1.  Basis of Preparation
 
 1.1 The financial statements have been prepared under the historical
 cost convention unless otherwise stated. They conform to Generally
 Accepted Accounting Principles (GAAP) in India, which comprises
 statutory provisions, regulatory / Reserve Bank of India (RBI)
 guidelines, Accounting Standards / Guidance Notes issued by the
 Institute of Chartered Accountants of India (ICAI) and practices
 prevalent in the banking industry in India. In respect of foreign
 offices, statutory provisions and practices prevailing in respective
 foreign countries are complied with.
 
 Use of Estimates
 
 1.2 The preparation of financial statements requires the Management to
 make estimates and assumptions which are considered in the reported
 amounts of assets and liabilities (including Contingent Liabilities) as
 of the date of the financial statements and reported income and expense
 for the reporting period. Management believes that the estimates used
 in the preparation of the financial statements are prudent and
 reasonable.  Future results could differ from these estimates.
 
 2.  Revenue Recognition and Expense Accounting
 
 2.1 Income is recognized on accrual basis on performing assets and on
 realization basis in respect of non-performing assets as per the
 prudential norms prescribed by Reserve Bank of India. Recovery in non
 performing assets is first appropriated towards interest and the
 balance, if any, towards principal, except in the case of Suit Filed
 Accounts and accounts under One Time Settlement, where it would be
 appropriated towards principal.
 
 2.2 Interest on Bills purchased/Mortgage Backed Securities, Commission
 (except on Letter of Credit / Letter of Guarantee/Government Business),
 Exchange, Locker Rent and Dividend are accounted for on realization
 basis.
 
 2.3 Income from consignment sale of precious metals is accounted for as
 Other Income after the sale is complete.
 
 2.4 Expenditure is accounted for on accrual basis, unless otherwise
 stated.
 
 2.5 In case of matured overdue Term Deposits, interest is accounted for
 as and when deposits are renewed. In respect of Inoperative Savings
 Bank Accounts, unclaimed Savings Bank accounts and unclaimed Term
 Deposits, interest is accrued as per RBI guidelines.
 
 2.6 Legal expenses in respect of Suit Filed Accounts are charged to
 Profit and Loss Account. Such amount when recovered is treated as
 income.
 
 2.7 In respect of foreign branches, Income and Expenditure are
 recognized / accounted for as per local laws of the respective
 countries.
 
 3.  Foreign Currency Transactions
 
 3.1 Accounting for transactions involving foreign exchange is done in
 accordance with Accounting Standard (AS) 11, The Effects of Changes
 in Foreign Exchange Rates, issued by The Institute of Chartered
 Accountants of India.
 
 3.2 Transaction in respect of Treasury (Foreign):
 
 a) Foreign Currency transactions except foreign currency deposits and
 lending are recorded on initial recognition in the reporting currency
 by applying to the foreign currency amount the exchange rate between
 the reporting currency and the foreign currency on the date of
 transaction. Foreign Currency deposits and lendings are initially
 accounted at the then prevailing FEDAI weekly average rate.
 
 b) Closing Balances in NOSTRO and ACU Dollar accounts are stated at
 closing rates. All foreign currency deposits and lendings including
 contingent liabilities are stated at the FEDAI weekly average rate
 applicable for the last week of each quarter. Other assets, liabilities
 and outstanding forward contracts denominated in foreign currencies are
 stated at the rates on the date of transaction.
 
 c) The resultant profit or loss on revaluation of all assets,
 liabilities and outstanding forward exchange contracts including
 contingent liabilities at year-end exchange rates advised by FEDAI is
 taken to revenue with corresponding net adjustments to Other
 Liabilities and Provisions/Other Asset Account except in case
 of NOSTRO and ACU Dollar accounts where the accounts stand adjusted at
 the closing rates.
 
 d) Income and expenditure items are translated at the exchange rates
 ruling on the date of incorporating the transaction in the books of
 accounts.
 
 3.3 Translation in respect of overseas branches:
 
 a) As stipulated in Accounting Standard 11, all overseas branches are
 treated as Non Integral Operations.
 
 b) Assets and Liabilities (including contingent liabilities) are
 translated at the closing spot rates notified by FEDAI at the end of
 each quarter.
 
 c) Income and Expenses are translated at quarterly average rate
 notified by FEDAI at the end of each quarter.
 
 d) The resulting exchange differences are not recognized as income or
 expense for the period but accumulated in a separate account Foreign
 Currency Translation Reserve till the disposal of the net
 investment.
 
