1.  BACKGROUND
 
 Development Credit Bank Limited (DCB or the Bank),
 incorporated in Mumbai, India is a publicly held banking company
 engaged in providing banking and financial services. DCB is a banking
 company governed by the Banking Regulation Act, 1949.
 
 2.  BASIS OF PREPARATION
 
 The financial statements have been prepared and presented under the
 historical cost convention on the accrual basis of accounting, unless
 otherwise stated, and comply with generally accepted accounting
 principles in India, statutory requirements prescribed under the
 Banking Regulation Act, 1949, circulars and guidelines issued by the
 Reserve Bank of India (''RBI'') from time to time and notified
 Accounting Standards by Companies (Accounting Standards) Rules, 2006,
 (as amended) to the extent applicable and current practices prevailing
 within the banking industry in India. The Accounting policies have been
 consistently applied and are consistent with those used in the previous
 year.
 
 3.  USE OF ESTIMATES
 
 The preparation of financial statements in conformity with generally
 accepted accounting principles requires management to make estimates
 and assumptions that affect the reported amounts of assets and
 liabilities and disclosure of contingent liabilities at the date of the
 financial statements and the results of operations during the reporting
 period. Although these estimates are based upon management''s best
 knowledge of current events and actions, actual results could differ
 from these estimates. Any revisions to the accounting estimates are
 recognized prospectively in the current and future periods.
 
 4.  INVESTMENTS
 
 4.1 The Investment portfolio comprising approved securities
 (predominantly Government Securities) and other securities (Shares,
 Debentures and Bonds, etc.) are classified at the time of acquisition
 in accordance with the Reserve Bank of India (RBI) guidelines under
 three categories viz. ''Held to Maturity'' (''HTM''), ''Available for
 Sale'' (''AFS'') and ''Held for Trading'' (''HFT''). For the purposes of
 disclosure in the Balance Sheet, they are classified under six groups
 viz. Government Securities, Other Approved Securities, Shares,
 Debentures & Bonds, Subsidiaries and/or Joint Ventures and Other
 Investments.
 
 4.2 Basis of Classification:
 
 Investments that are held principally for resale within 90 days from
 the date of purchase are classified as HFT securities. As per RBI
 guidelines, HFT securities, which remain unsold for a period of 90 days
 are reclassified as AFS securities as on that date.
 
 Investments which the Bank intends to hold till maturity, are
 classified as HTM securities.
 
 Investments which are not classified in the above categories, are
 classified under AFS category.
 
 4.3 Transfer of Securities between Categories:
 
 The transfer/shifting of securities between categories of investments
 is accounted as per RBI guidelines.
 
 4.4 Valuation:
 
 Held for Trading and Available for Sale categories:
 
 Investments classified as HFT and AFS are marked to market at monthly
 intervals. These securities are valued scrip-wise and any resultant
 depreciation or appreciation is aggregated for each category. The net
 depreciation for each category is provided for, whereas the net
 appreciation for each category is ignored. The book value of individual
 securities is not changed consequent to periodic valuation of
 investments.
 
 Held to Maturity:
 
 These are carried at their acquisition cost and are not marked to
 market. Any premium on acquisition is amortized over the remaining
 maturity period of the security on a straight-line basis. Provisions
 are made for diminutions other than temporary in the value of such
 investments for each investment individually.
 
 In the event provisions created on account of depreciation in the AFS
 or HFT categories are found to be in excess of the required amount in
 any year, such excess is recognized in the Profit and Loss account and
 subsequently appropriated, from profit available for appropriation, if
 any, to Investment Reserve Account in accordance with RBI guidelines
 after adjusting for income tax and appropriation to Statutory Reserve.
 
 4.5 Non-performing investments are identified and provision is made as
 per RBI guidelines.
 
 4.6 Profit/Loss on sale of investment under the aforesaid three
 categories is taken to the Profit & Loss Account. The profit on sale of
 investment in HTM category, net of taxes and transfers to Statutory
 Reserve is appropriated to Capital Reserves.
 
