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Home > Equity Market > Allahabad Bank share price- Notes To Account >

Allahabad Bank share price- Notes To Account

Industry: Finance - Banks - Public Sector
BSE Code :532480
Business Group:Public Sector
LTP (Rs.)
ISIN No :INE428A01015
Face Value/M Lot :10.00/1
P/E Ratio : 4.38
Market Cap : 5192.85 Cr
You can view the entire text of Notes to accounts of the company for the latest year.
Year End : 03 / 2013
1. Adequate provision has been made by the Bank in respect of performing and non-performing advances in terms of Reserve Bank of India (RBI) guidelines.

2.1 (i) Reconciliation and clearance of outstanding entries in inter branch adjustments are in progress and especially initial matching of debit and credit entries in various heads have been done upto 31.03.2013. Pending final clearance, the overall impact, if any, on the accounts, in the opinion of the management will not be significant.

(ii) At some branches, preparation of details / balancing / reconciliation of accounts relating to Balances with Banks and NOSTRO accounts are in progress. Since substantial progress has been made in the above areas, the management is of the view that the impact of reconciliation, if any, on the accounts of the Bank will not be material.

2.2 (i) Certain premises were revalued on the basis of the reports of the approved valuers during the year ended on 31.03.1997, 31.03.2005 and 31.03.2007 and upward revision amounting to Rs.125.99 Crore (commercial and residential), Rs.370.08 Crore (commercial and residential) and Rs.298.32 Crore (commercial) respectively had been credited to Revaluation Reserve. Depreciation on revalued premises is worked out each year on its written down value. Additional depreciation of Rs.4.01 Crore (previous year Rs.4.24 Crore) on account of revaluation has been transferred from Revaluation Reserve Account and shown in Miscellaneous Income under the head "Other Income" included in Schedule No. 14 item (vii)

(ii) Depreciation has been charged on composite cost of land and building, where separate cost of land is not available.

(iii) Premium on leasehold land has been amortized over the period of lease, based on cost or written down value, where original cost is not available.

(iv) Registration formalities are yet to be completed for 2 residential properties purchased during the year 1990 & 1998 at Kolkata & Bhubaneshwar consisting of 29 & 10 flats respectively with total original cost of Rs.0.86Crore.

2.3. (i) In respect of Investments of face value of Rs.1.25 Crore (Previous year Rs.61.25 Crore), the Bank is yet to re- ceive scrips/certificates.

(ii) Total Investments made in shares, convertible de- bentures and units of equity linked mutual fund/ven- ture capital funds and also advances against shares aggregate to Rs. 719.60 Crore (Previous year Rs.1045.18 Crore).

(iii) As per RBI guidelines, an amount of Rs.31.49 Crore (Previous Year Rs.11.65 Crore) being an amount equivalent to profit on sale of 'Held to Maturity' cat- egory securities, net of taxes & net of transfer to statutory reserve; is transferred to 'Capital Reserve Account'.

(iv) In respect of 'Held to Maturity' category as stated in significant Accounting Policy No. 4 (iv) (a), the ex- cess of acquisition cost over the face value of the security amortized during the year amounts to Rs.54.68 Crore (Previous year Rs.61.26 Crore) has been net- ted-off from Income on Investment shown under the head "Interest Earned" of Profit and Loss Account in terms of RBI guidelines.

2.4. The Bank has not made any financing for margin trading during the year and also not securitised any assets.

3.1.1. Sale & Transfer to/from HTM category: All sales and transfers to/from HTM category during the year are within the limit of 5% of book value at the beginning of the year.

3.1.2. The Bank has not made any provision towards diminution in the value of its investment in one of the joint venture companies (viz. M/s Universal Sompo General Insurance Co. Ltd.) classified as HTM, as the Bank is hopeful that the said investee company will generate profit in the near future and the diminution is of temporary nature.

3.1.3. Exchange Traded Interest Rate Derivatives: NIL (Previous year: NIL)

3.1.4. Disclosures on risk exposure in derivatives Qualitative Disclosure:

Operation in the Treasury Branch of the Bank are segregated in three functional areas i.e. Front Office, Mid Office and Back Office, which are provided with trained officers with defined responsibilities and back up roles.

The Treasury Policy & Derivative policy of the Bank lays down the type of financial derivative instruments, scope of usages, approval processes as also the limits like the open position limits, deal size limits and stop loss limits besides delegated power for trading in the approved instruments. The policy also allows purchase / sale of call or put options to hedge cross currency proprietary trading positions and to offer derivative products to its customers subject to back to back covering by the Bank.

The Front Office takes positions and executes the deals while the Mid Office monitors the transactions in the trading book and deviations of excesses, if any, are brought to the notice of higher authorities. The Mid office also measures the financial risk for transactions on a daily basis through measurement tools such as MTM, VAR, Convexity and modified durations. The figures are reported to Risk Management division, which appraises the risk profile to the Assets and Liability Management committee. The Back Office settles all the deals with counter parties.

