Manual-formatted

9.4.2 Few parameters are centrally maintained at COIS level which are applicable across the corporation such as VDA, percentage of PF, SABF, Company's borrowing rate etc. However, the responsibility of maintaining Info Type data in the master is with HR. Any modification in back end tables for various changes like VDA, professional tax etc. including compliance of circulars issued by CO(HR) is done by COIS in consultation with CPC. 9.4.3 Administration Department also maintain few parameters in SAP such as HBA, housing status which results in recoveries under various heads such as loan recovery instalments, HRR etc. 9.5 MONTHLY PROCESSING OF SALARY 9.5.1 Monthly Salary is being processed at CPC (Centralized Payroll Cell, PLHO Noida) as per data maintained by respective Division. Following activities are included in monthly payroll processing and is indicated sequentially: • Maintenance of all payroll data in SAP by respective unit’s HR/Payroll Section • Uploading of payments & deductions by payroll section which are not currently maintained in the system such as medical recoveries, overtime payment, honorarium payments, transport recoveries etc. • Payroll Simulation run by CPC • Cross verify the number of employees as per HR Headcount with the list of employees for whom payroll is being processed for the month • Maintenance of bank details in SAP • Info type update run by Units/Divisions • Payroll Live run by CPC • First Posting Simulation • Bank details changed by Units/Divisions to be updated by CPC on SBI site • Processing of Full & Final settlements (For superannuated/separated employees) • Ensuring error free simulation run • Final Payroll Live run by CPC • Final Posting Simulation run by CPC • Ensuring error free Posting simulation run • Payroll posting by CPC • IDOC run by CPC for scheduling payments The salary payment gets credited through bank transfer as per the bank details maintained in the system. 9.5.2 Salary for each employee is prepared based on master data, attendance, loan/advances recovery master and other temporary transactions like compensatory off etc., which are maintained in different wage type or given by other sections to be uploaded in the corresponding wage types. 9.5.3 The monthly processing is based on the data maintained under different Info Type and Wage Type in the system. The attendance gets updated in the system from the data fetched from Accounting of Employee Related Transactions INDEX Page 224

Access Control System by HR. For non-punching employees, certificate of attendance is sent by the heads of the departments by the prescribed date of every month, which is punched in the system. For items of pay and allowances which are variable with attendance, pay shall be calculated for the number of days attended. 9.5.4 Accounting entries for salary processing are being posted through PC00_M99_CIPE, after actual payroll processing, all relevant GL codes (advance, liability, expenses, banks) gets posted accordingly and after running of IDOC (t-code YF_SALARY), salary payment is scheduled for the date which is usually the second last working day of the month observed at PLHO, Noida. In case of superannuated employees, the payment is scheduled for last working day of the month. However, payment towards Provident Fund and commuted portion of SABF for separate employees is to be settled on the 1st working day of the month following the separation. 9.5.5 Various declarations on account of other income, other TDS, loss on house property, Rent receipt, savings bank interest etc. from employees are accepted in the system which are permissible as per IT Act and IT Rules through ESS. The same get updated in the system after approval of pay section. The same is considered for calculating income tax liability of the employee and depiction of the same in Income Tax card for the year and Form 16 issued to the employee. 9.6 OFF-CYCLE PAYMENTS 9.6.1 Off-cycle runs are being processed centrally at CPC, two times in a week i.e. every Monday 9.6.2 & Thursday with payment scheduled on each respective Tuesday & Friday. Off-cycle cannot be scheduled when payroll processing is in progress. As such off-cycle is not scheduled during the last week of the month. To cover for this, an additional off cycle is being processed on 1st of every month Following activities are included in Off-cycle processing • Maintenance of all Off-cycle data in SAP by respective unit’s HR/Payroll Section • Off cycle Live run • Posting Simulation run • Refer errors to division/units for correction • Off-cycle Live run for error cases • Off-cycle posting • IDOC run Employees claim the above through ESS which are approved at competent level before off- cycle run. Few payments such as loans/ advances are being updated in the system by HR/ (Payroll) for off- cycle payment after approval of the same outside SAP. It may be noted that INFU (info type update) (which captures the approved claims under ESS) shall include all approved claims upto Monday or Thursday as the case may be for settlement, except in case of 1st off-cycle of the month. Two off-cycles should not be processed on the same date. Accounting of Employee Related Transactions INDEX Page 225

9.6.3 Accounting Entries for off-cycle processing are being posted through PC00_M99_CIPE after processing of actual off-cycle run, all relevant GL codes (advance, liability, expenses, banks) gets posted accordingly and after running of IDOC, off-cycle payment is scheduled for payment. 9.7 BONUS PAYMENT Bonus such as PRP, PLI & PIS is being paid through off-cycle payments. Computation of base pay amount for further computation of bonus can be taken from the utility prepared in SAP (YHRBONUS). Appropriate percentage may be applied to the above base pay amount for bonus computation. The employee wise bonus amount so computed is to be uploaded in assigned wage types for payment processing. Separate wage types are created for PLI, PIS and PRP. 9.8 ARREAR PAYMENT Arrear payment such as cafeteria, pay revision etc. shall be computed as per scheme, circular and procedure issued by HR and paid through off-cycle or salary processing. Arrear for SAP Payroll period can be calculated by the system to adhere to the scheme and paid through salary processing. 9.9 DEPUTATION IN/ OUT EMPLOYEES 9.9.1 Salary for employees on deputation to outside organizations is processed as per the procedure stated above. An invoice is to be raised to the respective organization for salary and allowances paid. The respective Customer code is debited and Income codes are credited through YHR245. At the time of payment receipt bank account is debited and Customer account is credited and settled. GST should be charged in the bill, wherever applicable. The above billing process is to be done through YHR245. The printout of invoice and details are taken by T code YHR281 and sent to respective organizations 9.9.2 Salary for employees on deputation from other organization is processed as per the above stated procedure. The terms of salary shall be maintained in the system as per the terms of employment and options opted by the employee. Amount on account of leave salary, pension etc. towards the parent organization, wherever applicable, is computed and paid by debiting the respective expenditure GL code. 9.10 FINAL SETTLEMENT OF SEPARATED EMPLOYEES 9.10.1 Final settlement of separated employees is done as per the schedule of monthly payroll processing or as may be advised. An automated separation action is processed for the employees superannuating during the month, otherwise separation action is to be run by HR department. A confirmation of gratuity, leave balance, last basic dearness allowance is to be forwarded by HR to Finance payroll. Payroll section will check the data of full and final Accounting of Employee Related Transactions INDEX Page 226

settlement and input the values in SAP using t-code YHRFNF2 and PA30 (in various wage types) wherever required, and if needed upload the recoveries such as PRMS, Retention amount, asset buy-back etc. Presently, full and final settlement is processed along with monthly salary processing and payment will be scheduled for last day of the month. 9.10.2 Final settlement of resignation, death, and retrenchment cases is done as per the schedule of monthly payroll processing. In these cases, HR runs separation action and forward details of gratuity and leave balance. The loan balance if any is to be settled by the employee prior to final settlement, payroll section will check the details and upload the details by the employee master. Final processing runs along with monthly processing and payment are scheduled at last working day of the month. 9.10.3 A copy of final settlement along with Tax card, last pay slip and SABF annuity computation sheet is to be handed over to HR for onward transmission to separating employee and record purpose. 9.11 PAYMENT OF STATUTORY & OTHER LIABILITIES 9.11.1 Statutory Liabilities a. Tax Deducted at Source (TDS) TDS is to be deducted before making any taxable payment to employees as per Income Tax Act and Rules made there under. Tax is being deducted under single TAN (DELI00316B) from the salary and offcycle payments of all employees across corporation w.e.f. April 2013 .Accounting entries for TDS deduction automatically get posted through SAP at the time of payroll processing. Manual intervention is to be avoided for TDS deduction. TDS, so deducted, is to be deposited by the due date as prescribed by CBDT. TDS return (Quarterly & Annual) are to be filed as per the IT Act & Rules. These activities from 1st April 2013 are being carried out centrally at CPC. Form 16 & Form 12 BA are issued to employees after end of financial year before due date of filing returns by CPC. b. Professional Tax Professional Tax is to be deducted from salaries wherever applicable by maintaining details in Info Type 588. Amount so deducted will be credited to GL code 2120380310. The rates and deduction amount are to be checked and necessary debit credit note is to be exchanged for cross company adjustment. Compliances of deposition and submission of return as per respective state professional tax act and rules are to be ensured. c. Goods and Service Tax W.e.f. 01st Jul’2017 goods and service tax are applicable, where activities are falling under the definition of goods and services ad per GST provisions. Billing towards deputation out employees, notice pay recovery, bond pay recovery, and payment to deputation in employees from government departments etc. are broadly covered under GST. Accounting of Employee Related Transactions INDEX Page 227

d. State Welfare Fund (including Labour Welfare Fund) Wherever applicable, recovery for state welfare schemes is to be made from salaries of the employees as per provisions applicable to the unit/location. A credit will be posted to respective liability code at the time of salary processing. This amount can directly be deposited to regulatory authorities by debiting the liability code and crediting the bank GL after due reconciliation. 9.11.2 Other Liabilities Various recoveries are to be made from monthly payroll processing from the employees on account of clubs, societies, benevolent fund, association, Tatkal Sahayata Yojana I & II, etc. These recoveries are credited to respective liability code and to be settled with respective agencies after reconciliation. Apart from above, recoveries/ company contribution on account of PF, SABF, EPS etc., are automatically calculated by the system and posted to the respective company code by CPC. 9.12 CLOSING RELATED ACTIVITIES - QUARTERLY & ANNUAL 9.12.1 Provisions for SCO, overtime, exigency claim, bonus, earned leave more than 300 days, C - off encashment, arrear, Rotating Duty Compensation, Tanker duty allowance, gratuity, ex gratia etc. are to be made by debiting the expenditure code available in SAP (As given below) and crediting the provisional liability account. The amount of SCO, overtime, leave encashment, exigency claim is to be calculated on the basis of previous month’s pattern whereas the amount of bonus and ex-gratia, etc. are to be calculated as per guideline issued by RHQ/CO. Provision for offcycle claims submitted by employees till quarter end but paid in subsequent month should be provided based on the data extracted through T-Code YHOFFCYCLE. The provisional liability so provided is to be reversed on the 1st of the following quarter. GL Code Description 5281527000 PAYROLL-SAL & ALLOW - PROVISION FOR BONUS 5281527010 PAYROLL-SAL & ALLOW - PROVISION FOR LEAVE ENCASHMENT 5281527020 PAYROLL-SAL & ALLOW - PROVISION FOR SHIFT ALLOWANCE 5281527030 PAYROLL-SAL & ALLOW - PROVISION FOR OVERTIME 5281527040 PAYROLL-SAL & ALLOW - PROVISION FOR LFA 5281527050 PAYROLL-SAL & ALLOW - PROVISION FOR SCO 5281527060 PAYROLL-SAL & ALLOW - PROVISION FOR CAFETERIA 5281527070 PAYROLL-SAL & ALLOW - PROVISION OTHERS 2112203400 S C-EMPLOYEES-OTHERS 2112201400 SUNDRY CREDITORS-PRODUCTIVE INCENTIVE (OFFICERS) 2112201500 SUNDRY CREDITORS-PRODUCTIVE INCENTIVE (STAFF) Accounting of Employee Related Transactions INDEX Page 228

9.12.2 Expenses related to employees specifically assigned to project are to be debited to CWIP by project group by crediting the respective GL codes. The list of CWIP GL codes are as under: 5281010450 CWIP-Contribution to Leave Encashment 5281525900 CWIP-Contribution to PF 5281528010 PAYROLL-SAL & ALLOW -EXP CREDIT FOR CWIP 5282541000 CWIP-Contribution to SABF 5282560000 CWIP-Contribution to Gratuity Fund 5284120000 CWIP-Contribution to PRMB 5284400174 CWIP-Contribution to LSA 5290600074 CWIP-Contribution to RSA 9.12.3 Accounting for settlements on account of retirement benefits are governed by the chapter on Ind AS 19. Sectional schedules are to be reviewed time to time, to avoid any un- reconciled/ unidentified open item's. 9.13 PREPARATION OF MIS 9.13.1 Quarterly MIS 9.13.2 • Details for Basic and DA • Input for IndAS 19 • Directors Remuneration (As per prescribed format) Annual MIS • Wage Bill (Finance to provide Finance related data) • Data preparation for incentive payment • PE survey Data CWTR (Common wage type reporter) may be taken as base data for preparation of various MIS as stated above. Respective Division has to provide various MIS as desired by the management. 9.14 OTHER PAYMENTS a. While making payment in OVSS cases respective liability is to be reduced instead of debiting the expenditure code. b. All payment to employees whether active or otherwise are to be processed through SAP payroll only unless the payment head/wage type is not available in SAP payroll or cannot be created. c. Taxable value of payment made outside SAP payroll are to be updated in payroll on receipt of the same from respective section. 9.15 CONTROL CHECKS a. Salary is to be checked on sample basis, sample size may vary depending on the number of employees. However, following cases may be checked in detail: Accounting of Employee Related Transactions INDEX Page 229

