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Audit Note

 

Financial Year 2015 - 2016

A. SIGNIFICANT ACCOUNTING POLICIES FOR THE YEAR ENDED                                                           31st MARCH 2016.


1. BASIS OF PREPARATION

The financial statements hae been prepared and presented under historical cost conention on accrual basis of accounting unless otherwise stated and comply with generally accepted accounting principles, statutory requirements prescribed under Banking Regulation Act, 1949, Kerala Co-operatie Societies Act 1969 and circulars and guidelines issued by Resere Bank of India from time to time and accounting standards issued by the Institute of Chartered Accountants of India to the extent applicable.

2. INESTMENTS

2.1 Classification and aluation of inestments are made in accordance with the prudential norms prescribed by Resere Bank of India read with clarifications / directions gien by RBI.

2.2 The entire inestment portfolio is classified into two categories, iz, Held to Maturity and Aailable for Sale in line with the guidelines / directions of Resere Bank of India. Disclosure of the inestments under the two categories mentioned aboe is made under three classifications iz,

  1. Goernment securities

  2. Other approed securities

  3. Others

2.3 Basis Of Classification

  1. Inestments that the Bank intends to hold till maturity are classified as Held to Maturity.

  2. Inestments which are not classified in the aboe category are classified as Aailable For Sale.

  3. An inestment is classified under the aboe two categories at the time of its purchase. Shifting of securities from one category to another is done with the approal of the Board normally once in a year.

2.4 Securities under ‘Held to Maturity’ are stated at acquisition costs unless such costs are higher than the face alue, in which case the premium is amortized oer the remaining period of maturity. Such amortization is shown under “interest and discount”. In case, the cost is less than the face alue, the difference is ignored.

2.5 Securities under ‘Aailable For Sale’ are alued scrip wise and depreciation / appreciation is segregated category wise. While net appreciation is ignored, net depreciation under each category is proided for.

2.6 Cost of inestment is based on the actual cost incurred.

2.7 The ‘market alue’ for the purpose of aluation of inestments included in the ‘Aailable For Sale’ category is the market price of the scrip as aailable from the trades / quotes on the stock exchanges, price list of RBI, prices declared by Primary Dealers Association of India (PDAI) jointly with the Fixed Income Money Market and Deriaties Association of India (FIMMDA).

2.8 Broken period interest, if any, paid on acquisition of inestment is debited to Profit and Loss Account. Broken period interest receied on sale of securities is recognized as interest income.

2.9 Profit / Loss on sale of inestments is taken to profit and loss account. Howeer, in case of profit on sale of inestments in ‘Held to Maturity’ category, an equialent amount of profit is appropriated to Capital Resere.

2.10 Non Performing Inestments

In respect of Non-Performing Securities, income is not recognized and appropriate proision is made for depreciation in the alue of such securities as per Resere Bank of India guidelines.

3. ADANCES

All adances hae been classified under four categories .i.e. 1) Standard Assets 2) Sub-Standard Assets, 3) Doubtful Assets and 4) Loss Assets as per Resere Bank of India directies/guidelines.

Proisions on adances hae been made in accordance with Resere Bank of India directies/guidelines as under:-

  1. For Standard Assets

i) 0.25% on direct adances to agricultural & SMT Sectors

  1. 0.40% on all other adances.

  1. For all Non Performing Assets

  1. Substandard – 10%

  2. Doubtful (up to one year)

100% of unsecured portion plus 20% of secured portion.

  1. Doubtful (one to three years)

100%of unsecured portion plus 30% of secured portion.

  1. Doubtful for more than 3 years

100% of unsecured portion plus100% of secured portion.

  1. Loss -100%

4. REENUE RECOGNITION

4.1 Income and expenditure are accounted for on accrual basis unless otherwise stated.

4.2 Income on non-performing assets is recognized on realization basis in accordance with the prudential norms prescribed by Resere Bank of India.

4.3 Partial recoery in non-performing assets is appropriated first towards interest and thereafter towards principal.

4.4 Income on guarantees and letters of credit issued, locker rent, diidend on shares, interest on refund of income tax, processing fee are accounted for on receipt basis.

4.5 Interest on oerdue Term Deposits is proided at 4% being the rate applicable to Saings Bank Accounts, on the balance outstanding at the end of the year.

4.6 Liability in respect of incremental lease rent on renewal of lease agreement is accounted for at the time of renewal of the lease.

5. FIXED ASSETS AND DEPRECIATION

Premises and other Fixed Assets hae been accounted for at Historical Cost

Depreciation on premises and other Fixed Assets including System software is proided for on Straight Line method in the manner and at the rate as per The Kerala Co-operatie Societies Act. The depreciation for Furniture and fixture is done on diminishing balance method.

In a few cases as separate alues for Land and Building are not aailable, depreciation is proided on total alue including land.

