As a Capital planning measure, during FY 2018-19, the Bank has raised the following Capital:

a) During Q2 of the current FY, Bank had issued and allotted 2,92,02,589 new Equity Shares of Face Value of Rs.10/- each at an issue price of Rs.10.55/- per share to the eligible employees of the Bank under United Bank of India - Employee Share Purchase Scheme, 2018, thereby raising Equity Capital of Rs.30.81 crore including share premium of Rs.1.61 crores.

b) During Q3 and Q4 of the FY 2019, Bank had received an amount of Rs.4998 crore from Government of India in two tranches towards capital infusion.

a. Bank had received Rs.2159 crore on 31.12.2018 towards contribution of the Central Government in the preferential allotment of equity shares of the Bank, as Government’s investment. On 11.02.2019, Bank had allotted 1,81,73,40,067 equity shares of Rs.10/- each at a price of Rs.11.88/- per share to the President of India on behalf of Central Government including share premium of Rs.341.66 crores.

b. Bank had received Rs.2839 crore on 26.02.2019 to issue equity shares by way of preferential allotment to Government of India. On 29.03.2019, Bank had allotted 2,57,38,89,392 equity shares of Rs.10/- each at a price of Rs.11.03/- per share to the President of India acting on behalf of Central Government including share premium of Rs.265.11 crores.

RBI vide its circular DBR.No.BP.BC.102/21.04.048/2017-18 dated April 2, 2018 and DBR.No. BP.BC.113/21.04.048/2017-18 dated June 15, 2018 has permitted Banks to spread provisioning for Mark to Market (MTM) losses on investment held in AFS & HFT for the quarter ended December 31, 2017, March 31, 2018 and June 30, 2018. The loss can be spread over four quarters commencing from the quarter in which loss has been incurred. The staggered provision as on September 30, 2018 amounting to Rs.159.67 crores (Rs.90.59 crores & Rs.69.08 crores for the quarter ending December 31, 2018 & March 31, 2019 respectively) has been fully provided during the quarter ended 31st December, 2018 and there is no further staggered provision.

1. Sale and Transfers to/from Held to Maturity (HTM) category

1. Sale of Central Government Security & State Development Loan from HTM category during the FY 2018-19 was NIL.

2. Central Government Securities having face value of Rs.1299.14 crores (Book value Rs.1316.23 crores) was transferred from AFS to HTM on 06.04.2018.

3. State Development Loan Securities having Face Value of Rs.3458.65 crores (Book Value Rs.3492.92 crores) was transferred from AFS to HTM Category and State Development Loan having Face Value of Rs.4966.30 crores (Book Value Rs.4993.26 crores) was transferred from HTM to AFS category on 06.04.2018.

4. Venture Capital Securities having Face Value of Rs.0.03 crores (Book Value Rs.5.23 crores) were transferred from HTM to AFS Category.

2. Transactions involving Foreign Exchange

Monetary Assets and liabilities, excluding outstanding Forward Exchange Contracts in each currency, except currency of Bangladesh (BDT 23,00,131.26 equivalent INR 18.40 lacs) which is valued at notional value due to non availability of spot rates, are revalued at the balance Sheet date at closing spot rates announced by the Foreign Exchange Dealers Association of India (FEDAI).

2.2 Disclosures on risk exposure in derivatives

A) Qualitative Disclosures

a) The Bank has not undertaken derivative transactions in currency futures for trading (arbitrage) & hedging purposes.

b) Risk management of derivative transactions has been segregated into three functional areas namely,

i) Front-Office for undertaking transaction;

ii) Mid-Office for risk management and reporting; and

iii) Back-Office for settlement, reconciliation and accounting.

c) The risk measurement, reporting and monitoring function is undertaken by the mid-office. The Board of Directors is the apex body to oversee the overall risk measurement, monitoring and reporting functions of the Bank including derivative transactions through Risk Management Committee of the Board (RMCBOD). The bank also internally monitors risk management through in-house Risk Management Committee, Asset Liability Committee (ALCO), Operational Risk Management Committee (ORMC) and Internal Committee on Investment (ICI).

d) Identification of underlying hedge items for hedging / mitigating credit risk, operational risk and market risk arising out of derivative transactions is done in accordance with the Board approved Integrated Treasury Policy. The customer related derivative transactions are covered with counter party banks, on back to back basis for identical amounts and tenure and the bank does not carry market risk for such transactions.

e) The Integrated Treasury Policy prescribes accounting for hedge and non-hedge transactions, income recognition and valuation procedure for outstanding contracts. The income recognition is done as per AS-11 on “The Effects of changes in Foreign exchange Rates” and the guidelines issued by RBI / FEDAI from time to time. The integrated Treasury Policy also prescribes various limits such as Client Level Limits, Trading Member Level Limits, Net Open Position Limits for credit risk mitigation.

