1.  Capital:
 
 2.  Investments:
 
 The Bank has classified the investment portfolio into three categories
 i.e.  “Held to Maturity”, “Available for Sale”, and “Held for Trading”
 and valued the investments in terms of the Reserve Bank of India (RBI)
 guidelines.
 
 2.3 Non-SLR Investment Portfolio
 
 i) Issuer composition of Non-SLR Investments
 
 Note:
 
 (i) Investments as in (v) & (vi) above are exempted from classification
 as per RBI guidelines.
 
 (i) Amounts reported under columns 4, 5, 6 & 7 are not mutually
 exclusive.
 
 (ii) The total investment of Rs. 3941.39 crore (Rs. 3074.89 crore)
 includes one GOI Oil Bond of Rs. 2.94 crore (Rs. 2.94 crore). The same
 has been included as Govt. Securities in Schedule 8 to the Balance
 Sheet.
 
 2.4 As per RBI guidelines, an amount of Rs. 1.29 Crore (Rs. 30.97
 Crore) net of taxes and statutory reserves being profit on sale of
 investment in ‘Held to Maturity’ category is transferred to Capital
 Reserve.
 
 2.5 During the year, Bank has provided depreciation on investment for
 diminution in value on account of shifting of investments from
 ‘Available for Sale’ category to ‘Held to Maturity’ category Rs. 0.07
 Crore (Rs. Nil Crore) and from ‘Held to Maturity’ category to
 ‘Available for Sale’ category Rs. Nil (Rs. Nil Crore).
 
 2.6 The Bank has amortized Rs. 36.59 Crore during the year (Rs. 68.65
 Crore) for securities classified under ‘Held to Maturity’ category, and
 the amount has been charged to Profit & Loss account by reducing value
 of the respective securities to that extent.
 
 3.  Derivatives:
 
 3.1 Forward Rate Agreement / Interest Rate Swap
 
 The Bank has not entered into any forward rate agreement during the
 year.
 
 The Bank entered into derivatives contracts of the nature of interest
 Rate Swap (IRS) amounting to Notional Principal Value of Rs. 400 Crore
 during the year 2006 to hedge on balance sheet assets and liabilities.
 The notional principal value of swaps outstanding was Rs. 400 Crore
 (previous year Rs. 400 Crore) for an original tenure of seven years.
 During the year the outstanding swap position was to receive fixed rate
 of interest and to pay floating rate of interest for notional principal
 amount of Rs. 400 Crore. No collateral securities were required for the
 transactions. The fair value of swaps was Rs. (-) 13.11 Crore (Rs. (-)
 12.79 Crore).
 
 3.3 Disclosures on risk exposure in derivatives
 
 A) Qualitative Disclosure
 
 i) As a part of investment policy, derivative policy is approved by the
 Board, which includes measurement of credit & market risk.
 
 ii) Policy for hedging and processes for monitoring the same are in
 place.
 
 iii) The hedged transactions are undertaken for Balance Sheet
 management.  Proper system for reporting and monitoring of risks is in
 place.
 
 iv) The Bank uses derivative products for hedging its own Balance
 Sheet. Risk Management of derivative operations is headed by a Top
 Management Executive who reports to Central Office. The swaps are
 tracked on regular basis.
 
 v) Accounting Policy for recording hedge and non-hedge transactions is
 in place, which includes recognition of income, valuation of
 outstanding contracts and credit risk mitigation as given in para 3.4
 (f)(ii) of Schedule 17, viz., Signifi cant Accounting Policies.
 
 vi) The bank has made requisite provision on credit exposure of
 derivative contracts computed as per current exposure method & as per
 RBI guidelines.
 
 4.  Asset Quality
 
 4.1 Non-Performing Assets
 
 4.2 The Bank has changed the accounting policy for provisioning in
 respect of secured sub-standard assets from 10% to 15% during the year.
 Due to the said change, the net profit (net of taxes) for the year is
 lower by Rs. 18.86 crore, (Nil Crore).
 
 4.7 Provisions on Standard Assets
 
 The cumulative provision towards Standard Assets held by the Bank as at
 the year end amounting to Rs. 191.39 Crore (Rs. 153.81 Crore) is
 included under Other Liabilities and Provisions in Schedule 5 to the
 Balance Sheet.
 
 4.8 In terms of Agriculture Debt Waiver and Debt Relief Scheme, 2008
 (ADWDR) Scheme, the bank has received claim amount from Reserve Bank of
 India (RBI) against claims as certified by Central Statutory Auditors.
 Details of which are as follows:
 
 4.9 Interest on Agriculture
 
 Interest accrued but not due of Rs. 96.63 Crore in respect of
 agricultural advances hitherto classified under Other Assets is now
 classified as Agriculture advances and adequate provision for Standard
 Asset is made there against.
 
 7.8 Off-balance sheet SPVs sponsored
 
 (Which are required to be consolidated as per accounting norms)
 
 Name of the SPV sponsored
 
 Domestic Overseas
 
 NIL NIL
 
 8.3 Risk Category wise Country Exposure
 
 Since Bank’s net funded exposure for risk category-wise exposure for
 each country is less than 1% of bank’s total assets as on 31.03.2011,
 no provision is required in terms of RBI Circular No.
 DBOD.BP.BC.96/21.04.103 /2003-04 dated 17.06.2004.
 
 8.4 Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL)
 exceeded by the Bank.
 
 The Bank has not exceeded the prudential exposure limits, in respect of
 lending to single borrower or group borrower during the Financial Year
 2010-2011.
 
 8.5 Unsecured Advances:
 
 Unsecured advances includes Rs. 349.90 crore (Rs. 338.01 Crore) as on
 31.03.2011 which are collaterally secured by intangible securities such
 as charge over the rights, licenses, authority etc. The estimated value
 of such intangible collateral is Rs. 2208.22 crore (Rs. 3164.06 crore)
 as on 31.03.2011.
 
 8.6 Provisioning Coverage Ratio:
 
 The bank has computed the Provisioning Coverage Ratio (PCR) as required
 vide Circular No. DBOD.No.BP.BC.64/21.04.048/2009-2010 dated December
 1, 2009 which is 65.55%. This ratio is calculated on the basis of NPA
 level as on 31.03.2011 :
 
 Whereas such Provision coverage (PCR) calculated as per RBI Circular
 No.DP.DC.87/21.04.048/2010-11 dated April 21, 2011, based on NPA level
 as on 30.09.2010 and NPA provision as on 31.03.2011 works out to 59.56%
 
 9.  Miscellaneous:
 
 9.3 Work is in progress for adjustment/ reconciliation/elimination of
 inter- branch transactions, transactions with other banks/institutions,
 nominal accounts and old entries under other assets and liabilities.
 Further reconciliation between balances in subsidiary and general
 ledger in respect of certain deposit accounts, clearing accounts, other
 assets & liabilities and charge of depreciation on fixed assets and
 inter-branch transfer of fixed assets is still under progress. The
 effect of these including the consequential impact thereof on the
 revenue, is not ascertainable. In the opinion of the management
 consequential impact thereof on revenue is not material
 
 9.4 Till previous year, the Bank was identifying NPAs to comply with
 Income Recognition, Asset Classification (IRAC) Norms through the CREAM
 software. However, to comply with the directions of Ministry of
 Finance, the Bank has now modified its Core Banking Solution (CBS)
 system with a view to classify NPAs as per IRAC norms.
 
 9.5 Fixed Assets
 
 9.5.1 The title deeds in respect of few revalued premises having cost
 Rs. 7.00 crore (Rs. 8.02 crore) are not yet executed/registered in
 favor of the bank due to certain long pending legal
 disputes/formalities.
 
 9.5.2 The revaluation reserve account credited in the previous year by
 Rs. 14.74 crore for the revaluation in respect of certain premises
 revalued in 2009-10 has now been rectified to a sum of Rs. 16.18 crore
 with consequential effect of amortization thereof.
 
 9.5.3 Depreciation for the current year amounting to Rs. 12.35 crore
 (Rs. 12.35 crore) on revalued assets has been adjusted to Revaluation
 reserve account.
 
 9.5.4 Depreciation on certain items of Computer peripherals & software
 being charged on straight line method has exceeded the cost thereof.
 Such excess charge of Rs. 0.65 crore for depreciation charged in
 earlier years has been adjusted in the current year’s depreciation.
 This has effect of increasing the profit before tax for the year by the
 said amount.
 
 Similarly, depreciation for electric equipment has been charged at
 higher rate in earlier years, which had since been corrected in the
 current year to fall in line with Schedule XIV of Companies Act, 1956.
 But the impact of overcharge of earlier years is yet to be ascertained
 and given effect to the books. In the opinion of the management
 consequential impact of the same is not adverse/ material.
 
