Allahabad Bank [Merged] कंपली की लेखा नीति

Mar 31, 2019

1. Basis of Preparation:

The financial statements are prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

The financial statements are prepared in accordance with requirements prescribed under the Banking Regulation Act, 1949 and conform to the guidelines issued by the Reserve Bank of India (RBI) in respect to income recognition, asset classification, provisioning and other related matters and Accounting Standards and other pronouncements issued by The Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India.

In respect of foreign offices/branches statutory provisions and practices prevailing in respective foreign countries are complied with.

2. Use of Estimates:

The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognized prospectively unless otherwise stated.

3. Investments:

3.1 Classification

(i) In conformity with the requirements of Form A of the Third Schedule to the Banking Regulation Act, 1949, Investments are classified into the following six groups :

(a) Government Securities,

(b) Other Approved Securities,

(c) Shares,

(d) Debentures & Bonds,

(e) Subsidiaries/ Joint Ventures and

(f) Others

(ii) The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines into three categories viz.,

(a) Held to Maturity (HTM)

(b) Available for Sale (AFS)

(c) Held for Trading (HFT)

3.2 Basis of classification

(a) Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

(b) Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

(c) Investments which are not classified in the above two categories are classified as Available for sale.

(d) An investment is classified as Held to Maturity or Held for Trading or Available for sale at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

(e) Investments in Subsidiaries, Joint Ventures and Associates are classified as Held to Maturity.

3.3 Valuation

(i) As per RBI guidelines, the following principles are adopted for the purpose of valuation;

(a) (i) Securities held in ''HTM'' - at acquisition cost

The excess of acquisition cost over the face value is amortized over the remaining period of maturity,

(ii) Investments in Regional Rural Banks, Subsidiaries and Joint Ventures are valued at carrying cost.

Diminution, other than temporary, if any, in valuation of such investments is provided for.

(b) Securities held in ''AFS'' and ''HFT'' categories are valued scrip-wise. Appreciation/Depreciation is aggregated for each class of securities and net depreciation as per applicable norms is recognized in the Profit and Loss Account, whereas net appreciation is ignored.

(ii) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of assets classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(iii) Cost of acquisition of investments:

- is net of incentives/commission and front-end fee received in case of securities subscribed and

- excludes commission, brokerage, securities transaction tax and stamp duty.

(iv) Profit/Loss on sale of investments in any category is recognized in the Profit and Loss Account. However, in case of profit on sale of investments in “HTM” category, an equivalent amount (net of taxes and transfer to Statutory Reserves) is appropriated to the Capital Reserve Account.

(v) For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/ PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per the norms laid down by the Reserve Bank of India.

3.4 Transfer of Securities between categories

The transfer of securities between categories are carried out at the lower of acquisition cost / book value /market value as on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

3.5 As per RBI guidelines, the different categories of Swaps are valued as under:

- Hedge Swaps

Interest rate swap which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an asset or liability that is carried at lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

- Trading Swaps

Trading Swap transactions are marked to market with changes recorded in the financial statements.

4. Advances:

(i) Advances in India are classified as Standard, Sub Standard, Doubtful or Loss Assets and provision for advances are made as per Prudential Norms of the RBI. In respect of advances made in overseas branches, the same are classified in accordance with prudential norms prescribed by the RBI or local laws of the host country in which advances are made, whichever is more stringent.

(ii) Advances disclosed are net of provisions made for Non Performing Advances and provisions in lieu of diminution in the fair value of Restructured Advances. The provision for diminution in fair value of restructured advances is measured in net present value terms as per RBI guidelines.

(iii) The provision made for standard advances in terms of RBI guidelines is included in “Other Liabilities and Provisions”.

5. Foreign Currency transctions:

5.1 Accounting for transactions involving foreign exchange is done in accordance with AS 11 issued by ICAI .

5.2 The foreign currency operations of the bank are classified as (a) integral operations and (b) non integral operations as stipulated in AS 11. Overseas branches are treated as non Intgral operations and domestic operations in foreign exchange and representative offices are treated as integral operation.

5.3 Translation in respect of Non Integral operations;

(a) Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities are translated at the end of each quarter at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI).

(b) Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

(c) All resulting exchange differences are accumulated in a separate account ''Foreign Currency Translation Reserve''.

5.4 Translation in respect of integral operations;

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rates prevailing as on the date of transactions.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

6. Fixed Assets and Depreciation:

(i) Premises including Freehold land and leasehold land are stated at their revalued amount and other Fixed Assets are stated at their historical cost. Whenever certain Assets are revalued, the Bank adopts the guidelines issued by RBI and compliances of Accounting Standards issued in this regard. Any upward revision on such revaluation is credited to Revaluation Reserve. The amount equivalent to additional depreciation on revalued assets is directly transferred from Revaluation Reserve to Revenue & Other Reserve.

(ii) Premises under construction is shown under a separate heading “Premises under Construction”. Advances to contractors are shown under the head “Other Assets”.

(iii) Depreciation is charged on composite cost of Land and Building, where separate cost of land is not available.

(iv) Depreciation on Fixed Assets including revalued assets is provided as per the following rates on diminishing balance method as decided by the Management from the Financial year 2014-15 and onwards.

(v) On Computers, Data Processing Machines, ALPMs, depreciation is provided at the rate of 33.33% on Straight Line Method (SLM) so as to write down the asset value in three years as per RBI guidelines.

(vi) Premium on Leasehold Land (including revalued amount) is amortized over the period of the lease on Straight Line Method.

(vii) Premium on Leasehold Land is amortized over the period of the lease, based on cost or written down value, where original cost is not available.

(viii) The Capital Expenditure up to Rs.5000/- is debited directly to “Charges Account - Repairs & Maintenance”.

(ix) Pro-rata depreciation is provided on the assets purchased / sold / discarded during the year.

(x) Depreciation on Fixed Assets of Foreign branches is provided as per the applicable laws prevalent in that country.

7. Intangible Assets (Computer Software):

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets and is amortised along with the computer hardware. Where the software is not an integral part of the related hardware, computer software is recognised as an Intangible Asset.

(ii) Computer software acquired from vendors is recognised as Intangible Asset only if the value /cost of the software is more than Rs.10 Lakhs. Such intangible assets are amortised over its effective life subject to a maximum period of ten years.

8. Employee Benefits:

8.1 The Bank has applied Accounting Standard 15 (Revised) - Employees Benefits, issued by The Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

8.2 Long term Employees Benefits:

Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the quarter as well as in year-end by using various Actuarial Assumptions chosen following the modalities documented in the Bank''s Policy on Funding Superannuation Schemes and the Projected Unit Credit method as per the policies mentioned herein below:

8.2.1 Gratuity:

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of Gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability.

8.2.2 Pension (ABEPR):

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995 (ABEPR-1995) to employees, who exercised option under the Regulations and also to Employees joining the Bank''s Service during the period from 29.09.1995 to 31.03.2010. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. There is also provision for commutation of pension to a pensioner, against written request, to the maximum extent of 1 /3rd of Basic Pension. The commuted basic pension is restored after completion of 15 years of commutation. Employees covered under ABEPR - 1995 are not eligible for Bank''s contribution to Provident Fund. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect of Pension, which is conducted by approved Actuary, in addition to the statutory monthly contribution of 10% of Pay of the covered employees, ranking for PF.

8.2.3 Leave Fare Concession (LFC):

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the Scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non-funded scheme and the Bank maintains a provision on account of its liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment in respect of LFC facility is debited/ charged to the Profit and Loss Account.

8.2.4 Leave Encashment:

The Bank permits encashment of Privilege Leave balance to its employees availing LFC facility, up to the maximum limit of 30 days leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment of such leave encashment is debited/ charged to the Profit and Loss Account.

8.3 In respect of Provident Fund, the contribution for the period is recognized as expense and charged to the Profit & Loss account.

8.4 In terms of Industry wide Settlement/Joint Note dated 27.04.2010, employees joining the services of the Bank on or after 01.04.2010 are covered by defined contribution retirement benefit scheme.

8.5 Short term Employees Benefits

Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

9. Revenue Recognition:

(i) Income and Expenditure are generally accounted for on accrual basis unless otherwise stated.

(ii) In view of uncertainty of collection of income, Interest and Other Income in cases of Non Performing Assets/ Investments are recognized to the extent realized.

(iii) Recoveries from Non-Performing Assets (NPAs), in case of Doubtful/ Loss Assets is appropriated first against the Principal due and then interest, whereas in case of Substandard Assets, such recovery is appropriated first against the interest and then against the Principal.

(iv) Income from interest on refund of Income Tax and Interest Tax are accounted for in the year in which it is received/ adjusted.

10. Lease:

Rentals received by the Bank are recognized in the Profit and Loss Account on accrual basis.

Lease payments for assets taken on operating lease are recognized as an expense in the Profit and Loss Account.

11. Earnings Per Share:

The Bank reports Basic and Diluted Earnings per Equity Share in accordance with Accounting Standard 20 “Earnings per Share” issued by The Institute of Chartered Accountants of India.

11.1 Basic earnings per Share are computed by dividing the net profit after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding for the year.

11.2 Diluted Earnings per Share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted Earnings per Share are computed using the weighted average number of equity shares and diluted potential equity shares outstanding at year end.

12. Taxes on Income :

Income tax expense is the aggregate amount of current tax and deferred tax expense.

(i) Current tax is provided on the taxable income using applicable tax rates and tax laws. In compliance with Accounting Standard 22 “Accounting for Taxes on Income” issued by The Institute of Chartered Accountants of India,

Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet.

(ii) Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the Bank will pay normal income tax during the period specified under the Income Tax Act, 1961.

13. Cash and Cash equivalents:

Cash and cash equivalents include cash on hand and in ATMs and balances with RBI, balances with other banks and money at call and short notice.

14. Impairment of Assets:

Impairment losses, if any, on Fixed Assets (including revalued assets) are recognized and charged to the Profit & Loss Account in accordance with the Accounting Standard 28 “Impairment of Assets” issued by The Institute of Chartered Accountants of India.

15. Provisions, Contingent Liabilities & Contingent Assets:

(i) In conformity with AS 29 “Provisions, Contingent Liabilities and Contingent Assets”, issued by The Institute of Chartered Accountants of India, the Bank recognizes provisions only when

a. it has a present obligation as a result of a past event;

b. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

c. when a reliable estimate of the amount of the obligation can be made.

(ii) No provision is recognized for:

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

b) Any present obligation that arises from past events but is not recognized because;

i. it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii. a reliable estimate of the amount of obligation cannot be made.

(iii) Contingent Liabilities are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

(iv) Contingent Assets are not recognized in the financial statements as this may result in the recognition of income that may never be realized.

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Mar 31, 2018

1. Basis of Preparation:

The financial statements are prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

The financial statements are prepared in accordance with requirements prescribed under the Banking Regulation Act, 1949 and conform to the guidelines issued by the Reserve Bank of India (RBI) in respect to income recognition, asset classification, provisioning and other related matters and Accounting Standards and other pronouncements issued by The Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India.

In respect of foreign offices/branches statutory provisions and practices prevailing in respective foreign countries are complied with.

2. Use of Estimates:

The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognized prospectively unless otherwise stated.

3. Transactions involving Foreign Exchange:

3.1 Branches / Offices outside India

(i) Foreign Branches are classified as “Non-integral Foreign Operations” and their audited financial statements are translated as follows:

(a) Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities are translated at the end of each quarter at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI).

(b) Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

(c) All resulting exchange differences are accumulated in a separate account ‘Foreign Currency Translation Reserve’.

(ii) Operations of representative offices abroad are classified as “Integral Foreign Operations” and their financial statements are accounted for as follows:

(a) All monetary Assets and Liabilities, Guarantees, Acceptances, Endorsements and other obligations are translated to Indian Rupee equivalent at the spot exchange rates prevailing at the end of each quarter as per FEDAI guidelines.

(b) Non-monetary items are translated at exchange rates prevailing as on the date of transactions.