• Where claim is generated, and salary becomes negative; • Tax was not deducted during the month in spite of balance tax liability; • Separated employees; • PF should be deducted for all cases; • Death cases • Analyse cases where there is variation of 25% of gross salary over the previous month • Sample case checking for any extraordinary payments like arrear, bonus etc. b. Salary for employee who has gone on long leave may be processed in normal course after proper updation of leave record by HR to regularise the regular monthly recovery. 9B. OTHER EMPLOYEE RELATED TRANSACTIONS 9.16 REIMBURSEMENT OF MEDICAL EXPENSES a. Detailed procedure for submission of medical bills and reimbursement shall be prescribed at the Unit level. Medical reimbursement claims shall be paid in accordance with the rules in force. While reimbursement of medical expenditure is subject to income tax excepting the expenditure incurred on medical treatment in recognized public hospitals in India. b. Medical bills to hospitals are processed for payment in SAP through t-code FB60 (for creation of liability), YF51P, (for outgoing payment) for on roll, as well as ex-employees including bulk payments like half yearly payments to retired employees etc. through the E Payment module to the designated bank account of the beneficiary. c. Details relating to the data on medical expenses, incurred by the employees, which form part of the taxable salary, (in line with the provisions of the Income Tax Act) of the employee is to be communicated to the Payroll Section of Finance Department for the purposes of inclusion in the taxable income of the respective employee. d. Penal interest must be charged on unutilized medical advance if the unutilised amount is not deposited by the employee within permissible time period of two month. e. For quarterly closing purposes, the liability at the end of every quarter for medical bills which have been submitted by the Hospital and not paid is to be provided. f. Medical payments are also getting released through off-cycle route. 9.17 POST-RETIREMENT MEDICAL BENEFIT FACILITY (PRMS) 9.17.1 Corporation has introduced post-retirement medical benefit facility from 1.1.1985 on voluntary basis to its retired employees and their eligible dependent family members, as a welfare measure. The scheme is administered centrally through a Trust at Refineries Hqrs. The employee, depending upon his category/ grade at the time of cessation of service, is required to make a one-time, non-refundable, lump sum contribution, as per the provisions of the scheme. 9.17.2 Reimbursement of medical expenses will be subject to the maximum financial limits, for the designated time periods, as amended from time to time. For rules regarding PRMS, circulars Accounting of Employee Related Transactions INDEX Page 230

issued from time to time should be complied with. Reference may be made to Chapter on AS-15 (Retirement benefits). 9.18 TRAVELLING CLAIMS AND PAYMENTS 9.18.1 Applications shall be supported by tour program duly approved by the Controlling Officer or self-approved (for self-controlling officers). All the TA bills should be supported by the relevant and required documents like travel ticket, boarding passes, taxi bills, hotel bills etc., as the case may be. The section shall check the bills and make payment in accordance with the TA Rules. In case, if local conveyance exceeds the prescribed limits, the same needs to be approved by the Head of Department to make it eligible for reimbursement. 9.18.2 All tour programs, approvals as well as claims, are logged in through ESS. Payments are processed in off-cycle. All related accounting entries are directly generated by the off-cycle processing and concerned general ledger accounts in SAP are impacted thereupon. 9C. VALUATION OF EMPLOYEE/ADVANCES AS PER IND AS 9.19 OVERVIEW 9.19.1 Companies often extend advantageous loans at below-market/zero interest rates to its staff as a part of their compensation plan. The loans are extended over specified tenure and are subject to fixed repayment schedule as per the company’s policy. These subsidised loans may be subject to certain conditions like continuation of service with the company, etc. 9.19.2 In assessing whether the interest charged on a loan is at a below-market rate, an entity should consider the terms and conditions of the loan, local industry practice and local market circumstances. The characteristics of staff loans do not necessarily reflect the characteristics of similar loans made to the customers as the underlying credit risks and recovery mechanisms differ. Thus, it can be articulated that whilst the loan is at a lower rate of interest, other market participants in similar industry may actually be providing loans to staff at similar rates of interest. Accordingly, it is a matter of judgment to arrive at the conclusion that whether a loan is at advantageous terms to the staff or not. 9.19.3 The staff loans are recognised in the financial statements equivalent to the amount disbursed. The interest income for the period is recognised at the contracted rate (the subsidised rate) in the statement of profit and loss by the company. There is no specific guidance under Indian GAAP to recognise such loans at fair value. 9.19.4 These advantageous loans are financial asset as per Ind AS and it should be recognized at fair value in accounts. Accounting of Employee Related Transactions INDEX Page 231

9.20 APPLICABILITY 9.20.1 The Company has given long term loan to its employees either at concessional interest rate or free of interest, which needs to be disclosed at fair value as per the provisions of Ind AS. Following are the loans provided by the corporations to employees Loans at Concessional rate of interest: • House Building Allowance (HBA) • Vehicle loan • Bicycle loan • Children Education Loan • Flood loan Interest free Loans: 9.20.2 • Furniture Advance • Computer advance Fair valuation for bicycle loan, flood loan and short-term loans have not been done as the effect of fair valuation is not significant. 9.21 DEFINITIONS a. Financial Instrument: A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. b. Financial Asset: A financial asset is any asset that is: • cash; • an equity instrument of another entity; • a contractual right: to receive cash or another financial asset from another entity c. Deferred Employee Cost (DEC): Deferred employee cost is difference between the fair value and books value of loan. d. Effective Interest Rate (EIR): Rate that exactly discounts estimated future cash payments and receipts through the expected life of the financial instrument. We have considered SBI borrowing rate for each type of loan as EIR. e. Company Rate of Interest (CBR): CBR is the rate at which corporation is getting the loan from external organization. At the same rate company is also giving the long terms to employees. f. Effective interest method: The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, an entity shall estimate cash flows considering all contractual terms of the financial instrument Accounting of Employee Related Transactions INDEX Page 232

9.22 ACCOUNTING TREATMENT UNDER IND-AS Under Ind AS following standards deals with accounting of financial instrument • Ind AS 109: Financial Instruments • Ind AS 32: Financial Instruments: Presentation • Ind AS 107: Financial Instruments: Disclosures An entity should recognize a financial asset on its balance sheet when, and only when, the entity becomes the party to the contractual provisions of instrument and also classify the same according to following measurement basis. • Initial Measurement • Subsequent Measurement 9.23 INITIAL MEASUREMENT 9.23.1 Fair value of loan: Para 5.1.1 of Indian Accounting Standard (Ind-AS) 109, Financial Instruments inter alia states that “at initial recognition, an entity shall measure a financial asset or financial liability at its fair value”. Hence, an entity would be required to recognise the loans advanced to the employees at its fair value in the books of accounts. The para B5.1.1 of application guide provided in Appendix B to Ind-AS 109 inter alia states that “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. However, if part of the consideration given or received is for something other than the financial instrument, an entity shall measure the fair value of the financial instrument. For example, the fair value of a long term loan or receivable that carries no interest can be measured as the present value of all future cash receipts discounted using the prevailing market rate(s) of interest for a similar instrument (similar as to currency, term, type of interest rate and other factors) with a similar credit rating.” Accordingly, as per Ind-AS loans advanced at zero or concessional rates of interest are to be measured at fair value which is to be calculated using effective interest method. 9.23.2 Treatment of Difference between Transaction Value and Fair Value: Since the advancement of loans at zero/concessional rate of interest is made to the eligible employees as per the terms of service, the implied benefit is on the basis of the services rendered by the employee. Para 7 of Indian Accounting Standard (Ind-AS) 19 ‘Employee Benefits’ defines employee benefits as all forms of consideration given by an entity in exchange for service rendered by employees. Accordingly, the implied benefit has to be recognised as employee benefit expense. These employee expenses will be called as deferred employee cost and it will be amortized over the period of loan on straight line method. Accounting of Employee Related Transactions INDEX Page 233

9.23.3 Interest Recognition: Para 5.4.1 of Ind-AS 109 provides that “interest revenue shall be calculated by using the effective interest method.” The effective interest method uses the financial instrument’s carrying amount in the books of accounts as the principal value for the calculation of interest. Accordingly, the interest income is recognised in the books of accounts as per the market rate and not the interest rate as per the concessional terms. 9.23.4 Sample case: IOCL has given a loan of Rs 1000 to employee which is repayable in 15 installment (13 Principal+2 interest).Rate of interest is 5.61 % and market rate of interest is 10.00 %. Loan in IGAP books Ind As valuation Month Opening Instalment Closing Contractual Present Value of Balance Interest Loan 1 1,000.00 Balance 4.68 79.34 2 920.00 4.30 78.68 3 840.00 80 920.00 3.93 78.03 4 760.00 3.55 77.39 5 680.00 80 840.00 3.18 76.75 6 600.00 2.81 76.11 7 520.00 80 760.00 2.43 75.49 8 440.00 2.06 74.86 9 360.00 80 680.00 1.68 74.24 10 280.00 1.31 73.63 11 200.00 80 600.00 0.94 73.02 12 120.00 0.56 72.42 13 40.00 80 520.00 0.19 35.91 14 31.60 14.07 15 15.80 80 440.00 31.60 13.95 973.89 80 360.00 80 280.00 80 200.00 80 120.00 80 40.00 40 - 15.80 15.80 15.80 - 1,031.60 Loan in Ind AS books Deferment of prepaid expenses Accounting of Employee Related Transactions Page 234

Month Opening Interest Cash Closing Opening Amor Closing Balance accrued Payout Balance Balance Balance 1 @ EIR -1.74 2 973.89 -80 902.01 26.11 -1.74 24.37 902.01 8.12 -80 829.52 24.37 22.63 3 7.52 -1.74 4 829.52 -80 756.44 22.63 -1.74 20.89 5 756.44 6.91 -80 682.74 20.89 -1.74 19.15 6 682.74 6.30 -80 608.43 19.15 -1.74 17.41 7 608.43 5.69 -80 533.50 17.41 -1.74 15.67 8 533.50 5.07 -80 457.94 15.67 -1.74 13.93 9 457.94 4.45 -80 381.76 13.93 -1.74 12.18 10 381.76 3.82 -80 304.94 12.18 -1.74 10.44 11 304.94 -80 227.48 10.44 -1.74 8.70 12 227.48 3.18 -80 149.38 8.70 -1.74 6.96 13 149.38 2.54 -80 70.62 6.96 -1.74 5.22 14 70.62 1.90 -40 31.21 5.22 -1.74 3.48 15 31.21 1.24 -15.80 15.67 3.48 -1.74 1.74 15.67 0.59 -15.80 1.74 -26.11 0.00 0.26 -1,031.60 0.00 0.13 57.71 9.24 SUBSEQUENT MEASUREMENT 9.24.1 Para 5.1.1 of Indian Accounting Standard (Ind-AS) 109, Financial Instruments inter alia states that “If an entity revises its estimates of payments or receipts (excluding modifications in accordance with paragraph 5.4.3 and changes in estimates of expected credit losses), it shall adjust the gross carrying amount of the financial asset or amortised cost of a financial liability (or group of financial instruments) to reflect actual and revised estimated contractual cash flows. The entity recalculates the gross carrying amount of the financial asset or amortised cost of the financial liability as the present value of the estimated future contractual cash flows that are discounted at the financial instrument’s original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets) or, when applicable, the revised effective interest rate calculated in accordance 355 with paragraph 6.5.10. The adjustment is recognised in profit or loss as income or expense.” 9.24.2 Accordingly, the guidance in this respect is very clear that if there is any change in future estimate, the company will recalculate the fair value and deferred employee cost of loan and difference will be recognised ad profit or loss. 9.24.3 Following are some changes of cash estimation leading to change in PV & DEC: Accounting of Employee Related Transactions INDEX Page 235