 9.6 Contingent Liabilities include expired Guarantees amount to Rs.
 307.64 Crore (Rs. 166.83 Crore) which has not been cancelled because of
 pending completion formalities. Claims pending and to be preferred with
 ECGC amounting to Rs. 9.74 Crore (Rs. 4.60 Crore) have been considered
 as realizable for the purpose of computing provisions.
 
 Rs.9.7 Other Liabilities disclosed in Schedule - 5 include Rs. 0.52
 Crore (Rs. 0.57 cr.) towards unclaimed Share Application Money.
 
 9.8 During the year, Reserve Bank of India has not imposed any penalty
 on the Bank under the provisions of Section 46(4) of the Banking
 Regulation Act, 1949.
 
 9.11 Letters of Comfort (LOCs):
 
 During the current year, 667 trade credits aggregating to Rs. 572.47
 Crore (Previous year 398 trade credits aggregating to Rs. 582.03 Crore)
 were sanctioned by the Bank and Letters of Comfort issued by the
 branches in favor of various other Banks for arranging trade credit to
 corporate clients.
 
 As on 31.03.2011, 290 trade credits amounting to Rs. 272.16 Crore were
 outstanding as against 186 Trade Credits amounting to Rs. 183.50 Crore
 as on 31.03.2010.
 
 9.12 Draw Down from Reserve:
 
 Pursuant to RBI permission vide its letter no. DBOD.
 BP.No.1132/21.04.141/2010-11 Dt.14.01.2011, the bank has transferred an
 amount of Rs. 1.75 crore in the current year from the balance of profit
 and loss to capital reserve, being short amount transferred during
 2009-10 in respect of profit on sale of securities in HTM category.
 
 9.13 Dividend on Equity Share Capital
 
 The Board of Directors of the Bank has recommended a dividend @ 20% for
 the year, i.e. Rs. 2.00 per equity share of face value of Rs. 10/-
 each, which is subject to approval of Government of India.
 
 10. The Bank has complied with the mandatory Accounting Standards
 issued by The Institute of Chartered Accountants of India (ICAI) to the
 extent applicable as under:
 
 10.1 Accounting Standard 5 – Net Profit or Loss for the period, prior
 period items and changes in accounting policies.
 
 As prior period items of income/expenditure are not material, the same
 have been charged/accounted for in respective heads of accounts.
 
 10.2 Accounting Standard 9 – Revenue Recognition
 
 As per Accounting Policy No. 6.1, given in Schedule -17 – Significant
 Accounting Policies, certain items of income are recognized on
 realisation basis on account of statutory requirements or on account of
 materiality.
 
 10.3 Accounting Standard 15 - Employees Benefits.
 
 During the year the Bank has reopened the pension option for such of
 its employees who had not opted for the pension scheme earlier. As a
 result of exercise of which by second pension optees (4101 employees),
 the bank has incurred a liability of Rs. 375.24 crore. Further, during
 the year, the limit of gratuity payable to the employees of the Banks
 was also enhanced pursuant to the amendment to Payment of Gratuity Act,
 1972. As a result the gratuity liability of the Bank has increased by
 Rs. 137.14 crore.
 
 In terms of the requirement of the Accounting Standard (AS) 15,
 Employees Benefits, the entire amount of Rs. 512.38 crore (i.e. Rs.
 375.24 + Rs. 137.14) is required to be charged to the Profit & Loss
 Account. However, the RBI has issued a circular no.
 DBOD.BP.BC.80/21.04.018/2010-2011 on Reopening of Pension Option to
 Employees of Public Sector Banks and Enhancement in Gratuity Limit –
 prudential regulatory treatment, dated 9th February 2011. In accordance
 with the provisions of the said circular, the Bank would amortize the
 amount of Rs. 512.38 crore over the period of Five years.  Accordingly,
 Rs. 102.48 crore (representing 1/5th of Rs. 512.38 crore) has been
 charged to the Profit & Loss Account during the financial year 2010-11.
 In terms of the requirements of the aforesaid RBI circular, the balance
 amount carried forward, i.e., Rs. 409.90 crore (Rs. 512.38 crore – Rs.
 102.48 crore) does not include any amounts relating to
 separated/retired employees. The said unamortized amount and the
 corresponding liability have been disclosed as part of ‘Schedule 11
 -Other Assets’ and ‘Schedule 5 - Other Liabilities’ respectively in the
 Balance Sheet.
 
 But for the above relaxation given by the RBI, the profit (net of tax)
 of the Bank would have been lower by Rs. 273.74 pursuant to application
 of the requirements of AS-15,also having consequential effect on other
 components of the financial statements, including on provision for
 taxation, Deferred Tax as per Accounting Standard (AS 22), Intangible
 Assets (AS 26), the transfer to Statutory/other reserves, Earnings Per
 Share (AS 20) and Capital Adequacy Ratio, which consequential effect
 has not been ascertained.
 
 The Bank is following AS 15 (Revised 2005) - ‘Employee Benefits’. The
 Bank has calculated various benefits provided / recognized to employees
 as under for FY 2010-2011:
 
 B.  Defined Benefit Plans –
 
 a.  Contribution to Pension Plan
 
 b.  Contribution to Employees’ gratuity fund
 
 c.  Leave Encashment/ Compensated Absence
 
 d.  Resettlement Allowance
 
 e.  Leave Fare Concession
 
 f.  Silver Jubilee Award
 
 10.4 Accounting Standard 17- Segment Reporting
 
 a) Treasury segment includes Investment, balances with Banks outside
 India, Interest accrued on investments and related income therefrom.
 
 b) Corporate/ Whole sale Banking Segments include all advances to
 trusts, partnership firms, companies and statutory bodies which are not
 included in Retail Banking Segments.
 
 c) Retail Banking Segments include exposure to the individual person/
 persons or to a small business where
 
 i) Total average annual turnover is less than Rs. 50 Crore and
 
 ii) No aggregate exposure to one counter party exceeds 0.2% of the
 overall retail portfolio of the Bank and
 
 iii) The maximum aggregated retail exposure to one counterpart is up to
 Rs. 5 Crore.
 
 d) Other Banking Operations segment includes all other banking
 transaction not covered under segments, specified above.
 
 The above disclosures made are based on the records/information
 compiled by the management and relied upon by the auditors.
 
 Part B: Geographical Segment
 
 Since the operations of the Bank are within India only, Geographical
 Segment is not applicable.
 
 10.5 Accounting Standard 18 – Related party disclosures
 
 The details in this regard are as under:
 
 (A) Name of the Related Parties and their relationship:
 
 (a) Subsidiary of the Bank – The Maharashtra Executor &
 
 Trustee Co. Pvt. Limited
 
 (b) Associate of the Bank – Maharashtra Gramin Bank
 
 (c) Key Management Personnel-
 
 (1) Shri Anup Sankar Bhattacharya, Chairman & Managing Director (from
 1.10. 2010)
 
 (2) Shri Allen C. A. Pereira, Chairman & Managing Director (from
 04.06.2008 to 30.09.2010)
 
 (3) Shri Madhukant G.  Sanghvi, Executive Director (from 15.10.2008)
 
 (B) Transactions with Related parties
 
 Since the bank, its subsidiary and associate are state controlled, no
 disclosures are required to be made pertaining to the transactions with
 them in accordance with AS 18.
 
 10.7 Accounting Standard 22 – Accounting for Taxes on Income
 
 While making provision for Income tax for the year tax liability due to
 Minimum Alternate Tax (MAT) as per provisions of section 115 JB of
 Income Tax Act 1961, has not been considered in view of recent decision
 of ITAT, Mumbai regarding non applicability of MAT to Banks.
 
 10.8 Accounting Standard 26—Accounting for Intangible Assets.
 
 Computer Software – other than internally generated:
 
 Useful life - 3 years.
 
 Amortization Rate - 33.33 % Amortization Method - Straight line at cost
 
 10.9 Accounting Standard 28- Impairment of Assets
 
 Bank has identified that there is no impairment of fixed assets and as
 such, no provision is required as per AS-28.
 
 10.10 Accounting Standard 29– Provisions, Contingent Liabilities and
 Contingent Assets
 
 In the opinion of the management, no further provision is required
 against contingent liabilities referred to in Schedule 12.
 
 11. Previous year’s figures have been regrouped / reclassified wherever
 considered necessary to make them comparable with current year’s
 figures.
 
