auditors’ report to the members of …krishna bhima samruddhi local area bank limited rs. balance...

AUDITORS’ REPORT TO THE MEMBERS OF

KRISHNA BHIMA SAMRUDDHI LOCAL AREA BANK LIMITED We have audited the attached Balance Sheet of KRISHNA BHIMA SAMRUDDHI LOCAL AREA BANK LIMITED as at March 31, 2004 and the Profit and Loss account for the year ended on that date annexed thereto. The Balance Sheet and Profit and Loss Account have been drawn up in accordance with the provisions of the Section 29 of the Banking Regulation Act, 1949 read with section 211 of the Companies Act, 1956. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. On the basis of our audit we report that a) We have obtained all the information and explanations, which to the best of

our knowledge and belief, were necessary for the purposes of our audit and found them to be satisfactory;

b) The Transactions of the Bank, which have come to our notice, have been within the powers of the Bank;

c) in our opinion, proper books of accounts as required by the law have been

kept by the bank, so far as appears from our examination of the books maintained by the Bank;

d) the Balance Sheet and the Profit and Loss account dealt with by this report are in agreement with the books of account;

e) On the basis of the written representations received from the directors as

on March 31, 2004 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2004 form being appointed as director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

f) In our opinion, the Profit and Loss Account and the Balance Sheet comply with the accounting standards referred to in sub section 3(C) of section 211 of the Companies Act, 1956.

g) There is change in method of providing depreciation on assets of

low value costing less than Rs.5,000/- and such change has resulted in lower charge to Profit and Loss Account to the extent of Rs.1,62,148/-

h) We further report that subject to observation in Para (g), in our opinion and

to the best of our information and according to the explanations given to us, the Balance Sheet and the Profit and Loss Account read together with the notes on accounts attached thereto, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view:

i. in the case of the Balance Sheet, of the state of affairs of the bank

as at March 31, 2004 and ii. in the case of Profit and Loss account, of the profits of the bank for

the year ended on that date. for V. NAGARAJAN & Co.,

Chartered Accountants Hyderabad, 23rd April, 2004

(V. NAGARAJAN) Partner

KRISHNA BHIMA SAMRUDDHI LOCAL AREA BANK LIMITED

Rs. BALANCE SHEET AS ON Sch 31-Mar-04 31-Mar-03

CAPITAL AND LIABILITIES Capital 1 50,000,000 50,000,000 Reserves and Surplus 2 3,068,392 2,319,945 Deposits 3 45,972,524 24,487,337 Borrowings 4 - - Other Liabilities and Provisions 5 1,325,365 808,650 Total 100,366,282 77,615,932 ASSETS

Cash and Balances with Reserve Bank of India 6 715,966 622,662 Balances with Banks and Money at Call and Short Notice 7 12,035,706 19,570,144 Investments 8 22,629,798 12,951,000 Advances 9 59,616,873 39,738,815 Fixed Assets 10 2,023,207 2,074,523 Other Assets 11 3,344,731 2,658,788 Total 100,366,282 77,615,932 Contingent Liabilities 12 - - Principal Accounting Policies 18 Notes on Accounts 19

In terms of our report of even date for and on behalf of Board of Directors

for V.NAGARAJAN & CO., Chartered Accountants

Place: Hyderabad Managing Director Director Date: April 23, 2004

(V.NAGARAJAN) Partner Director Director

Audited Financial Statements for the financial year ended March 31, 2004


PROFIT AND LOSS ACCOUNT 31-Mar-04 31-Mar-03

Sch I. INCOME

Interest Earned 13 11,452,077 7,399,062 Other Income 14 2,732,001 1,000,858

Total 14,184,078 8,399,920

II. EXPENDITURE

Interest Expended 15 3,030,244 1,056,644 Operating Expenses 16 9,761,979 6,434,302 Provisions and Contingencies 17 643,408 303,801

Total 13,435,631 7,794,747

III. PROFIT

Net Profit for the Year 748,447 605,175 Prior Year adjustments - (295,366) Add: Profit Brought Forward 1,435,282 1,246,508

Total 2,183,729 1,556,317

IV. APPROPRIATIONS

Transfer to Statutory Reserves 149,689 121,035 Investment Fluctuation Reserve 220,000 - Balance Carried Over to Balance Sheet 1,814,039 1,435,282

Total 2,183,729 1,556,317

Principal Accounting Policies 18 Notes on Accounts 19

In terms of our report of even date for and on behalf of Board of Directors for V.NAGARAJAN & CO.,

Chartered Accountants Place: Hyderabad Managing Director Director Date: April 23, 2004

(V.NAGARAJAN)

Par ner t Director Director



Rs.

