusted from the account of provision and the balance ofRs.150.55 cr has been adjusted as loss from profit and loss account.
iv The Bank has an investment of '19.33 cr (Previous yearRs.19.33 cr) in one Regional Rural Bank (RRB) sponsored by the Bank. This includes Investment ofRs.18.28 cr (Previous YearRs.18.28 cr) by way of Share Capital deposits, towards recapitalization of the RRBs. Investment has been valued at cost in accordance with the RBI guidelines.
v. In terms of RBI circular DBR.No.BP.BC.102/21.04.048/2017-18 dated 2nd April, 2018, Out of the Total Net Mark to Market Losses ofRs.110.36 cr on AFS and HFT Investments, Bank has recognizedRs.38.49 cr depreciation in the FY 2017-18 and Balance amount ofRs.71.87 cr has been deferred to be recognized equally in subsequent three quarters
1.6 Derivatives:
a. Forward Rate Agreement/ Interest Rate Swap
b. Exchange Traded Interest Rate Derivatives:
c. Disclosures on risk exposure in derivatives:
i. Qualitative Disclosure
The Treasury Policy & Derivative Policy of the Bank lays down the type of financial derivates instruments, scope of usages, approval process as also the limits like the open position limits, deal size limits and counter party exposure limits besides delegated power for trading in the approved instruments.
Bank is exposed to credit risk, market risk, country risk and operational risk. Bank has risk management policies approved by the Board of Directors which is designed to measure the financial risks for transactions in the trading book on a regular basis. The Risk Management Department measures the financial risk for transactions through measurement tools such as MTM, VaR, Convexity and Modified Durations, and Sensitivity Analysis on a daily basis and Stress Testing, VaR Back Testing on a monthly basis. The reports are submitted to the Top Management which appraises the risk profile to the ALCO. The guidelines issued by RBI, FEDAI & FIMMDA from time to time are followed.
1. Bank does not have the derivative transaction except Forward Contracts like Merchant Forward Contracts and Inter Bank Contracts done for Arbitrage, Funding and Merchant Transactions covering and Proprietary Trading activities.
2. Bank is calculating PV01 of outstanding Forward Exchange Contract on quarterly basis collectively on hedging and trading positions.
As on Balance Sheet Date Provision Coverage Ratio is 60.20% calculated as per RBI circular no. RBI2009-10/240 DBOD.No.BP. BC.64/21.4.048/2009-10 dated 01.12.2009. In terms of RBI circular no. DBOD.No.BP.BC. 87/21.04.048 /2010-11 April 21, 2011 on PCR, shortfall ofRs.1,930.66 cr in Countercyclical Provisioning Buffer (Previous YearRs.3,041.43 cr), is to be built up by the Bank at the earliest.
e. Additional Disclosure requirements relating to sale of non-performing assets (NPAs) to Securitisation Companies(SCs)/ Reconstruction Companies (RCs)
As per RBI circular no. RBI/2014-15/508 DBR.No.BP.BC.78/21.04.048/2014-15 dated March 20, 2015, the details of sale of NPAs to SCs and RCs are as below:
f. As per RBI circular no. RBI/2014-15/508 DBR.No.BP.BC.78/21.04.048/2014-15 dated March 11,2015, during the FY 2016-17, Bank has reversed an excess provision amounting to ' NIL (PY ' NIL ) on account of sale of NPAs.
h. Food Credit Exposure: Bank’s exposure in food credit to Food Corporation of India (FCI) was aggregating toRs.568.97 Crs (PYRs.917.37 cr). Out of this, exposure to Government of Punjab (GoP) wasRs.327.85 cr (PY '339.78 cr). There was a gap between outstanding Food Credit to GoP and Value of Stock and receivables for which neither GoP nor FCI was accepting liability. RBI vide their letter dated 12.04.2016 informed the Secretary, Department of Expenditure, Ministry of Finance to make provision @ 15% by March 2017. Thereafter RBI vide their letter No DBR(BP) No 3992/21.04.048/2016-17 dated 03.10.2016 informed the Chairman that account will be eligible for up gradation and write back of provisions post January 2018, subject to satisfactory performance during this specified period. However, upon up gradation, as a matter of prudence, specific provision of 5% should be maintained by banks during the life of this restructured loan. Accordingly, Bank has made provision ofRs.16.39 cr (PYRs.50.97 cr) @ 5% on its share of outstanding balance.