 BASEL II (PILLAR 3) DISCLOSURE TABLE DF-1-SCOPE OF APPLICATION
 Qualitative Disclosures
 
 a.  The name of the top Bank in the group to which the frame work
 applies:
 
 BANK OF MAHARASHTRA
 
 b.  An outline of differences in the basis of consolidation for
 accounting and regulatory purposes, with a brief description of the
 entities within the group.
 
 i) that are fully consolidated
 
 Bank of Maharashtra is the top bank in the group to which the new
 capital adequacy frame-work applies. The bank has only one subsidiary
 as under:
 
 Name of the subsidiary : The Maharashtra Executor and
 
 Trustee Company Pvt. Ltd.
 
 Country of Incorporation : India
 
 Proportion of ownership : 100%
 
 The above subsidiary is consolidated as per “Accounting Standard 21”
 issued by the Institute of Chartered Accountants of India (ICAI).
 
 However for computing CRAR under Basel-II, the investment in above
 subsidiary is given deduction treatment and is not consolidated as the
 subsidiary is not a financial services entity.
 
 (ii) that are pro-rata consolidated
 
 There is no entity in the group which is consolidated on pro-rata
 basis.
 
 (iii) that are given a deduction treatment;
 
 1.  Name of the subsidiary : The Maharashtra Executor and
 
 Trustee Company Pvt. Ltd.
 
 2.  Name of the Associate : Maharashtra Gramin Bank.  Country of
 Incorporation : India
 
 Proportion of ownership : 35%
 
 (As per the notification dt.20.07.2009 issued by the Government of
 India, Marathtwada Gramin Bank and Maharashtra Godavari Gramin Bank
 sponsored by Bank of Maharashtra in the State of Maharashtra are
 amalgamated in to a single Regional Rural Bank which is “Maharashtra
 Gramin Bank” with its head office at Nanded.)
 
 The above entity is consolidated as per “Accounting Standard 23” issued
 by ICAI
 
 (iv) that are neither consolidated nor deducted (e.g. where the
 investment is risk-weighted) - Nil
 
 Quantitative Disclosures
 
 c) The aggregate amount of capital deficiencies in all subsidiaries not
 included in the consolidation i.e. that are deducted and the name(s) of
 such subsidiaries – Nil
 
 d) The aggregate amounts (e.g. current book value) of the bank’s total
 interests in insurance entities, which are risk-weighted as well as
 their name, their country of incorporation or residence, the proportion
 of ownership interest and, if different, the proportion of voting power
 in these entities. In addition, indicate the quantitative impact on
 regulatory capital of using this method versus using the deduction –
 Nil
 
 TABLE DF - 2- CAPITAL STRUCTURE
 
 Qualitative Disclosures
 
 (a) Summary information on the terms and conditions of the main
 features of all capital instruments, especially in the case of capital
 instruments eligible for inclusion in Tier I or in Upper Tier II.
 
 The Capital Structure of the Bank comprises Equity, Preference shares,
 Reserves & Surplus and Innovative Perpetual Bonds. The Government of
 India has infused capital in the banks during the current year as
 under:
 
 The Government of India (GOI) has infused Rs. 588 Crore through
 Perpetual Non-Cumulative Preference Shares (PNCPS). Consequently the
 bank has allotted, 5880 PNCPS @ Rs. 10,00,000 per PNCP each, on
 12/08/2010. The coupon on PNCPS is benchmark to REPO rate with spread
 of 100 basis points, to be readjusted annually, based on the prevailing
 Repo rate on the relevant date.
 
 The GOI further infused Rs. 352.00 Crore through equity shares in March
 2011, which was approved in the Extra-ordinary General meeting, held on
 
 23.03.2011, by the equity shareholders through special resolution
 passed.  The allotment of equity shares were made on 26.03.2011 to the
 Government of India at Rs. 68.76 per share (Face value of Rs. 10.00 per
 share plus Rs. 58.76 premium per share) as per SEBI guidelines
 regarding issue of equity shares on preferential basis. Consequently,
 5,11,92,553 equity shares of Rs.  10/- each were allotted to the
 Government of India and percentage share of Government of India in
 equity increased from 76.77% to 79.24%. The bank has also received
 premium of Rs. 300.81 crore (Rs. 58.76 per share) on allotment of
 equity to Government of India.
 
 The Bank has issued Innovative Perpetual Bonds (Tier I capital) and
 also other bonds eligible for inclusion in Tier II capital. Some of the
 important terms and conditions of the bonds are given below:
 
 Qualitative Disclosures:
 
 a) A summary discussion of the Bank’s approach to assessing the
 adequacy of its capital to support current and future activities:
 
 The bank is subjected to the capital adequacy guidelines stipulated by
 RBI.  Adequate capital is maintained by the Bank as a cushion for
 covering the risk of loss in value of exposure, businesses etc. so as
 to protect the depositors and general creditors against such losses.
 The Bank has evolved and put in place a Board approved Internal Capital
 Adequacy Assessment Process (ICAAP) framework. Assessment and review of
 bank’s capital requirements are carried out at periodical intervals.
 
 The Bank has a process for assessing its overall Capital Adequacy in
 relation to its risk profile and the process provides an assurance that
 the Bank has adequate capital to support all risks in its business and
 an appropriate capital buffer based on its business profile. The Bank
 has a policy to maintain capital to take care of the future growth in
 business so that the minimum capital required is maintained on
 continuous basis.
 
 In line with the guidelines of the RBI, the Bank has adopted the
 Standardised Approach for Credit Risk, Basic Indicator Approach for
 Operational Risk and Standardized Duration Approach for Market Risk for
 computing Capital Adequacy Ratio under New Capital Adequacy Framework-
 Basel II.
 
 Prudential floor limit for minimum capital requirement:
 
 The guidelines for implementation of the New capital adequacy Framework
 issued by RBI stipulates higher of the following amounts as minimum
 capital required to be maintained by the Bank.
 
 Qualitative Disclosures:
 
 Credit Risk:
 
 Credit Risk is related to the losses associated with diminution in the
 credit quality of borrowers or counterparties in a bank’s portfolio.
 Credit risk arises mostly from lending activities of the bank and it
 emanates from changes in the credit quality / worthiness of the
 borrowers or counterparties. Credit Risk is an aggregation of
 Transaction Risk (risk in various credit propositions), Industry and
 Business line risk wherein advances are lent, Geographic Concentration
 Risk and types of credit (such as Loans, Cash Credit, Overdrafts etc.).
 
 Policy & Strategy
 
 The Bank has been following a conservative risk philosophy. The
 important aspects of the risk philosophy are embodied in various
 policies, circulars, guidelines etc. The business objectives and the
 strategy of the bank is decided taking into account the profit
 considerations, the level of various risks faced, level of capital,
 market scenario and competition. The Bank is conscious of its asset
 quality and earnings and judiciously matches profit maximization with
 risk control.
 
 The Bank has put in place the following policies approved by the Board.
 
 i) Lending & Loan Review Policy
 
 ii) Risk Management Policy
 
 iii) Credit Risk Mitigation Techniques & Collateral Management
 
 iv) Investment Management Policy & Investment Risk Management Policy
 
 The Lending & Loan Review Policy, Risk Management Policy documents
 define organizational structure, role and responsibilities and, the
 processes and tools whereby the credit risks carried by the Bank can be
 identified, quantified and managed within the framework that the Bank
 considers consistent with its mandate and risk appetite. The policies
 prescribe various prudential and exposure limits, collateral standards,
 financial benchmarks for the purpose of credit risk management. The
 policy on Credit Risk Mitigation Techniques & Collateral Management
 lays down the details of eligible collaterals for credit risk
 mitigation under Basel II framework. The Investment Management Policy &
 Investment Risk Management Policy forms an integral part of credit risk
 in the Bank.
 
 Organizational Structure for Credit Risk Management
 
 The organizational structure of the Bank for Credit Risk Management
 function has the Board of Directors at the apex level that has the
 overall oversight of management of risks. The Risk Management Committee
 of the Board (RMC) devises the policy and strategy for integrated risk
 management. At operational level, the Credit Risk Management Committee
 (CRMC) manages the credit risk.  The main functions of the CRMC include
 implementation of the credit risk policy approved by the Board,
 monitoring credit risk on a bank wide basis and ensure adherence to
 threshold risk limits, approved by the Board / Risk management
 Committee. The Integrated Risk Management Department is headed by the
 Chief Risk Officer of General Manager rank.
 
 Systems / Process / tools for Credit Risk Management
 
 Credit Appraisal standards:
 
 The Bank has in place proactive credit risk management practices like
 consistent standard for the credit origination, maintenance and
 documentation for all credit exposures including off balance sheet
 items. Systems of periodic reviews, periodic inspections and collateral
 management systems are in place.
 
