1. BASIS OF PREPARATION
 
 The financial statements have been prepared under the historical cost
 convention unless otherwise stated. They conform to Generally Accepted
 Accounting Principles (GAAP) in India, which comprises statutory
 provisions, regulatory / Reserve Bank of India (RBI) guidelines,
 Accounting Standards / guidance notes issued by the Institute of
 Chartered Accountants of India (ICAI) and the practices prevalent in
 the banking industry in India. In respect of foreign offices, statutory
 provisions and practices prevailing in respective foreign countries are
 complied with.
 
 2. USE OF ESTIMATES
 
 The preparation of financial statements requires the management to make
 estimates and assumptions considered in the reported amount of assets
 and liabilites (including contingent liabilites) as of date of the
 financial statements and the reported income and expenses for the
 reporting period. Management believes that the estimates used in the
 preparation of the financial statements are prudent and reasonable.
 Future results could differ from these estimates. Any revision to the
 accounting estimates is recognised prospectively in the current and
 future periods unless otherwise stated.
 
 3. INVESTMENTS
 
 3.1 Classification
 
 The Investment portfolio of the Bank is classified, in accordance with
 the RBI guidelines, into:
 
 a. “Held to Maturity” comprising Investments acquired with the
 intention to hold them till maturity.
 
 b. “Held for Trading” comprising Investments acquired with the
 intention to trade.
 
 c. “Available for Sale” comprising Investments not covered by (a) and
 (b) above i.e. those which are acquired neither for trading purposes
 nor for being held till maturity.
 
 3.2 Basis of Classification
 
 Investments classified as “Held to Maturity” are carried at weighted
 average acquisition cost unless it is more than the face value, in
 which case the premium is amortized over the period remaining to
 maturity.
 
 Investments classified as “Held to Maturity” includes debentures /
 bonds which are deemed to be in the nature of / treated as advances
 (for which provision is made by applying the RBI prudential norms of
 assets classification and provisioning applicable to Advances).
 
 Investments in Regional Rural Banks, Treasury Bills, Commercial Papers,
 Indira Vikas Patras, Kisan Vikas Patras and Certificates of Deposit
 which have been valued at carrying cost.
 
 Investments in subsidiaries and joint ventures (both in India and
 abroad) are valued at acquisition cost less diminution, other than
 temporary in nature.
 
 Bank’s investments in units of VCFs made after 23.08.2006 are
 classified under HTM category for initial period of three years and are
 valued at cost.
 
 After period of three years from date of disbursement, it will be
 shifted to AFS and marked-to-market as per RBI guidelines.
 
 3.3 Acquisition Cost
 
 Cost of acquisition of Investments is net of incentives, front-end fees
 and commission.
 
 3.4 Disposal of Investments
 
 Profit / Loss on sale of Investments classified as “Held to Maturity”
 is recognized in the Profit & Loss Account based on the weighted
 average cost / book value of the related Investments and an amount
 equivalent of profit on sale of Investments in “Held to Maturity”
 classification is appropriated to Capital Reserve Account.
 
 Profit/loss on sale of Investment in AFS/HFT category is recognized in
 profit and loss account.
 
 3.5 Valuation
 
 Investments classified as “Held for Trading” and “Available for Sale”
 are marked to market scrip- wise and the resultant net depreciation if
 any, in each category disclosed in the Balance Sheet is recognized in
 the Profit and Loss Account, while the net appreciation, if any, is
 ignored.
 
 Investments made by the Bank as Primary Dealer in Treasury Bills under
 HFT category are marked-to- market on quarterly basis based on the
 FIMMDA prices declared and the resultant net depreciation if any, is
 recognized in the Profit and Loss Account, while the net appreciation,
 if any, is ignored.
 
 For the purpose of valuation of quoted investments in ”Held for
 Trading” and “Available for Sale” categories, the market rates / quotes
 on the Stock Exchanges, the rates declared by Primary Dealers
 Association of India (PDAI) / Fixed Income Money Market and Derivatives
 Association (FIMMDA) are used.
 
