The Directors have great pleasure in presenting the Seventeenth Annual
 Report on the business and operations of your Bank together with the
 audited accounts for the year ended March 31, 2011.
 
 FINANCIAL PERFORMANCE
 
 (Rs. in crore)
 
                                             For the year ended
                                       March 31, 2011   March 31, 2010
 
 Deposits and Other Borrowings            222,980.5      180,320.1
 
 Advances                                 159,982.7      125,830.6
 
 Total Income                              24,263.4       20,155.8*
 
 Profit before Depreciation and Tax         6,316.1        4,683.5
 
 Net Profit                                 3,926.4        2,948.7
 
 Profit brought forward                     4,532.8        3,455.6
 
 Total Profit available for Appropriation   8,459.2        6,404.3
 
 Appropriations :
 
 Transfer to Statutory Reserve                981.6          737.2
 
 Transfer to General Reserve                  392.6          294.9
 
 Transfer to Capital Reserve                    0.4          199.5
 
 Transfer to / (from) Investment Fluctuation 
 Reserve                                       15.6           (1.5)
 
 Proposed Dividend                            767.6          549.3
 
 Tax Including Surcharge and Education Cess 
 on Dividend                                  124.5           91.2
 
 Dividend (including tax/cess thereon) 
 pertaining to previous year paid
 during the year                                2.7            0.9
 
 Balance carried over to Balance Sheet      6,174.2        4,532.8
 
 * Change pursuant to reclassification
 
 The Bank posted total income and net profit of Rs. 24,263.4 crore and Rs.
 3,926.4 crore respectively for the financial year ended March 31, 2011
 as against Rs. 20,155.8 crore and Rs. 2,948.7 crore respectively in the
 previous year. Appropriations from net profit have been effected as per
 the table given above.
 
 DIVIDEND
 
 Your Bank has had a consistent dividend policy that balances the dual
 objectives of appropriately rewarding shareholders through dividends
 and retaining capital, in order to maintain a healthy capital adequacy
 ratio to support future growth. It has had a consistent track record of
 moderate but steady increases in dividend declarations over its history
 with the dividend payout ratio ranging between 20% and 25%. Consistent
 with this policy, and in recognition of the overall performance during
 this financial year, your directors are pleased to recommend a dividend
 of Rs. 16.50 per share for the financial year ended March 31, 2011, as
 against Rs. 12 per share for the year ended March 31, 2010. This dividend
 shall be subject to tax on dividend to be paid by the Bank.
 
 AWARDS
 
 As in the past years, awards and recognition were conferred on your
 Bank by leading domestic and international
 
 HDFC Bank Limited Annual Report 2010-11 organizations during the fiscal
 year ended March 31, 2011.  Some of them are :
 
 - Asian Banker 2011
 
 -  Strongest Bank in the Asia Pacific region
 
 - Bloomberg UTV’s Financial Leadership Awards 2011
 
 -  Best Bank
 
 - Outlook Money 2010 Awards
 
 -  Best Bank
 
 - Businessworld Best Bank Awards 2010
 
 -  Best Bank (Large)
 
 - NDTV Business Leadership Awards 2010
 
 -  Best Private Sector Bank
 
 - IDRBT Technology 2009 Awards
 
 -  Best IT Infrastructure
 
 -  Best use of IT within the Bank
 
 - Dun & Bradstreet Banking Awards 2010
 
 -  Overall Best Bank
 
 -  Best Private Sector Bank
 
 -  Best Private Sector Bank in SME Financing
 
 - Celent’s 2010 Banking Innovation Award
 
 -  Model Bank Award
 
 - Global Finance Awards
 
 -  Best Trade Finance Provider in India for 2010
 
 - The Asset Triple A Awards
 
 -  Best Cash Management Bank in India
 
 - IDC FIIA Awards 2011
 
 -  Excellence in Customer Experience
 
 - The Banker and PWM 2010 Global Private Banking Awards
 
 -  Best Private Bank in India
 
 - IBA Banking Technology Awards 2010
 
 -  Technology Bank of the Year
 
 -  Best Online Bank
 
 -  Best Customer Initiative
 
 -  Best Use of Business Intelligence
 
 -  Best Risk Management System
 
 - Forbes Asia
 
 -  Fab 50 Companies – 5th Year in a Row
 
 -  MIS Asia IT Excellence Award 2010
 
 -  Best Bottom-Line IT Category
 
 - FE-EVI Green Business Leadership Award
 
 -  Best Performer in the Banking Category
 
 - Avaya Global Connect 2010
 
 -  Customer Responsiveness Award – Banking and Financial Services
 Category
 
 ISSUANCE OF EQUITY SHARES
 
 During the year under review, 74.8 lac shares were allotted to the
 employees of your Bank pursuant to the exercise of options under the
 Employee Stock Option Schemes of the Bank. These include the shares
 allotted under the Employee Stock Option Schemes of the erstwhile
 Centurion Bank of Punjab.
 
 The Board of Directors of your Bank considered and approved the
 sub-division (split) of one equity share of your Bank having a nominal
 value of Rs. 10 each into five equity shares of nominal value of Rs. 2
 each. The record date for the same shall be determined subsequently.
 The sub- division of shares will be subject to approval of the
 shareholders and any other statutory and regulatory approvals, as
 applicable. The stock split has been recommended with a view to make
 the stock more affordable from the retail investors’ perspective and
 thereby encourage greater participation from the retail segment.
 
 EMPLOYEE STOCK OPTIONS
 
 The information pertaining to Employee Stock Options is given in an
 annexure to this report.
 
 CAPITAL ADEQUACY RATIO
 
 Your Banks total Capital Adequacy Ratio (CAR) calculated in line with
 the Basel II framework stood at 16.2%, well above the regulatory
 minimum of 9.0%. Of this, Tier I CAR was 12.2%.
 
 SUBSIDIARY COMPANIES
 
 Your Bank has two subsidiaries, HDFC Securities Limited (HSL) and HDB
 Financial Services Limited (HDBFS).
 
 HSL is primarily in the business of providing brokerage services
 through the internet and other channels with a focus to emerge as a
 full-fledged financial services provider offering a bouquet of
 financial services along with the core broking product. The company
 continued to strengthen its distribution franchise and as on March 31,
 2011 had a network of 150 branches across the country catering to the
 needs of its customers. During the year under review, the company’s
 total income amounted to Rs. 260.5 crore as against Rs. 235.3 crore in the
 previous year. The operations resulted in a net profit after tax of Rs.
 77.2 crore.
 
 HDBFS is a non-deposit taking non-bank finance company (NBFC), the
 customer segments being addressed by HDBFS are typically underserviced
 by the larger commercial banks, and thus create a profitable niche for
 the company to operate.  Apart from lending to individuals, the company
 grants loans to small and medium business enterprises and micro small
 and medium enterprises. The principle businesses of HDBFS are as
 follows :
 
 - Loans – The company offers a range of loans in the unsecured and
 secured loans space that fulfill the financial needs of its target
 segment.
 
 - Insurance Services – HDBFS is a corporate agent for HDFC Standard
 Life Insurance Company and sells standalone insurance products as well
 as products such as Loan Cover and Asset Cover.
 
 - Collections - BPO Services – The Company runs 6 call centers with a
 capacity of over 1,500 seats. These centers cover collection
 requirements at over 100 towns through its calling and field teams.
 Currently the company has a contract with your Bank for collection
 services.
 
 As on March 31, 2011 HDBFS had 100 branches in 65 cities in order to
 distribute its products and services. During the financial year ended
 March 31, 2011 the company’s total income increased by over 80% to Rs.
 179.4 crore as compared to Rs. 97.6 crore in the previous year. During
 the same period the company’s net profit was Rs. 16.1 crore as compared
 to Rs. 9.9 crore in the previous year. During the year under review the
 loan disbursements made by HDBFS increased to Rs. 1,208 crore as compared
 to Rs. 525 crore in the previous year.
 
 In terms of the approval granted by the Government of India, the
 provisions contained under Section 212(1) of the Companies Act, 1956
 shall not apply in respect of the Bank’s subsidiaries. Accordingly, a
 copy of the balance sheet, profit and loss account, report of the Board
 of Directors and the report of the auditors of HSL and HDBFS have not
 been attached to the accounts of the Bank for the year ended March 31,
 2011.
 