 Exposure Limits:
 
 Credit risk limits including single / group borrower limits,
 substantial exposure limits, exposure limits in respect of sectors /
 industries are in place. The exposure vis-à-vis the limits are
 monitored.
 
 Credit Approval Grids:
 
 Credit Approval Grids have been constituted at various levels covering
 very large branches / Regional offices / Central Office for considering
 fresh / existing proposals with or without enhancement. A structure
 namely, New Business Group (NBG) is in place at Central Office level
 for considering in-principle approval for taking up fresh credit
 proposal above a specified cut-off.
 
 Sanctioning Powers:
 
 The Bank follows a well-defined multi-layered discretionary power
 structure for sanction of loans. Higher sanctioning powers are
 delegated to sanctioning authorities for sanctioning loans and advances
 to better rated customers in line with RBI guidelines.
 
 Credit Risk Rating and Appraisal Process:
 
 The Bank manages its credit risk through continuous measuring and
 monitoring of risks at each obligor (borrower) and portfolio level. The
 Bank has in place an internal credit risk rating framework and well
 established standardized credit appraisal / approval processes. Credit
 risk rating enables the Bank to accurately assess the risk in a credit
 proposition and take a decision to accept or reject the proposal based
 on the risk appetite of the Bank. It also enables risk pricing of
 credit facilities for risk return trade off. The Bank has developed and
 put in place credit risk rating models for retail loans also. The Bank
 has in-house developed software for undertaking credit risk rating put
 on the Wide Area Network (WAN) of the Bank facilitating instant access
 by the Branches / Field Offices for undertaking credit risk rating of
 borrowers.
 
 As a measure of robust credit risk management practices, the Bank has
 in place a framework for approval of credit risk ratings. Rating for
 every borrower is reviewed at least once in a year. Credit portfolio
 quality is monitored by undertaking bi-
 
 annual credit risk rating for high value exposures and inferior rated
 borrowers.  Credit risk rating, as a concept, has been well
 internalized in the Bank.
 
 Loan Review Mechanism:
 
 The objectives of the Loan Review Mechanism in place in the Bank are:
 
 i) To ensure that credit decisions by various authorities are in
 conformity with the Bank’s Lending Policy and delegated lending powers.
 
 ii) To ensure that stipulated terms & conditions of sanction are
 complied with and various post sanction follow up, monitoring and
 supervision measures prescribed by the Bank are adhered to.
 
 iii) To ensure that all credit facilities are reviewed / renewed well
 in time so as to revise the risk perception and take necessary
 corrective action if necessary, immediately.
 
 iv) To aim at achieving maintenance of standard assets quality and
 improvement in non-performing assets (NPAs) so as to have a favorable
 impact on profitability of the Bank through prevention / reduction / up
 gradation of NPAs.
 
 v) To assess the health of credit portfolio of the Bank and to apprise
 the Top Management about the same from time to time.
 
 Checks and balances viz. separation of credit risk management from
 credit sanctions, system of assigning credit risk rating, vetting of
 ratings, mechanism to price credit facilities depending on risk rating
 of customer, credit audit etc. are in place. Minimum entry level rating
 benchmarks are stipulated. A suitable mechanism is in place to monitor
 aggregate exposure on other banks and country exposures. A diversified
 credit portfolio is maintained and a system to conduct regular analysis
 of portfolio so as to ensure ongoing control of credit concentration is
 in place.
 
 Loans past due and Impaired:
 
 The regulatory guidelines are adhered to in respect of income
 recognition, asset classification and provisioning, the Bank considers
 following categories of loans and advances as Non-performing Assets,
 wherein:
 
 • Interest and/or installment of principal remain overdue for a period
 of more than 90 days in respect of a Term Loan
 
 • The account remains ‘out of order’ in respect of an Overdraft/Cash
 Credit (OD/CC)
 
 • The bill remains overdue for a period of more than 90 days in the
 case of Bills Purchased and Discounted
 
 • In case of agricultural advances, interest and/or installment of
 principal remains overdue for 2 crop seasons (in respect of short
 duration crops) & 1 crop season (in respect of long duration crops).
 
 • Any amount receivable that remains overdue for a period of more than
 90 days in respect of other accounts.
 
 • Interest charged during any quarter is not serviced fully within 90
 days from the end of the quarter.
 
 ‘Out of Order’ status:
 
 An account is treated as out of order if the outstanding balance
 remains continuously in excess of the sanctioned limit/drawing power.
 In cases where the outstanding balance in the principal operating
 account is less than the sanctioned limit/drawing power, but there are
 no credits continuously for 90 days as on the date of Balance Sheet or
 credits are not enough to cover the interest debited during the same
 period, these accounts should be treated as out of order.
 
 Overdue:
 
 Any amount due to the bank under any credit facility is ‘overdue’ if it
 is not paid on the due date fixed by the bank.
 
 Quantitative Disclosures:
 
 Table DF – 5 - CREDIT RISK: DISCLOSURES FOR PORTFOLIOS SUBJECT TO THE
 STANDARDISED APPROACH
 
 Qualitative Disclosures:
 
 a) For portfolios under the Standardised Approach:
 
 Name of the credit rating agencies used:
 
 The Bank has approved the following external credit rating agencies,
 approved by RBI, for risk weighting claims on entities:
 
 1.  Credit Rating Information Services of India Limited (CRISIL),
 
 2.  Credit Analysis and Research limited (CARE),
 
 3.  FITCH India and
 
 4.  ICRA Limited.
 
 •• Types of exposure for which each credit rating agency is used: All
 the above agencies are approved for rating of all types of exposure.
 
 •• A description of the process used to transfer public issue ratings
 onto comparable assets in the banking book:
 
 1.  The Bank shall use the ratings assigned by any of these credit
 rating agencies as solicited and accepted by the borrowers in line with
 RBI guidelines. External ratings assigned, fresh or reviewed, at least
 during the previous 15 months only are reckoned for capital computation
 by the Bank.
 
 2.  Wherever available, the Bank uses facility rating or bank loan
 rating for risk weighting the borrower’s exposures. Where issuer rating
 is available the Bank uses such ratings unless the bank loan is
 specifically rated.
 
 3.  The Bank does not simultaneously use the rating of one credit
 rating agency for one exposure and that of another credit rating agency
 for another exposure of the same borrower, unless the respective
 exposures are rated by only one of the chosen credit rating agencies.
 Further, the Bank does not use rating assigned to a particular entity
 within a corporate group to risk weight other entities within the same
 group.
 
 4.  Running limits such as cash credit are treated as long term
 exposures and accordingly, long term ratings are used for assigning
 risk weights for such exposures.
 
 5.  While mapping / applying the ratings assigned by the credit rating
 agencies, the Bank is guided by Regulatory guidelines / Bank’s Board
 approved Policy.
 
 Quantitative Disclosures:
 
 For exposure amounts after risk mitigation subject to the Standardised
 Approach, amount of a bank’s outstandings (rated and unrated) in the
 following three major risk buckets as well as those that are deducted.
 
 TABLE DF – 6 - CREDIT RISK MITIGATION: DISCLOSURES FOR STANDARDISED
 APPROACHES
 
 Qualitative Disclosures:
 
 Policies and processes for, and an indication of the extent to which
 the bank makes use of, on- and off-balance sheet netting
 
 In line with RBI guidelines, the Bank has put in place a Board approved
 Policy on Credit Risk Mitigation Techniques & Collateral Management.
 The collaterals used by the Bank as the risk mitigants comprise of the
 financial collaterals (i.e.
 
 bank deposits, Govt. / Postal securities, Life policies with declared
 surrender value, gold jewellery etc.) where Bank has legally
 enforceable netting arrangements, involving specific lien. A software
 is in place for calculation of correct valuation and application of
 haircut.
 
 Policies & processes for collateral valuation and management:
 
 Collaterals and guarantees prudently stipulated and managed would serve
 to:
 
 • Mitigate the risk by providing secondary source of repayment in the
 event of borrowers default on a credit facility due to inadequacy in
 expected cash flow
 
 • Gain control on the source of repayment in the event of default;
 
 • Optimize risk weighted assets and to address residual risks
 adequately.
 
 In line with RBI guidelines, the Bank has put in place a Board approved
 Policy on Credit Risk Mitigation Techniques & Collateral Management.
 The Bank also has put in place Lending Policy duly approved by the
 Board. These policies lay down the types of securities normally
 accepted by the Bank for lending, and administration / monitoring of
 such securities in order to safeguard / protect the interest of the
 Bank so as to minimize the risk associated with it. Both the fixed and
 the current assets obtained to secure the loans granted by the Bank as
 per policy prescription are subjected to valuation by outside valuers
 empanelled by the Bank.
 
