1.  Reconciliation
 
 Reconciliation of Inter Bank and Inter Branch transactions has been
 completed up to 31.3.2013 and steps for elimination of outstanding
 entries are in progress. The management does not anticipate any
 material consequential effect on reconciliation / elimination of
 outstanding entries.
 
 2.  Investments
 
 2.1 In accordance with the Reserve Bank of India (RBI) guidelines, the
 Investments Portfolio of the Bank (domestic) has been classified into
 three categories, as given below: -
 
 2.2 SLR Securities under Held to Maturity accounted for 22.92%
 (previous year 22.54%) of Bank''s Demand and Time liabilities as at the
 end of March 2013, as against the ceiling of 25% stipulated by RBI.
 
 2.3 In respect of Held to Maturity category of Investments, premium of
 Rs.57.52 crore was amortised during the year (Previous year Rs.52.53
 crore).
 
 2.4 Securities of face value for Rs.450 crore (previous year Rs.300
 crore) towards Settlement Guarantee Fund and securities for Rs.8455
 crore (previous year Rs.8455 crore) towards collateral for borrowing
 under Collateralised Borrowing and Lending Obligations have been kept
 with Clearing Corporation of India Limited. We have placed securities
 of face value Rs.3700 crore with RBI for intraday borrowing. We have
 also placed securities to the extent of Rs.11050 crore with RBI for our
 borrowing under the LAF window. Besides, a sum of Rs.15 crore (previous
 year Rs.10 crore) have been lodged with NSCCL towards Currency
 Derivatives Segment and Rs. 15 crore (previous year Rs. 10 crore) with
 CCIL towards Default Fund for forex operations.
 
 2.5 Shares under Investments in India in Regional Rural Banks is
 Rs.222.04 crore (Previous year Rs.36.24 crore) includes amount towards
 share capital Deposits and Rs.184.75 crore towards Application money
 pending allotment of shares.
 
 2.6 The Bank sold Government Securities from HTM category during the
 year, both outright and under RBI''s Open Market Operations(OMO). The
 total notified amount of buy back was Rs.138000 crore. The extent of
 sale by the Bank was Rs.4430 crore, book value (BV) and earned a profit
 of Rs.34.55 crore. The Bank has also sold Government Securities (other
 than OMO), to the extent of Rs.1875 crore (BV) (within 5%, prescribed
 limit of RBI) and booked a profit of Rs.71.10 crore.
 
 3.  Advances
 
 3.1 The Classification for advances and provisions for possible loss
 has been made as per prudential norms issued by Reserve Bank of India.
 
 3.2 Claims pending settlement and claims yet to be lodged with
 Guarantee Institutions identified by the branches have been considered
 for provisioning requirements on the basis that such claims are valid
 and recoverable.
 
 3.3 In assessing the realisability of certain advances, the estimated
 value of security, Central Government guarantees etc. have been
 considered for the purpose of asset classification and income
 recognition.
 
 3.4 The classification of advances, as certified by the Branch Managers
 have been incorporated, in respect of unaudited branches.
 
 3.5 In compliance with RBI guidelines, Bank maintained a Counter
 Cyclical Provisioning Buffer of Rs.811.06 crore as at 31.3.2013.
 
 3.6 During the financial year full provision of Rs.227.47 crore
 computed at branch level as per IRAC norms, on secured portion of
 certain advances under doubtful category amounting to Rs. 1938.76 crore
 has been set off for partial write-off of these advances at Central
 Office, The total outstanding of these advances is Rs.2520.77 crore out
 of which the amount written off is Rs.871.15 crore.
 
 4.  Fixed Assets
 
 4.1 During the year 2008-09, certain land and buildings in India, were
 revalued through approved valuers and Rs.1123.55 crore added to the
 carrying value of assets on account of such revaluation.
 
 4.2 Profit on Sale of Assets for Rs.0.82 crore (previous year Rs.1.18
 crore), has been appropriated to Capital Reserve.
 
 5.  Rupee Interest Rate Swap
 
 An amount of Rs.3.83 crore (previous year Rs.5.92 crore) is held kept
 on deferred income on account of gains on termination of Rupee Interest
 Rate Swaps taken for hedging and would be recognized over the remaining
 contractual life of swap or life of the assets/liabilities, whichever
 is earlier.
 
