The management of the State Bank of Bikaner and Jaipur, a State Bank of India subsidiary, has clarified that there is nothing in the auditors' report for the 2000-01 accounts that could impact the profitability and other ratios of the bank. The bank had declared a net profit of Rs 105 crore for 2000-01.
Commenting on the observations made in the auditors' report, which was reported by Business Standard on October 4 under the heading "Auditors cast doubt over SBI arm's profit," the management has said the bank's annual report had also published its comments on the auditors' report.
The management said due to the inherent nature of banking operations, reconciliation of outstanding entries is an ongoing process and even with the best efforts, some segments of entries remain unreconciled thereby attracting comments of this nature usually every year. "The level of outstanding entries this year has been brought down substantially," the management has noted.
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As regards the revaluation of foreign currency assets and liabilities, as per RBI as well as Fedai guidelines whereunder the applicability of AS 11 (revised) to banks is still under examination, banks have been advised by RBI to follow the existing guidelines for finalising the accounts for the year ended March 31, 2001 also.
The amount of $11.880 million has been a part of the balances lying in the Nostro accounts abroad. These balances are accounted for in the bank's books through a mirror account in accordance with the procedure prescribed by Fedai.
Since such an accounting entry is carried out on the basis of advice obtained from the concerned branches, there is always a time lag causing a difference between the mirror account and the Nostro account.
As per the management, the income tax authorities have made an assessment for 1993-94 to 1995-96 by charging a tax on interest earned on government securities. As per the bank's contention, interest tax was applicable on interest earned from advances and not from government securities.
The bank has gone on appeal with the income tax tribunal on the matter. Based on legal opinion, no provision for this demand was made during those years by the bank in accordance with the practice adopted by banks for disputed liabilities. As there has been no change in the position since then, no provision has been made in subsequent years including 2000-01.