 Investments for which such rates / quotes are not available are valued
 as per norms laid down by RBI, which are as under :
 
 a. Government /     - on Yield to Maturity basis.  Approved securities
 
 b.  Equity Shares,  - at book value as per the 
 PSU and Trustee       latest Balance Sheet (not shares more than 12 
                       months old), otherwise Re.1 per company.
 
 c. Preference 
 Shares              - on Yield to Maturity basis.
                       with appropriate credit spread mark-up.
 
 d. PSU Bonds        - on Yield to Maturity basis
                       with appropriate credit spread mark-up.
 
 e. Units of Mutual  - at the latest repurchase price / NAV
 Funds                 declared by the Fund in respect of 
                       each scheme.
 
 f. Venture Capital  - Declared NAV or break up NAV as per audited
                       balance sheet which is not more than 
                       18 months old. If NAV/ audited financials 
                       are not available for more than 18 months 
                       continuously then at Re. 1/- per VCF.
 
 3.6 The Bank is following uniform methodology of accounting for
 investments on settlement date basis.
 
 3.7 In respect of Investments at Overseas Branches, RBI guidelines or
 those of the host countries, whichever are more stringent are followed.
 In case of those branches situated in countries where no guidelines are
 specified, the guidelines of the RBI are followed.
 
 3.8 The transfer of a security between these categories is accounted
 for at the acquisition cost / book value / market value on the date of
 transfer, whichever is the least, and the depreciation, if any, on such
 transfer is fully provided for.
 
 3.9 In respect of non-performing securities, income is not recognised,
 and provision is made for depreciation in the value of such securities
 as per RBI guidelines.
 
 3.10 REPO / Reverse REPO
 
 The Bank has adopted the Uniform Accounting Procedure prescribed by the
 RBI for accounting of market Repo and Reverse Repo transactions [other
 than the Liquidity Adjustment Facility (LAF) with the RBI]. Repo and
 Reverse Repo Transactions are treated as Collaterised Borrowing /
 Lending Operations with an agreement to Repurchase on the agreed terms.
 Securities sold under Repo are continued to be shown under investments
 and Securities purchased under Reverse Repo are not included in
 investments. Costs and revenues are accounted for as interest
 expenditure / income, as the case may be.
 
 Securities purchased / sold under LAF with RBI are debited / credited
 to investment Account and reversed on maturity of the transaction.
 Interest expended / earned thereon is accounted for as expenditure /
 revenue.
 
 3.11 Derivatives
 
 The Bank presently deals in interest rate and currency derivatives. The
 interest rate derivatives dealt with by the Bank are Rupee Interest
 Rate Swaps, Foreign Currency Interest Rate Swaps and forward rate
 agreements. Currency Derivatives dealt with by the Bank are Options and
 Currency swaps.
 
 Based on RBI guidelines, Derivatives are valued as under:
 
 The hedge / non-hedge (market making) transactions are recorded
 separately. Hedging derivative are accounted on an accrual basis.
 Trading derivative positions are marked-to-market (MTM) and the
 resulting losses, if any, are recognized in the Profit and Loss
 Account. Profit, if any, is ignored. Income and Expenditure relating to
 interest rate swaps are recognized on the settlement date. Gains /
 losses on termination of the trading swaps are recorded on the
 termination date as income / expenditure.
 
 For the purpose of valuation, the fair value of the total swap is
 computed on the basis of the amount that would be receivable or payable
 on termination of the transactions of the swap agreements as on the
 Balance Sheet date. Losses arising there from, if any, are fully
 provided for while the profits, if any, are ignored.
 
 Contingent Liabilities on account of derivative contracts denominated
 in foreign currencies are reported at closing rates of exchange
 notified by FEDAI at the Balance Sheet date.
 
 4. ADVANCES
 
 4.1 Advances in India are classified as Standard, Sub- standard,
 Doubtful or Loss assets and Provision for losses are made on these
 assets as per the Prudential Norms of the RBI. In respect of Advances
 made in overseas branches, Advances are classified in accordance with
 stringent of the Prudential Norms prescribed by the RBI or local laws
 of the host country in which advances are made.
 
 4.2 Advances are net of specific loan loss provisions, interest
 suspense, amount received and held in suit- filed Sundry Deposits and
 Claims Received.
 
 4.3 In respect of Rescheduled / Restructured accounts, Provision for
 dimunition in fair value of restructured advances is measured in
 present value terms as per RBI guidelines.
 
