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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
NSE Code :ALBK
Business Group:Public Sector
LTP (Rs.) :107.35  (0.6%) [NSE]
ISIN No :INE428A01015
Face Value/M Lot :10.00/1
P/E Ratio : 4.99
Market Cap : 5846.38 Cr
You can view the entire text of Notes to accounts of the company for the latest year.
Year End : 03 / 2014
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 31.03.2014. 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.3.87 Crore (previous year Rs.4.01 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 the following properties:

a. Two (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.

b. The Govt.of Bihar had allotted 1.01 acre of land at Budh Marg Patna on lease to the Bank w.e.f.07.09.1917. Bank is having its office complex there. Last lease expired on 07.09.2012. Payment for renewal of lease for further period of 30 years w.e.f. 07.09.2012 by payment of one time premium for Rs.70.70 lacs and annual rent @ Rs.7.07 lacs has been made to the Govt. of Bihar. The matter for execution of lease deed by the Govt.of Bihar is under process.

c. Renewal of lease of residential plots of land measuring 17520 sq.ft area at Paradeep, Odisha having 24 residential flats w.e.f. 02.04.2013 has been taken up with Paradeep Port Trust (PPT) and is under their consideration.

2.3. (i) In respect of Investments of face value of Rs.0.44 Crore (Previous year Rs.1.25 Crore), the Bank is yet to receive scrips/certificates.

(ii) Total Investments made in shares, convertible debentures and units of equity linked mutual fund/ venture capital funds and also advances against shares aggregate to Rs.916.91 Crore (Previous year Rs.719.60 Crore).

(iii) As per RBI guidelines, an amount of Rs.3.28 Crore (Previous Year Rs.31.49 Crore) being an amount equivalent to profit on sale of 'Held to Maturity' category 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 excess of acquisition cost over the face value of the security amortized during the year amounts to Rs.61.37 Crore (Previous year Rs.54.68 Crore) has been netted-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. Disclosure in terms of RBI guidelines:

3.1 Capital

As per RBI Circular DBOD.BP.BC.88/21.06.201/2012-13 dated 28 March, 2013, banks have been advised to disclose Capital Adequacy Ratio computed under Basel-III regulations from the quarter ended June-2013. Accordingly, corresponding details for the previous periods/year are not applicable and as such not furnished.

In terms of RBI circular DBOD.DP.BC.No.41/21.04.141/2013- 14 dated August 23, 2013 on 'Investment Portfolio of Banks - Classification, Valuation and Provisioning', the bank had transferred SLR securities having book value of Rs.7,961.10 crore from AFS category to HTM category and had fully recognized the category transfer loss of Rs.Rs.61.35 crore during the quarter ended September 30, 2013.

3.2.3 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.

3.3.2 Exchange Traded Interest Rate Derivatives: NIL (Previous year: NIL)

3.3.3 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 derivatives 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. Accounting Standard 5- Net Profit or Loss for the period, prior period items and changes in accounting policies: Income and Expenditure relating to prior period are as under:

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

4.3. The Bank has adopted Accounting Standard 15 (Revised)- Employee Benefits, issued by Institute of Chartered Accountants of India, for recognition of its liabilities in respect of employee benefits, viz, Pension, Gratuity, Leave Encashment, LFC and Sick Leave w.e.f. 1st April, 2007. Recognition of liability in respect of Sick Leave benefit has been discontinued with effect from 31st March'2013.

4.3.1.Bank's liabilities in respect of the funded/ non-funded employee benefits, viz., Pension(ABEPR-1995), 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.

4.4. Segment Reporting - Accounting Standard (AS) 17 "Segment Reporting" Segment information is given in the Consolidated Statement in terms of Para 4 of the AS-17.

Expenses towards gratuity and leave encashment are determined actuarially on an overall basis annually and accordingly have not been considered in the above information.

a) 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.

b) 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 Cr (previous year Rs.26.50 Cr )

c) 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).

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

4.6. 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 ex- pected to be received under non- cancellable sub- leases at the balance sheet date: NIL.

iii) Lease payments recognized in the statement of profit and loss for the period: Rs.111.45 Crore (previous year Rs.90.49 Crore)

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.

4.8. Accounting for Taxes on Income: Accounting Standard (AS) 22

During the year, an amount of Rs.47.54 Crore has been debited (Previous year Rs.32.92 Crore credited) to the Profit & Loss Account by way of adjustment of deferred tax. The major components 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.

4.9. Discontinuing Operations: Accounting Standard (AS) 24

Disclosure requirement is not applicable for the year under review.

4.10. 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 31.03.2014 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":

5.3. Draw Down from Reserves (Previous year: NIL)

a. In accordance with Reserve Bank of India Notification No. DBOD No. BP.BC.77/21.04.018/2013-14 dated 20.12.2013, the Bank has provided Deferred Tax Liability (DTL) of Rs.301.71 Crore on account of Special Reserve created (under section 36(1)(viii) of the Income Ta x Act, 1961) for the period upto 31.03.2013, directly from "Revenue Reserve".

Bank has provided Deferred Tax Liability (DTL) of Rs.88.71 Crore on account of Special Reserve created for the financial year 2013-14 through Profit and Loss Account.

b. The Reserve Bank of India vide their letter No. DBOD.No.BP.17109/21.04.132/2013-14 dated 11.04.2014, has permitted to credit Sundry Liabilities (Interest Capitalisation) account for the Funded Interest Term Loan (FITL) created upto 31st March'13 directly from Reserve. Accordingly, Sundry Liabilities (Interest Capitalisation) amounting to Rs.687.72 Crore on account of FITL upto 31.03.2013 has been created directly from Revenue Reserve.