(c) Revenue items are accounted for at the exchange rates prevailing on the date of transaction.

(d) All resulting exchange differences are accounted for in the Profit & Loss Account.

(iii) Advances are classified under various categories in line with those of Indian Offices. Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

3.2 Branches in India

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rates prevailing as on the date of transactions.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

4. Investments:

(i) In conformity with the requirements of Form A of the Third Schedule to the Banking Regulation Act, 1949, Investments are classified into the following six groups :

(a) Government Securities,

(b) Other Approved Securities,

(c) Shares,

(d) Debentures & Bonds,

(e) Subsidiaries/ Joint Ventures and

(f) Others

(ii) The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines into three categories viz.,

(a) Held to Maturity (HTM)

(b) Available for Sale (AFS)

(c) Held for Trading (HFT)

(iii) (a) Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

(b) Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

(c) Investments which are not classified in the above two categories are classified as Available for sale.

(d) An investment is classified as Held to Maturity or Held for Trading or Available for sale at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

(e) Investments in Subsidiaries, Joint Ventures and Associates are classified as Held to Maturity.

(iv) As per RBI guidelines, the following principles are adopted for the purpose of valuation;

(a) (i) Securities held in ‘HTM’ - at acquisition cost

The excess of acquisition cost over the face value is amortized over the remaining period of maturity,

(ii) Investments in Regional Rural Banks, Subsidiaries and Joint Ventures are valued at carrying cost.

Diminution, other than temporary, if any, in valuation of such investments is provided for.

(b) (i) Securities held in ‘AFS’ and ‘HFT’ categories are valued scrip-wise. Appreciation/Depreciation is aggregated for each class of securities and net depreciation as per applicable norms is recognized in the Profit and Loss Account, whereas net appreciation is ignored.

(v) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of assets classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(vi) Cost of acquisition of investments:

- is net of incentives/commission and front-end fee received in case of securities subscribed and

- excludes commission, brokerage, securities transaction tax and stamp duty.

(vii) Profit/Loss on sale of investments in any category is recognized in the Profit and Loss Account. However, in case of profit on sale of investments in “HTM” category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve Account.

(viii) For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per the norms laid down by the Reserve Bank of India.

(ix) Transfer of Securities between categories

The transfer of securities between categories specified at para 4 (ii) above are carried out at the lower of acquisition cost / book value /market value as on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

(x) As per RBI guidelines, the different categories of Swaps are valued as under:

- Hedge Swaps

Interest rate swap which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an asset or liability that is carried at lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

- Trading Swaps

Trading Swap transactions are marked to market with changes recorded in the financial statements.

5. Advances:

(i) Advances in India are classified as Standard, Sub Standard, Doubtful or Loss Assets and provision for advances are made as per Prudential Norms of the RBI. In respect of advances made in overseas branches, advances are classified in accordance with prudential norms prescribed by the RBI or local laws of the host country in which advances are made, whichever is more stringent.

(ii) Advances disclosed are net of provisions made for Non Performing Advances and provisions in lieu of diminution in the fair value of Restructured Advances. The provision for diminution in fair value of restructured advances is measured in net present value terms as per RBI guidelines.

(iii) The provision made for standard advances (performing) in terms of RBI guidelines is however included in “Other Liabilities and Provisions”.

6. Fixed Assets and Depreciation:

(i) Premises including Freehold land and leasehold land are stated at their revalued amount and other Fixed Assets are stated at their historical cost. Whenever certain Assets are revalued, the Bank adopts the guidelines issued by RBI and compliances of Accounting Standards issued in this regard. Any upward revision on such revaluation is credited to Revaluation Reserve. As per Revised AS-10 “Property, Plant and Equipment” issued by ICAI, effective from 1^st April 2017 additional depreciation charged on revalued assets is directly transferred from Revaluation Reserve to Revenue & Other Reserves.

(ii) Premises under construction is shown under a separate heading “Premises under Construction”. Advances to contractors is shown under the head “Other Assets”.

(iii) Depreciation is charged on composite cost of Land and Building, where separate cost of land is not available.

(iv) Depreciation on Fixed Assets including revalued assets is provided as per the following rates on diminishing balance method as decided by the Management from the Financial year 2014-15 and onwards.

(v) On Computers, Data Processing Machines, ALPMs, depreciation is provided at the rate of 33.33% on Straight Line Method (SLM) so as to write down the asset value in three years as per RBI guidelines.

(vi) Premium on Leasehold Land (including revalued amount) is amortized over the period of the lease on Straight Line Method.

(vii)Premium on Leasehold Land is amortized over the period of the lease, based on cost or written down value, where original cost is not available.

(viii)The Capital Expenditure up to Rs.5000/- is debited directly to “Charges Account - Repairs & Maintenance”.

(ix) Pro-rata depreciation is provided on the assets purchased / sold / discarded during the year.

(x) Depreciation on Fixed Assets of Foreign branches is provided as per the applicable laws prevalent in that country.

7. Intangible Assets (Computer Software):

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets and is amortised along with the computer hardware. Where the software is not an integral part of the related hardware, computer software is recognised as an Intangible Asset.

(ii) Computer software acquired from vendors is recognised as Intangible Asset only if the value /cost of the software is more than Rs.10 Lakhs. Such intangible assets are amortised over its effective life subject to a maximum period of ten years.

8. Employee Benefits:

(i) The Bank has applied Accounting Standard 15(Revised) -Employees Benefits, issued by The Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

(ii) Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the quarter as well as in year-end by using various Actuarial Assumptions chosen following the modalities documented in the Bank’s Policy on Funding Superannuation Schemes and the Projected Unit Credit method as per the policies mentioned herein below:

a. Gratuity:

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of Gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Bank’s contribution is maintained by an in-house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability.

b. Pension (ABEPR):

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995(ABEPR-1995) to employees, who exercised option under the Regulations and also to Employees joining the Bank’s Service during the period from 29.09.1995 to 31.03.2010. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. There is also provision for commutation of pension to a pensioner, against written request, to the maximum extent of 1/3rd of Basic Pension. The commuted basic pension is restored after completion of 15 years of commutation. Employees covered under ABEPR - 1995 are not eligible for Bank’s contribution to Provident Fund. A fund created out of Bank’s contribution is maintained by an in-house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect of Pension, which is conducted by approved Actuary, in addition to the statutory monthly contribution of 10% of Pay of the covered employees, ranking for PF.

c. Leave Fare Concession (LFC):

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the Scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non-funded scheme and the Bank maintains a provision on account of its liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment in respect of LFC facility is debited/charged to the Profit and Loss Account.

d. Leave Encashment:

The Bank permits encashment of Privilege Leave balance to its employees availing LFC facility, up to the maximum limit of 30 days leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment of such leave encashment is debited/ charged to the Profit and Loss Account.

(iii) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to the Profit & Loss account.

(iv)In terms of Industry wide Settlement/Joint Note dated 27.04.2010, employees joining the services of the Bank on or after 01.04.2010 are covered by defined contribution retirement benefit scheme.

(v) Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

9. Recognition of Income and Expenditure:

(i) Income and Expenditure are generally accounted for on accrual basis unless otherwise stated.

(ii) Interest and Other Income in cases of Non Performing Assets/Investments are recognized to the extent realized.

(iii) Recoveries from Non-Performing Assets (NPAs), in case of Doubtful/ Loss Assets is appropriated first against the Principal and then interest, whereas in case of Substandard Assets, such recovery is appropriated first against the interest and then against the Principal.

(iv) Income from interest on refund of Income Tax and Interest Tax are accounted for in the year in which it is received/ adjusted.

10. Lease:

Rentals received by the Bank are recognized in the Profit and Loss Account on accrual basis.

Lease payments for assets taken on operating lease are recognized as an expense in the Profit and Loss Account.

11. Earnings Per Share:

The Bank reports Basic and Diluted Earnings per Equity Share in accordance with Accounting Standard 20 “Earnings per Share” issued by The Institute of Chartered Accountants of India.

11.1 Basic earnings per Share are computed by dividing the net profit after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding for the year.

11.2 Diluted Earnings per Share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted Earnings per Share are computed using the weighted average number of equity shares and diluted potential equity shares outstanding at year end.

12. Taxation :

(i) Provision is made for both current tax (including Minimum Alternative Tax - MAT) and deferred tax. Current tax is provided on the taxable income using applicable tax rates and tax laws. In compliance with Accounting Standard 22 “Accounting for Taxes on Income” issued by The Institute of Chartered Accountants of India, Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet.

(ii) Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the Bank will pay normal income tax during the period specified under the Income Tax Act, 1961.

13. Cash and Cash equivalents:

Cash and cash equivalents include cash on hand and in ATMs and balances with RBI, balances with other banks and money at call and short notice.

14. Impairment of Assets:

Impairment losses, if any, on Fixed Assets (including revalued assets) are recognized and charged to the Profit & Loss Account in accordance with the Accounting Standard 28 “Impairment of Assets” issued by The Institute of Chartered Accountants of India.

15. Provisions, Contingent Liabilities & Contingent Assets:

(i) In conformity with AS 29 “Provisions, Contingent Liabilities and Contingent Assets”, issued by The Institute of Chartered Accountants of India, the Bank recognizes provisions only when

a. it has a present obligation as a result of a past event;

b. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

c. when a reliable estimate of the amount of the obligation can be made.

(ii) No provision is recognized for;

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

b) Any present obligation that arises from past events but is not recognized because;

i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii) a reliable estimate of the amount of obligation cannot be made.

iii) Contingent Liabilities are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

iv) Contingent Assets are not recognized in the financial statements as this may result in the recognition of income that may never be realized.

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Mar 31, 2017

1. Basis of Preparation:

The financial statements are prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

The financial statements are prepared in accordance with requirements prescribed under the Banking Regulation Act, 1949 and confirm to the guidelines issued by the Reserve Bank of India (RBI) in respect to income recognition, asset classification, provisioning and other related matters and Accounting Standards and other pronouncements issued by The Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India.

In respect of foreign offices/branches statutory provisions and practices prevailing in respective foreign countries are complied with.

2. Use of Estimates:

The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognized prospectively unless otherwise stated.

3. Transactions involving Foreign Exchange:

3.1 Branches / Offices outside India

(i) Foreign Branches are classified as "Non-integral Foreign Operations" and their audited financial statements are translated as follows:

(a) Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities are translated at the end of each quarter at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI).

(b) Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

(c) All resulting exchange differences are accumulated in a separate account ''Foreign Currency Translation Reserve''.

(ii) Operations of representative offices abroad are classified as "Integral Foreign Operations" and their financial statements are accounted for as follows:

(a) All monetary Assets and Liabilities, Guarantees, Acceptances, Endorsements and other obligations are translated to Indian Rupee equivalent at the spot exchange rates prevailing at the end of each quarter as per FEDAI guidelines.

(b) Non-monetary items are translated at exchange rates prevailing as on the date of transactions.

(c) Revenue items are accounted for at the exchange rates prevailing on the date of transaction.

(d) All resulting exchange differences are accounted for in the Profit & Loss Account.

(iii) Advances are classified under various categories in line with those of Indian Offices. Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

3.2 Branches in India

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rates prevailing as on the date of transactions.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

4. Investments:

(i) In conformity with the requirements of Form A of the Third Schedule to the Banking Regulation Act, 1949, Investments are classified into the following six groups :

(a) Government Securities,

(b) Other Approved Securities,

(c) Shares,

(d) Debentures & Bonds,

(e) Subsidiaries/ Joint Ventures and

(f) Others

(ii) The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines into three categories viz.,

(a) Held to Maturity (HTM)

(b) Available for Sale (AFS)

(c) Held for Trading (HFT)

(iii) (a) Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

(b) Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

(c) Investments which are not classified in the above two categories are classified as Available for sale.

(d) An investment is classified as Held to Maturity or Held for Trading or Available for sale at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

(e) Investments in Subsidiaries, Joint Ventures and Associates are classified as Held to Maturity.