Further, as per Minutes of Consortium Meeting dated 27.03.2018, Lead Bank SBI informed that in case of Food Credit Exposure to Govt. of Telangana, due to absence of adequate value of stocks, GoT Food Credit account was considered as out of order by RBI and as such RBI has advised to maintain a prudential provision of 15% on the outstanding amount. Accordingly, Bank has made provision ofRs.5.65 cr (PY Rs. NIL ) @ 15% on its share of outstanding balance.
i. RBI vide its circular no DBR.NO.BP.BC.101/21.04.048/2017-18 dated 12th February 2018, has issued revised framework on Resolution of Stressed Assets. In pursuance to the revised framework the bank has classified specific 12 accounts forRs.827.77 Crores as non performing and accordingly made provision towards such stressed accounts forRs.286.33 Crores. Impact in RBI Circular dated 12.02.2018 on resolution of Stressed Assets as on 31.03.2018 is as under:
j. As per the RBI directions vide letter No. DBR.No.BP.BC.100/21.04.048/2017-18 dated February 07, 2018 for Relief for MSME borrowers registered under Goods and Services Tax (GST), 50 MSME borrower accounts (Loan outstanding amount ofRs.51.14 Crs as on 31.03.2018) are eligible to be covered under provisions of relief, the Bank was required to make a provision of 5% i.e.Rs.2.55 Crs. Accordingly provision ofRs.2.55 Crs has been made during the quarter ending March 2018.
1.7 Risk Category wise Country Exposure:
a. In respect of Foreign Exchange transactions, where the Bank’s net funded exposure computed as per the guidelines of the RBI with each country exceeded 1% of the total assets of the Bank, the Bank is required to make the provision. Since, Bank’s net funded exposure in any country does not exceed 1% of total assets, no provision (Previous year NIL) is made.
b. Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the Bank
During the year 2017-18, the Bank has not exceeded prudential credit exposure limit in respect of group/single borrower.
1.8 Disclosure of penalties imposed by RBI
During the year RBI has imposed NIL penalty (P.Y. NIL).
1.9 DISCLOSURES AS PER ACCOUNTING STANDARDS (AS):
a. Accounting Standard - 5 - “Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies”
There were no material prior period income/expenditure items requiring disclosure under AS-5
b. Accounting Standard - 9 - “Revenue Recognition”
Certain items of income are recognized on realization basis as per Accounting Policy as stated at point no. 17.9.
c. Accounting Standard - 10 - “Accounting for Fixed Assets”
Premises does not include non-banking Assets acquired in satisfaction of claims ofRs.9.86 cr (Previous YearRs.9.86 cr). Fixed Assets are depreciated under Straight Line Method on the basis of useful life prescribed under schedule-II of the Companies Act 2013 for the respective assets.
d. Accounting Standard - 11 - “The Effects of Changes in Foreign Exchange Rates”
Net income on account of exchange differences credited in the Profit and Loss account for the year 2017-18 isRs.45.43 cr (previous yearRs.33.04 cr)
e. Accounting Standard - 15 - “Employee Benefits”
The following information is disclosed in terms of Accounting Standard issued by the ICAI.
i. Provision has been made for Employees Benefits viz; Pension, Gratuity, Leave Encashment and other Employees benefits in accordance with AS-15 on the basis of actuarial valuation.