 Shareholders who wish to have a copy of the annual accounts and
 detailed information on HSL and HDBFS may write to the Bank for the
 same. Further, the said documents shall also be available for
 inspection by shareholders at the registered offices of the Bank, HSL
 and HDBFS.
 
 MANAGEMENT’S DISCUSSIONS AND ANALYSIS
 
 Macro-economic and Industry Developments
 
 After a strong revival last year, the domestic growth cycle remained
 robust, extending and consolidating the recovery set forth in the
 fiscal year ended March 31, 2011. While emerging headwinds from
 tightening monetary conditions and a scale back in fiscal stimulus
 measures (put in place during the global credit crisis of the calendar
 year 2008) led to some moderation in industrial growth, service sector
 growth and agricultural performance were strong and picked up the slack
 from industry. This is likely to have pushed the headline GDP growth in
 the year ended March 31, 2011 to 8.6% from 8.0% in the previous year.
 
 Stimulus driven government spending has dissipated as a major driver of
 growth and private demand has successfully taken over. Structural
 factors such as strong rural demand, low product penetration and
 favorable demographics have remained key supports for private
 consumption. While government consumption growth is likely to have
 eased substantially from 16.4% in the fiscal year ended March 31, 2010
 to 2.6% in fiscal year ended March 31, 2011, private consumption has
 remained strong growing by 8.2% in the financial year ended March 31,
 2011 as against 7.3% a year ago.
 
 However, even as domestic consumption growth has remained robust,
 investment demand has somewhat disappointed with infrastructure project
 execution by the government remaining tardy and the corporate capital
 expenditure cycle remaining subdued. Investments are likely to have
 grown by 8.2% in the fiscal year ended March 31, 2011 against 12.2% a
 year ago and this has impinged on industrial performance. Growth in
 capital goods has fallen from 29.0% in the first half of the fiscal
 year ended March 31, 2011 to -1.3% in the second half pulling
 industrial growth lower from 10.3% in the first half of the financial
 year to 6.3% for the full year.
 
 The service sector has however remained strong with services such as
 finance, insurance, trade, transportation and communication performing
 well and taking overall service sector growth to 9.6% against 10.0% a
 year ago, despite a visible slowdown in government related services
 such as community, personal and social services. Further, a good
 monsoon season has meant that agricultural production has recovered
 from last year’s drought. Total food grain production is expected to
 grow by a strong 8.3% while agricultural growth is likely to have been
 close to 5.4% against 0.4% a year ago.  This, along with income support
 schemes by the government such as the Mahatma Gandhi National Rural
 Employment Scheme (MGNREGS) have meant that the rural economy has
 performed well and has been an active participant in domestic growth
 dynamics.
 
 While the rural sector has added to the robustness of the domestic
 growth cycle it has also contributed to the stickiness in inflationary
 pressures. Strong agricultural growth has meant that food inflation has
 cooled from 21% in June, 2010 to 9.2% in March, 2011 but the pace of
 decline has been diluted by demand-supply mismatches in specific
 categories such as protein-based food items (milk, eggs, meat, fish)
 and fruits and vegetables - an indication of rising rural incomes and
 the change in dietary patterns this entails. This has been exacerbated
 by supply chain problems and an inefficient food distribution system.
 As a result, while WPI inflation has fallen from a peak of 11.0 % in
 April, 2010 it has been slower to ease than initially anticipated
 settling in the 8.5-9.0% range in the fourth quarter of the fiscal year
 ended March 31, 2011 and averaging a rate of 9.4% in the full fiscal
 year.
 
 Domestic inflationary pressures however, are no longer driven by food
 prices alone and inflation has become more broad- based over the past
 year. Firm international commodity prices, especially items such as
 crude oil, as well as the return of pricing power amongst domestic
 manufacturing firms amidst firm demand have pushed manufactured goods
 inflation higher. Further, ‘core’ inflation or manufactured goods
 inflation net of food price effects has been rising steadily. While
 headline inflation eased from 9.0% in October, 2010 to 8.3% in
 February, 2011, core inflation has picked up from 5.0% to 6.0%.
 
 Monetary policy has, as a result, become more restrictive over the past
 year with the RBI changing policy focus from calibrating the exit from
 an accommodative stance to tackling inflation more aggressively. Policy
 rates (repo and reverse repo rate) have been hiked by 225-275 basis
 points over the last year but the effective tightening in rates has
 been far higher.  Structural pressures on banking system liquidity from
 subdued deposit growth such as leakages from the deposit base towards
 currency in circulation have meant that the monetary transmission
 mechanism has been quick. Additionally, frictional liquidity stress
 from tardy government spending has also kept liquidity under pressure
 swinging the system from a surplus of over Rs. 1,00,000 crore in March,
 2010 ( as measured by the Liquidity Adjustment Facility (LAF) reverse
 repo window) to an average deficit of a similar magnitude in March,
 2011 (as measured by the LAF repo window). A heavy government borrowing
 target of Rs. 4,37,000 crore has only exaggerated the pressure on the
 system.
 
 As a result, the effective policy rate has shifted from the reverse
 repo rate (rate consistent with surplus liquidity) to the repo rate
 (rate consistent with deficit liquidity) involving incremental
 tightening of 100-150 basis points over and above the policy rate hikes
 over the year. While short-term interest rates such as the overnight
 MIBOR has moved higher by close to 300 basis points, the yield on the
 benchmark 10-yr G-sec has increased by 15-20 basis points. Liquidity
 pressure has meant that the yield curve has flattened with the spread
 between the 10-yr G-sec and the 1-yr G-sec yields moving from 280 basis
 points to 50 basis points.
 
 Lending rates have moved higher by an average of 100-150 basis points
 as funding conditions have come under strain.  However, credit growth
 has been robust despite interest rate increases and has gathered pace
 over the year moving from 16.0% in March, 2010 to 23.0% in March, 2011.
 While infrastructure has continued to dominate credit growth in the
 past year, credit off-take has been relatively more broad-based with
 retail credit disbursements such as vehicle loans and housing loans as
 well as funding to services such as trade and Non Banking Financial
 Companies gathering ground.  Credit growth towards infrastructure
 continued to grow at last year’s level of around 40%, growth in
 personal loans accelerated sharply from 4% to 16% while the growth in
 service sector credit picked up from 15% to 24%.
 
 Deposit rates have also been hiked by an average of 150-200 basis
 points and while this has helped deposit growth move higher from a low
 of 14.0% in June, 2010 to 16.9% in March, 2011, deposit mobilization
 has been weak in the last year. Net foreign inflows into the country
 have been subdued and have been a major factor constraining money
 supply and deposit growth. Capital inflows into the country have been
 strong in the past year and are likely to have been USD 66 billion
 against USD 54 billion a year ago on the back of strong portfolio flows
 (both debt and equity), heavy external commercial borrowings and strong
 trade credit. However, the bulk of these inflows have been absorbed in
 financing a large current account deficit.  The current account gap
 over the last financial year is likely to be close to 2.5-2.8% of GDP
 or USD 48 billion leaving net foreign inflows into the country at close
 to USD 16.4 billion - just slightly higher than net inflows of USD 13.4
 billion in the previous year.
 
 That said, there have been some offsets in recent months. A recovery in
 export growth and a turn in invisibles (private transfers and service
 exports) as well as a normalization in import growth in line with
 moderating industrial momentum in the third quarter of the last fiscal
 year has meant that the current account gap has reduced from 4.3% of
 GDP in the second quarter of the last year to 2% in the third quarter.
 While the drag on foreign inflows during the last year is still
 expected to be a long term concern, the pressure on external balances
 has relatively eased in the near term.
 
 Reflecting the improvement in global growth conditions driven by fiscal
 and monetary stimulus measures, export growth in the last quarter of
 the fiscal year ended March 31, 2011 was a strong 42.0%. Growth was
 driven by categories such as engineering goods, chemicals, gems and
 jewellery and electronic goods, this has been a vital support to the
 domestic industry amidst flagging investment momentum. Import growth
 slowed down from 32.8% in the first half of the last financial year to
 10.0% in the second half, inflows from invisibles picked up pace in the
 third quarter of the fiscal year ended March 31, 2011 growing by 17.0%
 on the year against a decline of 2.6% Y-o-Y in the first half of the
 same year. The risk however is that firm global commodity prices could
 push import growth higher going ahead and the likelihood of further
 improvement in external balances is somewhat limited.
 
