The Directors have pleasure in presenting the Thirteenth Annual Report
 together with the Audited Balance Sheet as at March 31, 2007 and the
 Profit & Loss Account for the year ended on that day. The year ended
 March 31, 2007 represents the second full year of operations of your
 Bank as the merged entity after the amalgamation of Bank of Punjab
 Limited with your Bank was consummated. The results for the last two
 years are therefore comparable.
 
 The summarized financial performance of the Bank was as under:
 
                                                        (Rs. in Crores)
 
 Particulars                     For the year ended  For the year ended
                                 31st March 2007     31st March 2006*
 
 Gross Income (Interest Income
 plus Other Income)                        1,673.97            1,017.38
 
 Gross Expenditure                         1,404.77              907.25
 Operating Profit                            269.20              110.13
 
 Amount realised under
 Financial Support Agreement                      -               62.51
 
 Provisions St Contingencies                 147.82               84.84
 
 Net Profit/(Loss) after tax                 121.38               87.80
 Appropriations and Adjustments:
 Transfer to Statutory Reserve                30.35               21.95
 
 Balance in Profit and Loss Account
 Brought forward from previous year           73.72            (121.39)
 
 Adjustment of balance in Profit and
 Loss Account against Securities
 Premium Account                                  -               82.90
 
 Transfer from Investment Fluctuation Reserve     -               45.36
 
 Transfer from Debenture redemption Reserve       -                1.00
 
 Balance carried over to Balance Sheet       164.75               73.72
 
 Deposits and borrowings as on
 March 31, 2007                           15,794.61            9,451.21
 
 Advances as on March 31, 2007            11,221.35            6,533.44
 
 * Previous year's figures re-grouped/re-classified, wherever necessary.
 
 The Capital Adequacy Ratio (CAR) as at March 31, 2007 stood at 11.05%
 as compared to 12.52% as on March 31, 2006, which is well above the
 regulatory minimum of 9% stipulated by the Reserve Bank of India. Of
 this, Tier I CAR stood at 9.91% and Tier II CAR stood at 1.14% as at
 March 31, 2007.
 
 The year 2006-07 has been another year of transformational growth for
 your Bank. Your Bank continues to grow rapidly in all the business
 areas that it operates in. The growth in the Bank's retail advances at
 65% reiterates its retail focus^Additionally, the growth in the
 Corporate/SME advances at 89%^ demonstrates the emergence of the SME
 segment as a rapidly scaling up second growth engine for the Bank. Your
 Directors continue to remain optimistic about the economic progress in
 India, especially in the vibrant retail and SME sectors and believe
 that your Bank is in an unique position to capitalize on these growth
 opportunities.
 
 During the year a Scheme of Amalgamation for consolidation of Lord
 Krishna Bank Limited with your Bank was approved by the respective
 Boards of Directors and the shareholders. The Scheme has been submitted
 to the Reserve Bank of India for their final approval pursuant to
 Section 44A of the Banking Regulation Act, 1949 and is awaited.
 
 The Bank raised Rs.134.59 crores of Tier 1 capital through a
 preferential allotment of 6,99,20,000 equity shares of Re.1/- each for
 cash at a premium of Rs.18.25 per share in June 2006 and an additional
 Rs.184.05 crores in January 2007 through a preferential allotment of
 7,50,00,000 equity shares of Re.1/- each for cash at a premium of
 Rs.23.54 to leading private equity investors. An amount of Rs.1.28
 crores was realised on allotment of 32,00,000 equity shares against
 exercise of warrants convertible into equity shares of Re.1/- each
 (each warrant is convertible into one equity share) for cash at a
 premium of Rs.3/- per share. These warrants had been issued in February
 2004 in terms of the Scheme of Arrangement for re-capitalisation and
 re-structuring of the Bank pursuant to Sections 391-394 of the
 Companies Act, 1956.
 
 The Bank also realised a total amount of Rs.12.35 crores on allotment
 of 1,04,14,729 equity shares pursuant to the exercise of stock options
 under the Key Employee Stock Option Plan-2004 and the General Employee
 Stock Option Plan as detailed in the statutory disclosures regarding
 ESOPs annexed to this report.
 
 RATINGS
 
 The Bank has its subordinated debt issue and deposit program rated by
 Fitch Ratings India Private Limited. The Bank's subordinated debt issue
 is currently rated as `A+ind)' and its certificates of deposits program
 is rated as `F1+(ind) signifying the highest level of safety for such a
 deposit program.
 
 OTHER AWARDS
 
 The following awards were received by your Bank during the year:
 
 1) Fastest Growing Bank in its segment - Awarded by Business Today, a
 leading business magazine.
 
 2) Best Core Banking project for mid-sized banks - Asian Bankers IT
 Implementation Awards 2006.
 
 CAPITAL AND RESERVES
 
 The Bank's Capital and Reserves as on March 31, 2007 stood at
 Rs.1,371.59 crores. This is well above the minimum capital requirement
 of Rs.300 crores stipulated by the Reserve Bank of India in the
 guidelines on ownership of private sector banks issued in February
 2005.
 
 Subordinated Bonds of a value of Rs.50 crores carrying a coupon rate of
 12% were redeemed in April 2006 on the date of maturity.
 
 During the year, the Bank granted 3,14,78,793 stock options to
 employees under the General Employees Stock Option Plan covering
 permanent employees of the bank.
 
