Federal Bank Ltd. - Quarterly/Annual Result Disclosures and Notes dated 31 Dec 2018

Auditor and Management Disclosures and Notes for the quarterly results dated 31 Dec 2018

1. The above Standalone Unaudited Financial Results for the quarter and nine months ended December 31, 2018 were reviewed by the Audit Committee and approved by the Board of Directors at its meeting held on January 17, 2019. These Results have been subjected to "Limited review" by the Statutory Central Auditors of the Bank and an unqualified review report has been issued.

2. The Bank has made provision for Non Performing Assets as stipulated under Reserve Bank of India (RBI) norms. Further, provision for standard assets including requirements for exposures to entities with Unhedged Foreign Currency Exposures and provision for restructured advances have been made as per RBI guidelines.

3. The Bank has followed the same significant accounting policies in the preparation of the interim financial results as those followed in the annual financial statements for the year ended March 31, 2018.

4. In accordance with RBI Circular DBR.No.BP.BC.1/21.06.201/2015-16 on Basel III Capital Regulations dated July 01, 2015 and RBI Circular DBR.No.BP.BC.80/21.06.201/2014-15 dated March 31, 2015 - 'Prudential Guidelines on Capital Adequacy and Liquidity Standards - amendments'. Banks are required to make Pillar 3 disclosure requirements including Leverage Ratio disclosure requirements that are to be made along with the publication of Financial Results. These disclosures have not been subjected to audit or review by the Statutory Central Auditors of the Bank.

5. The Business operations of the Bank are largely concentrated in India and for the purpose of Segment reporting, the bank is considered to operate only in domestic segment, though the bank has its operations in International Finance Service Centre (IFSC) Banking Unit in Gujarat International Finance Tec-city (GIFT). The business conducted from the same is considered as a part of Indian operations.

6. Other income includes fees earned from providing services to customers, commission from non-fund based banking activities, earnings from foreign exchange and derivative transactions, selling of third party products, profit on sale of investments (net), recoveries from advances written off etc.

7. During the quarter and nine months ended December 31, 2018, the Bank has allotted 3,302,388 and 11,760,856 equity shares of Rs. 2 each, pursuant to the exercise of stock options by employees.

8. In terms of RBI Circular No.DBR.No.BP.BC.113/21.04.048/2017-18 dated June 15, 2018, the Bank had exercised the option of spreading the provision for depreciation on marking to market bank's investment in Government Securities held under AFS and HFT category. Accordingly, such provision for depreciation aggregating to Rs. 5,893.97 Lakhs as at June 30, 2018 was being amortised equally over four quarters. However, as on December 31, 2018, provision for depreciation towards marking such securities to market works out to Rs. 72.38 Lakhs only and accordingly, the Bank has carried forward unamortised depreciation of Rs. 36.19 Lakhs for amortisation in the quarter ending March 31, 2019.

9. Ministry of Labour and Employment, Government of India on March 29, 2018 has enhanced the gratuity ceiling to an employee under Payment of Gratuity Act, 1972 to Rs. 20 Lakhs from earlier limit of Rs. 10 lakhs. This change has resulted to an incremental gratuity liability amounting to Rs. 7,143.90 lakhs. As per the RBI circular DBR.BP.9730/21.04.018/2017-18 dated April 27, 2018 the Bank has an option to spread the impact of change in gratuity ceiling over four quarters beginning with the quarter ended March 31, 2018. The Bank had availed the option to spread the incremental gratuity expenditure over four quarters beginning with the quarter ended March 31, 2018. Accordingly, during the quarter ended March 31, 2018 the Bank has charged to the profit and loss account an amount off 1,785.97 Lakhs and there was an unamortised gratuity expenditure of Rs. 5,357.93 Lakhs. Based on the correspondence with the Reserve Bank of India (RBI) during the quarter ended June 30, 2018, the Bank has charged to the profit and loss account the entire unamortised gratuity expenditure of Rs. 5,357.93 Lakhs.

10. Previous period's / year's figures have been regrouped / reclassified, where necessary to conform to current period's classification.

Shyam Srinivasan
Managing Director & CEO