1. CA SAMIR PARIKH 11.05.2013

2. INTRODUCTION Users Of Financial Statements Need Information For Making Economic Decisions. Wants To Know Liquidity, Solvency And Risks Related To Assets And Liabilities. Information In The Nature Of Notes On Accounts To Financial Statements Helps The Users To Take Effective Decision. Summary Of Significant Accounting Policies And Notes To Accounts To Be Shown After Financial Statements.

3. Notes on Accounts – Accounting standards Significant Accounting policies – AS-4 Accounting conventions Revenue Recognition Expenditure Staff Retirement Benefit Fixed Assets Advances Investments Notes on Accounts.

4. Additional Disclosure – RBI Norms RBI Circular dated 30.10.2002 – Disclosure of Information. To Enhance the transparency, Comprehensive disclosure is required Net worth, Investment details, Advances to Directors and relatives, cost of deposits Concentration of deposits, Advances, Exposures and NPA Sector wise NPA Movement of NPAs Overseas assets, NPAs and revenue Separate disclosure for penalty levied by RBI

5. NOTES ON ACCOUNTS, ACCOUNTING STANDARDS MASTER CIRCULAR – DISCLOSURE IN FINANCIAL STATEMENTS – NOTES TO ACCOUNTS DBOD.BP.BC NO. 14/21.04.018/2012-13 DATED 02.07.2012 Circular dated 30.10.2002 – Disclosure of Information for UCB having deposits of Rs. 100 Crore or more.

6. SIGNIFICANT ACCOUNTING POLICIES Accounting Conventions : The accompanying financial statements have been prepared on historical cost convention on Going Concern basis and confirm to the statutory provisions and practices prevailing in India, unless otherwise stated.

7. REVENUE RECOGNITION : ACCOUNTING STANDARD 9 This standard requires that in addition to the disclosure required by Accounting standard 1 on Disclosure of Accounting policies (AS 1) bank should also disclose the circumstances in which revenue recognition has been postponed pending the resolution of significant uncertainties. All revenues are accounted for on accrual basis. However, considering the nature of transactions, smallness of amounts, uncertainties involved and consistent practice, locker rent, Commission, Brokerage and Exchange and Interest and other income on Non Performing Assets are recognized on Cash basis. Liability is created for locker rent received in advance.

8. Expenditure : All Expenses except as otherwise stated are accounted for on accrual basis. However, considering the nature of transactions, smallness of amounts, uncertainties involved and consistent practice: Interest on Overdue Deposits is accounted for at the time of Renewal however interest on O D deposit is accounted on accrual basis as per saving rate of interest. Legal Expenses incurred in suit filed/NPA accounts have been accounted as current assets till the same is recovered from the borrower.

9. Staff Retirement Benefits : ACCOUNTING STANDARD 15 Banks have to follow the disclosure requirements prescribed under AS 15 (revised) on Employees Benefits issued by ICAI. The bank has not made provision for gratuity during the year as in the opinion of the management, the existing gratuity fund is sufficient to discharge the liability of gratuity at the time of retirement of employees. Liability for Leave Encashment is accounted on cash basis.

10. Since the format of the profit and loss account of banks prescribed in Form B under Third Schedule to the Banking Regulation Act. 1949 does not specifically provide for disclosure of the impact of prior period items on the current years profit and loss, such disclosure, wherever warranted, may be made in the Notes to Accounts to the balance sheet of banks.

11. Merger closure of branches of banks by transferring the assets / liabilities to the other branches of the same bank may not be deemed as a discontinuing operation and hence this Accounting Standard will not be applicable to merger / closure of branches of banks by transferring the assets / liabilities to the Standard only when:

12. a) Discontinuing of the operation has resulted in shedding of liability and realization of the assets by the bank or decision to discontinue an operation which will have the above effect has been finalized by the bank and b) The discontinued operation is substantial in its entirety. c) This is to be reported for the bank which under liquidation.

13. Fixed Assets – AS -10 Fixed Assets : Fixed Assets are stated at their historical cost less depreciation. Depreciation is provided on Written Down Value Method and rates of Depreciation are as under:

14. Sr. No. Fixed Assets Rate of Depreciation 1 Building 2.5% 2Furniture & Fixtures10% 3Safe Deposit Vault2.5% 4Vehicles15% 5Electric Equipments10% 6Intercom10%

15. Sr. No. Fixed Assets Rate of Depreciation 7Shed5% 8Computer33.33% 9Dead Stock10% 10Air Conditioner15% 11D.G. Set Generator15% 12C.C.T.V.15%

16. Depreciation on Fixed Assets (except computer) purchased after 30 th September is provided at 50% of the above rates while no depreciation is provided on sale/deduction from fixed assets during the year. Depreciation on Computers & UPS is provided in 3 equal installments as per RBI guidelines.

17. Advances : Advances are classified into Performing & Non Performing Assets and provision is made based on Management assessment, which is not less than the requirement as per RBI guidelines. Advances are stated at gross value while provision for performing & Non Performing Assets required to be made as per R.B.I. guidelines are shown under the head Reserve & Other Funds under sub head Bad & Doubtful Debts Reserve Fund, Special Bad Debts Reserve Fund and Standard Assets Reserve fund in accordance with requirement of the applicable statute for disclosure.

18. Investments : Investments are categorized as under : State & Central Government Securities Approved Trustee Securities Shares of Co-operative Banks Other Investments Investments are further classified as under : Held to Maturity Held for Trading Available for Sale

19. Classification & Valuation of Investments : Held to Maturity Premium Paid on securities classified as HTM is required to be amortized over a period of Maturity and disclosure is required for amortization of premium.

