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Bank of India Notes to Accounts
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Market Cap. (Rs.) 62394.31 Cr. P/BV 1.16 Book Value (Rs.) 118.45
52 Week High/Low (Rs.) 156/69 FV/ML 10/1 P/E(X) 16.26
Bookclosure 20/06/2023 EPS (Rs.) 8.43 Div Yield (%) 1.46
Year End :2023-03 

All figures are in ? Crore unless specifically stated, figures in brackets relate to previous year.

NOTES FORMING PART OF ACCOUNTS

The following information is disclosed in terms of guidelines issued by RBI:

1. Capital (As per BASEL-III):

The said computation of Capital to Risk weighted asset Ratio & Leverage ratio is arrived at after considering the effect of Net Present Value of non-interest bearing recapitalization bond infused as capital by the Government of India during the FY ended 31.03.2021.

Pursuant to RBI Circular No. DBR.No.BP.BC.83/21.06.201/2015-16 dated March 1, 2016, the Bank has considered revaluation reserve, foreign currency translation reserve and deferred tax assets in calculation of Capital Adequacy Ratios as on March 31, 2023.

*Includes ? 3,000 received from Government of India on March 31, 2021 towards preferential allotment of equity shares for which the Bank has issued and allotted 42,11,70,854 equity shares of ? 10 each fully paid up at an issue price of ? 71.23 per share on June 11, 2021. In terms of RBI communication reference no. DOR.CAP.S82/21.01/002/ 2021-22 dated April 30, 2021, the share application money of ? 3,000 has been considered for computation of CET 1 capital as on March 31, 2021.

* The Bank has raised Equity Share Capital of ? 2550.01 through Qualified Institutional Placement on August 31, 2021. The Bank has issued and allotted 40,54,71,866 equity shares of face value ? 10 each at a premium of ? 52.89 per share to the investors

Bank has redeemed Tier II Bonds Series XIII & Series XIV amounting to ? 1,500 & ? 1,000 by exercising call option on July 7, 2021 and March 25, 2022 respectively.

(b) Draw down from Reserves:

During the year ended March 31, 2023, there has been no drawdown from reserves to the Profit and Loss Account.

2. Asset Liability Management

(a) Maturity pattern of certain items of assets and liabilities as on 31st March, 2023

Qualitative disclosures with regard to LCR

W.e.f. 1st January 2015, the Bank has implemented guidelines on Liquidity Coverage Ratio (LCR) as directed by Reserve Bank of India.

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (HQLA) that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario. At a minimum, the stock of liquid assets should enable the bank to survive until next 30 calendar days under a severe liquidity stress scenario.

High Quality Liquid Assets (HQLA)

LCR =

Total net cash outflows over the next 30 calendar days

Here,

- HQLA comprises of level 1 and level 2 assets, in other words these are cash or near to cash items which can be easily used / discounted in the market in case of need.

- Net cash outflows are excess of total inflows over total outflows under stressed situation as defined by Basel / RBI. While arriving at the net cash outflow, the inflows are taken with pre-defined hair-cuts and the outflows are taken at pre-defined run-off factors.

- In case stressed inflows are more than the stressed outflows, 25% of total outflows shall be taken as total net cash outflows to arrive at the LCR.

- With effect from 01.01.2015, Banks are required to maintain minimum 60% LCR on an ongoing basis. The same shall reach 100% as on 01.01.2019 with incremental increase of 10% each year.

Main Drivers of LCR: The main drivers of the LCR are adequacy of High Quality Liquid Assets (HQLA) and lower net cash outflow on account of higher funding sources from retail customers. Sufficient stock of HQLA helped the Bank to maintain adequate LCR.

Composition of HQLA: The composition of High Quality Liquid Assets (HQLA) mainly consists of cash balances, excess SLR, excess CRR and FALLCR (Facility to Avail Liquidity for Liquidity Coverage Ratio).

