1.  Accounting Conventions:
 
 1.1 The financial statements are prepared under the historical cost
 conventions except as otherwise stated and conform to the statutory
 provisions and practices prevailing within the Banking Industry in
 India and the guidelines issued by Reserve Bank of India (“RBI”).
 
 1.2 Revenue and costs are accounted for on accrual basis except as
 otherwise stated.
 
 1.3 The accounting policies with regard to Revenue Recognition,
 Investments and Advances are in conformity with the prudential
 accounting norms issued by Reserve Bank of India from time to time.
 
 2.  Foreign Exchange Transactions:
 
 2.1.  The foreign currency transactions are translated at the weekly
 average closing rates for the preceding week as published by Foreign
 Exchange Dealers Association of India (FEDAI). Revaluation of foreign
 currency assets and liabilities as on Balance Sheet date is done at the
 closing exchange rate published by FEDAI and the resultant profit/loss
 is accounted for in the Profit & Loss Account.
 
 2.2.  Outstanding Forward Exchange Contracts are stated at contracted
 rates and revalued as on Balance Sheet date at the exchange rates
 published by FEDAI for specified maturities. The resulting profit/loss
 is recognized in the Profit & Loss Account in accordance with RBI /
 FEDAI Guidelines.
 
 2.3 Contingent Liabilities on account of Guarantees and Letters of
 Credit issued in foreign currency are stated in the Balance Sheet at
 the closing exchange rates published by FEDAI.
 
 3.  Investments:
 
 As per Reserve Bank of India guidelines, the investments are classified
 and valued as under:
 
 3.1 Investments in SLR and non-SLR securities (Shares, Debentures,
 Bonds, units of MF, CP, CD etc.) are classified in the following
 categories:
 
 a.  Held to maturity
 
 b.  Available for sale
 
 c.  Held for trading
 
 3.2 All the securities are classified in the following six
 classifications:
 
 a.  Government Securities
 
 b.  Other approved securities
 
 c.  Shares
 
 d.  Debentures and bonds
 
 e.  Subsidiaries and Joint Ventures
 
 f.  Others (Commercial Papers, Mutual Fund Units , RIDF etc).
 
 3.3 Bank decides the category of each investment at the time of
 acquisition and classifies the same accordingly. Shifting of securities
 from one category to another is done once in a year with the approval
 of Board of Directors, at the least of acquisition cost / book value /
 market value on the date of shifting. The depreciation, if any, on such
 shifting is provided for and the book value of the security is changed
 accordingly.
 
 3.4 Valuation of investments:
 
 a. Held to Maturity:
 
 (i) Securities under the category Held to Maturity are valued at
 cost.  Wherever the cost is higher than the face value, the premium is
 amortized over the remaining period of maturity.
 
 (ii) In case of other investments under “Held to Maturity” category,
 where the cost price is less than the face value, the difference is
 ignored. In case of investments in subsidiaries and joint ventures
 permanent diminution in value is recognized and provided for.
 Investment in RRBs is valued at carrying cost.
 
 (iii) On sale of investments in this category (a) the net profit is
 initially taken to profit and loss account and thereafter net of
 applicable taxes and statutory reserve is appropriated to the ‘Capital
 Reserve account’ and (b) the net loss is charged to the profit and loss
 account.
 
 b.  Available for Sale:
 
 The individual securities under this category are marked to market.
 Central Government securities are valued at market rates declared by
 Fixed Income Money Market and Derivatives Association of India
 [FIMMDA]. State Government securities, other approved securities,
 Debentures and Bonds are valued as per the yield curve, average credit
 spread rating and methodology suggested by FIMMDA. Quoted Shares are
 valued at market rates. Unquoted shares are valued at book value
 ascertained from the latest available Balance Sheet and in case the
 latest Balance Sheet is not available, the same is valued at Rs. 1/-
 per company.
 
 Treasury bills and commercial papers are valued at carrying cost.
 Mutual Fund Instruments are valued at market rate or repurchase price
 or net asset value in that order depending on their availability.
 
 Based on the above valuation under each of six-sub classifications
 under Available for Sale:
 
 (i) If the figure results in appreciation, the same is ignored.
 
 (ii) If the figure results in depreciation, the same is charged to
 Profit & Loss account.
 
 (iii) The book value of securities is not changed after revaluation
 except as required by the RBI guidelines.
 
 (iv) Profit or Loss on sale of investment in this category is accounted
 for in the Profit and loss account.
 
 c.  Held for Trading:
 
 (i) The individual scrips under this category are held at original
 cost.  The same is valued at monthly intervals at market rates or as
 per the prices declared by FIMMDA and in respect of each classification
 under this category, net depreciation if any, is charged to profit and
 loss account and net appreciation, if any is ignored. The book value of
 the securities is not changed after revaluation except as required by
 the RBI guidelines.
 
 (ii) Profit or loss on sale of investment in this category is accounted
 for in the Profit and Loss account.
 
 d.  The non-performing investments are identified and depreciation/
 provision is made as per RBI guidelines.
 
 e.  Costs such as brokerage, fees etc. incurred at the time of
 acquisition of securities (except equity / preference shares, where it
 is treated as cost of acquisition) are recognized as expenses.
 
 f.  Interest Rate Swaps: (i) Valuation:
 
 (a) Hedging Swaps: Interest Rate Swaps for hedging assets and
 liabilities are not marked to market.
 