 • Description of the main types of collateral taken by the Bank
 
 The main types of financial collaterals commonly used by the Bank as
 risk mitigants comprise of financial collaterals (i.e. Bank Deposits,
 Government Securities, KVP, NSC, Life Insurance Policies with declared
 surrender value, Gold jewellery etc.). Bank also accepts non-financial
 collateral i.e.  stock, book debts, mortgage of residential &
 commercial property and plant & machinery.
 
 • Main types of guarantor counterparty and their creditworthiness
 
 Wherever required the Bank obtains personal or corporate guarantee as
 an additional comfort for mitigation of credit risk which can be
 translated into a direct claim on the guarantor which is unconditional
 and irrevocable.  The Bank also accepts guarantee given by State /
 Central Government as a security comfort.
 
 • Information about (Market or Credit) risk concentrations within the
 mitigation taken
 
 All types of securities eligible for credit risk mitigation are easily
 realizable financial securities. As such, no limit / ceiling have been
 prescribed for the present to address the concentration risk in credit
 risk mitigants.
 
 TABLE DF – 7 - SECURITISATION: DISCLOSURE FOR STANDARDIZED APPROACHES
 
 Qualitative Disclosures:
 
 The Bank has not securitised any exposure during the year 2010-11.
 Quantitative Disclosures: NIL
 
 TABLE DF – 8 MARKET RISK IN TRADING BOOK Qualitative disclosures: (a)
 Market Risk:
 
 Market Risk is defined as the possibility of loss to a bank caused by
 changes / movements in the market variables such as interest rates,
 foreign currency exchange rates, equity prices and commodity prices.
 Bank’s exposure to market risk arises from domestic investments
 (interest related instruments and equities) in trading book (both AFS
 and HFT categories), the Foreign exchange positions. Bank is not
 trading in commodities. The objective of the market risk management is
 to minimize the impact of losses on earnings and equity arising from
 market risk.
 
 Policies, strategies and processes for management of market risk
 
 The Bank has put in place Board approved Investment Management Policy &
 Investment Risk Management Policy, Risk Management Policy and Asset
 Liability Management (ALM) Policy for effective management of market
 risk in the Bank. The above policies lay down well-defined organization
 structure for market risk management functions and processes whereby
 the market risks carried by the Bank are identified, measured,
 monitored and controlled within the policy framework consistent with
 the Bank’s risk tolerance. The policies deal with the reporting
 framework for effective monitoring of market risk and also set various
 risk limits such as Overnight Limit, Intra-day limit, Aggregate Gap
 limit, Stop Loss limit, VaR limit etc. Exposure limits are set for the
 counterparty banks and the exposures are monitored on daily basis.
 
 The ALM Policy specifically deals with liquidity risk and interest rate
 risk management framework. As envisaged in the policy, liquidity risk
 is managed through the Gap Analysis based on the residual maturity /
 behavioral pattern of assets and liabilities as prescribed by the RBI.
 The Bank has put in place mechanism of short term dynamic liquidity
 management and contingency plan for liquidity management. Prudential
 (Tolerance) limits are set for different residual maturity time buckets
 for efficient asset liability management. The Bank’s contingency plan
 for liquidity management comprises various contingent measures to deal
 with any kind of stress on liquidity position. The Bank has put in
 place Board approved Stress Testing Policy and conducts periodic stress
 tests on liquidity risk, interest rate risk and foreign exchange risk.
 
 Interest rate risk is managed through use of Gap Analysis of rate
 sensitive assets and liabilities and monitored through prudential
 (Tolerance) limits prescribed. The Bank also has put in place Duration
 Gap Analysis framework for management of interest rate risk. The Bank
 estimates Earnings at Risk (EaR) and Modified Duration Gap (DGAP)
 periodically against adverse movement in interest rate for assessing
 the impact on Net Interest Income (NII) and Economic Value of Equity
 (EVE).
 
 The Asset Liability Management Committee (ALCO) / Board monitors
 adherence of prudential limits fixed by the Bank and determines the
 strategy in light of the market conditions. Dealing room activities are
 centralized and system is in place to monitor the dealing room
 activities.  The Mid- Office at the Treasury & International Banking
 Department (TIBD) also monitors adherence of prudential limits on a
 continuous basis.
 
 The aggregate exposure on country-wise basis is taken for monitoring
 the country risk. For risk categorization of various countries, the
 ECGC risk classifi cation is used by the Bank. Exposure on High Risk
 countries are taken with proper risk mitigation.
 
 Qualitative disclosures:
 
 Operational risk:
 
 Operational Risk is risk of loss resulting from inadequate or failed
 internal processes, people and systems or from external events.
 Operational risk includes Legal risk but excludes Strategic and
 Reputation Risk.
 
 Policies on management of Operational Risk:
 
 The Bank has framed Operational Risk Management Policy as a part of
 Risk Management Policy, duly approved by the Board. The other policies
 approved by the Board which deal with management of operational risk
 are (a) Information System Security Policy, (b) Business Continuity
 Planning Policy, (c) Compliance Policy, (d) Outsourcing Policy and (e)
 Fraud Risk Management Policy. The Bank has issued guidelines on ‘Know
 Your Customer’ (KYC) and ‘Anti-Money Laundering’ (AML) procedures.
 
 Strategies and processes: The Operational Risk Management process of
 the Bank is driven by a strong organizational culture and sound
 operating procedures, involving corporate values, internal control
 culture, effective internal reporting. Policies are put in place for
 effective management of Operational Risk in the Bank.
 
 The Bank has been constantly reviewing the legal documents to ensure
 that the legal documents are comprehensive and enforceable. As a
 measure of risk transfer, the Bank has obtained insurance cover for all
 the assets owned by the Bank. It is also ensured that the assets
 financed by the Bank are also adequately insured as a risk mitigation
 measure. The operational risk management policy outlines the
 organization structure and detail processes for management of
 operational risk. The basic objective of the policy is to closely
 integrate operational risk management system into the day-to-day risk
 management processes of the Bank by clearly assigning roles for
 effectively identifying, assessing, monitoring and controlling /
 mitigating operational risks and by timely reporting of operational
 risk exposures including material operational losses. Operational risks
 in the Bank are managed through comprehensive and well-articulated
 internal control framework.
 
 Approach adopted for capital charge computation for operational risk:
 
 The Bank is following Basic Indicator Approach (BIA) for calculating
 capital charge for operational risk.
 
 TABLE DF – 10 – INTEREST RATE RISK IN THE BANKING BOOK (IRRBB)
 
 Qualitative Disclosures:
 
 (a) Interest Rate Risk in the Banking Book:
 
 Interest Rate Risk in the Banking Book (IRRBB) refers to the potential
 adverse financial impact on the Bank’s Banking Book from changes in
 interest rates. The interest rate risk is measured and monitored
 through two approaches.
 
 (i) Earnings at Risk: The impact on income (Earning Perspective) is
 measured through use of Traditional Gap Analysis by applying notional
 rate shock (parallel shift in the interest rates across assets and
 liabilities) up to 100 basis point (bps).
 
 (ii) Economic Value of Equity (Duration Gap Analysis): The Bank has
 adopted Duration Gap Analysis for assessing the impact (as a
 percentage) on the economic value of equity (Economic Value
 Perspective) in line with method suggested by RBI. It is done by
 calculating modified duration of assets and liabilities to finally
 arrive at modified duration of equity.
 
 • Interest Rate Sensitivity statement is prepared.
 
 • The duration of each asset and liability is arrived at taking the
 midpoint of each time bucket as the maturity date and the average yield
 as coupon and taking the market rate for discounting purpose. For
 investments, the actual duration is taken.
 
 • The impact on the Economic Value of Equity is analyzed for a 200 bps
 rate shock as indicated by RBI.
 
 The Economic Value of Equity is measured and monitored on a quarterly
 basis.
 
 
 
 
 
 AUDITORS REPORT To
 
 The President of India Report On Financial Statements
 
 1.  We have audited the accompanying financial statements of BANK OF
 MAHARASHTRA as at 31st March 2011 which comprise the Balance Sheet as
 at March 31, 2011, and the Profit and Loss Account and the Cash Flow
 statement for the year then ended, and a summary of significant
 accounting policies and other explanatory information. Incorporated in
 these financial statements are the returns of 20 branches & The
 Treasury & International Banking Branch (TIBB) audited by us and 1298
 branches audited by Branch Auditors.
 