SCHEDULES TO BALANCE SHEET AS ON 31-Mar-04 31-Mar-03 SCHEDULE 1:CAPITAL

Authorised Capital 50,000,000 50,000,000 50,00,000 Equity Shares of Rs. 10 each Issued, Subscribed, and Paid-up capital 50,000,000 50,000,000 50,00,000 Equity Shares of Rs. 10 each Total 50,000,000 50,000,000

SCHEDULE 2:RESERVES AND SURPLUS

I.Statutory Reserves Opening Balance 432,662 311,627 Additions during the year 149,689 121,035 Deductions during the year - - Total 582,351 432,662 II.Investment Fluctuation Reserve Opening Balance - - Additions during the year 220,000 - Total 220,000 - III. Balance in Profit and Loss Account Opening Balance 1,887,283 1,246,509 Additions during the year 378,757 188,774 Additions(Deferred Tax Assets due to initial adoption of AS-22)

- 452,000

Total 2,266,041 1,887,283

Grand Total (I to III) 3,068,392 2,319,945

SCHEDULE 3:DEPOSITS

A I. Savings Bank Deposits 9,313,136 3,225,007 II. Term Deposits (i) From Banks - - (ii) From Others 36,659,388 21,262,330 Total 45,972,524 24,487,337 B. I. Deposits of branches in India 45,972,524 24,487,337 Total 45,972,524 24,487,337

In terms of our report of even date For and on behalf of Board of Directors for V.NAGARAJAN & CO.,

Chartered Accountants Place: Hyderabad Date: April 23, 2004 Managing Director Director

(V.NAGARAJAN)

Partner Director Director



Rs. SECHUDLES TO BALANCE SHEET AS ON 31-Mar-04 31-Mar-03 SCHEDULE 4:BORROWINGS I. Borrowings in India - - II. Borrowings outside India - - Total - - SCHEDULE 5:OTHER LIABILITIES AND PROVISIONS

I. Others (including provisions) 1,325,365 808,650 - Total 1,325,365 808,650 SCHEDULE 6:CASH AND BALANCES WITH RESERVE BANK OF INDIA I. Cash in hand 715,966 622,662 (includ ng foreign currency notes) i Total 715,966 622,662 SCHEDULE 7:BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE I. In India i. Balance with banks a. in current accounts 4,926,631 3,650,736 b. in other deposit accounts 7,109,075 15,919,408 Total 12,035,706 19,570,144 SCHEDULE 8:INVESTMENTS I. Investments in India i. Government Securities 13,968,150 11,951,000 ii. Other approved securities 7,661,648 - iii.Shares - - iv.Debentures and Bonds 1,000,000 1,000,000 Total 22,629,798 12,951,000

In terms of our report of even date For and on behalf of Board of Directors for V.NAGARAJAN & CO.,

Chartered Accountants Place: Hyderabad Managing Director Director Date: April 23, 2004

(V.NAGARAJAN) Director Director

Partner


KRISHNA BHIMA SAMRUDDHI LOCAL AREA BANK LIMITED SCHEDULES TO BALANCE SHEET AS ON 31-Mar-04 31-Mar-03

SCHEDULE 9:ADVANCES A i) Secured by Tangible Assets 55,786,967 34,458,375 ii) Covered by Bank/Government Guarantee - - iii) Unsecured 3,829,906 5,280,440 59,616,873 39,738,815 B I) Advances in India i) Priority Sectors 58,323,701 39,323,557 ii) Public Sector - - iii) Banks - - iv) Others 1,293,172 415,258

59,616,873 39,738,815 Total 59,616,873 39,738,815 SCHEDULE 10:FIXED ASSETS I Other Fixed assets (including furniture and fixtures) At cost as on 31st March of the preceding year

3,026,009 1,605,487

Additions during the year 897,761 1,420,522 Deductions during the year 417,056 - Depreciation to date 1,483,507 951,486 Total 2,023,207 2,074,523 SCHEDULE 11:OTHER ASSETS - I. Interest accrued on investments and loans 1,598,432 1,313,023 II. Taxes paid in advance / tax deducted at source 137,946 251,604 III. Stationery and stamps 43,274 63,781 IV. Non-banking assets acquired in satisfaction of claims

- -

V. Deferred Tax Assets ( Net) 270,000 337,000 VI. Others 1,295,079 693,380 Total 3,344,731 2,658,788 SCHEDULE 12:CONTINGENT LIABILITIES I. Claims against the bank not acknowledged as debts

- -

II. Liability for partly paid investments - - III. Liability on account of outstanding forward exchange contracts

- -

IV. Guarantees given on behalf of constituents V. Acceptances, endorsements and other obligations - - VI. Other items for which the bank is contingently liable.