Interest Rate Swaps which hedge interest bearing assets or liabilities are accounted for on accrual basis except the Swaps designated with an asset 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 recognised over the shorter of the remaining contractual life of the Swap or the remaining life of the assets/liabilities. Trading Swap transactions are marked to market with changes recorded in the financial statements. The counterparties to the transactions are Banks and corporate entities and deals undertaken are within the approved exposure limits only. The guidelines issued by RBI, FEDAI & FIMMDA from time to time for recognition of Income, Premium and Discount are followed.

4. Disclosure Requirements as per Accounting Standards where R.B.I has issued guidelines in respect of disclosure items for 'Notes to Accounts':

4.1. Income items recognised on cash basis were either not material or did not require disclosure under AS 9 on Revenue Recognition.

4.2. The Bank has adopted Accounting Standard 15 (Re- vised)- Employee Benefits, issued by Institute of Char- tered Accountants of India, for recognition of its liabili- ties in respect of employee benefits, viz, Pension, Gra- tuity, Leave Encashment, LFC and Sick Leave w.e.f. 1st April, 2007.

4.2.1. Bank's liabilities in respect of the funded/ non-funded employee benefits, viz., Pension(ABEPR), Gratuity, Leave Encashment and LFC are recognised on the basis of actuarial valuation carried out by approved Actuary as per

(a) Principles laid down in AS 15 (Revised) issued by the Institute of Chartered Accountants of India, and

(b) Guidelines GN 26 issued by Institutes of Actuaries of India.

- The Bank had provided Rs.46.37 Crore towards Sick Leave upto previous year. The Sick Leave being non-encashable, the Bank has written back the entire provision of Rs.46.37 crore in the current year as it is no longer required as per expert advice obtained.

4.3. Segment Reporting - Accounting Standard (AS) 17 "Segment Reporting"

Segment information is given in the Consolidated Finan- cial Statements in terms of para 4 of the Standard.

4.4. Related Party Disclosures - Accounting Standard (AS) 18 List of Related Parties and Transactions: The names of the related parties, their relationship with the bank and transactions effected- Expenses towards gratuity and leave encashment are determined actuarially on an overall basis annually and accordingly have not been considered in the above information.

b) Subsidiary:

i) All Bank Finance Limited (wholly owned): The bank holds entire share capital of Rs.15.00 Cr. (Previous year Rs.15.00 Cr) in the company.

c) Joint Venture:

i) Universal Sompo General Insurance Company Limited.

ii) ASREC (India) Ltd.

The Bank is holding 30% share in Universal Sompo General Insurance Company Limited amounting to Rs.105.00 Cr (previous year Rs.105.00 Cr) and 27.04% share in ASREC (india) Ltd. amounting to Rs.26.50 (previous year Rs. 26.50 Cr )

d) Associates:

Allahabad U.P. Gramin Bank:

The Bank is holding 35% share in Allahabad U.P. Gramin Bank amounting to Rs.21.67 Cr (previous year Rs.21.67 Cr).

During the F.Y. 2012-13, Sharda Gramin Bank, another Regional Rural Bank sponsored by the Bank was amalgamated with Madhyanchal Gramin Bank promoted by State Bank of India in terms of Govt. of India, Ministry of Finance (Department of Financial Services) notification dated 01.11.2012. As such, the Sharda Gramin Bank ceases to be an associate of Allahabad Bank.

Transactions with associated company namely Universal Sompo General Insurance Company Limited are as follows:

4.5. Lease Disclosure:

A) The Bank has various operating leases for office / residential facilities. Disclosures in this regard are as under:

i) Total of future minimum lease payments under non- cancellable operating leases for each of the following periods:

ii) The total of future minimum sublease payments expected to be received under non- cancellable subleases at the balance sheet date: NIL.

iii) Lease payments recognized in the statement of profit and loss for the period: Rs.90.49 Crore (previous year Rs.76.02Crore)

iv) Sub-lease payments received (or receivable) recognised in the statement of profit and loss for the period: NIL.

B) Financial Lease:

Bank is not having any assets under Financial Lease.

4.6. Accounting for Taxes on Income: Accounting Stan- dard (AS) 22

During the year, an amount of Rs.32.92 Crore has been cred- ited (Previous year Rs.18.35 Crore credited) to the Profit & Loss Account by way of adjustment of deferred tax. The major com- ponents of Deferred Tax Assets/ Liabilities as on Balance Sheet date are as under:

The Bank does not recognise deferred tax on HTM category of investments as in Bank's opinion; there is no timing difference in this regard. Pursuant to the opinion of the Expert Advisory Committee of the Institute of Chartered Accountants of India on recognition of deferred tax on investments, the bank has referred the issue to the Indian Banks' Association for their guidance on the matter since there is a difference in treatment on this subject in the industry.