 The statutory disclosures as required by the revised SEBI guidelines on
 ESOPs are given in the annexure to this report.
 
 DIVIDEND
 
 The Bank has demonstrated a strong growth potential and has made rapid
 strides in achieving significant scale and size along with constantly
 improving profitability. The need to conserve capital resources for
 investment in growth opportunities continues to increase. The Board has
 therefore decided not to recommend any dividend for the year even
 though the profits for the year have increased considerably over those
 in the previous year.
 
 MANAGEMENT DISCUSSION AND ANALYSIS
 
 MACRO ECONOMIC ENVIRONMENT
 
 India's economy continued to be amongst the strongest performing
 economies of the world, powered by a strong consumption led engine.
 Early in the year, as central banks around the world raised interest
 rates and removed monetary accommodation, there was a controlled
 re-assessment of the inflation outlook in global economies. This led to
 some re-pricing of risky assets and resulted in an equity market sell
 off in emerging markets, including India. However India's strong growth
 story remained intact and FII and FDI inflows resumed by the third
 quarter of the year. The benchmark BSE, rose from 11,571 to close the
 year at 13,070.
 
 High prices of primary articles such as foodgrains, pulses, cereals and
 edible oils pushed up the wholesale price inflation from 3.69% at the
 beginning of the year to 6.46% by the end of the year and the consumer
 price inflation to around 10%. Higher inflation coupled with growth of
 bank credit especially to sectors considered sensitive to pricing
 bubbles led to a talk of overheating of the Indian economy. The RBI
 used several-measures to restrict the amount of money banks could lend
 and the government also announced several measures to control
 inflation. These measures resulted in a sharp rise in. domestic
 interest rates. Despite the inflationary pressures the overall GDP
 growth for 2006-07 was strong at 9%.
 
 The Rupee witnessed two-way movements this year, falling to Rs.47/USD
 when equity outflows were taking place and then strengthening rapidly
 to end the year at 'Rs.43.37/USD. India's foreign exchange reserves
 soared to USD 201 billion.
 
 OPERATING AND FINANCIAL PERFORMANCE
 
 Summary
 
 The operating profit of the Bank has increased by 144.44% to Rs.269.20
 crores during the current year as compared to Rs.110.13 crores earned
 in the previous year. The Bank's profit after tax rose by 38.25% to
 Rs.121.38 crores during the current year as compared to Rs.87.80 crores
 (which included an amount of Rs.62.51 crores realised under a Financial
 Support Agreement) during the previous year. As of March 31, 2007, the
 Bank's ratio of gross non-performing assets (NPAs) to total customer
 assets was 2.78% as against 4.63% as on March 31, 2006. During the
 year, the Bank has assessed the delinquency level on its retail assets
 portfolio and changed its estimate of accelerated provisioning on Two
 Wheeler Loans, Personal Loans, Car Loans and Commercial Vehicle/
 Equipments Loans. The Bank has on a prudential basis •created
 provisions towards NPAs which are in specific and floating provisions,
 The Bank follows a provisioning policy which is in excess of the
 provisioning norms prescribed by the Reserve Bank of India.  The Bank
 continues to carry a provision of Rs.51.36 crores (including floating
 provision of Rs.27.84 crores) in excess of the RBI prudential norms.
 The Bank has also created a standard provision of Rs.75.77 crores on
 the outstanding balance as at March 31, 2007 of personal loans,
 advances qualifying as capital market exposures, residential housing
 loans individually beyond Rs.20 lacs and commercial real estate loans
 which are required to be provided under the RBI guidelines in the
 financial year 2006-07. The net NPAs to customer assets ratio as at
 March 31, 2007 is 1.26% as against 1.13% as of March 31, 2006.  The
 total assets of the Bank increased to Rs.18,482.78 crores as on March
 31, 2007 from Rs.11,330.19 crores in the previous year.  The Customer
 Assets constituted Rs.11,240.80 crores as on March 31, 2007 as against
 Rs.6,556.29 crores as of March 31, 2006.  The total deposits have grown
 to Rs.14,863.72 crores as on March 31, 2007 as against Rs.9,399.64
 crores at the end of the previous year.
 
 Gross Interest Income
 
 The Bank's total interest, income has increased by 57.93%, gross
 interest being Rs.1,268.53 crores for the year ended on March 31, 2007
 as against Rs.803.20 crores for the year ended March 31, 2006. Of this,
 the interest income on advances amounted to Rs.983.71 crores, an
 increase of 69.76%, compared to the income in the previous year of
 Rs.579.48 crores. The advances increased to Rs.11,221.35 crores as at
 March 31, 2007 from Rs.6,533.44 crores at March 31, 2006, a growth of
 71.75%. The share of interest income on investments was Rs.243.57
 crores during the year ended March 31, 2007, as against Rs.179.90
 crores during the previous year, reflecting a growth of 35.39%. The
 investments increased to Rs.4,614.96 crores as on March 31, 2007 from
 Rs.2,922.83 crores as on March 31,2006, registering a growth of 57.89%.
 Upon reduction in rate of interest on balance-maintained with the
 Reserve Bank of India, interest on balances with RBI and other banks
 was Rs,39.17 crores for the period ended March 31, 2007 as against
 Rs.39.54 crores for the previous year ended March 31, 2006.
 
