Unaudited Second Quarter 2022 - 23

INTERIM FINANCIAL STATEMENTS
As onAs
Chaitra 30, 2076
on Poush (12 April
30, 2079 2020) 2023)
(14 January
(Un-audited)
(Un-audited)
Siddhartha Bank Limited
Condensed Consolidated Statement of Financial Position
As on Quarter ended Poush, 2079
Amount in NPR
Group Bank
Immediate Previous Immediate Previous Year

This Quarter This Quarter
Year Ending Ending
Ending Ending
(Audited) (Audited)
Assets
Cash and cash equivalent 6,268,640,481 7,936,444,278 6,562,687,021 7,928,989,024
Due from Nepal Rastra Bank 9,889,239,323 5,730,448,535 9,889,239,323 5,730,448,535
Placements with Bank and Financial Institutions 1,159,215,303 320,313,255 1,159,215,303 320,313,255
Derivative financial instruments 12,771,171 19,694,323 12,771,171 19,694,323
Other trading assets 132,375,472 158,762,749 - -
Loans and advances to B/FIs 5,977,656,778 6,403,394,142 5,977,656,778 6,403,394,142
Loans and advances to customers 177,613,550,833 178,597,694,694 177,601,676,739 178,587,363,232
Investment securities 47,926,509,734 57,591,637,732 47,447,883,734 57,368,161,732
Current tax assets 405,863,581 214,652,905 400,776,892 221,065,203
Investment in subsidiaries - - 51,000,000 51,000,000
Investment in associates - - - -
Investment property 218,938,434 213,307,612 218,938,434 213,307,612
Property and equipment 3,245,466,056 3,111,858,718 3,214,685,088 3,077,068,355
Goodwill and Intangible assets 150,822,000 73,722,348 148,910,089 71,490,971
Deferred tax assets - - - -
Other assets 4,640,151,109 4,364,344,920 4,612,552,193 4,334,727,127
Total Assets 257,641,200,275 264,736,276,211 257,297,992,765 264,327,023,510
Liabilities
Due to Bank and Financial Institutions 6,132,319,639 7,234,641,506 6,132,319,639 7,234,641,506
Due to Nepal Rastra Bank 4,401,361,474 24,965,102,753 4,401,361,474 24,965,102,753
Derivative financial instruments 12,259,692 19,359,606 12,259,692 19,359,606
Deposits from customers 204,731,982,624 191,156,475,501 205,129,144,738 191,550,643,583
Borrowing - 1,022,800,000 - 1,022,800,000
Current Tax Liabilities - - - -
Provisions - - - -
Deferred tax liabilities 370,241,775 222,407,228 387,057,835 239,223,287
Other liabilities 6,955,363,751 6,468,899,300 6,565,169,252 6,034,819,684
Debt securities issued 11,662,559,000 11,662,559,000 11,662,559,000 11,662,559,000
Subordinated Liabilities - - - -
Total liabilities 234,266,087,955 242,752,244,893 234,289,871,630 242,729,149,419
Equity
Share capital 14,089,980,190 12,524,426,835 14,089,980,190 12,524,426,835
Share premium - - - -
Retained earnings 174,767,870 1,449,435,636 96,568,499 1,359,868,480
Reserves 8,905,548,579 7,795,961,806 8,821,572,447 7,713,578,776
Total equity attributable to equity holders 23,170,296,640 21,769,824,277 23,008,121,136 21,597,874,092
Non-controlling interest 204,815,680 214,207,041 - -
Total equity 23,375,112,320 21,984,031,318 23,008,121,136 21,597,874,092
Total liabilities and equity 257,641,200,275 264,736,276,211 257,297,992,765 264,327,023,510
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Condensed Consolidated Statement of Profit or Loss
For the Quarter ended Poush 2079
Amount in NPR
Group Bank
Current Year Previous Year Corresponding Current Year Previous Year Corresponding
Particulars Up to This Quarter Up to This Quarter Up to This Quarter Up to This Quarter
This Quarter This Quarter This Quarter This Quarter
(YTD) (YTD) (YTD) (YTD)
Interest income 6,574,130,483 13,444,697,195 4,492,825,710 8,993,175,477 6,564,189,204 13,422,628,340 4,484,575,436 8,978,589,285
Interest expense 4,671,434,820 9,399,116,082 3,226,063,238 5,969,222,789 4,674,892,295 9,404,754,192 3,227,868,198 5,971,640,264
Net interest income 1,902,695,662 4,045,581,113 1,266,762,472 3,023,952,688 1,889,296,909 4,017,874,148 1,256,707,238 3,006,949,021
Fees and commission income 403,013,896 828,355,057 375,339,806 867,436,241 387,479,666 774,657,421 344,104,081 764,115,887
Fees and commission expense 91,114,079 177,450,892 85,594,797 166,812,028 88,028,315 161,845,930 80,059,280 149,540,407
Net fee and commission income 311,899,817 650,904,165 289,745,009 700,624,213 299,451,352 612,811,491 264,044,801 614,575,480
Net interest, fee and commission income 2,214,595,479 4,696,485,278 1,556,507,481 3,724,576,901 2,188,748,260 4,630,685,639 1,520,752,039 3,621,524,501
Net trading income 91,012,263 127,196,137 133,361,851 235,402,858 68,919,678 123,940,807 119,123,604 252,585,534
Other operating income 69,688,230 214,587,845 99,704,498 461,826,419 64,483,378 203,201,092 99,677,509 445,062,903
Total operating income 2,375,295,971 5,038,269,260 1,789,573,830 4,421,806,178 2,322,151,316 4,957,827,539 1,739,553,152 4,319,172,938
Impairment charge/(reversal) for loan and other
299,409,863 1,192,475,570 (137,327,920) 71,185,719 299,409,863 1,192,475,570 (137,327,920) 71,185,719
losses
Net operating income 2,075,886,108 3,845,793,690 1,926,901,750 4,350,620,459 2,022,741,453 3,765,351,969 1,876,881,072 4,247,987,219
Operating expense
Personnel expense 748,684,253 1,440,004,178 650,134,277 1,381,190,240 736,751,408 1,418,441,305 638,202,402 1,357,576,869
Other operating expense 299,384,654 593,623,738 272,842,998 529,045,440 293,857,224 583,191,163 267,990,335 518,042,978
Depreciation & Amortisation 57,929,399 110,849,826 47,013,994 93,219,652 55,730,657 106,452,064 46,184,472 91,515,549
Operating Profit 969,887,803 1,701,315,948 956,910,481 2,347,165,127 936,402,165 1,657,267,436 924,503,863 2,280,851,823
Non operating income 1,100,000 1,187,045 7,422,378 7,691,879 1,100,000 1,187,045 7,422,978 7,480,147
Non operating expense - - 15,619,158 16,694,239 - - 15,619,158 16,694,239
Profit before income tax 970,987,803 1,702,502,993 948,713,701 2,338,162,767 937,502,165 1,658,454,481 916,307,683 2,271,637,731
Income tax expense
Current Tax 284,598,387 510,469,250 297,446,724 714,281,442 274,552,696 497,254,696 287,724,918 694,323,931
Deferred Tax - - - - - - - -
Profit for the period 686,389,416 1,192,033,743 651,266,977 1,623,881,325 662,949,469 1,161,199,785 628,582,765 1,577,313,800
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Statement of Comprehensive Income
For the Quarter ended Poush 2079
Amount in NPR
Group Bank
Particulars Up to This Quarter Up to This Quarter Up to This Quarter Up to This Quarter
This Quarter This Quarter This Quarter This Quarter
(YTD) (YTD) (YTD) (YTD)
Profit or loss for the period 686,389,416 1,192,033,743 651,266,977 1,623,881,325 662,949,469 1,161,199,785 628,582,765 1,577,313,800
Other comprehensive income, net of income tax
a) Items that will not be reclassified to profit or loss
Gains/(losses) from investments in equity instruments measured at fair value 492,781,826 492,781,826 311,156,176 (623,931,242) 492,781,826 492,781,826 311,156,176 (623,931,242)
Gains/(losses) on revalution - - - - - - - -
Actuarial gains/(losses) on defined benefit plans - - - - - - - -
Income tax relating to above items (147,834,548) (147,834,548) (93,346,852) 187,179,373 (147,834,548) (147,834,548) (93,346,852) 187,179,373
Net other comprehsive income that will not be reclassified to profit or loss 344,947,278 344,947,278 217,809,324 (436,751,869) 344,947,278 344,947,278 217,809,324 (436,751,869)
b) Items that are or may be reclassified to profit or loss

Gains/(losses) on cash flow hedge - - - - - - - -
Exchange gains/(losses) (arising from translating financial assets of foreign operation) - - - - - - - -
Income tax relating to above items - - - - - - - -
Reclassify to profit or loss - - - - - - - -
Net other comprehsive income that are or may be reclassified to profit or loss - - - - - - - -
c) Share of other comprehensive income of associate accounted as per equited method - - - - - - - -
Other comprehensive income for the year, net of income tax 344,947,278 344,947,278 217,809,324 (436,751,869) 344,947,278 344,947,278 217,809,324 (436,751,869)
Total Comprehensive Income for the period 1,031,336,694 1,536,981,021 869,076,301 1,187,129,456 1,007,896,747 1,506,147,063 846,392,089 1,140,561,931
Total comprehensive income attributable to:

Equity holders of the Bank 1,019,851,120 1,521,872,382 857,961,037 1,164,311,369 1,007,896,747 1,506,147,063 294,169,842 294,169,842
Non-controlling interest 11,485,574 15,108,639 11,115,264 22,818,087 - - - -
Total 1,031,336,694 1,536,981,021 869,076,301 1,187,129,456 1,007,896,747 1,506,147,063 294,169,842 294,169,842
Earning per share