 (Sources : Ministry of Finance, RBI, CSO, Ministry of Commerce)
 
 Macroeconomic Risks and Concerns
 
 While the balance of risks in the last financial year were largely
 
 external, rising domestic interest rates as well as firm inflationary
 pressures have meant that domestic factors have now emerged as points
 of concern for growth in the current fiscal year. Further, the
 withdrawal of monetary and fiscal stimulus measures last year has meant
 that the domestic growth cycle is likely to be far more vulnerable to
 external shocks going ahead.
 
 Even as food inflation is likely to stabilize, firm international
 commodity prices are likely to keep manufactured goods inflation
 strong. Rising global oil prices remain a foremost risk to inflation
 and India’s fiscal and current account deficits this year. With
 uncertainty surrounding the political crisis in the Middle East and
 North Africa (MENA) region oil prices are unlikely to move to lower
 levels in a hurry. The price of crude (as measured by the India crude
 oil basket) has already spiked up by 40% on the year to USD 108 per
 barrel and the expectation is that the average price of crude oil is
 unlikely to fall below the USD 95-100 per barrel mark. It is
 anticipated that inflation is likely to average close to 8.5% in the
 fiscal year ended March 31, 2012 just slightly lower than the average
 inflation rate of 9.4% in the past year, this is likely to see the
 Reserve Bank of India (RBI) hike its repo and reverse repo rate by a
 total of 100-125 basis points this year. The risk however is that
 further escalation in oil prices and a faster than expected build up of
 inflation could push the central bank to tighten interest rates to a
 level that could impinge on private investment and leveraged consumer
 spending and constrain future growth.
 
 The government has indicated its resolve to tame its imbalances and is
 targeting a fiscal deficit of 4.6% of GDP in the current year against
 5.1% last year. It will be a challenge to achieve this target should
 key outlays such as oil, fertilizer and food subsidy payments turn out
 to be higher than budgeted. There is an additional risk that moderating
 industrial growth could dampen government revenues below budgeted
 levels. This could entail a larger government draft on the market and
 the banking system posing an upside risk to interest rates.
 
 While the fundamentals of the Indian economy remain strong, the
 domestic equity markets and for that matter fund flows into the
 domestic financial system on the whole are dependent on the
 developments in the global economy and general risk appetite to a large
 extent. Any adverse changes therefore in the global economic or
 financial environment could have a negative impact on the domestic
 markets and the availability of foreign funds. In this regard, we see a
 few risks on the global front that could adversely impact the domestic
 markets.
 
 The single largest external risk that could impact inflows into the
 country stems from the normalization in global liquidity and monetary
 conditions. The great wall of liquidity provided by accommodative
 monetary conditions in major developed economies like the United States
 of America, Japan, United Kingdom and the Euro-area have been crucial
 in driving yield seeking flows to risky assets and emerging markets
 such as India. Inflation concerns however are gradually building up and
 with global commodity prices likely to remain firm it is unlikely that
 the magnitude of liquidity pumped into the global financial system over
 the last two years will continue.
 
 However the risks to external balances are not only limited to capital
 inflows. The likelihood of firm commodity prices as well as escalating
 oil prices means that the current account deficit could come under
 stress. With foreign exchange reserves of USD 305 billion in March,
 2011 pressure on external liquidity and solvency in this event is
 unlikely to pose a serious threat to external stability in the
 near-term. However, there are implications for both exchange rate
 volatility as well as domestic liquidity. A large current account
 deficit is likely to trim net foreign inflows into the country placing
 undue depreciation pressure on the rupee and impacting domestic
 liquidity.
 
 Stress on domestic funding conditions is likely to get exacerbated by
 an oil price shock and this is likely to make for a challenging
 operating environment for the banking system.  Offsets could come from
 open market operations by the RBI which bought back government
 securities of nearly Rs. 70,000 crore in the last fiscal year but the
 strain on system liquidity could sustain.
 
 While adequate capital provisioning and stringent prudential
 regulations largely shielded the domestic banking system from the
 global crisis, some cyclical deterioration in asset quality remains a
 concern. There is some evidence, both formal and anecdotal that credit
 quality in both the retail and wholesale portfolios of banks has
 deteriorated. There is also some concern that a portion of the loans
 that banks were allowed to restructure given the sharp cyclical
 deterioration in the economy may remain impaired and will add to the
 stock of non- performing loans. Recent stress tests have revealed
 however that the banking system as a whole remains robust enough to
 withstand a sharp increase in asset quality slippages.
 
 Outlook
 
 Further withdrawal of stimulus measures-both fiscal and monetary, are
 likely to moderate headline GDP growth in the year ahead and the
 expectation is that growth is likely to soften slightly from 8.6% in
 the last year to 8.0%. Additional monetary tightening in the current
 fiscal year could curtail private investment and leveraged consumer
 spending from entirely picking up the slack from fiscal compression and
 a cut back in government spending. However, this is unlikely to detract
 from structural positives and the premium attached to India as a
 rapidly growing economy. World output is likely to grow by 3.5% in 2011
 and despite the configuration of external and domestic risks looming
 over the horizon, India is likely to continue to outperform the global
 economy by a large margin.  Pressures are likely to be cyclical and key
 structural supports from a growing rural economy, favorable
 demographics and low product penetration are likely to continue to keep
 private consumption strong. Structural positives are likely to
 therefore offset downside risks to growth and keep India an attractive
 investment destination next year.
 
 Mission and Business Strategy
 
 Your Bank’s mission is to be ‘a World Class Indian Bank’, benchmarking
 itself against international standards and best practices in terms of
 product offerings, technology, service levels, risk management and
 audit and compliance. The objective is to continue building sound
 customer franchises across distinct businesses so as to be a preferred
 provider of banking services for its target retail and wholesale
 customer segments, and to achieve a healthy growth in profitability,
 consistent with the Bank’s risk appetite. Your Bank is committed to do
 this while ensuring the highest levels of ethical standards,
 professional integrity, corporate governance and regulatory compliance.
 
 The Bank’s business strategy emphasizes the following :
 
 - Develop innovative products and services that attract its targeted
 customers and address inefficiencies in the Indian financial sector;
 
 - Increase its market share in India’s expanding banking and financial
 services industry by following a disciplined growth strategy focusing
 on balancing quality and volume growth while delivering high quality
 customer service;
 
 - Leverage its technology platform and open scaleable systems to
 deliver more products to more customers and to control operating costs;
 
 - Maintain high standards for asset quality through disciplined credit
 risk management;
 
 - Continue to develop products and services that reduce its cost of
 funds; and
 
 - Focus on healthy earnings growth with low volatility.
 
 Financial Performance :
 
 The financial performance of your Bank during the fiscal year ended
 March 31, 2011 remained healthy with total net revenues (net interest
 income plus other income) increasing by 20.3% to Rs. 14,878.3 crore from
 Rs. 12,369.5 crore in the previous financial year. Revenue growth was
 driven both by an increase in net interest income and other income. Net
 interest income grew by 25.7% primarily due to acceleration in loan
 growth to 27.1% coupled with a stable net interest margin (NIM) of 4.3%
 for the year ending March 31, 2011.
 
 From April 01, 2010 the RBI mandated that interest payable on savings
 deposits be calculated on daily average balances, this resulted in an
 increase in savings deposit costs by approximately 70-80 basis points.
 Further, due to tight liquidity conditions that were prevalent in the
 monetary system during the second half of the fiscal year ended March
 31 2011, your Bank witnessed an increase of over 200 basis points in
 its retail term deposit rates during this period. Your Bank has however
 maintained steady NIMs which are amongst the highest within its peer
 group by managing the yields across its various customer and product
 segments in line with its cost of funds.
 
 Other income grew 8.8% over that in the previous year to Rs. 4,335.2
 crore during the financial year ended March 31, 2011. This growth was
 driven primarily by an increase in fees and commissions earned and
 income from foreign exchange and derivatives, offset in part by a loss
 on sale / revaluation of investments of Rs. 52.6 crore as compared to a
 gain of Rs. 345.1 crore in the previous financial year. In the fiscal
 year ended March 31, 2011, commission income increased by 19.7% to Rs.
 3,596.7 crore with the primary drivers being commissions from the
 distribution of third party insurance and mutual funds, fees on debit
 and credit cards, transactional charges and fees on deposit accounts
 and processing fees on retail assets. The banking industry witnessed
 regulatory changes that resulted in the capping of earnings from the
 distribution of insurance products, however the increase in your Bank’s
 sales volumes partly made up for the reduction in unit commissions, as
 a result the growth in income from the distribution of third party
 products remained a healthy 28.0%. Foreign exchange and derivatives
 revenues grew by 26.2% from Rs. 623.2 crore in the previous financial
 year to Rs. 786.3 crore in the fiscal year ended March 31, 2011.
 
