1) ACCOUNTING CONVENTION
 
 The accompanying financial statements have been prepared following the
 going concern concept, on historical cost basis unless otherwise stated
 and conform to the Generally Accepted Accounting Principles (GAAP) in
 India, which encompasses applicable statutory provisions, regulatory
 norms prescribed by the Reserve Bank of India, Accounting Standards
 (AS) and pronouncements issued by The Institute of Chartered
 Accountants of India and accounting practices prevalent in the banking
 industry in India. In respect of foreign offices/branches, statutory
 provisions & accounting practices prevailing in the respective foreign
 countries are complied with.
 
 The preparation of financial statements requires the management to make
 estimates and assumptions considered in the reported amount of assets
 and liabilities (including contingent liabilities) 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.
 
 2) TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
 
 Accounting for transactions involving foreign exchange is done in
 accordance with Accounting Standard (AS) 11, “The Effect of Changes in
 Foreign Exchange Rates” issued by The Institute of Chartered
 Accountants of India.
 
 2.1 Translation in respect of Integral Foreign operations:
 
 i) Indian branches having foreign currency transactions have been
 classified as integral foreign operations.
 
 ii) Monetary Foreign currency assets and liabilities are translated at
 the closing rates notified by Foreign Exchange Dealers Association of
 India (FEDAI) at the year end and non-monetary items are translated at
 the rates prevailing on the transaction date.
 
 iii) Acceptances, endorsements, other obligations and guarantees in
 foreign currencies are carried at the closing rates notified by FEDAI
 at the year end. Exchange differences arising on settlement and
 translation of monetary items at the end of the financial year are
 recognised as income or expenses in the period in which they arise.
 
 2.2 Translation in respect of Non-Integral Foreign operations:
 
 Foreign branches are classified as non-integral foreign operations and
 their financial statements are translated as follows:
 
 i) Assets and Liabilities (both monetary and non- monetary as well as
 contingent liabilities) are translated at the closing rates notified by
 FEDAI at the year end.
 
 ii) Income and expenses are translated at the quarterly average closing
 rates notified by FEDAI at the end of respective quarter.
 
 iii) All resulting exchange differences are accumulated in a separate
 account ‘Foreign Currency Translation Reserve till the disposal of the
 net investments in the respective foreign branches.
 
 2.3 Forward Exchange Contracts:
 
 In accordance with the guidelines of FEDAI and the provisions of AS-11,
 outstanding forward exchange contracts in each currency are revalued at
 the Balance Sheet date at the corresponding forward rates for the
 residual maturity of the contract. The difference between revalued
 amount and the contracted amount is recognized as profit or loss, as
 the case may be.
 
 Gains/Losses on account of changes in exchange rates of open position
 in currency futures trades are settled with the exchange clearing house
 on daily basis and such gains/losses are recognised in the Profit and
 Loss account.
 
 3) INVESTMENTS:
 
 Investments are classified under `Held to Maturity, ‘Held for Trading
 and ‘Available for Sale categories as per Reserve Bank of India (RBI)
 guidelines. In conformity with the requirements in Form A of the Third
 Schedule to the Banking Regulation Act, 1949, these are classified
 under six groups – Government Securities, Other Approved Securities,
 Shares, Debentures and Bonds, Investments in Subsidiaries/ Joint
 Ventures and Other Investments.
 
 3.1 Basis of classification
 
 Classification of an investment is normally done at the time of its
 acquisition:
 
 (a) Held to Maturity
 
 These comprise investments the Bank intends to hold on to maturity.
 
 (b) Held for Trading
 
 Investments acquired with the intention to trade within 90 days from
 the date of purchase are classified under this head.
 
 (c) Available for Sale
 
 Investments which are not classified either as “Held to Maturity” or as
 “Held for Trading” are classified under this head.
 
 3.2 Method of valuation
 
 Investments are valued in accordance with the RBI guidelines.
 
 (a) Held to Maturity
 
 Investments included in this category are carried at their acquisition
 cost. Premium, if any, paid on acquisition is amortised using constant
 yield method over the remaining period of maturity.
 
 (b) Held for Trading / Available for Sale
 
 1.  Investments under these categories are valued scrip-wise.
 Appreciation / depreciation is aggregated for each class of securities
 and net depreciation as per applicable norms is recognised in the
 Profit and Loss account, whereas net appreciation is ignored.
 
