1.  We have audited the accompanying financial statements of The
 Karnataka Bank Limited as at 31st March 2012, which comprises the
 Balance Sheet as at 31st March 2012; the statement of Profit and Loss
 Account and the Cash Flow Statement for the year then ended; and a
 summary of significant Accounting Policies and other explanatory
 information.  Incorporated in these financial statements are the
 returns of 23 branches / 5 offices audited by us and 480 branches / 20
 offices audited by Branch Auditors.  The Branches audited by us and
 those audited by other auditors have been selected by the Bank in
 accordance with the guidelines issued by the Reserve Bank of India.
 
 Management''s responsibility for the Financial Statements:
 
 2.  Management is responsible for the preparation of these financial
 statements in accordance with the Banking Regulation Act, 1949. This
 responsibility includes the design, implementation and maintenance of
 internal control relevant to the preparation of the financial
 statements that are free from material misstatements, whether due to
 fraud or error.
 
 Auditor''s Responsibility:
 
 3.  Our responsibility is to express an opinion on these Financial
 Statements based on our audit. We conducted our audit in accordance
 with the Standards on Auditing issued by the Institute of Chartered
 Accountants of India. Those Standards require that we comply with the
 ethical requirements and plan and perform the audit to obtain
 reasonable assurance about whether the financial statements are free of
 material misstatements.
 
 4.  An audit involves performing procedures to obtain audit evidence
 about the amounts and disclosures in the financial statements. The
 procedures selected depend on the auditor''s judgment, including the
 assessment of the risks of material misstatement of the financial
 statements, whether due to fraud or error.
 
 In making those risk assessments, the auditor considers internal
 control relevant to the bank''s preparation and fair presentation of the
 financial statements in order to design audit procedures that are
 appropriate in the circumstances. An audit also includes evaluating the
 appropriateness of accounting policies used and the reasonableness of
 the accounting estimates made by the management, as well as evaluating
 the overall presentation of the financial statements.
 
 5.  We believe that the audit evidence we have obtained is sufficient
 and appropriate to provide a basis for our audit opinion.
 
 Opinion:
 
 6.  In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read together with the
 accounting policies and notes thereon, give the information required by
 the Banking Regulation Act, 1949 as well as the Companies Act, 1956, in
 the manner so required for the banking companies and give a true and
 fair view in conformity with the accounting principles generally
 accepted in India: (i) in the case of the Balance Sheet, of the state
 of affairs of the bank as at 31st March, 2012; (ii) in the case of the
 Profit and Loss Account, of the profits for the year ended on that
 date; and (iii) in the case of the Cash Flow Statement, of cash flows
 for the year ended on that date.
 
 Report on other legal and Regulatory requirements:
 
 7.  The Balance Sheet and the Profit and Loss Account have been drawn
 up in accordance with the provisions of section 29 of the Banking
 Regulation Act, 1949 read with section 211 of the Companies Act, 1956;
 
 8.  Subject to the limitations of the audit indicated in paragraph 1 to
 5 above, we report that: a. we have obtained all the information and
 explanations, which to the best of our knowledge and belief were
 necessary for the purposes of our audit and have found them to be
 satisfactory, b. the transactions of the Bank, which have come to our
 notice, have been within the powers of the Bank; and c. the returns
 received from the Offices and Branches of the Bank have been found
 adequate for the purposes of our audit.
 
 9.  In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement comply with the Accounting Standards referred to in
 sub-section (3C) ofSection211 of the Companies Act, 1956.
 
 10.  We further report that: (i) the Balance Sheet and Profit and Loss
 account dealt with by this report are in agreement with the books of
 accounts and returns; (ii) in our opinion, proper books of accounts as
 required by law have been kept by the bank so far as appears from our
 examination of those books; and (iii) the reports on the accounts of
 the branches audited by branch auditors have been dealt with in
 preparing our report in the manner considered necessary by us; (iv) on
 the basis of the written representation received from the directors and
 taken on record by the Board of Directors, none of the directors is
 disqualified as on March 31, 2012 from being appointed as a director in
 terms of clause (g) of sub-section (1) of section 274 of
 the Companies Act, 1956.
 
 for Vishnu Daya & Co.             for R.K. Kumar & Co.
 
 Chartered Accountants             Chartered Accountants
 
 Firm Reg. No.: 008456S            Firm Reg. No.: 001595S
 
 Sd/-                                       Sd/-
 
 Guruprasad                             B.R. Ashok
 
 Partner                                Partner
 
 M. No. 219250                          M. No. 023313
 
 Place: Mangalore 
 
 Date: May 18, 2012