 Interest Expended
 
 The Bank's total interest expenses have increased by 72.82% to
 Rs.698.95 crores for the year ended March 31, 2007 as compared to
 Rs.404.44 crores in the previous year. Of these, the interest cost on
 deposits rose by 73.88% to Rs.653.46 crores for the current year as
 compared to Rs.375.81 crores during the previous year.  The average
 deposit cost for the year has increased to 5.62% as compared to 4.60%
 in the previous year.
 
 Net Interest Income
 
 The Net Interest Income for the year ended March 31, 2007 witnessed an
 increase of 42.84% to Rs.569.58 crores from Rs.398.76 crores in the
 previous year. This increase was primarily due to the growth in the
 asset book. Retail Assets which constitute 69% of the total assets,
 yield a higher interest as compared to corporate loans. The net
 interest margin for the year ended March 31, 2007 was 4.6% as compared
 to 4.8% for the year ended March 31, 2006.
 
 Other income
 
 The Bank's Non Interest income witnessed a significant increase of
 89.30% to Rs.405.44 crores during the year ended March 31; 2007 as
 compared to Rs.214.18 crores in the previous year. The retail loan
 service income grew robustly during the year to Rs.114.14 crores from
 Rs.50.03 crores in the previous year due to increase in disbursements
 to Rs.5,447 crores from Rs.3,561 crores in the previous year. An
 increase in third party product sales such as Bancassurance and Mutual
 Funds contributed significantly to the fee based income. The forex
 income was Rs.48.16 crores during the year ended March 31, 2007 as
 compared to Rs.31.30 crores during the previous year ended March 31,
 2006, reflecting a growth of 53.87%.
 
 As required by RBI circular No. DBOD.BP.BC 87/21.04.141/2006-07 dated
 April 20, 2007, the Bank has re-classified and adjusted from
 Provisions & Contingencies the amortisation of premium on the Held
 to Maturity portfolio for the year amounting to Rs.35.22 crores to
 Other Income.
 
 Operating Expenses
 
 The Bank's operating expenses excluding interest expenses have
 increased by 40.38% to Rs.705.82 crores during the year ended March
 31,2007 from Rs.502.81 crores in the previous year. The staff strength
 has increased to 5,832 as on March 31,2007 from 4,471 as on March 31,
 2006. Accordingly, the staff costs have increased to Rs.221.31 crores
 from Rs.142.4 3 crores in the previous year. Expenses incurred on
 infrastructure, establishment of additional distribution channels and
 expenses pertaining to marketing of retail loans have contributed to
 the increase in operating expenses during the year.
 
 Operating Profit
 
 The Bank has earned an operating profit of Rs.269.20 crores for the
 year ended March 31, 2007 as against Rs.110.13 crores earned during the
 previous year.
 
 Provisions & Contingencies
 
 The Bank has made adequate provisions for non-performing assets and for
 diminution in the value of investments. In respect of retail loans
 (excluding mortgages) and certain other classes of loans' the Bank
 follows an accelerated provisioning method whereby 100% of the value of
 the asset is provided by the time the account has remained delinquent
 for a period of nine months. A general provision @ 0.25% to 2.00% is
 made on various categories of standard assets as prescribed by the RBI.
 Pursuant to the change in the provisioning requirement for certain
 categories of standard assets from 0.40% to 2.00% as notified by the
 RBI, the Bank made an additional provision of Rs.19.75 crores during
 the year ended March 31, 2007.
 
 Details of provisions made for major items are as follows:
 
 * Provision for NPAs at Rs.40.24 crores (previous year Rs. 78.05
 crores)
 
 * Provision for standard assets at Rs.45.91 crores (previous year
 Rs.17.53 crores)
 
 * Provisions for tax at Rs.62.31 crores (previous year reversal of
 Rs.0.69 crores)
 
 * Provisions for depreciation on investments - Rs.0.83 crores (previous
 year reversal of Rs.8.87 crores)
 
 Net Profit
 
 The Bank has declared a net profit of Rs.121.38 crores for the year
 ended March 31, 2007 as against a profit of Rs.87.80 crores in the
 previous year. The Bank has appropriated Rs.30.35 crores to the
 Statutory Reserve.
 
 Assets
 
 The total assets of the Bank increased to Rs.18,482.78 crores as on
 March 31,2007 from Rs.11,330.19 crores in the previous year.  The
 Customer Assets (loans, leases) amounted to Rs. 11,240.80 crores as on
 March 31, 2007 (previous year Rs.6,556.29 crores).
 
 The gross NPAs, provisions and net NPAs as on March 31, 2007 were
 Rs.317.88 crores (previous year Rs.314.9S crores), Rs.176.38 crores
 (previous year Rs.241 crores) and Rs.141.50 crores (previous year
 Rs.73.95 crores) respectively. The Net NPAs increased to 1.26% of Net
 advances as on March 31, 2007 from 1.13% for the previous year.
 
 Liabilities
 
 Total deposits of the Bank grew to Rs.14,863.72 crores as on March 31,
 2007 from Rs.9,399.64 crores in the previous year. Current Accounts and
 Savings Accounts (CASA) deposits constituted 30.62% of the total
 deposits for the year ended March 31, 2007 (previous year 38.73%).
 
