1.  We have audited the attached Balance Sheet of THE FEDERAL BANK
 LIMITED, Aluva as at 31st March 2011 and also the Profit and Loss
 Account of the Bank and the Cash Flow Statement annexed thereto for the
 year ended on that date in which are incorporated the returns of 20
 branches /ofces audited by us and 737 branches / ofces audited by other
 auditors. These financial statements are the responsibility of the
 Bank''s management. Our responsibility is to express an opinion on these
 financial statements based on our audit.
 
 2.  We conducted our audit in accordance with auditing standards
 generally accepted in India. Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by the management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3.  The Balance Sheet and the Profit and Loss Account have been drawn up
 in accordance with the provisions of Section 29 of the Banking
 Regulation Act, 1949, read with Section 211 of the Companies Act, 1956.
 
 4.  We report that:
 
 a) We have obtained all the information and explanations which, to the
 best of our knowledge and belief, were necessary for the purpose of our
 audit and have found them to be satisfactory;
 
 b) In our opinion, the transactions of the Bank, which have come to our
 notice, have been within the powers of the Bank;
 
 c) The returns received from the ofces and branches of the Bank have
 been found adequate for the purposes of our audit;
 
 d) In our opinion, the Balance Sheet, the Profit and Loss Account and
 the Cash Flow Statement comply with the Accounting Standards referred
 to in sub-section (3C) of Section 211 of the Companies Act, 1956, in so
 far as they apply to banks;
 
 e) The Bank''s Balance Sheet and Profit and Loss Account dealt with by
 this report, are in agreement with the books of account and the
 returns;
 
 f) In our opinion, proper books of account as required by law have been
 kept by the Bank so far as appears from our examination of those books;
 
 g) The reports on the accounts of the branches audited by branch
 auditors have been dealt with in preparing our report in the manner
 considered necessary by us;
 
 h) As per information and explanation given to us, the Central
 Government has, till date, not prescribed any cess payable under
 Section 441A of the Companies Act,1956;
 
 i) On the basis of written representation received from the directors
 as on 31st March 2011 and taken on record by the Board of Directors,
 none of the directors is disqualifed as on 31st March 2011 from being
 appointed as a director in terms of clause (g) of sub-section (1) of
 Section 274 of the Companies Act, 1956.
 
 5.  Without qualifying our opinion, we draw attention to Note No.3 of
 Schedule 19 to the financial statements, which describes deferment of
 pension liability of the Bank to the extent of Rs. 134.72 crore pursuant
 to the approval granted by the Reserve Bank of India to the Bank vide
 letter no. DBOD.  No.BP.BC.15896/21.04.018/2010-11 dated 08.04.2011,
 for availing the exemption from application of the provisions of
 Accounting Standard (AS) 15 - Employee benefits, as provided therein.
 
 6.  In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read with the
 Accounting policies followed by the Bank and the notes thereon, give
 the information required by the Banking Regulation Act, 1949 as well as
 the Companies Act, 1956, in the manner so required for the banking
 companies and give a true and fair view in conformity with the
 accounting principles generally accepted in India:
 
 i) in the case of the Balance Sheet, of the state of afairs of the Bank
 as at 31st March 2011;
 
 ii) in the case of the Profit and Loss Account, of the Profit of the Bank
 for the year ended on that date; and
 
 iii) in the case of the Cash Flow Statement, of the cash flows of the
 Bank for the year ended on that date.
 
 For Varma and Varma                            For Price Patt & Co.,
 
 Chartered Accountants                          Chartered Accountants
 
 FRN: 004532S                                             FRN: 02783S
 
 R. Rajasekharan                                         S. Ramaswamy
 
 Partner, Membership No. 22703         Partner, Membership No. 025918
 
 Place: Kochi 
 Date: 6th May, 2011