19. ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
a) As per the Accounting Standard 29, the bank recognizes provisions only when it has a present obligation as a result of past event, it is probable that an outflow of resources is required to settle the obligation and when a reliable estimate of the amount can be made. The required disclosure for contingent liability is made on possible obligation that arises from past events, the existence of which depends on occurrence or nonoccurrence of future event not under control.
b) Contingent assets are not recognized in the financial statement since this may result in the recognition of income that may never be realized.
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S.Krishnan
Managing Director & CEO
DIN: 07261965
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A.Niranjan Sankar D.N.Nirranjan Kani S.R.Ashok B.Prabaharan C.Chiranjeeviraj
Director Director Director Director Director
DIN: 00084014 DIN: 00455352 DIN: 07933713 DIN: 00209875 DIN: 08730382
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S.Ezhil Jothi S.Sridharan C.S.Ram Kumar Thomas Mathew V.Jayaraman D. Inbamani
Director Director Director Director General Generai
IN: 07772888 DIN: 07205781 DIN: 09777115 DIN: 10642487 Manager Manager
Sd/ Sd/ Sd/ Sd/ Sd/ Sd/
P.Suriaraj D.Ramesh J.Sundaresh Kumar K.Vijayan P.R.Ashok Kumar S.Narayanan
General General General General General General
Manager Manager Manager Manager Manager Manager
b) draw down from reserve: During the year there has been no draw down from the reserves to the Profit & Loss account. C) BASEL III DISCLOSURES
In accordance with RBI circular DOR.CAP.REC.3/21.06.201/2022-23 dated 01st April 2022, read together with RBI circular DBR. No.BP. BC.1/21.06.201/2015-16 dated 1st July 2015, Banks are required to make Pillar 3 disclosures under Basel III capital regulations. Accordingly, necessary disclosures have been made available on the Bank's website https://www.tmb.in/pages/basel-disclosures.These disclosures have not been subjected to audit by the Statutory Central Auditors.
b) LIQUIDITY COVERAGE RATIO (LCR)
Quantitative information on Liquidity Coverage Ratio (LCR) for the year ended March 31, 2024 is given below
The Liquidity Coverage Ratio (LCR) is one of the key reforms of Basel Committee to develop a more resilient banking sector. The objective of the LCR is to promote the short-term resilience of the liquidity risk profile of banks by ensuring that banks have an adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted easily and immediately into cash to meet their liquidity needs for a 30 calendar days liquidity stress scenario. The LCR is expected to improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy. The LCR is calculated by dividing the bank's stock of HQLA by its total net cash outflows over a 30-days stress period. HQLA of the bank is in the form of Government Securities and highly marketable and liquid securities/ bonds. The Bank has been maintaining HQLA mainly in the form of SLR investments over and above the mandatory requirements.
The guidelines for LCR were effective January 1, 2015, with the minimum requirement at 60%, which would rise in equal annual
THE MAIN DRIVERS OF LCR RESULTS
The bank is having an adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted easily and immediately in markets into cash to meet liquidity needs for a 30 calendar days under liquidity stress scenario.
The net cash outflows for the next 30 days has been calculated after deducting the cash inflows from the outflows for the period. The inflows and outflows have been calculated based on RBI prescribed haircuts and run-off factors.
The Bank's LCR is more than the minimum regulatory requirement for all the dates from April'23 to March'24. LCR of the bank for the Annual Financial Year 2023-24 stood a 199.58%
COMPOSITION OF HQLA
The Level 1 Assets of our bank comprises of Cash in hand & Cash at ATM, Excess CRR and SLR, MSF & FALLCR are as per permitted extent. Level 1 asset is the main driver of HQLA of the Bank.
Level 2A and Level 2B assets are well within the regulatory cap of 40% and 15% of the stock of HQLA respectively after the required haircut.
Corporate Bonds not issued by a Bank/Financial/NBFC which have been rated AA- or above by an Eligible Credit Rating Agency have been classified under Level 2A assets. Similarly Bonds not issued by a Bank/FI/NBFC which have been rated not lower than BBB- have been classified under level 2B Assets.
OUTFLOWS & INFLOWS
Deposits are the main source of funds for the Bank.
CURRENCY MISMATCH IN LCR
LCR is expected to be met and reported in a single currency. The bank is not having significant liabilities and HQLAs in any foreign currency.
DESCRIPTION OF THE DEGREE OF CENTRALIZATION OF LIQUIDITY MANAGEMENT AND INTERACTION BETWEEN THE GROUP'S UNITS
The Bank does not belong to any group and does not have any associate, subsidiaries, joint venture, etc.
NET STABLE FUNDING RATIO
The RBI guidelines stipulated the implementation of NSFR effective from 1st October 2021 at a consolidated level with disclosure from quarter ended December 2021. Accordingly, the bank is computing the Consolidated NSFR. The NSFR is defined as the amount of Available Stable Funding relative to the amount of Required Stable Funding.
Net Stable Funding is a liquidity measure which is the indication of the long term liquidity health of the Bank is measured as under.