Concentration of funding sources: Majority of Bank's funding sources are from retail customers (about 60%) therefore the stressed outflows are comparatively lower. However, in absence of any non-callable option for term deposits, the Bank has considered almost all deposits under outflow section as per RBI guidelines. Bank also does not have funding concentration from any significant counterparty. A significant counterparty is defined as a single counterparty or group of connected or affiliated counter parties accounting in aggregate for more than 1% of the bank's total liabilities.

Derivative Exposures and potential collateral calls: Bank has very little exposure in derivative business which is not very significant.

Currency mismatch in the LCR: In terms of RBI guidelines, a significant currency is one where aggregate liabilities denominated in that currency amount to 5 per cent or more of the bank's total liabilities.

Description of the degree of centralization of liquidity management and interaction between the group's units:

The liquidity management of the Bank at enterprise level is a Board level function and a separate sub-committee of the Board (R.Com.) keeps close watch on that. The periodical monitoring of the liquidity management is being monitored by the ALCO on regular intervals. The entire liquidity management process of the Bank is being governed by ALM Policy of the Bank.

The liquidity management for domestic operations is the central function, being managed at Head Office level. The overseas liquidity management is being handled at each centre, jurisdiction wise to keep close monitoring and control and also to comply with the local regulatory requirements as well. International Division of the Bank keeps watch on the overseas liquidity position and the overall liquidity monitoring is done at Head Office level centrally.

The objective of the Net Stable Funding Ratio (NSFR) is to promote the resilience of bank's liquidity risk profiles and to incentivize a more resilient banking sector over a longer time horizon. The NSFR will require banks to maintain a stable funding profile in the form of Capital & liabilities in relation to the composition of their assets and off-balance sheet activities.

NSFR is defined as the amount of available stable funding relative to the amount of required stable funding.

Available Amount Of Stable Funding (ASF)

NSFR = > 100%

Required Amount Of Stable Funding (RSF)

RBI issued the regulations on the implementation of the Net Stable Funding Ratio in May 2018 with minimum requirement of equal to at least 100%. The implementation is effective from

1st October, 2021. NSFR is applicable to Bank's domestic operations as well as overseas operations and computed at standalone and consolidated level.

Available Stable Funding (ASF) is defined as the portion of capital and liabilities expected to be reliable which is determined by various factor weights according to the nature and maturity of liabilities with liabilities having maturity of 1 year or more receiving 100 weight.

Required Stable Funding (RSF) is defined as the portion of on balance sheet and off-balance sheet exposures which requires to be funded on an ongoing basis. The amount of such stable funding required is a function of the liquidity characteristics and residual maturities of the various assets held.

Brief about NSFR of the Bank

The main drivers of the Available Stable Funding (ASF) are the capital base, retail deposit base, and funding from non-financial companies and long-term funding from institutional clients. The capital base formed around 11%, retail deposits (including deposits from small sized business customers) formed 64% and wholesale funding formed 5% of the total Available Stable Funding, after applying the relevant weights.

The Required Stable Funding primarily comprised lending to corporates, retail clients and financial institutions which constituted 61% of the total RSF after applying the relevant weights. The stock of High-Quality Liquid Assets which majorly includes cash and reserve balances with the RBI, government debt issuances attracted no or low amount of stable funding due to their high quality and liquid characteristic. Accordingly, the HQLA constituted only 2% of the Required Stable Funding after applying the relevant weights. Other assets and Contingent funding obligations, such as committed credit facilities, guarantees and letters of credit constituted 36% of the Required Stable Funding.

Bank has maintained comfortable stable funding buffers with Available Stable Funding at consolidated level of ' 608,355.10 against ' 470,530.29 of Required Stable Funding, resulting in a consolidated NSFR of 129.29% as on 31st March, 2023.

(i) Government Securities (Face Value) amounting to ? 32,964.87 (previous year ? 36,705.27) are kept as margin with RBI, CCIL, Clearing House and Exchange towards margin/security settlement.

(ii) Bank has invested ? 675.63 (share application money pending allotment) in one of its subsidiary namely, PT Bank of India Indonesia TBK. Further, the Bank also acquired additional stake of 10.04% (for ? 529.97) in the said subsidiary which resulted in goodwill on consolidation of ? 304.78, and the same has been adjusted and written off during the year.