 Operating (non-interest) expenses grew in line with net revenues and
 increased from Rs. 5,939.8 crore in the previous financial year to Rs.
 7,152.9 crore in the year under consideration. During the year your
 Bank opened 261 new branches and over 1,200 ATMs which resulted in
 higher infrastructure and staffing expenses. In spite of that, the
 ratio of operating cost to net revenues (excluding bonds gains) for
 your Bank improved to 47.9% during the fiscal year ended March 31,
 2011, from 49.4% in the previous year.
 
 Total loan loss provisions including specific provisions for
 non-performing assets and floating provisions decreased from Rs. 1,988.9
 crore to Rs. 1,433.0 crore for the financial year ended March 31, 2011,
 on account of healthy asset quality across customer and product
 segments. Your Bank’s provisioning policies for specific loan loss
 provisions remain higher than regulatory requirements, the coverage
 ratio based on specific provisions alone without including write- offs
 technical or otherwise was 82.5% and that including general and
 floating provisions was well over 100% as on March 31, 2011. Your Bank
 has made contingent provisions on account of contingencies towards the
 loans that it has extended to micro finance institutions, in view of
 the credit concerns arising out of the disruptions in that sector. The
 Reserve Bank of India had reduced the general provisioning requirements
 for certain asset classes in May 2008, this reduced the requirements
 for general provisions for the Bank’s loan book. Your Bank however,
 continued to maintain the general provisions that were already created.
 As a result of the above, the requirement for general asset provisions
 was lower than what the Bank held on its books as on March 31, 2011 and
 the Bank did not have to make any additional general asset provisions
 on account of the increase in its loan book.
 
 Your Bank’s profit after tax increased by 33.2% from Rs. 2,948.5 crore in
 the previous financial year to Rs. 3,926.4 crore in the year ended March
 31, 2011. Return on average net worth was 16.5% while the basic
 earnings per share increased from Rs. 67.56 to Rs. 85.02 per equity share.
 
 As at March 31, 2011, your Bank’s total balance sheet size was Rs.
 277,353 crore an increase of 24.7% over Rs. 222,458 crore as at March 31,
 2010. Total Deposits increased 24.6% from Rs. 167,404 crore as on March
 31, 2010 to Rs. 208,586 crore as on March 31, 2011. Savings account
 deposits grew by 27.2% to Rs. 63,448 crore while current account deposits
 at Rs. 46,460 crore witnessed an increase of 24.8% as compared to those
 on March 31, 2010. Adjusting current account deposits for one offs at
 year end amounting to Rs. 3,700 crore the growth was 14.9%. The
 proportion of core current and savings deposits (CASA) to total
 deposits continued to be healthy at 51% as on March 31, 2011.  During
 the financial year under review, gross advances grew by 26.8% to Rs.
 161,359 crore, while system loan growth was approximately 21%. Your
 Bank’s loan growth was driven by an increase of 26.8% in retail
 advances to Rs. 80,113 crore, and an increase of 26.7% in wholesale
 advances to Rs. 81,246 crore. The Bank had a market share of 3.7% in
 total system deposits and 4.2% in total system advances. The Bank’s
 Credit Deposit (CD) Ratio was 76.7% as on March 31, 2011. Adjusted for
 overseas funding by its international operations, primarily funded from
 term borrowings, the CD Ratio was lower at 74.5%.
 
 Business Segments’ Update :
 
 Consistent with its performance in the past, in the last financial
 year, your Bank has achieved healthy growth across various operating
 and financial parameters. This performance reflected the strength and
 diversity of the Bank’s three primary business franchises - retail
 banking, wholesale banking and treasury, and of its disciplined
 approach to risk - reward management.
 
 Retail Banking
 
 Your Bank caters to various customer segments with a wide range of
 products and services. The Bank is a ‘one stop shop’ financial services
 provider of various deposit products, of retail loans (auto loans,
 personal loans, commercial vehicle loans, mortgages, business banking,
 loan against gold jewellery etc.), credit cards, debit cards,
 depository (custody services), investment advisory, bill payments and
 several transactional services. Apart from its own products, the Bank
 distributes third party financial products such as mutual funds and
 life and general insurance.
 
 The growth in your Bank’s retail banking business was robust during the
 financial year ended March 31, 2011. The Bank’s total retail deposits
 grew by over 23.3% to - 139,961 crore in the financial year ended March
 31, 2011, driven by retail savings balances which grew much faster at
 28.0% during the same period. The Bank’s retail assets grew by 26.8% to
 - 80,113 crore during the financial year ended March 31, 2011 driven
 primarily by a growth in mortgages, business banking, commercial
 vehicle loans and auto loans.
 
 Branch Banking
 
 This year your Bank expanded its distribution network from 1,725
 branches in 779 cities as on March 31, 2010 to 1,986 branches in 996
 Indian cities on March 31, 2011. The Bank’s ATMs increased from 4,232
 to 5,471 during the same period. Your Bank’s branch network is deeply
 entrenched across the country with significant density in areas
 conducive to the growth of its businesses. The Bank’s focus on
 semi-urban and under-banked markets continued, with over 70% of the
 Bank’s branches now outside the top nine Indian cities. The Bank’s
 customer base grew in line with the growth in its network and increased
 product penetration initiatives, this currently stands at 21.9 million
 customers. The average savings balance per account which is a good
 indicator of the strength of the Bank’s retail liability franchise grew
 over 17%. The Bank continues to provide unique products and services
 with customer centricity a key objective.
 
 In order to provide its customers increased choices, flexibility and
 convenience the Bank continued to make significant headway in its multi
 channel servicing strategy.  Your Bank offered its customers the use of
 ATMs, internet, phone and mobile banking in addition to its expanded
 branch network to serve their banking needs.
 
 The increase in the Bank’s debit card base this year coupled with a
 growth in its ATM network translated to an increase in ATM transactions
 by 14%. The Bank also made strong inroads in its internet banking
 channel with around 60% of its registered customers now using net
 banking facilities for their banking requirements. Your bank now offers
 phone banking in 996 locations in addition to giving its customers the
 convenience of accessing their bank accounts over their mobile phones.
 The success of the Bank’s multi-channel strategy is evidenced in the
 fact that over 80% of customer initiated transactions are serviced
 through the non-branch channels.
 
 Retail Assets
 
 Your Bank continued to grow at a healthy pace in almost all the retail
 loan products that it offers and further consolidated its position
 amongst the top retail lenders in India. The Bank grew its retail asset
 portfolio in a well balanced manner focusing on both returns as well as
 risk.  While the Bank’s auto finance business remained a key business
 driver for its retail asset portfolio, other retail loan products
 exhibited robust growth rates and good asset quality.
 
 The Bank continued its focus on internal customers for its credit cards
 portfolio. Overall credit cards remained a profitable business for your
 Bank with over 5 million cards in force as at March 2011. As part of
 its strategy to drive usage of its credit cards the Bank also has a
 significant presence in the ‘merchant acquiring’ business with the
 total number of point-of-sale (POS) terminals installed at over
 120,000.
 
 In addition to the above products the Bank does home loans in
 conjunction with HDFC Limited. Under this arrangement the Bank sells
 loans provided by HDFC Limited through its branches. HDFC Limited
 approves and disburses the loans, which are booked in their books, with
 the Bank receiving a sourcing fee for these loans. HDFC Limited offers
 the Bank an option to purchase up to 70% of the fully disbursed home
 loans sourced under this arrangement through either the issue of
 mortgage backed pass through certificates (PTCs) or by a direct
 assignment of loans; the balance is retained by HDFC Limited. Both the
 PTCs and the loans thus assigned are credit enhanced by HDFC Limited
 upto a AAA level. The Bank purchases these loans at the underlying home
 loan yields less a fee paid to HDFC Limited for the administration and
 servicing of the loans. Your Bank originated approximately an average Rs.
 700 crore of mortgages every month in the financial year ended March
 31, 2011, an increase from the Rs. 550 crore per month that it originated
 in the previous year. During the year the Bank also purchased from HDFC
 Ltd. under the “loan assignment” route approximately Rs. 4,300 crores of
 AAA credit enhanced home loans most of which qualified as priority
 sector advances.
 