(iv) As per RBI guidelines, the following principles are adopted for the purpose of valuation;

(a) (i) Securities held in ''HTM'' - at acquisition cost

The excess of acquisition cost over the face value is amortized over the remaining period of maturity,

(ii) Investments in Regional Rural Banks, Subsidiaries and Joint Ventures are valued at carrying cost.

Diminution, other than temporary, if any, in valuation of such investments is provided for.

(b)(i) Securities held in ''AFS'' and ''HFT'' categories are valued scrip-wise. Appreciation/Depreciation is aggregated for each class of securities and net depreciation as per applicable norms is recognized in the Profit and Loss Account, whereas net appreciation is ignored.

(v) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of assets classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(vi) Cost of acquisition of investments:

- is net of incentives/commission and front-end fee received in case of securities subscribed and

- excludes commission, brokerage, securities transaction tax and stamp duty.

(vii)Profit/Loss on sale of investments in any category is recognized in the Profit and Loss Account. However, in case of profit on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve Account.

(viii)For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per the norms laid down by the Reserve Bank of India.

(ix)Transfer of Securities between categories

The transfer of securities between categories specified at para 4 (ii) above are carried out at the lower of acquisition cost / book value /market value as on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

(x) As per RBI guidelines, the different categories of Swaps are valued as under:

- Hedge Swaps

Interest rate swap which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an asset or liability that is carried at lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

- Trading Swaps

Trading Swap transactions are marked to market with changes recorded in the financial statements.

5. Advances:

(i) Advances in India are classified as Standard, Sub Standard, Doubtful or Loss Assets and provision for advances are made as per Prudential Norms of the RBI. In respect of advances made in overseas branches, advances are classified in accordance with prudential norms prescribed by the RBI or local laws of the host country in which advances are made, whichever is more stringent.

(ii) Advances disclosed are net of provisions made for Non Performing Advances and provisions in lieu of diminution in the fair value of Restructured Advances. The provision for diminution in fair value of restructured advances is measured in net present value terms as per RBI guidelines.

(iii) The provision made for standard advances (performing) in terms of RBI guidelines is however included in "Other Liabilities and Provisions".

6. Fixed Assets and Depreciation:

(i) Premises including Freehold land and leasehold land are stated at their revalued amount and other Fixed Assets are stated at their historical cost. Whenever certain Assets are revalued, the Bank adopts the guidelines issued by RBI and compliances of Accounting Standards issued in this regard. Any upward revision on such revaluation is credited to Revaluation Reserve. Additional depreciation charged on revalued assets is transferred from Revaluation Reserve and shown as miscellaneous income under the head ''Other Income''.

(ii) Premises under construction is shown under a separate heading "Premises under Construction". Advances to contractors is shown under the head "Other Assets".

(iii) Depreciation is charged on composite cost of Land and Building, where separate cost of land is not available.

(iv) Depreciation on Fixed Assets including revalued assets is provided as per the following rates on diminishing balance method as decided by the Management from the Financial year 2014-15 and onwards.

(v) On Computers, Data Processing Machines, ALPMs, depreciation is provided at the rate of 33.33% on Straight Line Method (SLM) so as to write down the asset value in three years as per RBI guidelines.

(vi) Premium on Leasehold Land (including revalued amount) is amortized over the period of the lease on Straight Line Method.

(vii)Premium on Leasehold Land is amortized over the period of the lease, based on cost or written down value, where original cost is not available.

(viii) The Capital Expenditure up to Rs.5000/- is debited directly to "Charges Account - Repairs & Maintenance".

(ix) Pro-rata depreciation is provided on the assets purchased / sold / discarded during the year.

(x) Depreciation on Fixed Assets of Foreign branches is provided as per the applicable laws prevalent in that country.

7. Intangible Assets (Computer Software):

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets and is amortized along with the computer hardware. Where the software is not an integral part of the related hardware, computer software is recognized as an Intangible Asset.

(ii) Computer software acquired from vendors is recognized as Intangible Asset only if the value /cost of the software is more than Rs.10 Lakhs. Such intangible assets are amortized over its effective life subject to a maximum period of ten years.

8. Employee Benefits:

(i) The Bank has applied Accounting Standard 15(Revised) -Employees Benefits, issued by The Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

(ii) Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the quarter as well as in year-end by using various Actuarial Assumptions chosen following the modalities documented in the Bank''s Policy on Funding Superannuation Schemes and the Projected Unit Credit method as per the policies mentioned herein below:

a. Gratuity:

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of Gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability.

b. Pension (ABEPR):

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995(ABEPR-1995) to employees, who exercised option under the Regulations and also to Employees joining the Bank''s Service during the period from 29.09.1995 to 31.03.2010. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. There is also provision for commutation of pension to a pensioner, against written request, to the maximum extent of 1/3rd of Basic Pension. The commuted basic pension is restored after completion of 15 years of commutation. Employees covered under ABEPR - 1995 are not eligible for Bank''s contribution to Provident Fund. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect of Pension, which is conducted by approved Actuary, in addition to the statutory monthly contribution of 10% of Pay of the covered employees, ranking for PF.

c. Leave Fare Concession (LFC):

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the Scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non-funded scheme and the Bank maintains a provision on account of its liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment in respect of LFC facility is debited/charged to the Profit and Loss Account.

d. Leave Encashment:

The Bank permits encashment of Privilege Leave balance to its employees availing LFC facility, up to the maximum limit of 30 days leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment of such leave encashment is debited/ charged to the Profit and Loss Account.

(iii) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to the Profit & Loss account.

(iv)In terms of Industry wide Settlement/Joint Note dated 27.04.2010, employees joining the services of the Bank on or after 01.04.2010 are covered by defined contribution retirement benefit scheme.

(v) Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

9. Recognition of Income and Expenditure:

(i) Income and Expenditure are generally accounted for on accrual basis unless otherwise stated.

(ii) Interest and Other Income in cases of Non Performing Assets/Investments are recognized to the extent realized.

(iii) Recoveries from Non-Performing Assets (NPAs), in case of Doubtful/ Loss Assets is appropriated first against the Principal and then interest, whereas in case of Substandard Assets, such recovery is appropriated first against the interest and then against the Principal.

(iv) Income from interest on refund of Income Tax and Interest Tax are accounted for in the year in which it is received/ adjusted.

10. Lease:

(i) Rentals received by the Bank are recognized in the Profit and Loss Account on Accrual basis.

(ii) Lease payments for assets taken on operating lease are recognized as an expense in the Profit and Loss Account.

11. Earnings Per Share:

The Bank reports Basic and Diluted Earnings per Equity Share in accordance with Accounting Standard 20 "Earnings per Share" issued by The Institute of Chartered Accountants of India.

(i) Basic earnings per Share are computed by dividing the net profit after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding for the year.

(ii) Diluted Earnings per Share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted Earnings per Share are computed using the weighted average number of equity shares and diluted potential equity shares outstanding at year end.

12. Taxation :

(i) Provision is made for both current tax (including Minimum Alternate Tax - MAT) and deferred tax. Current tax is provided on the taxable income using applicable tax rates and tax laws. In compliance with Accounting Standard 22 "Accounting for Taxes on Income" issued by The Institute of Chartered Accountants of India, Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet.

(ii) Minimum Alternate Tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the Bank will pay normal income tax during the period specified under the Income Tax Act, 1961.

13. Cash and Cash equivalents:

Cash and cash equivalents include cash on hand and in ATMs and balances with RBI, balances with other banks and money at call and short notice.

14. Impairment of Assets:

Impairment losses, if any, on Fixed Assets (including revalued assets) are recognized and charged to the Profit & Loss Account in accordance with the Accounting Standard 28 "Impairment of Assets" issued by The Institute of Chartered Accountants of India.

15. Provisions, Contingent Liabilities & Contingent Assets:

(i) In conformity with AS 29 "Provisions, Contingent Liabilities and Contingent Assets", issued by The Institute of Chartered Accountants of India, the Bank recognizes provisions only when

a. it has a present obligation as a result of a past event;

b. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

c. when a reliable estimate of the amount of the obligation can be made.

(ii) No provision is recognized for;

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

b) Any present obligation that arises from past events but is not recognized because;

i. it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii. a reliable estimate of the amount of obligation cannot be made.

(iii) Contingent Liabilities are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

(iv) Contingent Assets are not recognized in the financial statements as this may result in the recognition of income that may never be realized.

1.1 Basis of preparation of Financial Statements

The financial statements are prepared in accordance with applicable accounting standards and relevant provisions of the Companies Act, 2013 and are based on the historical cost conventions. Accounting policies unless specifically stated to be otherwise, are consistent and are in consonance with generally accepted accounting principles. All expenses and income to the extent considered payable and receivable , unless stated otherwise, have been accounted for on accrual basis.

1.2 Use of Estimates

The preparation of financial statements require management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures relating to contingent liabilities and assets as at the Balance Sheet date and the reported amounts of income and expenses during the year.

Contingencies are recorded when it is probable that a liability will be incurred and the amounts can reasonably be estimated. Differences between the actual results and estimates are recognized in the year in which the results are known / materialized.

1.3 Revenue Recognition

(i) Lease Finance

The Accounting Standard 19 (AS-19) on Leases came into effect in respect of all assets leased during accounting periods commencing on or after 1.4.2001. Since the Company has not sanctioned any lease on or after 1.4.2001, the AS-19 is not applicable to the Company. .

Lease Rentals are not considered where Leased Assets have been classified as Non Performing Assets (NPA) under the Prudential Norms announced by Reserve Bank of India.

However, the Company had registered itself as a Category I Merchant Banker in the year 2005 and had surrendered NBFC license since it discontinued HP and Leasing business.

(ii) Interest income is recognized on a time proportion basis depending upon the amount outstanding and the rate applicable and to the extent considered realizable.

(iii) Income on account of dividend is recognized when the right to receive is established.

1.4 Fixed Assets

Fixed Assets are capitalized at cost inclusive of installation expenses as incurred by the Company.

1.5 Leased Assets

Assets purchased in earlier years and given on lease are capitalized on installation at cost and installation expenses.

1.6 Depreciation

(i) Assets other than given on Lease:

Depreciation is provided as per the method prescribed in Schedule II of the Companies Act 2013 considering 100% useful life of the assets instead of 95% as the residual value of assets are treated as insignificant.

Intangible Assets are amortized over a period of five years or in lesser period if useful life is lower than five years on straight line basis.

(ii) Assets given on Lease:

Depreciation on Leased Assets is provided as per the Guidance Note on ''Accounting for Leases'' issued by the Institute of Chartered Accountants of India.

Depreciation on all the fixed assets (excluding Leased Assets classified as Non Performing Assets) has been provided as per method prescribed in the Companies Act, 2013 subject to our comment in clause (i) in the foregoing paragraph.

1.7 Investment

Long Term Investments are valued at cost. Provision for diminution in value of investment is made for decrease in value of such investments if permanent in nature as at the end of the year.

Current Investments are valued at the lower of cost and market value.

In cases where Investments are listed but suspended and market quotations are not available, where investments are delisted and where investments are not listed, the value of the investment in each of such company has been taken at Re. 1/-.

In the case of shares acquired in settlement of M/s V B Desai A/c pursuant to the Order of The Special Court, Mumbai, constituted under The Special Courts (Trial of Offences relating to Transactions in Securities) Act, 1992, the cost of acquisition of the Shares so acquired have been taken at the net amount due from M/s V B Desai, prior to such ruling. This investment has been considered as Long Term Investment.

1.8 Prudential Norms

Although the Company is not doing Hire Purchase and Leasing business yet the Directions issued by the Reserve Bank of India regarding prudential norms for Non-Banking Financial Companies for income recognition, asset classification and provisions have been followed, wherever found applicable.

1.9 Sundry Debtors

Amount due/ receivable but yet to be received at the end of the year on account of Merchant banking, trusteeship etc. are debited to Sundry Debtors Account and credited to respective income/ assets account.