 The branches audited by us and those audited by other auditors, as
 informed to us, have been selected by the Bank in accordance with the
 guidelines issued to the Bank by the Reserve Bank of India. Also
 incorporated in the Balance Sheet and the statements of Profit & Loss
 are the returns from 14.13% branches which have not been subjected to
 audit but certified by the management. These unaudited branches account
 for 1.49% of advances, 2.17% of deposits, and 0.67% of interest income
 and 2.16% of interest expenses.
 
 Managements Responsibility for the Financial Statements
 
 2.  Management is responsible for the preparation of these financial
 statements in accordance with 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 misstatements, 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 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 misstatements.
 
 4.  An audit involves performing procedures to obtain audit evidence
 about the amounts and disclosures in the financial statements. The
 procedures selected depend on auditor’s judgment, including the
 assessment of the risk of material misstatement of the financial
 statements, whether due to fraud or error. In making those risk
 assessments, the auditor considers internal control relevant to
 company’s preparation and fair presentation of the financial statements
 in order to 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 management, as well as evaluating the overall
 presentation of the financial statements.
 
 5.  We believe that our audit evidence we have obtained is sufficient
 and appropriate to provide a basis for our audit opinion.
 
 Emphasis of Matters
 
 6.  Without qualifying our opinion, we draw attention to
 
 a) Note No. 4.2 in Schedule 18 regarding change in accounting policy of
 provisioning in respect of secured sub-standard assets, due to which
 net profit (net of tax) for the year is lower by Rs. 18.86 crore with a
 consequential effect on assets and liabilities of the bank.
 
 b) Note No. 10.3 in Schedule 18 which describes deferment of pension
 and gratuity liability of the bank to the extent of Rs. 409.90 crores,
 pursuant to the exemption granted by the Reserve Bank of India to the
 public sector banks from application of the provisions of Accounting
 Standard 15 - Employees Benefit vide its Circular
 DBOD.BP.BC/80/21.04.018/2010-11 of 9th February, 2011 on Reopening of
 pension Option to Employees of Public Sector Bank and Enhancement in
 Gratuity limits — Prudential Regulatory Treatment.
 
 Had the said Circular not been issued, the ‘profit before tax’ of the
 Bank would have been lower by Rs. 409.90 crores pursuant to application
 of the requirements of AS 15, the consequential effect of which has not
 been ascertained on other related components of the financial
 statements.
 
 Opinion
 
 7.  We have observed that-
 
 a) Note No. 9.5.4 in Schedule 18 regarding excess charging of
 depreciation in earlier years on Electrical Equipments, the impact of
 which is not yet ascertained.
 
 b) The effect of adjustments that may arise from the on going
 reconciliation of certain assets/liabilities. clearing differences,
 inter branch accounts/inter branch transfer of fixed assets and charge
 of depreciation on fixed assets, (as stated in Note No. 9.3 of Schedule
 18 annexed to the Balance Sheet), the consequential impact thereof on
 the accounts is not ascertainable;
 
 c) The Bank is following the policy of recognizing the income from
 commission, locket rent etc. on cash basis during the year, instead of
 accrual basis as stated in para no. 6.1 Schedule 17 Significant
 Accounting Policies which are not in conformity with the ‘Accounting
 Standard 9 Revenue Recognition, issued by The Institute of Chartered
 Accountants of India’; and
 
 Subject to our observations above, in our opinion as shown by the books
 of the 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 the 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 the accounting principles
 generally accepted in India, for the year covered by the account; and
 
 iii. The Cash Flow Statement gives a true and fair view of the cash
 flows for the year ended on that date.
 
 Report on Other Legal & Regulatory Requirements
 
 8.  The Balance Sheet and Profit & 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 audit indicated in paragraph 1 to 5
 above and as required by the Banking Companies (Acquisition and
 Transfer of Undertakings) Act, 1970/1980, and subject also to the
 limitations of disclosure required therein, we report that:
 
 a.  We have obtained all the information and explanation which to the
 the best of our knowledge and belief, were necessary for the purposes
 of our audit and have found them to be satisfactory.
 
 b.  The transaction of the Bank, which have come to our notice, have
 been within the powers of the Bank.
 
 c.  The returns received from the officers and branches of the Bank
 have been found adequate for the purpose of our audit.
 
 10. In out opinion, the Balance Sheet - Profit and Loss Account and
 Cash Flow Statement comply with the applicable accounting standards.
 
 
 
 For B. Chhawchharia & Co.     For Ray & Co.  
 FRN: 305123E                  FRN: 313124E
 Chartered Accountants         Chartered Accountants
 
 
 For Jodh Joshi                For JCR & Co.
 FRN: 104317W                  FRN :105270W
 Chartered Accountants         Chartered Accountants
 
 For N.Kumar Chhabra           For DSP & Associates
 And Co & Co.
 FRN : 000837N                 FRN: 006791N
 Chartered Accountants         Chartered Accountants
 
 (S. K. Chhawchharia)          (Subrata Roy)                      
 (Partner)                     (Partner)               
 Membership No.: 008482        Membership No.:051205   
 
 
 (Makarand Joshi)              (Amit Tanpure)  
 (Partner)                     (Partner)               
 Membership No : 047196        Membership No : 129055           
 
 
 (Navtej Kumar)                (Sanjay Jain)
 (Partner)                     (Partner)
 Membership No : 080496        Membership No : 084906
 
 
 
 Place: Pune
 
 Dated: 30th April 2011
 
 
 
 ACCOUNTING POLICIES AND NOTES ON ACCOUNTS
 
 (ANNEXED TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS FOR THE YEAR
 ENDED 31st MARCH 2011.)
 
 (Figures in bracket relate to previous year)
 
 SIGNIFICANT ACCOUNTING POLICIES
 
 1.  Accounting Conventions:
 
 1.1 The financial statements are prepared under the historical cost
 conventions except as otherwise stated.
 
 1.2. The Consolidated Financial Statements have been prepared in
 accordance with Accounting Standard 21 - “Consolidated Financial
 Statements” and Accounting Standard 23 - “Accounting for investments in
 Associate in Consolidated Financial Statements”, issued by The
 Institute of Chartered Accountants of India.
 
 1.3 Revenue and costs are accounted for on accrual basis except as
 otherwise stated.
 
 1.4 The accounting policies with regard to Revenue Recognition,
 Investments and Advances are in conformity with the prudential norms
 issued by the Reserve Bank of India from time to time.
 
 1.5. The financial statements of the Subsidiary and Associate are drawn
 up to 31st March 2011.
 
 2.  Principles of Consolidation:
 
 A) Related Entity:
 
 The following subsidiary has been consolidated as per Accounting
 Standard 21 - “Consolidated Financial Statement”.
 
                     Country /                         Ownership
 Name of the         Residence     Relationship        Interest
 company 
 
 
 The Maharashtra       India        Subsidiary           100%
 Executors & Trustee 
 Co. Pvt. Ltd. 
 (METCO)
 
 The following Associate Company has been accounted for under the Equity
 Method as per Accounting Standard 23 - “Accounting for investments in
 Associates in consolidated financial statements”
 
 
  Country /                         Ownership
 Name of the         Residence     Relationship        Interest
 company 
 
 
 Maharashtra           India        Sponsored           35%
 Gramin Bank                          Bank 
 
 As per the Government of India, notification dt.20.07.2009, Marathwada
 Gramin Bank and Maharashtra Godavari Gramin Bank sponsored by Bank of
 Maharashtra in the State of Maharashtra are amalgamated into a single
 Regional Rural Bank which is “Maharashtra Gramin Bank” with its Head
 Office at Nanded
 
 B) Basis of Preparing Consolidated Financial Statement & its impact
 
 The Consolidated financial statements of the Bank & its subsidiary have
 been combined on a line-by-line basis by adding together the book
 values of assets, liabilities, income & expenses, after fully
 eliminating intra-group balances/transactions & the excess over Bank’s
 investment in subsidiary is taken as Capital Reserve after
 consolidation.
 
 The Consolidated financial statements of the Bank & its associate have
 been combined on Equity Method basis. The excess of carrying cost of
 Bank’s investment in Associate is recognized in the financial
 statements as goodwill.
 
 The financial statement of the Subsidiary has been regrouped with that
 of the parent Bank, wherever necessary.
 
 The subsidiary has used accounting policies other than those adopted by
 the Bank in certain cases for like transactions & events in similar
 circumstances. No adjustments have been made to the financial
 statements of the subsidiary, when they are used in preparing the
 consolidated financial statements. However, the proportion of the items
 in the consolidated financial statements to which the different
 accounting policies are applied by the subsidiary is insignificant.
 