• Change in Instalment amount • CBR changed • Partial repayment of loan • Subsequent gratuity Adjustment • Revocation of gratuity adjustment • New trench in HBA-Construction linked 9.24.4 Sample Case: IOCL has given a loan of Rs 1000 to employee which is repayable in 15 installments (13 Principal+2 interest). Rate of interest is 5.61 % and market rate of interest is 10.00 %.In 3rd month installment is changed from Rs 80 to Rs 140 per month. Loan in IGAP books Ind As valuation Present Value of Month Opening Instalment Closing Contractual Balance Interest Loan 1 1,000.00 Balance 4.68 79.34 2 920.00 4.30 78.68 3 840.00 80 920.00 3.93 82.91 1 755.00 3.53 84.30 2 670.00 80 840.00 3.13 83.60 3 585.00 2.73 82.91 4 500.00 85 755.00 2.34 82.22 5 415.00 1.94 81.55 6 330.00 85 670.00 1.54 80.87 7 245.00 1.15 80.20 8 160.00 85 585.00 0.75 79.54 9 75.00 0.35 69.60 10 30.36 85 500.00 13.97 11 15.18 13.86 85 415.00 85 330.00 85 245.00 85 160.00 85 75.00 75 - 15.18 15.18 15.18 0.00 Loan is Ind AS books Deferment of prepaid expenses Interest Cash PV Opening accrued Payout Adj Closing Opening Amortisation DEC Closing Balance @ EIR Balance Balance Adj Balance 973.89 8.12 -80 902.01 902.01 7.52 -80 829.52 26.11 -1.74 -5.61 24.37 829.52 6.91 -85 1.19 752.62 24.37 -1.74 22.63 22.63 -1.74 15.28 752.62 6.27 -85 673.90 15.28 -1.39 13.89 673.90 5.62 -85 594.51 594.51 4.95 -85 514.47 13.89 -1.39 12.50 514.47 4.29 -85 433.75 12.50 -1.39 11.11 433.75 3.61 -85 352.37 11.11 -1.39 9.72 352.37 2.94 -85 270.30 9.72 -1.39 8.33 8.33 -1.39 6.95 Accounting of Employee Related Transactions Page 236

270.30 2.25 -85 187.56 6.95 -1.39 5.56 187.56 1.56 -85 104.12 5.56 -1.39 4.17 104.12 0.87 -75 29.99 4.17 -1.39 2.78 29.99 0.25 -15 15.05 2.78 -1.39 1.39 15.05 0.13 -15 1.39 -1.39 0.00 0.00 9.25 ACCOUNTING ENTRIES Following entries are required to passed for fair valuation of loan • Initial Measurement Deferred Employee Cost A/c Dr Employee Loan A/c Cr • Subsequent Measurement Employee Loan A/c Dr (Partial repayment of loan) Profit & Loss A/c Dr Deferred Employee Cost A/c Cr • Differential Interest booking Interest A/c Dr/Cr Profit & Loss A/c Dr/Cr 9.26 IND AS FAIR VALUATION PROGRAM 9.26.1 A program is developed for fair valuation of loan as per Ind AS. In this program we can calculate the fair value of loan and deferred employee at the time of initial measurement. We can also do the subsequent measurement of loans and calculate amount to be recognize as profit or loss in accounts. 9.26.2 For identifying the fair value of Employee Loans as per Ind AS requirement, Future cash inflows of each loan type are required over the tenure of loan which includes inflow of principal amount as well as interest thereon. 9.26.3 Fair Valuation of loan depends on future cash projection of loan and future cash projection is depends on Type & Status of Loan. In first stage Ind AS program is bifurcating the loans in different scenarios on the basis of status of loan. 9.26.4 Following are some scenarios on the basis of status and recovery pattern of loan: a. Principal and Principal Recovery: These are the cases wherein HBA principal recovery has started and monthly interest is accruing. Cash inflow pattern would be that first principal amount will be recovered and then total accrued interest recovery will start. b. Principal and Gratuity Adj + Principal Recovery: These are the cases wherein employee has adjusted Gratuity in principal HBA. In such cases, first cash inflow would be of balance HBA and till that time interest will get accumulated on balance HBA as well as on gratuity adj. Once the balance HBA is recovered then recovery of total accrued interest will start and simultaneously, monthly interest on gratuity adj will also be charged and recovered by system (we have taken annualized interest for cash inflow purpose). Gratuity will be recovered in the superannuation month. Accounting of Employee Related Transactions INDEX Page 237

c. Principal, Gratuity Revoked and Recovery of Prin. & Grat. : These are the cases wherein employee had adjusted the gratuity but later on revoked it. There would be two recovery instalments which will end separately and interest will accrue accordingly. Once both recoveries will end then only accumulated interest recovery will start. d. Gratuity Revoked and Interest is accruing: There would be one recovery installment and interest will get accumulated till the revoked gratuity balance ends and then interest recovery will start. e. Interest Recovery, Gratuity Adj and Monthly interest recovery on Grat. : These are the cases wherein employee had adjusted gratuity and balance principal has already been recovered and now accumulated interest recovery has started. In addition, monthly interest on gratuity adj will also be charged and recovered by system. Gratuity will be recovered in the superannuation month. f. Only Gratuity Adj and Monthly interest recovery on Grat. : These are the cases wherein balance principal and accumulated interest has already been recovered. Monthly interest on gratuity is being charged and recovered and gratuity amount will be recovered in the month of superannuation. g. Interest Recovery only: These are simple cases wherein only accumulated interest is being recovered in monthly instalments etc. 9.26.5 In second stage Ind AS program will calculate the present value discounting the future cash flow with effective interest rate. 9.26.6 Deferred employee cost will be derived considering the transaction value and fair value of loan. 9.26.7 On the same line all new loan will be fair valued in Ind AS books through Ind AS program on balance sheet date and if there is any change in old loan, subsequent measurement will be done. 9.26.8 SAP T codes: Following are SAP T codes for Ind As fair valuation program • YHR227-Fair valuation of loan • YHR229-Ind AS Report Accounting of Employee Related Transactions Page 238

CHAPTER 10 : BORROWINGS 10.1 INTRODUCTION The overall main objective of Treasury Management at Corporate Level is to meet funds requirement (whether INR/ Forex or Short term/ Long term) on time, have flexibility in capital structure to leverage market opportunities, provide exit routes and above all, optimize cost of capital. Interest differential between Cash credit facility and other working capital loans is significant and therefore endeavor is to minimize utilization of CC limit while also avoid surplus balances. To optimise the debt cost, Indian Oil tries to have judicious mix of fixed & floating interest rates borrowings taking advantage of interest and exchange rate movements, tapping domestic and international market for maintaining optimum proportion of FE & rupee loans, raising loans of various maturities to avoid bunching up of loan repayments during any particular period, availing FE and rupee facilities of significant amounts with prepayment option as per requirement, development of broad & diversified sources of funding etc. The planning for such borrowings is based on the annual/monthly/daily cash flow projections done by Treasury for entire IOC as a whole. Based on IOC’s own funds availability (from internal and external sources) and the estimated needs, the differentials are bridged by borrowings in the Market as above. 10.2 DEFINITIONS Borrowings are considered as financial liability. The Ind-AS definition of financial instrument and financial liability is as under: A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. A financial liability is any liability that is: a. A contractual obligation: • To deliver cash or another financial asset to another entity; or • To exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity; or b. A contract that will or may be settled in the entity's own equity instruments and is: • A non-derivative for which the entity is or may be obliged to deliver a variable number of the entity's own equity instruments; or Borrowings INDEX Page 239

• a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity's own equity instruments. 10.3 CLASSIFICATION OF BORROWINGS Based on the requirements, Corporate Treasury decides to borrow money either in INR or foreign currency from domestic or international markets including banks, corporate & financial Institutions. Documentation for all such loans including all the terms and conditions are finalized by Corporate Treasury. Borrowings are classified into the following types based on the currency and term. A. Domestic: A.1 Short term  Cash credit/overdraft  Access to TREPS market  Commercial paper  JPM Revolving line  Working capital demand loan (WCDL)  Inter corporate deposits A.2 Long term  Bonds  Loans from OIDB B. Foreign: B.1 Short term  Buyer’s credit  PCFC  Revolving lines of credit B.2 Long term  Syndicated Term Loan  International Bonds 10.3.1 INDIAN RUPEE BORROWINGS 10.3.1.1 Short Term Domestic Borrowings Based on the requirements for short period (less than a year), CO (T) borrows the funds from the following avenues for short term. • Loan through Tri-Party Repo Segment (TREPS) of CCIL • Commercial Paper • Working Capital Demand Loans (WCDL) • Inter Corporate Deposits (ICD) • Cash Credit (CC) / Overdraft a. Tri-Party Repo Segment (TREPS) of CCIL INDEX Borrowings Page 240

Borrowing from Tri-Party Repo Segment operated by Clearing Corporation of India Ltd (CCIL) is done by CO (T) on daily basis. These funds are generally borrowed for overnight (1 day or next working day as is the case). Funds net of interest (discounted value) are received into our settlement account with HDFC and have to be repaid in face value. Daily settlement is handled by Ref HQ based on the data provided by CO (T). Interest is booked as expense in registered office books and the principal outstanding as on reporting date is shown in Ref HQ books of accounts. Since, funds are received net of interest, prepaid interest as on reporting date, if any shall be shown adjusted against principal loan outstanding as on date. All charges related to TREPS operations shall be booked in registered office books under head ‘Other Finance Costs’. b. Commercial Paper Commercial paper is an unsecured, short-term debt instrument (promissory note) issued by Corporate & Financial institutions. CP can be issued for maturities between a minimum of 7 days and a maximum of up to one year. Applicable stamp duty as per Indian Stamp act is to be paid at Mumbai. Funds net of interest are received into our settlement account with HDFC and have to be repaid in face value. Interest is booked as expense in registered office books and the principal outstanding as on reporting date is shown in Ref HQ / Marketing HO books of accounts. Since, funds are received net of interest (discounted value) and is repaid in face value, prepaid interest as on reporting date, if any shall be shown adjusted against principal loan outstanding as on date. All charges related to commercial paper shall be booked in registered office books under head ‘Other Finance Costs’. c. Working Capital Demand Loan (WCDL) Working capital demand loan or Term Loan is availed for a definitive period to cover the working capital requirements of the corporation. The minimum number of days of the term loans differs from the bank to bank and the maximum number of days is 365. All related agreements / documentation shall be carried out by CO(T) and the same is advised to either Marketing HO or Refinery HQ based on which respective divisions service the loans. The details of loan viz., Loan amount, Interest rate, Bank/Financial Institution, Term are advised by CO(T) to respective division. Interest is payable as per the terms of the loan and is booked as expense in registered office books and the principal outstanding as on reporting date is shown in Ref HQ or Registered office books of accounts. Certain banks offer flexible repayment date such as the loan can be repaid at any date with one day notice. Repayment date is such type of loans shall be carried out by respective division based on the instructions by CO(T). Interest accrued, if any on any reporting date shall be shown along with Principal outstanding. Borrowings Page 241

d. Inter Corporate Deposits (ICD) Inter Corporate Deposits are unsecured borrowings by corporate and financial institutions from other corporate entities. All related agreements / documentation shall be carried out by CO(T) and the same is advised to either Marketing HO or Refinery HQ based on which respective divisions service the loans. The details of loan viz., Loan amount, Interest rate, Bank/Financial Institution, Term are advised by CO(T) to respective division. Interest is payable as per the terms of the loan and is booked as expense in registered office books and the principal outstanding as on reporting date is shown in Ref HQ or Registered office books of accounts. Interest accrued, if any on any reporting date shall be shown along with Principal outstanding. e. Cash Credit (CC) / Overdraft Cash credit / Overdraft is a type of facility provided by the bank or financial institution in which, a company can withdraw an amount more than what he holds to his credit. Corporation currently operates cash credit with SBI and HDFC. CC limits with SBI/HDFC are secured by hypothecation of stock and trade receivables. Based on the cash flow requirements of the corporation, CO(T) decides to utilize CC limits. Interest is payable monthly and is booked as expense in registered office books and the principal outstanding as on reporting date is shown in Ref HQ in case of CC from HDFC bank and in Registered office books in case of CC from SBI. Interest accrued, if any on any reporting date shall be shown along with Principal outstanding. Refineries Practices- Short Term Borrowings Borrowings in Indian Rupee from Banks (INR Loans) in the short term are done for meeting the working capital requirements. However, long term borrowings have also been done to meet the working capital requirements. a. In order to bridge the gap between available resources and payment commitments, CO(T) borrows money from various Banks and Financial Institutions in Indian Rupees for various terms. Such borrowings are effected at “MIBOR rate + Margins” or at Fixed rates of Interest mutually agreed by CO(T) with the Banks/ Lending Institutions. b. Agreements for availing such loans are entered into with the lending institutions by Corporate Office and the same are forwarded to Refinery HQ for availment. c. Based on the daily Cash Flows of the Corporation, one day before such loan availment, CO (T) advises RHQ the details of the loan like • Amount of Loan to be availed • Type of loan (Secured/ Unsecured) • Terms of Payment • Lender Bank • Interest rate • Tenure of loan Borrowings Page 242