(iii) Bank has infused additional capital of ? 57.92 in its joint venture namely, Star Union Dai-ichi Life Insurance Company Limited and ? 4.63 in one of its subsidiary namely, Bank of India Investment Managers Private Limited during the year.

(iv) During the year, Bank has been allotted shares of ? 270.24, by one of its associate Regional Rural Bank namely, Vidharbha Konkan Gramin Bank.

(v) Bank has infused additional proportionate capital in FY 2022-23 in the following associate Regional Rural Banks:

a. ? 110.09 in Vidharbha Konkan Gramin Bank (pending allotment)

b. ?152.04 in Aryavart Bank (pending allotment)

c. ?139.08 in Madhya Pradesh Gramin Bank (pending allotment)

(c) Sale and transfers to/from HTM category during the financial year 2022-23:

The total value of sale and transfers of securities from HTM category during April 1, 2022 to March 31, 2023 has not exceeded 5% of the book value of investments held in HTM category as on March 31, 2022. The 5 per cent threshold referred to above will exclude:

(a) The one-time transfer of securities to/from HTM category with the approval of Board of Director permitted to be undertaken by banks at the beginning of the accounting year.

(b) Sale to the Reserve Bank of India under preannounced OMO auctions.

(c) Repurchase of Government Securities by

Government of India from banks.

(d) Sale of securities or transfer to AFS/HFT consequent to the reduction of ceiling on SLR securities under HTM, in addition to the shifting permitted at the beginning of the accounting year.

(e) Divergence in asset classification and provisioning:

As per RBI Master Direction No. RBI/DOR/2021-22/83 DOR.ACC.REC.No.45/21.04.018/2021-22 dated August 30, 2021 (updated as on 13.12.2022) on Financial statements - Presentation and Disclosures, divergence in the asset classification and provisioning, Banks should disclose divergences, if either or both of the following conditions are satisfied:

(a) the additional provisioning for non-performing assets (NPAs) assessed by RBI exceeds 10% of the reported profit before provisions and contingencies for the reference period, and;

(b) the additional Gross NPAs identified by the RBI exceeds 10% of reported incremental Gross NPAs for the reference period.

Divergences are within threshold limits in the Bank as specified above. Hence, no disclosure is required with respect to Divergence in Asset Classification and Provisioning.

(f) Disclosure of transfer of loan exposures:

Disclosure of Transfer of Loan Accounts (SMAs & NPAs) in terms of RBI Circular No. DOR.STR. REC.51/21.04.048/2021-22 dated September 24, 2021:

a. The Bank has not transferred any loans not in default or Special Mention Accounts (SMA) during the year ended March 31,2023.

c. During the year ended March 31, 2023 the Bank has not acquired any stressed (Non-Performing) Assets.

In terms of RBI Circular No. DOR. BP.BC/3/21.04.048/2020-21 dated August 6, 2020

(Resolution Framework 1.0) and DOR. STR. REC.11/21.04.048/2021-22 dated May 5, 2021 (Resolution Framework 2.0), the details of resolution plan as on March 31, 2023:

v. Factoring exposures:

Bank has not taken any Export Factoring on non-recourse basis exposure during the financial year 2022-23.

The bank has a policy with regard to capital and provisioning requirements for exposure to entities with unhedged foreign currency exposure (UFCE) which is based on RBI Circulars.

As on 31.03.2023, based on available data and declaration from the borrowers, wherever received in accordance with the policy, the additional RWA on this exposure is ? 134.46 (Previous Year ? 414.81). As against this, additional minimum capital requirement is ? 15.46 (Previous Year ? 47.70).

viii. Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the Bank:

The Bank had taken single borrower exposure and Group Borrower exposure within the prudential limit prescribed by RBI.

There was no default and penalty imposed by Reserve Bank of India in Repo/Reverse Repo transactions and in RRC Account with RBI during the Financial year 2022-23.