1.10 Provision for Non Performing Assets

In case of Installments due for more than 12 months from Hire Purchase, Lease, etc and in case of interest remained due for more than 6 months from Inter Corporate Deposit, the asset is treated as Non Performing Assets and no income is considered in the accounts.

Provision for a Non-Performing Asset is made by debiting Profit & Loss Account.

1.11 Impairment of Assets

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to profit and loss account in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

1.12 Employee Benefits

Employee benefits accrued in the year are for services rendered by the employees. Contribution to defined contribution schemes such as Provident fund is recognized as and when incurred.

Long term employee benefits under defined benefits scheme such as gratuity and leave encashment are determined at close of the year at present value of the amount payable using actuarial techniques.

1.13 Taxes on Income

Provision for tax is made for both current and deferred tax. Current Tax is provided on the taxable income using the applicable tax rates and tax laws. Deferred tax assets and liabilities arising on account of timing difference which are capable of reversal in subsequent periods are recognized using tax rates and tax laws which have been enacted or substantively enacted. Deferred tax assets are not recognized unless there is sufficient assurance with respect to the reversal of the same in the future.

1.14 Provisions , Contingencies and Contingent Assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources and a reliable estimate can be made of the amount of the obligation. Contingent Assets are neither recognized nor disclosed in the financial statement . Contingent Liabilities are not provided for and are disclosed by way of notes.

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Mar 31, 2016

1. Basis of Preparation:

The financial statements are prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

The financial statements are prepared in accordance with requirements prescribed under the Banking Regulation Act, 1949 and confirm to the guidelines issued by the Reserve Bank of India (RBI) in respect to income recognition, asset classification, provisioning and other related matters and Accounting Standards and other pronouncements issued by The Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India.

In respect of foreign offices/branches statutory provisions and practices prevailing in respective foreign countries are complied with.

2. Use of Estimates:

The preparation of financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of date of the financial statements and the reported income and expenses for the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognized prospectively unless otherwise stated.

3. Transactions involving Foreign Exchange:

3.1 Branches / Offices outside India

(i) Foreign Branches are classified as “Non-integral Foreign Operations” and their audited financial statements are translated as follows:

a) Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities are translated at the end of each quarter at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI).

b) Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

c) All resulting exchange differences are accumulated in a separate account ''Foreign Currency Translation Reserve''.

(ii) Operations of representative offices abroad are classified as “Integral Foreign Operations” and their financial statements are accounted for as follows:

a) All monetary Assets and Liabilities, Guarantees, Acceptances, Endorsements and other obligations are translated to Indian Rupee equivalent at the spot exchange rates prevailing at the end of each quarter as per FEDAI guidelines.

b) Non-monetary items are translated at exchange rates prevailing as on the date of transactions.

c) Revenue items are accounted for at the exchange rates prevailing on the date of transaction.

d) All resulting exchange differences are accounted for in the Profit & Loss Account.

(iii) Advances are classified under various categories in line with those of Indian Offices. Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

3.2 Branches in India

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers'' Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rates prevailing as on the date of transactions.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

4. Investments:

(i) In conformity with the requirements of Form A of the Third Schedule to the Banking Regulation Act, 1949, Investments are classified into the following six groups :

a) Government Securities,

b) Other Approved Securities,

c) Shares,

d) Debentures & Bonds,

e) Subsidiaries/ Joint Ventures and

f) Others

(ii) The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines into three categories viz.,

(a) Held to Maturity (HTM)

(b) Available for Sale (AFS)

(c) Held for Trading (HFT)

(iii) a) Investments that the Bank intends to hold till maturity

are classified as Held to Maturity.

b) Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

c) Investments, which are not classified in the above two categories, are classified as Available for sale.

d) An investment is classified as Held to Maturity, Held for Trading or Available for sale at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

e) Investments in Subsidiaries, Joint Ventures and Associates are classified as Held to Maturity.

(iv) As per RBI guidelines, the following principles are adopted for the purpose of valuation;

(a) (i) Securities held in ''HTM'' - at acquisition cost

The excess of acquisition cost over the face value is amortized over the remaining period of maturity,

(ii) Investments in Regional Rural Banks, Subsidiaries and Joint Ventures are valued at carrying cost.

Diminution, other than temporary, if any, in valuation of such investments is provided for.

(b) (i) Securities held in ''AFS'' and ''HFT'' categories arevalued scrip-wise. Appreciation/Depreciation is aggregated for each class of securities and net depreciation as per applicable norms is recognized in the Profit and Loss Account, whereas net appreciation is ignored.

(v) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of assets classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(vi) Cost of acquisition of investments:

- is net of incentives/commission and front-end fee received in case of securities subscribed, and

- excludes commission, brokerage, securities transaction tax and stamp duty.

(vii)Profit/Loss on sale of investments in any category is recognized in the Profit and Loss Account. However, in case of profit on sale of investments in “HTM” category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve Account.

(viii)For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per the norms laid down by the Reserve Bank of India.

(ix)Transfer of Securities between categories

The transfer of securities between categories specified at para 4 (ii) above are carried out at the lower of acquisition cost / book value /market value as on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

(x) As per RBI guidelines, the different categories of Swaps are valued as under:

- Hedge Swaps

Interest rate swap which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an asset or liability that is carried at lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

- Trading Swaps

Trading Swap transactions are marked to market with changes recorded in the financial statements.

5. Advances:

(i) Advances in India are classified as Standard, Sub Standard, Doubtful or Loss Assets and provision for advances are made as per Prudential Norms of the RBI. In respect of advances made in overseas branches, advances are classified in accordance with prudential norms prescribed by the RBI or local laws of the host country in which advances are made, whichever is more stringent.

(ii) Advances disclosed are net of provisions made for Non Performing Advances and provisions in lieu of diminution in the fair value of Restructured Advances. The provision for diminution in fair value of restructured advances is measured in net present value terms as per RBI guidelines.

(iii) The provision made for standard advances (performing) in terms of RBI guidelines is however included in “Other Liabilities and Provisions”.

6. Fixed Assets and Depreciation:

(i) Premises including Freehold land and leasehold land are stated at their revalued amount and other Fixed Assets are stated at their historical cost. Whenever certain Assets are revalued, the Bank adopts the guidelines issued by RBI and compliances of Accounting Standards issued in this regard. Any upward revision on such revaluation is credited to Revaluation Reserve. Additional depreciation charged on revalued assets is transferred from Revaluation Reserve and shown as miscellaneous income under the head ''Other Income''.

(ii) Premises under construction is shown under a separate heading “Premises under Construction”. Advances to contractors is shown under the head “Other Assets”.

(iii) Depreciation is charged on composite cost of Land and Building, where separate cost of land is not available.

(iv) Depreciation on Fixed Assets including revalued assets is provided as per the following rates on diminishing balance method as decided by the Management from the Financial year 2014-15 and onwards.

(v) On Computers, Data Processing Machines, ALPMs, depreciation is provided at the rate of 33.33% on Straight Line Method (SLM) so as to write down the asset value in three years as per RBI guidelines.

(vi)In respect of revalued assets, the amount of additional depreciation consequent to revaluation is transferred from Revaluation Reserve to the miscellaneous income under the head ''Other Income''.

(vii) Premium on Leasehold Land (including revalued amount) is amortized over the period of the lease on Straight Line Method.

(viii) Premium on Leasehold Land is amortized over the period of the lease, based on cost or written down value, where original cost is not available.

(ix)The Capital Expenditure up to Rs,5000/- is debited directly to “Charges Account - Repairs & Maintenance”.

(x) Pro-rata depreciation is provided on the assets purchased / sold / discarded during the year.

(xi) Depreciation on Fixed Assets of Foreign branches is provided as per the applicable laws prevalent in that country.

7. Intangible Assets (Computer Software):

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets and is amortized along with the computer hardware. Where the software is not an integral part of the related hardware, computer software is recognized as an Intangible Asset.

(ii) Computer software acquired from vendors is recognized as Intangible Asset only if the value /cost of the software is more than Rs,10 Lakhs. Such intangible assets are amortized over its effective life subject to a maximum period of ten years.

8. Employee Benefits:

(i) The Bank has applied Accounting Standard 15(Revised) -

Employees Benefits, issued by The Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

(ii) Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the quarter as well as in year-end by using various Actuarial Assumptions chosen following the modalities documented in the Bank''s Policy on Funding Superannuation Schemes and the Projected Unit Credit method as per the policies mentioned herein below:

a. Gratuity:

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of Gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability.

b. Pension (ABEPR):

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995(ABEPR-1995) to employees, who exercised option under the Regulations and also to Employees joining the Bank'' Service during the period from 29.09.1995 to 31.03.2010. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. There is also provision for commutation of pension to a pensioner, against written request, to the maximum extent of 1/3^rd of Basic Pension. The commuted basic pension is restored after completion of 15 years of commutation. Employees covered under ABEPR - 1995 are not eligible for Bank''s contribution to Provident Fund. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect of Pension, which is conducted by approved Actuary, in addition to the statutory monthly contribution of 10% of Pay of the covered employees, ranking for PF.

c. Leave Fare Concession (LFC):

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the Scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non-funded scheme and the Bank maintains a provision on account of its liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment in respect of LFC facility is debited/charged to the Profit and Loss Account.

d. Leave Encashment:

The Bank permits encashment of Privilege Leave balance to its employees availing LFC facility, up to the maximum limit of 30 days leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment of such leave encashment is debited/ charged to the Profit and Loss Account.

(iii) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to the Profit & Loss account.

(iv)In terms of Industry wide Settlement/Joint Note dated 27.04.2010, employees joining the services of the Bank on or after 01.04.2010 are covered by defined contribution retirement benefit scheme.

(v) Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

9. Recognition of Income and Expenditure:

(i) Income and Expenditure are generally accounted for on accrual basis unless otherwise stated.

(ii) Interest and Other Income in cases of Non Performing Assets/Investments are recognized to the extent realized.

(iii) Recoveries from Non-Performing Assets (NPAs), in case of Doubtful/ Loss Assets is appropriated first against the Principal and then interest, whereas in case of Substandard Assets, such recovery is appropriated first against the interest and then against the Principal.

(iv) Income from interest on refund of Income Tax and Interest Tax are accounted for in the year in which it is received/adjusted.

10. Lease:

Rentals received by the Bank are recognized in the Profit and Loss Account on Accrual basis.

Lease payments for assets taken on operating lease are recognized as an expense in the Profit and Loss Account.

11. Earnings Per Share:

11.1 The Bank reports Basic and Diluted Earnings per Equity Share in accordance with Accounting Standard 20 “Earnings per Share” issued by The Institute of Chartered Accountants of India. Basic earnings per Share are computed by dividing the net profit after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding for the year.

11.2 Diluted Earnings per Share reflect the potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the year. Diluted Earnings per Share are computed using the weighted average number of equity shares and diluted potential equity shares outstanding at year end.

12. Taxation :

(i) Provision is made for both current tax (including Minimum Alternative Tax - MAT) and deferred tax. Current tax is provided on the taxable income using applicable tax rates and tax laws. In compliance with Accounting Standard 22 “Accounting for Taxes on Income” issued by The Institute of Chartered Accountants of India, Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognized using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet.

(ii) Minimum Alternative Tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the Bank will pay normal income tax during the period specified under the Income Tax Act, 1961.

13. Cash and Cash equivalents:

Cash and cash equivalents include cash on hand and in ATMs and balances with RBI, balances with other banks and money at call and short notice.

14. Impairment of Assets:

Impairment losses, if any, on Fixed Assets (including revalued assets) are recognized and charged to the Profit & Loss Account in accordance with the Accounting Standard 28 “Impairment of Assets” issued by The Institute of Chartered Accountants of India.

15. Provisions, Contingent Liabilities & Contingent Assets:

(i) In conformity with AS 29 “Provisions, Contingent Liabilities and Contingent Assets”, issued by The Institute of Chartered Accountants of India, the Bank recognizes provisions only when

a. it has a present obligation as a result of a past event;

b. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

c. when a reliable estimate of the amount of the obligation can be made.

