1.  We have audited the accompanying financial statements of the Andhra
 Bank as at 31st March 2011 which comprises the Balance Sheet as at 31st
 March, 2011 and the Profit and Loss account and the Cash Flow Statement
 for the year then ended and a summary of the significant accounting
 policies and other explanatory information. Incorporated in these
 financial statements are returns of 20 branches audited by us, 1416
 branches audited by other auditors. The branches audited by us and
 those audited by other auditors have been selected by the Bank in
 accordance with the guidelines issued by Reserve Bank of India. Also
 incorporated in the Balance Sheet and Profit and Loss account are the
 returns from 196 branches and 18 service centers which have not been
 subjected to audit. These unaudited branches account for 0.35 % of
 advances , 3.42% of deposits, 0.24% of interest income and 2.79% of
 interest expenses.
 
 Managements Responsibility for the Financial Statements
 
 2.  Management is responsible for the preparation of these financial
 statements in accordance with the Banking Regulation Act, 1949. This
 responsibility includes the design, implementation and maintenance of
 internal control relevant to the preparation of the financial
 statements that are free from material misstatement, whether due to
 fraud or error.
 
 Auditors Responsibility
 
 3.  Our responsibility is to express an opinion on these financial
 statements based on our audit. We conducted our audit in accordance
 with the Standards on Auditing issued by the Institute of Chartered
 Accountants of India.  Those Standards require that we comply with
 ethical requirements and plan and perform the audit to obtain
 reasonable assurance about whether the financial statements are free
 from material misstatement.
 
 4.  An audit involves performing procedures to obtain audit evidence
 about the amounts and disclosures in the financial statements. The
 procedures selected depend on the auditorsjudgment, including the
 assessment of the risks of material misstatements of the financial
 statements, whether due to fraud or error. In making those risk
 assessments, the auditor considers internal control relevant to the
 banks preparation and fair presentation of the financial statements in
 orderto design audit procedures that are appropriate in the
 circumstances. An audit also includes evaluating the appropriateness of
 accounting policies used and the reasonableness of the accounting
 estimates made by the management, as well as evaluating the overall
 presentation of the financial statements.
 
 5.  We believe that the audit evidence we have obtained is sufficient
 and appropriate to provide a basis for our audit opinion.
 
 Opinion
 
 6.  In our opinion, as shown by books of bank, and to the best of our
 information and according to the explanations given to us.
 
 (i) the Balance Sheet, read with the notes thereon is a full and fair
 Balance Sheet containing all the necessary particulars, is properly
 drawn up so as to exhibit a true and fair view of state of affairs of
 the Bank as at 31st March 2011, in conformity with accounting
 principles generally accepted in India.
 
 (ii) the Profit and Loss Account, read with the notes thereon shows a
 true balance of profit, in conformity with accounting principles
 generally accepted in India, for the year covered by the accounts; and
 
 (iii) the Cash Flow Statement gives a true and fair view of the cash
 flows for the year ended on that date.
 
 Emphasis of Matter
 
 7.  Without qualifying our opinion, we draw attention to:-
 
 (i) Note no. 4 of Schedule 18 regarding deferment of pension and
 gratuity liability to the extent of Rs. 506.65 crores pursuant to
 exemption granted by the Reserve Bank of India to the public sector
 banks from application of the provisions of Accounting Standards (AS)
 15, Employee Benefits vide its circular no. DBOD.BP.BC/
 80/21.04.018/2010-11 on Re-opening of Pension Option to Employees of
 Public Sector Banks and Enhancement in Gratuity Limits - Prudential
 Regulatory Treatment.
 
 (ii) Note no 5(a)(i) of Schedule 18 regarding the claim lodged by the
 bank with Government of India under
 
 Agricultural Debt Waiver and Debt Relief Scheme 2008.
 
 (iii) Note No. 12.2.3.(c) regarding change in Accounting Policy for
 depreciation on transferring securities from H.F.T. to AF.S. category
 and vice versa.
 
 Report on Other Legal and Regulatory Requirements
 
 8.  The Balance Sheet and the Profit and Loss Account have been drawn
 up in Forms A and B respectively of the Third Schedule to the
 Banking Regulation Act, 1949.
 
 9.  Subject to the limitation of the audit indicated in paragraph 1 to
 5 above and as required by the Banking Companies (Acquision and
 Transfer of Undertakings) Act, 1980 and subject also to the limitation
 of disclosure required therein, we report that: -
 
 (i) we have obtained all the information and explanations which, to the
 best of our knowledge and belief were necessary for the purpose of
 audit and have found them to be satisfactory.
 
 (ii) the transactions of the Bank, which have come to our notice, have
 been within the powers of the Bank.
 
 (iii) the returns received from the offices and branches of the Bank
 have been generally found adequate for the purposes of our audit and
 where the particulars in the returns received were
 incomplete/inadequate, we have relied upon the information and
 explanations furnished by the Management.
 
 10. In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement comply with the applicable Accounting Standards.
 
 ForB.N.KEDIA&CO       For K.K.GHEI & CO     For K.S.RAMAKRISHNA & CO
 
 Chartered Accountants Chartered Accountants Chartered Accountants
 
 FRN-001652N           FRN-001342N           FRN-02888S
 
 (S.K. Kedia)         (SumitGhei)            (Ch. Amar Sudheer)
 
 Partner 
 (M. No. 052579)       Partner 
                      (M.No. 097893)         Partner (M No. 201320)
 
 For RAMAN ASSOCIATE  For RAJU & PRASAD      For NATARAJA IYER & CO
 
 Chartered Accountants Chartered Accountants Chartered Accountants
 
 FRN-02910S            FRN-003475S           FRN-002413S
 
 (G.Vasudevan)        (M. Siva Ram Prasad)   (G.Prasad)
 
 Partner 
 (M. No.020739)      Partner (M. No.018943)  Partner (M. No.019617)
 
 Place : Hyderabad
 Date  : 05.05.2011