Basic Earnings Per Share 4.79 8.35 4.54 11.36 4.71 8.24 4.46 11.19
Annualized Basic Earnings Per Share 19.87 16.75 18.63 22.66 19.52 16.53 18.30 22.33
Annualized Diluted Earnings Per Share 19.87 16.75 18.63 22.66 19.52 16.53 18.30 22.33
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Ratios as per NRB Directive
Group Bank
Particulars Up to This Quarter Up to This Quarter Up to This Quarter
This Quarter This Quarter Up to This Quarter (YTD) This Quarter This Quarter
(YTD) (YTD) (YTD)
Capital Fund to RWA 13.03% 13.03% 12.89% 12.89% 13.02% 13.02% 12.88% 12.88%
Non-Performing Loan (NPL) to Total Loan 2.87% 2.87% 0.37% 0.37% 2.87% 2.87% 0.37% 0.37%
Total loan loss provision to Total NPL 93.96% 93.96% 478.17% 478.17% 93.96% 93.96% 478.17% 478.17%
Cost of Funds 8.70% 8.70% 6.59% 6.59% 8.70% 8.70% 6.59% 6.59%
Credit to Deposit Ratio 83.30% 83.30% 88.60% 88.60% 83.30% 83.30% 88.60% 88.60%
Base Rate 10.91% 10.91% 8.58% 8.58% 10.91% 10.91% 8.58% 8.58%
Interest Rate Spread 4.22% 4.22% 2.68% 2.68% 4.22% 4.22% 2.68% 2.68%
Return on Equity (Annualized) 12.34% 10.41% 12.32% 14.98% 12.33% 10.44% 12.32% 15.03%
Return on Assets (Annualized) 1.07% 0.90% 1.12% 1.36% 1.05% 0.89% 1.08% 1.35%
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Condensed Consolidated Statement of Cash Flows
For the period ended Poush 2079
Amount in NPR
Group Bank
Corresponding Corresponding
Particulars Upto This Quarter Previous Year Upto This Quarter Previous Year
Up to this Quarter Up to this Quarter
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received 11,696,787,721 8,177,841,582 11,699,044,434 8,177,995,117
Fees and other income received 832,691,027 881,876,140 774,657,421 764,115,887
Dividend received - - - -
Receipts from other operating activities 195,686,762 281,119,807 195,176,362 280,456,265
Interest paid (8,816,557,171) (5,708,813,442) (8,822,195,281) (5,711,230,916)
Commission and fees paid (177,450,892) (166,812,028) (161,845,930) (149,540,407)
Cash payment to employees (1,147,379,689) (1,109,936,164) (1,125,816,816) (1,086,322,793)
Other expense paid (593,622,155) (545,739,679) (583,191,163) (534,737,217)
Operating cash flows before changes in operating assets and liabilities 1,990,155,602 1,809,536,217 1,975,829,026 1,740,735,936
(Increase)/Decrease in operating assets

Due from Nepal Rastra Bank (4,158,790,788) (597,308,410) (4,158,790,788) (597,308,410)
Placement with bank and financial institutions (838,902,048) 2,277,519,476 (838,902,048) 2,277,519,476
Other trading assets 3,023,138 24,281,305 - -
Loan and advances to bank and financial institutions 425,737,364 (683,788,514) 425,737,364 (683,788,514)
Loans and advances to customers (214,007,617) (18,420,349,859) (212,419,899) (18,422,157,612)
Other assets (271,860,005) 1,099,743,385 (270,901,915) 1,098,645,191
(5,054,799,957) (16,299,902,617) (5,055,277,286) (16,327,089,869)
Increase/(Decrease) in operating liabilities
Due to bank and financial institutions (1,102,321,867) (2,209,421,134) (1,102,321,867) (2,209,421,134)
Due to Nepal Rastra Bank (20,563,741,279) 3,235,027,256 (20,563,741,279) 3,235,027,256
Deposit from customers 13,575,507,123 8,086,769,651 13,578,501,155 7,874,420,282
Borrowings (1,022,800,000) 949,600,000 (1,022,800,000) 949,600,000
Other liabilities 293,502,150 (2,224,384,593) 338,976,933 (1,999,555,026)
(8,819,853,873) 7,837,591,180 (8,771,385,057) 7,850,071,378
Net cash flow from operating activities before tax paid (11,884,498,228) (6,652,775,220) (11,850,833,317) (6,736,282,555)
Income taxes paid (700,086,114) (785,003,993) (676,966,386) (764,002,235)
Net cash flow from operating activities (12,584,584,342) (7,437,779,213) (12,527,799,702) (7,500,284,790)
CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investment securities (219,577,869) (298,424,714) - -
Receipts from sale of investment securities 10,413,059,824 9,278,224,269 10,413,059,824 9,278,224,269
Purchase of property and equipment (226,702,075) (147,290,596) (226,633,175) (146,130,539)
Receipt from the sale of property and equipment - 4,915,101 - -
Purchase of intangible assets (95,689,078) - (95,689,078) -
Receipt from the sale of intangible assets - - - -
Purchase of investment properties - - - -
Receipt from the sale of investment properties - - - -
Interest received 1,639,079,815 831,905,683 1,615,232,137 817,617,765
Dividend received 135,074,086 423,909,493 133,986,920 423,909,493
Net cash used in investing activities 11,645,244,703 10,093,239,236 11,839,956,628 10,373,620,989
CASH FLOWS FROM FINANCING ACTIVITIES

Receipt from issue of debt securities - - - -
Repayment of debt securities - - - -
Receipt from issue of subordinated liabilities - - - -
Repayment of subordinated liabilities - - - -
Receipt from issue of shares - - - -
Dividends paid (132,402,774) (162,217,244) (82,397,545) (82,217,244)
Interest paid (582,558,911) (260,409,348) (582,558,911) (260,409,348)
Other receipt/payment (13,502,473) (11,981,342) (13,502,473) (11,981,342)
Net cash from financing activities (728,464,157) (434,607,933) (678,458,929) (354,607,933)
Net increase (decrease) in cash and cash equivalents (1,667,803,796) 2,220,852,089 (1,366,302,003) 2,518,728,265
Cash and cash equivalents at Shrawan 1, 2079 7,936,444,278 6,198,805,271 7,928,989,024 5,976,055,588
Effect of exchange rate fluctuations on cash and cash equivalents held - - - -
Cash and cash equivalents at Poush end 2079 6,268,640,481 8,419,657,360 6,562,687,021 8,494,783,854
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Condensed Consolidated Statement of Changes in Equity
Group
Amount in NPR
Attributable to equity holders of the Bank
Exchange
Revaluation Non-controlling interest Total equity
Share Capital Share premium General reserve equalisation Regulatory reserve Fair value reserve Retained earning Other reserve Total
reserve
reserve
Balance at Shrawan 1, 2078 10,962,299,199 - 3,219,181,780 31,125,658 643,992,682 2,686,056,366 - 1,913,477,937 1,129,750,959 20,585,884,581 225,859,501 20,811,744,082
Profit for the period - - - - - - - 1,601,063,238 - 1,601,063,238 22,818,086 1,623,881,324
Other comprehensive income - - - - - (436,751,869) - - - (436,751,869) - (436,751,869)
Total comprehensive income for the year - - - - - (436,751,869) - 1,601,063,238 - 1,164,311,368 22,818,086 1,187,129,455
Transfer to reserve during the period - - 317,837,704 - 126,296,688 - - (891,536,941) 447,402,549 - - -
Transfer from reserve during the period - - - - - - - - (11,981,342) (11,981,342) - (11,981,342)
Contributions from and distributions to owners
Share issued - - - - - - - - - - - -
Share based payments - - - - - - - - - - - -
Dividends to equity holders - - -
Bonus shares issued 1,562,127,636 - - - - - - (1,562,127,636) - - - -
Cash dividend paid - - - - - - - (123,017,244) - (123,017,244) (39,200,000) (162,217,244)
Total contributions by and distributions 1,562,127,636 - - - - - - (1,685,144,880) - (123,017,244) (39,200,000) (162,217,244)
Balance at Poush end 2078 12,524,426,835 - 3,537,019,484 31,125,658 770,289,370 2,249,304,497 - 937,859,356 1,565,172,166 21,615,197,364 209,477,587 21,824,674,952
Balance at Shrawan 1, 2079 12,524,426,834 - 3,806,241,487 45,698,341 848,154,757 1,177,672,136 - 1,449,435,636 1,918,195,087 21,769,824,277 214,207,039 21,984,031,315
Profit for the period - - - - - - - 1,176,925,104 - 1,176,925,104 15,108,639 1,192,033,743
Other comprehensive income - - - - - 344,947,278 - - - 344,947,278 - 344,947,278
Total comprehensive income for the year - - - - - 344,947,278 - 1,176,925,104 - 1,521,872,382 15,108,639 1,536,981,021
Transfer to reserve during the period - - 233,812,489 6,525,624 295,958,037 - - (1,278,141,968) 741,845,819 - - -
Share issued - - - - - - - - - - - -
Bonus shares issued 1,565,553,357 - - - - - - (1,065,553,357) (500,000,000) - - -
Cash dividend paid - - - - - - - (107,897,545) - (107,897,545) (24,500,000) (132,397,545)
Total contributions by and distributions 1,565,553,357 - - - - - - (1,173,450,902) (500,000,000) (107,897,545) (24,500,000) (132,397,545)
Balance at Poush end 2079 14,089,980,190 - 4,040,053,975 52,223,965 1,144,112,794 1,522,619,414 - 174,767,871 2,146,538,432 23,170,296,639 204,815,680 23,375,112,319
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Condensed Consolidated Statement of Changes in Equity
Bank
Amount in NPR
Attributable to equity holders of the Bank
Exchange
Revaluation Non-controlling interest Total equity
Share Capital Share premium General reserve equalisation Regulatory reserve Fair value reserve Retained earning Other reserve Total
reserve
reserve
Balance at Shrawan 1, 2078 10,962,299,199 - 3,191,648,969 31,125,658 643,992,682 2,686,056,366 - 1,808,628,800 1,078,054,653 20,401,806,327 - 20,401,806,327
Profit for the period - - - - - - - 1,577,313,800 - 1,577,313,800 - 1,577,313,800
Other comprehensive income - - - - - (436,751,869) - - - (436,751,869) - (436,751,869)
Total comprehensive income for the year - - - - - (436,751,869) - 1,577,313,800 - 1,140,561,931 - 1,140,561,931
Transfer to reserve during the period - - 315,462,760 - 126,296,688 - - (888,924,502) 447,165,055 - - -
Share issued - - - - - - - - - - - -
Bonus shares issued 1,562,127,636 - - - - - - (1,562,127,636) - - - -
Cash dividend paid - - - - - - - (82,217,244) - (82,217,244) - (82,217,244)
Total contributions by and distributions 1,562,127,636 - - - - - - (1,644,344,880) - (82,217,244) - (82,217,244)
Balance at Poush end 2078 12,524,426,835 - 3,507,111,729 31,125,658 770,289,370 2,249,304,497 - 852,673,219 1,513,238,366 21,448,169,671 - 21,448,169,671
Balance at Shrawan 1, 2079 12,524,426,833 - 3,775,841,483 45,698,341 848,154,757 1,177,672,136 - 1,359,868,481 1,866,212,062 21,597,874,092 - 21,597,874,091
Profit for the period - - - - - - - 1,161,199,785 - 1,161,199,785 - 1,161,199,785
Other comprehensive income - - - - - 344,947,278 - - - 344,947,278 - 344,947,278
Total comprehensive income for the year - - - - - 344,947,278 - 1,161,199,785 - 1,506,147,063 - 1,506,147,063
Transfer to reserve during the period - - 232,239,957 6,525,624 295,958,037 - - (1,276,548,866) 741,825,248 - - -
Share issued - - - - - - - - - - - -
Bonus shares issued 1,565,553,357 - - - - - - (1,065,553,357) (500,000,000) - - -
Cash dividend paid - - - - - - - (82,397,545) - (82,397,545) - (82,397,545)
Total contributions by and distributions 1,565,553,357 - - - - - - (1,147,950,902) (500,000,000) (82,397,545) - (82,397,545)
Balance at Poush end 2079 14,089,980,190 - 4,008,081,440 52,223,965 1,144,112,794 1,522,619,414 - 96,568,499 2,094,534,834 23,008,121,136 - 23,008,121,136
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Notes to the Interim Financial Statements
1. Basis of preparation
The interim condensed financial statements prepared for the second quarter of FY 2079/80 ending 14
January 2023 (Poush 30, 2079) are presented in accordance with Nepal Accounting Standard - NAS 34
on “Interim Financial Reporting” published by the Accounting Standards Board (ASB) Nepal and
pronounced by The Institute of Chartered Accountants of Nepal (ICAN). These interim condensed
financial statements should be read in conjunction with the audited financial statements for the year
ended 16 July 2022 (Ashadh 32, 2079). In order to conform to better presentation, previous year figures
and phrases have been adjusted where relevant.
1.1 Functional and Presentation Currency
The interim condensed financial statements of the Bank are presented in Nepalese Rupees (NPR), which
is the currency of the primary economic environment in which the Bank operates. The interim financial
information has been presented in Nepalese Rupees and has been shown in actual figure, unless
otherwise stated.
2. Statement of Compliance with NFRSs
The interim financial statements of the Bank which comprises Statement of Financial Position,
Statement of Profit or Loss, Statement of Other Comprehensive Income, Statement of Changes in Equity
and Statement of Cash Flows have been prepared in accordance with Nepal Financial Reporting
Standards comprising of Nepal Financial Reporting Standards and Nepal Accounting Standards
(hereafter referred as NFRS), laid down by the Institute of Chartered Accountants of Nepal and in
compliance with the requirements of the Companies Act, 2006.
3. Use of estimates, assumptions and judgments
The preparation of interim financial statements in conformity with Nepal Financial Reporting Standards
(NFRS) requires the management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised and in any future periods
affected.
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The most significant areas of estimation, uncertainty and critical judgments in applying accounting
policies that have most significant effect in the Financial Statements are as follows:
1. Going Concern
2. Fair Value of Financial Instruments
3. Impairment of Financial Assets
4. Taxation (Current as well as Deferred Tax)
5. Defined Benefit Plans
6. Useful Life-time of the Property, Plant and Equipment
7. Commitments and Contingencies
8. Classification of Investment Properties
4. Changes in accounting policies
There are no changes in accounting policies and methods of computation since the publication of
financial statements for the year ended 16 July 2022, unless otherwise indicated.
5. Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these
financial statements, unless otherwise indicated.
5.1 Cash and cash equivalents
Cash and Cash Equivalents include cash in hand, balances with banks and money at call and at short
notice. These are subject to insignificant risk of changes in their fair value and are used by the Bank in
the management of short term commitments.
5.2 Financial assets and Financial Liabilities
Initial Recognition
a. Date of Recognition
All financial assets and liabilities are initially recognized on the trade date, i.e. the date on which the
Bank becomes a party to the contractual provisions of the instrument. This includes ‘regular way
trades’. Regular way trade means purchases or sales of financial assets that required delivery of assets
within the time frame generally established by regulation or convention in the market place.
b. Recognition and Initial Measurement of Financial Instruments