(c) Disclosures on risk exposure in derivatives

i. Qualitative Disclosure

The Bank enters into derivative contracts such as interest rate derivatives, currency swaps and currency options to hedge on balance sheet assets and liabilities or to meet client requirements as well as for trading purpose as per policy approved by the Board. These products are used for hedging risk, reducing cost and increasing the yield. In such transactions, the types of risks to which the bank is exposed to, are credit risk, market risk, operational risk etc.

Risk management is an integral part of bank's business management. Bank has risk management policies designed to identify and analyse risks, to set appropriate risk limits and to monitor these risks and limits on an on-going basis by means of reliable and up to date management information systems. The risk management policies and major control limits are approved by the Board of Directors and they are monitored and reviewed regularly. The organization of the Bank is conducive to managing risks. There is sufficient awareness of the risks and the size of exposure of the trading activities in derivative operations.

The Bank has a Risk Management Committee of Directors presided over by the Chairman.

The hedge/non-hedge (market making) transactions are recorded separately. Income/expenditure on hedging derivatives is accounted on accrual basis.

Forex forward contracts are marked to market and the resultant gains and losses are recognized in the profit and loss account.

Interest rate derivatives and currency derivatives other than exchange traded derivatives for trading purpose are marked to market and the resulting losses, if any, are recognised in the Profit & Loss account. Net Profit, if any, is ignored.

Exchange traded derivatives entered into for trading purposes are valued at prevailing market rates based on rates given by the Exchange and the resultant gains and losses are recognized in the Profit & Loss account.

Gains/losses on termination of the trading swaps are recorded on the termination date as income/expenditure. Any gain/loss on termination of hedging swaps are deferred and recognised over the shorter of the remaining contractual life of the swap or the remaining life of the designated assets/liabilities.

Option fees/premium is amortised over the tenor of the option contract.

Bank has a proper system of submitting periodical reports to Senior and Top Management and Board as well as regulatory authorities as required by RBI and/or as per operational requirements. Bank has clearly spelt derivative guidelines on various aspects approved by the Board of Director. The derivative transactions are subject to concurrent, internal, statutory and regulatory audits.

The counter parties to the transactions are banks, primary dealers and corporate entities. The deals are done under approved exposure limits. The Bank has adopted the Current Exposure method prescribed by Reserve Bank of India for measuring Credit Exposures arising on account of interest rate and foreign exchange derivative transactions. Current exposure method is the sum of current credit exposure and potential future exposure of these contracts.

The current credit exposure is the sum of positive mark to market value of these contracts i.e. when the Bank has to receive money from the counter party.

Potential future credit exposure is determined by multiplying the notional principal amount of these contracts irrespective of whether the contract has zero, positive or negative mark to market value by the relevant addon factors as under according to the nature and residual maturity of the instrument.

While computing the credit exposure, “sold options” are excluded wherever the entire premium/fee or any other form of income is received / realized.

As per the extant RBI guidelines, credit exposures computed as per the current Mark to Market value of the contracts, also attracts provisioning requirement as applicable to the loan assets in the “Standard” category, of the concerned counterparty. At present, the provision is to be maintained at 0.40% of the risk weighted assets. The Bank makes the requisite provision as aforesaid in the books.

(d) Credit Default Swaps

The bank has not dealt with any Credit Default Swap.

8. Disclosures relating to Securitisation

The Bank has not floated any Special purpose Vehicle (SPV) during the Financial Year 2022-23.

The Bank has purchased Priority Sector Lending Certificate (PSLCs) for Agriculture portfolio amounting to ? 3,000 during the year ended March 31, 2023 costing ? 23.73 to bridge the gap in Agriculture portfolio. The Bank also sold PSLCs for Small Farmer & Marginal Farmer portfolio amounting to ? 4,800 and earned commission of ? 64.76.

(f) Implementation of IFRS converged Indian Accounting Standards (Ind AS):

RBI vide its circular DBR.BP.BC.No.29/21.07.001/2018-19 dated March 22, 2019, deferred implementation of Ind AS till further notice as the legislative amendments in Banking Regulation Act, 1949 as recommended by RBI are under consideration of the Government of India. However, RBI requires all banks to submit Proforma Ind AS Financial Statements (PFS) every half year. Accordingly, the Bank has been preparing and submitting to RBI Proforma Ind AS Financial Statements (PFS) half-yearly with effect from September-2021, after seeking approval of Steering Committee formed for monitoring of implementation of Ind-AS in the Bank. The PFS are also presented to Audit Committee of Board and Board for information and reporting.