ii. In terms of RBI Letter No. DBR.No.BP.9730 21.04.018//2017-18 dated 27th April, 2018, Out of the Total additional liability ofRs.96.80 cr on account of enhancement in the gratuity limit as per the recent amendment in payment of gratuity Act ( As per the Govt. of India notification dated 29.03.2018), Bank has recognizedRs.24.20 cr in the FY 2017-18 and Balance amount ofRs.72.60 cr has been deferred to be recognised equally in subsequent three quarters
f. Accounting Standard - 17 - “Segment Reporting”
As per the Reserve Bank of India revised guidelines on Accounting Standard -17, the Bank’s Operations are classified into Primary Segment, i.e., the business segment comprising of “Treasury”, “Corporate/ Wholesale Banking”, “Retail Banking” and “Other Banking Operations”, as follows:
(Figures in the Bracket are of previous financial year 2016-17)
* Out ofRs.594.35 cr (Previous YearRs.342.72 cr), Dena Bank participation amount in IBPC is ' NIL (Previous YearRs.120.00 cr) issued by DGGB on risk sharing basis representing various loans to Priority Sector.
DGGB has participated in IBPC ' NIL (Previous YearRs.120.00 cr) issued by Dena Bank on risk sharing basis representing various loans to NonPriority Sector.
l. Accounting Standard 21 - “Consolidated Financial Statements (CFS)”
The Bank is not having any subsidiaries, within the meaning of this Standard; therefore, this Accounting Standard does not apply.
j. Accounting Standard 22 - “Accounting for Taxes on Income”
The Bank has complied with requirements of “AS-22 issued by ICAI and accordingly, deferred tax assets and liabilities are recognized.
The net balance of Deferred Tax Asset as on 31st March 2018 amounting toRs.2,975.52 cr (Previous YearRs.1,719.92 cr) consists of the following:
Based on the thorough review and on the expert advice of Bank’s Tax Consultant, the Bank has estimated future taxable income against which timing difference arising on account of provisions for Bad & Doubtful Debts (NPA) can be realized and accordingly during the year 2017-18, the Bank has recognized deferred tax assets ofRs.1,255.60 crores (cumulativelyRs.2,975.52 crores assets as on 31/03/2018) in respect of the above on such timing difference based on reasonable certainty of availability of future taxable income against which such deferred tax assets can be realized.
k. Accounting Standard 23 - “Accounting for Investments in Associates in Consolidated Financial Statements”
Consolidated Financial Statements have not been prepared due the reason stated in Note 18 (j) above. The Bank has made an investment in equity of Dena Gujarat Gramin Rural Bank ofRs.19.33 cr ( Previous yearRs.19.33 cr) as at 31.03.2018. The same has been accounted for at Cost.
l. Accounting Standard - 24 - “Discontinuing Operations”
No operations have been discontinued in the Bank during the year. m. Accounting Standard - 25 - “Interim Financial Reporting”
Bank has complied with this Accounting Standard n. Accounting Standard - 28 - “Impairment of Assets”
In the opinion of the Management, there is no impairment to its assets.
o. Accounting Standard - 29 - “Provisions, Contingent Liabilities and Contingent Assets” i Movement of Provisions for Contingent Liabilities
ii. Item No’s (I) to (V) of the Schedule - 12 of the Balance Sheet on contingent liabilities, reflect the various types of contingent liabilities categorized according to their nature. These amounts are estimated on the basis of documents related to the basic contracts or claims made. Outflow on account of these contingent liabilities would depend upon the outcome of disposal of litigations by the respective judicial authorities, execution of contracts, invocation of guarantees, devolvement of LCs, settlement of claims etc.