 TREASURY OPERATIONS
 
 The Bank's Treasury had a profitable year and was also able to leverage
 corporate relationships developed by the Corporate and SME departments,
 to generate increased business volumes for the Bank. The Treasury
 undertook sales of new products to existing customers and was also
 instrumental in bringing new customers to the Bank. To manage the needs
 of customers better, the Treasury's geographical presence was expanded
 and Treasury Relationship Managers are now present in Mumbai, Delhi,
 Bangalore, Chennai and Ahmedabad.
 
 The Bank was not very adversely affected by the rising interest rates
 in the short-term inter-bank (Call) market and borrowing costs remained
 within manageable limits.
 
 RETAIL BANKING
 
 The Retail Bank continued to remain the premier growth engine of the
 Bank. The retail business continued to grow at a robust pace across
 both deposits and advances. This growth was achieved despite hardening
 of interest rates and tighter market liquidity, particularly during the
 second half of the year. The Retail business will continue to be a
 primary focus area for the Bank in the coming years. This is keeping in
 mind the robust rates of economic growth, tremendous headroom for
 increased consumer credit off-take, higher savings rates and raising
 income levels that offer an increasing scope for wealth management
 services.
 
 The Bank follows a customer-centric strategy built on the financial
 life cycle of the consumer as well as existing and emerging consumer
 needs.
 
 The Bank has a well rounded suite of products in keeping with its focus
 on the growth sectors of the economy and has emerged as a significant
 player in many businesses spanning assets, wealth management,
 agricultural lending and the NRI business.
 
 DISTRIBUTION
 
 The Bank expanded its distribution significantly, which helped it to
 use different distribution channels to tap into both existing as well
 as emerging market segments.
 
 Branch Banking
 
 Branch Banking was the driver for deposits and wealth management
 services for both existing and new Bank customers.  The branches were
 also drivers of a few other products such as Credit Cards and certain
 Loan products.
 
 Direct Distribution
 
 The Direct Distribution channel of the Bank was focused on Mortgages,
 Personal Loans and Credit Cards. This channel widened the Bank's reach
 across different customer segments. In addition the channel also
 delivered on deposit and wealth management products.
 
 CONSUMER FINANCE BUSINESS
 
 This channel focused on the large mass-market segment and was a big
 driver of two-wheeler loans as well as the small ticket personal loans
 that are addressed to the two-wheeler customers as a strong, robust and
 branded feeder channel.
 
 INFRASTRUCTURE BUSINESS
 
 Given the importance of the infrastructure segment and its linkage to
 the economic growth of the country, the Bank decided to create a
 special unit catering to the needs of the infrastructure segment by
 building on the existing business spanning construction equipment and
 commercial vehicle financing.
 
 BUSINESS SEGMENTS
 
 ASSETS
 
 The Bank grew its assets business significantly and created a
 well-balanced asset portfolio keeping in mind both returns as well as
 risk.
 
 Mortgages
 
 Mortgages emerged as a key business driver on the assets side.  The
 Bank became one of the fastest growing new generation private sector
 banks in this business clocking an impressive 166% growth in the
 mortgages book. Though a relatively new entrant, having entered the
 business just two years ago, the Bank today has a top ten position in
 the business in terms of new disbursements.
 
 The Bank is tapping both the new home loan segment as well as high
 opportunity segments such as Loan Against Property, Commercial Property
 Loans as well as Lease Rental Discounting.
 
 Two-wheeler Loans
 
 The Bank maintained its strong position in two-wheeler financing,
 despite aggressive competition in the segment from both established and
 emerging players. This was achieved due to a strong sales and
 distribution network spanning over 700 locations, and well entrenched
 relationships with all leading Two Wheeler manufacturers. The Bank
 remained a strong top-3 financier in this market clocking 34% growth in
 the book size during the year 2006-07.
 
 Personal Loans
 
 The Bank tapped into one of the fastest growing segments in the
 country-personal loans. Using its growing Direct Distribution channel
 the Bank entered the top ten ,in personal loan disbursements. During
 the year 2006-07 the Bank's personal loan book size grew by an
 impressive 166% over the previous year.  Personal Loans will continue
 to be an area of focus for the Bank in the coming years.
 
 Commercial Vehicle/Construction Equipment Loans
 
 With the overall increase in the focus on infrastructure spending, the
 Bank capitalized on the opportunity by increasing the book size in
 2006-07 by 35% over the past year. The business focus was on quality
 business as well as identifying greater cross-sell opportunities.
 
 Agriculture Loans
 
 The book size of the Bank's agriculture portfolio has increased by 50%
 during the year 2006-07. The Bank has made concentrated efforts to
 maintain a quality portfolio.
 
 The Bank's farmer friendly schemes like HNI farmers scheme, scheme for
 takeover of selected accounts from other banks, financing post harvest
 infrastructure development etc. continue to remain extremely popular
 within the agricultural community.
 
 Credit Cards
 
 The Bank crossed the milestone of 100,000 credit cards with the Miracle
 Credit Card.
 
 The Miracle Credit Card is a differentiated offering with a strong
 business foundation and corporate social responsibility combination
 creating a `credit card with a conscience'.
 
 The Miracle Credit Card collects a nominal initial contribution of
 Rs.50 from every new customer that is matched by an equivalent
 contribution from the Bank. This corpus is collected and handed over to
 the Ved Vignan Maha Vidya Peeth, a school that has been set up by the
 Art of Living Foundation to sponsor education for rural children who
 will become first generation literates in their families.
 