 4.  Investments
 
 4.1 Investments in India are classified into Held for Trading,
 Available for Sale and Held to Maturity categories in line
 with the guidelines from Reserve Bank of India. Disclosures of
 Investments are made under six classifications viz.,
 
 a) Government Securities
 
 b) Other Approved securities including those issued by local bodies,
 
 c) Shares,
 
 d) Bonds & Debentures,
 
 e) Subsidiaries /Joint Ventures,
 
 f) Units of Mutual Funds and Others.
 
 4.2 Interest on Investments, where interest/principal is in arrears for
 more than 90 days and income from Units of Mutual Funds, is recognized
 on realisation basis as per prudential norms.
 
 4.3 Valuation of Investments is done in accordance with the guidelines
 issued by Reserve Bank of India as under:
 
 4.3.1.Individual securities under Held for Trading and 
 Available for Sale categories are marked to market at quarterly
 intervals. Central Government securities are valued at market rates
 declared by FIMMDA. Securities of State Government, other Approved
 Securities and Bonds & Debentures are valued as per the yield curve,
 credit spread rating-wise and other methodologies suggested by FIMMDA.
 Quoted equity shares are valued at market rates, Unquoted equity shares
 and units of Venture Capital Funds are valued at book value / NAV
 ascertained from the latest available balance sheets, otherwise the
 same are valued at Re.1/- per company / Fund.
 
 Treasury Bills, Commercial Papers and Certificate of Deposits are
 valued at carrying cost. Units held in Mutual fund schemes are valued
 at Market Price or Repurchase price or Net Asset Value in that order
 depending on availability.
 
 Valuation of Preference shares is made on YTM basis with appropriate
 markup over the YTM rates for Central Government Securities put out by
 the PDAI / FIMMDA periodically.
 
 Based on the above valuations under each of the six classifications,
 net depreciation, if any, is provided for and net appreciation, if any,
 is ignored. Though the book value of individual securities would not
 undergo any change due to valuation, in the books of account, the
 investments are stated net of depreciation in the balance sheet.
 
 4.3.2.Held to Maturity: Such investments are carried at
 acquisition cost/amortised cost. The excess, if any, of acquisition
 cost over the face value of each security is amortised on an effective
 interest rate method, over the remaining period of maturity.
 Investments in subsidiaries, associates and sponsored institutions and
 units of Venture capital funds are valued at carrying cost.
 
 4.4 Investments are subject to appropriate provisioning / de
 -recognition of income, in line with the prudential norms prescribed by
 Reserve Bank of India for NPA classification. Bonds and Debentures in
 the nature of advances are also subject to usual prudential norms and
 accordingly provisions are made, wherever applicable.
 
 4.5 Profit/Loss on sale of Investments in any category is taken to
 Profit and Loss account. In case of profit on sale of investments in
 Held to Maturity category, profit net of taxes is appropriated to
 Capital Reserve Account.
 
 4.6 Broken period interest, Incentive / Front-end fees, brokerage,
 commission etc. received on acquisition of securities are taken to
 Profit and Loss account.
 
 4.7 Repo / Reverse Repo transactions are accounted as per RBI
 guidelines.
 
 4.8 Investments held by overseas branches are classified and valued as
 per guidelines issued by respective overseas Regulatory Authorities.
 
 5.  Advances
 
 5.1 Advances in India have been classified as ''Standard'',
 ''Sub-standard'', ''Doubtful'' and ''Loss assets'' and provisions
 for losses on such advances are made as per prudential norms issued by
 Reserve Bank of India from time to time. In case of overseas branches,
 the classification and provision is made based on the respective
 country''s regulations or as per norms of Reserve Bank of India
 whichever is higher.
 
 5.2 Advances are stated net of provisions except general provisions for
 standard advances.
 
 6.  Derivatives
 
 6.1 The Bank enters into Derivative Contracts in order to hedge
 interest bearing assets/ liabilities, and for trading purposes.
 
 6.2 In respect of derivative contracts which are entered for hedging
 purposes, the net amount receivable / payable is recognized on accrual
 basis. Gains or losses on termination on such contracts are deferred
 and recognized over the remaining contractual life of the derivatives
 or the remaining life of the assets / liabilities, whichever is
 earlier. Such derivative contracts are marked to market and the
 resultant gain or loss is not recognized, except where the derivative
 contract is designated with an asset/ liability which is also marked to
 market, in which case, the resulting gain or loss is recorded as an
 adjustment to the market value of the underlying asset/ liability.
 