 3.  Foreign Exchange Transactions:
 
 3.1 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.
 
 3.2 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 R.B.I. /
 FEDAI Guidelines.
 
 3.3 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.
 
 4.  Investments:
 
 As per Reserve Bank of India guidelines, the investments are classified
 and valued as under:
 
 i. Investments in SLR and non-SLR securities (Shares, Debentures,
 Bonds, Units of MF, CP, CD, etc.) are classified in following
 categories:
 
 a.  Held to maturity
 
 b.  Available for sale
 
 c.  Held for trading
 
 ii.  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).
 
 iii. 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.
 
 iv.  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 Swaps for trading purpose are 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.
 
 5.  Advances:
 
 5.1 Advances shown in the Balance Sheet are net of write offs,
 provisions made for non-performing assets, claims settled with the
 credit guarantee institutions and rediscounts.
 
 5.2 Classification of advances and provisions are made in accordance
 with the prudential norms prescribed by Reserve Bank of India from time
 to time except in case of secured sub standard assets, the Bank has
 made provision @15% instead of @10% as per IRAC norms issued by RBI.
 
 5.3 Provisions for standard assets is shown under the head “Other
 Liabilities and Provisions”
 
 5.4 Recoveries in the non performing Assets are appropriated first
 towards principal and thereafter towards interest.
 
 6.  Fixed Assets and Depreciation:
 
 6.1 Premises and other Fixed Assets are accounted for at cost except
 certain premises, which are revalued and stated at revalued amount.
 
 6.2 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 Reserve Bank of India guidelines. Computers include
 software, ATM 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.
 
 6.3 Depreciation relating to revaluation is adjusted against the
 Revaluation Reserve.
 
 6.4 Leasehold land is amortized over the period of lease.
 
 In case of the subsidiary:
 
 6.5 In the case of METCO, the fixed assets are valued at cost less
 depreciation. The depreciation on fixed assets has been charged on WDV
 basis at the rates prescribed under Schedule XIV of the Companies Act,
 1956.
 
 7.  Revenue Recognition
 
 7.1 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 Reserve Bank of India, 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.
 
 7.2 Interest income on refund of Income Tax is accounted for in the
 year the order is passed by the concerned authority.
 
 7.3 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.
 
 8.  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.
 
 9.  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 Institute of Chartered Accountants of India (ICAI) and
 charged to profit and loss account.
 
 10 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 than 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.
 
 11.  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
 taxation), provision for advances and contingencies/others.
 
 12.  Income tax:
 
 The provision for tax for the year comprises current income tax, wealth
 tax and the deferred tax. The deferred tax assets and liabilities are
 recognized, subject to the consideration of prudence, taking in to
 account the timing differences between taxable income and accounting
 income, in terms of Accounting Standard 22 issued by the Institute of
 Chartered Accountants of India.
 
 The tax expenses shown in the Consolidated Financial Statements is the
 aggregate of the amounts of tax expenses appearing in the separate
 financial statements of the parent & subsidiary.
 
 SCHEDULE -17 -NOTES ON ACCOUNTS
 
 1.  As on 31.03.2009 there were two associates viz. Marathwada Gramin
 Bank (MGB) and Maharashtra Godavari Gramin Bank (MGGB) which were
 amalgamated on 20.07.2009 and a new entity in the name of Maharashtra
 Gramin Bank(MGB) came into existence. During the year parent bank has
 recognized its share of profit in associates after adjusting the
 unabsorbed losses from goodwill, due to excess of carrying amount in
 associates over unabsorbed losses of the associates.
 
 During the current year, the bank has infused Rs. 15.87 crore out of
 total recapitalization fund of Rs. 45.34 crore to be provided by
 Government of India (50% i.e. Rs. 22.67 crore), Government of
 Maharashtra (15% i.e. Rs. 6.80 crore) and Bank of Maharashtra (35% i.e
 Rs. 15.87 crore).
 
 2.  Investments:
 
 The Bank has classified the investment portfolio into three categories
 i.e.  “Held to Maturity”, “Available for Sale” and “Held for Trading”
 and valued the investments in terms of the Reserve Bank of India
 guidelines.
 
 3.  Dividend on Equity Share Capital
 
 The Board of Directors of the Bank has recommended a dividend @ 20% for
 the year, i.e. Rs. 2.00 per equity share of face value of Rs. 10/-
 each, which is subject to approval of Government of India.
 
 4.  The Bank has complied with the mandatory Accounting Standards
 issued by The Institute of Chartered Accountants of India (ICAI) to the
 extent applicable as under:
 
 4.1 Accounting Standard 5 – Net Profit or Loss for the period, prior
 period items and changes in accounting policies.
 
 As Prior period items of income/expenditure are not material, the same
 have been charged/accounted for in respective heads of accounts.
 
 4.2 Accounting Standard 9 – Revenue Recognition
 
 As per Accounting Policy No. 7(i), given in Schedule -17 – Significant
 Accounting Policies, certain items of income are recognized on
 realization basis on account of statutory requirements or materiality.
 
 a) Treasury segment includes Investment, balances with Banks outside
 India, Interest accrued on Investments and related income there from.
 
 b) Corporate/ Whole sale Banking Segments include all advances to
 trusts, partnership firms, companies and statutory bodies which are not
 included in Retail Banking Segments.
 
 c) Retail Banking Segments include exposure to the individual person/
 persons or to a small business where
 
 i.  total average annual turnover is less than Rs. 50.00 crore and
 
 ii.  no aggregate exposure to one counterpart exceeds 0.2% of the
 overall retail portfolio of the Bank and
 
 iii.  The maximum aggregated retail exposure to one counterpart is up
 to Rs. 5.00 crore.
 
 d) Other Banking Operations segment includes all other banking
 transaction not covered under segments, specified above.
 
 The above disclosures made are based on the records/information
 compiled by the management and relied upon by the auditors.
 
 Geographical Segment
 
 Since the operations of the Bank are within India only, Geographical
 Segment is not applicable.
 
 4.4 Accounting Standard 18 – Related party disclosures:
 
 The details in this regard are mentioned as below:
 
 Name of the Related Parties and their relationship with the Bank:
 
 Key Managerial Personnel-
 
 1.  Shri Anup S Bhattacharya, Chairman & Managing Director (from
 01.10.2010)
 
 2.  Shri Allen C. A. Pereira, Chairman & Managing Director (from
 04.06.2008 to 30.09.2010)
 
 3.  Shri Madhukant G Sanghvi, Executive Director (from 15.10.2008)
 
 Subsidiary of the Bank– The Maharashtra Executor & Trustee Co. Pvt.
 Limited
 
 Associate of the Bank- Maharashtra Gramin Bank
 
 4.6 Accounting for Taxes on Income (AS-22):
 
 The parent bank has accounted for Income Tax in compliance with AS 22.
 Accordingly, Deferred Tax Assets and Deferred Tax Liabilities are
 recognized. Major Components of Deferred Tax Assets & Deferred Tax
 Liabilities are as under:
 
 In respect of METCO, DTA in respect of depreciation & preliminary
 expenses for the current year amounting to Rs. 649590/- (DTL Rs. 18092)
 has been shown in Balance Sheet.
 
 4.7 Accounting Standard 26—Accounting for Intangible Assets.
 
 Computer Software – other than internally generated:
 
 Useful life - 3 years.
 
 Amortization Rate - 33.33%
 
 Amortization Method - Straight line at cost.
 
 4.8 Impairment of Assets (AS-28):
 
 Bank has identified that there is no impairment of fixed assets and as
 such no provision is required as per AS-28.
 
 4.9 Provisions, Contingent Liabilities & Contingent Assets (AS-29):
 
 In the opinion of the management, no provision is required against
 contingent liabilities referred in Schedule 12.
 
 (i) Work is in progress for adjustment/ reconciliation/elimination of
 inter-branch transactions, transactions with other banks/institutions,
 nominal accounts and old entries under other assets and liabilities,
 further reconciliation between balances in subsidiary and general
 ledger in respect of certain deposit accounts, clearing accounts, other
 assets & liabilities. Similarly, reconciliation of inter-branch
 transfer of fixed assets is still under progress. The effect of these
 including the consequential impact thereof on the revenue, is not
 ascertainable.
 
 (ii) Till previous year, the Bank was identifying NPAs to comply with
 Income Recognition, Asset Classification (IRAC) Norms through the CREAM
 software. However, to comply with the directions of Ministry of
 Finance, the Bank has now modified its Core Banking Solution (CBS)
 system with a view to classify NPAs as per IRAC.
 