 Your Bank also distributes life, general insurance and mutual fund
 products through its tie-ups with insurance companies and mutual fund
 houses. The income from these businesses continued to demonstrate
 robust growth largely due to an expanded branch network and the
 increased penetration of the Bank’s managed portfolio despite the fact
 that during the year there were regulatory changes which in some cases
 impacted the commission paid by the manufacturers of these products to
 the Bank. The success in the distribution of the above products has
 been demonstrated with the growth in the Bank’s fee income.  Third
 party distribution income contributes approximately 25% of total fee
 income.
 
 The Bank’s data warehouse, Customer Relationship Management (CRM) and
 analytics solutions have helped it target existing and potential
 customers in a cost effective manner and offer them products
 appropriate to their profile and needs. Apart from reducing costs of
 acquisition, this has also led to deepening of customer relationships
 and greater efficiency in fraud control and collections resulting in
 lower credit losses. The Bank is committed to investing in advanced
 technology in this area which will provide cutting edge in the Bank’s
 product and service offerings.
 
 Wholesale Banking
 
 The Bank provides its corporate and institutional clients a wide range
 of commercial and transactional banking products, backed by high
 quality service and relationship management. The Bank’s commercial
 banking business covers not only the top end of the corporate sector
 but also the emerging corporate segments and some small and medium
 enterprises (SMEs). The Bank has a number of business groups catering
 to various segments of its wholesale banking customers with a wide
 range of banking services covering their working capital, term finance,
 trade services, cash management, foreign exchange and electronic
 banking requirements.
 
 The business from this segment registered a healthy growth in the
 financial year ended March 31, 2011. The Bank’s wholesale deposits grew
 by around 27.4%, while wholesale advances showed a growth of over 26.7%
 both of which were significantly faster than the growth in the system
 during the same period. Your Bank provides its customers both working
 capital and term financing. The Bank witnessed an increase in the
 proportion of its medium tenor term lending, however working capital
 loans and short tenor term loans retained a large share of its
 wholesale advances. While the duration of the Bank’s term loans largely
 remained small to medium term, the Bank did witness an increase in its
 longer duration term loans, and project lending including loans to the
 infrastructure segment.
 
 During the financial year ended March 31, 2011, growth in the wholesale
 banking business continued to be driven by new customer acquisition and
 higher cross-sell with a focus on optimizing yields and increasing
 product penetration.  Your Bank’s cash management and vendor &
 distributor (supply chain) finance products continued to be an
 important contributor to growth in the corporate banking business.
 Your Bank further consolidated its position as a leading player in the
 cash management business (covering all outstation collection,
 disbursement and electronic fund transfer products across the Bank’s
 various customer segments) with volumes growing to over Rs. 30 trillion.
 The Bank also strengthened its market leadership in cash settlement
 services for major stock exchanges and commodity exchanges in the
 country. The Bank met the overall priority sector lending requirement
 of 40% of net bank credit and also strived for healthy growth in the
 sub-targets such as weaker sections, direct agriculture and the micro
 and SME segments.
 
 The Bank’s financial institutions and government business group (FIG)
 offers commercial and transaction banking products to financial
 institutions, mutual funds, public sector undertakings, central and
 state government departments.  The main focus for this segment remained
 offering various deposit and transaction banking products to this
 segment besides deepening these relationships by offering funded,
 non-funded treasury and foreign exchange products.
 
 International Operations
 
 The Bank has a wholesale banking branch in Bahrain, a branch in Hong
 Kong and two representative offices in UAE and Kenya. The branches
 offer the Bank’s suite of banking services including treasury and trade
 finance products to its corporate clients. Your Bank has built up an
 asset book over USD 1 billion through its overseas branches. The Bank
 offers wealth management products, remittance facilities and markets
 deposits to the non-resident Indian community from its representative
 offices.
 
 Treasury
 
 The treasury group is responsible for compliance with reserve
 requirements and management of liquidity and interest rate risk on the
 Bank’s balance sheet. On the foreign exchange and derivatives front,
 revenues are driven primarily by spreads on customer transactions based
 on trade flows and customers’ demonstrated hedging needs.  During the
 financial year ended March 31, 2011, revenues from foreign exchange and
 derivative transactions grew by 26.2% to Rs. 786.3 crore. These revenues
 were distributed across large corporate, emerging corporate, business
 banking and retail customer segments for plain vanilla foreign exchange
 products and across primarily large corporate and emerging corporate
 segments for derivatives.  The Bank offers Indian rupee and foreign
 exchange derivative products to its customers, who use them to hedge
 their market risks. The Bank enters into foreign exchange and
 derivative deals with counterparties after it has set up appropriate
 counterparty credit limits based on its evaluation of the ability of
 the counterparty to meet its obligations in the event of
 crystallization of the exposure. Appropriate credit covenants may be
 stipulated where required as trigger events to call for collaterals or
 terminate a transaction and contain the risk. Where the Bank enters
 into foreign currency derivative contracts with its customers it lays
 them off in the inter-bank market on a matched basis. For such foreign
 currency derivatives, the Bank does not have any open positions or
 assume any market risks but carries only the counterparty credit risk
 (where the customer has crystallized payables or mark-to-market
 losses). The Bank also deals in Indian rupee derivatives on its own
 account including for the purpose of its own balance sheet risk
 management. The Bank recognizes changes in the market value of all
 rupee derivative instruments (other than those designated as hedges) in
 the profit and loss account in the period of change. Rupee derivative
 contracts classified as hedge are recorded on an accrual basis.
 
 Given the regulatory requirement of holding government securities to
 meet the statutory liquidity ratio (SLR) requirement, your Bank
 maintains a portfolio of government securities. While a significant
 portion of these SLR securities are held in the ‘Held-to-Maturity’
 (HTM) category, some of these are held in the ‘Available for Sale’
 (AFS) category.
 
 Information Technology
 
 Since its inception, your Bank has made substantial investments in its
 technology platform and systems, built multiple distribution channels,
 including an electronically linked branch network, automated telephone
 banking, internet banking and banking through mobile phones, to offer
 its customers convenient access to various products.
 
 The Bank has templatized credit underwriting through automated customer
 data de-duplication and real-time scoring in its loan origination
 process. Having enhanced its cross selling and up-selling capabilities
 through data mining and analytical customer relationship management
 solutions, the Bank’s technology enables it to have a 360 0 view of its
 customers. Your Bank employs event detection technology based customer
 messaging and has deployed an enterprise wide data warehousing solution
 as a back bone to its business intelligence system.
 
 Implementation of a risk management engine for internet transactions
 has reduced the phishing and man in the middle attacks significantly.
 The bank has also implemented a digital certificates based security
 engine for corporate internet banking customers. Credit and debit cards
 usage of the Bank’s customers is secured by powerful proactive risk
 manager technology solutions which does rules based SMS alerts as well
 as prompts customer service representatives to call the customer on
 detecting abnormal usage behavior. This prevents frauds and minimizes
 losses to customers, if the card has been stolen and yet to be hot
 listed.
 
 Sophisticated automated switch-over and switch-back solutions power the
 Bank’s disaster recovery management strategy for key core banking
 solutions in its data center, improving availability of your Bank’s
 services to its customers.
 
 With the various initiatives that your Bank has taken using technology,
 it has been successful in driving the development of innovative product
 features, reducing operating costs, enhancing customer service delivery
 and minimizing inherent risks.
 
 Service Quality Initiatives
 
 Your Bank was one of the few banks in the country to have put in place
 a team dedicated to improve service quality through the Lean and Six
 Sigma methodologies with a focus on right origination, cost effective
 and error free operations and effective complaint resolution. The Bank
 continued driving improvements in Service Quality (SQ) initiatives
 encompassing all customer touch points namely branches, ATMs, phone
 banking, net banking, e-mail service as well as back office support
 functions impacting customer service through a dedicated Quality
 Initiatives Group (QIG) team. Some of the key elements covered by the
 QIG team are workplace management, etiquette and courtesy, lobby
 management, complaints management, management of turn-around times,
 overall customer service and compliance with the Bank’s internal
 processes as well as regulatory compliance. The group also runs
 programs such as ‘voice of the customer’ and ‘voice of the employee’
 for effective complaint resolution and process improvement.  Various
 departments of the Bank are empowered to deliver superior customer
 experience through improvements in products, processes and people
 skills. To this effect, your Bank has designed and implemented
 customized Lean Sigma Project Management (LSPM) methodology that
 incorporates the Lean philosophy into the Six Sigma framework to
 deliver faster and sustainable results clubbed with customer delight
 and improved profitability. The Bank also takes advantage of various
 information technology platforms to improve products, processes and
 services. Your Bank does not believe in designing a product and fitting
 it into the customers’ needs rather it designs products to meet
 customer needs. The Bank has always ensured that its products and
 services are delivered through processes which are in line with the
 prevalent regulatory framework and has adequate controls to safe-guard
 against possible misuse.
 