(i) Disclosure on amortisation of expenditure on account of enhancement in family pension of employees of banks

Reserve Bank of India vide its Circular No. RBI/2021-22/105 DOR.ACC.REC.57/21.04.018/2021-22 dated

October 4, 2021, permitted Banks to amortise the additional liability on account of revision in family pension over a period not exceeding five years beginning with the financial year ending March 31, 2022, subject to a minimum of 1/5th of the total amount being expensed every year. The Bank recognised the additional liability on account of revision in family pension amounting to ? 612.09 and has opted to amortise the said liability over a period not exceeding five years, beginning financial year ending March 31, 2022.

Accordingly, Bank has recognised ? 306.04 (? 122.42) as an expense in the Profit and Loss account, for the year ended March 31, 2023 and the balance unamortised liability of ? 183.63 (?489.67) has been carried forward. If the unamortised liability had been fully recognised in the Profit & Loss account by the Bank, the Net Profit (after tax) for the quarter and year ended March 31, 2023 would have been lower by ? 119.46 (? 318.56).

(k) Disclosure of Letters of Comfort (LoCs) issued by bank for Subsidiaries (As compiled by the management):

During the year 2022-23, the bank has not issued any Letter of Comfort on behalf of Subsidiaries.

During the year 2010-11, the bank had issued parental guarantee in favour of Royal Bank of New Zealand, for its wholly owned subsidiary, Bank of India (New Zealand) Ltd. to meet its financial obligations, if they fall due.

As on 31.03.2023, no financial obligations have arisen on the above commitments.

(l) Income Tax:

i. Claims against the Bank not acknowledged as debt under contingent liabilities (Schedule 12) include disputed income tax/interest tax liabilities of ? 355.86 (previous year ? 529.03) for which no provision is considered necessary based on various judicial decisions in respect of past assessments on such disputes. Payments/adjustments against the said disputed dues are included under Other Assets (Schedule 11).

ii. Provision for taxes has been arrived at after due consideration of the provisions of the applicable tax laws and relevant judicial decisions on certain disputed issues.

(m) The Bank has Details of Number of Investors complaints for the year ended March 31, 2023: Pending at Beginning: Nil; Received: 140; Disposed off: 140 and Pending at the end: Nil.

(n) Bank was holding 100% provision in a particular account,

recovery of which is under dispute with another PSU Bank. The account has been reported as fraud to RBI. RBI vide its communication ref. no. DoS. Co. SSM (BOI)/6557/13.37.007/2019-20 dated April 13, 2020

permitted the Bank to maintain provision of 50% of the disputed amount on an ongoing basis subject to certain conditions. Accordingly, the Bank holds provision of ?144.03 (being 50% of the outstanding amount) for the said disputed amount.

(o) In accordance with the RBI guidelines, during the year ended March 31, 2023, Bank has shifted Central Government securities with a book value of ? 2,887.84 and State Government securities with a book value of ? 5,054.58 from HTM to AFS category. Further, Bank has shifted from AFS to HTM category, Central Government securities with a book value of ? 656.41 after charging shifting loss of ? 21.62. Venture Capital Fund for an amount of ? 7.65 has been shifted from HTM to AFS category.

(p) In respect of RBI referred NCLT accounts (List 1 & 2) as on March 31, 2023, Bank holds 100% provision of the outstanding value of ? 3,403.66.

(q) Bank has made provision of ? 268 for the year ended March 31, 2023 towards arrears of wages, on ad-hoc basis, due for revision with effect from November 1, 2022.

(r) Impact of Covid-19:

The COVID-19 virus, a global pandemic has affected the world economy over the last three years. The extent to which any new wave of COVID-19 will impact the Bank's operations and financial results will depend on ongoing as well as future developments, including, among other things, any new information concerning the severity of the COVID-19 pandemic, and any action to contain its spread or mitigate its impact whether government- mandated or elected by us.

