1. Scheme of Amalgamation of Bank of Punjab Limited.
 
 1.1 The Scheme of Amalgamation (`the scheme') of Bank of Punjab Limited
 (`BoP') with Centurion Bank Limited (`Centurion or CBL') pursuant to
 section 44A(4) of the Banking Regulation Act, 1949 which was approved
 by the shareholders of both the Banks on 3rd August, 2005 was
 sanctioned by the RBI vide their order dated 24th September, 2005,
 
 1.2 Both the entitles were banking companies incorporated under the
 Companies Act, 1956 and licensed by RBI under the Banking Regulation
 Act, 1949.
 
 1.3 As per the scheme, upon Its coming into effect from the Appointed
 Date i.e. 1st April, 2005, the entire undertaking of BoP Including all
 its assets and liabilities stood transferred/deemed to be transferred
 to and vest in Centurion. As per the said order of RBI, the scheme of
 amalgamation was effective on 1st October, 2005.
 
 1.4 As per the scheme, in consideration of the transfer of and vesting
 of the undertaking of BoP, nine equity shares of Centurion of the face
 value of Re.1/- each fully paid-up were issued to members of the
 erstwhile BoP for every four equity shares of Rs.10/- each of BoP held
 by them, Accordingly 236,250,000 equity shares of Re.1/- each of
 Centurion were allotted at par to the shareholders of Bank of Punjab on
 19th October, 2005.
 
 1.5 The amalgamation was accounted for in the previous year, using the
 Purchase Method.
 
 1.6 The assets and liabilities of BoP that vested in Centurion as on 1
 st April, 2005 were accounted at the values at which they were
 appearing In the books of BoP as on 31st March, 2005 and provisions, as
 approved by the Board of Directors of Centurion, were made for the
 difference between the net value appearing in the books of BoP and the
 fair value as determined by Centurion as also for `restructuring
 expenses'. Such adjustments, as per the scheme, determined based on the
 fair value of the assets and liabilities of BoP as on the Appointed
 Date and restructuring expenses on an estimated basis, were made by the
 Bank against the reserves arising on amalgamation.
 
 1.7 As per the scheme, the balances in the Statutory Reserve Account of
 Rs.7,526 lacs, Investment Fluctuation Reserve Account of Rs.3,653 lacs
 and Debenture Reserve Account Rs.100 lacs of BoP as on 31st March, 2005
 were accounted under the respective heads in the books of Centurion.
 
 1.8 After accounting the assets, liabilities and reserves of BoP as
 above and after effecting the other adjustments referred to above, a
 deficit of Rs.5,888 lacs arose which was debited to 'Goodwill Account'
 in accordance with the scheme.
 
 1.9 As per Accounting Standard - 14 (AS 14) on Accounting for
 Amalgamations issued by the ICAI, under the `purchase method' of
 accounting amalgamation, the identity of reserves of the amalgamating
 entity (BoP) is not required to be preserved in the books of Centurion
 whereas, as per the scheme, the balance in Statutory Reserve Account,
 Investment Fluctuation Reserve Account and Debenture Reserve Account of
 BoP were required to be accounted under the respective heads in the
 books of Centurion. AS-14 requires that In such situations, the
 treatment prescribed in the scheme should be followed. Accordingly the
 balances in the aforesaid reserve accounts as on 31st March, 2005 were
 accounted under the respective heads In the books of Centurion. As a
 result of the aforesaid deviation in the accounting treatment of the
 aforesaid reserves as prescribed In the scheme as compared with the
 requirements.
 
 1.10 Pursuant to the special .resolution passed by the shareholders at
 the Extraordinary General Meeting held on 24th December, 2005 and
 confirmed by the High Court of judicature at Bombay, Panaji Bench, Goa,
 vide order dated on 10th March, 2006, the Bank utilized Rs,14,178 lacs
 of the balance in the Securities Premium Accounts for adjusting the
 Goodwill of Rs.5,888 lacs arising on amalgamation and the debit balance
 of Rs.8,290 lacs in the Profit and Loss Account pursuant to Section 78
 and 100 of the Companies Act, 1956,
 
 1.11 The income, expenditure and the net results of operations of the
 erstwhile BoP for the period 1 st April, 2005 to 31st March^ 2006 were
 included In the Profit and Loss Account of Centurion for the aforesaid
 period.
 
 1.12 The name of the Bank was changed from Centurion Bank Limited to
 Centurion Bank of Punjab Limited effective 17th October, 2005.
 