2.3 In compliance with RBI directives on the Assets Quality Review (AQR) for their classification over the six quarters ending March 31, 2017, the Bank had made the classification of Advances and provisioning as per directives of RBI and IRAC norms as on 31.03.2017. The effect of AQR has fully provided till 31.03.2017.

2.4. Bank has maintained a provision of Rs.16.03 crores towards exposure on Food Credit availed by State Government of Punjab having outstanding amount of Rs.320.50 crores as on 31.03.2019 i.e. 5% on outstanding balance as on 31.03.2019.

2.5 Risk category-wise country Exposure

The Bank has analyzed its risk exposure to various countries as on 31st March, 2019 and such exposure is less than the threshold limit of 1% of the total assets of the Bank. In terms of RBI guidelines, no provision is required for this exposure.

2.6 Penalty Imposed by RBI

During the financial year 2018-19, RBI imposed penalty of Rs.3.00 crores on United Bank of India under Section 46(4) of Banking Regulation Act 1949.

3. Disclosures as per Accounting Standards (AS) in terms of RBI guidelines:

3.1 AS-5 Net Profit or Loss for the period, prior period items and changes in the Accounting Policies

There is no change in accounting policy during the year. The impact of prior period items is immaterial in the opinion of the management.

3.2 AS-9 Revenue Recognition

Revenue is recognized as per the Accounting Policies disclosed in Schedule 17.

3.3 AS-10 Accounting for Fixed Assets

3.3.1 Accounting for Fixed Assets is done as per the Accounting Policies disclosed in Schedule 17.

3.4 AS-12 Government Grants

During the year Rs.NIL crores has been received in the form of subsidies/grants/incentives from RBI and State Government as below:

3.6 AS-17 Segment Reporting

The Banks operations are classified into two primary business segments viz. “Treasury Operations” and “Banking Operations”. The relevant information is given hereunder in the prescribed format:

3.7 Leases (AS-19) (As compiled by the Management)

a) Lease rent paid for operating leases are recognized as an expense in the Profit & Loss Account in the year to which it relates.

b) Future Lease Rent Payable for operating lease: (As compiled and certified by Management)

i) Future lease rents and escalation in the rent are determined on the basis of agreed terms.

ii) At the expiry of the initial lease term, generally the bank has an option to extend the lease for a further pre-determined period.

3.8 AS-21 consolidated Financial Statements/AS-23-Accounting for Investments in Associates in consolidated Financial Statements

The Bank does not have any subsidiary and as such, AS-21 and AS-23 are not applicable.

(c) The Bank has recognised net Deferred Tax Assets of Rs.2233.70 crores during the year 2018-19 on account of timing differences in accordance with Accounting Standard- 22 on “Taxes on Income” issued by the Institute of Chartered Accountants of India and the guidelines issued by the Reserve Bank of India.

3.9 AS-28 Impairment of Assets

In the opinion of the Bank, there is no indication of any material impairment of fixed assets and consequently no provision is required.

3.10 AS 29 - Provisions, contingent liabilities and contingent Assets

Movements in significant Provisions and Contingent Liabilities have been disclosed at the appropriate places in the Notes forming part of the accounts.

3.11 Strategy for Ind AS implementation and its progress

The strategy adopted by Bank for Ind AS implementation vis-a-vis the progress made by the Bank is given below:

As per the RBI guideline, the Bank is in the process of implementing the Indian Accounting Standards (Ind AS). A Steering Committee has been formed to take the required steps on a continuous basis for smooth convergence. The Bank has appointed M/s. Deloitte Haskins & Sells, LLP as the consultant for assisting the bank in smooth implementation of Indian Accounting Standards. The pro-forma financial statement for the quarter ended 31.12.2018 has been submitted to RBI within the prescribed due date. In order to facilitate smooth transition to Ind AS, after receipt of final guidelines from RBI, Bank shall identify the changes required to be made in the IT system and other policies to comply with Ind AS. Bank is also in the process of developing Expected Credit Loss (ECL) Model in line with the requirements of IND AS 109.

4.1 Disclosure of letter of comforts (Locs) issued by the Bank

a) During the current financial year ended 31.03.2019, the Bank has issued NIL (previous year 451) Letter of Comforts/Letter of Undertakings amounting to Rs.NIL (previous year Rs.1540.86 crores).

b) There are 9 nos (previous year 186) of outstanding Letter of Comforts as on 31.03.2019 amounting to Rs.75.25 crores (previous year Rs.487.37 crores).

4.2. Provision coverage Ratio (PcR)

The provision coverage ratio (PCR) for the Bank as on 31st March 2019 is 72.94%.