 For all securities other than discounted instruments, weighted average
 cost after adjusting the depreciation booked is used to compute
 profit/loss on sale. In case of discounted instruments the FIFO method
 is used for computing profit/loss on sale.
 
 4.7 Brokerage, fees, commission and broken period interest incurred at
 the time of acquisition of securities, including money market
 instruments, are recognized as expenses.
 
 5.  ADVANCES
 
 5.1 In pursuance of guidelines issued by the RBI, advances are
 classified as Standard, Sub-Standard, Doubtful and Loss Assets and are
 stated net of the required provision made on such advances.
 
 5.2 Provision for non-performing advances (''NPAs'') comprising
 sub-standard, doubtful and loss assets is made in accordance with the
 RBI guidelines which prescribes minimum provision levels and also
 encourages banks to make a higher provision based on sound commercial
 judgement. Non- performing advances are identified by periodic
 appraisals of the loan portfolio by the management. In respect of
 identified NPAs, provision is made based on the inherent risk assessed
 for the various product categories. The provisioning done is at or
 higher than the minimum prescribed under the RBI guidelines.
 
 5.3 Advances are net of bills rediscounted, claims realised from ECGC,
 provisions for non- performing advances, unrealized fees and unrealized
 interest held in suspense account.
 
 5.4 Credit facility/investment, where interest and/or installment of
 principal has remained overdue for more than 90 days, is classified as
 non-performing asset. However, in respect of Equated Monthly Instalment
 (EMI) based advances those accounts where more than 3 EMIs are overdue
 are classified as non-performing advances.
 
 5.5 In case of non performing assets other than retail EMI loans,
 recoveries effected are first adjusted towards the principal amount. In
 case of retail EMI loans, recoveries effected are adjusted towards the
 EMI and within the EMI first towards the principal amount.
 
 6.  FIXED ASSETS
 
 Premises and other fixed assets are stated at historical cost (or
 revalued amounts, as the case may be), less accumulated depreciation
 and impairment losses, if any. Cost comprises the purchase price and
 any attributable cost of bringing the asset to its working condition
 for its intended use.
 
 7.  REVALUATION OF FIXED ASSETS
 
 Portfolio of immovable properties is revalued periodically by an
 independent valuer to reflect current market valuation. All land and
 building owned by the Bank and used as branches or offices or godowns
 are grouped under Office Premises in the fixed assets category.
 Appreciation, if any, on revaluation is credited to Revaluation Reserve
 under Capital Reserves.
 
 8.  DEPRECIATION
 
 Depreciation on fixed assets, including amortisation of software, is
 charged over the estimated useful life of the fixed assets on a
 straight line basis at the rates and in the manner prescribed in
 Schedule XIV of the Companies Act, 1956, except as mentioned below:
 
 - Computer Hardware - 33.33% p.a.
 
 - ATM - 12.50% p.a.
 
 - Core Banking Software - 12.50% p.a.
 
 - Application Software & System Development Expenditure - Depending
 upon estimated useful life between 3-5 years.
 
 - Hard Furnishing - 25% p.a.
 
 - Improvements (Civil) to Leased Premises - over the contracted period
 of the lease.
 
 - Fixed Furniture in Leased Premises such as work-stations, etc. - over
 the contracted period of the lease.
 
 - Vehicle - 19% p.a. over 5 years with 5% residual value.
 
 Assets purchased/sold during the year are depreciated on a pro-rata
 basis, based on the actual number of days the asset has been put to
 use.  Assets individually costing upto Rs 5,000/- are depreciated fully
 in the year of purchase.
 