 6.  Capital and Reserves:
 
 6.1 During the financial year, in March 2013, Bank raised equity share
 capital of Rs.999.99 crore (previous year Rs.1743.63 crore) including
 share premium of Rs.872.90 crore (previous year Rs.1565.38 crore) by
 way of preferential allotment of 12,70,97,102 equity shares to
 Government of India (previous year 14,73,11,388 equity shares to
 Government of India and 3,09,37,467 equity shares to LIC and its
 various schemes aggregating to 17,82,48,855 equity shares) at a premium
 of Rs.68.68 per equity share (previous year Rs.87.82 per equity share).
 Pursuant to the above the shareholding of the Government of India has
 increased from 69.62% to 73.80%.
 
 6.2 The Bank has not raised Tier II capital during the current year or
 in the previous year.
 
 7.  Taxes
 
 7.1 Taking into consideration the decisions of Appellate Authorities,
 judicial pronouncements and the opinion of tax experts, no provision is
 considered necessary in respect of disputed and other demands of income
 tax aggregating Rs.1208.42 crore (previous year Rs.592.32 crore).
 
 7.2 Tax expense for the year is Rs.180.25 crore (Previous year
 Rs.247.58 crore).
 
 8.  Unamortised Pension and Gratuity Liability
 
 On the reopening of pension to employees of Public Sector Banks and
 enhancement of Gratuity limits, the Bank incurred a liability of
 Rs.1005.21 crore in 2010-11. In terms of requirement of Accounting
 Standard (AS 15) Employee Benefits, the entire amount of Rs.1005.21
 crore is required to be charged to Profit and Loss Account.
 
 In terms of Reserve Bank of India circular No.DBOD.BP.BC.80/
 21.04.018/2010-11, on Reopening of Pension Option to employees of
 Public Sector Banks and enhancement in Gratuity limits - Prudential
 Regulatory Treatment, dated 09.02.2011, Bank would amortise the amount
 of Rs.1005.21 crore over a period of 5 years from 31.3.2011.
 Accordingly, Rs.201.04 crore (previous year Rs.201.04 crore) has been
 charged to Profit and Loss Account for the year 2012-13 and the balance
 amount of Rs.402.09 crore has been carried over.  Had the RBI not
 issued such a circular, the Revenue Reserves of the Bank would have
 been lower by Rs.402.09 crore pursuant to application of the
 requirements of AS-15.
 
 9.  Information relating to vendors registered under Micro, Small and
 Medium Enterprises Development Act, 2006 and from whom goods and
 services have been procured by the Bank, is being ascertained.
 
 ADDITIONAL DISCLOSURES
 
 In accordance with the guidelines issued by Reserve Bank of India vide
 Master Circular dated 2.7.2012, the following additional disclosures
 are made:-
 
 10.1 DISCLOSURES ON RISK EXPOSURE IN DERIVATIVES
 
 10.1.1 Qualitative Disclosure
 
 Treasury (Foreign)
 
 The Bank uses Interest Rate Swaps (IRS), Currency Swaps and Options for
 hedging purpose to mitigate interest rate risk and currency risk in
 banking book. The Bank also offers these products to corporate clients
 to enable them to manage their own currency and interest rate risk.
 Such transactions are entered only with Clients and Banks having
 agreements in place.
 
 a) The Risk Management Policy of the Bank allows using of derivative
 products to hedge the risk in Interest/ Exchange rates that arise on
 account of overseas borrowing/ FCNR(B) portfolio/ the asset liability
 mis- match, for funding overseas branches etc., and also to offer
 derivative products on back- to- back basis to customers.
 
 b) The Bank has a system of evaluating the derivatives exposures
 separately and placing appropriate credit lines for execution of
 derivative transactions duly reckoning the Net Worth and security
 backing of individual clients.
 
 c) The Bank has set in place appropriate control systems to assess the
 risks associated in using derivatives as hedge instruments and proper
 risk reporting systems are in place to monitor all aspects relating to
 derivative transactions.  The Derivative transactions were undertaken
 only with banks and counterparties well within their respective
 exposure limit approved by appropriate credit sanctioning authorities
 for each counter party.
 
 d) The Bank has set necessary limits in place for using derivatives and
 its position is continuously monitored.
 
 e) The Bank has a system of continuous monitoring and appraisal of
 resultant exposures across the administrative hierarchy for initiation
 of necessary follow up actions.
 
 f) Derivatives are used by the Bank to hedge the Bank''s Balance sheet
 and offered to select corporate clients on back-to-back basis. In
 respect of hedge transactions the value and maturity of hedges has not
 exceeded that of the underlying exposure. In respect of back-to-back
 transactions the transactions with clients are fully matched with
 counter party Bank transactions and there is no uncovered exposure.
 