The classification of financial instruments at the initial recognition depends on their purpose,
characteristics and the management’s intention in acquiring them. All financial instruments are
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measured initially at their fair value plus transaction costs that are directly attributable to acquisition
or issue of such financial instruments except in the case of such financial assets and liabilities at fair
value through profit or loss. Transaction costs in relation to financial assets and financial liabilities at
fair value through profit or loss are dealt within the Statement of Profit or Loss.
Classification and subsequent measurement of Financial Instruments
Classification and Subsequent Measurement of Financial Assets
At the inception, a financial asset is classified into one of the following:

(a) Financial assets at fair value through profit or loss
i. Financial assets held for trading
ii. Financial assets designated at fair value through profit or loss
(b) Financial assets measured at amortized cost
(c) Financial assets at fair value through other comprehensive income
The subsequent measurement of financial assets depends on their classification.
(a) Financial Assets at Fair Value through Profit or Loss
A financial asset is classified as fair value through profit or loss if it is held for trading or is designated at
fair value through profit or loss.
(a) (i) Financial Assets Held for Trading
Financial assets are classified as held for trading if they are acquired principally for the purpose of selling
or repurchasing in the near term or hold as a part of a portfolio that is managed together for short-term
profit or position taking.
Financial assets held for trading are recorded in the Statement of Financial Position at fair value.
Changes in fair value are recognized in Statement of Profit or Loss under the heading - Net trading
income. Dividend income is recorded in ‘Net trading income’ when the right to receive the payment has
been established.
Bank evaluates its held for trading asset portfolio, other than derivatives, to determine whether the
intention to sell them in the near future is still appropriate. When Bank is unable to trade these financial
assets due to inactive markets and management’s intention to sell them in the foreseeable future
significantly changes, the Bank may elect to reclassify these financial assets. Financial assets held for
trading include instruments such as equity instruments that have been acquired principally for the
purpose of selling or repurchasing in the near term.
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(a) (ii) Financial Assets Designated at Fair Value through Profit or Loss
Bank designates financial assets at fair value through profit or loss in the following circumstances:
 Such designation eliminates or significantly reduces measurement or recognition inconsistency

that would otherwise arise from measuring the assets.
 The assets are part of a group of financial assets, financial liabilities or both, which are managed
and their performance evaluated on a fair value basis, in accordance with a documented risk
management or investment strategy.
 The assets contain one or more embedded derivatives that significantly modify the cash flows
that would otherwise have been required under the contract.
Financial assets designated at fair value through profit or loss are recorded in the Statement of Financial
Position at fair value. Changes in fair value are recorded in ‘Net trading income’ in the Statement of
Profit or Loss. Interest earned is accrued under ‘Interest income’, using the effective interest rate
method, while dividend income is recorded under ‘Other operating income’ when the right to receive
the payment has been established.
The Bank has not designated any financial assets upon initial recognition as designated at fair value
through profit or loss.
(b) Financial assets measured at amortized cost
Financial assets measured at amortized cost are non-derivative financial assets with fixed or
determinable payments and fixed maturities which the Bank has the intention and ability to hold to
maturity. After the initial measurement, financial assets measured at amortized cost are subsequently
measured at amortized cost using the effective interest rate, less impairment. The amortization is
included in ‘Interest income’ in the Statement of Profit or Loss. The losses arising from impairment of
such investments are recognized in the Statement of Profit or Loss.
(c) Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income include equity and debt securities.
Equity Investments classified as financial assets at fair value through other comprehensive income are
those which are neither classified as ‘Held for Trading’ nor ‘Designated at fair value through profit or
loss’. Debt securities in this category are intended to be held for an indefinite period of time and may
be sold in response to needs for liquidity or in response to changes in the market conditions.
After initial measurement, financial assets at fair value through other comprehensive income are
subsequently measured at fair value. Unrealized gains and losses are recognized directly in equity
through Statement of Other comprehensive income in the ‘Fair value reserve’. When the investment is
disposed of, the cumulative gain or loss previously recognized in equity is recognized in the Statement
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of Profit or Loss under ‘Other operating income’. Where the Bank holds more than one investment in
the same security, they are deemed to be disposed of on a first-in-first-out basis. Interest earned whilst
holding financial assets at fair value through other comprehensive income is reported as ‘Interest
income’ using the effective interest rate. Dividend earned whilst holding Financial assets at fair value
through other comprehensive income are recognized in the Statement of Profit or Loss as ‘other
operating income’ when the right to receive the payment has been established. The losses arising from
impairment of such investments are recognized in the Statement of Profit or Loss under ‘Impairment
charge for loans and other losses’ and removed from the ‘Fair value reserve’.
Financial assets at fair value through other comprehensive income that are monetary securities
denominated in a foreign currency – translation differences related to changes in the amortized cost of
the security are recognized in Statement of Profit or Loss and other changes in the carrying amount are
recognized in Statement of Other comprehensive income.
In the normal course of business, the fair value of a financial instrument on initial recognition is the
transaction price (that is, the fair value of the consideration given or received). In certain circumstances,
however, the fair value will be based on other observable current market transactions in the same
instrument, without modification or repackaging, or on a valuation technique whose variables include
only data from observable markets, such as interest rate yield, option volatilities and currency rates.
When such evidence exists, the Bank recognizes a trading gain or loss on inception of the financial
instrument, being the difference between the transaction price and fair value.
When unobservable market data have a significant impact on the valuation of financial instruments,
the entire initial difference in fair value from the transaction price as indicated by the valuation model
is not recognized immediately in the Statement of Profit or Loss. Instead, it is recognized over the life
of the transaction on an appropriate basis, when the inputs become observable, the transaction
matures or is closed out, or when the Bank enters into an offsetting transaction.
Classification and Subsequent Measurement of Financial Liabilities
At the inception, the Bank determines the classification of its financial liabilities. Accordingly financial
liabilities are classified as:
(a) Financial liabilities at fair value through profit or loss

i. Financial liabilities held for trading
ii. Financial liabilities designated at fair value through profit or loss
(b) Financial liabilities at amortized cost
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(a) Financial Liabilities at Fair Value through Profit or Loss
Financial Liabilities at fair value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as fair value through profit or loss. Subsequent to
initial recognition, financial liabilities at fair value through profit or loss are measured at fair value and
changes therein are recognized in Statement of profit or loss.
(a) (i) Financial Liabilities Held for Trading
Financial liabilities are classified as held for trading if they are acquired principally for the purpose of
selling or repurchasing in the near term or hold as a part of a portfolio that is managed together for
short-term profit or position taking.
(a) (ii) Financial Liabilities Designated at Fair Value through Profit or Loss
Bank designates financial liabilities at fair value through profit or loss at following circumstances:
 Such designation eliminates or significantly reduces measurement or recognition inconsistency