 9.  IMPAIRMENT OF ASSETS
 
 The carrying amount of assets is reviewed at each balance sheet date if
 there is any indication of impairment based on internal/external
 factors. An impairment loss is recognised wherever the carrying amount
 of an asset exceeds its recoverable amount. The recoverable amount is
 the greater of the asset''s net selling price and value in use. In
 assessing value in use, the estimated future cash flows are discounted
 to their present value using a pre-tax discount rate that reflects
 current market assessments of the time value of money and risks
 specific to the asset. After impairment, depreciation is provided on
 the revised carrying amount of the asset over remaining useful life.
 
 10.  RECOGNITION OF INCOME & EXPENDITURE
 
 10.1 Revenue is recognised to the extent that it is probable that the
 economic benefit will flow to the Bank and the revenue can be reliably
 measured.
 
 10.2 Items of income and expenditure are generally accounted on accrual
 basis, except as otherwise stated.
 
 10.3 Interest income is recognised in Profit & Loss Account on accrual
 basis, except in the case of non-performing assets where it is
 recognised as per RBI norms.
 
 10.4 Processing fees recovered on loans are recognised as income and
 processing overheads on loans are expensed at the inception of the
 loan.
 
 10.5 Overdue rent on Safe Deposit Lockers is accounted for on
 realisation.
 
 10.6 Commission on bank guarantees issued is amortised over the period
 of the guarantees.
 
 11.  FOREIGN EXCHANGE TRANSACTIONS
 
 11.1 Initial recognition:
 
 Foreign currency transactions are recorded in the reporting currency,
 by applying to the foreign currency amount the exchange rate between
 the reporting currency and foreign currency at the date of the
 transaction.
 
 11.2 Conversion:
 
 Foreign currency monetary items are reported using the closing rate
 notified by Foreign Exchange Dealers'' Association of India (FEDAI), as
 per the guidelines issued by the RBI.
 
 11.3 Exchange differences:
 
 Exchange difference arising on settlement of monetary items or on
 reporting monetary items of the Bank at rates different from those at
 which they were initially recorded during the year, or reported in
 previous financial statements, are recognised as income or as expenses
 in the year in which they arise. Non-monetary items which are carried
 in terms of historical cost denominated in a foreign currency are
 reported using the exchange rate at the date of the transaction and
 non-monetary items which are carried at fair value or other similar
 valuations denominated in a foreign currency are reported using
 exchange rates that existed when the values were determined.
 
 11.4 Outstanding forward exchange contracts, bills and foreign currency
 loans are revalued on the balance sheet date at rates notified by FEDAI
 and the resultant gain/loss on revaluation is included in the Profit
 and Loss Account.
 
 11.5 Contingent liabilities denominated in foreign currencies are
 disclosed in balance sheet date at the rates notified by FEDAI.
 
 11.6 Forward exchange contracts and other derivative contracts which
 have overdue receivables which have remained unpaid over 90 days or
 more are classified as non-performing assets and provided for as per
 the extant master circular on Prudential Norms on Income Recognition,
 Asset Classification and Provisioning issued by the RBI.
 
 12.  RETIREMENT BENEFITS OF EMPLOYEES:
 
 12.1 Provision in respect of future liability for payment of gratuity
 is made on the basis of actuarial valuation on projected unit credit
 method made at the end of the year. Gratuity is funded with the
 Gratuity Trust duly registered under the provisions of Income tax Act,
 1961. Actuarial gains/losses are immediately taken to Profit and Loss
 Account and are not deferred.
 
 12.2 Retirement benefit in the form of provident fund is a defined
 contribution scheme and the contributions are charged to the profit and
 loss account of the year when the contributions to the fund are due.
 There are no other obligations other than the contribution payable to
 the fund.
 
 13.  TAXES ON INCOME:
 
 13.1 Tax expense comprises current and deferred tax. Current income tax
 is measured at the amount expected to be paid to the tax authorities in
 accordance with the Income Tax Act, 1961 enacted in India. Deferred
 Income Tax reflects the impact of current year timing differences
 between taxable income and accounting income for the year and reversal
 of timing differences of earlier years.
 
