Dear Shareholders,
 
 Global economy witnessed its own challenges in the year 2011 due to
 various macroeconomic environment factors.  The economy in fact has
 shown signs of recovery from the unprecedented financial crisis and the
 recovery is likely to mature over the coming years.
 
 While the dynamics of recovery shows stability, the lead indicators
 suggest that global growth may remain moderated under the impact of
 high oil and other commodity prices and also due to the monetary
 tightening in Emerging Market Economies to contain the inflationary
 pressures.  Uncertainty about the resolution of the sovereign debt
 problem in the Euro area is also a matter of concern for the economy.
 These developments increase downside risks to global growth prospects.
 
 Every year has its own challenges for the financial sector and more
 specifcally for the banking sector which is the major financial
 intermediary between savers and investors.  The immediate issue which
 the policy makers are trying to address is the problem of inflation
 which is nothing but a global phenomenon. RBI is closely monitoring and
 implementing efective measures to abate the inflationary pressures.
 
 The monetary policy stance of RBI in 2010 -11 was calibrated on the
 basis of domestic growth inflation dynamics amidst persistent global
 uncertainties. We are closely analyzing the impact of the policies of
 the government and RBI on our balance sheet and adopting strategies to
 ensure that its projected goals remain achieved.
 
 Amidst these risks, India continues to be in the fast track and
 forecasted to achieve robust economic growth. Growth of the agro based
 rural economy, financial inclusion and investment in infrastructure will
 be the key factors that will drive the economy to the targeted level of
 growth.
 
 The challenge for the Indian economy is to make its promising growth
 more inclusive. At the grass root level India still continues to be
 less developed. The benefit of the growth has to percolate to the lowest
 stratum living in the rural areas. There should be equitable
 distribution of the benefits of growth to the less privileged segments
 of the society.
 
 RBI expects the Banks to play a vital role in the financial inclusion
 whereby banking facilities should be available at afordable cost to
 each and every person in the country.  Improving the banking
 penetration and financial inclusion and reaching out to the unbanked
 villages is a social responsibility cast on the banks. And our Bank
 intends to convert this into a Profitable venture by leveraging on its
 technology
 
 I am glad to inform you that in the structural reorganization we have
 implemented recently our Bank has started an exclusive Department to
 take care of the financial inclusion and to develop specifc products
 designed to cater to the hitherto financially excluded segments.
 
 Agriculture is still the back bone of the Indian economy and
 penetrating more into this segment is indeed an attractive proposition
 for the Bank as mobilizing the rural savings which is comparatively of
 low cost, will contribute in a larger measure to the sustained growth
 in our business fgures and profitability.
 
 Our Bank is continuously upgrading its technology platform and
 leveraging on it to ofer innovative products in tune with the customer
 demand. A range of initiatives is taken by us to reduce the cost of
 banking especially to the unbanked segments of the country.
 
 Federal Bank is a leading private sector bank with dominance in Kerala
 and plans to enhance its presence in Kerala apart from making its role
 more prominent at the national level.  Recently a few new executives
 with in depth knowledge in specialized areas and international exposure
 and experience, have joined our top team. The skill levels of all the
 other executives and staf are continuously getting upgraded.
 
 With the reorganization of the way we do our work and the ushering in
 of well designed new strategies to suit the ever- changing scenario, we
 feel confdent about achievement of our corporate goals. Our new MD &
 CEO Shri.Shyam Srinivasan has settled down nicely into our environment
 and we are confdent that he would lead our top management team
 successfully into the second decade of this century, with your support
 .The unstinted support of the stakeholders
 of the Bank is of course the key to our success and with your
 wholehearted support and co-operation we will steer the Bank to better
 heights and glory in the days to come.
 
 P. C. Cyriac