In respect of assets acquired during the year the depreciation/amortization is charged for full year irrespectie of the period the asset was put to use.

6. EMPLOYEE BENIFITS

6.1 Proident Fund

The employer contributes 12% of salary of an employee of which 8.33% towards Employees pension scheme and 3.67% towards Employees Proident Fund.

6.2 Gratuity

The Bank has joined in group gratuity insurance scheme of Life Insurance Corporation of India in respect of which the premium is paid by the bank.

6.3 Earned Leae Encashment

The liability towards earned leae encashment as on 31 st March 2016 has been estimated at Rs 23295699/-on the basis of earned leae to the credit of each employee.Acturial aluation as required by Accounting Standard-15 (employees benefits) issued by the Institute of Chartered Accountants of India has not been obtained. Proision for earned leae encashment for Rs 5000000/- has been made during the year.The aggregate amount of proision made up to 31 st March 2016 amount to Rs 16331928/-Proision for the full liability is proposed to be made in 2 yearly instalments commencing from 2016-17.

7. Accounting for Proisions and Contingent liabilities

7.1. The bank has recognized proisions only when it has a present obligation as a result of a past eent.

B. NOTES ON ACCOUNTS

  1. Proision for income tax.

Income tax liabilities relating to the years ended 31.03.2007, 31.03.2008, 31.03.2009, 31.03.2010, 31.03.2011 and 31.03.2012 hae been proided for and paid fully on the basis of the demands raised by the Income Tax Department and proision for the liabilities hae been made.

The bank has disputed the disallowance of claim made under section 36 (1)(iia) of the Income Tax Act 1961 and the matter is in appeal before Hon’ble Supreme Court and is pending final order for the year ended 31.03.2007, 31.03.2008, 31.03.2009 and 31.03.2010.

The Bank has also disputed the disallowances made on arious issues relating to the year 31.03.2011 and is pending in appeal before the Appellate Tribunal of Income tax.

Appeals relating to the disallowances made for the years ended 31.03.2012 and 31.03.2013 are pending in appeal before the Commissioner of Income Tax (Appeals).

The assessments for the years ending 31.03.2014 and 31.03.2015 hae not been completed. Proisions for the income tax liability for these years and for the year hae been made taking in to account the claims allowed in appeals.

The Adance Tax paid for the years ended 31.03.2012, 31.03.2013 and 31.03.2014 hae been refunded under section 143(1)(a) and the proisions for income tax made for these years hae been retained since the regular assessments are pending.

ii) RECONCILLIATION

Inter branch transactions in accounts with H.D.F.C; Draft payable accounts, clearing and other adjustment account hae been reconciled. In the opinion of the management there will not be any material impact of such reconciliation on the financial statements. Howeer the reconciliation of transactions with The Kerala State Co-operatie Bank and suspense account is in progress and adequate proision for doubtful portion in the opinion of the management, has been made.

  1. RESERE FUND AND OTHER RESERES

Sl No

Particulars

Amount in Rs.

1

Statutory Resere Fund



  1. Opening Balance

  2. Additions: Unclaimed diidend

2011 -12

  1. :Current Year Profit

Appropriation

  1. Closing Balance

62905830.22

1735189.00


3911504.00


68552523.22

2

Inestment Fluctuation Resere



  1. Opening Balance

  2. Additions :Preious Year Profit

Appropriation

  1. Closing Balance

7943706.26


2926362.10

10870068.36

3

Building Recoupment Fund



  1. Opening Balance

  2. Additions During the Year

  3. Closing Balance

441290.70

220645.35

661936.05

4

Resere for NPA

(Represents excess proision made for Non Performing Assets transferred)

54843983.00

i) PREMIUM ON INESTMENTS

Premium on inestments is amortised oer the remaining period of maturity. An amount of Rs.750282.00 (preious year Rs.780050.00) has been amortised during the year and disclosed as a deduction from income on inestments under “interest and discount”.

) PAY REISION ARREARS

The pay reision agreement has been signed and implemented from April 2016 onwards.Proision for arrears of salary relating to the period up to 31.03.2016 amounting to Rs 13477228/- including proident contribution has been made during the year.

i) AUDITORS FEES

The details of auditor’s fee of Rs.1911835.00 are as follows:

Co-operatie Department Auditors - Rs. 972871.00

Statutory Auditors - Rs. 327635.00

Concurrent Auditors - Rs. 611329.00

Rs.1911835.00

ii) SHARE CAPITAL

Subscribed capital includes Rs.92981900/- in respect of 929819 - A class shares of Rs.100 each. The fraction amount receied of Rs.831000.00 is also included in the total amount of Rs.93812900.00 of A class share capital.