1.10 Details of Provisions and Contingencies debited to the Profit and Loss Account during the year:
1.11 Amount of Provisions made for Income Tax /MAT during the year:
a. The Bank has recognized Income Tax liability of ' NIL cr [previous yearRs.116.31 cr] on Book Profits in terms with Section 115JB of the Income Tax Act out of which MAT credit of ' NIL cr [ previous yearRs.51.38 cr] as MAT Credit entitlement u/s 115JAA of the Income Tax Act, 1961 has been recognized. The MAT credit entitlement is treated as an asset.
b. Amount of provision made for Income-tax during the year;
1.12 The advances covered by Bank/ Govt. Guarantee amounting toRs.2,119.52 cr [PYRs.1,711.30 cr][shown in Schedule - 9 Para B (ii)] include '1,23 7.78 cr [PYRs.786.69 cr] guaranteed by various State Governments for FY 2017-18.
1.13 Draw Down from Reserve
There are no draw down of reserves during the year 2017-18.
1.14 Disclosure of Letter of Comforts (LOCs) issued by the Bank
A total of 1,097 Guarantees/ Letter of Undertaking amounting toRs.1,486.43 cr (equivalent to USD 230.63 million) were issued in respect of Buyer’s Credit during the period April 2017 to March 2018 (Previous YearRs.1,990.90 cr).
The outstanding Guarantees/ Letter of Undertakings as of March 31, 2018 stood atRs.391.92 cr equivalent to USD 60.21 million (Previous Year the same wasRs.624.22 cr).
1.15 Bancassurance Business
During the F.Y. 2017-18, the Bank has earned commission income ofRs.11.09 cr (includingRs.1.84 cr income from PMJJBY &Rs.0.29 cr from PMSBY (received as administrative expenses) as compared toRs.7.40 cr (includingRs.1.66 cr PMJJBY income) during corresponding period of F.Y. 2016-17 from Bancassurance Business.
1.16 Credit Default Swaps
The Bank does not have any Credit Default Swap transaction during the period 01.04.2017 to 31.03.2018.
1.17 Intra Group Exposures
The Bank has one group entity i.e Dena Gujarat Gramin Bank which has availed overdraft facility against Fixed Deposit ofRs.594.35 cr. Percentage of Intra Group exposure to total exposure of the Bank on borrowers/customers is 0.80%.
There is no breach of limits of intra-group exposure.
1.18 Transfer to Depositor Education and Awareness Fund (DEAF)
The details of Unclaimed liabilities amount transferred to DEAF during the year FY 2017-18.
1.19 Unhedged Foreign Currency Exposure
Incremental Capital and provision requirements for Exposures are based on Circular No. DBOD.No.BP.BC.85/21.06.200/2013-14 dated 15.01.2014 and DBOD.No.BP.BC.116/21.06.200/2013-14 dated 03.06.2014 issued by Reserve Bank of India are as under: -For the FY 2017-18, Based on available data, financial statements and the certification received from borrowers wherever received, the Bank has estimated and made an incremental provision ofRs.4.37 cr (Previous YearRs.10.33 Cr reversal of provision) and capital requirement of '5.92 Cr (Previous year decrease in capital requirement ofRs.5.10 Cr) towards Unhedged Foreign Currency Exposure.
1.20 Qualitative Disclosures around LCR
RBI has introduced LCR as per Basel -III guidelines to monitor the short term liquidity of Banks. The aim of LCR standard is to ensure that Bank maintains adequate level of unencumbered High Quality Liquid Assets (HQLA) that can be converted into cash to meet its Liquidity needs for a 30 days time horizon. At a minimum, the stock of liquid assets should enable the Bank to survive until 30 days of the stress scenario by which time it is assumed that appropriate action can be taken.
The LCR is calculated by dividing the High Quality Liquid Assets with the total net cash out flows over the next 30 days calendar period. As per LCR guidelines net cash outflow is total expected cash outflows minus total expected cash inflows for the next 30 days calendar horizon. The HQLA includes, Cash including cash reserves in excess of CRR, government securities in excess of SLR over & above the mandatory SLR requirement, Government securities to the extent allowed by RBI under Marginal Standing Facility and marketable securities issued/ guaranteed by Sovereigns etc. All such assets must be available at all time to be converted into cash and should be unencumbered. Bank’s HQLA consists of assets which are liquid or can be converted to liquid assets within short notice.