 4.4 In case of financial assets sold to Asset Reconstruction Company
 (ARC) / Securitization Company (SC), if the sale is at a price below
 the net book value (NBV), (i.e.  Book value less provisions held) the
 shortfall is debited to the profit and loss account. If the sale value
 is higher than the NBV, the surplus provision is not reversed but is
 utilised to meet the shortfall /loss on account of Sale of other
 non-performing financial assets.
 
 5. FIXED ASSETS
 
 5.1 Premises and other Fixed Assets are stated at historical cost
 except revalued premises. The appreciation on such revaluation is
 credited to Capital Reserve and the depreciation provided thereon is
 deducted therefrom.
 
 5.2 Premises includes land & building under construction.
 
 6. RESERVES AND SURPLUS
 
 Revenue and other Reserves include Statutory Reserves created by
 foreign branches as per applicable local laws of the respective
 countries.
 
 7. REVENUE RECOGNITION
 
 7.1 Income / expenditure is recognised on accrual basis, unless
 otherwise stated. In case of foreign offices, income/ expenditure is
 recognised as per the local laws of the country in which the respective
 foreign office is located.
 
 7.2 In view of uncertainty of collection of income in cases of
 Non-performing Assets/Investments, such income is accounted for only on
 realisation in terms of the RBI guidelines.
 
 7.3 Income by way of Fees, Commission other than on Government
 business, Commission on Guarantees, LCs, Exchange, Brokerage and
 Interest on Advance Bills are accounted for on realisation basis.
 Dividend on
 
 shares in Subsidiaries, joint ventures and associates is accounted on
 actual realisation basis.
 
 7.4 Lease payments including cost escalation for assets taken on
 operating lease are recognised in the Profit & Loss Account over the
 lease term in accordance with the AS 19 (Leases) issued by ICAI.
 
 8. EMPLOYEE BENEFITS
 
 8.1 PROVIDENT FUND
 
 Provident fund is a defined contribution scheme as the Bank pays fixed
 contribution at pre-determined rates.The obligation of the Bank is
 limited to such fixed contribution. The contributions are charged to
 Profit & Loss A/c.
 
 8.2 GRATUITY
 
 Gratuity liability is a defined benefit obligation and is provided for
 on the basis of an actuarial valuation made at the end of the financial
 year. The scheme is funded by the bank and is managed by a separate
 trust.
 
 8.3 PENSION
 
 Pension liability is a defined benefit obligation and is provided for
 on the basis of an actuarial valuation made at the end of the financial
 year. The scheme is funded by the bank and is managed by a separate
 trust.
 
 8.4 COMPENSATED ABSENCES
 
 Accumulating compensated absences such as Privilege Leave (PL) and Sick
 Leave (including un- availed casual leave) is provided for based on
 actuarial valuation.
 
 8.5 OTHER EMPLOYEE BENEFITS
 
 Other Employee benefits such as Leave Fare Concession (LFC), Medical
 Benefits etc. are provided for based on actuarial valuation.
 
 In respect of overseas branches and offices, the benefits in respect of
 employees other than those on deputation are accounted for as per laws
 prevailing in the respective territories.
 
 9. DEPRECIATION
 
 9.1 Depreciation on Fixed Assets in India [other than those referred to
 in Para 9.3 & 9.4 below] is provided on the written down value method
 in accordance with Schedule XIV to the Companies Act, 1956, except in
 case of revalued assets, in respect of which higher depriciation is
 provided on the basis of estimated useful life of these revalued
 assets.
 
 9.2 Depreciation on Fixed Assets outside India except [other than those
 referred to in Para 9.3 below] is provided as per local laws or
 prevailing practices of the respective territories.
 
 9.3 Depreciation on Computers in and oustside India is provided on
 Straight Line Method at the rate of 33.33%, as per the guidelines of
 RBI. Computer software not forming an integral part of hardware is
 depreciated fully during the year of purchase.
 
 9.4 Depreciation on ATMs is provided on Straight Line Method at the
 rate of 20%.
 
 9.5 Depreciation on additions is provided for full year and no
 depreciation is provided in the year of sale / disposal.
 
 9.6 Cost of leasehold land & leasehold improvements are amortised over
 the period of lease.
 
 10. IMPAIRMENT OF ASSETS
 
 Impairment losses (if any) on Fixed Assets (including revalued assets)
 are recognised in accordance with the AS 28 (Impairment of Assets)
 issued by the ICAI and charged off to Profit and Loss Account.
 
