1.  BASIS OF PREPARATION OF FINANCIAL STATEMENTS
 
 a) The financial statements have been prepared and presented under the
 historical cost convention on accrual basis of accounting unless
 otherwise stated and except for items recognized on cash basis, as per
 guidelines issued by the Reserve Bank of India [‘RBI] and comply with
 the Accounting standards issued by the Institute of Chartered
 Accountants of India and relevant requirements prescribed under the
 Banking Regulation Act, 1949 and Companies Act, 1956, and current
 practices prevailing within the banking industry in India.
 
 b) The preparation of financial statements in conformity with generally
 accepted accounting principles [GAAP] requires the management to make
 estimates and assumptions considered in the reported amounts of assets
 and liabilities (including contingent liabilities) as of the date of
 the financial statements and the reported income and expenses during the
 reporting period. The Management believes that the estimates used in
 the preparation of the financial statements are prudent and reasonable.
 Actuals could differ from these estimates.
 
 2.  REVENUE RECOGNITION
 
 a] Income is recognized on an accrual basis except:
 
 (i) Commission on Bank Guarantees and Letters of Credit; arrangement of
 suppliers /buyers Credit; and Locker rent which are recognized on
 receipt basis.
 
 (ii) Interest income on Non-Performing advances and investments, and
 securities guaranteed by Central Government where interest is not
 realized within 90 days is recognized on receipt basis.
 
 b] Profit or loss on sale of investments is recognized in the Profit and
 loss account on settlement basis at the time of sale except the
 realized Profit on sale of investments in ‘Held to Maturity category
 which is recognized in the Profit and loss account and subsequently
 appropriated to capital reserve account in accordance with RBI
 guidelines.
 
 c] Brokerage/commission/incentives received on Banks direct
 subscriptions are deducted from the cost of securities, whereas
 brokerage paid in connection with acquisition of securities is treated
 as revenue expenditure.
 
 d] The broken period interest on sale or purchase of securities is
 treated as revenue item.
 
 3.  ADVANCES
 
 a) Advances are classifed into standard, sub-standard, doubtful and
 loss assets in accordance with the guidelines issued by the RBI and are
 stated net of specifc provisions made towards Non-Performing Advances
 [‘NPAs].
 
 b) Credit Card dues are identifed as NPAs where minimum dues receivable
 are in default for a continuous period of more than 90 days. Income
 from non performing card accounts is not recognized in financial
 statements.
 
 c) Provisions for sub-standard, doubtful and loss advances are made on
 the basis of asset classifcation and provisioning requirements under
 the prudential norms laid down by the Reserve Bank of India.
 
 d) Recoveries in non-performing advances are appropriated frst towards
 book balance, then to charges and thereafter to unrealized interest.
 
 e) General provision for Standard Assets made in accordance with RBI
 Guidelines is included under Other liabilities- others.
 
 f) Restructured Accounts: For restructured advances, provisions for
 erosion in fair value of loan are made in accordance with the
 guidelines issued by RBI, in addition to the provision otherwise
 required. The provision for erosion in fair value of advance is not
 reduced from advances and is included in the balance sheet under the
 head Other Liabilities-Others.
 
 4.  INVESTMENTS
 
 4.1 Categorization & Classifcation
 
 In accordance with the RBI guidelines, investments at the time of
 acquisition are categorized as
 
 - Held to Maturity [HTM],
 
 - Available for Sale [AFS] and
 
 - Held for Trading [HFT].
 
 The Bank shifts the investments category inter-se as permitted by RBI
 at the least of acquisition cost / book value / market value, on the
 date of transfer and the depreciation, if any, on such transfer is
 recognized in the Profit and loss account.
 
 However, for disclosure in the balance sheet, investments are classifed
 under six categories – Government securities, other approved
 securities, shares, debentures and bonds, Investments in Subsidiaries/
 RRB/Joint Ventures and Others [units of Mutual Funds, Commercial
 Papers, certifcate of deposits and Venture Capital Funds and
 investments in RIDF of NABARD, MSME Fund of SIDBI,NHB].
 
 Investments classifed under ‘Held to Maturity include the following:
 
 a) Investments in SLR securities upto 25% of Demand and Time
 liabilities.
 
 b) Recapitalisation bonds received from the Government of India towards
 recapitalisation requirements.
 
 c) Investments in share of subsidiaries.
 
 d) RIDF Schemes of NABARD/MSME (Refnance) Fund of SIDBI/ RHF Deposits
 of NHB.
 
 e) Investment in Venture Capital Funds, for an initial period of 3
 years of each draw down, after 23rd August 2006.
 
 Investments acquired primarily with an intention for trading are
 classifed as HFT securities. As per RBI guidelines, securities in HFT
 category are not held beyond 90 days and are transferred to AFS
 category under exceptional circumstances like not able to sell or
 extreme volatility or market becoming unidirectional, with the approval
 of the ALCO/Investment Committee.
 
 All other investments are classifed under AFS.
 