NSFR= (AVAILABLE STABLE FUNDING (ASF)/ (REQUIRED STABLE FUNDING (RSF)) >=100%
Available stable funding (ASF) is measured based on the broad characteristics of relative stability of funding sources, including contractual maturity of its liabilities and the differences in the tendency of different types of funding providers to withdraw their funding. Required Stable Funding (RSF) is a function of the liquidity characteristics and residual maturities of the various assets held by the bank including Off-Balance Sheet (OBS) exposures. The result should minimum of 100% to ensure liquidity comfort.
The table given below sets out the un-weighted and weighted value of the NSFR components as on 31st March 2024 based on audited financials.
At a consolidated level, the NSFR of the bank comes out to 174.15% as on 31st March 2024 against the requirement of 100% as per RBI guidelines.
BANK INVESTMENT IN LAKSHMI VILAS BANK LIMITED (LVB)
The Bank had invested in the Tier II bonds of LVB to the tune of ¥5 Crore. As per RBI's scheme of Amalgamation with DBS Bank India with effect from 27 Nov 2020, LVB ceased to exist and the entire amount of the share Capital & Reserves and Tier II bonds were written off. The said amalgamation scheme has been challenged at various High Courts by some of the investors in the above said Tier II Bonds and as per orders of Hon'ble Supreme Court of India the said writ petitions were now transferred to the Hon'ble High Court of Madras. Considering the same, The Bank had treated the investment as NPI and holding 100 % provision.
Instructions : For the purpose of disclosure in the above format, the following instructions are required to be followed
1 Advances restructured under CDR mechanism, SME Debt restructuring mechanism and other categories of restructuring should be shown separately
Under each of the above categories, restructured advances under their present asset classification i.e, standard, sub standard, doubtful and loss ' should be shown separately.
Under the standard restructured account; accounts, which have objective evidence of no longer having inherent credit weakness, need not be disclosed. For this purpose, an objective criteria for accounts not having inherent credit weakness is discussed below
• As regards restructured accounts classified as standard advances, in view of the inherent credit weakness in such accounts, banks are required to make a general provision higher than what is required for otherwise standard accounts in the first two years from the date of restructuring. In case of moratorium on payment of interest/ principal after restructuring, such advances attract the higher general provision for the period covering moratorium and two years thereafter.
• Further, restructured standard unrated corporate exposures and housing loans are also subjected to an additional risk weight of 25 percentage point with a view to reflect the higher element of inherent risk which may be latent in such entities.
• The aforementioned [ (a) and (b) additional / higher provision and risk weight cease to be applicable after the prescribed period if the performance is as per the rescheduled programme. However, the diminution in the fair value will have to be assessed on each balance sheet date and provision should be made as required.
• Restructured accounts classified as sub standard and doubtful advances, when upgraded to standard category also attract a general provision higher than what is required for otherwise standard accounts for the first year from the date of up gradation, in terms of extant guidelines on provisioning requirement of restructured accounts. This higher provision ceases to be applicable after one year from the date of upgradation if the performance of the account is as per the rescheduled programme. However , the diminution in the fair value will have to be assessed on each balance sheet date and provision made as required.
• Once the higher provisions and/or risk weights ( if applicable and as prescribed from time to time by RBI ) on restructured standard advances revert to the normal level on account of satisfactory performance during the prescribed periods as indicated above, such advances, henceforth,
: would no longer be required to be disclosed by banks as restructured standard accounts in the " Notes on Accounts " in their Annual Balance Sheets.
j However , banks should keep an internal record of such restructured accounts till the provisions for diminution in fair value of such accounts are
> maintained.
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DIVERGENCE IN ASSET CLASSIFICATION AND PROVISIONING
Divergence in Asset classification and Provisioning for NPAs. The divergence observed by RBI for the financial years 2022-23 in respect of the Bank's asset classification and provisioning under the extant prudential norms on income recognition, asset classification and provisioning is below the regulatory requirement for disclosure and hence the disclosure as required under RBI Master Direction on 'Financial Statements-Presentation and Disclosures' on 'Divergence in the asset classification and provisioning is not required to be made
DISCLOSURE OF TRANSFER OF LOAN EXPOSURES: NIL
• There were no loans that are not in default or stressed, transferred and acquired to or from other entities
COVID -19
COVID-19 pandemic has and had an extraordinary impact on macroeconomic conditions in India and around the world during the past two years. The impact of COVID-19, including changes in customer behaviour and pandemic fears, as well as restrictions on business and Individual activities, had led to volatility in global and Indian financial markets and a decrease in global and local economic activities. The revival of economic activity has since improved supported by relaxation of restrictions due to administration of the COVID vaccines to a large population in the country. The extent to which any new wave of COVID-19 pandemic will impact the Bank 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. On a prudent basis, the Bank holds a provision of ?250 crores as at 31st March, 2024 against the potential impact of COVID-19 & other uncertainties (previous year 31.3.2023: Rs.300 crores).
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