NOTES ON ACCOUNTS: (2006)

01. Provision against Loan amounting to Nu.4,988,032.50 has been made during the year 2006 (Nu.71,562,053.31 in 2005) as per the prudential guidelines issued by Royal Monetary Authority of Bhutan. Similarly interest earned but not collected amounting to Nu.2,268,522.09 has not been recognised in 2006 (Nu.4,399,376.39 in 2005) and kept under Interest-in-Suspense Account.

02. Guarantees given and Letters of Credit issued are outstanding at the year end amounting to Nu.633,945,968.49 and Nu.119,802,651.80 respectively (Previous year Nu.416,420,824.27 and Nu.228,795,932.38). The total Margin money collected against Guarantees amounts to Nu.1,462,089.00 and against Letters of Credit Nu. 29,684,308.42 (Previous year Nu.392,978.00 and Nu.31,505,594.73) respectively.

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

04. a)The bank has provided Nu.101,395,058.83 (previous year Nu.79,040,000.00 in 2005) 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 and the same is included in the amount of provisions as stated above.

b )Misappropriation of loan under "Government Employee Loan" amounting to Nu.20,244,713.37 (Principal & interest) was detected by the Management in 2005 and necessary legal action has been taken to recover the amount. An amount of Nu.799,930.72 was recovered and the balance amount of Nu.19,444,782.65 has been written off from the books of acoount in 2006.

05. Provision for taxation includes:-
Tax on current year's profit                                 : Nu.82,450,257.86
Less: Advance Tax paid (net of TDS)               : Nu.45,452,584.30
Payable                                                                 : Nu.36,997,673.56

06. Capital work - in progress amounting to Nu.5,949,076.52 (previous year Nu.288,000.00) represents the expenditure in connection with the payments against the purchase and installation of ATMS and HR Tools pending as on 31-12-2006.

07. Other assets (advance, claims, prepayments, deferrals etc.) include balances in Sundry Receivables accounts aggregating to Nu.10,972,348.62 (previous year Nu 16,083,338.16) pertaining to Banking Division pending settlement of claims by various parties.. Similarly, Other current liabilities include an unadjusted balance in Sundry Payables Account of International Banking Division amounting to Nu.11,755,853.28(previous year Nu.23,932,308.14) representing receipt from the foreign sources pending identification of the payees.

08. Market value of Quoted Equity Investments at the end of the year is Nu.49,429,400.00 (previous year Nu. 48,621,360.00).

09 . Aggregate recoveries amounting to Nu.9,796,032.12 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) have been paid to the Ministry of Finance during the year. Further recoveries made amounting to Nu.163,500.00 against the same are included in Other Liabilities pending payment to Ministry of Finance, Royal Government of Bhutan.

10. Remuneration and expenditure paid, reimbursed or accrued to the Managing Director :

11. Tax assessment of the bank has been completed upto 31st December, 2005. The tax authorities demanded additional tax for Nu.6,838,450.48 for the Income Year 2003-2005. The bank has appealed to the Revenue authorities against such demand. Pending appeal, the bank has made an adhoc payment of Nu.622,364.81 against the said addiitonal tax demand. The matter is subjudice and the actual tax liability is not ascertainable.

12. During the year 2006 gain out of foriegn exchange trading amounted to Nu.3,752,126.66 (Nu. 24,318,756.72 in 2005) and loss on account coversion of foreign currency assets/liabilities at prevailing rates as on 31-12-2006 amounted to Nu.9,786,034.28 (gain of Nu.7,878,793.21 in 2005). The net loss of Nu.6,033,907.62 has been adjusted with the foreign Exchange Fluctuation Reserve as per RMA Prudential Regulations.

13. BNB Employees Gratuity Fund is a separate fund created under the aegis of BNB Employees Gratuity Trust. During the year a sum of Nu. 8,474,427.97 (Nu.949,137.20 in 2005 ) has been provided towardsgratuity liability.

14. Previous Year’s figures have been re-arranged & regrouped, wherever necessary.