that would otherwise arise from measuring the liabilities.
 The liabilities are part of a group of Financial assets, financial liabilities or both, which are
managed and their performance evaluated on a fair value basis, in accordance with a
documented risk management or investment strategy
 The liability contains one or more embedded derivatives that significantly modify the cash flows
that would otherwise have been required under the contract.
(b) Financial Liabilities at amortized Cost
Financial instruments issued by Bank that are not classified as fair value through profit or loss are
classified as financial liabilities at amortized cost, where the substance of the contractual arrangement
results in Bank having an obligation either to deliver cash or another financial asset to another Bank, or
to exchange financial assets or financial liabilities with another Bank under conditions that are
potentially unfavorable to the Bank or settling the obligation by delivering variable number of Bank’s
own equity instruments.
After initial recognition, such financial liabilities are subsequently measured at amortized cost using the
effective interest rate method. Within this category, deposits and debt instruments with fixed maturity
period have been recognized at amortized cost using the method that very closely approximates
effective interest rate method. The amortization is included in ‘Interest Expenses’ in the Statement of
Profit or Loss. Gains and losses are recognized in the Statement of Profit or Loss when the liabilities are
derecognized.
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Reclassification of Financial Instruments
a. Reclassification of Financial Instruments ‘At fair value through profit or loss’
Bank does not reclassify derivative financial instruments out of the fair value through profit or loss
category when it is held or issued.
Non-derivative financial instruments designated at fair value through profit or loss upon initial
recognition are not reclassified subsequently out of fair value through profit or loss category.
Bank may, in rare circumstances, reclassify financial instruments out of fair value through profit or loss
category if such instruments are no longer held for the purpose of selling or repurchasing in the near
term notwithstanding that such financial instruments may have been acquired principally for the
purpose of selling or repurchasing in the near term. Financial assets classified as fair value through profit
or loss at the initial recognition which would have also met the definition of ‘Loans and Receivables’ as
at that date is reclassified out of the fair value through profit or loss category only if Bank has the
intention and ability to hold such asset for the foreseeable future or until maturity.
The fair value of financial instruments at the date of reclassification is treated as the new cost or
amortized cost of the financial instrument after reclassification. Any gain or loss already recognized in
respect of the reclassified financial instrument until the date of reclassification is not reversed to the
Statement of Profit or Loss.
If a financial asset is reclassified, and if Bank subsequently increases its estimates of the future cash
receipts as a result of increased recoverability of those cash receipts, the effect of that increase is
recognized as an adjustment to the effective interest rate from the date of the change in estimate rather
than an adjustment to the carrying amount of the asset at the date of change in estimate.
b. Reclassification of Financial assets at fair value through other comprehensive income
Bank may reclassify financial assets at fair value through other comprehensive income as a result of
change in intention or ability or in rare circumstances that a reliable measure of fair value is no longer
available.
A financial asset classified as a financial asset at fair value through other comprehensive income that
would have met the definition of loans and receivables at the initial recognition may be reclassified out
of ‘financial assets at fair value through other comprehensive income’ category to the loans and
receivables category if Bank has the intention and ability to hold such asset for the foreseeable future
or until maturity.
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The fair value of financial instruments at the date of reclassification is treated as the new cost or
amortized cost of the financial instrument after reclassification. Difference between the new amortized
cost and the maturity value is amortized over the remaining life of the asset using the effective interest
rate. Any gain or loss already recognized in Other Comprehensive Income in respect of the reclassified
financial instrument is accounted as follows:
i) Financial assets with fixed maturity

Gain or loss recognized up to the date of reclassification is amortized to profit or loss over the remaining
life of the investment using the effective interest rate. If the financial asset is subsequently impaired,
any previous gain or loss that has been recognized in other comprehensive income is reclassified from
equity to profit or loss.
ii) Financial assets without fixed maturity

Gain or loss recognized up to the date of reclassification is recognized in profit or loss only when the
financial asset is sold or otherwise disposed of. If the financial asset is subsequently impaired, any
previous gain or loss that has been recognized in other comprehensive income is reclassified from
equity to profit or loss.
If a financial asset is reclassified, and if Bank subsequently increases its estimates of future cash receipts
as a result of increased recoverability of those cash receipts, the effect of that increase is recognized as
an adjustment to the effective interest rate from the date of the change in estimate rather than an
adjustment to the carrying amount of the asset at the date of change in estimate.
c. Reclassification of financial assets measured at amortized cost

As a result of a change in intention or ability, if it is no longer appropriate to classify an investment as
financial assets measured at amortized cost, Bank may reclassify such financial assets as financial assets
at fair value through other comprehensive income and re- measure those financial instruments at fair
value. Any difference between the carrying value of the financial asset before reclassification and fair
value is recognized in equity through other comprehensive income.
De-recognition of Financial Assets and Liabilities
a. De-recognition of Financial Assets

Bank derecognizes a financial asset (or where applicable a part of financial asset or part of a group of
similar financial assets) when:
 The rights to receive cash flows from the asset have expired; or
 Bank has transferred its rights to receive cash flows from the asset or
 Bank has assumed an obligation to pay the received cash flows in full without material delay to
a third party under a ‘pass-through’ arrangement and either Bank has transferred substantially
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all the risks and rewards of the asset or it has neither transferred nor retained substantially all
the risks and rewards of the asset, but has transferred control of the asset.
On de-recognition of a financial asset, the difference between the carrying amount of the asset (or the
carrying amount allocated to the portion of the asset derecognized) and the sum of the consideration
received (including any new asset obtained less any new liability assumed) and any cumulative gain or
loss that had been recognized in other comprehensive income is recognized in profit or loss.
When Bank has transferred its rights to receive cash flows from an asset or has entered into a pass-
through arrangement and has neither transferred nor retained substantially all of the risks and rewards
of the asset nor transferred control of the asset, the asset is recognized to the extent of the Bank’s
continuing involvement in the asset. In that case, Bank also recognizes an associated liability. The
transferred asset and the associated liability are measured on a basis that reflects the rights and
obligations that Bank has retained.
When Bank’s continuing involvement that takes the form of guaranteeing the transferred asset, the
extent of the continuing involvement is measured at the lower of the original carrying amount of the
asset and the maximum amount of consideration received by Bank that Bank could be required to
repay.
When securities classified as financial assets at fair value through other comprehensive income are sold,
the accumulated fair value adjustments recognized in other comprehensive income are reclassified to
the Statement of Profit or Loss as gains and losses from investment securities.
b. De-recognition of Financial Liabilities
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or
expired. Where an existing financial liability is replaced by another from the same lender on
substantially different terms or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as de-recognition of the original liability and the recognition of a
new liability.
The difference between the carrying value of the original financial liability and the consideration paid is
recognized in profit or loss.
Offsetting of Financial Instruments
Financial assets and financial liabilities are offset and the net amount presented in the Statement of
Financial Position when and only when Bank has a legal right to set off the recognized amounts and it
intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
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Income and expenses are presented on a net basis only when permitted under NFRSs or for gains and
losses arising from a group of similar transaction such as in trading activity.
Amortized Cost Measurement
The Amortized cost of a financial asset or liability is the amount at which the financial asset or liability
is measured at initial recognition, minus principal repayments, plus or minus the cumulative
amortization using the effective interest method of any difference between the initial amount
recognized and the maturity amount, minus any reduction for impairment.
Fair Value Measurement
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability (exit price)
in an orderly transaction between market participants at the measurement date in the principal or, in
its absence, the most advantageous market to which the Bank has access at that date. The fair value of
liability reflects its non-performance risk.
When available, the Bank measures the fair value of an instrument using the quoted price in an active
market for that instrument (Level 01 valuation). A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume to provide pricing information on an
ongoing basis on an arm’s length basis.
If there is no quoted price in an active market, then the Bank uses valuation techniques that maximize
the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen
valuation technique incorporates all of the factors that market participants would take into account in
pricing a transaction. Valuation techniques include using recent arm’s length transactions between
knowledgeable, willing parties (if available), reference to the current fair value of other instruments
that are substantially the same, discounted cash flow analysis and option pricing models. Inputs to
valuation techniques reasonably represent market expectations and measures of the risk-return factors
inherent in the financial instrument. The Bank calibrates valuation techniques and tests them for validity
using prices from observable current market transactions in the same instrument or based on other
available observable market data. Assets and long positions are measured at a bid price; liabilities and
short positions are measured at an ask price. Where the Bank has positions with offsetting risks, mid-
market prices are used to measure the offsetting risk positions and a bid or asking price adjustment is
applied only to net open position as appropriate.
The best evidence of the fair value of a financial instrument at initial recognition is normally the
transaction price - i.e. the fair value of the consideration given or received. If the Bank determines that
the fair value at initial recognition differs from the transaction price and the fair value is evidenced
neither by a quoted price in an active market for an identical asset or liability (Level 01 valuation) nor
based on a valuation technique that uses only data from observable markets (Level 02 valuation), then
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the financial instrument is initially measured at fair value, adjusted to defer the difference between the
fair value at initial recognition and the transaction price. Subsequently, that difference is recognized in
profit or loss on an appropriate basis over the life of the instrument but not later than when the
valuation is wholly supported by observable market data or the transaction is closed out.
Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit
risk of the Bank and the counterparty where appropriate. Fair value estimates obtained from models
are adjusted for any other factors, such as liquidity risk or model uncertainties; to the extent that the
Bank believes a third-party market participant would take them into account in pricing a transaction.
The fair value of a demand deposit is not less than the amount payable on demand, discounted from
the first date on which the amount could be required to be paid.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to
generate economic benefits by using the asset in its highest best use or by selling it to another market
participant that would use the asset in its highest and best use.
The Bank recognizes transfers between levels of the fair value hierarchy as of the end of the reporting
period during which the change has occurred.
Impairment of Financial Assets
Bank assesses at each reporting date, whether there is any objective evidence that a financial asset or
group of financial assets not carried at fair value through profit or loss is impaired. A financial asset or
group of financial assets is deemed to be impaired if and only if there is objective evidence of
impairment as a result of one or more events, that have occurred after the initial recognition of the
asset (an ‘incurred loss event’) and that loss event (or events) has an impact on the estimated future
cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include: indications that the borrower or a group of borrowers is
experiencing significant financial difficulty; the probability that they will enter bankruptcy or other
financial reorganization; default or delinquency in interest or principal payments; and where observable
data indicates that there is a measurable decrease in the estimated future cash flows, such as changes
in arrears or economic conditions that correlate with defaults.
a. Impairment of Financial Assets carried at Amortized Cost
For financial assets carried at amortized cost, such as amounts due from banks, held to maturity
investments etc., Bank first assesses individually whether objective evidence of impairment exists for
financial assets that are individually significant or collectively for financial assets that are not individually
significant. In the event Bank determines that no objective evidence of impairment exists for an
individually assessed financial asset, it includes the asset in a group of financial assets with similar credit
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risk characteristics such as collateral type, past due status and other relevant factors and collectively
assesses them for impairment. However, assets that are individually assessed for impairment and for
which an impairment loss is or continues to be recognized are not included in a collective assessment
of impairment.
If there is an objective evidence that an impairment loss has been incurred, the amount of the loss is
measured as the difference between the assets’ carrying amount and the present value of estimated
future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying
amount of the asset is reduced through the use of an allowance account and the amount of the loss is
recognized in the Statement of Profit or Loss. Interest income continues to be accrued on the reduced
carrying amount and is accrued using the rate of interest used to discount the future cash flows for the
purpose of measuring the impairment loss.
If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current
rate that closely approximates effective interest rate. If the Bank has reclassified trading assets to loans
and advances, the discount rate for measuring any impairment loss is the new rate that closely
approximates effective interest rate determined at the reclassification date. The calculation of the
present value of the estimated future cash flows of a collateralized financial assets reflects the cash
flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not
foreclosure is probable.
(a) (i) Individually Assessed Financial Assets
The criteria used to determine whether there is objective evidence of impairment include and not
limited to:
 Known cash flow difficulties experienced by the borrowers:
 Past due contractual payments of either principal or interest;
 Breach of loan covenants or conditions;
 The probability that the borrower will enter bankruptcy or other financial reorganization; and
 A significant downgrading in credit rating by an external credit rating agency.
If there is objective evidence that an impairment loss on financial assets measured at amortized cost
has been incurred, the amount of the loss is measured by discounting the expected future cash flows
of a financial asset at its original effective interest rate and comparing the resultant present value with
the financial asset’s current carrying amount. The impairment allowances on individually significant
accounts are reviewed more regularly when circumstances require. This normally encompasses re-
assessment of the enforceability of any collateral held and the timing and amount of actual and
anticipated receipts. Individually assessed impairment allowances are only released when there is
reasonable and objective evidence of reduction in the established loss estimate. Interest on impaired
assets continues to be recognized through the unwinding of the discount.
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Loans together with the associated allowance are written off when there is no realistic prospect of
future recovery and all collateral has been realized or has been transferred to the Bank. If, in a
subsequent year, the amount of the estimated impairment loss increases or decreases because of an
event occurring after the impairment was recognized, the previously recognized impairment loss is
increased or reduced by adjusting the allowance account. If a future write off is later recovered, the
recovery is credited to the impairment charges for loans and other losses.
When impairment losses are determined for those financial assets where objective evidence of
impairment exists, the following common factors are considered:
 Bank’s aggregate exposure to the customer;
 The viability of the customer’s business model and their capacity to trade successfully out of
financial difficulties and generate sufficient cash flows to service debt obligations;
 The amount and timing of expected receipts and recoveries;
 The extent of other creditors‘ commitments ranking ahead of, or pari-pasu with the Bank and
the likelihood of other creditors continuing to support the company;
 The realizable value of security and likelihood of successful repossession
(a) (ii) Collectively Assessed Financial Assets
Impairment is assessed on a collective basis in two circumstances:

 To cover losses which have been incurred but have not yet been identified on loans subject to
individual assessment; and
 For homogeneous groups of loans that are not considered individually significant.
Incurred but not yet identified impairment
Individually assessed financial assets for which no evidence of loss has been specifically identified on an
individual basis are grouped together according to their credit risk characteristics for the purpose of
calculating an estimated collective loss. This reflects impairment losses that the Bank has incurred as a
result of events occurring before the reporting date, which the Bank is not able to identify on an
individual loan basis and that can be reliably estimated.
These losses will only be individually identified in the future. As soon as information becomes available
which identifies losses on individual financial assets within the group, those financial assets are removed
from the group and assessed on an individual basis for impairment.
The collective impairment allowance is determined after taking into account:

 Historical Loss Experience in portfolios of similar credit risk; and
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 Management’s experienced judgment as to whether current economic and credit conditions are
such that the actual level of inherent losses at the reporting date is like to be greater or less than
that suggested by historical experience.
Homogeneous groups of Financials Assets
Statistical methods are used to determine impairment losses on a collective basis for homogenous
groups of financial assets. Losses in these groups of financial assets are recorded on an individual basis
when individual financial assets are written off, at which point they are removed from the group.
Bank uses the following method to calculate historical loss experience on collective basis:
After grouping of loans on the basis of homogeneous risks, the Bank uses net flow rate method. Under
this methodology, the movement in the outstanding balance of customers into default categories over
the periods are used to estimate the amount of financial assets that will eventually be irrecoverable, as
a result of the events occurring before the reporting date which the Bank is not able to identify on an
individual loan basis.
Under this methodology, loans are grouped into ranges according to the number of days in arrears and
statistical analysis is used to estimate the likelihood that loans in each range will progress through the
various stages of delinquency and ultimately prove irrecoverable.
Current economic conditions and portfolio risk factors are also evaluated when calculating the
appropriate level of allowance required to cover inherent loss. These additional macro and portfolio
risk factors may include:
 Recent loan portfolio growth and product mix
 Unemployment rates
 Gross Domestic Production (GDP) Growth
 Inflation
 Interest rates
 Changes in government laws and regulations
 Property prices
 Payment status
But, the amount of provision to be created against Loans and Advances shall be higher of the following
two amounts as required by Directive No. 4 of Unified Directives issued by Nepal Rastra Bank:
i) Impairment calculated as per Impairment Assessment Methodology as described above or,
ii) Loan Loss Provision calculated as per the provisions of Unified Directives issued by Nepal Rastra Bank.
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(a) (iii) Reversal of Impairment
If the amount of an impairment loss decreases in a subsequent period and the decrease can be related
objectively to an event occurring after the impairment was recognized, the excess is written back by
reducing the financial asset Impairment allowance account accordingly. The write-back is recognized in
the Statement of Profit or Loss.
(a) (iv) Write-off of Financial Assets Carried At Amortized Cost
Financial assets (and the related impairment allowance accounts) are normally written off either
partially or in full, when there is no realistic prospect of recovery. Where financial assets are secured,
this is generally after receipt of any proceeds from the realization of security.
(a) (v) Impairment of Rescheduled Loans and Advances
Where possible, the Bank seeks to restructure loans rather than to take possession of collateral. This
may involve extending the payment arrangements and the agreement of new loan conditions. Once the
terms have been renegotiated, any impairment is measured using the original EIR as calculated before
the modification of terms and the loan is no longer considered past due. Management continually
reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to
occur. The loans continue to be subject to an individual or collective impairment assessment, calculated
using the loan’s original effective interest rate (EIR).
(a) (vi) Collateral valuation

The Bank seeks to use collateral, where possible, to mitigate its risks on financial assets. The collateral
comes in various forms such as cash, securities, letters of credit/guarantees, real estate, receivables,
inventories, other non-financial assets and credit enhancements such as netting agreements. The fair
value of collateral is generally assessed, at a minimum, at inception and based on the guidelines issued
by the Nepal Rastra Bank. Non-financial collateral, such as real estate, is valued based on data provided
by third parties such as independent valuator and audited financial statements.
(a) (vii) Collateral legally repossessed or where properties have devolved to the Bank
Legally Repossessed Collateral represents Non-Financial Assets acquired by the Bank in settlement of
the overdue loans. The assets are initially recognized at fair value when acquired. The Bank’s policy is
to determine whether a repossessed asset is best used for its internal operations or should be sold. The
proceeds are used to reduce or repay the outstanding claim. The immovable property acquired by
foreclosure of collateral from defaulting customers, or which has devolved on the Bank as part
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settlement of debt, has not been occupied for business use. These assets are shown as “Investment
Properties” in Statement of Financial Position.
b. Impairment of financial assets at fair value through other comprehensive income
For financial assets at fair value through other comprehensive income, Bank assesses at each reporting
date whether there is objective evidence that an investment is impaired.
In the case of debt instruments, Bank assesses individually whether there is objective evidence of
impairment based on the same criteria as financial assets carried at amortized cost. However, the
amount recorded for impairment is the cumulative loss measured as the difference between the
amortized cost and the current fair value, less any impairment loss on that investment previously
recognized in the Statement of Profit or Loss. Future interest income is based on the reduced carrying
amount and is accrued using the rate of interest used to discount the future cash flows for the purpose
of measuring the impairment loss. If, in a subsequent period, the fair value of a debt instrument
increases and the increase can be objectively related to a credit event occurring after the impairment
loss was recognized, the impairment loss is reversed through the Statement of Profit or Loss.
In the case of equity investments classified as financial assets at fair value through other
comprehensive income, objective evidence would also include a ‘significant’ or ‘prolonged’ decline in
the fair value of the investment below its cost. Where there is evidence of impairment, the cumulative
loss measured as the difference between the acquisition cost and the current fair value, less any
impairment loss on that investment previously recognized in profit or loss is removed from equity and
recognized in the Statement of profit or loss. However, any subsequent increase in the fair value of an
impaired equity security measured at fair value through other comprehensive income is recognized in
other comprehensive income.
Bank writes-off certain financial assets at fair value through other comprehensive income when they
are determined to be uncollectible.
5.3 Trading Assets
One of the categories of financial assets at fair value through profit or loss is “held for trading” financial
assets. All financial assets acquired or held for the purpose of selling in the short term or for which there
is a recent pattern of short term profit taking are trading assets.
5.4 Derivatives assets and derivative liabilities
A derivative is a financial instrument whose value changes in response to the change in an underlying
variable such as an interest rate, commodity or security price, or index; that requires no initial
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investment, or one that is smaller than would be required for a contract with similar response to
changes in market factors; and that is settled at a future date.
Forward contracts are the contracts to purchase or sell a specific quantity of a financial instrument, a
commodity, or a foreign currency at a specified price determined at the outset, with delivery or
settlement at a specified future date. Settlement is at maturity by actual delivery of the item specified
in the contract, or by a net cash settlement.
All freestanding contracts that are considered derivatives for accounting purposes are carried at fair
value on the statement of financial position regardless of whether they are held for trading or non-
trading purposes. Changes in fair value of derivatives held for trading are included in net gains/ (losses)
from financial instruments in fair value through profit or loss.
5.5 Property, Plant and Equipment
Recognition
Property, plant and equipment are tangible items that are held for use in the production or supply of
services, for rental to others or for administrative purposes and are expected to be used during more
than one period. The Bank applies the requirements of the Nepal Accounting Standard - NAS 16
(Property, Plant and Equipment) in accounting for these assets. Property, plant and equipment are
recognized if it is probable that future economic benefits associated with the asset will flow to the entity
and the cost of the asset can be measured reliably measured.
Measurement
An item of property, plant and equipment that qualifies for recognition as an asset is initially measured
at its cost. Cost includes expenditure that is directly attributable to the acquisition of the asset and cost
incurred subsequently to add to, replace part of an item of property, plant & equipment. The cost of
self-constructed assets includes the cost of materials and direct labor, any other costs directly
attributable to bringing the asset to a working condition for its intended use and the costs of dismantling
and removing the items and restoring the site on which they are located. Purchased software that is
integral to the functionality of the related equipment is capitalized as part of computer equipment.
When parts of an item of property or equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.
Cost Model
Property and equipment is stated at cost excluding the costs of day–to–day servicing, less accumulated
depreciation and accumulated impairment in value. Such cost includes the cost of replacing part of the
equipment when that cost is incurred, if the recognition criteria are met.
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Revaluation Model
The Bank has not applied the revaluation model to any class of freehold land and buildings or other
assets. Such properties are carried at a previously recognized GAAP Amount.
On revaluation of an asset, any increase in the carrying amount is recognized in ‘Other comprehensive
income’ and accumulated in equity, under capital reserve or used to reverse a previous revaluation
decrease relating to the same asset, which was charged to the Statement of Profit or Loss. In this
circumstance, the increase is recognized as income to the extent of previous write down. Any decrease
in the carrying amount is recognized as an expense in the Statement of Profit or Loss or debited to the
Other Comprehensive income to the extent of any credit balance existing in the capital reserve in
respect of that asset.
The decrease recognized in other comprehensive income reduces the amount accumulated in equity
under capital reserves. Any balance remaining in the revaluation reserve in respect of an asset is
transferred directly to retained earnings on retirement or disposal of the asset.
Subsequent Cost
The subsequent cost of replacing a component of an item of property, plant and equipment is
recognized in the carrying amount of the item, if it is probable that the future economic benefits
embodied within that part will flow to the Bank and it can be reliably measured. The cost of day to day
servicing of property, plant and equipment are charged to the Statement of Profit or Loss as incurred.
Depreciation
Depreciation is calculated by using the straight line method on cost or valuation of the property. The
rates of depreciations are given below:
Rate of Depreciation per annum (%)