• Bank contact details for RHQ to place the loan drawdown notice d. The draw down is then placed with the Lenders by RHQ duly signed by Two Authorised signatories. The funds are directly transferred from the Lender to IOC’s designated Bank account with State Bank of India, CAG Branch, New Delhi or with HDFC Bank, Kasturba Gandhi Marg branch, as may be advised by CO(T). e. As advised by Treasury, the Interest on the same are to be paid on monthly basis on the first day of the succeeding month and on maturity along with the principal when repayment is due within the month. In case the first day of the succeeding month falls on a Holiday (Sunday) or Bank Holiday (RTGS holiday) then the Interest payment is effected on the last Banking day of the previous month, for the period from the last Interest payment to the second last day of the current month. The interest of last day shall be paid on second day of succeeding month. The next interest payment would be effected for the period from current interest payment date to last day of succeeding month or to the date of Maturity of Loan, whichever is earlier. f. Before an Interest payment is effected, the Interest amount is cross verified with the concerned Institution or Bank for accuracy purposes. For the same a letter advising the Interest amount is always received from the Bank which is then confirmed at RHQ. g. Under Income Tax Act, the Interest payment to Banks are exempt from TDS. For Interest payment to Financial Institutions, TDS are effected in line with IT Act unless a TDS exemption certificate under the IT Act is received from the concerned Institutions. Wherever needed, legal/Tax opinion is received from the Taxation Cell on the TDS issues. h. The Loans are accounted for in Refinery Division’s Books and remain in the Balance Sheet of the Refinery Division. The Loans are shown under “Note 21:–Borrowings –Current Working Capital Demand Loan. i. Apart from loans from banks/financial institutions, another method by which IOC bridges the gap between funds requirements and the funds availability is through INR borrowing from the Tri-Party repo Segment (TREPS). The basic features of borrowings under TREPS operations are: • IOCL borrows funds from Clearing Corporation of India Ltd (CCIL) on overnight/ short term basis. The borrowing limit of Rs.2636 crore is allocated by CCIL consequent to pledging of G-SEC purchased from market as collateral security. An additional financial guarantee has been provided to CCIL in the form of Bank Guarantee of Rs.1650 crore. Borrowings are allowed to the limit of the market value of the pledged G-Sec, which is estimated on day to day basis by CCIL. The borrowing cost of the same (paid to CCIL) is generally lower than the MIBOR/ CP rate/ Borrowing rate of banks. • Under agreement with HDFC, the funds for the borrowings from CCIL are received into IOC’s TREPS Settlement A/c with HDFC net of interest. The same is transferred by HDFC Bank under IOC instruction to HDFC cash credit account with HDFC. The gross amount from HDFC CC is then transferred to main SBI CC account • The Loans are repaid on the due date along with Interest by transfer of funds into IOC’s TREPS settlement account with HDFC. The funds in Settlement account are automatically swept in by CCIL in settlement of the Loan repayment. • The Borrowings from CCIL is shown in Balance Sheet of Refinery Division under Note 21 – 'Borrowings -Current From Others . Interest cost paid to CCIL – Interest on Short Borrowings Page 243

term Borrowings is to be transferred to Marketing Division for Accounting in Registered Office Books. j. Pursuant to changes brought due to IND AS, TREPS closing balance as on balance sheet date is now shown as net of interest (earlier shown as prepaid) in books of accounts. k. In the recent years, apart from loans from banks, another instrument which is frequently used for raising short term funds is Commercial paper(CP). CP is an unsecured money market instrument having maturities ranging from 7 days to one year. CP is one of the most competitive sources for raising funds to finance working capital requirements. CP is subject to RBI guidelines issued from time to time. The interest rate on CPs is fixed and payable upfront i.e. investor pays discounted face value of CP to the issuer and upon maturity, face value is paid to the investor holding the CP. CO(T) informs Banking section RHQ / Marketing HO about availment of CP at least two days in advance. The net amount of CP is received in SBI CC Account (being the settlement bank) on the value date. On the repayment date, gross value of CP is settled by SBI to the investors. CPs are issued in dematerialized form and subject to trading in secondary market. l. The Charges pertaining to CP are transferred to Books of Marketing and closing balances of CP are kept in books of RHQ / Marketing HO. m. These loans are shown under Note 21 Borrowings – Current . n. Pursuant to changes brought due to IND AS, CP closing balance as on balance sheet date is now shown as net of interest (earlier shown as prepaid) in books of accounts. 10.3.1.2 Long Term Domestic Borrowings Long term borrowing consists of loans and financial obligations lasting over one year and includes any financial & leasing obligations. CO (T) borrows the funds from the following avenues for long term in INR. • Bonds (Debentures) • OIDB Loans a. Bonds (Debentures) Corporation has issued various types of Non-convertible redeemable bonds to banks and institutional customers. Purpose of the utilization of proceeds from these bonds has to be mentioned prior to the issue of bonds and hence, proceeds can be utilized only for the said purpose. Corporation has issued bonds for either working capital or for capital expenditure. Contractual obligation to redeem such bonds after a specified period at face value only and hence these bonds shall be recorded at amortized cost using effective interest rate method. All related agreements / documentation shall be carried out by CO(T) and the same is advised to Marketing HO for servicing. Interest is payable as per terms and condition specific to each bond series. Interest on bonds borrowed for specific capital purpose shall be capitalized till the project completion and changed off to expense once the project commences. Interest on bonds borrowed for working capital shall be expensed off in registered office books. Borrowings Page 244

Interest accrued, if any on any reporting date shall be shown along with Principal outstanding. b. OIDB Loans Long term Loans from OIDB (Oil Industry Development Board) are taken at a concessional rate as advised by CO(T). The same is used for various projects of IOCL. Loan is kept in books of RHQ and interest servicing is done by Ref HQ. Interest shall be payable monthly as per loan terms and expensed off in respective refineries based on the ratio of utilization. [Post implementation of IND AS the loan availed from OIDB at concessional rate, after cut-off date of 1st April 2015 (compared with G-sec of relevant disbursement date) is recognized as capital grant by using the discounting factor. This Capital Grant is amortized over the period of loan. The relevant asset against this grant is transferred to refinery Units where it is depreciated over the life of asset Refineries Practices- Long Term Borrowing Borrowings for working capital are also made through issuance of bonds. The bonds are issued through Corporate Treasury and the loan is kept in the books of Registered Office. The interest servicing is done by Marketing Division for these bonds. Long term Loans from OIDB are taken at a concessional rate as advised by CO(T). The same is used for various projects of IOCL. Loan is kept in books of RHQ and interest servicing is done by RHQ. • Repayment of OIDB loans is made monthly in instalments as per the loan agreement. • Interest is paid on quarterly basis. TDS u/s 194A is applicable on this interest payment. The interest cost of these loans is debited to the respective units in ratio of their utilisation of loan. The Loans are shown under Note 16: Secured loans , Term Loans OIDB. Post implementation of IND AS the loan availed from OIDB at concessional rate, after cut-off date of 1st April 2015 (compared with G-sec of relevant disbursement date) is recognised as capital grant by using the discounting factor. This Capital Grant is amortised over the period of loan. The relevant asset against this grant is transferred to Units where it is depreciated over the life of asset 10.3.2 FOREIGN CURRENCY BORROWINGS 10.3.2.1 Short Term Foreign Currency Borrowings Foreign Currency Loan Availment: a. IOC avails Foreign currency Loans in order to bridge gap between the Funds requirements for import commitments against the funds availability. Loans are availed in Foreign currency from the foreign branches of the various Banks and are repaid on maturity with interest using currency purchase. Borrowings Page 245

b. Currently IOC avails loans in following time formats: • Revolving Loans with variable maturity. • Forex loans with maturity upto11 Months c. Currently, as per RBI guidelines there is no annual limit for FE borrowings. However, there is a limit of USD 150 Mn or Equivalent per import transaction for oil/gas refining & marketing, airline and shipping companies. For others, up to USD 50 million or equivalent per import transaction (RBI Ref. Letter no RBI/FED/2018-19/67 dated 26.03.2019). d. The revolving loans are availed to bridge temporary gap in the Funds availability with IOC. The Loans are availed with 2 days prior notice against payment commitments. The agreements for these lines are annual/semiannual agreements and are revised subsequently. These loans can be prepaid any time with two days’ notice and are thereafter available for availment within the maturity period. The prepayment/ availment of these loans is decided by CO(T) based upon market conditions and currency purchase requirements e. The revolving Loans are generally from Foreign Branches of Indian Public sector Banks. f. The Forex Loans are repayable at the end of the maturity period; however, applicable interest rate may vary depending on the agreement i.e. whether linked to 1/3/6 months Libor. g. Foreign Currency loans are availed on the basis of advice of CO(T). The requirement of Foreign currency loans is assessed by CO(T) on daily basis based on factors like Crude Oil Payments due on that date vis-a-vis availability of rupee funds for effecting payments thru Currency purchases. Other critical factors that influence the decision are Currency exchange rates in the Forex Market (for buying foreign currency) and London Interbank Offered Rate (LIBOR) Interest rates (for fixation of interest on foreign loans). h. Forex Loans are availed to effect payments for crude oil imports and can be availed to the maximum of limit as prescribed by RBI from time to time( as mentioned in Para 3 above). Quarterly return in prescribed format is filed with RBI enabling them to monitor our limits. i. Loans agreements are signed by CO (T) with the respective Banks and copy forwarded to Refinery HQ Finance. For availment of loans, following documents are issued to the bank: • Draw down request in the prescribed format duly signed by two authorized signatories as per list of authorized signatories attached with the Loan Agreement. • FEMA declaration and other statutory documents. • Copy of invoice and bill of lading or Letter of indemnity in lieu of BL and other documents evidencing proof of shipment. Borrowings Page 246

• The loan amount is credited to NOSTRO account of SBI and SBI remits the funds to beneficiary Supplier. • SBI issues NOC to the lending banks on a quarterly basis for remitting the funds to SBI. • In case payment to a supplier is under documentary credit (LC), lending bank will remit funds to the NOSTRO account of SBI. Further SBI will remit funds to LC issuing banks. The LC bank issues LC wise NOC to SBI for remittance. j. Date of repayment of loan with interest and the repayment amount are fixed and advised by the Bank. RHQ Finance executes the operational part of the loan agreement k. To arrive at the rupee amount for booking of the loan, the USD/INR rate as maintained by Corporate Treasury, available in the SAP T-Code YF116 (Type ZPUR) is considered. The rate is the closing rate on the date of availment of loan. l. The Short-term Foreign currency loan are shown in Note 21 – 'Borrowings -Current UNSECURED LOANS In foreign currency. Foreign Currency Loan Repayments: a. Loans are availed for fixed period of time with Interest based on LIBOR (London Inter Bank Offered rates) + Margin. The margin is either payable fully in Foreign Currency or part payable in INR as Commitment charges (Arrangement fee) to the local Branch of the Bank extending the Loan. b. Many loans have multiple interest periods with resetting of interest done at the end of each interest period. On the resetting date, interest payable till that date is paid and interest for next period is calculated with reset interest rate which in turn is calculated using LIBOR of resetting date. In final interest period, principal is repaid along with the interest. c. Based on the LIBOR and contract clauses of Interest, Banks advice the amount of foreign currency payable at the time of repayment of the loan with Interest and the due date of Loan repayment. d. The calculation is checked and cross verified with Treasury also for the rates etc. For interest payments, less than $ 0.5 million, Agent banker (State Bank of India) is requested to purchase the required currency and remit to lending bank. For final repayments, which are always more than $ 0.5 million, CO(T)is intimated of the currency requirement and the due date of repayment for effecting the currency purchase. e. Details of currency purchased like Bank from whom currency is purchased, amount in USD, Rupee amount etc. are advised by CO(T) two days before the due date of repayment. f. Based on this intimation from CO (T), INR payments to the various Banks (from whom currency was purchased) are effected by RTGS mode through HDFC Bank on value date. Documents containing payment instructions to various bankers along with copy of bank invoice, FEMA Declaration are prepared and handed over to these currency remitting banks one day in advance of the payment. These banks generally are instructed to send the currency to our Agent Banker’s NOSTRO account. Borrowings Page 247

g. Another document is prepared for the Agent banker with instructions to remit the amount to Lending bank. This document also contains details of currency being remitted by various Banks to the credit of the Agent Banker‘s account as aforesaid along with copy of invoice, FEMA Declaration and Form A2. Based on these documents amount is finally remitted by the Agent Bank to the lending bank to settle the loan amount. h. Withholding Tax under IT Act and Double Taxation Avoidable Agreements (DTAA) is applicable on the Interest payments for the forex loans. The rates are determined by the DTAA agreement between India and the country where the Beneficiary bank (the Lender bank) is assessed to Tax. For the payment of the Withholding Tax, a Tax Deduction certificate (Form 15 CB) is effected through a practicing Chartered Accountant for the amount to be deposited with tax authorities. The details of the same are also updated in the Income Tax website (Form 15 CA) on the date of payment. The amount so calculated is deposited with the tax authorities within 7 days of the following month. Withholding tax so paid is considered as part of interest cost. To avail benefits under DTAA Residency certificate of bank, PAN and Form 10 F duly filled by bank is taken from them. Withholding tax is on borrower’s account. Therefore, the interest amount is grossed up so that net payment after TDS is equal to original interest amount. i. One copy of the CA certificate along with Undertaking under Section 195 of IT Act, duly signed by authorised signatories (Grade D and above), is forwarded to the Agent Bank for onward submission to Tax Authorities. j. Based on the amounts paid to various banks for currency purchased from them and advice received from SBI for the currency purchases from SBI itself, various accounting entries are passed. k. The total INR amount as arrived aforesaid for repayment of the loan is divided into three elements: • Principal amount • Interest amount • Exchange Fluctuation Exchange fluctuation is the difference between Exchange rate prevalent on the day of availment of the loan and exchange rate at which loan is repaid and in case loan is outstanding on the last day of the reporting period, exchange fluctuation is the difference between Exchange rate prevalent on the day of availment of the loan and exchange rate on the last day of the reporting period. For this purpose exchange rate is maintained in SAP by CO(T) which is available under t-code YF116 (Type ZPUR). l. Under IND AS the interest accrued but not due on loans is clubbed with the loan Amount in Books of accounts. In the next quarter the same entry is reversed Forward cover (USD/INR) for Short Term Loans All Short-Term Foreign Currency Loans (other than revolving lines) are hedged on availment through Forward contracts. Borrowings Page 248