 2. Merger of Centurion Bank of Punjab Limited and Lord Krishna Bank
 Limited
 
 The shareholders of Centurion Bank of Punjab Limited, at their
 Extraordinary General Meeting held on 30th September, 2006 at Panjim
 and the shareholders of Lord Krishna Bank Limited (`LKB') at their ACM
 held on 30th September, 2006 at Kochi, approved the proposed merger of
 Lord Krishna Bank Limited with Centurion Bank of Punjab Limited, The
 Board of Directors of both the Banks approved the merger proposal on
 4th September, 2006, The Bank has made an application to the RBI for
 the requisite regulatory approval and the same is awaited.
 
 As on 31st March, 2006, LKB had total assets of Rs.259,934 lacs,
 deposits of Rs.227,888 lacs, advances of Rs.142,085 lacs and capital
 adequacy of 10.11%. During the year ended 31st March, 2006, LKB made a
 profit of Rs.368 lacs.
 
 3. Amount recovered under the Financial Support Agreement
 
 4,00,00,000 equity shares of the Bank had vested on 19th January, 2004
 in 'Centurion Bank Stock Trust' in terms of the Scheme of Arrangement
 approved by the Bombay High Court and RBI, which discharged TCFC
 Finance Ltd's obligation to the Bank under a Financial Support
 Agreement ('FSA'). The said shares were held by the said trust for the
 benefit of the Bank. A sum of Rs.480 lacs was realised in earlier year
 by sale of the rights entitlement on the said shares. During the year
 ended 31st March, 2006, the Trust sold 4,00,00,000 equity shares and
 made over the net sales proceeds of Rs.9,771 lacs, to the Bank which
 resulted in a surplus of Rs.6,251 lacs.
 
 4. Share capital
 
 Pursuant to the special resolution passed by the shareholders at the
 Extraordinary General Meeting held on 24th December, 2005, and approval
 of RBI vide letter dated 2nd June, 2006, the Bank has on a preferential
 basis allotted 6,99,20,000 equity shares of face value of Re. 1/- each
 at a premium of Rs.18.25 per share aggregating Rs.13,460 lacs to Johann
 Limited on 12th June, 2006. Further, the Bank has also pursuant to a
 special resolution passed by the shareholders at the Extraordinary
 General Meeting held on 30th September, 2006 and the approval of the
 RBI vide letter dated 4th January 2007, allotted on a preferential
 basis 7,50,00,000 equity shares of face value of Re.1/- each at a
 premium of Rs.23.54 aggregating Rs.18,405 lacs to India Advantage Fund
 V through its trustee. The Western India Trustee and Executor Company
 Limited on 18th January, 2007.
 
 On 6th February, 2004, the Bank issued 13,50,00,000 warrants
 convertible into 13,50,00,000 equity shares of the face value of Re.
 1/- per share at a premium of Rs. 3/- per share. The warrants can now
 be exercised at any time prior to 60 months from the date of issue of
 the warrants. Of these 32,00,000 equity shares on conversion of
 warrants were allotted on 30th March, 2007 leaving a balance of
 13,18,00,000 warrants outstanding as on 31st March, 2007.
 
 5. Disputed tax demands
 
 In respect of disputed income-tax demands (Including those of the
 erstwhile BoP) of earlier years in appeal not provided for, the Bank,
 based on the advice received, is of the opinion that it has a good
 chance of succeeding in these cases.
 
 In respect of the Bank's appeals (including those of erstwhile BoP)
 that were pending before the Income Tax Appellate Tribunal against
 income-tax demands for the earlier years aggregating Rs.6,700 lacs, the
 Tribunal has set aside the issues involved to the file of the Assessing
 Officer. An application for settlement of these cases was filed before
 the Settlement Commission. The application in respect of:
 
 * years for which demands aggregating to Rs.306 lacs have been
 admitted;
 
 * years for which demands aggregating to Rs.605 lacs are pending for
 admission; and
 
 * years for which demand aggregating to Rs.5,789 lacs were rejected.
 
 An application for settlement before the Settlement Commissioner in
 respect of appeals pending before the first appellate authority against
 income-tax demands of Rs.19,772 lacs was also filed which was rejected.
 Subsequently, the Bank filed a writ petition In the Bombay High Court
 challenging the rejection of its application. During the year, the
 Bombay High Court passed an order rescinding the rejection and directed
 the Settlement Commission to proceed with the hearing for final
 disposal treating the settlement application as having been admitted
 for settlement.
 
 Tax paid in advance/tax deducted at source appearing under Schedule
 11 - Other Assets includes an amount of Rs.9,564 lacs (previous year
 Rs.8,661 lacs) paid by the Bank/adjusted by the Income Tax department
 in respect of disputed tax demands as reduced by the provision made
 therefor.
 
 6. Fixed assets and depreciation
 
 Fixed assets include Rs,455.31 lacs (previous year Rs.464 lacs)
 representing book value of certain properties acquired and in the
 possession of the Bank in respect of which some formalities relating to
 transfer in the name of the flank are pending.
 
