1.  Accounting Conventions:
 
 The financial statements have been prepared by following the going
 concern concept on the historical cost basis except as modified by the
 Revaluation of Premises and conform, in all material aspects, to
 Generally Accepted Accounting Principles (GAAP) in India, which
 encompasses applicable statutory provisions, regulatory norms
 prescribed by Reserve Bank of India (RBI), Accounting Standards (AS)
 and pronouncements issued by The Institute of Chartered Accountants of
 India (ICAI) and prevailing practices within the Banking industry in
 India.
 
 2.  Transactions involving Foreign Exchange:
 
 2.1 Monetary Assets and Liabilities in Foreign Currencies are
 translated at the Exchange Rates prevailing at the year end as notified
 by FEDAl and the resultant Profit/ Loss is recognised in Profit and
 Loss Account.
 
 2.2 Income and Expenditure items are translated at the exchange rates
 ruling on the respective date of transactions.
 
 2.3 Guarantees, Letters of Credit, Acceptances, Endorsements, and other
 obligations in Foreign Currencies are translated at year end rates
 notified by FEDAl.
 
 2.4 Outstanding Forward Contracts are translated at the year end rates
 notified by FEDAI and the resultant profit/loss is recognized in Profit
 and Loss Account.
 
 3.  Investments:
 
 3.1 In accordance with the guidelines issued by Reserve Bank of India,
 Investments are classified into  Held to Maturity, Held for Trading
 and Available for Sale categories. However, for disclosure in the
 Balance Sheet, investments are classified under the following heads :
 
 i) Government Securities
 
 ii) Other Approved Securities
 
 iii) Shares
 
 iv) Debentures and Bonds
 
 v) Investments in Subsidiaries and sponsored institutions and
 
 vi) Others (UTI Shares, Commercial Papers and units of Mutual Funds.)
 
 3.2 Basis of Classification :
 
 Classification of an Investment is done at the time of purchase into
 the following categories:
 
 i) Held to Maturity
 
 These comprise of investments, the bank intends to hold on till
 maturity.
 
 ii) Held for Trading
 
 Securities which are principally held for resale within 90 days from
 the date of purchase.
 
 iii) Available for Sale
 
 Investments that cannot be classified in the above categories.
 
 3.3 Transfer of Securities between categories :
 
 The transfer/ shifting of securities between the three categories of
 investments is accounted at the lower of acquisition cost/ book value
 or market value on the date of the transfer. The depreciation, if any,
 on such transfer is fully provided for.
 
 3.4 Valuation :
 
 a) Held to Maturity :
 
 The investments classified under this category are valued at
 acquisition cost. The excess of acquisition cost / book value over the
 face value is amortised over the remaining period of maturity.
 
 c) Held for Trading :
 
 Investments under this category are valued at monthly intervals at
 market rates, wherever available, or as per the prices declared by
 FIMMDA. The net depreciation under each classification is provided for,
 without adjusting the book value of the securities and net
 appreciation, if any, is ignored.
 
 3.5 Determination of Cost :
 
 Cost of investments is determined on the basis of Weighted Average Cost
 method.
 
 3.6 Income Recognition :
 
 i) The Profit or loss on sale/ redemption of investments is taken to
 the Profit and Loss Account. However, in case of profit on sale/
 redemption of investments from ‘Held to Maturity category, an
 equivalent amount is appropriated to the ‘Capital Reserve.
 
 ii) In respect of securities included in any of the three categories of
 investments where interest/ principal is in arrears, for more than 90
 days, income is not reckoned and appropriate provision for the
 depreciation in the value of the investments is made, as per prudential
 norms applicable to non-performing advances. Debentures/ Bonds in the
 nature of advances are subjected to usual prudential norms applicable
 to advances.
 
 iii) State Government guaranteed exposures is classified as Sub
 Standard/ Doubtful/ Loss, as the case may be if interest and/ or
 principal or any other amount due to the Bank remains overdue for more
 than 90 days and necessary provisions are made as per Prudential Norms.
 
 iv) Brokerage, incentive, front-end fees etc., received on purchase of
 securities are reduced from the cost of investments.
 
 v) Expenses such as brokerage, fees, commission or taxes incurred at
 the time of acquisition of securities is charged to revenue.
 
 vi) The broken period interest on sale or purchase of securities is
 treated as revenue item.
 