 Your Bank has taken various steps to improve the effectiveness of its
 grievance re-dressal mechanism across its delivery channels. Some key
 measures taken up by the Bank include a three layered grievance
 re-dressal mechanism, bank-wide online complaint resolution system,
 root cause remediation, customer service committees at the branch level
 and at the corporate headquarters level with representation from
 customers. The levels of customer service are periodically reviewed by
 the board of directors of the Bank.
 
 Apart from the above, your Bank continued with the ongoing service
 quality initiatives which include the audit of services as well as
 mystery shopping at various customer touch points to capture and
 improve customer experiences. Your Bank has also set up a robust
 training mechanism; both on the online platform as well as using
 conventional class room sessions, to enable its employees improve the
 quality of customer service.
 
 Risk Management and Portfolio Quality
 
 Taking on various types of risk is integral to the banking business.
 Sound risk management and balancing risk-reward trade-offs are critical
 to a bank’s success. Business and revenue growth have therefore to be
 weighed in the context of the risks implicit in the Bank’s business
 strategy. Of the various types of risks your Bank is exposed to, the
 most important are credit risk, market risk (which includes liquidity
 risk and price risk) and operational risk. The identification,
 measurement, monitoring and management of risks accordingly remain a
 key focus area for the Bank. For credit risk, distinct policies and
 processes are in place for the retail and wholesale businesses. In the
 retail loan businesses, the credit cycle is managed through appropriate
 front-end credit, operational and collection processes. For each
 product, programs defining customer segments, underwriting standards,
 security structure etc., are specified to ensure consistency of credit
 buying patterns. Given the granularity of individual exposures, retail
 credit risk is monitored largely on a portfolio basis, across various
 products and customer segments. During the financial year ended March
 31, 2008 the Bank obtained an ISO 9001:2008 certification of its retail
 asset underwriting. Last year, the second surveillance audit was
 conducted successfully at key locations and the certification was
 confirmed with no instances of non-conformity. For wholesale credit
 exposures, management of credit risk is done through target market
 definition, appropriate credit approval processes, ongoing
 post-disbursement monitoring and remedial management procedures.
 Overall portfolio diversification and reviews also facilitate
 mitigation and management.
 
 The Risk Policy and Monitoring Committee of the Board monitors the
 Bank’s risk management policies and procedures, vets treasury risk
 limits before they are considered by the Board, and reviews portfolio
 composition and impaired credits.
 
 As of March 31, 2011, the Bank’s ratio of gross non-performing assets
 (NPAs) to gross advances was 1.05%. Net non- performing assets (gross
 non-performing assets less specific loan loss provisions, Export Credit
 Guarantee Corporation (ECGC) claims received and provision in lieu of
 diminution in the fair value of restructured assets) were 0.2% of
 customer assets as of March 31, 2011. The specific loan loss provisions
 that the Bank has made for its non-performing assets continue to be
 more conservative than the regulatory requirement.
 
 In accordance with the guidelines issued by the Reserve Bank of India
 on Basel II, your Bank migrated to the standardized approach for Credit
 Risk and the Basic Indicator approach for operational risk in the
 financial year ended March 31, 2009.  Through the year, your Bank has
 been continuing work on various initiatives which would enable it to
 comply with the standards laid out for the more advanced capital
 approaches under Basel II. While the core systems which support such
 initiatives are more or less in place, the Bank has been working
 towards testing the results and fine-tuning such systems and plugging
 the gaps to meet the operational requirements for the advanced
 approaches. This is a long process, which requires not only having the
 quantitative inputs in place, but also a strong culture of risk
 management and awareness in the Bank, which rely on these inputs for
 decision making. The Bank has made reasonable progress in this regard.
 The implementation of the Basel II framework is in harmony with the
 Bank’s objective of adopting best practices in risk management.
 
 INTERNAL AUDIT AND COMPLIANCE
 
 The Bank has Internal Audit and Compliance functions which are
 responsible for independently evaluating the adequacy of all internal
 controls and ensuring operating and business units adhere to internal
 processes and procedures as well as to regulatory and legal
 requirements. The audit function also pro- actively recommends
 improvements in operational processes and service quality. To ensure
 independence, the audit department has a reporting line to the Chairman
 of the Board of Directors and the Audit and Compliance Committee of the
 Board and only a dotted line to the Managing Director. To mitigate
 operational risks, the Bank has put in place extensive internal
 controls including restricted access to the Bank’s computer systems,
 appropriate segregation of front and back office operations and strong
 audit trails. The Audit and Compliance Committee of the Board also
 reviews the performance of the audit and compliance functions and
 reviews the effectiveness of controls and compliance with regulatory
 guidelines.
 
 CORPORATE SOCIAL RESPONSIBILITY
 
 Your Bank views Corporate Social responsibility as its commitment to
 operate ethically and contributing to economic development while
 improving the quality of life of its employees as well as that of the
 local communities and society at large. Pursuing a vision towards the
 socio-economic empowerment of underprivileged and marginalized sections
 of society, the Bank reiterates its commitment to support social
 initiatives with a special focus on education and livelihood support.
 
 The major initiatives that your Bank has taken in this direction over
 the last few years cover the following areas :
 
 - Education
 
 - Livelihood training and support
 
 - Environmental sustainability
 
 - Employee welfare, health and well being
 
 - Employee engagement
 
 Education Initiatives
 
 School adoption project
 
 This is a public private partnership to ensure that children in
 municipal schools have access to quality education; the program
 provides direct learning inputs to slow learners through academic
 support centers. These centers provide children with access to concept
 based, child friendly focused teaching methods. Teachers are also
 assisted with innovative teaching methods and learning material. Your
 Bank is presently supporting seven schools in Mumbai covering 1,850
 children; in addition the Bank is working with 10 schools in Pune on a
 reading program that covers over 5,000 children.
 
 Special educational sponsorships for the girl child
 
 Girls who are at the risk of dropping out of school on account of
 affordability and poor academic performance are identified and
 supported under a special sponsorship program. This program covers
 their material needs with regard to their education as well as provides
 them with academic support.  Presently, this program covers 1,500 girls
 in Mumbai, Sheopur and Chattisgarh.
 
 Educational assistance
 
 Under this program your Bank provides education support to children who
 have dropped out of school with an aim to reintegrate them into the
 mainstream education channels.  Simultaneously, support classes are
 also conducted in high risk areas to reduce dropouts and increase the
 level of learning.  Over 1,000 children in Mumbai, Bangalore, Hyderabad
 and Kolkata are being covered through this educational assistance
 program.
 
 Pre-schools
 
 The Bank has initiated partnerships to operate pre-schools in areas
 where there is a high concentration of out of school children. These
 are focused predominantly towards first generation learners, the
 pre-primaries prepare children for schooling while at the same time
 counseling their parents on the importance of education. On completion
 of the pre-school module children are enrolled into school. Your Bank
 currently reaches out to over 9,000 children in Mumbai, Delhi and
 Hyderabad under this program.
 
 Financial Literacy
 
 We believe that by inculcating sound economic practices in rural
 children, we can tangibly demonstrate the power of the savings habit.
 This financial education program aims to inculcate practices in
 children that would over time empower them with the right decision
 making skills in terms of saving money, making financial decisions
 based on real needs, and differentiate between good and bad spending.
 Your Bank has tied up with 464 schools in Maharashtra covering over
 69,000 children through this program.
 
 Livelihood Training and Support
 
 With the economic upliftment of the underprivileged in mind, the Bank
 provides support for vocational training to individuals in order to
 enable them to have regular and sustainable income. Under this program
 your Bank supports non formal vocational and technical education
 programs in trades such as welding, plumbing, electrical maintenance,
 mobile repair, tailoring etc. We also support training courses in
 making of paper bags, gel candles, wax candles, chef caps and courses
 on physiotherapy for visually challenged candidates. Further through
 onsite skills up-gradation courses in basic trades related to the
 construction industry, we are reaching out to the unorganized sector
 and have provided training to over 2,650 youth and women.
 