 In respect of premises - written down value (WDV) of Rs,629 lacs, owned
 by the Bank in a co-operative society that was gutted by fire in
 2004-05, the Bank has written off Rs.113 lacs being the estimated WDV
 of the superstructure of the premises destroyed by the fire. The
 balance WDV of the premises of Rs.516 lacs is carried forward as the
 carrying value of the Bank's share in the undivided land on which the
 superstructure stood. The Bank has also written off Rs.254 lacs being
 the WDV of the movable assets therein. The conveyance of the land in
 favour of the co-operative society is pending. The Bank has preferred a
 claim for the insured value of the assets destroyed (which Is higher
 than the WDV of the assets written off) on the insurance company for
 the loss suffered. Pending acceptance/settlement, the claim has been
 accounted to the extent of the loss as per books, The Bank has to date
 received a sum of Rs.300 lacs as `on account' payment against the
 claim. Accounting adjustments, as further required, will be made on
 final settlement of the claim.
 
 7. Securitlsation transactions
 
 During the previous year and prior to 1st February, 2006, the Bank had
 securitised-out retail loans of the carrying value of Rs.17,635 lacs to
 Special Purpose Vehicles (SPVs) and recognised gains of Rs. 1,526 lacs.
 The Bank continues to service the loans, transferred to these SPVs by
 acting as a collection agent. The Bank also provided credit
 enhancements in the form of cash collaterals and by subordination of
 cash flows to Senior Pass Through Certificates.
 
 The RBI issued guidelines on securitization transactions effective 1st
 February, 2006. As per these guidelines, profit/premium on
 securitisation transactions are required to be amortised over the life
 of the securities issued by SPV. The Bank has not entered into any
 securitisation transaction on or after 1st February, 2006. Under the
 aforesaid guidelines, it is stated that RBI would take a view on
 treatment of securitisation transactions undertaken prior to 1st
 February, 2006. A reference has been made in this regard to RBI and the
 response is awaited.  Accounting adjustments, if any required, will be
 made on receipt of instructions from RBI.
 
 In respect of certain loans irrevocably assigned by the erstwhile BoP,
 where the Bank has a guaranteed obligation to the assignee, provision
 on an estimated basis is made for the expected delinquency in the
 assigned portfolio. The Bank maintains full capital on the outstanding
 balance of these assets based on the risk weight prescribed by the RBI
 guidelines on Capital Adequacy norms.
 
 8. Legal claims
 
 Claims against the Bank not acknowledged as debts includes expired
 guarantees of Rs.3,448 lacs which were Issued by the erstwhile BoP to a
 government department for which demand notices were received. The
 beneficiary filed a complaint before the Banking Ombudsman, Chandigarh
 which directed the Bank vide order dated 16th October, 2003 to pay to
 the beneficiary Rs. 3,448 lacs and Rs.20 lacs as penalty. After
 obtaining approval of RBI, the Bank filed an appeal before the
 Honorable Delhi High Court against the order of the Banking Ombudsman
 which is pending disposal. The Bank has been legally advised that the
 claim Is not tenable. However, the Bank continues to hold a prudential
 provision of Rs.690 lacs made in Financial Year 2005-06 against the
 aforesaid claim.
 
 Qualitative disclosures
 
 The Bank's Investment Policy, approved by the Board, lays down the
 broad parameters of derivatives activity.
 
 The Bank may enter into derivatives to hedge Balance Sheet exposures
 only with the prior approval of the Bank's Investment Committee. During
 the year the Bank has not undertaken any hedging derivative
 transactions.
 
 The Bank may take trading positions only in widely traded derivatives
 and within the risk limits prescribed by the Investment Committee. The
 limit on positions in interest rate derivatives is based on the net
 present value of a one basis point movement (netPV01). During the year
 the Bank took trading positions in overnight indexed swaps (OIS). Open
 trading positions in interest rate derivatives are marked to market
 (`MTM') daily by the Market Risk Department to ensure compliance with
 the limit approved by the Investment Committee.
 
 During the year the Bank's main activity in derivatives was the
 structuring and sales of derivative products to corporate customers, as
 appropriate to the customer's needs and risk profile. Such transactions
 are immediately fully covered back to back with another counter party,
 so there is no open market risk arising from such transactions. The
 Bank's Market Risk Department marks to market such customer deals every
 fortnight and monitors and reports the MTM on these contracts to the
 Corporate Credit Risk Department and treasury. Where the MTM plus the
 credit equivalent exceeds the approved credit limit for a customer,
 appropriate credit risk mitigating measures are taken, including, but
 not limited to, obtaining a cash collateral from the customer.
 
 9. Exchange traded Interest rate derivatives
 
 No transactions were undertaken during the year in exchange traded
 interest rate derivatives (Previous year - Rs. Nil). There is no amount
 outstanding as notional principal on account of exchange traded
 interest rate derivatives (Previous year - Rs. Nil).
 