Application of ASI-10 to Short Term Foreign Exchange loans. The Guidelines with regard to the depiction of Interest costs and Exchange loss/ gain on repayment of Loans is as follows: a. The exchange difference on the foreign currency borrowings to the extent of difference between the interest on local currency borrowings (INR) and the interest on foreign currency borrowings shall be treated as adjustment to interest cost. b. In respect of exchange fluctuations on borrowings raised for financing working capital, the following procedure needs to be followed: • The actual interest on the foreign currency loan raised shall be calculated from the availment date of loan to the balance Sheet date • The notional interest on equivalent local currency borrowings is advised by CO(T) at each quarterly financial closure based on actual cost of short-term rupee funds availed by Corporate Treasury in the said quarter. • The differential interest between the foreign currency borrowings and equivalent local currency borrowings shall be worked out. • The exchange loss incurred on foreign currency loans is to be compared with the interest differential calculated as above and the exchange loss equivalent to the interest differential shall be considered as borrowing costs.. In case of exchange gain on a borrowing in an accounting period, unrealized exchange loss which was earlier treated as an adjustment to interest including the amounts considered in the previous accounting periods limited to the extent of the gain, needs to be reversed. As explained earlier the impact of ASI-10 is also sent to Registered Office at the end of each quarter. • The procedure explained above shall be followed for each of the foreign currency loan and the details of the exchange loss accounted as borrowing costs should be provided separately along with the quarterly accounts. 10.3.2.2 Long Term - Foreign Currency Loan Transaction For Capex Requirements a. Currently IOCL avails Capex loans in forex in following formats: • Syndication Loans (These are single loan with more than 1 lender. Lender details and Interest disbursements are handled by agents as per loan agreements.) • Bonds Issue (Issue of Foreign bonds to investors at large. The list of bond holders and interest disbursements are handled by depositories) • Notes Issue (Private placement of notes is done to sophisticated customers defined as per US Securities Act. Details of Note holders and interest disbursements are handled by agents) b. These loans are governed by Master Direction - External Commercial Borrowings (ECB), Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers issued by RBI. As per clause 2.4.6 of the direction, ECB up-to to USD 750 million or equivalent, for the companies in infrastructure and manufacturing, can be raised under the automatic route per financial year. Borrowings Page 249

c. These are long-term loans usually for a tenure of 5 to 10 Years. Syndicated loans are mainly availed for fixed period of time with Interest based on LIBOR (London Inter Bank Offered rates) + Margin and some loans are of fixed coupon rates also. d. Foreign Currency loans are availed on the basis of advice of Corporate Office -Treasury. Loan agreements are signed with the respective Banks by Authorised Signatories as per delegated powers by Board and copy of the agreements are forwarded to Refinery HQ Finance. For availing the Loan Registration Number (LRN) for ECB (External Commercial Borrowings), following documents are submitted to Authorized Dealer (as specified in the Loan Agreement) for onward submission to RBI: • Form 83 duly signed by authorized signatory at RHQ, Finance and certified by a practicing Chartered Accountant. • Details of lenders in case of syndication loans. • Schedule of other expenses pertaining to Loan. e. A new bank account is generally opened with SBI for receiving the proceeds of a fresh ECB. The details of new account are then provided to CO(T) for arranging the draw down. f. Upon drawl of forex loans, the funds required for utilization during the month of drawl are transferred to Marketing HO CC A/c. Balance funds are invested into Fixed Deposits. All the information in this regard is provided by CO(T) which is duly approved by Dir(F). The details are as below: • Month wise Expected utilization of proceeds in the project for which loan is drawn • Bank details into which Fixed Deposits are to be made • Tenure of Fixed deposits • Interest rates of Fixed deposits g. The FD maturity amounts received in the current A/c every month are transferred to Marketing CC a/c. The month wise utilization of loan proceeds in the specified projects are monitored. In case of shortfall, the details of unutilized amount are to be provided to treasury. Such unutilized funds may be re-invested in FD, if treasury advises so. h. Project/ expansion details for which forex loan are being availed are to be furnished in Form 83 to RBI. i. Revised Form 83 are submitted on any change in the terms and conditions of loan agreement like change in Loan amount, change in lenders due to sale etc. j. In case a loan is refinanced, Form 83 is again submitted to RBI with details of refinancing. k. The Forex Loans are repayable at the end of the maturity period. In syndication loans, 1M,3M/6M LIBOR re-fixation for the succeeding period are also taken. l. Based on the LIBOR and contract clauses of Interest, Bank/agent advice, the amount of foreign currency payable as Interest is finalized. If the currency requirement is more than USD 0.5 Million, request for currency purchase is sent to CO(T) as per established procedure and thereafter (two day before the due date of payment), details of currency purchased like Bank from where currency is purchased, amount in USD, Rupee amount etc. are advised to RHQ. m. Based on this, INR payments to the various Banks (from where currency was purchased) are effected by RTGS mode thru HDFC Bank. Documents containing payment instructions to various bankers along with copy of bank invoice, Interest calculations etc. are prepared and handed over to these currency remitting Banks one day in advance of Borrowings Page 250

the payment. These banks generally are instructed to send the currency to SBI NOSTRO account. n. The interest payment is made to the agent (as prescribed in the agreement) who in turn disburses the payment to lenders, bond holders, note holders etc. as the case may be. A document is prepared for SBI with instructions to remit the amount to Agent’s Bank Account. This document also contains details of currency being remitted by various Banks to the credit of SBI as aforesaid. o. Withholding Tax in respect of ECB is computed as per section 194LC of the Income Tax Act. p. The maximum Tax liability of IOC shall be as per the agreed terms & conditions of Loan agreement. q. The Tax amount on Forex loans is calculated in USD. The exchange rate used for converting tax amount is the TT buying rate as on the date of tax deduction. r. Form 15CA is required to be submitted online on or before the due date of payment. One copy of the Form 15CB along with Form 15CA, duly signed by authorized signatory is forwarded to the remitting bank. s. The Tax amount so calculated is deposited with the tax authorities by 7th of succeeding month. t. Agency Fee are paid annually as per agency agreements. Tax provisions are as advised by taxation cell. u. ECB return has to be submitted to Authorized Dealer for onward submission to RBI for each forex loan (of every format) on monthly basis. v. Based on the amounts paid to various banks for currency purchased from them and/or advice received from SBI for the currency purchases from SBI itself, various accounting entries are passed for interest payments/repayments. The interest cost/ other expenses pertaining to loan are charged to respective projects. w. Every Forex Loan is revalued at quarter end. The difference in exchange rate at quarter end with exchange rate at last quarter is booked as Exchange fluctuation and passed on to respective project for which the loan was availed. x. In cases where Interest Rate Swap (from floating rate to fixed rate) is undertaken, there is an additional interest impact depending on interest rate fixed under the swap deal. If the floating rate (LIBOR) is lesser than the fixed rate, IOC has to pay the difference of fixed rate and LIBOR to the bank with whom the swap transaction has been done and vice versa. The interest based on the coupon rate is paid to the individual investors separately as per the terms of the bond issue. y. In cases where Loans are availed in a currency other than USD, Cross Currency Swap deal may be entered into. In such cases z. The swap dealer converts the currency availed into USD. The swap cost shall be paid to swap dealer at a pre-fixed rate in USD and the swap dealer in-turn pays the interest to lender in loan currency. The withholding tax calculations shall be made on the basis of actual loan currency. aa. The cost pertaining to interest and other expenses along with FD income are passed on to respective refinery location where the project for which long term loan through ECB was availed, is located. Respective locations account for the debit/credit passed on to the respective project. Borrowings Page 251

bb. The Expenditure on issue of syndication loan (Namely Agency fee, Arrangement fee & out of Pocket expenses) which was earlier amortised are now netted off from the value of loan and adjustment entry is passed at quarterly closing to bring out the value of loan at original amount using IRR method. The IRR method has been explained in paragraph 10.3.2.1.3 above cc. Discount on issue of bonds which was earlier amortised is now netted from the value of bond and adjustment entry is passed at quarterly closing using IRR method. dd. Cross currency SWAP is valued at MTM on the basis of valuation provided by banks. The MTM report from banks is arranged by CO(T). The gain / loss on MTM valuation is kept in books of RHQ and corresponding derivative asset liability is also kept in books of RHQ. ee. Hedging with Forwards Contracts taken by CO(T): A forward contract is a contract to exchange a fixed amount of a financial or non- financial asset on a fixed future date at a fixed price. The fair value of a forward contract is affected by changes in the spot rate. CO(T) enters into Forward contract for Short term Foreign Currency Loan and Long Term Foreign Currency Loan . Forward Contract settled during the period: Movement of Exchange Loss or gain is shown in Other Comprehensive income account and then recycles to Statement of Profit & Loss A/c i.e. (Comparison of Spot Rate as on value date v/s Forward Rate). Forward Contract open during the period: Exchange gain/ loss for Open Forward contracts at period end are booked in OCI & corresponding Derivative Asset or liability created. Derivative Asset & liability is kept in the books of RHQ and Exchange gain/loss booked in OCI is transferred to Marketing Division. MTM loss/gain booked in OCI up to the maturity of forward is to be reversed along with corresponding derivative asset or liability ff. The interest accrued but not due on loans is clubbed with the loan amount in the Balance Sheet. These Loans are shown under Note 16: Long term borrowings Unsecured Loans Borrowings Page 252

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10.4 REFINERIES PRACTICES- CASH BUDGET – PREPARATION & MANAGEMENT: A key element of treasury management involves projections of inflows and outflows of the corporation, constant updation on day to day basis for ensuring effective fund management. Debt availment/repayment is decided based on cash flow projections - daily/ monthly/ yearly. Variance analysis is done of actual vs budgeted cash flow on an ongoing basis. Monthly dollar / rupee cash flow is compiled based on inputs received from RHQ Shipping / all Refinery Locations and liaison office. The main payments which affect the cash flow are crude payments, excise payments and project payments. The following is the detailed methodology adopted for preparation of INR cash budget at RHQ: a. For better management of Funds of the Corporation, all division are required to furnish Monthly Cash Budget/ Cash Flow Projections of their Division to Marketing HO Mumbai who in turn consolidate the same and forward to Corporate Treasury. Borrowings INDEX Page 255

b. Monthly Cash Flow Projections of Refineries Division for Indigenous Crude payments, Freight & Demurrage payments (INR), Capital expenditure, Interest Payment/ Repayment of Loans, Excise duty and other payments etc. are prepared and submitted to Marketing HO Mumbai/ Corporate Treasury by Banking Section RHQ. c. All Refinery locations and different Sections of RHQ Finance submit their projected Cash Flow requirements by 10th of the preceding month. The projections include Actual cash flow for previous month, Revised for Current Month and Budgeted for Next Month. d. After compiling the data received from Refinery locations/ Different Sections of RHQ Finance, consolidated day wise Projections in various heads as stated above of Refinery Division as a whole are sent to Marketing HO Mumbai/ Corporate Treasury. e. Changes in Cash Budget, if any (Increase or decrease in funds requirement) are to be intimated before 11 a.m. for onward intimation either by mail/phone. The net effect of such changes on a day to day basis is duly updated in Monthly Cash Budget by Banking Section, RHQ and intimated to Marketing HO Mumbai/ Corporate Treasury for incorporating the same at their end. Even where there is a likely inflow or outflow subsequently during the month, the same has to be duly intimated for inclusion in the cash budget. These changes are accommodated by Treasury by making suitable adjustments in borrowings through TREPS/CC. f. At the end of the month Actual Expenditure is compared with Budget and reasons for variation in actual expenditure w.r.t. Cash Budget are reported to Corporate Treasury for incorporating the same in the note for Treasury Review Meeting to be submitted to Dir(F). g. As far as possible Cash Budget variations are maintained within the limits. h. As far as Forex Cash flow are concerned, the budget is informed by Shipping (F),RHQ to CO(T). For crude payments (in USD), projections are made based on cash flow information send by Shipping on daily basis. Freight/demurrage payments in Forex are budgeted after receipt of invoice from Shipping. Forex loan repayments along with interest are budgeted after due confirmation from the concerned bank. All Refinery Locations, different section of RHQ, BD, Pipeline and liaisoning office submit their foreign currency requirement to Shipping Finance RHQ. Shipping Finance RHQ consolidates all currency purchase along with main foreign currency cash flow of shipping and submits the same to CO(T). The same is updated on daily basis. i. Currency is purchased by CO(T) based on intimation by Shipping Finance for Oil imports and related payments above 0.5 MnUSD and for imports related to capital goods above 1.0 MnUSD. For payment below the threshold currency is purchased directly from SBI. j. NIOC Euro currency purchase is intimated separately through mail and equivalent INR budget is taken through banking section in INR cash flow. • Similarly, as and when, CO(T) desires Annual Budget (month wise), the same is consolidated and sent to CO(T) by Shipping and Banking section. • The Loans in INR are borrowed from those banks who have their branches in India, whereas the Forex Loans are sourced from various Banks disbursed from their foreign branches mainly in Singapore, Hong Kong, London, Tokyo etc. Forex Borrowings are mainly in US Dollars. Borrowings Page 256