 4.2 Valuation and consequential adjustments :
 
 a] Held to Maturity: Investments classifed under ‘Held- to-Maturity
 are carried at weighted average acquisition cost.  Premium on
 acquisition, if any, is amortized on
 
 a straight-line basis over the remaining maturity period.  In case of
 investments in subsidiaries any diminution, other than temporary, in
 the value of such investment is recognized and provided for.
 Investments in Venture Capital Fund is valued at Cost.
 
 b] Available for Sale and Held for Trading:
 
 (i) Investments in these categories (classifed under the category Rs.Held
 for Trading and Rs.Available for Sale) are marked to market / estimated
 realizable value as per RBI guidelines at monthly and quarterly
 intervals for HFT and AFS respectively. While the resultant net
 depreciation, if any, within each category referred to in 4.1 above, is
 recognized in Profit & loss account as Provisions and Contingencies,
 the net appreciation is ignored except to the extent of depreciation
 previously provided. The book value of the individual scrip is not
 changed after revaluation.  In the case of write back of excess
 provision of depreciation the same is credited to Provisions and
 Contingencies  and a like amount (net of taxes and transfer to
 Statutory Reserve) is appropriated to Investment Reserve Account under
 Schedule 2 – Reserves & Surplus.
 
 (ii) For the purpose of (i) above, the market price / estimated
 realizable value is determined as under:
 
 4.3 Non-performing Investments
 
 a] All such securities where repayment of principal or interest not
 serviced within 90 days from the due date are classifed as
 Non-Performing Investments, except securities guaranteed by the Central
 Government
 
 which are treated as performing investments notwithstanding arrears of
 principal / interest payments. In respect of investments classifed as
 Non- performing, appropriate provisions are made for the depreciation
 in the value of these investments. The
 
 depreciation requirement in respect of these securities is not set off
 against appreciation in respect of other performing securities.
 
 b] Where the Bank has both credit and investment exposures to any
 borrower/ group and in the event the credit exposure is classifed as
 Non-Performing asset, the investment exposure to them is also classifed
 as Non-Performing.
 
 4.4 ACCOUNTING FOR REPO TRANSACTIONS
 
 In line with the uniform accounting treatment prescribed by the RBI,
 monies received/paid during the year on Repo transactions are
 debited/credited to Repo Account and reversed on maturity of the
 transactions. Costs and revenues are accounted for as interest
 expenditure/income, as the case may be. Balance in Repo account is
 adjusted against the balance in the investment account.
 
 In respect of Repo transactions under Liquidity Adjustment Facility
 with the RBI, monies borrowed during the year on such transactions are
 credited to REPO account from RBI. Expenditure thereon is accounted for
 as Interest Expenditure. Balance held in Repo account with RBI is not
 deducted from investment and are valued. SLR securities (including
 margin) acquired under the Reserve Bank of India (RBI)- Liquidity
 Adjustment Facility (LAF), are not treated as an eligible asset for
 maintenance of SLR.
 
 In respect of Reverse Repo Transactions under LAF with the RBI, monies
 paid during the year are debited to ‘Reverse REPO/Investment –RBI and
 reversed on maturity of the transaction. Revenue thereon is accounted
 as interest income. Balance held in Reverse Repo with RBI is included
 under investments as on the Balance Sheet date and are not valued.
 
 4.5 Accounting For Investment Transactions
 
 i) The Bank follows settlement date method of accounting its
 investments;
 
 ii) Cost is determined on weighted average cost method;
 
 iii) Profit on sale is netted with loss on sale of securities;
 
 iv) The difference between the sale/ redemption value of liquid Mutual
 Funds and the book value is treated as Profit on sale of investments.
 
 5.  FIXED ASSETS
 
 a] Fixed assets are stated at cost less accumulated depreciation and
 provision for impairment. Cost comprises of the purchase price and any
 cost attributable for bringing the asset to its working condition for
 its intended use. The carrying amounts of fxed assets are reviewed at
 each balance sheet date
 
 and adjusted for any impairment in accordance with the Accounting
 Standard 28 ( Impairment of Assets) issued in this regard by the
 Institute of Chartered Accountants of India.
 
 Capital Work-in-progress includes cost of fxed assets that are not
 ready for their intended use and also includes advances paid to acquire
 fxed assets.
 
 b] Depreciation is provided on the diminishing balance method from the
 date of addition except in case of computers /ATMs and leasehold
 improvements where the straightline method is used. The assets are
 depreciated at the rates prescribed in Schedule XIV to the Companies
 Act 1956, except in the case of computers, ATMs and leasehold
 improvements which are depreciated at the rate of 1/3rd per annum,
 1/7th per annum and over the period of the lease respectively.
 
 c] Depreciation on premises is provided for on composite cost, wherever
 the value of land and building is not separately identifed.
 