(s) Other Income includes commission and brokerage income, profit/loss on sale of assets, profit/loss on revaluation of investments (net) (including depreciation on performing investments), earnings from foreign exchange and derivative transactions, recoveries from accounts previously written off, dividend income, etc.

(t) The Board of Directors has recommended a dividend of ?

2.00 per equity share (20%) for the year ended March 31, 2023 subject to requisite approvals.

(u) Balancing of Subsidiary Ledger Accounts, confirmation/ reconciliation of balances with foreign branches, Interoffice accounts, NOSTRO Accounts, Suspense, Draft Payable, Clearing Difference, other office accounts, etc.

is in progress on an on-going basis. In the opinion of the management, the overall unadjusted impact on the financial statements, if any, of pending final clearance/ adjustment of the above, is not likely to be significant.

(v) Advances covered by Bank / Government Guarantees

under Schedule 9 - Advances includes advances

guaranteed by CGTMSE amounting to ? 844.17.

(w) Other Income / Expenditure exceeding 1% of total income

6.1 Accounting Standard - 5 Net Profit / loss for the period, Prior Period Items and changes in accounting policies:

(i) Prior Period Items:

During the year, there were no material prior period income / expenditure items.

(ii) Change in accounting policy:

There is no change in the Significant Accounting Policies followed during the year ended March 31, 2023 as compared to those followed in the previous financial year ended March 31,2022.

6.2 Accounting Standard 9 - Revenue recognition Certain items of income are recognised on realisation basis as per Accounting Policy para 3 of Schedule 17: Significant Accounting Policies. However, the said income is not considered to be material.

The Bank has recognised Business Segments as Primary reporting segment and Geographical Segments as Secondary segment in line with RBI guidelines in compliance with Accounting Standard 17.

Primary Segment: Business Segments

a) Treasury: ‘Treasury' segment includes the entire investment portfolio i.e. dealing in Government and other Securities, Money Market Operations and Forex Operations including Derivative contracts.

b) Wholesale Banking: Wholesale Banking includes all lending activities which are not included under Retail Banking.

c) Retail Banking: Retail Banking segment comprises of Digital Banking and Other Retail Banking.

Digital Banking includes digital banking products acquired by DBUs.

Other Retail Banking includes all housing loan accounts and borrower accounts having exposure up to ? 7.50 crore.

Pricing of Inter-Segmental transfers

Retail Banking Segment is a Primary resource mobilising unit and Wholesale Segment and Treasury Segment compensates the Retail banking segment for funds lent by it to them taking into consideration the average cost of deposits and borrowings incurred by it.

Allocation of Costs:

a) Expenses directly attributed to particular segment are allocated to the relative segment.

b) Expenses not directly attributable to specific segment are allocated in proportion to number of employees/business managed.

Secondary Segment: Geographical Segments

a) Domestic Operations

b) International Operations

6.5 Accounting Standard 18 - Related Party Transactions (As compiled by the management and relied upon by the Auditors):

6.6 Accounting Standard 19 - Leases: - Operating leases are cancellable at the option of the Bank. The amount of lease expenses recognized in the Profit & Loss Account for such operating lease is ? 676.84 (Previous Year: ? 618.36).

Government of India has pronounced section 115BAA of Income Tax Act 1961 through Taxation Laws (Amendment) Act, 2019. The Bank has evaluated the options available under section 115BAA of the Act and opted to continue to recognise the taxes on income for the year ended 31st March, 2023 as per the earlier provisions of Income-tax Act.

6.9 Accounting Standard 24 - Discontinuing Operations: NilB. Contingent Liabilities:

Such liabilities are dependent upon, the outcome of court order/arbitration/out of court settlement, disposal of appeals and the amount being called up, terms of contractual obligations, devolvement and raising of demand by concerned parties, as the case may be. No reimbursement is expected in such cases.

7. Figures of the previous period have been regrouped / reclassified, wherever considered necessary to conform to the current period's classification.


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