The Loans are repaid on maturity. The Loans are accounted in Refineries books and interest costs and exchange fluctuations are transferred to Marketing Division and from Marketing division to Registered Office Books on quarterly basis. Borrowings Page 257

CHAPTER 11 : BANKING OPERATIONS Banking Section functionally covers the following areas: • Opening of a New Bank Account • E-Payments • Receipts & Payments by cheques and bank drafts • Stale Cheques Accounting • Payment through Letter of Authority • Bank Reconciliations - Daily & Monthly • Safe custody of Valuables, Documents and Vouchers • Transactions pertaining to Alternate banker • Online EMD thru E-Portal (Receipt and payment) • Payments to foreign Vendors under service contracts (All divisions) • Investments • Getting Bank Guarantee Issued for units/departments 11.1 OPENING OF A NEW BANK ACCOUNT a. Cash Credit Account and any other specific account including bank accounts to be opened in foreign countries shall be under the approving authority of the Board of Directors. b. Any functional Director along with Director(F) is authorized to open Special Current (Withdrawal) Account with SBI. c. Any officer of the level of Chief General Manager (Grade H) and above of Finance Department at Divisional Head Quarters is authorized to open a Current (Imprest) Account with SBI. d. Officers of the level of General Manager (Grade G) and above of the Finance Department at Divisional Head Quarters to open Collection Account/Other Non-Operative accounts, Letter of Authority Account and Railway Credit Note Account with SBI. e. Any two officers of the level of General Manager (Grade G) and above of Finance Department in Marketing HO are authorized to open Export Packing Credit Account with SBI. f. Chairman and/or Director(F) are authorized to open Dividend Account with any scheduled Bank. g. Chairman and/or Director(F) are authorized to open any type of account (Other than cash credit account) with any other scheduled Bank. 11.2 E-PAYMENTS 11.2.1 With the implementation of E-payments at all units/locations, E-payments have to be affected through server to server mode only. 11.2.2 Payment to all the vendors is to be made by e-payment mode and only in exception cases through cheque/DD. The reason for making the payment by cheque/ Demand Draft has to be recorded and to be approved by the authority not below the level of head of the Banking Operations INDEX Page 258

Functional department. Banking section head shall also endorse for 'cheque/DD mode' of payment before the concerned finance section processes the payment. 11.2.3 However, the Functional Departments shall ensure that the numbers of such cases are limited and all efforts are made from time to time to convert such vendors to E-payment mode. 11.2.4 While ensuring maximum payments through E-payment, it is essential to keep proper internal controls in vendor master to mitigate security risks involved in the maintenance of vendor bank details in SAP. 11.2.5 The data in the prescribed format shall be collected from the tenderers at the time of receipt of offer by the respective functional departments. Upon successful award of the tender, the officer of the Functional Dept. shall upload the successful Vendor‘s details such as Bank data, E-mail id, Mobile no etc. in SAP. The officer (EIC) will upload the bank mandate in PDF file (as per the prescribed format), duly signed by the vendor, in SAP thru T-Code YMV. The officer uploading the bank details shall put his initials on the face of vendor mandate letter. Thereafter, the original mandate shall be forwarded to Finance for confirmation. The vendor details uploaded by functional dept. shall be confirmed by the authorised officer of the Finance department thru T-Code YMV. In other words, the scheme of uploading bank details of vendor shall work on the concept of Maker (Functional) and Checker (Finance). Such officer of the Finance Dept shall also sign on the mandate letter (and also cancelled cheque leaf) and forward to Banking section for record maintenance. 11.2.6 E-Payments through SBI are regulated through following stages and the respective roles are described below: a. Regulator: There is one regulator for IOC as a whole. Finance Head of Marketing Division is the regulator for SBI E-banking. His role is to define the overall limit for the account, maximum monitory limit for a single transaction and appointment of Local Administrators etc., amongst other things. b. Administrator: As per the applicable Board resolution, officer of grade G and above of Finance Department can only be appointed as Administrator. However, with the approval of Director(Finance), officers below Grade G can be appointed as administrators based on the requirement. The Administrator’s role is to add the E- banking users, assigning them the role, fixing monetary limit to each user and to approve the vendor’s bank details in the bank site based on the input from the concerned section of finance Department. c. Uploader: Uploads the E-payment transaction file (auto generated from SAP), Tax file (CBEC & OLTAS), bank details and other information of vendors. d. Maker: Maker has enquiry and view rights only. Further, maker generates Tax payments outside SAP on various Government sites for e.g. OLTAS, CBEC etc. e. Authorizers: Along with the view rights, they authorize the transaction for payment. The Authorizers are the Officers who are designated for authorization of E-payments as per DOA limits set by the Administrator. Banking Operations Page 259

11.2.7 For the E-payments, the Officers/ Staff of Finance Sections would have to be assigned individual roles of Maker, Uploader and Authoriser of the e-cheques. Each role (maker, uploader & authoriser) would be effected through Electronic IDs and Passwords for operation in the internet site. 11.2.8 SBI E-Banking platform has additional security feature of maintaining masters in respect of bank details of respective vendors in their website. Vendor's bank account details, as obtained from functional department (in the prescribed format), are to be uploaded in SBI banking site by the authorised finance officer (uploader) of banking section and thereafter the same is approved by the designated Administrator. Same process is to be adopted for any modification in existing bank details in SBI site master. The vendor details to be uploaded in SBI website should be in consistency with similar information in SAP. In case of mismatch in bank data of 'SAP' and 'SBI site' for any payment, the transaction gets rejected in SBI's E- payment platform. 11.2.9 Procedure for centralized e payments in Marketing divisions is enclosed as Annexure – 11.1. 11.2.10 The procedure for E-payments for non-centralized payments are as under: a. All payer sections of Finance Department shall generate payment vouchers and pass on the same to Banking section duly approved by competent authority. b. Upon receipt of the duly signed hard copy of the SAP payment voucher, designated uploader in banking section shall create SAP E-cheques using YF52, thereby uploading the same to bank website. The SAP E-cheque number has to be recorded on the physical voucher. c. The physical voucher as above shall be passed on to the Authorized signatories for online authorization of E-pay orders created for respective vouchers as per the E-pay order authorization rota. All vouchers are to be authorised jointly by two signatories. d. The authorizers shall authorize the e-pay orders after cross-checking with duly approved physical payment voucher. Post-authorization in Bank e-payment site, the authorizers shall put their signatures on the physical payment voucher with designation and date. The duly authorized payment vouchers shall then be returned to the Banking section for record. e. Authorisation rota has to be prepared every year in order to allow hassle free authorisation of e-payment transactions. 11.2.11 Monitoring of the status of success/failure/pending of e-payment order: a. At the end of day, Banking section shall ensure that all vouchers uploaded in the bank e- payment site, which have been put up for authorization, have been duly authorized in the e-banking site. For high-value and value dated payments, the paying section shall also follow up the status of payment with the Banking section. Needful action should be taken in case of any irregularity. Banking Operations Page 260

b. On the next day, banking section shall take the print-out of the list of all E-pay orders uploaded on the previous day(s) and compare the status of all payments scheduled for previous day with the bank statement and put his signature. c. Upon noticing any failed transaction(s) scheduled for previous day, banking section shall immediately reverse the SAP e-cheque and record the reversal on the physical voucher with signature and date and intimate the same to the payer section for reversal of the bank voucher in SAP. Banking section shall retain a print-out of the communication received from the Bank for failed transaction (Email or print of failed e-pay order) for record. Unless and until confirmation of cheque failure is obtained from the Bank/Bank e-payment site by banking section, no further action should be taken for processing the same payment through any other alternative mode. d. If, for any reason whatsoever, an e-payment is not completed even after the value date, then such e-cheque will not be left pending in Bank site and the same shall be cancelled/ deleted after obtaining written clarification from the Payer section. Post cancellation/deletion of the e-pay orders in Bank site, the e-cheque shall be reversed in SAP. Post reversal of the e-pay order, banking section shall intimate the same to the payer section for reversal of the bank voucher in SAP. 11.2.12 Managing E-payment authorisations, login passwords, list of signatories with banks a. The authority for operating the bank accounts and internet banking is as per the authority sub-delegated by the Board. b. A list of authorised signatories along with their specimen signatures has to be submitted to bank at least once a year. The list has to be duly attested by the location Finance HOD. c. All the new e-banking users shall be created by the local administrator. Upon the receipt of Login id & passwords for new users from the bank, administrator shall grant the respective access rights to these users. This activity shall be coordinated by a designated officer from banking section. d. All Units will communicate in writing, the deletion of names of signatories due to separation/transfer/long leave immediately to the bank. In cases of separation from service like superannuation, resignation etc., the deletion intimation has to be sent on the day of separation itself or at the most the next working day. The written confirmation from bank about the deletion in their system is to be obtained and kept in record. SBI, CAG has already issued necessary instructions to all its branches to give such confirmation in writing. In case of E-banking authorisation, banking section shall ensure that authorisation for such transferred/departed officers, is immediately disabled in SBI site through the Administrator of the concerned bank account. e. There have been instances when the internet payments could not be made due to non- updation of the correct/ enhanced validity date of the limit of the concerned units bank account in the system by local SBI branch. The bank account validity date is generally advised by SBI CAG Mumbai to all branches on yearly basis as soon as IOCL’s Cash Credit facilities are renewed by CAG Mumbai. The respective location should maintain follow- up with the branch to ensure that the validity date is duly updated as soon as it is advised by SBI, CAG Mumbai. Banking Operations Page 261

11.3 RECEIPTS AND PAYMENTS THROUGH CHEQUES AND BANK DRAFTS 11.3.1 Receipts 11.3.1.1 Subject to specific exceptions permitted by the Head of Finance Department, the Banking section alone will be authorised for receiving money on behalf of the Corporation. Cheques, DDs, Postal Orders etc. received through post or otherwise by the concerned department will be passed on to Finance Department immediately for getting the same credited to the Corporations account. FDRs are not to be accepted as security/security deposit even if it is endorsed or discharged in favour of IOCL. 11.3.1.2 Generally, the money received from outside parties by IOC is to be in the form of either Bank Drafts or online Transfers. Though receipt of cheques is not normally to be accepted from outside parties, but if necessary, payments may be accepted and received in the form of Account Payee Cheques only with the permission of head of the Banking section. Outstation cheques are not to be accepted. 11.3.1.3 No Cheque/DDs shall be received by the Banking Section unless authorised by concerned Section of Finance Department, duly specifying the account head to be credited for receipt of such Cheque. 11.3.1.4 For each money receipt transaction, official receipts will be issued by the Banking Section, to the party tendering such money. The receipts will be signed by Cashier/ Officer-in-charge. 11.3.1.5 Each receipt shall be properly accounted in SAP with credit to the correct Account Code. 11.3.1.6 The cheques/ demand drafts received should be deposited with the bank on the same day or on the next working day. The counterfoils/ duplicate copies of receipts should be checked with reference to the pay-in-slip of the bank and the relevant pay-in-slip should be countersigned by the Officer in-charge. 11.3.1.7 In case of dishonour of cheque received, the following procedure shall be adopted: • As soon as the bank-intimation about dis-honour of a cheque is received, a copy of the same should be sent to the concerned department who has originally received and deposited the cheque. • The concerned party should be intimated suitably by the concerned department under intimation to Finance. • The counterfoil of the receipt issued against the above cheque should be properly defaced with the remarks that the cheque has been dis-honoured. • An adjustment voucher should be prepared crediting the bank account and debiting the concerned account where the amount was originally credited. In other words, proper adjustment should be carried out to nullify the effect of the receipt earlier accounted for at the time of receiving of the cheque in question. The fact that receipt issued against the original deposit has been defaced should also be recorded on the said adjustment voucher. • Charges, if any, is levied on IOC by the Bank shall immediately be advised to the Section/ department which received the original cheque. The charges shall be debited to the concerned defaulter ‘s a/c and recovered from him. Banking Operations INDEX Page 262