An amount of Rs.182.84 Crore has been charged to Profit & Loss account for the FITL for the current period F.Y. 2013-14.

5.5. Letters of Comfort (LoCs)

During the current financial year, the Bank has issued 382 number of LoCs amounting to Rs.2464.59 crore (previous year Rs.1901.94 Crore) for providing Buyers credit facility. The outstanding LoCs as on 31.03.2014 amount to Rs.1394.45 crore (previous year Rs.1060.65 Crore). In Bank's assessment, no financial impact is likely to arise in this respect.

5.6. Provision Coverage Ratio

The provision coverage ratio as on 31.03.2014: 46.03% (Previous Year 50.00%)

5.7. Income from Bancassurance business during the year Commission received on life & non-life insurance business: Rs.20.08 Crore (previous year Rs.19.87Crore)

5.8. Concentration of Deposits, Advances, Exposures & NPAs

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

5.13. 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.598.34 Crore (i.e.Rs.566.41 Crore for Pension and Rs.31.93 Crore for Gratuity) has been charged to the Profit and Loss Account in F.Y. 2010-11, 2011-12, 2012- 13 & 2013-14, carrying forward an amount of Rs.149.36 Crore (i.e. Rs.141.66 Crore for Pension and Rs.7.70 Crore for Gratuity) as unamortized expenses for F.Y. 2014-15. 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.

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 been operationalised in our Bank since April,2012.

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.282.00 Crore during the current financial year (previous year Rs.100.00 Crore).As suchtotal Provision on account of wage revision as on 31st March 2014 stands at Rs.382.00 Crore. Keeping in line with the IBA's Guidance Note/ Bank's Policy on Funding Superannuation Schemes as also in compliance of RBI directive in the matter, the Bank reviewed the model of provisioning in respect of the probable load on account of 10th Bipartite Settlement, during this fiscal. With the object to achieve strict compliance of the IBA's Guidance Note in this regard, the probable funding load on Superannuation Schemes (viz. Pension, Gratuity and Leave Encashment) have been estimated on the basis of actuarial valuation conducted by Bank's approved Actuary and accordingly, aggregate provision of Rs.382.00 Crore has been relocated as (1) Arrear Salary Rs.178.00 Crore; (2) Pension Rs.145.00 Crore;(3) Gratuity Rs.41.00 Crore and (4) Leave Encashment Rs.18.00 Crore.

5.14. Disclosures relating to Securitisation

As no SPVs sponsored by the Bank, the outstanding amount of securitized assets of SPVs as on date of balance sheet is Nil (Previous year: Nil)

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.61.05 Crore (Previous Year Rs.87.00 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.900.00 Crore (previous year Rs.700.00) 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.900.00 Crore (previous year Rs.700.00 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.261.00 Crore (Previous Year Rs.251.00 Crore) to Special Reserve in terms of section 36 (1) (viii) of the income Tax Act, 1961.

11 . In accordance with RBI circular DBOD.No.BP.BC.2/ 21.06.201/2013-14 dated 1st July, 2013, banks are required to make half yearly Pillar 3 disclosures under Basel III capital requirements with effect from 30th September, 2013. The disclosures have been made available on Bank's website at the following link (https://www.allahabadbank.in/english/ home.aspx).

12. The Board of Directors of the Bank in its meeting dated 11th January, 2014 declared an interim dividend of Rs.2.50 per equity share i.e. @ 25% of the paid up capital of the Bank subject to necessary permission/approval from the Government of India. The Government of India vide its Notification No. F. No. 10/3/2010-BOA dated 15th January, 2014 notified that the provisions of Section 15(1) of the Banking Regulation Act, 1949 shall not apply to Public Sector Banks for the Financial Year 2013-14. The Dividend payment date was 30th January, 2014.

Further, the Board of Directors of the Bank have not recommended any final dividend for the financial year 2013-14.

13. The Bank has allotted 4,45,83,147( Four Crore Forty Five Lac Eighty Three Thousand One Hundred and Forty Seven) equity shares of face value of Rs.10.00 (Rupees Ten only) at a premium of Rs.79.72 (Rupees Seventy Nine and Paisa Seventy Two only) per equity share to Govt. Of India (President of India) on preferential basis on 24.12.2013 for a total consideration of Rs.399,99,99,948.84 (Rupees Three Hundred Ninety Nine Crore Ninety Nine Lac Ninety Nine Thousand Nine Hundred Forty Eight and Paisa Eighty Four only). Accordingly the EPS has been calculated on weighted average number of equity shares as specified in AS-20 issued by the Institute of Chartered Accountants of India.

14. An amount of Rs.0.74 Crore comprising of 103 credit entries of individual value of less than USD2500.00 which originated between the period from 1st April 1996 to 31st March 2002, and were held in "Blocked Account-Nostro Accounts Reconciliation" at the branch were credited to 'Profit & Loss' account in terms of RBI circular DBOD.BP.BC.No.133/ 21.04.018/2008-09 dated 11th May,2009.The amount credited to Profit & Loss account was appropriated to the Reserve and shall not be available for declaration of dividend. Had this amount not been credited to Profit & Loss Account, the amount of profit for the year would have been lower by such amount.

15. Minimum Alternate Tax (MAT) Credit has been recognised as an asset to the extent of Rs.192.43 Crore as MAT Credit Entitlement under section 115JAA of the Income Tax Act, 1961.

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

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