NOTES ON ACCOUNTS: (2004)

01. In conformity with the accounting policies and guidelines (issued by the Royal Monetary Authority of Bhutan) interest earned (but not collected) aggregating to Nu.34,579,946.50 (previous year Nu. 28,354,812.24) as on the date of the balance sheet has not been recognized as income and kept under ‘Interest - in - Suspense’ Account.

02. Guarantees given and Letters of Credit issued (on behalf of various clients) are outstanding at the year end amounting to Nu.384,100,715.36 (Total Margin Nu.157,200.00) and Nu.596,280,617.21 (Total Margin Nu.29,016,645.36) with corresponding previous year figures of Nu. 287,909,617.21 (Total Margin Nu.485,474.00) and Nu.310,892,224.27 (Total Margin Nu. 22,859,994.75) respectively.

03. Assets acquired on capital grant from ADB has been segregated from the other fixed assets and has been shown seperately since the previous year.Depreciation on assets acquired (through capital grants) has been charged against capital reserve during the year and in the process book value of assets acquired under Capital Grant has been "Nil" (previous year Nu.888,211.65) as at the end of the year.

04. Confirmation, being not available, book balances of loans, advances and other receivables are reflected in this account.

05. a) Additional amount of provision against loan (excluding interest - in - suspense) amounting to Nu.78,413,687.86being the difference between provision of Nu.180,068,645.45 as on 31.12.2004 required as per the prudential guidelines issued by Royal Monetary Authority of Bhutan and the amount of provision Nu.
101,654,957.59 held as on 31.12.2003, has been provided for during the year.

b)As a prudent policy the bank has provided Nu.49,630,000.00 (previuos year Nu.31,990,000.00) as required to be provided based on the figures of non-performing assets of this year under the Transitional Stipulation of the prudential guidelines, 2002 issued by Royal Monetary Authority of Bhutan)in this account and the same is included in the amount of provision as stated above.

c) In case of Loans pending fixation of repayment schedules (Bullet Loans) provisions and suspension of interests are made wherever interest remains overdue for more than 90 days except in case of Industrial Loans and Housing Loans where provisions have not been made during the “gestation period”.

06.

07. Capital work - in progress amounting to Nu.2,309,462.50 (previous year Nu.558,163) represents the expenditure in connection with the purchase of:
      Cash Delivery Van:                    Nu.2,129,462.50
     HR cum Asset Software:           Nu.180,000.00

08. Other assets (advance, claims, prepayments, deferrals etc.) include balances in Sundry Receivables accounts aggregating to Nu. 13,502,493.47 (previous year Nu 8,508,127.20) pertaining to Banking Division pending settlement of claims by the party. Similarly, Other current liabilities include an unadjusted balance in Sundry Payables Account of International Banking Division amounting to Nu.24,154,155.73(previous year Nu.5,580,823.11) representing receipt from the foreign sources pending identification of the payees.

09. ‘Tax deducted at Source’ on income from interest on time deposits with banks outside Bhutan for the year is amounting to Nu. Nu 324,741.000 (previous year Nu 1,559,143.00)

10 . 'Market value of Quoted Equity Investments at the end of the year is amounting to Nu.45,599,860.00 (previous year Nu. 44,387,000). Market value of RGOB treasury bills and Druk Air bond are amounting to Nu.120,000,000.00 (previous year Nu.120,000,000) and Nu.527,002,000.00 (previous year Nu.421,631,000) respectively. Diminution in value of investment of Bhutan Board Products Ltd. to the extent of Nu.15,400.00 (Previous year Nu. 16,800.00) has been maintained.

11. a) Unclaimed matured deposits, Unit Shares and other payables of miscellaneous nature aggregating Nu.61,432,157.90 (previous year Nu 11,806,294.79), that are not claimed by the beneficiaries, have been kept under ‘Unclaimed Deposit’ Account. Out of the above figure, Nu 44,049,100.83is high value deposits and those that matured on the last two days of the year.

b) Aggregate recoveries till date amounting to Nu.9,696,032.12 (previous year Nu 9,546,032.12) from certain old bad loan accounts (which were liquidated by Ministry of Finance, Royal Government of Bhutan at the time of incorporation of the Bank) are included in Other Liabilities.

12. MicroBanker software, installed in the year 1997, was replaced by Flexcube software from the beginning of the year, 2003. Consequential impairment lossdue to obsolescence of MICROBANKER and few other related softwares amounting to Nu. 367,691.35 that had been fully provided for in the previous year account, has been maintained.

13. Remuneration and expenditure paid, reimbursed or accrued to the Managing Director was as follows :

14. Tax assessment of the bank has been completed upto 31st December, 2002.

15. Forex Gains include gains (net) arising out of foreign exchange trading amounting to Nu.17,871,980.41 (previous year 1,333,638.67) and gains (net) arising out of foreign exchange valuation as per rates prevailing on the closing date of the account amounting to Nu.6,702,424.57 (previous year Nu.16,496,995.39).

16. BNB Employees Gratuity Trust Fund, a separate fund created under the aegis of BNB Employees Gratuity Trust during the previous year has been maintained and a further sum of Nu. 1,849,552.39 (previous year Nu.1,382,063.44) has been transferred towards provision for gratuity as at the end of the year. The total fund stood at Nu.13,717,285.00 (previous year Nu.11,724.900.00).During the year Nu.338,255.00 (previous year Nu.721,825.00) has been paid towards Separation/ Superannuation of the employees of the bank.

17. Assets Acquired in Satisfaction of Debts includes an amount of Nu.19,026,307.05 being the book value of 113 decimals of land in Thimphu City Corporation area acquired from a single client in full satisfaction of the debts to the bank. The valuation of the land as per Bank's own internal assessment is adequate.

18. Proposed Dividend of 50% has been considered in the account

19. Previous Year’s figures have been rearranged & regrouped, wherever necessary.