Asset Category
As of Poush 2079 As of Poush 2078
Buildings 50 years 50 years
Vehicles 10 years 10 years
Office Equipment 7 years 7 years
Furniture & Fixtures-Wooden 10 years 10 years
Furniture & Fixtures-Metal 7 years 7 years
Furniture & Fixtures-Plastic 5 years 5 years
Battery 3 years 3 years
Computer hardware 7 years 7 years
Leasehold Properties Lease term Lease term
Sign Board/Mats and Carpets 2 Years 2 Years
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Changes in Estimates
The asset’s methods of depreciation are reviewed, and adjusted if appropriate, at each financial year
end.
Capital Work in Progress
These are expenses of capital nature directly incurred in the construction of buildings, major plant and
machinery and system development, awaiting capitalization. Capital work-in-progress would be
transferred to the relevant asset when it is available for use, i.e. when it is in the location and condition
necessary for it to be capable of operating in the manner intended by management. Capital work-in-
progress is stated at cost less any accumulated impairment losses.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as
part of the cost of an asset. All other borrowing costs are expensed in the period in which they occur.
Borrowing costs consist of interest and other costs that the Bank incurs in connection with the
borrowing of funds.
De-recognition
The carrying amount of an item of property, plant and equipment is derecognized on disposal or when
no future economic benefits are expected from its use. The gain or loss arising from de-recognition of
an item of property, plant and equipment is included in the Statement of Profit or Loss when the item
is derecognized. When replacement costs are recognized in the carrying amount of an item of property,
plant and equipment, the remaining carrying amount of the replaced part is derecognized. Major
inspection costs are capitalized. At each such capitalization, the remaining carrying amount of the
previous cost of inspections is derecognized.
5.6 Goodwill and Intangible Assets

Recognition
An intangible asset is an identifiable non-monetary asset without physical substance, held for use in the
production or supply of goods or services, for rental to others or for administrative purposes. An
intangible asset is recognized if it is probable that the future economic benefits that are attributable to
the asset will flow to the entity and the cost of the asset can be measured reliably. An intangible asset
is initially measured at cost. Expenditure incurred on an intangible item that was initially recognized as
an expense by the Bank in previous annual financial statements or interim financial statements are not
recognized as part of the cost of an intangible asset at a later date.
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Computer Software & Licenses
Cost of purchased licenses and all computer software costs incurred, licensed for use by the Bank, which
are not integrally related to associated hardware, which can be clearly identified, reliably measured,
and it’s probable that they will lead to future economic benefits, are included in the Statement of
Financial Position under the category ‘Intangible assets’ and carried at cost less accumulated
amortization and any accumulated impairment losses.
Subsequent Expenditure
Expenditure incurred on software is capitalized only when it is probable that this expenditure will enable
the asset to generate future economic benefits in excess of its originally assessed standard of
performance and this expenditure can be measured and attributed to the asset reliably. All other
expenditure is expensed as incurred.
Amortization of Intangible Assets

Intangible Assets, except for goodwill, are amortized on a straight–line basis in the Statement of Profit
or Loss from the date when the asset is available for use, over the best of its useful economic life based
on a pattern in which the asset’s economic benefits are consumed by the bank. Amortization methods,
useful lives, residual values are reviewed at each financial year end and adjusted if appropriate. The
Bank assumes that there is no residual value for its intangible assets.
Goodwill is measured at cost less accumulated impairment losses.
Period of Amortization
Asset Category
As of Poush 2079 As of Poush 2078
Software Useful life or 7 years, Useful life or 7 years,
whichever is lower whichever is lower
De-recognition of Intangible Assets
The carrying amount of an item of intangible asset is derecognized on disposal or when no future
economic benefits are expected from its use. The gain or loss arising on de-recognition of an item of
intangible assets is included in the Statement of Profit or Loss when the item is derecognized.
5.7 Investment Property
Investment property is property (land or a building or part of a building or both) held (by the owner or
by the lessee under a finance lease) to earn rentals or for capital appreciation or both but not for sale
in the ordinary course of business.
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Measurement
Investment property is accounted for under Cost Model in the Financial Statements. Accordingly, after
recognition as an asset, the property is carried at its cost, less impairment losses. If any property is
reclassified to investment property due to changes in its use, fair value of such property at the date of
reclassification becomes its cost for subsequent accounting.
De-recognition
Investment properties are derecognized when they are disposed of or permanently withdrawn from
use since no future economic benefits are expected. Transfers are made to and from investment
property only when there is a change in use. When the use of a property changes such that it is
reclassified as Property, Plant and Equipment, its fair value at the date of reclassification becomes its
cost for subsequent accounting.
5.8 Income Tax
As per Nepal Accounting Standard- NAS 12 (Income Taxes), tax expense is the aggregate amount
included in determination of profit or loss for the period in respect of current and deferred taxation.
Income Tax expense is recognized in the statement of Profit or Loss, except to the extent it relates to
items recognized directly in equity or other comprehensive income in which case it is recognized in
equity or in other comprehensive income. The Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to be paid to tax authorities.
Current Tax
Current tax assets and liabilities consist of amounts expected to be recovered from or paid to Inland
Revenue Department in respect of the current year, using the tax rates and tax laws enacted or
substantively enacted on the reporting date and any adjustment to tax payable in respect of prior years.
Deferred Tax
Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are
recognized for all taxable temporary differences except:
 Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination, and at the time of transaction, affects
neither the accounting profit nor taxable profit or loss.
 In respect of taxable temporary differences associated with investments in subsidiaries, where
the timing of the reversal of the temporary differences can be controlled and is probable that
the temporary differences will not reverse in the foreseeable future.
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 Deferred tax assets are recognized for all deductible temporary differences, carried forward
unused tax credits and unused tax losses (if any), to the extent that it is probable that the taxable
profit will be available against which the deductible temporary differences, carried forward
unused tax credits and unused tax losses can be utilized except:
 Where the deferred tax asset relating to the deductible temporary differences arising from the
initial recognition of an asset or liability in a transaction that is not a business combination, and
at the time of transaction, affects neither the accounting profit nor taxable profit or loss.
 In respect of deductible temporary differences associated with investments in Subsidiaries,
deferred tax assets are recognized only to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be available against
which the temporary difference will be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent
that it is probable that sufficient profit will be available to allow the deferred tax asset to be utilized.
Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the
extent that it has become probable that future taxable profit will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year
when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting date.
Current and deferred tax assets and liabilities are offset only to the extent that they relate to income
taxes imposed by the same taxation authority.
5.9 Deposits, debt securities issued and subordinated liabilities

Deposits, debt securities issued and subordinated liabilities are the Bank’s sources of funding. Deposits
include non-interest bearing deposits, saving deposits, term deposits, call deposits and margin deposits.
The estimated fair value of deposits with no stated maturity period is the amount repayable on demand.
The fair value of fixed interest bearing deposits is considered as the interest receivable on these
deposits plus carrying amount of these deposits. The fair value of debt securities issued is also
considered as the carrying amount of these debt securities issued. Sub-ordinated liabilities are liabilities
subordinated, at the event of winding up, to the claims of depositors, debt securities issued and other
creditors.
5.10 Provisions
A provision is recognized if, as a result of a past event, the Bank has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will
be required to settle the obligation. The amount recognized is the best estimate of the consideration
required to settle the present obligation at the reporting date, taking in to account the risks and
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uncertainties surrounding the obligation at that date. Where a provision is measured using the cash
flows estimated to settle the present obligation, its carrying amount is determined based on the present
value of those cash flows. A provision for onerous contracts is recognized when the expected benefits
to be derived by the Bank from a contract are lower than the unavoidable cost of meeting its obligations
under the contract. The provision is measured as the present value of the lower of the expected cost of
terminating the contract and the expected net cost of continuing with the contract. Provision are not
recognized for future operating losses.
Before a provision is established, the Bank recognizes any impairment loss on the assets associated with
that contract. The expense relating to any provision is presented in the Statement of Profit or Loss net
of any reimbursement.
5.11 Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to Bank and
the revenue can be reliably measured. The following specific recognition criteria must also be met
before revenue is recognized.
Interest Income
For all financial assets measured at amortized cost, interest bearing financial assets classified as
financial assets at fair value through other comprehensive income and financial assets designated at
fair value through profit or loss, interest income is recorded using the rate that closely approximates
the EIR because the bank considers that the cost of exact calculation of effective interest rate method
exceeds the benefit that would be derived from such compliance. EIR is the rate that exactly discounts
estimated future cash payments or receipts through the expected life of the financial instrument or a
shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability.
When a receivable is impaired, the Bank reduces the carrying amount to its recoverable amount, being
the estimated future cash flow discounted at the original effective interest rate of the instrument, and
continues unwinding the discount as interest income. Interest income on impaired loans is recognized
using the original closely approximate EIR.
However, interest accrual is suspended and are not recognized as Interest income in the Statement of
Profit or Loss in following circumstances:
a. Loans where there is reasonable doubt about the ultimate collectability of principal or interest
b. Loans against which individual impairment as per NAS 39 has been made
c. Loans where contractual payments of principal and/or interest are more than 3 months in arrears
and where the “net realizable value” of security is insufficient to cover payment of principal and
accrued interest
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d. Loans where contractual payments of principal and/or interest are more than 12 months in arrears,
irrespective of the net realizable value of collateral
e. Overdrafts and other short term facilities which have not been settled after the expiry of the loan
and even not renewed within 3 months of the expiry, and where the net realizable value of security
is insufficient to cover payment of principal and accrued interest
f. Overdrafts and other short term facilities which have not been settled after the expiry of the loan
and even not renewed within 12 months of the expiry, irrespective of the net realizable value of
collateral
Fee and Commission Income

Fees earned for the provision of services over a period of time are accrued over that period. These fees
include Service fees, commission income. Loan syndication fees are recognized as revenue when the
syndication has been completed and the Bank retained no part of the loan package for itself, or retained
a part at the same effective interest rate as for the other participants. Portfolio and other management
advisory fees and service distribution fees are recognized based on the applicable contracts, usually on
a time apportionment basis.
Dividend Income
Dividend income on equity instruments are recognized in the statement of profit and loss when the
Bank’s right to receive payment is established.
Net Trading Income

