Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Management of Financial Institutions - II - Question Paper

iii. In accordance with the guidelines of Reserve Bank of India to build up adequate reserves to meet future depreciation on investments a sum of Rs.15.00 crore (previous year Rs.226 crore) was transferred to Investment Fluctuation Reserve out of the profits for the year 2004-2005. The aggregate amount held under Investment Fluctuation Reserve as on 31st March 2005 amounts to Rs.555 crore (previous year Rs.540 crore) which constitutes 4.09% (previous year 3.00%) of investments excluding those held under "Held to Maturity" category.

iv. In respect of "Held to Maturity" category, as said in significant Accounting Policy No.3(ii)(a), the excess of acquisition cost over face value of the securities amortised during the year amounted to Rs.16.58 crore (previous year Rs.9.97 crore).

v. Total investments made in shares, convertible debentures and units of equity linked mutual funds/ venture capital funds and also advances against shares aggregate to Rs.315.36 crore (previous year Rs.401.98 crore).

Derivates : Interest Rate Swaps.

i) The Notional principal of Interest Rate Swap transactions outstanding at the year end amounted to Rs.3470.25 crore (previous year - Rs.2094.00 crore).

ii) Interest Rate Swaps in Indian rupees were undertaken for hedging Tier II Bonds, Term Loans, Foreign Currency Loans, Refinances and in US Dollars for hedging Fixed Rate Liabilities.

iii) The Bank has entered into Floating to Fixed or Fixed to Floating Interest Rate Swap transactions for hedging and trading during the year.

iv) The losses which could be incurred if counterparties fail to fulfil their obligations are estimated at Rs.1.97 crore (previous year Rs.2.33 crore).

v) Collateral needed on entering into swaps is NIL.

vi) Concentration of credit risk arising from swaps pertain to Banking Industry.

The fair value of the total Swap Book is Rs.(-) 22.72 crore (previous year Rs.(+)36.68 crore). All underlyings for hedge transactions are on accrual basis.

3. FIXED ASSETS

Documentation formalities are yet to be completed in respect of certain immovable properties held by the Bank at written down value of Rs.11.76 crore in respect of which steps have already been initiated (previous year Rs.15.17 crore)

4. INCOME TAX

The Bank considers that provision for Income tax held in its accounts is adequate on the subsequent basis:

Earning:   Approval pending.