DBOD.No. BP.BC.32/21.04.018/98

April 29, 1998

Vaishakha 9, 1920 (Saka)

All Commercial Banks

(excluding Regional Rural Banks)

Dear Sir,

Capital adequacy, disclosures in balance sheets

(i) Capital Adequacy - Risk Weights in respect of investments

Under the existing instructions (c.f. para. 6A of DBOD. Circular No. BP. BC. 117/21.01.002/92 dated April 22, 1992), investments in government and other trustee securities carry zero risk weight and other investments carry 100 per cent risk weight.

It is clarified that investments in Indira Vikas Patra/Kisan Vikas Patra (IVP/KVP) and investments in Bonds and Debentures where payment of interest and principal is guaranteed by Central/State Government shall also carry zero risk weight. All other investments shall carry 100 percent risk weight.

(ii) Disclosures in Balance Sheets

In terms of paragraph 2 of circular DBOD. No. BP. BC. 9/21.04.018/98 dated January 27, 1998, banks were advised to disclose certain business ratios in the 'Notes on accounts' commencing from the Balance Sheet as at 31st March 1998.

In this connection, it is clarified as under:

(a) In the following ratios viz. (i) interest income as percentage to working funds, (ii) non-interest income as percentage to working funds, (iii) operating profit as percentage to working Funds, 'working funds' should be reckoned as average of total of assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in form X under Section 27 of Banking Regulation Act, 1949 during the 12 months of the financial year. However, the ratio of 'return on assets' would be with reference to working funds (i.e. total of assets excluding accumulated losses, if any) on the balance sheet date.

(b) For the purpose of computation of the business per employee (deposits plus advances) inter bank deposits may be excluded.

Yours faithfully,

(C.R. Muralidharan)

General Manager