• It shall be ensured that all Legal actions stipulated by Corporate Affairs vide the Policy Circular No.CA/Legal dated 23.01.2008 shall also be complied with in this regard. 11.2.1.8 The clearance of deposit of cheque is to be regularly reviewed by the banking section and in case of delay in credit by bank, the same should be regularly followed up for early clearance. 11.3.1.8 After introduction of Section 269SU of Income Tax Act, 1961 w.e.f. 1st November 2019, it is mandatory for person carrying on business whose turnover/gross receipts for PY exceeds Rs 50 Crore to provide a facility for accepting payment in prescribed Electronic Mode. There is Penalty of Rs 5,000 for every day during which failure continues. • It is to be ensured that customers /debtors/payees are made aware of the preference of the company to accept payment in electronic mode • In addition to NEFT, RTGS, IMPS other E Modes like BHIM UPI, UPI-QR Code, Aadhar Pay, Payment Gateways of banks / Financial Institutions / Payment Settlement Systems etc. must also be encouraged. • If they insist on payment by cheque/DD payment only, please get a declaration duly signed duly by them carrying their address along with their Aadhar No, PAN No, GST No and valid Mobile phone no. stating the following in order to avoid penal provisions. - I / We do not have net banking facility or any other E Mode faculty at the time of payment / for the time being / always. - I / We have no option but to pay by mode other than E Mode, though you insisted for payment by E Mode only. 11.3.2 Payments 11.3.2.1 Payment to all the vendors is to be made only by e-payment mode and only in exception case through cheque/ DD. The reason for making the payment by cheque/ Demand Draft has to be recorded and to be approved unit Finance Head/CGM. All efforts are to be made to reduce the issuance of physical cheques and steps should be for transition for e-payments. In case, where cheques are needed to be issued to outside vendors, payments exceeding Rs.10,000/- each day, shall be made only by account payee crossed cheque or demand draft as provided under section 40 A(3) of the Income Tax Act read with Rule 6 DD of Income Tax Rules. No cheque payment shall be made by means of bearer cheques to any contractor/Outside vendors. Payments to employees through demand draft are to be stopped. 11.3.2.2 All payments shall be made only on the basis of payment vouchers. Payment vouchers for bank documents shall be printed and approved, duly signed by the competent officer of Finance. 11.3.2.3 No payment vouchers shall be prepared by the Banking Section except for bank charges, bank interest, revenue stamps affixed on vouchers and transfer of funds, working Capital Loan repayment. Banking Operations Page 263

11.3.2.4 Whenever cheques are presented to IOC for revalidation, such cheques shall be cancelled and fresh cheques only shall be issued in its place, with proper adjustment entry. No revalidation of the earlier issued cheque by signatures against date etc. shall be effected. 11.3.2.5 For issue of any fresh cheque to a party against a Lost cheque etc., the same can be done only after receiving from the party an indemnity bond on a stamp paper as per the prescribed format of the Corporation. An instruction is to be send to the bank for stop payment against the lost cheque. 11.3.2.6 Units shall ensure that no manual correction is made on the cheques. In case, the cheque requires correction, the same should be cancelled and a fresh cheque should be issued. Units should also write to local branch of their banks that in case the bank receives any such manually corrected cheque, the same shall be brought to the notice of concerned IOC office, which has issued the cheque. 11.3.2.7 The payment voucher shall be retained by the Banking Section after release of payment. Record (along with supporting) of all vouchers shall be maintained in Banking sections. Cheque number and date shall be mentioned invariably in all the vouchers. 11.3.2.8 For all payments released through cheques, proper acknowledgement shall be obtained except where cheques are sent by Registered Post/ courier. For cheques sent by post/ courier, the parties shall be asked to furnish official receipts. 11.3.2.9 It has to be ensured that at the end of the day, banking section should keep complete control of the cheques which have been signed and any unsigned cheques should be kept under safe custody. The counterfoils of manually issued cheques shall be kept separately by banking section. 11.3.2.10 All blank cheque books/ leafs shall be kept in proper custody under lock and key and a register containing the details of receipts and issues of cheque books/ leafs shall be maintained. 11.3.2.11 In view of increased use of e-payments/RTGS/NEFT, multi-city/ payable-at-par cheques are no longer required and the use of the same should be stopped with immediate effect. There is an inherent risk involved in use of such cheques also. Therefore, units/liaison offices should surrender such unused cheque books and obtain confirmation from the bank regarding deletion of the cheque series from their records. 11.3.2.12 Physical cheque stationery should be got issued through SBI rather than by direct printing by the Corporation through the printers designated by SBI. For this, it is required that locations should give indent to the respective branch at least 3 months prior to the actual requirement of stationery. 11.3.2.13 In case in any account, there is no requirement of physical cheque transaction, the unused cheque books of that account must be surrendered to the bank and confirmation is to be obtained from bank about deletion of cheque series from bank records Banking Operations Page 264

11.4 STALE CHEQUES The accounting procedure to be followed for the treatment of Stale Cheques is as below: 11.4.1 Banking Section to review the Outgoing Bank GLs at each month end, subsequent to completion of bank reconciliation exercise. 11.4.2 Bank Open Items in the form of Uncleared Cheques over three months, if lying in the Outgoing Bank GL should be considered as \"Stale Cheques\" for removing from the Bank GLs. 11.4.3 The Banking section should list out the details of such Cheque Numbers which are over three months. The banking section should make all such cheques as Void in SAP system. 11.4.4 Subsequently, banking section should transfer the cheque amount of the payment document from the Outgoing Bank GL to the GL for \"Sundry Creditors-Uncleared Cheques\" (2112101800). The subject document should be posted by clearing Open Items from the Outgoing Bank GL code. 11.4.5 While posting the document,, the banking section should capture (a) Cheque Number in the Assignment field, (b) cheque date in the value date field, & (c) Payment Doc Number, vendor code and paying section reference in the Text field, each separated by special character \"I\". 11.4.6 Banking section of the respective Units should ensure that details as required are correctly captured in the Assignment & Text Field so that schedule of GL 2112101800 for 'Sundry Creditors - Uncleared Cheques' can be extracted directly from SAP. 11.4.7 Where a vendor submits claim for the uncleared cheque after three months, subsequent to transfer of the cheque amount from Bank GL to Sundry Creditors, the following action is prescribed: a. If the vendor brings back the previously issued cheque which had been classified as Stale Cheque: The old cheque shall be submitted by the vendor. Such cheque shall be defaced and kept in the custody of banking section for official records. The concerned section shall initiate an approval note enclosing the vendor request letter and forward to Banking section for approval. Subsequently, the stale cheque amount lying in the Sundry Creditors GL should be transferred, thru open item clearance only, to the Vendor Code where after, the vendor liability shall be cleared for payment by the concerned section and a new cheque will be issued. b. If the vendor is unable to submit the previous issued cheque: An 'Indemnity bond' should be submitted by the vendor in the prescribed format certifying that the previously issued cheque had not been encashed till date. Concerned section shall initiate an approval note enclosing the vendor request letter and indemnity bond and forward to Banking Section for approval. After obtaining approval, the stale cheque amount should be transferred, thru open item clearance only, to the Vendor Code. Thereafter, the vendor liability shall be cleared for payment by the concerned section and a new cheque will be issued. Note: Efforts should be made to release the payment against the stale cheque through RTGS/NEFT mode only. The consent of the vendor in the prescribed format is to be obtained alongwith the copy of the cancelled cheque. Only in case of any eventuality, fresh manual cheque may be issued and that too approved by the authority not below the level of CGM of the indenting Functional department. 11.4.8 If there is no claim for three years from the date of transfer of stale cheque amount to GL 2112101800 'Sundry Creditors - Uncleared Cheques', the amount should be transferred from Banking Operations INDEX Page 265

'Sundry Creditors-Uncleared Cheques GL' to the Misc. income GL 4516080140 by following the process of open items clearance only. 11.4.9 In case of any request to validate the cheque transferred to Misc. income GL 4516080140: The Functional Department shall initiate an approval note enclosing the vendor request letter and submit the same to the concerned finance section for releasing the new cheque to the Vendor. The concerned finance section while forwarding the approval note to Banking section will mention all the relevant information on the approval note such as old cheque number, old SAP document numbers etc. Banking Section after verification of all data will inform the concerned finance section to create a fresh liability in favour of the vendor by debiting 'Misc Expense' GL code. Thereafter, the vendor liability should be cleared for payment and a new cheque will be issued. 11.5 INSTRUMENTS OTHER THAN E-BANKING/ CHEQUES LIKE LOA ETC. 11.5.1 INR payment through Letter of Authority: All INR LOA payment should be routed through SAP and SAP generated LOA instruction/PR duly signed by the authorised signatories be sent for payment. Only in exceptional cases duly approved by “Unit Finance Head”, the use of Non-SAP LOA is to be allowed. The following controls should be exercised: 11.5.1.1 All INR LOA payments must be supported by SAP vouchers duly approved by competent authority and must be approved by the competent authority of the Payer section on the face of the office copy of the LOA. 11.5.1.2 All Non-SAP LOA must compulsorily be entered in the LOA Control Register maintained with Banking section and the serial number of such entry in the LOA register must be recorded on the face of the SAP voucher as well as the LOA. The SAP voucher number should also be recorded on the face of the LOA. 11.5.1.3 For all INR LOAs of project finance in Refineries Division, the first authorized signatory of the LOA must be the Competent authority of Payer section/department. The second signatory has to be as per the pre-decided Signatory rota issued by Banking Section. 11.5.1.4 Separate rota for authorised signatories to authorise LOA has to be prepared in order to allow hassle free authorisations. 11.5.1.5 Both the authorizers of LOA shall put their signatures on the physical payment voucher with designation and date. 11.5.1.6 Post authorization by the second signatory from Banking section, the LOA should be sent to the bank. 11.5.1.7 The original voucher and a copy of the LOA should be handed over by the payer section to Banking section for record and reconciliation purposes. 11.5.1.8 On the next day, Banking section shall compare the entries in the LOA Control Register scheduled for previous day with the bank statement and initial against the entries in the register. Banking Operations INDEX Page 266

11.5.2 FOREX payment through Letter of Authority (LOA) The LOA for FOREX payment to be issued in foreign currency for this purpose a separate approval is prepared for signatory to sign on FOREX LOA. As the exact value of INR payment is not known at the time of payment instruction, it is not feasible to prepare INR SAP voucher for the payment. Therefore, for FOREX payment through LOA, the following procedure should be followed: 11.5.2.1 All FOREX payment must be approved by the competent authority of the Payer section on the face of the office copy of the LOA. 11.5.2.2 FOREX LOAs must compulsorily be entered in the LOA Control Register maintained with Banking section and the serial number of such entry in the LOA register must be recorded on the face of the LOA. 11.5.2.3 For all LOAs of project Finance, the first authorized signatory of the LOA must be the competent authority of Payer section/department. The second signatory has to be as per the pre-decided Signatory Rota issued by Banking section. 11.5.2.4 Post authorization of the LOA by the second signatory, the LOA should be sent to the bank. 11.5.2.5 A copy of the LOA should be handed over by the payer section to Banking section immediately. Upon receipt of the Bank advices, the payer section shall immediately prepare the SAP voucher and record the LOA control register serial number of the LOA on the SAP voucher and pass on the same to Banking section for record and reconciliation purposes. 11.5.2.6 Wherever RTGS/NEFT or LOA in FC instruction is being given to the bank on the company letterhead duly signed by the authorized signatories, such instruction issued to the bank should also be followed up and confirmation of receipt obtained. The record of such telephonic confirmation should also be kept. For the sake of better control, the series (starting and ending serial numbers) of RTGS/NEFT instruction should be advised to bank by the units/liaison offices so that the same can be fed into the bank’s computer record also. SBI branches should be advised by the units/liaison offices to incorporate the serial number in the bank statement in the cheque number column so that the same can be used for bank reconciliation. 11.6 BANK RECONCILIATION 11.6.1 The bank reconciliation of withdrawal account shall be done concurrently on daily basis by downloading the Bank statement. Immediate action is to be taken in case any extra debits/short credits are found. The matter is to be taken up with the bank without any loss of time to protect IOCs interest and insist for reversal of the debit by the bank. There should not be any backlog in reconciliation/ taking up with the bank for liquidation of open items. 11.6.2 Report on bank reconciliation along-with status of reconciliation items is to be put up on a monthly basis to Head of Finance of the Unit/liaison Office and action is to be taken to clear Banking Operations INDEX Page 267