20. Available for Sale Provision for diminution in value of Investments held for trading is made on year to year basis whereas in respect of those held to maturity no provision is required as per RBI guidelines. -- Disclosure for depreciation in investments held for sale/trading is required.

21. NOTES ON ACCOUNTS : Note for Priority & Weaker sector advance: -The Bank has achieved the overall exposure of advances to Priority Sector as per RBI guidelines. However part of this exposure required for weaker section has not been fulfilled. Note for implementation of share Linkages on advances: - When CRAR of the bank is above 9%, implementation of share linkages is not applied.

22. Notes for Compliance with Accounting Standards The Bank is primarily engaged in banking activity as defined by RBI. As interest income accounts for nearly 95% of banks total revenue, separate business segment reporting as per AS-17 is not considered necessary. Earning per share is not disclosed as it is not considered relevant for a cooperative bank. Expenditure on software is not treated as intangible asset as per past practice. No provision is made for deferred tax liability/assets as per AS-22.

23. Note for Taxation: During the year, provision for current year Income Tax amounting to Rs. Lacs is computed as per total Income computed under the Income Tax Act, 1961 after taking into account available deductions and exemptions.

24. Note for Urban Banks Equalization Fund: The Bank is required to transfer 15% of the profits remaining after allocation as per by laws to Urban Bank Branch Equilization Fund and pay the same to the State Government. However, the bank has not paid Rs. accumulated till 31.03.2013 in view of the stay granted by the Honorable Gujarat High Court as per the writ petition filed by the Federation of Cooperative Banks.

25. Disclosure Note on Movement of CRAR: 31.03.201331.03.2012 Capital to Risk Assets Ratio 20.95% 22.50%

26. Disclosure Note on Advances: Advances against real estate, construction business and housing are Rs. lacs Advances against Shares & Debentures are Rs. Nil Unrealized Interest Income amounting to Rs. Lacs on Non Performing Asset accounts which are debited to borrower accounts are reversed and credited to Overdue Interest Reserve Account on the basis of excess balance over sanction limit.

27. The Bank has created Interest Reserve Account for interest accrued in respect of Non Performing Asset by debiting Interest Receivable Account and crediting Overdue Interest Reserve Account amounting to Rs. Lacs.

29. Disclosure of Movement of NPAs ParticularsAmount in crore Gross NPAs* as on 1 st April of particular year (Opening Balance) Additions (Fresh NPAs) during the year Sub-total (A) Less : (i)Up gradations (ii) Recoveries (excluding recoveries made from upgraded accounts) (iii) Write-offs Sub-total (B) Gross NPAs as on 31 st March of following year (closing balance) (A-B)

30. At present, Reserve Bank is empowered to impose penalties on a commercial bank under the provision of Section 46 (4) of the Banking Regulation Act, 1949, for contraventions of any of the provisions of the Act or non-compliance with any other requirements of the Banking Regulation Act, 1949; order, rule or condition specified by Reserve Bank under the Act. Consistent with the international best practices in disclosure of penalties imposed by the regulator, placing the details of the levy of penalty on a bank in public domain will be in the interests of the investors and depositors. Further, strictures or directions on the basis of inspection reports or other adverse findings should also be placed in the public domain. The penalty should also be disclosed in the Notes on Accounts to be Balance Sheet.

31. Disclosure on Profitability Following disclosure is required with reference to Profitability of UCB: a) Interest income as a percentage of working funds b) Non-Interest income as a percentage of working funds c) Operating profit as a percentage of working funds d) Return on Assets e) Business(Deposit+Advances) per Employee f) Profit per Employee

32. Management Representation Report To obtain MRR from Bank regarding followings Accounting policies followed by the bank. Assets/Fixed Assets/Investments/Loans & Advances/Other Current Assets/Cash & Bank Balance Capital Commitment Liabilities/provision for loss/ Profit & Loss Account/Balancing of Books/ General/Statutory Registers.

33. Submission of Statutory Returns: Submission of SLR/CRR Statements Submission of CTR/STR transaction Report Submission of ALM Submission of other OSS Statements Submission of DICGC Premium Correctly

34. Taxation of co op Banks Section 36(viia) – In respect of provision for Bad & Doubtful debts 7.5% of total income computed before making any provision under this clause – No special reserve is required to be deducted. Section 36(viii) – Deduction of 20% of profit on eligible business subject to creation of special reserve

35. Taxation of co op Banks Written off of Investment in MMCB Bank. Whether to be allowed under section 37 or is restricted under section 36(viia)? Whether proceedings under section 263 on account of interest on NPA which is not offered for tax as the same is accounted on the basis of realization as per RBI guideline is correct where the bank is follows accrual basis of accounting? Applying ruling in case of Oriental Bank of Commerce Vs IAC (1989) 31 ITD 519 (Delhi) on the basis of Board circular F.No. 201/21/84 –ITA-II dated 09.10.1984.

36. Taxation of co op Banks United Bank of India Vs. Deputy Commissioner of Income Tax ITAT Calcutta D Bench (1999) 64 TTJ (Cal) 432 Deputy Commissioner of Income Tax Vs. Syndicate Bank & Others ITAT Bangalore Bench (1995) 51 TTJ (Bang) 365 Income Tax Officer Vs. Oriental Bank of Commerce Ltd. ITAT Delhi B Bench (1983) 3 ITD (DEL) 226 State Bank of Patiala Vs. Joint Commissioner of Income Tax ITAT, Chandigarh B Bench. (2008) 10 DTR (Chd) (Trib) 527

37. THANK YOU