The total number of B class of 9389 includes 7589 shares issued at Rs.5 and 1800 shares issued at Rs.10

iii) REALUATION OF PREMISES

Premises hae been realued during the year at Rs 96208150/- on the basis of aluation certificate issued by an approed aluer.The difference between the realued alue and the book alue amounting to Rs 93709200/- has been disclosed as “Realuation Resere“ under the head Reseres and Surplus.

C. DETAILS REGARDING DISCLOSURE NORMS PRESCRIBED FOR UCBs

  1. Capital to Risk Weight Asset Ratio.(CRAR) : - 14.29%

  2. Moement of CRAR i.e., CRAR as on Balance Sheet date for the current

Year is-a is preious year

(Rs. In Crore)

Particulars

31.03.2016

31.03.2015

1) Share Capital

9.38

8.47

2) Funds & Reseres

26.39

20.52

3) Capital to Risk Weighted Assets Ratio (CRAR)

14.29 %

11.82 %

iii) Inestments

(Rs. In Crore)

Item No

Particulars

31.03.2016

31.03.2015

a)

Face alue

231.95

172.84

Book alue

232.59

172.54

b)

Market alue

237.93

177.50

c) Details of issuer composition of non-SLR inestments and non performing

Non-SLR Inestments.

  • Issuer Composition of Non SLR Inestments. (Rs. In Crore)

No.

ISSUER

2015-16

2014-15

1

PSU

Nil

Nil

2

Financial Institution

Nil

Nil

3

Banks



 

a) The Federal Bank LTD

0.08

0.06

 

b) HDFC Bank LTD

1.85

0.13

 

c) ICICI Bank LTD

1.21

0.77


d) Thrissur District Co-op Bank

13.92

0.00

 

e) The South Indian Bank LTD

0.01

0.01


f) Idukki District Co-op Bank

5.00

0.00


g) State Bank of India

2.00

2.00


h) State Bank of Traancore

0.50

0.00


g) SBI Debt Fund

0.00

0.00






Subtotal

24.57

2.97

4

Priate Corporates

Nil

Nil

5

Subsidiaries &Joint entures

Nil

Nil

6

Others

Nil

Nil

7

Proision held towards Depreciation

Nil

Nil

 

Grand Total

24.57

2.97

  • Non Performing Non SLR Inestments

(Rs. In Crore)

Particulars

31.03.2016

31.03.2015

Opening Balance

0.00

0.00

Additions during the year since 1st April

0.00

0.00

Reduction during the aboe period

0.00

0.00

Closing Balance

0.00

0.00

Total Proisions Held

0.00

0.00

i) Adances against real estate,construction business,housing

(Rs. In Crore)

  1. Direct Exposures


Particulars

31.03.2016

31.03.2015

1

Residential Mortgages

12.99

9.00

2

Commercial Mortgages (including non fund based limits)

Nil

Nil

  1. Adances against shares & debentures:- NIL

  2. Adance to Directors, their Relaties, Companies, firms in which they are interested:

(Rs. In Crore)

Particulars

31.03.2016

31.03.2015

a) Fund Based

0.00

0.00

b) Non Fund Based

0.00

0.00

ii) Cost of Deposits: Aerage Cost of Deposits

Particulars

31.03.2016

31.03.2015

Cost of Deposits: Aerage Cost of Deposits

8.34%

8.78%

iii) Non Performing Asset

(Rs. In Crore)

Particulars

31.03.2016

31.03.2015

a) Gross NPAs

9.02

8.38

b) Net NPAs

0.00

0.00

ix) Moement of Non-Performing Assets (Rs. In Crore )

Particulars

31.03.2016

31.03.2015

  1. Net NPA to net adances (%)

0.00%

0.00’%

  1. Moement of NPA gross



    1. Opening balance

8.38

9.51

    1. Additions during the year

5.48

3.35

    1. Reductions during the year

4.84

4.48

    1. Closing balance

9.02

8.38

  1. Moement of net NPA



a) Opening Balance

0.00

0.00

b) Closing Balance

0.00

0.00

  1. Moement of Proision for NPA

(excluding proision on standard assets)



a) Opening balance

9.59

9.59

b) Closing balance (including Resere for NPA of Rs.5.58 crore)

9.59

9.59

Note: Net NPA to Adances (%) has been calculated after deducting proision for NPA and Resere for NPA aggregating to 9.59 crores.

x) Profitability (Rs. In Crore)

Particulars

31.03.2016

31.03.2015

a) Interest Income as a percentage of Working Funds

9.82 %

11.16%

b) Non Interest Income as a percentage to Working Funds

0.27 %

0.32%

c) Operating profits as a percentage to Working Funds

1.10 %

1.33%

d) Return on Assets as a percentage

0.32 %

0.41%

e)Business (Deposits plus adances) per employee

6.16

5.45

f) Profit per employee

0.01

0.02

xi) Proision made towards NPAs, depreciation in inestments, Standard Assets (Rs. In Crore)

