Interest Earned
The following items are included under this head:
(a) Interest/Discount on Advances/Bills: This includes interest and discount on all types of loans and advances like cash credit, overdrafts, demand loans, term loans, export loans, domestic and foreign bills purchased and discounted (including those rediscounted), overdue and penal interest and interest subsidy, if any, relating to such advances/bills. The amount to be included under this head is net of the share of participating banks under inter–bank participation schemes on risk–sharing basis. In modern day banking, the entries for interest income on advances are automatically generated through a batch process in the CBS system. The auditor must take into account the internal controls over modification in interest rates in the CBS system and verify whether these have been appropriately accounted for in the accounts
(b) Interest Income on Investments: This includes all income derived from Government securities, bonds and debentures of corporates and other investments by way of interest and dividend, except income earned by way of dividends, etc., from subsidiaries and joint ventures abroad/in India. Broken period interest paid on securities purchased and amortisation of premium on SLR investments is net off from the interest income on investments.
(c) Interest on Balances with RBI and Other Inter–bank Funds: This includes interest on balances with Reserve Bank and other banks, call loans, money market placements, etc.
(d) Others: This includes any other interest/discount income not included in the above heads. Interest on advances given by the bank to staff member in its capacity as employer rather than as banker should be included under this head.