1.  General
 
 The financial statements have been prepared on historical cost
 convention and on accrual basis of accounting, except where stated
 otherwise and conform to the statutory provisions and practices
 prevailing within the banking industry in India.
 
 2.  Foreign Exchange Transactions
 
 2.1 Assets and Liabilities denominated in Foreign Currencies are
 translated at the rates notified by FEDAI at the close of the year.
 Profit or Loss accruing from such transactions is recognised in the
 Profit and Loss Account.
 
 2.2 Income and Expenditure items have been translated at the exchange
 rates ruling on the date of the transactions.
 
 2.3 The Bank does not have a branch in any Foreign Country.
 
 2.4 Outstanding Forward Exchange contracts are revalued at the exchange
 rates notified by FEDAI and the resultant net gain or loss is
 recognised in the Profit and Loss Account.
 
 2.5 Foreign Currency Guarantees, Acceptances, Endorsements and other
 obligations are accounted at the exchange rates prevailing on the date
 of the transactions.
 
 3.  Investments
 
 3.1 As per RBI guidelines, the investments of the bank are classified
 as under at the time of acquisition.
 
 - Held to Maturity
 
 - Available for Sale
 
 - Held for Trading
 
 They are further sub classified and shown in Balance Sheet under the
 following six categories:
 
 i) Government Securities ii) Other Approved Securities iii) Shares iv)
 Debentures and Bonds v) Subsidiaries /Joint Ventures and vi) Others
 
 a) Securities classified under Held to Maturity category are valued
 at acquisition cost. Where the acquisition cost is higher than the face
 value, such excess of acquisition cost over the face value is amortised
 over the remaining period to maturity.
 
 b) Securities held in Available for Sale Category are valued scrip
 wise as under:
 
 i) Government of India Securities are valued at market price as per
 quotation put out by Primary Dealers'' Association of India/ Fixed
 Income Money Market and Derivatives Association of India & Bloomberg.
 
 ii) State Government loans, Trustee Securities, Securities guaranteed
 by Central/State Governments and PSU Bonds are valued on appropriate
 Yield to Maturity (YTM) basis as per Primary Dealers'' Association of
 India/ Fixed Income Money Market and Derivatives Association of India
 guidelines.
 
 iii) Treasury Bills/ Certificate of Deposits/ Commercial Papers are
 valued at carrying cost.
 
 iv) Equity Shares are valued at market rate if quoted, otherwise at
 Break up Value as per the latest Balance Sheet if available or Re.1/-
 per Company.
 
 v) Preference shares are valued at market price if quoted or at
 appropriate YTM basis as per Primary Dealers'' Association of India/
 Fixed Income Money Market and Derivatives Association of India
 guidelines.
 
 vi) Debentures are valued at market price, if quoted, otherwise on an
 appropriate YTM basis.
 
 vii) Mutual Funds are valued at market price if quoted or at NAV or
 Market Price/ Repurchase Price.
 
 viii) Security Receipts are valued at NAV as declared by Securitisation
 companies.
 
 c) Securities under Held for Trading category are valued at Market
 Price based on quotations of Government Securities put out by Fixed
 Income Money Market and Derivatives Association of India.
 
 3.2 Investments in Available for Sale / Held for Trading are valued
 scrip wise, category wise and net depreciation if any in each category
 is charged to Profit & Loss Account, while net appreciation if any, is
 ignored.
 
 3.3 Shifting of securities from one category to another category is
 carried out lower of acquisition cost/ book value/ market value on the
 date of transfer. The depreciation, if any on such transfer is fully
 provided for.
 
 3.4 Profit/Loss on sale of Investments in any category is taken to the
 Profit & Loss Account. However, in case of sale of investment in Held
 to Maturity category, the profit is first credited to Profit and Loss
 Account and thereafter an amount equivalent to profit net of statutory
 reserve and taxes is appropriated to the Capital Reserve Account.
 
 3.5 Commission, brokerage, broken period interest etc. on securities
 incurred on acquisition are debited to Profit and Loss account.
 Commission, incentives, brokerage received on subscription are deducted
 from the Cost of the securities.
 
 3.6 The Investments shown in the Balance Sheet are net of Depreciation,
 if any.
 
 3.7 The Non Performing Investments are identified and provided for as
 per RBI guidelines.
 
 4.  Advances
 
 4.1 Advances have been classified as per the Asset Classification norms
 laid down by the Reserve Bank of India. The required provisioning for
 Standard Assets and for Non Performing Assets have been made as per the
 Regulatory Norms.
 
 4.2 Advances shown in the Balance Sheet are net of provisions and
 interest reserve on NPA accounts, ECGC/DICGC claims received and
 provisions for Restructured accounts.
 
 5.  Fixed Assets
 
 5.1 Premises and other Fixed Assets are accounted at acquisition cost
 less depreciation.
 
 5.2 Depreciation has been provided on the composite value for premises
 acquired with land and building, where cost of the land is not
 separately identifiable.
 
 5.3 Depreciation in respect of fixed assets is charged on the written
 down value of the assets from the date of purchase on pro-rata basis at
 the rates specified under Schedule XIV of the Companies Act, 1956;
 except in the case of computers, which are depreciated @ 33.33 % on
 straight line method as per RBI guidelines.
 
 6.  Staff Benefits
 
 6.1 Provision towards leave encashment is accounted on actuarial basis
 in accordance with the guidelines contained in Accounting Standard 15
 (revised 2005) issued by ICAI.
 
 6.2 Liability of Gratuity to staff is contributed to the Group Gratuity
 Life Assurance Scheme of the Life Insurance Corporation of India.
 
 6.3 Payments to defined contribution schemes such as Provident Fund and
 Employees Pension Fund Superannuation Scheme of Life Insurance
 Corporation of India are charged as expenses as they fall due.
 
 7.  Employees Stock Option Scheme
 
 The Employee Stock Option Scheme provides for grant of equity stock
 options to employees that vest in a graded manner. The Bank follows the
 intrinsic value method to account for its employee compensation costs
 arising from grant of such options. The excess of fair market price
 over the exercise price shall be accounted as employee compensation
 cost in the year of vesting. The fair market price is the latest
 closing price of the shares on the stock exchanges in which shares of
 the Bank are largely traded immediately prior to the date of meeting of
 the compensation committee in which the options are granted.
 
 8.  Earning Per share
 
 Basic earning per share is calculated by dividing the net profit of the
 year by the weighted average number of equity shares.
 
 Diluted earning per share is computed using the weighted average number
 of equity shares and dilutive potential equity shares.
 
 9.  Income Recognition
 
 Interest Income on all advances / performing assets is recognised on
 accrual basis. In respect of Non- Performing Assets / Non-Performing
 Investments, interest income is recognised on receipt basis.
 Commission earned, Locker rent, Dividends on equity shares & Mutual
 Funds are recognised on receipt basis.
 
 10.  Income Tax
 
 Income Tax comprises current tax and Deferred Tax for the year. The
 deferred tax assets/liability is recognised in accordance with
 Accounting Standard-22 issued by the Institute of Chartered Accountants
 of India.
 
 11.  Net Profit
 
 The Net Profit disclosed in the Profit and Loss Account is after
 considering
 
 11.1 Provision for taxes on income in accordance with statutory
 requirements.
 
 11.2 Provision for bad and doubtful advances and investments.
 
 11.3 Contingent Provision for Standard Assets.
 
 11.4 Other usual and necessary provisions.