4.3 Unamortized Pension and Gratuity Liabilities

RBI vide its communication DBR No. BP.BC.9730/21.04.018/2017-18 dated April 27, 2018 has given the option to Banks to spread additional liability on account of the enhancement in gratuity limits from Rs.10 lakhs to Rs.20 lakhs from March 29, 2018 under Payment of Gratuity Act, 1972, over four quarters beginning with the quarter ended March 31, 2018. The Bank has exercised the option and has fully provided Rs.140.36 crores by 31st December, 2018.

The bank does not have any Unamortized Pension and Gratuity Liabilities (Previous year unamortized Gratuity liability was Rs.105.25 crores).

4.4 credit Default Swaps

The Bank has not undertaken any Credit Default Swaps in the year 2018-19 as well as in the year 2017-18.

4.5 Qualitative Disclosure around LcR

The Liquidity Coverage Ratio (LCR) standard aims to ensure that a Bank maintains an adequate level of unencumbered High Quality Liquid Assets (HQLAs) 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 specified by supervisor. Bank has implemented and is computing LCR since 1st January, 2015.

LCR is calculated as a ratio of HQLA to net cash outflow under stress scenario over the next 30 calendar days.

As per RBI guideline, Bank is required to maintain minimum 100% LCR as on 31.03.2019.

LCR of the Bank is assessed at 237.92 % for the quarter ended on 31.03.2019 which is well above the minimum requirement as prescribed by Reserve Bank of India.

4.6 a) Registration formalities are pending in case of one property consisting of Rs.1.65 Crores, WDV as on 31.03.2019: Rs.0.96 Crores (Previous Year Rs.1.39 Crores).

b) Premises include leased properties amounting to Rs.136.10 Crores (net of amortization) as at 31st March 2019 (Previous Year Rs.167.71 Crores).

5. Based on information available with the bank, there are few suppliers/services who are registered as Micro Small or Medium Enterprise under the Micro Small and Medium Enterprise development act 2006 (MSMED ACT, 2006) information in respect of micro and small enterprises as required by MSMED.

6. Pending settlement of the Bipartite agreement on wage revision (due from November, 2017), an adhoc amount of Rs.52 crores has been provided during the current quarter towards wage revision and cumulative provision held as on March 31, 2019 for wage revision is Rs.153 crores.

7. During the year Bank has reported 81 numbers of fraud cases involving total amount of Rs.427.95 crores against which Bank has some existing provision. A further provision of Rs.253.50 crores has been made during the year, out of which Rs.1.90 crores is for non advance related frauds and Rs.251.60 crores is for advance related frauds. No amount is required against unamortised provision except under noted account.

Further, in view of fraud reported by certain banks in respect of Frost International Limited, the Bank has declared the account as fraud involving a total funded exposure of Rs.185.06 crores, out of which Rs.46.26 crore has been provided on 31.03.2019 being 25% of funded exposure. The quantum of unamortised provision of Rs.138.80 crores being 75% of the funded exposure has been debited from Revenue & Other Reserve and will be provided in next three quarters.

8. In terms of RBI communication DBR NO. BP. BC. 1924/21.04.048/2017-18 dated August 28, 2017, Rs.423.90 crores has been additionally provided in respect of eligible NCLT (List 1 & List 2) accounts as on 31st March, 2019. Total actual provision made as on 31st March 2019 for NCLT (List 1 & List 2) accounts is Rs.3205.40 crores instead of Rs.2781.50 crores as per IRAC norms.

9. RBI vide circular no. DBR.No.BP.BC.108/21.04/018/2017-18 dated June 6, 2018 permitted Banks to continue the exposures to MSME borrowers to be classified as standard assets where the dues between September 1, 2017 and December 31, 2018 are paid not later than 180 days from their respective original due dates. Accordingly, the Bank has retained MSME exposure of Rs.195.11 crores as standard asset as on March 31, 2019. In accordance with the provisions of the circular, the Bank has not recognised interest income of Rs.2.49 crores and is maintaining a standard asset provision of Rs.9.76 crores as on March 31, 2019 in respect of such borrowers. In addition to above, subsequent to RBI Circular DBR No. BP. BC. 18/21.04.048/2018-19 dated January 01, 2019, the Bank has restructured without downgrading the following accounts as per extant instruction:

10. The Bank has exercised call option on Additional Tier-1 Bonds on 11.04.2018 and accordingly redeemed Additional Tier-1 Bonds at par aggregating Rs.940 crores.

11. Based on the available financial statements and the declaration from borrowers, the Bank has estimated the liability towards Unhedged Foreign Currency Exposure to their constituents in terms of RBI Circular DBOD No.BP.BC.85/21.06.200/2013-14 dated January 15, 2014 and holds a provision of Rs.0.05 crores as on 31st March, 2019.

13. Previous Year’s figures have been regrouped/rearranged wherever considered necessary to make them comparable with those of the current year.