 g) The income from such derivatives are amortized and taken to Profit
 and Loss Account on accrual basis over the life of the contract. In
 case of early termination of swaps undertaken for Balance Sheet
 management, income on account of such gains would be recognized over
 the remaining contractual life of the swap or life of the
 assets/liabilities whichever is lower. In case of early termination of
 derivatives undertaken for customers on a back- to- back basis, income
 on account of such things will be recognized on termination.
 
 h) All the hedge transactions are accounted on accrual basis.
 Valuations of the outstanding contracts are done on Mark to Market
 basis. The Bank has duly approved Risk Management and Accounting
 procedures for dealing in Derivatives.
 
 i) The derivative transactions are conducted in accordance with the
 extant guidelines of Reserve Bank of India.
 
 Treasury (Domestic)
 
 The Bank uses Rupee Interest Rate Swaps (IRS) for hedging purpose to
 mitigate interest rate risk in Govt. Securities and to reduce the cost
 of Subordinated Debt and term deposits. In addition, the Bank also
 enters into rupee interest rate swaps for trading purposes as per the
 policy duly approved by the Board.  Swap transactions are entered only
 with Banks having ISDA agreements in place.
 
 a) The Bank has put in place an appropriate structure and organization
 for management of risk, which includes treasury department, Asset
 Liability Management Committee and Risk Management Committee of the
 Board.
 
 b) Derivative transactions carry Market Risk (arising from adverse
 movement in interest rates), Credit risk (arising from probable counter
 party failure), Liquidity risk (arising from failure to meet funding
 requirements or execute the transaction at a reasonable price),
 Operational risk, Regulatory risk and Reputation risk. The Bank has
 laid down policies, set in place appropriate control systems to assess
 the risks associated in using derivatives and proper risk reporting and
 mitigation systems are in place to monitor all risks relating to
 derivative transactions. The IRS transactions were undertaken with only
 Banks as counter party and well within the exposure limit approved by
 the Board of Bank for each counter party.
 
 c) Derivatives are used by the Bank for trading and hedging.  The Bank
 has an approved policy in force for derivatives and has set necessary
 limits for the use of derivatives and the position is continuously
 monitored. The value and maturity of the hedges which are used only as
 back to back or to hedge Bank''s Balance Sheet has not exceeded that of
 the underlying exposure.
 
 d) The accounting policy for derivatives has been drawn up in
 accordance with RBI guidelines, as disclosed in Schedule 17-Significant
 Accounting Policies (Policy No.6)
 
 11.1.1 Provision Coverage Ratio
 
 The Provision Coverage Ratio (PCR) computed as per the RBI guidelines
 stood at 58.89% as on 31.3.2013 (67.68% as on 31.3.2012).
 
 12.1 De tails of Single Borrower Limit (SBL), Group Borrower Limit
 (GBL) exceeded by the Bank:
 
 As per RBI guidelines and terms of Loan Policy Document of our Bank for
 2012-13, the permissible level of Single Borrower exposure limit is
 Rs.2640.45 crore (15% of Capital funds) and Rs.7041.20 crore for Group
 Borrower limit (40% of Capital funds). SBL and GBL in case of overseas
 branches is USD 40 Mio and USD 60 Mio respectively.
 
 During the year 2009-10, the Bank has issued a Letter of Comfort (LOC)
 undertaking to maintain a minimum CRAR of 12% in respect of Bangkok
 branch and to arrange to convert retained earnings to capital funds
 and/ or infuse further capital in order to restore the CRAR to a
 minimum of 12% subject to approval from RBI.
 
 In the worst case scenario of the entire textile exposure of the branch
 becoming NPA, we may have to make additional provision to the extent of
 THB235.186 mio being unsecured portion of standard textile advances.
 The additional provisions have to be made from retained earnings. The
 existing retained earnings of the branch as on 31.03.2013 are at
 THB315.287 mio. Hence if this contingency arises, there would be no
 additional capital to be remitted as existing reserves are adequate to
 cover the unsecured amount.
 
 During the year 2010-11, the Bank has issued a letter of comfort
 favoring Bank Negara Malaysia. The Bank in association with other JV
 partners will provide support to India International Bank (Malaysia)
 Bhd in funding, business and other matters as and when required and
 ensure that it complies with the requirements of the Malaysian Laws,
 Regulations and Policies in the conduct of its business operations and
 management.
 
 The financial impact for the letter of undertaking issued to Bank
 Negara Malaysia is remittance of our share of 35% of the paid up
 capital of MYR310 mio ie. MYR108.500 mio. Our Bank has so remitted
 INR186,30,62,371/- towards the capital of MYR108.500 mio.
 