 The Miracle continues as customers spend by using the card. The reward
 points gathered by customers are converted to Seva points all of which
 are periodically encashed in order to sustain the education of children
 sponsored to the Ved Vignan Maha Vidya Peeth until they complete their
 matriculation.
 
 The Bank is proud to share with you that the Miracle Credit Card has
 enabled one thousand children to discover the joy of education and this
 is just the beginning.
 
 Other Loan Products
 
 The Bank also offers Education Loans in select geographies and segments
 as well as Auto loans to existing customers.
 
 WEALTH MANAGEMENT AND LIABILITIES
 
 The Bank continued to focus on the liabilities business through the
 Branch Banking channel.
 
 The Bank emerged as a leading player in the Wealth Management segment
 charting an impressive growth in business during the year 2006-07. In
 order to tap into the fast growing Mass Affluent and Affluent sections
 of society, the Bank launched Centurion Elite a top of the line
 priority banking service.
 
 Insurance
 
 The Bank became a distribution powerhouse for insurance products and
 cemented its place in the bancassurance business. This led to greater
 revenues and a significant increase in the Bank's fee income.
 
 Life Insurance
 
 The Bank, which distributes AVIVA Life Insurance products, emerged as
 one of the top five distributors of life insurance amongst banks. This
 was achieved by adopting a multi-channel strategy across segments and
 products and by leveraging the large customer base of the Bank.
 
 General Insurance
 
 The Bank also became one of the top three distributors amongst banks
 for general insurance covering health, auto and other general insurance
 products. The Bank distributes products from ICICI Lombard General
 Insurance Company.
 
 Mutual Funds
 
 The Mutual Fund business has grown tremendously and the Bank is now
 empanelled with over 32 leading mutual fund houses to distribute their
 funds as well as New Fund Offerings. The Bank utilises a sophisticated
 wealth management software to understand consumer needs, risk appetite
 and uses the software to suggest initial model portfolio allocation as
 well as track portfolio performance over time. The Bank targets to
 further increase the penetration of this business through its expanding
 branch network.
 
 E-broking
 
 The Bank has partnered with Ambit Corporate Finance and Web 18 (a TV18
 venture) to pursue the stock broking business. The venture will be the
 first of its kind with 3 domestic players coming together to capture
 the fast-growing equity brokerage market. Apart from stock broking, a
 range of financial services including distribution of third party
 products, portfolio management services etc. will be offered by the
 venture to retail, HNI and institutional customers.  With increasing
 Internet penetration in the country, retail customers will be offered a
 state-of-the-art online trading platform by this venture.
 
 NRI Business
 
 The focus on NRI business during the year 2006-07 earned the Bank good
 dividends. The business footprint in CCC increased by leveraging the
 distribution of Bank Muscat in the region and through the Bank's own
 Relationship Managers. The Bank also signed up agreements with leading
 exchange houses in the region to help NRIs remit funds to India, in a
 more convenient, faster and cost effective manner. The Bank will
 continue to focus on attracting the Indian diaspora in the CCC, Canada,
 UK and the USA.
 
 Card Merchant Acquisition
 
 The Bank's Card Merchant Acquisition business grew by 18% during the
 year 2006-07. Thischannel has emerged as a gateway channel for CASA
 growth, SME as well as the Asset Business.
 
 The Bank has demonstrated its ability to compete and grow in the market
 place during the year 2006-07 at a pace which is twice that of the
 market growth .rate.
 
 With the current environment and the state of customer confidence the
 Bank is poised to reap the rewards of the growing economy through
 customer-focused products, world class system and processes and an eye
 on increased levels of customer service and delight. The Bank wishes to
 create and sustain 'magic' in the lives of customers across geographies
 and segments.
 
 WHOLESALE BANKING
 
 The Wholesale Banking group provides a wide range of value added
 services to Small & Medium Enterprises (SME), Emerging Corporates,
 Large Corporates, Financial Institutions and Government clients.
 Corporate and transaction banking products are offered through
 qualitative relationship management and service. This group has grown
 its risk weighted asset book to around Rs.4,500 crores.
 
 Corporate Banking Segment
 
 The Corporate Banking segment of the Bank caters to emerging and large
 Corporates with turnover of Rs.150 crores and above.  The Bank offers a
 host of products to the segment which includes Fund Based Facilities,
 Non Fund Based Facilities, Cash Management Services, Trade Finance
 Services and Treasury Products. The Capital Markets Division which is
 also a part of the segment grew its business significantly to about
 Rs.200 crores by the end of the year.
 
 The Bank's focus in the year 2006-07 was to double the book size,
 increase the number of clients and focus on cross sell revenues.  The
 segment grew significantly, as the number of clients grew from 100 in
 the previous year to 280 by the end of the year.  The Fund Based Assets
 have grown from Rs.995 crores in the year 2005-06 to Rs.1893 crores in
 the year 2006-07 whereas the Non-funded Assets grew from Rs.472 crores
 to Rs.13 75 crores.  Another noteworthy feature has been the
 significant contribution from fee income.
 
 The customers to whom financial assistance is provided by the Bank are
 spread across Textile, Infrastructure, Power, Pharmaceuticals,
 Financial Intermediaries and Agro-processing industry segments.
 