(ii) No provision is recognized for;

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

b) Any present obligation that arises from past events but is not recognized because;

i. it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii. a reliable estimate of the amount of obligation cannot be made.

(iii) Contingent Liabilities are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

(iv) Contingent Assets are not recognized in the financial statements as this may result in the recognition of income that may never be realized.

---

Mar 31, 2014

1. Basis of Preparation

The financial statements have been prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

The financial statements also conform to the guidelines issued by the Reserve Bank of India (RBI) in respect to income recognition, asset classification, provisioning and other related matters and Accounting Standard and other pronouncements issued by the Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India.

In respect of foreign offices/branches statutory provisions and practices prevailing in respective foreign countries are complied with.

2. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (Including contingent liabilities) as of date of the financial statement and the reported income and expenses for the reporting period. Management believes that the estimates used in preparation of the financial statement are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

3. Transactions involving Foreign Exchange

3.1 Branches / Offices outside India

(i) Foreign Branches are classified as "Non-integral Foreign Operations" and their financial statements are translated as follows:

a) Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI) at the end of each quarter.

b) Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

c) All resulting exchange difference is accumulated in a separate account ''Foreign Currency Translation Reserve''.

(ii) Operations of representative offices abroad are classi fied as "Integral Foreign Operations" and their financial statements are accounted for as follows:

a) All monetary Assets and Liabilities, Guarantees, Acceptances, Endorsements and other obligations are translated to Indian rupee equivalent at the spot exchange rates prevailing at the end of each quarter as per FEDAI guidelines.

b) Non-monetary items are translated at exchange rate prevailing on the date of transaction.

c) Revenue items are accounted for at the exchange rates prevailing on the date of transaction.

d) All resulting exchange differences are accounted for in Profit & Loss Account.

(iii) Advances are classified under categories in line with those of Indian Offices. Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

3.2 Branches in India

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers'' Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rate prevailing as on the date of transaction.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

4. Investments

(i) In conformity with the requirements in Form A of the Third Schedule to the Banking Regulation Act, 1949, Investments are classified into the following six groups :

(a) Government Securities,

(b) Other Approved Securities,

(c) Shares,

(d) Debentures & Bonds,

(e) Subsidiaries/ Joint Ventures and

(f) Others

(ii) The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines into three categories viz.,

(a) Held to Maturity (HTM)

(b) Available for Sale (AFS)

(c) Held for Trading (HFT)

(iii) (a) Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

(b) Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

(c) Investments, which are not classified in the above two categories, are classified as Available for sale.

(d) An investment is classified as Held to Maturity, Held for Trading or Available for sale at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

e) Investments in subsidiaries, joint ventures and associates are classified as Held to Maturity.

(iv) As per RBI guidelines, the following principles have been adopted for the purpose of valuation.

(a) (i) Securities held in ''HTM'' - at acquisition cost

The excess of acquisition cost over the face value is amortized over the remaining period of maturity

(ii) Investments in Regional Rural Banks, subsidiaries and Joint Ventures are valued at carrying cost.

Diminution, other than temporary, if any, in valuation of such investments is provided for.

(b) (i) Securities held in ''AFS'' and ''HFT categories are valued scrip-wise. Appreciation/depreciation is aggregated for each class of securities and net depreciation as per applicable norms is recognized in the Profit and Loss Account, whereas net appreciation is ignored.

(v) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of asset classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(vi) Cost of acquisition of investments

- is net of incentives/commission and front-end fees received in case of securities subscribed, and

- excludes commission, brokerage, securities transaction tax and stamp duty.

(vii) Profit/loss on sale of investments in any category is recognized in the Profit and Loss Account. However, in case of profit on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve Account.

(viii) For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per norms laid down by the Reserve Bank of India.

(ix) Transfer of Securities between categories

The transfer of securities between categories specified at para 4 (ii) (a) to (c) above are carried out at the lower of acquisition cost / book value /market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

(x) As per RBI guidelines, the different categories of Swaps are valued as under:

- Hedge Swaps

Interest rate swaps which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an assets or liability that is carried at market value or lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

- Trading Swaps

Trading Swap transactions are marked to market with changes recorded in the financial statements.

5. Advances

(i) Advances in India are classified as Standard, Sub Standard, Doubtful or Loss assets and provisions for advances are made as per Prudential Norms of the RBI. In respect of advances made in overseas branches, advances are classified in accordance with prudential norms prescribed by the RBI or local laws of the host country in which advances are made, which ever is more stringent.

(ii) Advances disclosed are net of provisions made for non performing advances and provisions in lieu of diminution in the fair value of restructured advances. The provision for diminution in fair value of restructured advances is measured in net present value terms as per RBI guidelines.

(iii) The provision made for standard advances (performing) in terms of RBI guidelines is however included in "Other Liabilities and Provisions".

6. Fixed Assets and Depreciation

(i) Premises including Freehold and other Fixed Assets are stated at historical cost except certain premises, which are stated at their revalued amount.

(ii) Capital expenditure incurred during construction period is included under ''Other Assets''.

(iii) Depreciation is provided on diminishing balance method at the rates and the manner prescribed in Schedule XIV of the Companies Act, 1956 except that in respect of ALPMs and Computers, where depreciation is provided on straight line method @ 33.33% as per guidelines of Reserve Bank of India.

(iv) In respect of revalued assets, the amount of additional depreciation consequent to revaluation is transferred from Revaluation Reserve to the Profit & Loss Account.

(v) Premium on leasehold land is amortized over the period of the lease on straight line method.

(vi) Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws prevalent in that country.

7. Intangible Assets (Computer Software)

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets. Where the software is not an integral part of the related hardware, computer soft- ware is recognised as an Intangible Asset.

(ii) Computer software acquired from vendors is recognised as Intangible Asset only if the value /cost of the software is more than Rs.10 Lakhs. Such intangible assets are amortised over its effective life subject to a maximum period of ten years.

8. Employee Benefits

(i) The Bank has applied Accounting Standard 15(Revised) Employees Benefits, issued by the Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

(ii) Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the quarter as well as in year-end by using various Actuarial Assumptions chosen following the modalities documented in the Bank''s Policy on Funding Superannuation Schemes and the Projected Unit Credit method as per policies mentioned herein below:

a. Gratuity

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability.

b. Pension (ABEPR)

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995(ABEPR-1995) to employees, who exercised option under the Regulations and also to Employees joining the Bank''s Service during the period from 29.09.1995 to 31.03.2010. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. There is also provision for commutation of pension to a pensioner, against written request, to the maximum extent of 1/3rd of Basic Pension. The commuted basic pension is restored after completion of 15 years of commutation. Employees covered under ABEPR – 1995 are not eligible for Bank''s contribution to Provident Fund. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect of Pension, which is conducted by approved Actuary, in addition to the statutory monthly contribution of 10% of Pay of the covered employees, ranking for PF.

c. Leave Fare Concession (LFC)

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the Scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non-funded scheme and the Bank maintains a provision on account of its liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment in respect of LFC facility is made through the Profit and Loss Account.

d. Leave Encashment

The Bank permits encashment of Privilege Leave balance to it employees availing LFC facility, up to the maximum limit of 30 days leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment of such leave encashment is made through the Profit and Loss Account.

(iii) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to Profit & Loss account.

(iv) In terms of Industry wide Settlement/Joint Note dated 27.04.2010, employees joining the services of the Bank on or after 01.04.2010 are covered by defined contribution retirement benefit scheme.

(v) Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

9. Recognition of Income and Expenditure

(i) Income and Expenditure are generally accounted for on accrual basis unless otherwise stated.

(ii) Interest and Other Income in cases of Non Performing Assets/Investments are recognized to the extent realized.

(iii)Income from interest on refund of Income Tax and on Interest Tax are accounted for in the year in which it is received.

10. Lease

Rentals received by the Bank are recognized in the profit and loss account on accrual basis.

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account.

11. Earnings Per Share

Basic and Diluted Earnings per Equity Share are reported in accordance with the Accounting Standard 20 "Earnings per share" issued by the Institute of Chartered Accountants of India.

12. Taxation

(i) Provision is made for both current tax (including Minimum Alternative Tax - MAT) and deferred tax. Current tax is provided on the taxable income using applicable tax rate and tax laws. In compliance with Accounting Standard 22 : "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India, deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet.

(ii) Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period specified under the Income Tax Act, 1961.

13. Cash and Cash equivalents

Cash and cash equivalent include cash on hand and in ATMs and balances with RBI.

14. Impairment of Assets

Impairment losses (if any) on Fixed Assets (including revalued assets) are recognized and charged to Profit & Loss Account in accordance with the Accounting Standard 28 "Impairment of Assets" issued by The Institute of Chartered Accountants of India.

15. Provisions, Contingent Liabilities & Contingent Assets

(i) In conformity with AS 29. "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when

a) it has a present obligation as a result of a past event;

b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

c) when a reliable estimate of the amount of the obligation can be made.

(ii) No provision is recognized for;

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

b) Any present obligation that arises from past events but is not recognized because

i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii) a reliable estimate of the amount of obligation cannot be made.

iii) Contingent Liabilities are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

iv) Contingent Assets are not recognized in the financial statements as this may result in the recognition of income that may never be realized.

---

Mar 31, 2013

1. Basis of Preparation:

The financial statements have been prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

The financial statements also conform to the guidelines issued by the Reserve Bank of India (RBI) in respect to income recognition, asset classification, provisioning and other related matters and Accounting Standard and other pronouncements issued by the Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India.

In respect of foreign offices/branches, statutory provisions and practices prevailing in respective foreign countries are complied with.

2. Use of Estimates

The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amount of assets and liabilities (Including contingent liabilities) as of date of the financial statement and the reported income and expenses for the reporting period. Management believes that the estimates used in preparation of the financial statement are prudent and reasonable. Future results could differ from these estimates. Any revision to the accounting estimates is recognized prospectively in the current and future periods unless otherwise stated.

3. Transactions involving Foreign Exchange:

3.1 Branches / Offices outside India

(i) Foreign Branches are classified as "Non-integral Foreign Operations" and their financial statements are translated as follows:

a) Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI) at the end of each quarter.

b) Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

c) All resulting exchange difference is accumulated in a separate account ''Foreign Currency Translation Reserve''.

(ii) Operations of representative offices abroad are classified as "Integral Foreign Operations" and their financial statements are accounted for as follows:

a) All monetary Assets and Liabilities, Guarantees, Acceptances, Endorsements and other obligations are translated to Indian rupee equivalent at the spot exchange rates prevailing at the end of each quarter as per FEDAI guidelines.

b) Non-monetary items are translated at exchange rate prevailing on the date of transaction.

c) Revenue items are accounted for at the exchange rates prevailing on the date of transaction.

d) All resulting exchange differences are accounted for in Profit & Loss Account.

(iii) Advances are classified under categories in line with those of Indian Offices. Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

3.2 Branches in India

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers'' Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rate prevailing as on the date of transaction.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

4. Investments:

(i) In conformity with the requirements in Form A of the Third Schedule to the Banking Regulation Act, 1949, Investments are classified into the following six groups :

a) Government Securities,

b) Other Approved Securities,

c) Shares,

d) Debentures & Bonds,

e) Subsidiaries/ Joint Ventures and

f) Others

(ii) The Investment portfolio of the Bank is further classified in accordance with the RBI guidelines into three categories viz.,

(a) Held to Maturity (HTM)

(b) Available for Sale (AFS)

(c) Held for Trading (HFT)

(iii) a) Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

b) Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

c) Investments, which are not classified in the above two categories, are classified as Available for Sale.

d) An investment is classified as Held to Maturity, Held for Trading or Available for Sale at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

e) Investments in subsidiaries, joint ventures and associates are classified as Held to Maturity.