Under outflow the items taken in to account for calculation of LCR includes all types of deposits withdrawable within a period of 30 days, unutilized portion of CC/ OD and un disbursed portion of Loans and expected devolvement of LCs and invocation of Guarantees issued by Bank within 30 days period etc, which is calculated on the basis of past historical data.
Under inflow the items to be taken in to account for calculation of LCR includes interest and installments recordable in loans and advances in next 30 days period and lines of credit or any liquidity arrangements with other Banks, from where Bank can get funds to meet the liquidity stress. Banks funding sources are well diversified and concentration of funding sources are avoided.
Bank does not have any subsidiary/joint venture, hence consolidation is not required. As per RBI guidelines Banks are required to maintain minimum 90% LCR as of March 2018 and Banks LCR is 146.85%.
1.21 Financial Inclusion:
Bank has been allotted total 6485 villages covering 2105 Sub Service Area (SSA) under Financial Inclusion for coverage by March 2018. Against target, 746 SSA have been covered through Brick & Mortar Branch and 1359 Sub Service Area (SSA) have been covered through BC model.
1.22 Aadhaar Enrolment under UIDAI:
Bank is a Non State Registrar of Unique Identification Authority of India (UIDAI). In 2nd phase, Bank has selected 79 Enrolment Agencies and has been carrying out Aadhaar Enrolment through various Enrolment Agencies. Bank has enrolled 10.59 cr approximately residents for Aadhaar Number as of March, 2018.
1.23 Priority Sector lending Certificate (PSLC) :
As per RBI circular no. RBI/2015-16/366 FIDD.CO.Plan.BC.23/04.09.01/2015-16 dated April 7, 2016, the details of sale/purchase of amount of PSLCs (category wise) during the year 2017-18 are as under:
1.24 Procurement from Micro, Small & Medium Enterprises
The procurements made by the Bank from various vendors during the financial year 2017-18 amounts toRs.88.71 cr (Previous YearRs.44.25 cr) Out of this procurement made from MSE amounts toRs.7.84 cr and out of which the procurements made from MSE unit owned by SC/STs entrepreneurs amounts toRs.1.48 cr. The details are being published on the website of the Bank for the benefits of MSEs There are no Micro, Small and Medium enterprises to which the Bank owes dues, which are outstanding for more than 45 days as at March 31, 2018. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the bank
1.25 Note on Ind AS Implementation in Dena Bank:
In Pursuance to the roadmap for the implementation of Ind AS (Indian Accounting Standards) converged with IFRS (International Financial Reporting Standards) for scheduled commercial banks drawn up by MCA (Ministry of Corporate Affairs) notified on January 18, 2016, the Reserve Bank of India has issued notification on February 11, 2016 giving detailed instructions for the implementation of Ind AS by the banks.
The Bank has formed a Steering Committee headed by the Executive Director and comprising of four General for implementation of Ind AS. The proforma financials for the half year ended September 30, 2016 and for quarter ended June 2017 have been submitted by the bank to RBI. The officers of the bank have been imparted training on Ind AS from ICAI/NIBM (National Institute of Banking Management) etc.
The consultants have been appointed by the bank to guide the bank in implementation of Ind AS as per the prescribed time line.
However implementation of Ind AS has been deferred by RBI for one year as per RBI’s Statement on Developmental regulatory Policies dated 05.04.2018.
1.26 Corporate Social Responsibility (CSR):
Since Bank has incurred losses during FY2015-16 & FY 2016-17, there is no allocation of fund for CSR activities in FY 2016-17 & FY 2017-18.
However, during current year Bank has incurred an amount ofRs.2.55 crores under CSR for following activities;
1.27 Previous year’s figures have been regrouped/reclassified/re-arranged, wherever necessary, to make them comparable with the current year’s figures.
|