 6.3 Derivative contracts entered for trading purposes are marked to
 market as per the generally accepted practices prevalent in the
 industry and the changes in the market value are recognized in the
 profit and loss account. Income and expenses relating to these
 contracts are recognized on the settlement date. Gain or losses on
 termination of the trading derivative contracts are recorded as income
 or expenses.
 
 7.  Fixed Assets
 
 7.1 Fixed Assets except revalued premises are stated at historical
 cost.
 
 7.2 Depreciation is provided on straight-line method at the rates
 considered appropriate by the Management as under:
 
 Premises 2.50%
 
 Furniture 10%
 
 Electrical Installations, Vehicles & Office Equipments 20% Computers 33
 1/3 %
 
 Fire Extinguishers 100%
 
 Depreciation on revalued portion of the fixed assets is withdrawn from
 revaluation reserve and credited to profit and loss account.
 
 7.3 Depreciation is provided for the full year irrespective of the date
 of acquisition / revaluation.
 
 7.4 Depreciation is provided on Land and Building as a whole where
 separate costs are not ascertainable.
 
 7.5 In respect of leasehold properties, premium is amortised over the
 period of lease.
 
 7.6 Depreciation on Fixed Assets of foreign branches is provided as per
 the applicable laws/practices of the respective countries.
 
 8.  Staff Benefits
 
 8.1 Contribution to Provident Fund is charged to Profit and Loss
 Account.
 
 8.2 Provision for gratuity and pension liability is made on actuarial
 basis and contributed to approved Gratuity and Pension Fund. Provision
 for encashment of accumulated leave payable on retirement or otherwise
 is based on actuarial valuation at the year-end.  However, additional
 liability accrued during the year on account of Re-opening of pension
 option and enhancement of Gratuity limit is being amortised over a
 period of five years.
 
 8.3 In respect of overseas branches gratuity is accounted for as per
 laws prevailing in the respective countries.
 
 9.  Tax on Income
 
 This comprises provision for current tax and deferred tax charge or
 credit (reflecting the tax effects of timing differences between
 accounting income & taxable income for the period) as determined in
 accordance with Accounting Standard 22 of ICAI, Accounting for taxes on
 income. Deferred tax is recognized subject to consideration of prudence
 in respect of items of income and expenses those arise at one point of
 time and are capable of reversal in one or more subsequent periods.
 Deferred tax assets and liabilities are measured using enacted tax
 rates expected to apply to taxable income in the years in which the
 timing differences are expected to be reversed. The effect on deferred
 tax assets and liabilities of a change in tax rates is recognized in
 the income statement in the period of enactment of the change.
 
 10.  Earning per Share
 
 The Bank reports basic and diluted earnings per equity share in
 accordance with Accounting Standard - 20, Earnings Per Share, issued by
 The Institute of Char- tered Accountants of India. Basic earnings per
 equity share has been computed by dividing net profit for the year by
 the weighted average number of equity shares outstanding for the
 period. Diluted earnings per share reflect the potential dilution that
 could occur if securities or other contracts to issue equity shares
 were exercised or converted during the year. Diluted earnings per
 equity share have been computed using the weighted average number of
 equity shares and dilutive potential equity shares outstanding during
 the period except where the results are anti-dilutive.
 
 11.  Impairment of Assets
 
 The bank assesses at each balance sheet date whether there is any
 indication that an asset may be impaired.  Impairment loss, if any, is
 provided in the Profit and Loss Account to the extent the carrying
 amount of assets exceed their estimated recoverable amount.
 
 12.  Accounting for Provisions, Contingent Liabilities and Contingent
 Assets
 
 In accordance with Accounting Standard 29, Provisions, Contingent
 Liabilities and Contingent Assets, issued by the Institute of Chartered
 Accountants of India, the Bank recognizes provisions when it has a
 present obligation as a result of a past event, it is probable that an
 outflow of resources embodying economic benefits will be required to
 settle the obligation and when a reliable estimate of the amount of the
 obligation can be made.
 
 Provisions ore determined based on management estimate required to
 settle the obligation at the balance sheet date, supplemented by
 experience of similar transactions. These are reviewed at each balance
 sheet date and adjusted to reflect the current management estimates. In
 cases where the available information indicates that the loss on the
 contingency is reasonably possible but the amount of loss cannot be
 reasonably estimated, a disclosure is made in the financial statements.