- -

Total - - In terms of our report of even date for and on behalf of Board of Directors



(V.NAGARAJAN) Director Director

Partner


KRISHNA BHIMA SAMRUDDHI LOCAL AREA BANK LIMITED Rs.

PROFIT AND LOSS ACCOUNT 31-Mar-04 31-Mar-03 SCHEDULE 13: INTEREST EARNED I. Interest/discount on advances/bills/loans 9,689,927 5,870,863 II. Income on Investments 1,576,449 422,354 III.Interest on balances with RBI and other inter-bank funds

185,701 1,105,845

Total 11,452,077 7,399,062 SCHEDULE 14:OTHER INCOME I. Profit on sale of Investments 1,246,027 - II. Miscellaneous Receipts 1,485,974 1,000,858 Total 2,732,001 1,000,858 SCHEDULE 15:INTEREST EXPENDED I. Interest on Deposits 3,030,244 1,056,644 II.Interest on Others - - Total 3,030,244 1,056,644 SCHEDULE 16:OPERATING EXPENSES I. Payment to and provision for employees 3,474,011 2,250,311 II. Rent, taxes and lighting 459,952 333,338 III. Printing and Stationery 382,110 282,931 IV. Depreciation on bank property 647,423 612,217 V. Directors' fees and expenses 233,320 243,413 VI. Auditors Fees and Expenses 250,682 167,718 VII. Postage, Telegrams, Telephones. Etc. 411,785 221,548 VIII. Repairs and maintenance 123,771 42,104 IX. Insurance 188,600 108,819 X. Other expenditure 3,590,327 2,171,904 Total 9,761,979 6,434,302 SCHEDULE 17: PROVISIONS AND CONTINGENCIES I. Provision for Non Performing Assets 393,577 102,479 II. Provision on Standard Assets 46,731 28,322 III. Provision for Taxation 68,000 58,000 IV. Provision for Depreciation on Investments 67,000 115,000 V. Deferred Taxation 68,100 - Total 643,408 303,801

In terms of our report of even date for V.NAGARAJAN & CO., for and on behalf of Board of Directors

Chartered Accountants


(V.NAGARAJAN) Partner Director Director


SCHEDULE 18: PRINCIPAL ACCOUNTING POLICIES 1) Accounting Conventions:

a) The financial statements are drawn upon the historical cost basis unless

otherwise stated and conform to statutory provisions and practices prevalent in India.

2) Revenue recognition:

a) Incomes on advances classified under standard assets category is recognized

on accrual basis. b) Income on Non-performing advances is recognized as and when realized. c) Interest on Investments and Bank Fixed deposits is recognized on accrual

basis. 3) Investments:

1. In accordance with the Reserve Bank of India guidelines, for the purpose of

valuation investments are classified into “Held for trading” “Available for sale” and “Held to maturity” categories and valued as below:

a. Investment in the “Held to Maturity” categories is accounted for at acquisition cost. In case cost price is higher than the face value, the premium is amortized over the period from the date of purchase remaining to maturity.

b. Securities classified as “Available for sale” categories are marked to market at the year-end. Appreciation or Depreciation is calculated in respect of each category. Depreciation is provided for in the Profit and Loss Account while any appreciation is ignored.

c. Presently, there are no securities under “Held for Trading” category

2. For the purposes of disclosure in the Balance Sheet, Investments are classified under ‘Government Securities’, ‘Approved Securities’ and “Debentures and Bonds” under Schedule - 8.

4) Advances:

1. In accordance with the prudential norms prescribed by RBI from time to time advances against the security of the Intangible assets such as future crop and assets created out of such advances have been shown against the secured categories. The existence and valuation of such securities are monitored by the periodic verification conducted by the agents and employees of the bank and certified by the management.

2. The loans are classified as secured and un-secured after taking into consideration, the estimated value of primary security in terms of Livestock, Standing Crops and Other assets and collaterals wherever applicable.