Net trading income comprises gains less losses relating to trading assets and liabilities, and includes all
realized interest, dividend and foreign exchange differences as wells as unrealized changes in fair value
of trading assets and liabilities.
Net Income from other financial instrument at fair value through Profit or Loss
Trading assets such as equity shares and mutual fund are recognized at fair value through profit or loss.
No other financial instrument are designated at fair value through profit or loss.
5.12 Interest Expense

For financial liabilities measured at amortized cost using the rate that closely approximates effective
interest rate, interest expense is recorded using such rate. EIR is the rate that exactly discounts
estimated future cash payments or receipts through the expected life of the financial instrument or a
shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability.
5.13 Employee Benefits

Employee benefits include:
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• Short-term employee benefits such as the following, if expected to be settled wholly before
twelve months after the end of the annual reporting period in which the employees render the
related services:
i. Wages, salaries and social security contributions;
ii. Paid annual leave and paid sick leave;
iii. Profit sharing and bonuses, and
iv. Non-monetary benefits (such as medical care, housing, cars and free or subsidized goods
or services) for current employees
Short term employee benefits are measured on an undiscounted basis and are expensed as the
related service is provided. A liability is recognized for the amount expected to be paid under
short term cash bonus or profit sharing plans if the Bank has present legal or constructive
obligation to pay this amount as a result of past service provided by the employee and the
obligation can be estimated reliably.
• Post-employment benefits, such as the following:
i. Retirement benefits (For example: pensions, lump sum payments on retirement); and
ii. Other post-employment benefits such as post-employment life insurance and post-
employment medical care;
• Other long term employee benefits and
• Termination benefits
1. Post employments benefits

Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under which the Bank pays fixed
contribution into a separate Bank (a fund) and will have no legal or constructive obligation to pay further
contributions if the fund does not hold sufficient assets to pay all employee benefits relating to
employee services in the current and prior periods, as defined in Nepal Accounting Standards – NAS 19
(Employee Benefits).
The contribution payable by the employer to a defined contribution plan is in proportion to the services
rendered to the Bank by the employees and is recorded as an expense under ‘Personnel expense’ as
and when they become due. Unpaid contribution are recorded as a liability under ‘Other Liabilities’.
Bank contributes 10% of the salary of each employee to the Employees’ Provident Fund. The above
expense is identified as contributions to ‘Defined Contribution Plans’ as defined in Nepal Accounting
Standards – NAS 19 (Employee Benefits).
Defined Benefit Plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
Accordingly, staff gratuity has been considered as defined benefit plan as per Nepal Accounting
Standards – NAS 19 (Employee Benefits).
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 Gratuity
In compliance with Labor Act, 2017, provision is made in the account year of service, for gratuity payable
to employees who joined bank on a permanent basis.
An actuarial valuation is carried out every year to ascertain the full liability under gratuity. Bank’s
obligation in respect of defined benefit obligation is calculated by estimating the amount of future
benefit that employees have earned for their service in the current and prior periods and discounting
that benefit to determine its present value, then deducting the fair value of any plan assets to determine
the net amount to be shown in the Statement of Financial Position. The value of a defined benefit asset
is restricted to the present value of any economic benefits available in the form of refunds from the
plan or reduction on the future contributions to the plan. In order to calculate the present value of
economic benefits, consideration is given to any minimum funding requirement that apply to any plan
in the Bank. An economic benefit is available to the Bank if it is realizable during the life of the plan, or
on settlement of the plan liabilities.
Bank determines the interest expense on the defined benefit liability by applying the discount rate used
to measure the defined benefit liability at the beginning of the annual period to the defined benefit
liability at the beginning of the annual period. The discount rate is the yield at the reporting date on
government bonds that have maturity dates approximating to the terms of Bank’s obligations.
The increase in gratuity liabilities attributable to the services provided by employees during the year
(current service cost) is recognized in the Statement of Profit or Loss under ‘Personnel Expenses’
together with the net interest expense. Bank recognizes the total actuarial gain and loss that arises in
calculating Bank’s obligation in respect of gratuity in other comprehensive income during the period in
which it occurs.
The demographic assumptions underlying the valuation are retirement age (60 years), early withdrawal
from service and retirement on medical grounds.
2. Other long term employee benefits

Other long term employee benefits are all employee benefits other than short term employee benefits,
post-employment benefits and terminal benefits. Accordingly, leave encashment plan of the Bank has
been considered as other long term employee benefits as per Nepal Accounting Standards – NAS 19
(Employee Benefits).
 Unutilized Accumulated Leave

Bank’s liability towards the accumulated leave which is expected to be utilized beyond one year from
the end of the reporting period is treated as other long term employee benefits. Bank’s net obligation
towards unutilized accumulated leave is calculated by discounting the amount of future benefit that
employees have earned in return for their service in the current and prior periods to determine the
present value of such benefits. The discount rate is the yield at the reporting date on government bonds
that have maturity dates approximating to the term of Bank’s obligation. The calculation is performed
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using the Projected Unit Credit method. Net change in liability for unutilized accumulated leave
including any actuarial gain and loss are recognized in the Statement of Profit or Loss under ‘Personnel
Expenses’ in the period in which they arise.
5.14 Finance and Operating Leases

The determination of whether an arrangement is a lease, or it contains a lease, is based on the
substance of the arrangement and requires an assessment of whether the fulfillment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right
to use the asset.
1. Finance Lease
Agreements which transfer to counterparties substantially all the risks and rewards incidental to the
ownership of assets, but not necessarily legal title, are classified as finance lease. When Bank is the
lessor under finance lease, the amounts due under the leases, after deduction of unearned interest
income, are included in ‘Loans & receivables from other customers’, as appropriate. Interest income
receivable is recognized in ‘Net interest income’ over the periods of the leases so as to give a constant
rate of return on the net investment in the leases.
When the Bank is a lessee under finance leases, the leased assets are capitalized and included in
‘Property, plant and equipment’ and the corresponding liability to the lessor is included in ‘Other
liabilities’. A finance lease and its corresponding liability are recognized initially at the fair value of the
asset or if lower, the present value of the minimum lease payments. Finance charges payable are
recognized in ‘Interest expenses’ over the period of the lease based on the interest rate implicit in the
lease so as to give a constant rate of interest on the remaining balance of the liability.
2. Operating Lease
All other leases are classified as operating leases. When acting as lessor, Bank includes the assets subject
to operating leases in ‘Property, plant and equipment’ and accounts for them accordingly. Impairment
losses are recognized to the extent that residual values are not fully recoverable and the carrying value
of the assets is thereby impaired.
When the Bank is a lessee under operating leases, the leased assets are capitalized and included in
‘Property, plant and equipment’ and the corresponding liability to the lessor is included in ‘Other
liabilities’.
Foreign Currency Transactions, Translation and Balances

All foreign currency transactions are translated into the functional currency, which is Nepalese Rupees,
using the exchange rates prevailing at the dates when the transactions were affected.
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Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated
to Nepalese Rupees using the spot foreign exchange rate ruling at that date and all differences arising
on non-trading activities are taken to ‘Other Operating Income’ in the Statement of Profit or Loss. The
foreign currency gain or loss on monetary items is the difference between amortized cost in the
functional currency at the beginning of the period, adjusted for effective interest and payments during
the period, and the amortized cost in foreign currency translated at the rates of exchange prevailing at
the end of the reporting period.
Non-monetary items in a foreign currency that are measured in terms of historical cost are translated
using the exchange rates as at the dates of the initial transactions. Non-monetary items in foreign
currency measured at fair value are translated using the exchange rates at the date when the fair value
was determined.
Foreign exchange differences arising on the settlement or reporting of monetary items at rates different
from those which were initially recorded are dealt with in the Statement of Profit or Loss. However,
foreign currency differences arising on available-for-sale equity instruments are recognized in other
comprehensive income. Forward exchange contracts are valued at the forward market rates ruling on
the reporting date.
5.15 Financial guarantee and loan commitment

A financial guarantee contract is a contract that requires the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.
Financial guarantee contracts may have various legal forms, such as a guarantee, some types of letter
of credit, etc. Where the bank has confirmed its intention to provide funds to a customer or on behalf
of a customer in the form of loans, overdrafts, etc. whether cancellable or not and the bank had not
made payments at the reporting date, those instruments are included in these financial statements as
commitments.
5.16 Share capital and reserves

Share capital and reserves are different classes of equity claims. Equity claims are claims on the residual
interest in the assets of the entity after deducting all its liabilities. Changes in equity during the reporting
period comprise income and expenses recognized in the statement of profit or loss and in the statement
of other comprehensive income; plus contributions from holders of equity claims, minus distributions
to holders of equity claims.
5.17 Earnings per share

The Bank presents basic and diluted Earnings per share (EPS) data for its ordinary shares. Basic EPS is
calculated by dividing the profit and loss attributable to ordinary equity holders of Bank by the weighted
average number of ordinary shares outstanding during the period. Diluted EPS is determined by
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adjusting both the profit and loss attributable to the ordinary equity holders and the weighted average
number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares, if any.
Earnings per share is calculated and presented in consolidated statement of profit or loss.
5.18 Segment reporting

An operating segment is a component of an entity:
• that engages in business activities from which it may earn revenues and incur expenses (including
revenues and expenses relating to transactions with other components of the same entity),
• whose operating results are regularly reviewed by the entity’s chief operating decision maker to
make decisions about resources to be allocated to the segment and assess its performance, and
• for which discrete financial information is available.
Not every part of an entity is necessarily an operating segment or part of an operating segment. For
example, a corporate headquarters or some functional departments may not earn revenues or may
earn revenues that are only incidental to the activities of the entity and would not be operating
segments. For the purposes of this NFRS, an entity’s post-employment benefit plans are not operating
segments.
The bank has identified the key segments of business on the basis of nature of operations that assists
the Executive Committee of the bank in decision making process and to allocate the resources. It will
help the management to assess the performance of the business segments. The business segments
identified are Banking (including loan, deposit and trade operations), Payment solutions (Cards),
Remittance, Treasury and Micro Banking. All operations between the segments are conducted on pre-
determined transfer price. Treasury department acts as the fund manager of the Bank.
5.19 Employee Bonus

Employee bonus shall be calculated at the rate of 10% of Profit before bonus and tax.
5.20 Dividend on Ordinary Shares