 Small and Medium Enterprises Segment (SME)
 
 This division caters to the banking requirements of borrowers with an
 annual turnover of Rs.2 crores to Rs.150 crores. The Bank aims to be
 one of the top 3 SME players in the next 3 years. The division has done
 exceedingly well doubling the book size with a significant increase in
 the number of clients. The client base for the segment has increased
 from 500 to 1800 whereas the Book size has increased from Rs.860
 crores in the year 2005-06 to Rs.1834 crores in the year 2006-07. Fund
 Based Assets have grown from Rs.760 crores to Rs.1591 crores in the
 year 2006-07 and Non-funded Assets have grown from Rs.100 crores to
 Rs.243 crores in the year 2006-07.
 
 Financial, Institutions & Government Group (FIG)
 
 FIC established itself as a full-fledged business Group during the year
 2005-06. The segment offers commercial and transaction banking products
 to Financial Institutions, Public Sector Undertakings, Central and
 State Government Departments. The main focus for the segment is
 accepting Demand and Time Deposits besides deepening relationships by
 offering funded, non-funded, treasury and forex products. The year
 2006-07 has been a year of excellent growth in deposits from Rs.1257
 crores in March, 2006 to Rs.2958 crores in March, 2007.
 
 Major achievements in the year 2006-07 were empanelment with Haryana
 Government to conduct Government Business in the State and the
 clinching of the Haj deal, that involved delivery of approx.  220.05
 Mio Saudi Rials to over 105,000 Haj pilgrims across India.
 
 The segment was instrumental in the largest IPO collection of Rs.1060
 crores, of the Power Finance Corporation. During the year 2006-07, the
 Bank got a record 51 new empanelments done with various Central and
 State PSUs, Financial Institutions & Apex Co-operative Banks.
 
 Remedial Division
 
 Remedial Division functions within the Wholesale Banking Group with the
 primary objective of effecting recoveries from the impaired and loss
 assets. The Remedial Team has achieved commendable results in the year
 2006-07. It effected recovery of Rs.51 crores from about 174 borrowers
 during the year. Due to the concerted efforts, the Gross NPAs came down
 from Rs.186 crores to Rs.96 crores and net NPAs came down from Rs.65
 crores to Rs.27 crores.  An amount of Rs.8.27 crores was credited to
 the Profit and Loss Account while provision was released to the extent
 of Rs.18.12 crores.
 
 Trade Finance (TF)
 
 In TF business, the Bank provides wide range of services, viz. export
 trade, import trade, remittance, domestic trade,, structured trade,
 buyers' credit etc. The TF business unit of the Bank is building on its
 existing presence in various locations as well as developing new
 markets with an emphasis on high quality service and relationship
 management. In addition to the Corporate Sector which has.
 traditionally remained a key segment for this business, the Bank has
 also built healthy and growing TF business from small and medium
 enterprises.
 
 In order to provide efficient financing option, the Bank has been
 arranging Buyers' Credit for its import customers. Fee based non-credit
 collections and structured trade/buyers' credit businesses will be the
 key focus areas for TF, whose vision is: To become a trusted and
 responsive partner for trade services by providing highest delivery
 standards consistently.
 
 The Bank has, for the first time, organised export-import seminars at
 various locations all over the country with a view to growing and
 further developing its Trade Finance franchise. The usual topic at
 these seminars has been Emerging Trends in International Trade
 Finance.
 
 Cash Management Business
 
 The Bank is actively focused to leverage its branch network and provide
 a complete range of transaction banking products under Cash Management
 Services to various Customer segments such as Corporates, SME, Utility
 providers and domestic correspondent Banks. To achieve this, the Bank
 has strengthened its delivery infrastructure and created a robust
 technology platform to be able to handle large volumes. All centres of
 the Bank have also been migrated to a common platform for cash
 management services.  During the year, the Bank has also launched
 technology enabled payment products in keeping with the emerging trends
 in payment systems.
 
 Foreign Exchange Services (FES)
 
 With India becoming tourism's new address across the world coupled with
 the fact that Indians are now travelling abroad in large numbers for
 business, leisure, education etc, the travel & tourism industry (both
 outbound as well as inbound) is poised for stupendous growth stimulated
 by the buoyant Indian & Global economy. This unprecedented boom in the
 industry is reflected in the growing numbers of Foreign Exchange
 Services in the year 2006-07, enabling it to surge forward to the
 position of an undisputed market leader in travel related foreign
 exchange services across the banking industry.
 
 Clearly the focus for the year was on outbound travel business where
 the Bank registered growth of over 200%, signed up major corporates and
 tied up with immigration agents and other travel agents to provide a
 thrust in the direct sales. FES also spread its wings geographically to
 almost double its locations across the nation.
 
 FES also added products and services to ensure value to the Bank's
 customers by offering a one stop window for all foreign exchange
 related requirements. FES demonstrated its superlative service
 standards while servicing over 105,000 pilgrims across the country
 during Haj 2006 without a single complaint, thus setting new standards
 of service for the business.
 
 FES consolidated its leadership position in the wholesale segment by
 virtue of exclusive service arrangements with top banks of India and
 continues to remain the largest principle agent of Western Union Money
 Transfer amongst all the banks across the country.  The Bank maintains
 this leadership position while at the same time accelerating its growth
 in these businesses.
 
 FES continues to build a solid foundation by investing in creating new
 products, services and infrastructure, building a world class team,
 expanding distribution including set-up of offsite bureaus and a new
 relationship management center with a nationwide toll free number to
 provide service to all categories of clients with foreign exchange
 requirements across India.
 