 Your bank has an active lending program wherein it focusses on lending
 to customers typically below the poverty line for income generation
 purposes through the formation of self- help groups. The bank believes
 that this lending should be supported with training programs that
 nurture the appropriate skill sets as well as the provision of market
 linkages to the primary markets in order to ensure that the livelihood
 activities are sustainable.
 
 To this effect your bank conducts capacity building and training
 sessions that focus on enhancing the skills of the borrowers, some of
 these in the past have included basket weaving, agarbatti rolling etc.
 The bank also has in place a program that assists in providing market
 linkages to the self help groups so that they can sell the products
 produced at a fair price and in a hassle free manner. In addition to
 the above the bank provides counselling to all the self help groups
 that it works with on the benefits of the savings habit, wise investing
 habits etc.
 
 Environmental Sustainability
 
 Your Bank believes in taking responsibility for the effects of its
 operations in society and on the environment and this belief embodies
 its approach to the reduction of carbon emissions.  Taking forward this
 commitment the Bank has undertaken the following projects :
 
 Annual Foot-printing / Calculation of its carbon emissions
 
 The Bank has developed and put in place a template to collate and
 calculate its carbon emissions on an annual basis. This provides us
 with our emissions regarding travel, electricity, paper and other
 utilities, which then enables us to take efforts in specific areas in
 order for the Bank to reduce the impact of its operations on the
 environment.
 
 Carbon Disclosure Project
 
 The Bank has been associated with the carbon disclosure project since
 2007, adhering to their disclosure practices, each year we have strived
 to improve the quality of reporting and the number of parameters that
 go into the disclosure. In the year 2010, your Bank registered as a
 signatory to the carbon disclosure project.
 
 Carbon Management Awareness
 
 Employees are made aware of the importance of conservation of natural
 resources and smart resource management techniques through various
 e-mailers and other communications sent out periodically.
 
 Sustainability Reporting
 
 We have engaged consultants to create an in-house capability for triple
 bottom line / sustainability reporting, based on the Global Reporting
 Initiative guidelines. This is a disclosure tool used to communicate
 important information regarding the organization and its performance
 across social, environmental, and economic parameters to stakeholders.
 
 Green Initiative
 
 In line with its commitment to green and sustainable development your
 bank has followed green principles in the construction of its back
 office premises located in Mumbai.  The building core and shell has
 been designed and implemented in lines with a LEED rating of gold.
 All materials used in the construction of the interiors of the building
 conform to green norms for commercial premises. The operations of the
 premises consume less than one watt per square foot of space. Indoor
 air quality is monitored through Co2 control and sewage for the
 building is treated and recycled.
 
 Employee Health, Welfare and Well Being
 
 Your Bank has its people as one of its stated values. Keeping in line
 with this we ensure equal opportunities, living wages, social security
 and well being of our employees. Employee development is integral to
 the bank, which is achieved through a range of training and
 developmental program and activities.
 
 Employee Participation
 
 The Bank encourages employee participation at all levels to strengthen
 its corporate social responsibility initiatives as well as inculcate a
 stronger sense of ownership amongst its employees of each of these
 initiatives.
 
 Employee Payroll Giving
 
 Employees are provided with an easy and convenient system to donate
 through the employee payroll giving. The donor enjoys the flexibility
 of choice with regards to the amount that they wish to donate and the
 cause that they wish to support. The Bank adds a matching amount to the
 contribution to endorse its support to the cause chosen by the
 employees.
 
 Employee Volunteering
 
 Employees are an integral part of the Bank’s social initiatives, they
 are encouraged to participate in philanthropy work involving their time
 and skills in many possible ways.  Employees can choose NGO partners
 they would like to work with and the manner in which they would like to
 dedicate their time and skill. Your Bank’s employees have increasingly
 participated in summer camps; conducted english-speaking classes;
 collected paper waste, assisted in academic support programs, donated
 blood and so on.
 
 With its focus on creating self-reliance and promoting education in the
 interiors of the country, your Bank has been able to make meaningful
 differences a small group of individuals through its many programs.
 Going forward we would like to look at CSR not as a stand-alone
 function but as an ideology that is interwoven into every aspect of
 your Bank’s operations.
 
 FINANCIAL INCLUSION
 
 Over the last few years, your Bank has been working on a number of
 initiatives to promote Financial Inclusion across identified sections
 of rural, under-banked and un-banked consumers. These initiatives
 target segments of the population that have limited or no access to the
 formal banking system for their basic banking and credit requirements,
 by building a robust and sustainable model that provides relevant
 services and viable and timely credit that ultimately results in
 economically uplifting its customers. The Banks financial inclusion
 initiatives have been integrated across its various businesses, across
 product groups. By March 31, 2014 your Bank will endeavor to bring 10
 million households currently excluded from basic banking services under
 the fold of this program.
 
 Rural Initiative
 
 The Bank has a number of its branches in rural and under- banked
 locations. In these branches the Bank offers products and services such
 as savings, current, fixed & recurring deposits, loans, ATM facilities,
 investment products such as mutual funds and insurance, electronic
 funds transfers, drafts and remittances etc. The Bank also leverages
 some of these branches as hubs for other inclusion initiatives such as
 direct linkages to self help groups and to promote mutual guarantee
 micro-loans, POS terminals and information technology enabled kiosks,
 as well as other ICT initiatives such as mobile banking in these
 locations. The Bank covers over 4,000 villages in the country through
 various distribution set ups, these include branches and business
 correspondents. Over half of the above villages are those having a
 population of less than 2,000 that have typically been financially
 excluded from the formal banking sector.
 
 A number of retail credit products such as two-wheeler loans, car
 loans, mortgages etc. that are consumption products in urban centers
 happen to be means of income generation for rural consumers. Apart from
 loans directly linked to agriculture such as pre and post harvest
 credit, there are many other credit products that the Bank uses to aid
 financial betterment in rural locations. The Bank has extended
 provision of its retail loans to large segments of the rural population
 where the end use of the products acquired (by availing our loans) is
 used for income generating activities. For example, loans for tractors,
 commercial vehicles, two wheelers etc. supplement the farmer’s income
 by improving productivity and reducing expenses.
 
 No Frills Savings Accounts
 
 A savings account is the primary requirement for the provision of other
 banking services; the account promotes the habit of saving, provides
 security, and inculcates confidence among the target segment in the
 banking sector.
 
 The Bank provides ‘No Frills’ savings accounts through all its branches
 as a stepping stone towards financial inclusion.  These accounts are
 offered only to customers who do not have any other bank account (are
 un-banked) and who are either beneficiaries of a government welfare
 scheme or have annual incomes less than a defined threshold (constitute
 the bottom of the economic pyramid). Apart from the basic no frills
 savings account your Bank also offers these segments other accounts
 such as no frills salary accounts and limited KYC accounts.  Your Bank
 has been empanelled by the unique identification authority of India in
 444 districts of the country allowing citizens to open small savings
 accounts with your Bank in a convenient, hassle free manner at the time
 of registration for the ‘Aadhar’.
 
 Loans to Self Help Groups and Mutual Guarantee Micro loans
 
 Your Bank has been working with various non government organizations
 (appointing them as business correspondents) in order to cover a wider
 consumer base than that it could have reached through its branch
 network. The NGOs that the Bank partners work with the objective of
 providing credit for income generation activities, (often by providing
 training, vocational guidance and marketing support to their members).
 Leveraging their distribution, credit expertise and on-ground
 knowledge, the Bank funds self help groups. Over the last one year the
 Bank has accelerated its direct linkage program to self-help groups,
 under this program the Bank itself works at the grass root level with
 women in villages, conducts financial literacy programs, forms groups
 and then funds these groups for income generation activities. Till date
 the Bank has lent to over 54,000 self help groups covering
 approximately 8 lakh households. Your Bank also disburses loans to its
 rural customers under the mutual guarantee micro loan product.  This
 product works on the principle of group guarantees and provides clean
 (not backed by any collateral) loans to the borrowers based on a
 guarantee by other borrowers.
 