Dividend on ordinary shares are recognized as a liability and deducted from equity when they are
approved by the Bank’s shareholders. Interim Dividend is deducted from equity when they are declared
and no longer at the discretion of the Bank. Dividend for the year that is approved after the reporting
date is disclosed as an event after the reporting date.
5.21 Cash Flow Statement
The cash flow statement has been prepared by taking into consideration the gross cash receipts and
gross cash payments of operating activities, finance activities and investing activities.
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6. Segmental Information
A. Information about reportable segments
The Bank has identified the key segments of business on the basis of nature of operations that assist the Executive Committee of the bank in decision making
process and to allocate the resources. It will help the management to assess the performance of the business segments. The business segments identified
are Banking (including loans, deposits and trade operations), Payment Solutions (Cards), Remittance and Treasury. Treasury Department acts as the fund
manager of the Bank.
Payment Solutions Remittance Treasury Banking Total

Particulars
Corresponding
Corresponding
Corresponding
Corresponding
Corresponding
Year Quarter
Year Quarter
Year Quarter
Year Quarter
Year Quarter
Previous
Previous
Previous
Previous
Previous
Quarter
Quarter
Quarter
Quarter
Quarter
Current
Current
Current
Current
Current
Revenues from 266,974,566 235,098,414 40,209,044 28,454,430 1,891,570,257 1,494,130,493 12,326,860,840 8,690,150,420 14,525,614,707 10,447,833,757
external customers
Intersegment 3,087,769 - 129,593,554 77,731,623 81,790,232 51,567,155 5,251,895,356 3,441,018,224 5,466,366,911 3,570,317,001
revenues
Segment Profit 36,824,712 81,403,140 27,054,209 31,900,934 452,343,683 1,014,618,645 1,142,231,878 1,143,715,012 1,658,454,481 2,271,637,731
(loss) before tax
Segment assets 472,250,605 362,919,458 3,087,558,813 2,034,502,995 8,029,890,795 9,015,179,858 245,708,292,552 226,491,017,145 257,297,992,765 237,903,619,457
Segment liabilities 435,425,893 276,674,548 3,060,504,604 2,000,930,793 7,577,547,112 7,999,562,961 246,224,515,156 227,626,451,155 257,297,992,765 237,903,619,457
B. Reconciliation of reportable segment profit or loss
Current Corresponding
Particulars
Quarter Previous Year Quarter
Total profit before tax for reportable segments 1,658,454,481 2,271,637,731
Profit before tax for other segments - -
Elimination of inter-segment profit - -
Elimination of discontinued operation - -
Unallocated amounts:
- Other corporate expenses - -
Profit before tax 1,658,454,481 2,271,637,731
38 | P a g e
7. Concentration of Borrowings, Credits and Deposits
A. Concentration of Borrowings
Particulars Poush 2079 Poush 2078

Borrowings from 10 largest lenders* 6,683,593,000 6,691,101,000
Percentage of borrowings from ten largest lenders to 3.18% 3.47%
total deposit
*It does not include borrowings (including refinance) made from Nepal Rastra Bank.
B. Concentration of Credit exposures

Total exposures to 20 largest borrowers
a. As per group (related party) 25,621,695,314 21,734,880,391
b. As per individual customer 19,509,716,346 18,514,504,784
Percentage of exposures to 20 largest borrowers to Total

loans and Advances
a. As per group (related party) 13.87% 11.77%
b. As per individual customer 10.56% 10.03%
C. Concentration of Deposits

Total deposits from 20 largest depositors
a. Group-wise 38,426,873,939 35,739,506,875
b. As per individual customer 2,249,712,881 2,796,203,525
Percentage of deposits from 20 largest depositors to
Total Deposits
a. As per group 18.28% 18.53%
b. As per individual customer 1.07% 1.45%
8. Related parties disclosures

Parties are considered to be related if one party has the ability to control the other party or exercise
significant influence over the other party in making financial or operational decisions and include major
shareholders, subsidiary companies, associates, retirement funds, directors and key management
personnel and their close family members.
Banking transactions with the related parties are executed substantially on the same terms, including
mark-up rates and collateral, as those prevailing at the time for comparable transactions with unrelated
parties and do not involve more than a normal risk.
39 | P a g e
a. Subsidiary
Transactions between the Bank and its subsidiary, Siddhartha Capital Limited, meet the definition of
related party as defined under NAS-24 “Related Party Disclosures”.
Poush 2079
Transactions during the interim period
(NPR)
Call Deposits held by Siddhartha Capital Limited at
397,162,114
Siddhartha Bank Ltd.
Interest earned by Siddhartha Capital Ltd. on
5,638,110
deposits held at Siddhartha Bank Ltd.
Share RTS fee earned by Siddhartha Capital Ltd 250,000
All of the transactions mentioned above have been eliminated upon consolidation.
b. Associates
Transactions between the Bank and its associates also meet the definition of related parties. The Bank
considers an investee as its associate if the Bank can exercise significant influence in the financial and
operating policy decisions of the investee but does not have control or joint control of those policies.
The Bank does not exercise significant influence in the financial and operating policy decisions of any of
its investees as at Poush 30, 2079.
The Bank has appointed its employee as a director in case of following investees but do not exercise
significant influence in their financial and operating policy decisions:
Particulars Poush 2079
(NPR)
Siddhartha Insurance Limited
Investment in shares 80,432,213
Shareholding % 15%
c. Directors and other Key Managerial Personnel (KMP)

Key Management Personnel and their immediate family members are also considered to be related
parties for disclosure purpose as per NAS-24 “Related Party Disclosures”.
As per Nepal Financial Reporting Standard (NAS 24) “Related Party Disclosures”, Key Management
Personnel are those having authority and responsibility for planning, directing and controlling the
40 | P a g e
activities of the entity. The Bank considers the members of its Board, Chief Executive Officer and all
managerial level executives as Key Management Personnel (KMP) of the Bank.
Following is a list of Board of Directors and CEO bearing office at Poush 30, 2079.
Mr. Manoj Kumar Kedia Chairman

Mr. Narendra Kumar Agrawal Director
Mr. Rahul Agrawal Director
Mr. Dinesh Shanker Palikhe Director
Mr. Ankit Kedia Director
Mrs. Mina Kumari Sainju Independent Director
Mr. Sundar Prasad Kadel Chief Executive Officer
Compensation to the members of the Board

All members of the Board are non-executive directors and no executive compensation is paid to the
directors. Specific non-executive allowances paid to directors are as under:

(NPR) (NPR)
Board Meeting fees 694,000 818,000
Other board related expenses 1,356,068 1,254,443
Compensation to other KMP of the Bank
Nature of Total Compensation Remarks

Compensation (NPR) up to Poush 30,
2079
Short-term employee 177,178,929 Salary, PF and allowances of management level
benefits staff (Management level staff comprises of all
staff of assistant manager level and above)
Post employee Nil

benefits
Other long-term 13,088,000 Sick Leave and Annual Leave
benefits
Terminal benefits 28,011,914 Gratuity benefits of eligible management staff
Share based payments Nil
41 | P a g e
9. Dividends paid (aggregate or per share) separately for ordinary shares and other shares
During the interim period, the Bank has paid NPR 1,565,553,354 as bonus shares and NPR 82,397,545
as cash dividend for FY 2078/79.
10. Issues, repurchases and repayments of debt and equity securities

The Bank has not issued or repaid any debt or equity securities during the interim period.
11. Events after interim period

No material events have occurred subsequent to Poush 30, 2079 till the publication of the interim
financial statements.
12. Effect of changes in the composition of the entity during the interim period including
merger and acquisition
There has been no change in the composition of the entity during the interim period. The bank has also
not entered into any merger or acquisition during the interim period.
13. Distributable Profit

Amount in NPR
Opening retained earnings after distribution of dividend for FY 2078/79 211,917,579
Add: Net Profit for the period ended Poush 2079 1,161,199,785
1. Appropriations
1.1 Profit required to be appropriated to statutory reserve 980,590,829
a. General Reserve 232,239,957
b. Capital Redemption Reserve -
c. Exchange Fluctuation Fund 6,525,624
d. Corporate Social Responsibility Fund 11,611,998
e. Employees Training Fund -
f. Debenture Redemption Reserve 730,213,250
g. Others -
1.2 Profit required to be transferred to Regulatory Reserve 295,958,037
a. Transfer to Regulatory Reserve 295,958,037
b. Transfer from Regulatory Reserve -
Total distributable profit as of Poush 30, 2079 96,568,499
42 | P a g e

Unaudited Second Quarter 2022 - 23

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INTERIM FINANCIAL STATEMENTS

Immediate Previous Immediate Previous Year

b) Items that are or may be reclassified to profit or loss

c) Share of other comprehensive income of associate accounted as per equited method - - - - - - - -

Total comprehensive income attributable to:

Earning per share

(Increase)/Decrease in operating assets

CASH FLOWS FROM INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

2. Statement of Compliance with NFRSs

3. Use of estimates, assumptions and judgments

4. Changes in accounting policies

5. Significant accounting policies

5.1 Cash and cash equivalents

b. Recognition and Initial Measurement of Financial Instruments

Classification and subsequent measurement of Financial Instruments

Classification and Subsequent Measurement of Financial Assets

At the inception, a financial asset is classified into one of the following:

The subsequent measurement of financial assets depends on their classification.

(a) Financial Assets at Fair Value through Profit or Loss

(a) (i) Financial Assets Held for Trading

 Such designation eliminates or significantly reduces measurement or recognition inconsistency

(c) Financial assets at fair value through other comprehensive income

Classification and Subsequent Measurement of Financial Liabilities

(a) Financial liabilities at fair value through profit or loss

(a) (i) Financial Liabilities Held for Trading

 Such designation eliminates or significantly reduces measurement or recognition inconsistency

(b) Financial Liabilities at amortized Cost

a. Reclassification of Financial Instruments ‘At fair value through profit or loss’

b. Reclassification of Financial assets at fair value through other comprehensive income

i) Financial assets with fixed maturity

ii) Financial assets without fixed maturity

c. Reclassification of financial assets measured at amortized cost

De-recognition of Financial Assets and Liabilities

a. De-recognition of Financial Assets

b. De-recognition of Financial Liabilities

Offsetting of Financial Instruments

Amortized Cost Measurement

Fair Value Measurement

Impairment of Financial Assets

a. Impairment of Financial Assets carried at Amortized Cost

(a) (i) Individually Assessed Financial Assets

(a) (ii) Collectively Assessed Financial Assets

Impairment is assessed on a collective basis in two circumstances:

The collective impairment allowance is determined after taking into account:

Homogeneous groups of Financials Assets

i) Impairment calculated as per Impairment Assessment Methodology as described above or,

(a) (iv) Write-off of Financial Assets Carried At Amortized Cost

(a) (v) Impairment of Rescheduled Loans and Advances

(a) (vi) Collateral valuation

b. Impairment of financial assets at fair value through other comprehensive income

5.4 Derivatives assets and derivative liabilities

5.5 Property, Plant and Equipment

Rate of Depreciation per annum (%)

Capital Work in Progress

5.6 Goodwill and Intangible Assets

Amortization of Intangible Assets

Goodwill is measured at cost less accumulated impairment losses.

De-recognition of Intangible Assets

5.7 Investment Property