 RISK MANAGEMENT
 
 Retail Credit
 
 Banking business of lending involves risk, which is adequately
 mitigated by the returns attached to the same. The Bank has continued
 to achieve steady progress in the realm of risk management through
 standardisation of processes the procedures.  In the area of Retail
 banking the individual exposure is granular in nature and the process
 and management is the key for success. In this area your Bank has
 implemented the state-of-art systems to manage the retail lending
 including identification, measurement, monitoring and management of
 risks. The retail credit is managed through a team of professionals,
 who handle policies, credit evaluation, operational risk, fraud
 control, collections fit recoveries.  The vast geographic St product
 mixes make it mandatory to manage the same on portfolio basis and hence
 separate product programs are laid down defining customer segments,
 credit evaluation standards, operational procedures etc.
 
 Corporate/Small & Medium Enterprises (SME) Credit
 
 Envisaging a rapid growth in the corporate asset portfolio a suitable
 credit management process was put in place which involves separation of
 credit sourcing, credit appraisal, credit administration and operations
 with suitable checks and balances so as to de-risk the entire process.
 The credit process though strict on credit quality is quick and
 flexible enough to facilitate business teams on deal closures.
 
 Even as the portfolio grew rapidly, an early warning process was put in
 place to foresee and pre-empt problems at individual and portfolio
 level.
 
 The entire loan documentation was overhauled and simplified. A credit
 rating system for large corporates from CRISIL was introduced.
 
 In an environment of high growth the Bank is well equipped to control
 and manage credit quality of corporate assets at individual and
 portfolio level.
 
 INFORMATION TECHNOLOGY
 
 During the year 2006-07, the Bank's Information Technology (IT)
 Department successfully completed the implementation of Finacle
 7.0.11 across all the branches of the Bank. The Bank now has a single
 Core Banking Platform. In addition new software systems for Retail
 Assets, ATMs, Cash Management, Depository Operations, Electronic
 Payment Gateway and Wealth Management were implemented during the year.
 
 In addition to the software changes and to support growth in business
 transactions across all businesses, branches and staff, the Information
 Technology team enhanced the Bank's Network by implementing the latest
 MPLS technology and this has resulted in an optimum utilization of the
 bandwidth.
 
 The Network Architecture was redesigned to support online access to
 data with adequate information security measures to facilitate
 implementation of the Disaster Recovery and Business Continuity Plans
 in future.
 
 INTERNAL CONTROL AND AUDIT
 
 The Internal Audit Department of the Bank undertakes regular internal
 audit and inspection of the operations of the Bank through its various
 branches/offices. The concurrent audit of the branches/offices were
 undertaken by independent Chartered Accountant firms, covering
 approximately 74% of the total business of the Bank.
 
 The Bank has built up a system of internal controls, audit trails and
 individual rating of the branches based on different parameters such as
 business performance, operations, earning, compliance, housekeeping,
 etc. The internal and concurrent audit functions are periodically
 reviewed by the Bank's Audit Committee of the Board (ACB).
 
 During the year all the branches/offices were subject to regular
 internal audit as welt as risk based internal audit. A risk matrix was
 drawn up for every branch/office indicating the level of risk measured
 for various activities. The internal audit department is also
 conducting a separate Information Security Audit of branches in
 addition to the Risk Based Internal Audit.
 
 The Bank has an Information Security Officer, who exclusively monitors
 information technology related system and security aspects as per
 regulatory and internal guidelines issued from time to time.
 
 The Securities and Exchange Board of India (SEBI) had conducted a
 special scrutiny, inter alia, of the Depository Participant and IPO
 funding activities of the Bank. As part of an ad interim ex-parte
 measure taken by SEBI vide an Order dated April 27, 2006, SEBI had
 restrained the Bank from opening new Depository Accounts as a
 Depository Participant. The Bank provided a detailed response to SEBI
 on the ex-parte Order, explaining the Bank's position and the facts
 relating to the matter. The Bank also made representations during the
 course of personal hearings to SEBI in the matter and vide an Order
 dated February 21, 2007 SEBI has permitted the Bank to resume its
 activities as a Depository Participant.
 
 SEBI has issued an enquiry/adjudication notice in relation to the same
 finding and the Bank has prepared a detailed response to the same
 re-iterating its commitments to maintaining highest internal control
 standards and adopting best practices in its Depository Participant
 operations.
 
 The Reserve Bank of India (RBI) also conducted an independent scrutiny
 in relation to adherence to Know Your Customer (KYC) norms connected
 with opening of accounts in one of our branches.  While the Bank
 represented its point of view, the RBI concluded that there were
 deficiencies in complying with the KYC norms and a penalty of Rs.15
 lakhs was imposed by RBI during the year.  The Bank has since further
 strengthened the account opening processes to ensure adherence to the
 KYC norms.
 
 BRANCH NETWORK
 
 The Bank has a network of 279 branches across 147 locations, 47 Asset
 Finance Division offices, 77 administrative offices and 408 ATMs as on
 March 31, 2007. In addition, 18 service centres and two Centralised
 Operations Offices have been set up that would help enhanced
 productivity and utilization i.e. sales and customer relationship
 management. Out of the licences granted by the Reserve Bank of India
 for setting up of 28 off-site ATMs, the validity in respect of 23
 off-site ATMs has been extended from March 1, 2007 to September 1,
 2007.
 