5) Fixed Assets: a) Premises and other Fixed Assets have been accounted for at their historical

cost. b) Depreciation on fixed assets has been provided at the rates stipulated by

Schedule XIV of the Companies Act, 1956, except for computers where depreciation has been provided at 33.33% as per the RBI guidelines.

c) The bank has provided 100% depreciation for the assets, acquired during the year, costing Rs.1,000 and below as against Rs.5,000 till last financial year.

d) Change in practice has resulted in reduced provision for deprecation to the extent of Rs. 1,62,148/-

6) Provision for Taxation:

Provision for taxation is made on the basis of estimated tax liability with adjustment for deferred taxation in terms of the Accounting Standard - 22 issued by the Institute of Chartered Accountants of India.

7) Miscellaneous Expenditure:

a) Miscellaneous Expenditure comprising Preliminary and Pre-operative

Expenditure are shown under Other Assets and is amortized over a period of five years. The Pre-operative expenditure includes expenditure incurred up to the commencement of operations of the new branch.

8) Employee Benefits:

e) Provident Fund: Contribution is accounted on actual liability basis and paid in to

Government. f) Gratuity: is being computed as per statutory norms on actuarial valuation basis

and paid into a trust created with and for this purpose, through the group schemes of Life Insurance Corporation India.

SCHEDULE 19 – NOTES ON ACCOUNTS 1) Net Profit: As disclosed in the Profit and Loss Account is after considering the

following : a) Provision for Non Performing Assets and write offs amounting to

Rs.3,93,577 and Rs.46,731 towards provisioning on standard assets in accordance with RBI norms.

b) Provision for Income Tax: Current Tax Rs. 68,000

Deferred Tax Rs. 67,000 c) Total Income, expenditure and Surplus/(Deficit) of foreign branches is Rs.

Nil 2) Preoperative Expenditure in respect of the new branches commenced operations

during the year or about to commence operations: Rs.9,38,151/- 3) The loan portfolio has been classified as per the norms prescribed for classification

by the Reserve Bank of India.

Rs. Asset Classification Amount Standard 5,53,09,171 Sub-standard 22,22,417 Doubtful 19,08,882

Loss Assets 1,76,403 Total 5,96,16,873

4) Movement of NPAs:

Rs. Particulars Gross NPAs Provision Net NPAs

As at 31-03-2003 31,21,843 3,51,613 27,70,230 Additions 20,48,672 4,96,695 15,51,977 Recoveries 10,39,216 1,03,118 9,36,098 As at 31-03-2004 41,31,299 7,45,190 33,86,109

5) Capital adequacy ratio of the bank is 65% as on 31 March 2004. 6) Maturity Pattern of Deposits, Loans and Advances, Investments in Securities and

Borrowings: Rs. Lakhs

Period Deposits Loans & Advances

Investments in Securities

1 to 14 days 131 112 - 15 to 28 days 20 4 - 29 to 3 months 33 120 - Over 3 months and upto 6 months 31 114 - Over 6 months and upto 1 year 59 151 - Over 1 year and upto 3 years 141 91 10 Over 3 year and upto 5 years 31 5 15 Over 5 years 13 0 194

Total 460 596 219

7) Deferred Taxation

Rs. Particulars Deferred Tax

Asset Deferred

Tax Liability Opening Balance 3,37,000 Nil Profit and Loss Account 2,49,000 Deprecation (Reversal) 3,000 Nil Preliminary Expenses W/off (Reversal)

1,89,000 Nil

Closing Balance 2,27,000 Nil

8) Other additional information: In Percentage

31.3.04 31.3.03 Operating Profit / Average Assets 1.6 1.2 Return on Assets 0.8 0.9 Interest Income to Total Assets 11.4 9.5 Non-Interest Income to Total Assets 2.7 1.3 NPA to Advances 6.9 7.8 Credit-Deposit Ratio 130 162 Capital Adequacy Ratio 65 103 Business per employee (Rs. in thousands) 3,200 2,569 Profit per employee (Rs. in thousands) 23 24

9) The previous year figures have been re-grouped / rearranged to conform to the

current classification. 10) Wherever certain items are not relevant or applicable to the bank, as per the

disclosure requirements of Third Schedule of the Banking Regulations Act, the same has been omitted.

In terms of our report of even date for and on behalf of the Board of Director


Managing Director Director (V.NAGARAJAN) Partner Director Director Place: Hyderabad, Date: 23rd April, 2004

auditors’ report to the members of …krishna bhima samruddhi local area bank limited rs. balance...

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