 6.  TRANSACTIONS INVOLVING FOREIGN EXCHANGE
 
 a) Transactions denominated in foreign currencies are accounted for at
 the rates prevailing on the date of the transaction. Foreign currency
 monetary assets and liabilities are translated at the balance sheet
 date at closing exchange rates notifed by Foreign Exchange Dealers
 Association of India [‘FEDAI] and the resulting Profits/losses are
 recognized in the Profit and loss account.
 
 b) Foreign Currency non-monetary items, which are carried in terms at
 historical cost, are reported using the exchange rate at the date of
 the transaction.
 
 c) Outstanding foreign exchange spot and forward contracts meant for
 trading purpose are revalued at the exchange rates specifed for spot
 and the respective forward maturities as notifed by FEDAI. The
 resulting Profit or loss is shown under Profit or Loss account.
 
 d) Foreign exchange forward contracts, which are not intended for
 trading and are outstanding at the balance sheet date, are not
 revalued. The premium or discount arising at the inception of such a
 forward exchange contract is amortized as interest expense or income
 over the period of the contract.
 
 e) Contingent liabilities denominated in foreign currency are reported
 using the FEDAI closing spot rates.
 
 7.  DERIVATIVES
 
 a) The bank enters into derivative contracts such as foreign currency
 interest rate swaps, currency swaps, currency futures, options and
 forward rate agreements.
 
 b) The income/expenses on derivative contracts classifed as hedge are
 recorded on accrual basis.
 
 c) All trading derivative contracts are marked to market and the
 resultant gains or losses are recognized in the Profit and loss account.
 
 d) All derivative transactions are classifed under contingent
 liabilities and those denominated in foreign currencies are reported
 using the FEDAI closing spot rates.
 
 8.  TRANSACTIONS INVOLVING PRECIOUS METALS
 
 a] Income from precious metals transactions is accounted for as Other
 Income. In case of metals received on consignment basis, the income
 thereon is recognized at the time of sale.
 
 b] Commodity loans to the constituents and deposits from public under
 the gold deposit scheme in the form of precious metals are translated
 at market related rates prevailing at the close of the period and shown
 under the head Advances and Deposits respectively.
 
 c] Closing stock of precious metals [own dealing] is valued at lower of
 the cost and net realizable value.
 
 d] Closing stock of gold held under Gold Deposit Scheme is valued at
 market related rates, as per RBI guidelines.
 
 9.  CASH AND BALANCES WITH RESERVE BANK OF INDIA
 
 Cash and Balance with Reserve Bank of India include cash on hand and in
 ATMs, and gold in hand and balances with RBI in current accounts.
 
 10.  EMPLOYEE BENEFITS
 
 a) The Bank has accounted for Employee Benefts as per Accounting
 Standard 15 issued by the Institute of Chartered Accountants of India.
 
 b) i) Contributions payable to Gratuity, Pension and
 
 Leave Encashment, Sick Leave, etc., which are defned benefts, based on
 actuarial valuations, at the Balance Sheet date, carried out by an
 independent actuary;
 
 ii) Contributions payable to the recognized provident fund, which is a
 defned contribution scheme; are charged to the Profit and loss account.
 
 11.  LEASE TRANSACTIONS
 
 Lease payments for assets taken on operating lease are recognized as an
 expense in the Profit and loss account on a straight-line basis over the
 lease term.
 
 12.  CONTINGENT LIABILITIES AND PROVISIONS
 
 In conformity with AS 29, Provisions, Contingent Liabilities and
 Contingent Assets, issued by the Institute of Chartered Accountants of
 India, the Bank recognizes provisions only when it has a present
 obligation as a result of a past event, it is probable that an outflow
 of resources embodying economic benefts will be required to settle the
 obligation, and when a reliable estimate of the amount of the
 obligation can be made.
 
 Past events leading to possible obligations existence of which will be
 confrmed only by the occurrence or nonoccurrence of one or more
 uncertain future events not wholly within the control of the Bank; or
 present obligations where it is not probable that an outflow of
 resources embodying economic benefts will be required to settle the
 obligation; or a reliable estimate of the amount of obligation cannot
 be made, are treated as contingent liabilities and are dealt-with in
 accordance with AS29.
 
 Contingent Assets are not recognized in the financial statements.
 
 13.  TAXES ON INCOME
 
 Income-tax expense comprises current tax [i.e. amount of tax for the
 period determined in accordance with the income-tax law] and
 deferred-tax charge or credit [refecting tax effects of timing
 differences between accounting income and taxable income for the
 period].
 
 a] Current tax is measured at the amount expected to be paid to the
 taxation authorities, using the applicable tax rates, tax laws and
 favourable judicial pronouncements / legal opinions.
 
 b] The deferred-tax charge or credit and the corresponding deferred-tax
 liabilities or assets are recognized using the tax rates that have been
 enacted or substantively enacted by the balance sheet date. Deduction
 under Section 36(1)(viii) of the Income Tax Act,1961 is considered as
 permanent difference. Deferred-tax assets are recognized keeping in
 view the consideration of prudence only to the extent there is virtual
 certainty that the assets can be realized in future.
 
 14.  EARNINGS PER SHARE
 
 Basic and diluted Earnings Per Equity Share are computed in accordance
 with Accounting Standard 20, Earnings Per Share, issued by the
 Institute of Chartered Accountants of India.