 HUMAN RESOURCES
 
 The Bank's employee strength has grown substantially consequent to the
 amalgamation of Bank of Punjab Ltd. with the Bank. There were 5832
 employees on the Bank's rolls as of March 31, 2007.
 
 The Bank stays committed to augment its talent with quality resources
 from the top Management Schools in the country. 253 Management Trainees
 joined the Bank during the year 2006 - 07.  Further, 427- Management
 Trainees have been recruited who will join in 2007-08. Over 3659
 banking professionals with proven track records have joined during the
 year-in varied roles including operations, unit management and sales.
 Training programmes for Relationship Managers, Branch Heads, Financial
 Advisors and others were instituted to enhance product knowledge,
 selling skills and customer service across the Bank and also to bring
 continuous improvement in operations. 63 training programmes were
 conducted on Finacle for 1040 employees to facilitate smooth transfer
 to the new software.
 
 To ensure that the lateral hire employees are oriented effectively
 towards the Bank's background, history and policies, a one-day
 induction programme `Centegration' was launched. 1370 employees have
 been inducted through `Centegration'.
 
 To help employees integrate with the Vision, Mission & Values (VMV) of
 the Bank, 40 one-day workshops were conducted by internal VALUE
 facilitators who are business managers trained in conducting this
 workshop. 1249 employees have been trained through VMV workshops.
 
 The Bank continued to use the online HRMS system, now re-christened as
 'OASIS' and additional modules like online transfers, confirmations,
 leave records, etc. were launched during the year. The online Appraisal
 system was further refurbished and was used for conducting performance
 appraisals during the year.
 
 STATUTORY DISCLOSURES
 
 Particulars of Employees pursuant to Section 217 (2A) of the Companies
 Act, 1956
 
 The information required under the provisions of Section 217 (2A) of
 the Companies Act, 1956 and Companies (Particulars of Employees) Rules,
 1975 as amended by the Companies (Particulars of Employees) Amendment
 Rules, 2002 is given in the Annexure appended hereto and forms part of
 this report. However, in terms of Section 219(1)(b)(iv) of the Act, the
 Report and Accounts excluding the aforesaid Annexure are being sent to
 the Members.  Interested members may write to the Company Secretary at
 the Registered Office of the Bank for obtaining a copy of the said
 Annexure.
 
 Particulars of conservation of energy and technology absorption as per
 Section 217(1)(e).
 
 The provisions of Section 217(1)(e) of the Companies Act, 1956
 relating to conservation of energy and technology absorption do not
 apply to your Bank. The Bank has however, extensively used information
 technology in its operations.
 
 Directors' Responsibility Statements under Section 217 (2AA)
 
 In terms of the provisions of Section 217(2AA) of the Companies
 (Amendment) Act, 2000 the Directors state that:
 
 i. The applicable accounting standards have been followed in the
 preparation of the Annual Accounts and proper explanations have been
 furnished relating to material departures.
 
 ii. Accounting policies have been selected and applied consistently and
 reasonably, and prudent judgment and estimates have been made so as to
 give a true and fair view of the state of affairs of the Bank as at the
 end of financial year on March 31, 2007 and of the Profit of the Bank
 for the financial year 2006-07.
 
 iii. Proper and sufficient care has been taken for the maintenance* of
 adequate accounting records in accordance with the provisions of the
 Companies (Amendment) Act, 2000, for safeguarding the assets of the
 Bank and for preventing and detecting fraud and other irregularities.
 
 iv. The annual accounts have been prepared on a going concern basis.
 
 CORPORATE GOVERNANCE
 
 A separate section on Corporate Governance has been included as part of
 the Directors' Report.
 
 DIRECTORS
 
 Mr.S.Venkiteswaran retires by rotation at the ensuing Annual General
 Meeting (ACM) and is not seeking re-appointment as he has completed the
 maximum stipulated contiguous tenure of 8 years as a Director as per
 the relevant provisions of the Banking Regulation Act, 1949 and the RBI
 guidelines on the subject.
 
 The directors wish to place on record their sincere appreciation of the
 contribution made by Mr. S.Venkiteswaran during his tenure as a
 director, especially the leadership and guidance provided by him at the
 time of re-capitalization and re-structuring of the Bank.
 
 Mr.Kamlesh Vikamsey and Mr.Shital Kumar Jain also retire by rotation at
 the ensuing AGM and being eligible offer themselves for re-appointment.
 
 AUDITORS
 
 M/s. BSR & Co., Statutory Auditors of the Bank, would be retiring at
 the conclusion of the ensuing AGM and are eligible for re-appointment
 subject to the approval of the RBI. Members are requested to consider
 their re-appointment on a remuneration to be recommended by the Audit
 Committee of the Board.
 
 ACKNOWLEDGEMENTS
 
 The Board of Directors thanks the Reserve Bank of India for extending
 valuable guidance and support to your Bank. The Board expresses its
 gratitude to all depositors, customers, other banks and correspondents,
 financial institutions and shareholders for their continued support.
 The Board wishes to place on record its deep appreciation of the
 strenuous and sincere efforts put in by all employees in meeting the
 challenges of the market place.
 
 For and on behalf of the Board
 
 Place : Mumbai            Rana Talwar
 Date  : 24th May 2007     Chairman