 2.  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 Reserve
 Bank of India, which are as under:
 
 Government /                     on Yield to Maturity basis
 Approved securities
 
 Equity Shares, PSU               at book value as per the latest 
 and Trustee shares               Balance Sheet (not more than
                                  12 months old), otherwise Rs. 1
                                  per company.
 
 Preference Shares                on Yield to Maturity basis
 
 PSU Bonds                        on Yield to Maturity basis with
                                  appropriate credit spread mark-up
 
 Units of Mutual Funds            at the latest repurchase price / 
                                  NAV declared by the Fund in 
                                  respect of each scheme
 
 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 
                                  Rs. 1/- per VCF
 
 (c) Held at Foreign Branches
 
 Investments held at foreign branches are carried at lower of the value
 as per the statutory provisions prevailing at the respective foreign
 countries or as per RBI guidelines issued from time to time.
 
 (d) Transfer of Securities between Categories
 
 The transfer of a security between categories specified in (a) to (c)
 above are 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.
 
 (e) Profit or loss on sale of investment
 
 Profit or loss on sale of investments in any category is taken to
 Profit and Loss account.  However, in case of profit on sale of
 investments under ‘Held to Maturity category, an equivalent amount net
 of taxes and amount required to be transferred to Statutory Reserves is
 appropriated to ‘Capital Reserve Account.
 
 (f) Provisioning and income recognition - Non performing Investments
 (NPIs):
 
 In respect of non performing investments, income is not recognised and
 provision is made for depreciation in value of such securities as per
 Reserve Bank of India Guidelines.
 
 (g) Repo / Reverse Repo
 
 The Bank has adopted the Accounting Procedure prescribed by the RBI for
 accounting of Repo and Reverse Repo transactions [other than
 transactions under the Liquidity Adjustment Facility (LAF) with the
 RBI]. The economic essence of repo transactions, viz., borrowing
 (lending) of funds by selling (purchasing) securities is refected in
 the books of repo participants, by accounting the same as
 collateralized lending and borrowing transaction, with an agreement to
 repurchase, on the agreed terms. Costs and revenues are accounted for
 as interest expenditure / income, as the case may be. Balance in Repo/
 Reverse Repo Account is adjusted against the balance in the Investment
 Account.
 
 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.
 
 h) Derivative
 
 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, Forward Rate Agreements and Interest Rate Futures.
 Currency Derivatives dealt with by the Bank are Options, Currency Swaps
 and Currency Futures.
 
 Based on RBI guidelines, Derivatives are valued as under:
 
 The hedge/non hedge (market making) transactions are recorded
 separately. Hedging derivative are accounting on an accrual basis.
 Trading derivative positions are marked to market (MTM) and the
 resulting losses, if any, are recognised in the Profit & Loss Account.
 Proft, if any, is ignored. Income and Expenditure relating to interest
 rate swaps are recognised on the settlement date. Gains/ losses on
 termination of the trading swaps are recorded on the termination date
 as income/expenditure. Any gain/loss on termination of swap is deferred
 and recognized over the shorter of the remaining contractual life of
 the swap or the remaining life of the designated assets/liabilities.
 
 4) ADVANCES:
 
 (a) In terms of guidelines issued by the RBI, advances to borrowers are
 classified into “Performing” or “Non-Performing” assets based on
 recovery of principal/ interest. Non-Performing Assets (NPAs) are
 further classified as Sub- Standard, Doubtful and Loss Assets.
 
 (b) Provision for standard assets is made as per RBI norms.
 
 (d) In respect of advances at foreign offices/branches, provision is
 made as per the statutory requirements prevailing at the respective
 foreign countries, or as per RBI guidelines, whichever is higher.
 
 (e) Provisions in respect of NPAs, unrealised interest, ECGC claims
 settled, etc., are deducted from total advances to arrive at net
 advances as per RBI norms.
 
 (f) In respect of Rescheduled/Restructured accounts, provision is made
 for the sacrifice of interest/ diminution in the value of restructured
 advances measured in present value terms as per RBI guidelines. The
 said provision is reduced to arrive at Net advances.
 
 (g) In case of financial assets sold to Asset Reconstruction Company
 (ARC) / Securitisation Company (SC), if the sale is at a price below
 the net book value (NBV), 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 will be utilised to meet the shortfall/
 loss on account of sale of other financial assets to SC/ ARC.
 
 5) FIXED ASSETS:
 
 (a) Fixed assets are stated at historic cost, except in the case of
 assets which have been revalued.  The appreciation on revaluation is
 credited to Revaluation Reserve.
 
 (b) Cost of premises includes cost of land, both freehold and
 leasehold.
 