the open items on priority. Detailed modalities of Bank Reconciliation are available in the shared folder in SAP. 11.7 SAFE CUSTODY OF VALUABLES, DOCUMENTS AND VOUCHERS 11.7.1 All securities and documents like FDR‘s/BGs/other documents & records of the Corporation shall be kept in safe custody with the Banking Section. In addition, any other important documents or articles as may be approved by the Head of Finance Department shall also be kept in the safe custody of the Banking Section. A register containing the details of all documents kept in the safe shall be maintained by the Cashier. 11.7.2 All paid vouchers duly numbered, serially arranged based on cheque number, shall be preserved in files along with supporting papers. Periodically, vouchers should be bound in books and indexed properly. These vouchers shall be retained in Banking section till the annual audit is over after which they shall be transferred to the Record Room. 11.8 TRANSACTIONS PERTAINING TO ALTERNATE BANK (HDFC BANK) 11.8.1 HDFC bank was inducted in IOCL as an alternative bank during 2006. Presently, HDFC bank is in operation at RHQ ,Panipat Refinery and Delhi State Office. Both 'E-payment' and 'payment 11.8.2 through cheque' to various vendors are being made through S2S mode. All the HDFC 11.8.3 Operations are administered by RHQ. Collection of Delhi State Office and other offices and day end balance of Panipat Refinery account is pooled from different locations in the main cash credit account. Most of the vendor payments for RHQ and DSO are made from withdrawal account of HDFC Bank. The withdrawal account & CBLO account are again pooled into main Cash Credit account The payments through net banking on HDFC site are authorized by two officers. Thereafter the payment needs to be confirmed by any of the authorized officer. CO(T) decides the optimal balance to be kept in SBI & HDFC at day end and accordingly advises transfer of funds between HDFC and SBI on each working day. Divisional HO banking does the transaction of fund transfer on advise of CO(T). 11.8.4 At present, Four Bank accounts are in operation with RHQ: • Withdrawal account for normal payment at RHQ. • Current account for CBLO Operation. • Current account for Commercial paper operation. • Main Cash Credit account 11.8.5 After the RBI circular DBR.BP.BC.No.12/21.04.048/2018-19, the Outstanding balance in HDFC Cash credit account is converted to a Working Capital Demand Loan which remains outstanding for a period of 7 days and the interest is charged thereupon at the rate Banking Operations INDEX Page 268

prescribed by HDFC which is less than the prevailing CC rate. The loan amount is kept in our books and the interest so charged is transferred to Mktg HO. 11.8.6 At RHQ and Panipat Refinery: Cheque printing is outsourced from HDFC. This ensures elimination of tampering of valid data in the cheques and necessary validation is ensured at the time of clearing. In addition to this, other risks associated with in-house printing are completely absolved. 11.9 EMD ACCOUNT Indian Oil Corporation Ltd. has developed a secured and user-friendly e-Tendering system through National Informatics Centre (NIC). All electronic tenders in Indian Oil are published on this site https://iocletenders.gov.in. Bidders can Search, View, Download and submit bids online in a secured and transparent manner. For whole of IOCL, EMD received/ refunded etc. is accounted for in books of RHQ Finance. ICICI Bank is our banker for handling online EMD. The procedure for receipt/refund and transfer to Security Deposit (Successful bidder) of EMD is as follows: 11.9.1 All bidders have to register themselves in NIC E-tendering portal. 11.9.2 The bidders deposit online EMD through Net banking, NEFT or RTGS in ICICI EMD account. 11.9.3 EMD amount received is credited to EMD account (GL:2142010010) in company code 9000. 11.9.4 After Tender evaluation, Award of contract (AOC) is done on E-tendering portal by IOCs E - Tendering Cell of respective units, locations and divisions. 11.9.5 On completion of Step 4 above, refund of EMD to unsuccessful bidders is processed through ICICI bank by debiting IOC’s SAP GL code EMD Gateway (2142010010) in company code 9000.The refund of unsuccessful bidder is funded manually by Banking section after running the report on ICICI bank website. Once the funds are received the Refunds are authorised on ICICI website by two officers from banking section. 11.9.6 Transfer to Security deposit: On AOC (Award of Contract), EMD of L1 bidder appears in ICICI website. On authorisation of L1 bidder by two officers of Banking section on ICICI website, the EMD is transferred from GL Code 2142010010 (Co Code 9000) to SAP GL code 262000000 (Company Code 9000). 11.9.7 At the time of release of PO/ WO in SAP by EIC, the unique 11-digit NIC number and Tender ID is to be updated in PO. Finance concurrence should ensure the same at the time of doing FC in SAP. On release of PO/WO, if the NIC NO and Tender No is updated in PO in SAP, the EMD of L1 is transferred to respective location from GL code 2620000000(Company code 9000) to the credit of vendor code. 11.9.8 All the above entries are Auto entries posted by System through XML files and there is no manual intervention. Only entry posted manually is the funding of refunds mentioned at point no 6. Banking Operations INDEX Page 269

11.9.9 Release of P.O. / W.O. in SAP is done by Concurrence Section. To ensure discipline and ensure compliance of online EMD process, the following is to be ensured by Concurring Officer while releasing P.O. / W.O. in SAP: Sl. No. Particulars Remarks 1. Whether E-Tender Yes / No If No, then approval of Competent Authority is to be verified and recorded in Note Sheet. 2. Whether OnlineYes / No EMD Paid  If No, then Exemption Certificate or approval of Competent Authority is to be verified and recorded in Note Sheet 3. Copy of AOC doneTo be verified and recorded in Note Sheet. on NIC Website 11.10 PAYMENTS TO FOREIGN VENDORS UNDER SERVICE CONTRACTS Effective 1st April 2016 all payments to foreign vendor under service contract, including INR payments are handled by RHQ (F) Banking. The objective is to streamline the compliance of withholding tax, application of DTAA and reporting requirement of 15 CA / CB. Payments under Supply contract, lower or Nil withholding tax certificate (issued under section 195/197 of Income tax act 1962) are still handled by locations and hence are decentralized. Documents pertaining to RHQ, Corporate office, locations and other divisions are received vide email along with IOM and necessary tax documents. The documents are as follows: • Tax Residency Certificate (TRC) • PAN or Statement in Lieu of PAN • Form 10F • Copy of PO/WO • Certified Copy of Invoice • OFAC compliance of the party (Website of US treasury) • Copy of IOM from payee section. The IOM should also clearly mention the banking details of foreign vendor. The IOM should clearly mention who will bear the withholding tax and bank charges. The Documents received are verified by RHQ Banking and sent to taxation section for advising the tax rates on the same. If Tax is applicable 15 CB if also filed by practicing Chartered Accountant (approved panel). After that 15 CA is filed online by the concerned officer in banking section. The Bank (SBI) is then advised to purchase the currency and remit to the Foreign Vendor. In case the payments belong to RHQ/ Corporate office the necessary entries are passed in Company Code 9000. TDS and GST (Reverse Charge) is deposited by RHQ Banking. If the payment is of different location/ division the amount of remittance is posted/debited to the control account of the location/division. Location/Division has to deposit TDS/ GST respectively. Banking Operations INDEX Page 270

11.11 INVESTMENTS Banking Section of RHQ does investments as advised by CO (T). These investments can broadly be categorized into following categories • Investments in Mutual funds • Redemption of Mutual Funds • Investments in Fixed Deposit • Maturity of Fixed Deposit 11.11.1 Investments in Mutual funds Corporate office has taken approval for investments of Short-term surplus funds in line with DPE guidelines vide note no CO/T/897 dated 16.09.2015.In accordance with above CO (T) has finalized modalities for investment in Mutual funds Presently, the investments in mutual Funds are made in two schemes • SBI Premier Liquid –Direct Plan-Daily Dividend Reinvestment • UTI Liquid Cash Plan Institutional Direct Daily Income Option Reinvestment. On the basis of advice by CO/T, Banking Section RHQ does the documentation and Transfer the funds for investment in mutual fund latest by 2.00 pm on date of investment. Along with Fund transfer a letter signed by authorized signatory confirming the date / amount of Purchase of MF is also to be delivered by Mail / Fax to the concerned person in Mutual funds. The Mutual Fund confirms receipt of funds and documents vide Email/SMS. 11.11.2 Redemption of Mutual funds On the basis of advice by CO/T, Banking Section RHQ does the documentation for redemption of MF. The Cut Off time for sending request for redemption by email/ Fax is 3.00 Pm and the funds shall be credited in our account on next working day. The request is signed by authorized signatory from RHQ The Funds along with dividend / return are credited in our account on next working day in our nominated bank account. The income on mutual funds is transferred to books of registered office. In case there is any Mutual fund outstanding as on balance sheet date the same is also transferred to the books of registered office. The dividend / return is supported by a statement send by these Mutual Funds to Corporate office and RHQ banking. 11.11.3 Investments in Fixed Deposit Corporate Office in accordance with DPE guidelines decide the amount / period of Fixed Deposit to be made for Surplus funds. The surplus funds are placed in bank term deposits with Public Sector Banks (PSBs).CO(T) informs vide email the Amount /Rate / Tenure of Fixed deposit to be place with PSB. INDEX Banking Operations Page 271

On basis of advice of CO(T), RTGS is processed for payments to the Public Sector Banks (PSBs). Along with a letter signed by authorized signatory for placement of FD is emailed /Faxed to PSBs. The PSBs confirm receipt of fund over mail and share the Receipt of Fixed Deposit. 11.11.4 Maturity of Fixed Deposit On the basis of advice by CO/T, a letter authorizing maturity of FD along with IOCLs account details is emailed /Faxed to PSBs. On maturity of FD the PSB fund IOCLs account along with interest net of TDS. The TDS certificates are shared by banks on quarterly basis after they have filed their return. The income on FD is transferred to books of Registered Office. Any FD outstanding as on the date of balance sheet is accounted for in books of divisional HO. 11.12 GETTING BANK GUARANTEE ISSUED FOR SUBMISSION IN VARIOUS IOCL BIDS. • User department provides the following for issuance of BG :- - Duly approved note. - Bank Guarantee Draft with all details (BG amount, date of issue, claim date, duration etc.) • Request is sent via E-mail to SBI along with above. • Hard copy of request is being sent thereafter. • Bank Guarantee is personally collected from Bank. However, bank sometimes agrees to dispatch through courier if necessary. • BG is handed over to user department and proper acknowledgement is taken on copy of BG for official record. • Bank charges IOC for BG and are adjusted in our books/ transferred to units. • Recording of all New BGs Issued has to be done in SAP through T Code- YFU23. • For BGs in excess of Rs.10 crores guidelines from Corporate Office (CO/T/801 dated 17.10.2017) is followed. 11.13 CASH & BANK BALANCES Cash balances includes cash in hand, imprest balances, franking machine balance & Cheques/DD’s in hand whereas the bank balance includes balance with scheduled and non- scheduled banks. Disclosure Requirements As per Schedule III of Companies Act 2013, cash and cash equivalents shall be disclosed as follows: • Cash and cash equivalents shall be classified as: INDEX - Balances with banks; - Cheques, drafts on hand; - Cash on hand; - Others (specify nature). Banking Operations Page 272

• Earmarked balances with banks (for example, for unpaid dividend) shall be separately stated. • Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments shall be disclosed separately. • Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated. • Bank deposits with more than twelve months maturity shall be disclosed separately. 11.13.1 Collection Accounts Collection accounts are opened & operated at various locations depending on the corporation’s requirement for receiving e-collections or depositing various instruments collected from customers/vendors. 11.13.1.1 CMP Collection Account: CMP (Cash Management Product) is the module provided by SBI to deposit/transfer collections with proper MIS. The collection accounts opened under CMP are 5-digit virtual accounts and have no balance at the end of day. • Pay in Slip is to be generated and submitted along with instruments or Cash (in case of COCOs) to bank on daily basis. • Reconciliation for these accounts is carried centrally at Marketing HO on daily basis based on the MIS provided by SBI. • SO/Locations to check and immediately clear open items in the CMP Account GLs arising out of reconciliation in SAP. • There should not be any unidentified open items pending for clearance for more than a month. • SO/ Locations to check open items in bank incoming GL & ensure that no open items remain pending beyond 5 days. • SO/Locations to check whether the instruments are credited on time as per the clearing arrangement in that location. 11.13.1.2 Non-CMP Collections Account: These types of accounts are opened and operated usually at a place where SBI is not offering CMP facility. • Balances at the end of the day are transferred to Marketing HO pooling bank account. • Cash collections can be deposited into this account. • Non-CMP collections accounts are also operated at regional level for foreign currency inward remittances & LC receipts. • Reconciliation is to be carried out by respective SO/Location on daily basis based on the bank account statement obtained from SBI. • SO/Locations to check and clear any open items arising out of reconciliation in SAP. There should not be any open items pending for clearance for more than a month. Banking Operations Page 273