 (iii) The title deeds in respect of few revalued premises having cost
 Rs. 7.00 crore (Rs. 8.02 crore) are not yet executed/registered in
 favour of the bank due to certain long pending legal
 disputes/formalities
 
 5.  Goodwill and carrying amount of investment.
 
 Goodwill of Rs. 22.36 crores (Rs. 31.21 crores) pertains to associate
 as on 31.03.2011.
 
 During the year, the bank has infused Rs. 15.87 crore in the form of
 capital in Maharashtra Gramin Bank. Based on the intrinsic value of
 share of Maharashtra Gramin Bank, Rs. 12.83 crore has been shown as
 carrying amount of fresh investment and Rs. 3.04 crore are identified
 as goodwill out of fresh infusion made.
 
 6.  Other significant Notes on Accounts.
 
 These are set out under “Notes on Accounts” as given in the sole
 Financial Statements of Bank, its subsidiary and the associate.
 
 7.  Previous year’s figures have been regrouped / reclassified wherever
 considered necessary to make them comparable with current year’s
 figures.
 
 
 
 AUDITORS REPORT To The President of India.
 
 Report On Financial Statements -
 
 1.  We have audited the accompanying Consolidated financial statements
 of BANK OF MAHARASHTRA , its one subsidiary and one associate (the
 Group) as at 31st March 2011 which comprise the Consolidated Balance
 Sheet as at March 31, 2011, and the Consolidated Profit and Loss
 Account and the Consolidated Cash Flow statement for the year then
 ended, and a summary of significant accounting policies and other
 explanatory information.
 
 2.  The Financial Statements of Parent (i.e. Bank of Maharashtra)
 audited by us and incorporated in these statements incorporate the
 returns of 20 branches & The Treasury & International Banking Branch
 (TIBB) audited by us and the returns of 1298 branches audited by other
 Branch Auditors.
 
 The branches audited by us and those audited by other auditors, as
 informed to us, have been selected by the Bank in accordance with the
 guidelines issued to the Bank by the Reserve Bank of India. Also
 incorporated in the Balance Sheet and the Statement of Profit & Loss of
 parent are the returns from 14.13% branches which have not been
 subjected to audit but certified by the management. These unaudited
 branches of Parent account for 1.49% of advances, 2.17% of deposits,
 and 0.67% of interest income and 2.16% of interest expenses of the
 Parent.
 
 3.  We did not audit the financial statements of subsidiary which
 reflect total assets of Rs. 669.54 lakh as on 31st March, 2011 and net
 profit of Rs. 13.80 lakh for the year ended on that date, and associate
 whose financial statements reflect the Group share of profit of Rs.
 427.32 lakh for the year ended on that date as considered in
 consolidated financial statements. These financial Statements have been
 audited by other auditors whose reports have been furnished to us and
 our opinion, in so far as it relates to the amounts included in respect
 of the subsidiary and the associate, is based solely on the reports of
 the other auditors.
 
 4.  We report that the Consolidated Financial Statements have been
 prepared by the bank in accordance with the requirements of the
 ‘Accounting Standard (AS) 21 -Consolidated Financial Statements’ and
 ‘AS 23 — Accounting for Investments in Associates in Consolidated
 Financial Statements’, and on the basis of separate audited financial
 statements of the bank and its subsidiary and associate included in the
 Consolidated Financial Statements.  These Consolidated Financial
 Statements have been drawn up in the form prescribed by the Reserve
 Bank of India.
 
 Management’s Responsibility for the Financial Statements -
 
 5.  Management is responsible for the preparation of these consolidated
 financial statements. This responsibility includes the design,
 implementation and maintenance of internal control relevant to the
 preparation of the financial statements that are free from material
 misstatements, whether due to fraud or error.
 
 Auditors Responsibility -
 
 6.  Our responsibility is to express an opinion on these consolidated
 financial statements based on our audit. We conducted our audit in
 accordance with standards on auditing issued by the Institute of
 Chartered Accountants of India(ICAI). 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 misstatements.
 
 7.  An audit involves performing procedures to obtain audit evidence
 about the amounts and disclosures in the financial statements. The
 procedures selected depend on auditor’s judgment, including the
 assessment of the risk of material misstatement of the financial
 statements, whether due to fraud or error. In making those risk
 assessments, the auditor considers internal control relevant to
 company’s preparation and fair presentation of the financial statements
 in order to 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 management, as well as evaluating the overall
 presentation of the financial statements.
 
 8.  We believe that the audit evidence we have obtained is sufficient
 and appropriate to provide a basis for our audit opinion.
 
 Emphasis of Matters —
 
 9.  Without qualifying our opinion, we draw attention to —
 
 a) Note No. 4.2 in Schedule 18 of the Parent annexed to consolidated
 accounts regarding change in accounting policy of provisioning in
 respect of secured sub-standard assets, due to which net profit (net of
 tax) of the Parent for the year is lower by Rs. 18.86 crore with a
 consequential effect on consolidated assets and liabilities of the
 bank.
 
 b) Note No. 10.3 in Schedule 18 of the Parent annexed to consolidated
 accounts which describes deferment of pension and gratuity liability of
 the bank to the extent of Rs. 409.90 crores, pursuant to the exemption
 granted by the Reserve Bank of India to the public sector banks from
 application of the provisions of ‘AS 15 — Employee Benefits’ vide its
 Circular DBOD.BP.BC/80/21.04.018/2010-11 of 9th February, 2011 on
 ‘Reopening of pension Option to Employees of Public Sector Bank and
 Enhancement in Gratuity limits — Prudential Regulatory Treatment’.
 
 Had the said Circular not been issued, the ‘profit before tax’ of the
 Parent Bank would have been lower by Rs. 409.90 crores pursuant to
 application of the requirements of AS 15, the consequential effect of
 which has not been ascertained on other related components of the
 financial statements.
 
 Opinion
 
 10.  We have observed that -
 
 a) Note No. 9.5.4 in Schedule 18 of Parent annexed to consolidated
 accounts regarding excess charging of depreciation in earlier years by
 the Parent on Electrical Equipments, the impact of which is not yet
 ascertained.
 
 b) the effect of adjustments that may arise from the ongoing
 reconciliation of certain assets/liabilities, clearing differences,
 inter branch accounts/ inter branch transfer of fixed assets and charge
 of depreciation on fixed assets, (as stated in Note No. 9.3 of Schedule
 18 of the Parent annexed to consolidated accounts ), the consequential
 impact whereof on the accounts is not ascertainable.
 
 c) the Parent is following the policy of recognizing the income from
 commission, locker rent etc. on cash basis during the year, instead of
 accrual basis as stated in para no. 6.1 of ‘Schedule 17 Significant
 Accounting Policies’ annexed to consolidated accounts which are not in
 conformity with the AS 9 - Revenue Recognition, issued by ICAI.
 
 Subject to our observations above, in our opinion, and to the best of
 our information and according to the explanations given to us and as
 shown by the books of the Group :- i.  The Consolidated Balance Sheet,
 read with the notes thereon and Statement of Significant Accounting
 Policies is a full and fair Balance Sheet containing the necessary
 particulars and is properly drawn up so as to exhibit the true and fair
 state of affairs of the Group as at 31st March, 2011 in conformity with
 accounting principles generally accepted in India;
 
 ii. The Consolidated Profit and Loss Account, read with the notes
 thereon and Statement of Significant Accounting Policies 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 Consolidated Cash Flow Statement gives a true and fair view of
 the cash flows of the Group for the year ended on that date.
 
 Report on Other Legal & Regulatory Requirements
 
 11.  The Consolidated Balance Sheet and Consolidated Profit & Loss
 Account have been drawn up in accordance with Forms ‘A’ and ‘B’
 respectively of the Third Schedule to the Banking Regulation Act, 1949.
 
 12.  Subject to the limitations of auit indicated in paragraph 1 to 8
 above and as required by the Banking Companies (Acquisition and
 Transfer of Undertakings) Act, 1970/1980, and subject also to the
 limitations of disclosure required therein, we report that:
 
 a.  We have obtained all the information and explanations, which to the
 best of our knowledge and belief, were necessary for the purposes of
 our audit and have found them to be satisfactory.
 
 b.  The returns received from the offices and branches of the Group
 have been found adequate for the purpose of our audit.
 
 c.  In our opinion, the Consolidated Balance Sheet, Consolidated Profit
 and Loss Account and Consolidated Cash Flow Statement comply with the
 applicable Accounting Standards.