(iv) As per RBI guidelines, the following principles have been adopted for the purpose of valuation

(a) (i) Securities held in ''HTM'' - at acquisition cost

The excess of acquisition cost over the face value is amortized over the remaining period of maturity

(ii) Investments in Regional Rural Banks, subsidiaries and Joint Ventures are valued at carrying cost.

Diminution, other than temporary, if any, in valuation of such investments is provided for.

(b) (i) Securities held in ''AFS'' and ''HFT'' categories are valued scrip-wise. Appreciation/depreciation is aggregated for each class of securities and net depreciation as per applicable norms is recognized in the Profit and Loss Account, whereas net appreciation is ignored.

(v) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of asset classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(vi) Cost of acquisition of investments:

- is net of incentives/commission and front-end fees received in case of securities subscribed, and

- excludes commission, brokerage, securities transaction tax and stamp duty.

(vii)Profit/loss on sale of investments in any category is recognized in the Profit and Loss Account. However, in case of profit on sale of investments in "HTM" category, an equivalent amount (net of taxes and net of transfer to Statutory Reserves) is appropriated to the Capital Reserve Account.

(viii)For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per norms laid down by the Reserve Bank of India.

(ix) Transfer of Securities between categories:

The transfer of securities between categories specified at para 4 (ii) (a) to (c) above are carried out at the lower of acquisition cost / book value /market value on the date of transfer. The depreciation, if any, on such transfer is fully provided for.

(x) As per RBI guidelines, the different categories of Swaps are valued as under:

- Hedge Swaps

Interest rate swaps which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an assets or liability that is carried at market value or lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

- Trading Swaps

Trading Swap transactions are marked to market with changes recorded in the financial statements.

5. Advances:

(i) Advance in India are classified as Standard, Sub Standard, Doubtful or Loss assets and provisions for advances are made as per Prudential Norms of the RBI. In respect of advances made in overseas branches, advances are classified in accordance with prudential norms prescribed by the RBI or local laws of the host country in which advances are made, which ever is more stringent.

(ii) Advances disclosed are net of provisions made for non performing advances and provisions in lieu of diminution in the fair value of restructured advances. The provision for diminution in fair value of restructured advances is measured in net present value terms as RBI guidelines.

(iii) The provision made for standard advances (performing) in terms of RBI guidelines is however included in "Other Liabilities and Provisions".

6. Fixed Assets and Depreciation:

(i) Premises including Freehold and other Fixed Assets are stated at historical cost except certain premises, which are stated at their revalued amount.

(ii) Capital expenditure incurred during construction period is included under ''Other Assets''.

(iii) Depreciation is provided on diminishing balance method at the rates and the manner prescribed in Schedule XIV of the Companies Act, 1956 except that in respect of ALPMs and Computers, where depreciation is provided on straight line method @ 33.33% as per guidelines of Reserve Bank of India

(iv) In respect of revalued assets, the amount of additional depreciation consequent to revaluation is transferred from Revaluation Reserve to the Profit & Loss Account.

(v) Premium on leasehold land is amortized over the period of the lease on straight line method.

(vi) Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws prevalent in that country.

7. Intangible Assets (Computer Software)

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets. Where the software is not an integral part of the related hardware, computer software is recognised as an Intangible Asset.

(ii) Computer software acquired from vendors is recognised as Intangible Asset only if the value /cost of the software is more than Rs.10 Lakhs. Such intangible assets are amortised over its effective life subject to a maximum period of ten years.

8. Employee Benefits:

(i) The Bank has applied Accounting Standard 15(Revised) - Employees Benefits, issued by the Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

(ii) Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the year-end by using Projected Unit Credit method as per policies mentioned herein below:

a. Gratuity:

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability.

b. Pension (ABEPR):

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995(ABEPR) to employees, who exercised option under the Regulations and also to Employees joining the Bank'' Service during the period from 29/09/1995 to 31.03.2010. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. Employees covered under ABEPR - 1995 are not eligible for Bank''s contribution to Provident Fund. A fund created out of Bank''s contribution is maintained by an in-house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect of Pension, which is conducted by approved Actuary.

c. Leave Fare Concession (LFC):

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non-funded scheme and the Bank maintains a provision on account of its liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment in respect of LFC facility is made through the Profit and Loss Account.

d. Leave Encashment:

The Bank permits encashment of Privilege Leave balance to its employees availing LFC facility, up to the maximum limit of 30 days'' leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary . Payment of such leave encashment is made through the Profit and Loss Account.

(iii) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to Profit & Loss account.

(iv) In terms of Industry wide Settlement/Joint Note dated 27.04.2010, employees joining the services of the Bank on or after 01.04.2010 are covered by defined contribution retirement benefit scheme.

(v) Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

9. Recognition of Income and Expenditure:

(i) Income and Expenditure are generally accounted for on accrual basis unless otherwise stated.

(ii) Interest and Other Income in cases of Non Performing Assets/Investments are recognized to the extent realized.

(iii) Income from interest on refund of Income Tax and Interest Tax are accounted for in the year in which it is received.

10. Lease

Rentals received by the Bank are recognized in the profit and loss account on accrual basis.

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account.

11. Earnings Per Share

Basic and Diluted Earnings per Equity Share are reported in accordance with the Accounting Standard 20 "Earnings per share" issued by the Institute of Chartered Accountants of India.

12. Taxation

(i) Provision is made for both current tax (including Minimum Alternative Tax - MAT) and deferred tax. Current tax is provided on the taxable income using applicable tax rate and tax laws. In compliance with Accounting Standard 22 :Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India, deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet.

(ii) Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period specified under the Income Tax Act 1961.

13. Cash and Cash equivalents

Cash and cash equivalent include cash on hand and in ATM''s and balances with RBI.

14. Impairment of Assets

Impairment losses (if any) on Fixed Assets (including revalued assets) are recognized and charged to Profit & Loss Account in accordance with the Accounting Standard 28 "Impairment of Assets" issued by The Institute of Chartered Accountants of India.

15. Provisions, Contingent Liabilities & Contingent Assets

(i) In conformity with AS 29 "Provisions, Contingent Liabilities and Contingent Assets", issued by the Institute of Chartered Accountants of India, the Bank recognizes provisions only when

a. it has a present obligation as a result of a past event;

b. it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

c. when a reliable estimate of the amount of the obligation can be made.

(ii) No provision is recognized for

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

b) Any present obligation that arises from past events but is not recognized because

i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii) a reliable estimate of the amount of obligation cannot be made.

iii) Contingent Liabilities are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

iv) Contingent Assets are not recognized in the financial statements as this may result in the recognition of income that may never be realized.

---

Mar 31, 2012

1. Basis of Accounting:

(i) The financial statements have been prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

(ii) The financial statements also conform to the guidelines issued by the Reserve Bank of India (RBI) from time to time in respect of income recognition, asset classification, provisioning and other related matters. Accounting Standard and pronouncements issued by the Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India.

2. Transactions involving Foreign Exchange:

2.1 Branches / Offices outside India

(i) Foreign Branches are classified as "Non-integral Foreign Operations" and their financial statements are translated as follows:

a) Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI) at the end of each quarter.

b) Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

c) All resulting exchange difference is accumulated in a separate account 'Foreign Currency Translation Reserve'.

(ii) Operations of representative offices abroad are classified as "Integral Foreign Operations" and their financial statements are accounted for as follows:

a) All monetary Assets and Liabilities, Guarantees, Acceptances, Endorsements and other obligations are translated to Indian rupee equivalent at the spot exchange rates prevailing at the end of each quarter as per FEDAI guidelines.

b) Non-monetary items are translated at exchange rate prevailing on the date of transaction.

c) Revenue items are accounted for at the exchange rates prevailing on the date of transaction.

d) All resulting exchange differences are accounted for in Profit & Loss Account.

(iii) Advances are classified under categories in line with those of Indian Offices. Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

2.2 Branches in India

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers' Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rate prevailing as on the date of transaction.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

3. Investments:

(i) Investments are classified in accordance with RBI guidelines under three categories viz. "Held to Maturity", "Held for Trading" and "Available for Sale".

(ii) The disclosures of Investments are further classified into the following six groups :

a) Government Securities,

b) Other Approved Securities,

c) Shares,

d) Debentures & Bonds,

e) Subsidiaries/ Joint Ventures and

f) Others

(iii) a) Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

b) Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

c) Investments, which are not classified in the above two categories, are classified as Available for sale.

d) An investment is classified as Held to Maturity, Held for Trading or Available for sale at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

e) Investments in subsidiaries, joint ventures and associates are classified as Held to Maturity.

(iv) Investments classified as 'Held to Maturity' (other than in Regional Rural Banks) are carried at acquisition cost. In case the acquisition cost is higher than the face value, the excess is amortized over the period remaining to maturity and provision is made for:

a) Depreciation in the value of debentures / bonds which are deemed to be in the nature of advances by applying the RBI prudential norms of asset classification and provisioning applicable to advances.

b) Diminution, other than temporary, in the value of investments in subsidiaries / joint ventures.

(v) Investments classified as "Held for Trading" are revalued scrip-wise at monthly interval and resultant net depreciation is recognized and net appreciation, if any, is ignored under each classification. The book value of the individual scrip is not changed with the revaluation as indicated above.

(vi) Investments classified as "Available for Sale" are marked to market scrip-wise at quarterly intervals and resultant net depreciation is recognized and net appreciation, if any, is ignored under each classification. The book value of the individual scrip is not changed with the revaluation as indicated above.

(vii) Investments in Regional Rural Banks are valued at carrying cost.

(viii) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of asset classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(ix) Cost of acquisition of investments: is net of incentives/commission and front-end fees received in case of securities subscribed, and excludes commission, brokerage, securities transaction tax and stamp duty.

(x) Profit/loss on sale of investments is recognized in the Profit and Loss Account. An amount equivalent to the profit on sale of investments under "Held to Maturity" category is first taken to the Profit and Loss Account and thereafter, appropriated to the "Capital Reserve Account".

(xi) For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per norms laid down by the Reserve Bank of India.

(xii) As per RBI guidelines, the different categories of Swaps are valued as under:

a) Hedge Swaps :

Interest rate swaps which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an assets or liability that is carried at market value or lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

b) Trading Swaps :

Trading Swap transactions are marked to market with changes recorded in the financial statements.

4. Advances:

(i) Advances are classified as performing and non- performing as per guidelines prescribed by RBI and are shown net of provisions for non-performing advances.

(ii) The provision made for standard advances (performing) in terms of RBI guidelines is however included in "Other Liabilities and Provisions".

5. Fixed Assets and Depreciation:

(i) Premises including Freehold and other Fixed Assets are stated at historical cost except certain premises, which are stated at their revalued amount.

(ii) Capital expenditure incurred during construction period is included under 'Other Assets'.

(iii) Depreciation is provided on diminishing balance method at the rates and the manner prescribed in Schedule XIV of the Companies Act, 1956 except that in respect of ALPMs and Computers, where depreciation is provided on straight line method @ 33.33% as per guidelines of Reserve Bank of India

(iv) In respect of revalued assets, the amount of additional depreciation consequent to revaluation is transferred from Revaluation Reserve to the Profit & Loss Account.

(v) Premium on leasehold land is amortized over the period of the lease.

(vi) Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws prevalent in that country.

6. Intangible Assets (Computer Software) :

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets. Where the software is not an integral part of the related hardware, computer software is recognised as an Intangible Asset.

(ii) Computer software acquired from vendors is recognised as Intangible Asset only if the value /cost of the software is more than Rs.10 Lakhs. Such intangible assets are amortised over its effective life subject to a maximum period of ten years.