 13.2 Deferred tax is measured based on the tax rates and the tax laws
 enacted or substantively enacted at the balance sheet date. Deferred
 tax assets and deferred tax liabilities are offset, if a legally
 enforceable right exists to set off current tax assets against current
 tax liabilities and the deferred tax assets and deferred tax
 liabilities relate to taxes levied by same governing taxation laws.
 Deferred tax assets are recognised only to the extent that there is
 reasonable certainty that sufficient future taxable income will be
 available against which such deferred tax assets can be realised. In
 situations where the Bank has unabsorbed depreciation or carry forward
 tax losses, all deferred tax assets are recognised only if there is
 virtual certainty supported by convincing evidence that they can be
 realized against future taxable profits.
 
 13.3 At each balance sheet date the Bank re-assesses unrecognized
 deferred tax assets. It recognises unrecognized deferred tax asset to
 the extent that it has become reasonably certain or virtually certain,
 as the case may be that sufficient future taxable income will be
 available against which such deferred tax assets can be realised.
 
 14.  ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT
 ASSETS:
 
 Provisions are recognised in terms of Accounting Standard-29 on
 Provisions, Contingent Liabilities and Contingent Assets issued
 by the ICAI, when there is a present legal or statutory obligation as a
 result of past events leading to probable outflow of resources, where a
 reliable estimate can be made of the amount required to to settle the
 obligation.
 
 Contingent Liabilities are recognised only when there is a possible
 obligation arising from past events due to occurrence or non-occurrence
 of one or more uncertain future events, not wholly within the control
 of the Bank, or where there is a present obligation arising from a past
 event which is not recognised as it is not probable that an outflow of
 resources will be required to settle the obligation or a reliable
 estimate of the amount of the obligation cannot be made. When there is
 a possible obligation or a present obligation in respect of which the
 likelihood of outflow of resources is remote, no provision or
 disclosure is made
 
 15.  ACCOUNTING FOR DERIVATIVE CONTRACTS:
 
 Income from derivative transactions designated as hedge is recorded on
 an accrual basis and these transactions are not marked to market.
 Derivative transactions, which are not designated as hedge, are marked
 to market as per the generally accepted practices prevalent in the
 industry.  Any resultant gain or loss is recognised in the Profit &
 Loss Account.
 
 16.  EMPLOYEE SHARE BASED PAYMENTS
 
 Measurement and disclosure of employee share-based employment plans is
 done in accordance with SEBI (Employee Stock Option Scheme and Employee
 Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
 Accounting for Employee Share-based Payments issued by the Institute of
 Chartered Accountants of India. The Bank measures compensation cost
 relating to employee stock options using the intrinsic value method.
 Compensation expense is amortised over the vesting period of the option
 on a straight line basis.
 
 17.  EARNINGS PER SHARE
 
 Basic and diluted earnings per share are computed in accordance with
 Accounting Standard 20 - Earning per share. Basic earnings per share is
 calculated by dividing the net profit or loss for the year attributable
 to equity shareholders (after deducting attributable taxes) by the
 weighted average number of equity shares outstanding during the year.
 
 For the purpose of calculating diluted earnings per share, the net
 profit or loss for the year attributable to equity shareholders and the
 weighted average number of shares outstanding during the year are
 adjusted for the effect of dilutive potential equity shares.
 
 18.  CASH AND CASH EQUIVALENTS
 
 Cash and cash equivalents include cash in hand and ATMs, balances with
 Reserve Bank of India, balances with other banks/institutions and money
 at call and short notice (including effect of changes in exchange rates
 on cash and cash equivalents in foreign currency).
 
 19.  LEASES
 
 Leases where lessor effectively retains substantially all risks and
 benefits of ownership of the leased item are classified as operating
 leases. Operating lease payments are recognised as an expense in the
 Profit and Loss account on a straight-line basis over the lease term.