 11. FOREIGN CURRENCY TRANSACTIONS:
 
 11.1 Accounting for transactions involving foreign exchange is done in
 accordance with AS 11 (The Effects of Changes in Foreign Exchange
 Rates), issued by ICAI.
 
 11.2 As stipulated in AS 11, the foreign currency operations of the
 Bank are classified as
 
 a) Integral Operations and
 
 b) Non Integral Operations. All Overseas Branches, Offshore Banking
 Units, Overseas Subsidiaries are treated as Non Integral Operations and
 domestic operations in foreign exchange and Representative Offices are
 treated as Integral Operations.
 
 11.3 Translation in respect of Integral Operations:
 
 a. The transactions are initially recorded on weekly average rate as
 advised by FEDAI.
 
 b. Foreign Currency Assets and Liabilities (including contingent
 liabilities) are translated at the closing spot rates notified by FEDAI
 at the end of each quarter.
 
 c. The resulting exchange differences are recognized as income or
 expenses and are accounted through Profit & Loss Account. Any reversals
 / payment of foreign currency assets & liabilities is done at the
 weekly average closing rate of the preceding week and the difference
 between the outstanding figure and the amount for which reversal /
 payment is made, is reflected in profit and loss account.
 
 d. Foreign exchange spot and forward contracts outstanding as at the
 balance sheet date and held for trading, are revalued at the closing
 spot and forward rates respectively notified by FEDAI and at
 interpolated rates for contracts of interim maturities. The resulting
 forward valuation profit or loss is included in the Profit and Loss
 Account.
 
 11.4 Translation in respect of Non Integral Operations:
 
 a. Assets and Liabilities are translated at the closing spot rates
 notified by FEDAI at the end of each quarter.
 
 b. Foreign Exchange Spot and Forward contingent liabilities
 outstanding as at the balance sheet date are translated at the closing
 spot and forward rates respectively notified by FEDAI and at
 interpolated rates for contracts of interim maturities.
 
 c. Income and Expense are translated at quarterly average rate
 notified by FEDAI at the end of each quarter.
 
 d. The resulting exchange differences are not recognized as income or
 expense for the period but accumulated in a separate account ”Foreign
 Currency Translation Reserve” till the disposal of the net investment
 in the respective foreign branches.
 
 11.5 Forward Exchange Contracts
 
 In accordance with the guidelines of FEDAI and the provisions of AS 11,
 Foreign exchange spot and forward contracts outstanding as at the
 balance sheet date and held for trading, are revalued at the closing
 spot and forward rates respectively notified by FEDAI and at
 interpolated rates for contracts of interim maturities. The resulting
 forward valuation profit or loss is included in the Profit and Loss
 Account.
 
 12. TAXES ON INCOME
 
 This comprise of provision for Income tax and deferred tax charge or
 credit (reflecting the tax effects of timing differences between
 accounting income and taxable income for the period) as determined in
 accordance with AS 22 (Accounting for taxes on Income) issued by ICAI.
 Deferred tax is recognised subject to consideration of prudence in
 respect of items of income and expenses those arise at one point of
 time and are capable of reversal in one or more subsequent periods.
 Deferred tax assets and liabilities are measured using enacted tax
 rates expected to apply to taxable income in the years in which the
 timing differences are expected to be reversed. The effect on deferred
 tax assets and liabilities of a change in tax rates is recognised in
 the income statement in the period of enactment of the change
 
 13. EARNINGS PER SHARE
 
 The bank reports basic and diluted earnings per equity share in
 accordance with the AS 20 (Earnings Per Share) issued in this regard by
 the ICAI. Basic earnings per equity share has been computed by dividing
 net income by the weighted average number of equity shares outstanding
 for the period. Diluted earnings per equity share has been computed
 using the weighted average number of equity shares and dilutive
 potential equity shares outstanding during the period.
 
 14. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
 
 As per AS 29 (Provisions, Contingent Liabilities and Contingent Assets)
 issued in this regard by the ICAI, the Bank recognises 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 recognised in the financial statements since
 this may result in the recognition of income that may never be
 realised.