 6) DEPRECIATION ON FIXED ASSETS:
 
 (i) Depreciation
 
 (a) on assets (including revalued assets), is charged on the Written
 Down Value at the rates determined by the Bank, except in respect of
 computers where it is calculated on the Straight Line Method, at the
 rates prescribed by the RBI;
 
 (b) on additions is provided for the full year, irrespective of the
 date on which the assets were put to use;
 
 (c) is not provided in the year of sale/disposal of an asset;
 
 (d) on the revalued portion of assets, is adjusted against the
 Revaluation Reserve.
 
 (ii) Where the cost of land and building cannot be separately
 ascertained, depreciation is provided on the composite cost, at the
 rate applicable to buildings.
 
 (iii) Premium paid on leasehold land is amortised over the period of
 lease.
 
 v) Computer Software, not forming integral part of hardware, is
 depreciated fully during the year of purchase.
 
 vi) Depreciation on fixed assets outside India is provided as per the
 regulatory requirements / or prevailing practices of respective country
 / industry.
 
 7) REVENUE RECOGNITION:
 
 (a) Income/Expenditure is generally accounted for on accrual basis,
 except in the case of income on NPAs which is recognised on
 realisation, in terms of the RBI guidelines issued from time to time.
 
 (b) The recoveries made from NPA accounts are appropriated first
 towards unrealised interest/ income, principal dues and thereafter
 towards uncharged interest.
 
 (c) Dividend Income, Commission on Government Business, Commission on
 Third Party Products are accounted on actual realisation basis.
 
 (d) Interest on Income-tax refunds is accounted for in the year of
 receipt of the assessment order.
 
 8) EMPLOYEE BENEFITS:
 
 a) Contribution to the Provident Fund is charged to Profit and Loss
 Account.
 
 b) Contribution to recognised Gratuity Fund, Pension Fund and the
 provision for encashment of accumulated leave and additional retirement
 benefits are made on actuarial basis and charged to Profit and Loss
 account.
 
 c) The effect of transitional liability till 31.03.2007 as required by
 Revised AS 15 has been recognised as an expense on straight line basis
 over a period of five years.
 
 d) The additional liability on account of reopening of pension option
 for existing employees who had not opted for pension earlier and the
 enhancement of gratuity limits as per Payment of Gratuity Act, 1972 has
 been amortised over a
 
 period of five years beginning with the financial year ending
 31.03.2011.
 
 9) LEASED ASSETS:
 
 Lease Income is recognised based on the Internal Rate of Return method
 over the primary period of the lease and is accounted for in accordance
 with the Accounting Standard (AS) 19 on “Accounting for Leases”, issued
 by the Institute of Chartered Accountants of India (ICAI).
 
 10) EARNING PER SHARE:
 
 Basic and Diluted earnings per equity share are reported in accordance
 with the Accounting Standard (AS) 20 “Earnings per share” issued by the
 Institute of Chartered Accountants of India. Basic earnings per equity
 share are computed by dividing net profit by the weighted average
 number of equity shares outstanding for the period. Diluted earnings
 per equity share are computed using the weighted average number of
 equity shares and dilutive potential equity shares outstanding during
 the period.
 
 11) TAXES ON INCOME
 
 Income Tax comprises the current tax provision and net change in
 deferred tax assets or liabilities during the year, in accordance with
 the Accounting Standard (AS) 22, “Accounting for Taxes on Income”
 issued by The Institute of Chartered Accountants of India (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 years.
 Deferred tax assets and liabilities are measured using the tax rates
 and tax laws that have been enacted or substantively enacted by the
 balance sheet date.
 
 12) IMPAIRMENT OF ASSETS
 
 Impairment losses, if any on Fixed Assets (including revalued assets)
 are recognised and charged to Profit and Loss account in accordance
 with the Accounting Standard (AS) 28 “Impairment of Assets” issued by
 The Institute of Chartered Accountants of India.
 
 13) PROVISIONS, CONTINGENT LIABLITIES AND CONTINGENT ASSETS
 
 As per the Accounting Standard (AS) 29 “Provisions, Contingent
 Liabilities and Contingent Assets” issued by The Institute of Chartered
 Accountants of India, the Bank recognises provisions only when it has a
 present obligation as a result of a past event and it is probable that
 an outflow of resources embodying economic benefits will be required to
 settle the obligation and when a reliable estimate of the amount of the
 obligation can be made.
 
 Contingent Assets are not recognized in the financial statements since
 this may result in the recognition of income that may never be
 realised.