 10. Disclosure of penalties Imposed by RBI
 
 During the year, based on a special scrutiny of certain customer
 accounts, RBI imposed penalties on the Bank aggregating to Rs.15 lacs
 under the provision of Banking Regulation Act, 1948. The said penalties
 were imposed mainly for not displaying prudence in the opening and
 operations of certain deposit accounts, non compliance of know your
 Customer (KYC) norms in certain accounts and non adherence to certain
 extant guidelines of the RBI.
 
 a) Claims against the Bank not acknowledged as debts
 
 These represent claims filed against the Bank in the normal course of
 business relating to various legal cases currently in progress.
 
 b) Liability on account of outstanding forward exchange
 contracts/currency options and swaps
 
 The Bank enters into foreign exchange contracts, currency options/swaps
 on its own account and for customers.  Forward exchange contracts are
 commitments to buy or sell foreign currency at a future date at the
 contracted rate.  A foreign currency option is an agreement between two
 parties in which one grants to the other the right to buy or sell a
 specified amount of currency at a specific price within a specified
 time period or at a specified future time.  Currency swaps are
 commitments to exchange cash flows by way of interest/principal in two
 currencies, based on ruling spot rates. All such options and swaps in
 the Bank's books are on a back to back basis.
 
 c) Guarantees given on behalf of constituents
 
 As a part of its banking activities, the Bank issues guarantees on
 behalf of its customers to enhance their credit standing. Guarantees
 represent irrevocable assurances that the Bank will make payments in
 the event of the customer failing to fulfill its financial or
 performance obligations.
 
 d) Acceptances, endorsements and other obligations
 
 These include documentary credit issued by the Bank on behalf of its
 customers and bills drawn by the Bank's customers that are accepted or
 endorsed by the Bank.
 
 Borrowings
 
 The Bank has repaid certain liabilities taken over from the erstwhile
 TCFC, in respect of which the release of charge on specific assets is
 in progress.
 
 Other Assets
 
 Non Banking Assets acquired in satisfaction of claims as shown in
 Schedule 1.1, includes certain immovable properties of Rs.4 lacs, where
 execution of conveyance deed is pending.
 
 Investment Fluctuation Reserve
 
 As on 31st March, 2006, the Bank had maintained capital charge for
 market risk on its trading book as required under RBI guidelines for
 Capital Adequacy ratio, except on RIDF deposits with NABARD which had
 been re-classified under Held to Maturity category in April, 2006.
 Therefore, the balance in Investment Fluctuation Reserve as on 31st
 March, 2006, was transferred to the Profit and Loss Account for
 recognition as Tier I capital as per RBI circular
 DBOD.No.BP.BC.38/21.04.1417 2005-06 dated 10th October, 2005.
 
 Debenture Redemption Reserve
 
 As per the circular issued by the Ministry of Law in April 2002,
 banking companies are not required to create debenture redemption
 reserve under section 117C of the Companies Act, 1956 in respect of
 debentures issued by them. Accordingly, in the previous year no amounts
 were appropriated to the said reserve, and the balance in the said
 reserve was transferred to the Profit and Loss Account.
 
 Employees Trust
 
 Centurion Bank of Punjab Employee Trust (previously known as Centurion
 Bank Employee Trust) was established by CBL in the financial year
 1994-95 for the benefit of its employees and was allotted 12,50,000
 equity shares of the Bank. Bank of Punjab Employee Trust was
 established in the financial year 1995-96 for the benefit of its
 employees and was allotted 50,00,000 equity shares, that were mainly
 acquired out of interest free advance from erstwhile Bank of Punjab.
 The Trust further acquired 1,64,46,488 equity shares of the bank at
 cost of Rs.1,138 lacs out of loans from the Bank which has been repaid
 during the financial year 2005-06. As per the resolution passed at the
 meeting held on 4th September, 2006, the Bank of Punjab Employee Trust
 got merged with Centurion Bank of Punjab Employee Trust after
 transferring the shares to CBET.
 
 As per the Trust Deed, the Trustees are empowered to either allot the
 shares to the Bank's employees or to sell the shares and utilise the
 proceeds for the benefit of the Bank's employees.
 
 As at 31st March, 2007, the Centurion Bank of Punjab Employee Trust
 holds 1,18,66,486 equity shares of which 33,47,888 equity shares were
 allotted (but not transferred) to employees of the Bank, who will be
 entitled to these shares on 1st October, 2007, subject to their
 continuation in service as on that date.
 
 Prior period comparatives
 
 Previous year's figures have been regrouped/reclassified wherever
 necessary to conform to current year's presentation. Previous year
 figures have been audited by earlier auditors.