Particulars

31.03.2016

Proision made towards NPAs (including Resere for NPA of Rs.5.58 crore)

9.59

Depreciation in inestments

0.00

Proision towards Standard Assets

1.43

xii) Moement in proisions

(Rs. In Crore)

Particulars

31.03.2016

31.03.2015

a) Proision towards Non Performing Assets (including Resere for NPA of Rs.5.58 crore)

9.59

9.59

b) Proision towards Depreciation on Inestments

0.00

0.00

c) Proision towards Standard Assets

1.43

1.43

Since the proision already made up to 31.03.2015 has exceeded the actual proision required for the year, no additional proision has been made.

xiii) Foreign currency assets & liabilities (if applicable) :- Not Applicable

xi) Payment of DICGC Insurance Premium

(Rs. In Crore)

Particulars

31.03.2016

31.03.2015

a) Amount Paid

0.41

0.40

b) Balance to be Paid

0.00

0.00

x) Penalty imposed by RBI :- NIL

xi) Restructured Accounts :- NIL

xii) Fixed Assets- aluation / Realuation of Land :- 9.37 crores

xiii) Moement of Amount Transfered to Depositors Education and Awareness Fund (DEAF) (Amount in Rs crore)


Current Year

Preious Year

Opening balance of amounts transferred to DEAF

0.37

0.00

Add: Amounts transferred to DEAF during the year

0.13

0.37

Less : Amounts reimbursed by DEAF towards claims

0.00

0.00

Closing balance of amounts transferred to DEAF

0.50

0.37

D. DISCLOSURES UNDER THE ACCOUNTING STANDARDS ISSUED BY THE

INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA.

i) a) Accounting Standard - 15 - Employee Benefits

Salary and Allowance to Staff Rs. 54307405.00

Bonus Rs. 1793400.00

Medical Allowance Rs. 194400.00

Proident Fund Contribution Rs. 1911148.00

Pension Scheme Contribution Rs. 4337706.00

Gratuity Rs. 1994207.00

Leae Surrender Rs 4890319.00

Other Benefits Rs. 822699.64

b) Accounting Standard -AS 18 (Related Party Disclosures)

Related Party Disclosures:-

The Key managerial personnel of the bank and their remunerations are as below;

i. Honorarium to Chairman

a) K G Sianandan (01-04-2015 to 31-03-2016 ) : Rs.1,20,000.00

b) Directors sitting fee: Rs.8,96,940.00

c) Salary and Allowances to C E O

Sanal Chacko (01-04-2015 to 31-03-2016) :Rs.5,46,632.00

c) Accounting Standard (AS) 20 (Earnings per Share)

Particulars

31.03.2016

31.03.2015

Net Profit in Rupees

15646015.87

17644427.10

Weighted aerage number of Equity shares

892910

782480

Earnings per share in Rupees (Nominal alue per share Rs.100)

17.52

22.55

d) Accounting Standard (AS) 22 (Accounting for Taxes and Income)


Tax effects of timing difference

As on 31.03.2016

As on 31.03.2015

Deferred Tax Assets

Deferred Tax Assets on account of timing difference of proisions for expenditure

3489576.00

2847000.00

Deffered Tax Liability on account of difference in Depreciation

765000.00

765000.00

Other Items

177000.00

177000.00

Total Deffered Tax Liability

(942000)

(942000.00)

Net Deferred Tax Assets/(Liabilities)

2547576.00

1905000.00

e) Accounting Standard (AS) 28 (Impairment of Assets)

In the opinion of the bank management there is no impairment to the assets to which AS 28 (Impairment of Assets) applies.

f) Accounting Standard (AS) 29 ( Statement of Proisions, Liabilities , and

Contingent Liabilities)

The Bank has recognized proisions only when it has a present obligation as a result of past eent.

Details of Proision made (Amount in crores)

Sl No

Particulars

As on 31.03.2015

Current Years Adjustment

As on 31.03.2016

1

Proision for Income Tax

1.90

2.97

4.87

2

Proision for Leae Salary

1.13

0.50

1.63

3

Proision for Pay Reision Arrear

1.00

0.35

1.35

4

Proision for Branch Modernisation

0.90

(0.10)

0.80

5

Proisions for Suspense due to

0.03

0.00

0.03

6

Building Recoupment Fund

0.04

0.03

0.07

ii) Preious year’s figures hae been regrouped / rearranged whereer necessary to suit the current year’s figures.


                                                                                              For MENON AND MENON

                                                                                                Chartered Accountants

                                                                                                    (Reg. No. 002060S)


Place: Ernakulam                                                                            M. P. ITTYRAH (Partner)

Date: 07.09.2016                                                                             Membership No.18483

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