 4.  Derivatives
 
 Derivatives used for hedging are accounted as under :
 
 i) Marked to market in cases where the underlying Assets/ Liabilities
 are marked to market. The resultant gain/ loss is recognised in the
 Profit & Loss Account.
 
 ii) Interest Rate Swaps which hedges interest bearing assets or
 liabilities are accounted for on accrual basis in cases where
 underlying Asset/ Liabilities are not marked to market.
 
 iii) Gain or losses on the termination of Swaps are recognised over the
 shorter of the remaining contractual life of the Swap or the remaining
 life of the assets/ liabilities.
 
 5.  Advances:
 
 5.1 Advances are classified as Standard, Sub-Standard, Doubtful or Loss
 Assets and Provisions required in respect thereof are made as per the
 Prudential Norms prescribed by the Reserve Bank of India.
 
 5.2 Recoveries against Non-performing Assets (NPA) are first
 appropriated towards interest. However, recovery in suit filed, decreed
 accounts and compromise cases, is first appropriated towards principal
 or as per the terms of decree/ settlement.
 
 5.3 Advances are shown net of provisions (in case of NPA), Unrealised
 Interest and amount recovered from borrowers held in Sundries and
 amount recovered from CGTSI/ ECGC.  Provision for Standard Assets is
 included in Other Liabilities and Provisions- Others.
 
 5.4 Financial Assets sold are recognized as under:
 
 In case the sale is at a price lower than the Net Book Value (NBV) the
 shortfall is charged to the Profit and Loss Account.  In case the sale
 is at a price higher than the NBV, the surplus provision is retained to
 meet shortfall/loss on account of sale of other non-performing
 financial assets.
 
 6.2 In the case of assets, which have been revalued, the depreciation
 is provided on the revalued amount and the incremental depreciation
 attributable to the revalued amount is adjusted to the ‘Revaluation
 Reserve.
 
 6.3 Depreciation on additions to assets, made upto 30th September is
 provided for the full year and on additions made thereafter, is
 provided for the half year. No depreciation is provided on assets sold
 before 30th September and depreciation is provided for the half year
 for assets sold after 30th September.
 
 6.4 Cost of leasehold land is amortised over the period of lease. In
 the case of revaluation, the difference between the original cost and
 revalued amount is amortised over the remaining period of the lease and
 is adjusted to the ‘Revaluation Reserve.
 
 6.5 Where it is not possible to segregate the cost of Land and
 Premises, Depreciation is charged on the composite cost.
 
 7.  Staff Benefits:
 
 7.1 Annual contribution to Gratuity and Pension Funds are determined on
 the basis of actuarial valuation. The contribution to Pension Fund is
 made under a defined benefit scheme.
 
 7.2 The liability for earned leave is provided for on the basis of
 actuarial valuation.
 
 7.3 In respect of employees who have opted for Provident Fund Scheme, a
 matching contribution is made.
 
 7.4 The Bank recognizes in its Books of Accounts the liability arising
 out of Employee Benefits as the sum of the present value of obligations
 as reduced by fair value of Plan Assets on the Balance Sheet.
 
 8.  Recognition of Income and Expenditure:
 
 8.1 Income/ Expenditure is generally accounted for on accrual basis
 unless otherwise stated.
 
 8.2 Income on NPA is recognized on realization as per the Prudential
 Norms prescribed by the Reserve Bank of India.
 
 8.3 In accordance with the guidelines issued by the Reserve Bank of
 India, prior period disclosures are made in respect of any item which
 exceeds one percent of the total income/total expenditure.
 
 8.4 Provision for interest payable on overdue deposits is made as per
 Reserve Bank of India guidelines.
 
 8.5 Commission (excluding on Government Business), exchange, locker
 rent and insurance claims are accounted for on realization/settlement.
 
 8.6 Expenses for Share Issue are amortized over a period of 5 years on
 quarterly basis.
 
 9.  Income Tax:
 
 The provision for tax for the year comprises of current tax liability
 computed in accordance with the applicable tax laws and the deferred
 tax which recognizes, timing differences between taxable income and
 accounting income that originate in one period and capable of reversal
 in one or more subsequent periods. Deferred tax assets are not
 recognized unless there is ‘virtual certainty that sufficient future
 taxable income will be available against which such deferred tax assets
 will be realized.