4.7. Discontinuing Operations: Accounting Standard (AS) 24

Disclosure requirement is not applicable for the year under review.

4.8. A substantial portion of the bank's assets comprise of financial assets' to which Accounting Standard (AS) 28 'Impairment of Assets' is not applicable. In the opinion of the management, there is no impairment of other assets of the Bank as at 31.03.2013 to any material extent requiring recognition in terms of the said standard.

5. Disclosure in terms of Accounting Standard (AS) 29 on "Provisions, Contingent Liabilities and Contingent Assets":

5.1. Letters of Comfort (LoCs):

During the current financial year, the Bank has issued 368 number of LoCs amounting to Rs.1901.94 crore (previous year Rs.998.04 Crore) for providing buyers credit facility. The out- standing LoCs as on 31.03.2013 amount to Rs.1060.65 crore (previous year Rs.108.88 Crore). In Bank's assessment, no fi- nancial impact is likely to arise in this respect.

5.2. Provision Coverage Ratio

The provision coverage ratio as on 31.03.2013: 50.00% (Pre- vious Year 74.00%)

5.3. Income from Bancassurance business during the year:

Commission received on life & non-life insurance business: Rs.19.87 Crore (previous year Rs.18.87Crore)

5.4. Concentration of Deposits, Advances, Exposures & NPAs:

5.5. Off-Balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms): NIL.

5.6. Unamortised Pension and Gratuity Liabilities:

A. On re-opening of Pension option to employees under Allahabad Bank (Employees') Pension Regulations 1995 and enhancement in Gratuity limits under the Payment of Gratuity Act 1972 during the financial year 2010-2011, the Bank had incurred huge liability towards additional load amounting to Rs.708.07 Crore for Pension and Rs.39.63 Crore for Gratuity, which were amortised in terms of Reserve Bank of India circular DBOD No.BP.BC.80/21.04.018/ 2010-11 dated 9th February, 2011. As per the provisions of the said circular, 1/5th of the amortised expenses is to be absorbed each year and accordingly, Rs.448.74 Crore (i.e. Rs.424.81 Crore for Pension and Rs.23.93 Crore for Gratuity) has already been charged to the Profit and Loss Account in F.Y. 2010-11, 2011-12 & 2012-13, carrying forward Rs.298.96 Crore (i.e. Rs.283.26 Crore for Pension and Rs.15.70 Crore for Gratuity) as unamortised expenses for future years. Following the said directive of the Reserve Bank of India, during the current financial year the Bank has charged a sum of Rs.149.60 Crore (i.e. Rs.141.60 Crore for Pension and Rs.8.00 Crore for Gratuity) to the Profit and Loss Account and Rs.298.96 Crore (i.e. Rs.283.26 Crore for Pension and Rs.15.70 Crore for Gratuity) is carried forward to next financial year.

B. In implementation of the Defined Contribution Retirement Benefit Scheme for the employees joining service of the Bank on or after 01.04.2010, the Bank has adopted National Pension System for Corporate Model of NPS under the regulatory and administrative control of PFRDA and has joined NPS as Corporate under the purview of employer-employee relationship for these underlying employees, which has since been operationalised.

C. Provision on account of Wage revision: To meet the probable load on the Bank on account of wage revision of employees (10th bipartite settlement) which is due from November 2012, the Bank has made a provision of Rs.100.00 Crore during the current financial year.

6. Contingent Liabilities:

Such liabilities as mentioned at Sl. No.(I) to (VI) in schedule 12 of Balance Sheet are dependent upon the outcome of court / arbitration / out of court settlement, disposal of appeals, the amount being called up, terms of contractual obligations, devolvement and raising of demand by concerned parties respectively.

7. Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of advance) Rs.87.00 Crore (Previous Year Rs.110.46 Crore).

8. Sector wise break-up of provision held under non- performing advances is deducted on estimated basis from gross advances to arrive at the balance of net advances as stated in the Schedule-9 of the Balance Sheet.

9. Priority Sector Advances include Rs.700.00 Crore (previous year Rs.550.00) on account of Inter Bank Participation Certificates (IBPC) of Direct Agriculture Advances purchased by the Bank on risk sharing basis from Allahabad U.P. Gramin Bank. Likewise, Rs.700.00 Crore (previous year Rs.350.00 Crore) has been reduced from advances being amount of Inter Bank participation Certificates of non-priority sector advances sold by the Bank to Allahabad U.P. Gramin Bank.

10. During the year, the Bank has transferred a sum of Rs.251.00Crore (Previous Year Rs.209.00 Crore) to Special Reserve in terms of section 36 (1) (viii) of the income Tax Act, 1961.

11. The Board of Directors of the Bank has recommended dividend @60% of paid-up capital i.e. Rs.6/- per share of face value of Rs.10/- each.

12. Figures of previous year have been regrouped or reclassified wherever considered necessary.

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