7. Employee Benefits:

(i) The Bank has applied Accounting Standard 15(Revised) - Employees Benefits, issued by the Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

(ii) Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the year-end by using Projected Unit Credit method as per policies mentioned herein below:

a. Gratuity:

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Bank's contribution is maintained by an in- house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability.

b. Pension (ABRPR):

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995(ABEPR) to employees, who exercised option under the Regulations and also to Employees joining the Bank' Service during the period from 29/09/1995 to 31.03.2010. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. Employees covered under ABEPR - 1995 are not eligible for Bank's contribution to Provident Fund. A fund created out of Bank's contribution is maintained by an in- house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect of Pension, which is conducted by approved Actuary.

c. Leave Fare Concession (LFC):

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the Scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non- funded scheme and the Bank maintains a provision on account of it s liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment in respect of LFC facility is made through the Profit and Loss Account.

d. Leave Encashment:

The Bank permits encashment of Privilege Leave balance to it employees availing LFC facility, up to the maximum limit of 30 days' leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary . Payment of such leave encashment is made through the Profit and Loss Account.

e. Sick Leave:

The Bank maintains a provision for its liability on account of any contingency arising out of employees going on sick leave on medical ground, which is permissible in terms of prevailing service conditions / rules. It is a non-funded scheme and the Bank maintains the provision on the basis of actuarial valuation, which is conducted by approved Actuary..

(iii) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to Profit & Loss account.

(iv) In terms of Industry wide Settlement/Joint Note dated 27.04.2010, employees joining the services of the Bank on or after 01.04.2010 are covered by defined contribution retirement benefit scheme.

(v) Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

8. Recognition of Income and Expenditure:

Income and Expenditure are accounted for on accrual basis other than those stated below:

(i) Interest and Other Income on advances classified as non-performing assets are recognized to the extent realized.

(ii) Income from interest on refund of Income Tax and Interest Tax are accounted for in the year the order is passed by the concerned assessing officer.

9. Lease :

Rentals received by the Bank are recognized in the profit and loss account on accrual basis.

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account.

10. Earnings Per Share :

Basic and Diluted Earnings per Equity Share are reported in accordance with the Accounting Standard 20 "Earnings per share" issued by the Institute of Chartered Accountants of India. Basic earnings per equity share are computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.

11. Taxation :

(i) Provision is made for both current tax (including Minimum Alternative Tax - MAT) and deferred tax. Current tax is provided on the taxable income using applicable tax rate and tax laws. In compliance with Accounting Standard 22 "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India, deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognised unless there is "virtual certainty" that sufficient future taxable income will be available against which such deferred tax assets will be realised.

(ii) Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period specified under the Income Tax Act 1961.

12. Cash and Cash equivalents :

Cash and cash equivalent include cash on hand and in ATM's and balances with RBI.

13. Impairment of Losses (if any) on Fixed Assets (including revalued assets) are recognized and charged to Profit & Loss Account in accordance with the Accounting Standard 28 "Impaired of Assets" issued by The Institute of Chartered Accountants of India.

14. Contingent Liabilities and Provisions & Contingent Assets

(i) In conformity with AS 29. "Provisions, Contingent Liabilities and contingent Assets", issued by the Institute of Chartered Accounts of India, the Bank recognizes provisions only when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

(ii) No provision is recognized for :

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

b) Any present obligation that arises from past events but is not recognized because :

i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii) A reliable estimate of the amount of obligation cannot be made. Such obligations are recorded as contingent Liabilities. These are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

(iii) Contingent Assets are not recognized in the financial statements as this may result in the recognition of income that never be realized.

---

Mar 31, 2011

1. Basis of Accounting:

(i) The financial statements have been prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

(ii) The financial statements also conform to the guidelines issued by the Reserve Bank of India (RBI) from time to time in respect of income recognition, asset classification, provisioning and other related matters. Accounting Standard and pronouncements issued by the Institute of Chartered Accountants of India and accounting practices prevalent in the banking industry in India.

2. Transactions involving Foreign Exchange:

2.1 Branches / Offices outside India

(i) Foreign Branches are classified as "Non-integral Foreign Operations" and their financial statements are translated as follows:

a) Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI) at the end of each quarter.

b) Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

c) All resulting exchange difference is accumulated in a separate account ‘Foreign Currency Translation Reserve.

(ii) Operations of representative offices abroad are classified as "Integral Foreign Operations" and their financial statements are accounted for as follows:

a) All monetary Assets and Liabilities, Guarantees, Acceptances, Endorsements and other obligations are translated to Indian rupee equivalent at the spot exchange rates prevailing at the end of each quarter as per FEDAI guidelines.

b) Non-monetary items are translated at exchange rate prevailing on the date of transaction.

c) Revenue items are accounted for at the exchange rates prevailing on the date of transaction.

d) All resulting exchange differences are accounted for in Profit & Loss Account.

(iii) Advances are classified under categories in line with those of Indian Offices. Provisions in respect of advances are made as per the local law requirements or as per the norms of RBI, whichever is higher.

2.2 Branches in India

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rate prevailing as on the date of transaction.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

3. Investments:

(i) Investments are classified in accordance with RBI guidelines under three categories viz. "Held to Maturity", "Held for Trading" and "Available for Sale".

(ii) The disclosures of Investments are further classified into the following six groups :

a) Government Securities,

b) Other Approved Securities,

c) Shares,

d) Debentures & Bonds,

e) Subsidiaries/ Joint Ventures and

f) Others

(iii) a) Investments that the Bank intends to hold till maturity are classified as Held to Maturity.

b) Investments that are held principally for resale within 90 days from the date of purchase are classified as Held for Trading.

c) Investments, which are not classified in the above two categories, are classified as Available for sale.

d) An investment is classified as Held to Maturity, Held for Trading or Available for sale at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

e) Investments in subsidiaries, joint ventures and associates are classified as Held to Maturity.

(iv) Investments classified as ‘Held to Maturity (other than in Regional Rural Banks) are carried at acquisition cost. In case the acquisition cost is higher than the face value, the excess is amortized over the period remaining to maturity and provision is made for:

a) Depreciation in the value of debentures / bonds which are deemed to be in the nature of advances by applying the RBI prudential norms of asset classification and provisioning applicable to advances.

b) Diminution, other than temporary, in the value of investments in subsidiaries / joint ventures.

(v) Investments classified as "Held for Trading" are revalued scrip-wise at monthly interval and resultant net depreciation is recognized and net appreciation, if any, is ignored under each classification. The book value of the individual scrip is not changed with the revaluation as indicated above.

(vi) Investments classified as "Available for Sale" are marked to market scrip-wise at quarterly intervals and resultant net depreciation is recognized and net appreciation, if any, is ignored under each classification. The book value of the individual scrip is not changed with the revaluation as indicated above.

(vii) Investments in Regional Rural Banks are valued at carrying cost.

(viii) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of asset classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(ix) Cost of acquisition of investments:

. is net of incentives/commission and front-end fees received in case of securities subscribed, and

. excludes commission, brokerage, securities transaction tax and stamp duty.

(x) Profit/loss on sale of investments is recognized in the Profit and Loss Account. An amount equivalent to the profit on sale of investments under "Held to Maturity" category is first taken to the Profit and Loss Account and thereafter, appropriated to the "Capital Reserve Account".

(xi) For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/ rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per norms laid down by the Reserve Bank of India.

(xii) As per RBI guidelines, the different categories of Swaps are valued as under:

g) Hedge Swaps

Interest rate swaps which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an assets or liability that is carried at market value or lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

h) Trading Swaps

Trading Swap transactions are marked to market with changes recorded in the financial statements.

4. Advances:

(i) Advances are classified as performing and non- performing as per guidelines prescribed by RBI and are shown net of provisions for non-performing advances.

(ii) The provision made for standard advances (performing) in terms of RBI guidelines is however included in "Other Liabilities and Provisions".

5. Fixed Assets and Depreciation:

(i) Premises including Freehold and other Fixed Assets are stated at historical cost except certain premises, which are stated at their revalued amount.

(ii) Capital expenditure incurred during construction period is included under ‘Other Assets.

(iii) Depreciation is provided on diminishing balance method at the rates and the manner prescribed in Schedule XIV

of the Companies Act, 1956 except that in respect of ALPMs and Computers, where depreciation is provided on straight line method @ 33.33% as per guidelines of Reserve Bank of India. (iv) In respect of revalued assets, the amount of additional depreciation consequent to revaluation is transferred from Revaluation Reserve to the Profit & Loss Account.

(v) Premium on leasehold land is amortized over the period of the lease.

(vi) Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws prevalent in that country.

6. Intangible Assets (Computer Software)

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets. Where the software is not an integral part of the related hardware, computer software is recognised as an Intangible Asset.

(ii) Computer software acquired from vendors is recognised as Intangible Asset only if the value /cost of the software is more than Rs.10 Lakhs. Such intangible assets are amortised over its effective life subject to a maximum period of ten years.

7. Employee Benefits:

(i) The Bank has applied Accounting Standard 15(Revised) - Employees Benefits, issued by the Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

(ii) Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the year-end by using Projected Unit Credit method as per policies mentioned herein below:

a. Gratuity:

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Banks contribution is maintained by an in-house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability.

b. Pension (ABRPR):

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995(ABEPR) to employees, who exercised option under the Regulations and also to Employees joining the Bank Service during the period from 29/09/1995 to 31.03.2010. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. Employees covered under ABEPR – 1995 are not eligible for Banks contribution to Provident Fund. A fund created out of Banks contribution is maintained by an in-house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect of Pension, which is conducted by approved Actuary .

c. Leave Fare Concession (LFC):

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the Scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non- funded scheme and the Bank maintains a provision on account of its liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary. Payment in respect of LFC facility is made through the Profit and Loss Account.

d. Leave Encashment:

The Bank permits encashment of Privilege Leave balance to it employees availing LFC facility, up to the maximum limit of 30 days leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary . Payment of such leave encashment is made through the Profit and Loss Account.

e. Sick Leave:

The Bank maintains a provision for its liability on account of any contingency arising out of employees going on sick leave on medical ground, which is permissible in terms of prevailing service conditions / rules. It is a non-funded scheme and the Bank maintains the provision on the basis of actuarial valuation, which is conducted by approved Actuary.

(iii) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to Profit & Loss account.

(iv) In terms of Industry wide Settlement/Joint Note dated 27.04.2010, employees joining the services of the Bank on or after 01.04.2010 are covered by defined contribution retirement benefit scheme.

(v) Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

8. Recognition of Income and Expenditure:

Income and Expenditure are accounted for on accrual basis other than those stated below:

(i) Interest and Other Income on advances classified as non- performing assets are recognized to the extent realized.

(ii) Income from interest on refund of Income Tax and Interest Tax are accounted for in the year the order is passed by the concerned assessing officer.

9. Lease

Rentals received by the Bank are recognized in the profit and loss account on accrual basis.

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account.

10. Earnings Per Share

Basic and Diluted Earnings per Equity Share are reported in accordance with the Accounting Standard 20 "Earnings per share" issued by the Institute of Chartered Accountants of India. Basic earnings per equity share are computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.

11. Taxation

(i) Provision is made for both current tax (including Minimum Alternative Tax - MAT) and deferred tax. Current tax is provided on the taxable income using applicable tax rate and tax laws. In compliance with Accounting Standard 22 : Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India, deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognised unless there is "virtual certainty" that sufficient future taxable income will be available against which such deferred tax assets will be realised.

(ii) Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period specified under the Income Tax Act 1961.

12. Cash and Cash equivalents

Cash and cash equivalent include cash on hand and in ATMs and balances with RBI.

13. Impairment of Losses (if any) on Fixed Assets (including revalued assets) are recognized and charged to Profit & Loss Account in accordance with the Accounting Standard 28 "Impaired of Assets" issued by The Institute of Chartered Accountants of India.

14. Contingent Liabilities and Provisions & Contingent Assets

(i) In conformity with AS 29. "Provisions, Contingent Liabilities and contingent Assets". Issued by the Institute of Chartered Accounts of India, the Bank recognizes provisions only when It has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of the obligation can be made.

(ii) No provision is recognized for

a) Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or

b) Any present obligation that arises from past events but is not recognized because

i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

ii) A reliable estimate of the amount of obligation cannot be made. Such obligations are recorded as contingent Liabilities. These are assessed at regular intervals and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.