 Agriculture and Allied Activities
 
 A large portion of India’s un-banked population relies on agriculture
 as the main source of livelihood. We believe provision of credit to
 marginal farmers through various methods that your Bank has employed
 replaces the traditional money lending channel, while at the same time
 providing income generating activities. The Bank provides various loans
 to farmers through its suite of specifically designed products such as
 the Kisan Gold Card, tractor and cattle loans etc. In addition the Bank
 offers post-harvest cash credit, warehouse receipt financing and bill
 discounting facilities to mandi (markets for grain and other
 agricultural produce) participants and farmers.  These facilities
 enable the mandi participants to make timely payments to farmers. The
 Bank carries out this business through over 200 branches that are
 located in close proximity to mandis.
 
 The Bank targets specific sectors to capture supply chain of certain
 crops from the production stage to the sales stage. On the basis of
 these cashflows, your Bank is able to finance specific needs of the
 farmers. This is further supported by using business correspondents
 closer to their respective locations and helping them to create a
 savings and banking habit. This model has currently been implemented
 with dairy and sugarcane farmers.
 
 The initiative currently underway includes the appointment of dairy
 societies and sugarcane co-operatives as business correspondents,
 through whom the Bank opens accounts of individual farmers attached to
 these societies. The societies route all payments to the farmers
 through this account.
 
 Small and Micro Enterprises
 
 One of the means to financial inclusion is by supporting small and
 micro enterprises which in turn provide employment opportunities to the
 financially excluded. Though indirect, we believe this model may in
 many instances be more effective than providing subsidies that are
 often unsustainable, or never reach the intended beneficiary.
 
 The Bank offers complete banking solutions to micro, small and medium
 scale enterprises across industry segments including manufacturers,
 retailers, wholesalers / traders and services. The entire suite of
 financial products including cash credit, overdrafts, term loans, bills
 discounting, export packing credit, letter of credit, bank guarantees,
 cash management services and other structured products are made
 available to these customers.
 
 Gold Loans
 
 Gold loans are the simplest and most effective means of unlocking the
 value of the widest held security in India. The Bank offers loans
 against gold jewellery to its customers at interest rates that are fair
 in a quick hassle free manner. A number of these loans are availed by
 housewives, small entrepreneurs and farmers both for income generation
 activities as well as for emergency needs. This product provides
 customers with easy credit as and when they need it without their
 having to resort to loans disbursed by local money lenders typically at
 usurious rates of interest.
 
 Promoting Financial Awareness
 
 In addition to providing various products and services to the
 financially excluded, that Bank believes that imparting education and
 training to these target segments is equally essential to ensure
 transparency and create awareness. To this effect the Bank has put in
 place various training programs, these are conducted by Bank staff in
 local languages and cover not only the customers but also various
 intermediaries such as the Bank’s business correspondents. Through
 these programs the Bank provides credit counseling and information on
 parameters like savings habit, better utilization of savings, features
 of savings products, credit utilization, asset creation, insurance,
 income generation program etc.
 
 HUMAN RESOURCES
 
 The total number of employees of your bank were 55,752 as of March 31,
 2011. The Bank continued to focus on training its employees, both on -
 the - job as well as through training programs conducted by internal
 and external faculty. The Bank has consistently believed that broader
 employee ownership of its shares has a positive impact on its
 performance and employee motivation.
 
 HDFC Bank lists ‘people’ as one of its stated core values. The Bank
 believes in empowering its employees and constantly takes various
 measures to achieve this.
 
 STATUTORY DISCLOSURES
 
 The information required under Section 217(2A) of the Companies Act,
 1956 and the rules made there under as ammended, are given in the
 annexure appended hereto and forms part of this report. In terms of
 section 219(1)(iv) of the Act, the Report and Accounts are being sent
 to the shareholders excluding the aforesaid annexure. Any shareholder
 interested in obtaining a copy of the said annexure may write to the
 Company Secretary at the Registered Office of the Bank. The Bank had
 55,752 employees as on March 31, 2011. 84 employees employed throughout
 the year were in receipt of remuneration of more than Rs. 60 lacs per
 annum and 8 employees employed for part of the year were in receipt of
 remuneration of more than Rs. 5 lacs per month.
 
 The provisions of Section 217(1)(e) of the Act relating to conservation
 of energy and technology absorption do not apply to your Bank. The Bank
 has, however, used information technology extensively in its
 operations.
 
 The report on Corporate Governance is annexed herewith and forms part
 of this report.
 
 The Ministry of Corporate Affairs has issued “Corporate Governance
 Voluntary Guidelines” in December 2009. While these guidelines are
 recommendatory in nature, the Bank has adopted most of these guidelines
 as detailed in the Corporate Governance Report. The Bank will examine
 the possibilities of adopting the remaining guidelines in an
 appropriate manner.
 
 RESPONSIBILITY STATEMENT
 
 The Board of Directors hereby state that
 
 i) In the preparation of the annual accounts, the applicable accounting
 standards have been followed along with proper explanation relating to
 material departures;
 
 ii) We have selected such accounting policies and applied them
 consistently and made judgments and estimates that are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 the Bank as on March 31, 2011 and of the profit of the Bank for the
 year ended on that date;
 
 iii) We have taken proper and sufficient care for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956 for safeguarding the assets of the Bank and for
 preventing and detecting frauds and other irregularities; and
 
 iv) We have prepared the annual accounts on a going concern basis.
 
 DIRECTORS
 
 Mr. Ashim Samanta will retire by rotation at the ensuing Annual General
 Meeting and is eligible for re-appointment.
 
 Mr. C. M. Vasudev, who has been a Director of the Bank since October
 2006, has been appointed as the Chairman of the Bank with effect from
 August 26, 2010 with the approval of the
 
 Reserve Bank of India for a period of 3 years. The Reserve Bank of
 India has also granted approval for the remuneration payable to him.
 The approval of the shareholders is being sought at the ensuing Annual
 General Meeting for the appoinment of the Chairman and remuneration
 payable to him.
 
 Mr. Partho Datta, Mr. Bobby Parikh and Mr. Anami N Roy have been
 appointed as additional directors by the Board during the year and they
 shall hold office up to the conclusion of the ensuing Annual General
 Meeting. The Bank has received notices pursuant to Section 257 of the
 Companies Act, 1956 from some of its shareholders proposing the
 candidature of Mr. Partho Datta, Mr. Bobby Parikh and Mr. Anami N Roy
 as Directors of the Bank at the ensuing Annual General Meeting.
 
 Mrs. Renu Karnad retired as a Director of the Bank in July 2010 on
 completion of a tenure of eight years as permitted under the Banking
 Regulation Act, 1949. Mrs. Karnad has been re-appointed as an
 additional director in January 2011 in accordance with the relevant
 applicable guidelines of the Reserve Bank of India, subject to the
 approval of the shareholders. The Bank has received a notice pursuant
 to Section 257 of the Companies Act, 1956 from a shareholder proposing
 the candidature of Mrs. Karnad as a Director at the ensuing Annual
 General Meeting.
 
 Mr. Jagdish Capoor retired as the Chairman of the Board with effect
 from the close of business hours on July 05, 2010.  Mr. Gautam Divan
 retired as a Director of the Bank with effect from July 22, 2010 on
 attaining the age of 70 as prescribed by the Reserve Bank of India. Mr.
 Arvind Pande and Mr. Keki Mistry ceased to be directors of the Bank
 with effect from the close of business hours on January 14, 2011 and
 March 26, 2011 respectively on completing the permitted tenure of eight
 years as Directors as per the Banking Regulation Act, 1949.
 
 Your Directors would like to place on record their sincere appreciation
 of the contributions made by Mr. Jagdish Capoor, Mr. Gautam Divan, Mr.
 Arvind Pande and Mr. Keki Mistry during their tenure as Directors of
 the Bank.
 
 The brief resume / details relating to Directors who are to be
 appointed / re-appointed are furnished in the report on Corporate
 Governance.
 
 AUDITORS
 
 The Auditors, M/s. BSR & Co., Chartered Accountants will retire at the
 conclusion of the forthcoming Annual General Meeting and are eligible
 for re-appointment. Members are requested to consider their
 re-appointment on remuneration to be decided by the Audit and
 Compliance Committee of the Board.
 
 ACKNOWLEDGEMENT
 
 Your Directors would like to place on record their gratitude for all
 the guidance and co-operation received from the Reserve Bank of India
 and other government and regulatory agencies. Your Directors would also
 like to take this opportunity to express their appreciation for the
 hard work and dedicated efforts put in by the Bank’s employees and look
 forward to their continued contribution in building a World Class
 Indian Bank.
  
                                 On behalf of the Board of Directors
 
                                                       C. M. Vasudev
 Mumbai, April 18, 2011                                     Chairman