 (b) Trading Swaps: Interest Rate Swap for trading purpose is marked to
 market.
 
 (ii) Accounting of income on derivative deals:
 
 (a) Hedging Swaps: Income is accounted for on realization basis.
 Expenditure, if any, is accounted for on accrual basis, if
 ascertainable.
 
 (b) Trading Swaps: Income or expenditure is accounted for on
 realization basis on settlement date.
 
 (iii) Accounting of gain or loss on termination of swaps:
 
 (a) Hedging Swaps: Any gain or loss on the terminated swap is
 recognized over the shorter of (a) the remaining contractual life of
 the swap or (b) the remaining life of the asset/ liability.
 
 (b) Trading Swaps: Any gain or loss on terminated swap is recognized as
 income or expenses in the year of termination.
 
 4.  Advances:
 
 4.1 Advances shown are net of write offs, provisions made for
 non-performing assets, claims settled with the credit guarantee
 institutions and rediscounts.
 
 4.2 Classification of advances and provisions are made in accordance
 with the prudential norms prescribed by RBI from time to time except
 that provision on NPA-secured substandard assets of the Bank is made @
 15% instead of 10% as per IRAC norms issued by RBI
 
 4.3 Provision for performing assets is shown under the head “Other
 liabilities and provisions”.
 
 4.4 Recoveries in the Non Performing Assets are appropriated first
 towards principal and thereafter towards interest.
 
 5.  Fixed Assets and Depreciation:
 
 5.1 Premises and Other Fixed Assets are accounted for at cost except
 for certain premises, which were revalued and stated at revalued
 amount.
 
 5.2 Depreciation is provided for on the diminishing balance method at
 the rates specified in Schedule XIV to the Companies Act, 1956 on fixed
 assets except for:- 
 
 a.  On computers, depreciation is provided at the rate of 33.33% on
 Straight Line Method so as to write down the asset value in three years
 to Rupee One as per RBI guidelines. Computers include softwares, ATMs
 and UPS also.
 
 b.  On Fixed Assets having original cost below Rs. 5,000/-,
 depreciation is provided for at applicable rates instead of providing
 100% depreciation in the year of purchase.
 
 c.  Depreciation is provided for full year in respect of assets
 purchased during the year. No depreciation is provided on assets
 sold/discarded during the year.
 
 5.3 Depreciation relating to revaluation is adjusted against the
 Revaluation Reserve.
 
 5.4 Leasehold land cost is amortized over the period of lease.
 
 6.  Revenue Recognition
 
 6.1 All revenues and costs are accounted for on accrual basis except
 the following items, which are accounted for on cash basis:- 
 
 a.  Interest on Advances and Investments identified as Non-Performing
 Assets according to the prudential norms issued by RBI, from time to
 time.
 
 b.  Income from commission viz on Guarantees, Letter of Credit,
 Government business, Bancassuarance, Mutual Fund business and Locker
 Rent.
 
 c.  Interest for overdue period on bills purchased and bills
 discounted.
 
 d.  Insurance claims.
 
 e.  Remuneration on Debenture Trustee Business.
 
 f.  Processing Fees.
 
 g.  Income from Merchant Banking Operations and Underwriting
 Commission.
 
 6.2 Interest income on refund of Income Tax is accounted for in the
 year the order is passed by the concerned authority.
 
 6.3 Pursuant to RBI guidelines, the interest payable on overdue term
 deposit is provided on accrual basis at Saving Bank rate effective from
 date of RBI circular dated 22.08.2008, and the balance at the time of
 renewal.
 
 7.  Employees’ Benefits:
 
 Defined Contribution Plan: The contribution paid/ payable under defined
 contribution benefit schemes are charged to profit and loss account.
 
 Defined Benefit Plan: Bank’s liabilities towards defined benefit
 schemes are determined using Projected Unit Credit Method. Actuarial
 Valuations under the Projected Unit Credit Method are carried out as at
 the Balance Sheet date. Actuarial gains and losses are recognized in
 the Profit and Loss account.
 
 8.  Impairment of Assets:
 
 Impairment losses if any, on fixed assets including Revalued Assets,
 are recognized in accordance with Accounting Standard 28- Impairment of
 Assets issued by the Institute of Chartered Accountants of India (ICAI)
 and charged to profit and loss account.
 
 9.  Provisions Contingent Liabilities and Contingent Assets:
 
 As per the Accounting Standard 29-“Provisions, Contingent Liabilities
 and Contingent Assets” issued by ICAI, the Bank recognizes provisions
 only when it has a present obligation as a result of a past event, it
 is probable that an outflow of resources embodying economic benefits
 will be required to settle the obligation and when a reliable estimate
 of the amount of the obligation can be made.
 
 Contingent assets are not recognized in the financial statements since
 this may result in the recognition of the income that may never be
 realized.
 
 10.  Net Profit, Provisions and contingencies:
 
 The Net Profit disclosed is after making the Provisions and
 Contingencies which include adjustment to the value of investments,
 write off of bad debts, provision for taxation (including deferred
 tax), provision for advances and contingencies/others.
 
 11.  Income tax:
 
 The provision for tax for the year comprises liability towards Current
 Income Tax, Wealth Tax and Deferred Tax. The deferred tax asset is
 recognized, subject to the consideration of prudence, taking into
 account the timing differences between the taxable income and
 accounting income, in terms of the Accounting Standard 22 issued by
 ICAI.