 13. DISCLOSURES IN TERMS OF ACCOUNTING STANDARDS
 
 13.1 Accounting Standard 9 - Revenue Recognition
 
 Revenue has been recognized as described in item No. 2 of Significant
 Accounting Policies - Schedule 17.
 
 13.2 Accounting Standard 15 - Employee Benefits
 
 i) The Bank has adopted Accounting Standard 15 (Revised) Employees
 Benefits issued by the Institute of Chartered Accountants of India,
 with effect from 1st April 2007.
 
 ii) The summarized position of Post-employment benefits and long term
 employee benefits recognized in the Profit & Loss Account and Balance
 Sheet as required in accordance with Accounting Standard-15 (Revised)
 are as under:
 
 The estimates of future salary increases, considered in actuarial
 valuation, take into account actual return on plan assets, inflation,
 seniority, promotion and other relevant factors, such as supply and
 demand in employee market.
 
 In respect of overseas branches, disclosures if any, required for
 Employee Benefit Schemes are not made in the absence of information.
 
 (b) The financial assumptions considered for the calculations are as
 under:-
 
 Discount Rate: - The discount rate has been chosen by reference to
 market yield on Government bonds as on the date of valuation. (Balance
 sheet dated 31.3.2013)
 
 Expected Rate of Return: In case of Pension the expected rate of return
 is taken on the basis of yield on Government bonds.  In case of
 gratuity, the actual return has been taken.
 
 Salary Increase: On the basis of past data.
 
 (c) Bank''s best estimate expected to be paid in the next Financial Year
 for Gratuity is 160 crore.
 
 13.3 Accounting Standard 17 - Segment Reporting
 
 The Bank has adopted Reserve Bank of India''s revised guidelines issued
 in April 2007 on Segment Reporting in terms of which the reportable
 segments have been divided into Treasury, Corporate/Wholesale Banking,
 Retail Banking and Other Banking Operations.
 
 13.4 Accounting Standard 21 - Consolidated Financial Statements (CFS)
 
 As there is no subsidiary, no consolidated financial statement is
 considered necessary.
 
 13.5 Accounting Standard 22: Accounting for Taxes on Income
 
 The Bank has accounted for reversal of Deferred Tax Liability of
 Rs.399.33 crore during the year (Previous year accounting of DTL of
 Rs.330.16 crore). The Bank has outstanding net Deferred Tax Liability
 of Rs.230.49 crore (Previous year Rs.628.96 crore). The breakup of
 deferred tax assets and liabilities into major items is given below:
 
 13.6 Accounting Standard 26 - Intangible Assets
 
 The application software in use in the Bank has been developed in-house
 and has evolved over a period of time. Hence, the costs of software is
 essentially part of Bank''s operational expenses like wages etc. and as
 such are charged to the respective heads of expenditure in the Profit
 and Loss Account.
 
 13.7 Accounting Standard 27 - Financial Reporting of Interests in Joint
 Ventures
 
 Our Bank (with 35% share) has floated a Joint Venture at Malaysia along
 with Bank of Baroda (40%) and Andhra Bank (25%). Bank Negara, the
 Central Bank of Malaysia, issued the license to the Joint Venture on
 16.04.2010. The Joint Venture was incorporated at Malaysia on
 13.08.2010 by name INDIA INTERNATIONAL BANK (MALAYSIA) BHD (IIBM).
 IIBM has an Authorised Capital of MYR500 Mio. The Joint Venture''s
 Assigned Capital is MYR310 Mio. Our Bank''s share in the Assigned up
 Capital is 35% - MYR108.50 Mio.
 
 As on 31.3.2013, Bank has paid Rs.186.31 crore towards 10850000 shares
 of MYR10 each aggregating to MYR108.50 Mio. The Joint Venture has
 commenced operations on 11.7.2012.
 
 13.8 Accounting Standard 28 - Impairment of Assets
 
 Fixed Assets owned by the Bank are treated as ''Corporate Assets'' and
 are not ''Cash Generating Units'' as defined by AS28 issued by ICAI. In
 the opinion of the Management, there is no impairment of any of the
 Fixed Assets of the Bank.
 
 13.9 Accounting Standard 29 - Provision for Contingent Liabilities and
 Contingent Assets:
 
 The guidelines issued by the Institute of Chartered Accountant of India
 in this respect have been incorporated at the appropriate places.
 
 14 Comparative Figures
 
 Previous year''s figures have been regrouped / rearranged wherever
 necessary.