(iii) Contingent Assets are not recognized in the financial statements as this may result in the recognition of income that never be realized.

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Mar 31, 2010

1. Basis of Accounting:

(i) The financial statements have been prepared and presented under the historical cost convention and accrual basis of accounting, unless otherwise stated and are in conformity with the statutory provisions and generally accepted accounting principles.

(ii) The financial statements also conform to the guidelines issued by the Reserve Bank of India (RBI) from time to time in respect of income recognition, asset classification, provisioning and other related matters.

2. Transactions involving Foreign Exchange:

2.1 Branches / Offices outside India

(i) Foreign Branches are classified as “Non-integral Foreign Operations” and their financial statements are translated as follows:

Both monetary and non-monetary Assets and Liabilities as well as Contingent Liabilities at the closing spot rates notified by the Foreign Exchange Dealers Association of India (FEDAI) at the end of each quarter.

Revenue items are translated at the quarterly average closing rate notified by FEDAI at the end of respective quarter.

All resulting exchange difference is accumulated in a separate account ‘Foreign Currency Translation Reserve’.

(ii) Operations of representative offices abroad are classified as “Integral Foreign Operations” and their financial statements are accounted for as follows:

All monetary Assets and Liabilities, Guarantees, Acceptances, Endorsements and other obligations are translated to Indian rupee equivalent at the spot exchange rates prevailing at the end of each quarter as per FEDAI guidelines.

Non-monetary items are translated at exchange rate prevailing on the date of transaction.

Revenue items are accounted for at the exchange rates prevailing on the date of transaction.

All resulting exchange differences are accounted for in Profit & Loss Account.

(iii) Advances will be classified under categories in line with those of Indian Offices. Provisions in respect of advances will be made as per the local law requirements or as per the norms of RBI, whichever is higher.

2.2 Branches in India

(i) Foreign currency balances whether of assets or liabilities [including deposits mobilized under FCNR Scheme, EEFC Scheme, RFC Scheme etc.] and outstanding forward exchange contracts are converted at quarter end rates as advised by Foreign Exchange Dealers’ Association of India (FEDAI).

The resultant profit/loss on revaluation of forward exchange contracts and NOSTRO accounts is taken to revenue as per FEDAI guidelines.

(ii) Income and Expenditure items relating to foreign currency are converted using the exchange rate prevailing as on the date of transaction.

(iii) Acceptances, endorsements and other obligations including guarantees are stated at FEDAI advised rates prevailing at the end of each quarter.

3. Investments:

(i) The investment portfolio of the Bank is classified in accordance with RBI guidelines under three categories viz. “Held to Maturity”, “Available for Sale” and “Held for Trading”.

(ii) The disclosure of investments under all the three categories mentioned above is made under six groups viz. (a) Government securities (b) Other approved securities (c) Shares (d) Debentures & Bonds (e) Investment in Subsidiaries/Associates/joint ventures and (f) Others (commercial paper, units in Mutual Funds etc).

(iii) Investments classified as ‘Held to Maturity’ (other than in Regional Rural Banks) are carried at acquisition cost. In case the acquisition cost is higher than the face value, the excess is amortized over the period remaining to maturity and provision is made for:

Depreciation in the value of debentures / bonds which are deemed to be in the nature of advances by applying the RBI prudential norms of asset classification and provisioning applicable to advances.

Diminution, other than temporary, in the value of investments in subsidiaries / joint ventures.

(iv) Investments classified as “Available for Sale” are marked to market scrip-wise at quarterly intervals and resultant net depreciation is recognized and net appreciation, if any, is ignored under each classification. The book value of the individual scrip is not changed with the revaluation as indicated above.

(v) Investments classified as “Held for Trading” are revalued scrip-wise at monthly interval and resultant net depreciation is recognized and net appreciation, if any, is ignored under each classification. The book value of the individual scrip is not changed with the revaluation as indicated above.

(vi) Investments in Regional Rural Banks are valued at carrying cost.

(vii) In respect of non-performing securities (where interest/ principal is in arrears for more than 90 days) income is not recognized and appropriate provision is made for depreciation in the value of the securities by applying prudential norms of asset classification and such depreciation is not set-off against the appreciation in respect of other performing securities.

(viii) Cost of acquisition of investments:

is net of incentives/commission and front-end fees received in case of securities subscribed, and excludes commission, brokerage, securities transaction tax and stamp duty.

(ix) Profit/loss on sale of investments is recognized in the Profit and Loss Account. An amount equivalent to the profit on sale of investments under “Held to Maturity” category is first taken to the Profit and Loss Account and thereafter, appropriated to the “Capital Reserve Account”.

(x) For the purpose of determining market value of investments, Stock exchange quotations or rates put up by FIMMDA/PDAI are adopted. In absence of such quotations/rates, the market value is determined by applying appropriate Yield to Maturity rates as prescribed by FIMMDA / PDAI or as per norms laid down by the Reserve Bank of India.

(xi) As per RBI guidelines, the different categories of Swaps are valued as under:

Hedge Swaps

Interest rate swaps which hedges interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an assets or liability that is carried at market value or lower of cost or market value in the financial statements.

Gains or Losses on the termination of Swaps are recognized over the shorter of the remaining contractual life of the Swap or the remaining life of the assets / liabilities.

Trading Swaps

Trading Swap transactions are marked to market with changes recorded in the financial statements.

4. Advances:

(i) Advances are classified as performing and non-performing as per guidelines prescribed by RBI and are shown net of provisions for non-performing advances.

(ii) The provision made for standard advances (performing) in terms of RBI guidelines is however included in “Other Liabilities and Provisions”.

5. Fixed Assets and Depreciation:

(i) Premises including Freehold and other Fixed Assets are stated at historical cost except certain premises, which are stated at their revalued amount. Selection of assets for revaluation is based on systematic basis. Revaluation is made with sufficient regularity to ensure that the carrying amount does not differ materially from the market value at the Balance Sheet date. Some of the Premises of the Bank experience significant and volatile changes in the fair value, thus necessitating frequent valuation. However, such frequent valuation is not done for items of Premises where the changes in fair value are insignificant.

(ii) Capital expenditure incurred during construction period is included under ‘Other Assets’.

(iii) Depreciation is provided on diminishing balance method at the rates and the manner prescribed in Schedule XIV of the Companies Act, 1956 except that in respect of ALPMs and Computers, where depreciation is provided on straight line method @ 33.33% as per RBI guidelines.

(iv) In respect of revalued assets, the amount of additional depreciation consequent to revaluation is transferred from Revaluation Reserve to the Profit & Loss Account.

(v) Premium on leasehold land is amortized over the period of the lease.

(vi) Depreciation on Fixed Assets of foreign branches is provided as per the applicable laws prevalent in that country.

6. Intangible Assets (Computer Software)

(i) Software for a computer that cannot operate without that specific software is an integral part of related hardware and is treated as fixed assets. Where the software is not an integral part of the related hardware, computer software is recognised as an Intangible Asset.

(ii) Computer software acquired from vendors is recognised as Intangible Asset only if the value /cost of the software is more than Rs.10 Lakhs. Such intangible assets are amortised over its effective life subject to a maximum period of ten years.

7. Employee Benefits:

(i) The Bank has applied Accounting Standard 15(Revised) - Employees Benefits, issued by the Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits.

(ii) Liability towards long term defined employee benefits is determined based on actuarial valuation by independent actuaries at the year-end by using Projected Unit Credit method as per policies mentioned herein below:

a. Gratuity:

The Bank pays gratuity in case of retirement or death or resignation or termination etc. of its employees, having regard to the provisions of Payment of gratuity Act, 1972 / Service Awards / Service Regulations, as the case may be. A fund created out of Bank’s contribution is maintained by an in-house Trust for payment of gratuity. The Bank makes contribution to this fund on the basis of actuarial valuation of its liability in respect of Gratuity, which is conducted by approved actuary every quarter.

b. Pension (New):

The Bank pays pension under Allahabad Bank (Employees) Pension Regulations, 1995 to employees, who exercised option under the Regulations and also to Employees joining the Bank’ Service on or after 29.09.1995. The plan provides for a pension / family pension on monthly basis in respect of these employees on their retirement / death, as the case may be, based on the salary and qualifying service of the respective employees. Employees covered under ABEPR – 1995 are not eligible for Bank’s contribution to Provident Fund. A fund created out of Bank’s contribution is maintained by an in-house Trust for payment of Pension. The bank makes contributions to this Fund on the basis of actuarial valuation of its liability in respect New Pension, which is conducted by approved Actuary every quarter.

c. Pension (Old):

The Bank also pays pension under its own Old Pension Scheme to members of Award Staff who were recruited before 29.09.1995 and those Officers who were recruited or promoted on or before 01.07.1979 and not opted for pension under ABEPR-1995. It is a non-funded scheme and the Bank maintains a provision on account of its pension liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary every quarter. Payment is made through Profit and Loss Account of the Bank. The Pension is paid against specific request from retired eligible employees, who are required to refund the amount of gratuity to avail of Pension (Old).

d. Leave Fare Concession (LFC):

This facility is granted to the employees and extends to reimbursement of travelling expenses incurred for the family members of the employee concerned, as defined under the Scheme, in terms of service rules as amended from time to time as per Industry wide Settlements / Awards. It is a non-funded scheme and the Bank maintains a provision on account of its liability in respect of Leave Fare Concession under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary every quarter. Payment in respect of LFC facility is made through the Profit and Loss Account.

e. Leave Encashment:

The Bank permits encashment of Privilege Leave balance to its employees availing LFC facility, up to the maximum limit of 30 days’ leave in a block of four years of service. Encashment of privilege leave standing to the credit of an employee is also permitted in case of retirement or death subject to a maximum of 240 days. In case of resignation from the service by an employee, such encashment is restricted to 50% of the balance of privilege leave subject to a maximum of 120 days. It is a non-funded scheme and the Bank maintains a provision on account of its leave encashment liability under the Scheme on the basis of actuarial valuation, which is conducted by approved Actuary every quarter. Payment of such leave encashment is made through the Profit and Loss Account.

f. Sick Leave:

The Bank maintains a provision for its liability on account of any contingent arising out of employees going on sick leave on medical ground, which is permissible in terms of prevailing service conditions / rules. It is a non-funded scheme and the Bank maintains the provision on the basis of actuarial valuation, which is conducted by approved Actuary every quarter.

(iii) In respect of Provident Fund, the contribution for the period is recognized as expense and charged to Profit & Loss account.

(iv) Short-term employee benefits are recognized as an expense at an undiscounted amount in the Profit and Loss Account of the year in which the related services are rendered.

8. Recognition of Income and Expenditure:

Income and Expenditure are accounted for on accrual basis other than those stated below:

(i) Interest and Other Income on advances classified as non- performing assets are recognized to the extent realized.

(ii) Income from interest on refund of Income Tax and Interest Tax are accounted for in the year the order is passed by the concerned assessing officer.

(iii) Expenditure on Follow on Public Offer is considered as Deferred Revenue Expenditure and is amortized over a period of five years.

9. Lease

Rentals received by the Bank are recognized in the profit and loss account on accrual basis.

Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account.

10. Earnings Per Share

Basic and Diluted Earnings per Equity Share are reported in accordance with the Accounting Standard 20 “Earnings per share” issued by the Institute of Chartered Accountants of India. Basic earnings per equity share are computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share are computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period.

11. Taxation

(i) Provision is made for both current tax (including Minimum Alternative Tax - MAT) and deferred tax. Current tax is provided on the taxable income using applicable tax rate and tax laws. Deferred Tax Assets and Liabilities arising on account of timing differences and which are capable of reversal in subsequent periods are recognised using the tax rates and the tax laws that have been enacted or substantively enacted till the date of the Balance Sheet. Deferred Tax Assets are not recognised unless there is “virtual certainty” that sufficient future taxable income will be available against which such deferred tax assets will be realised.

(ii) Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period specified under the Income Tax Act 1961.