1.   GENERAL
 
 BASIS OF PREPARATION
 
 The financial statements have been prepared and presented under
 historical cost convention on accrual basis of accounting unless
 otherwise stated and comply with Generally accepted accounting
 principles, statutory requirements prescribed under Banking
 Regulation Act, 1949, circulars and guidelines issued by Reserve Bank
 of India from time to time and notified accounting standards by
 companies (Accounting Standards) Rules, 2006 to the extent applicable
 and current practices in Banking Industry in India.
 
 2.  Foreign Exchange Transactions
 
 2.1 All the Monetary assets and liabilities in foreign currencies are
 translated in Indian rupees at the ex- change rates prevailing at the
 Balance Sheet date as notified by Foreign Exchange Dealers Association
 of India (FEDAI). The resultant gain / loss is accounted for in the
 Profit & Loss account.
 
 2.2 The outstanding foreign exchange contracts are stated at the
 prevailing exchange rate on the date of commitment. Profit or loss on
 such contracts is accounted for as per rates advised by FEDAI and in
 accordance with FEDAI guidelines and provisions of para 38 of AS-11.
 
 2.3 Items of Income and expenditure relating to foreign exchange
 transactions are recorded at exchange rates prevailing on the date of
 the transactions.
 
 2.4 Contingent liabilities on account of acceptances, endorsements and
 other obligations including guarantees & letter of credits in foreign
 currencies are valued as per rates published by FEDAI except Bills for
 Collection which are accounted for at the notional rates at the time of
 lodgment.
 
 3.  Investments
 
 3.1 Classification and valuation of investments are made in accordance
 with the prudential norms prescribed by Reserve Bank of India read with
 clarifications / directions given by RBI.
 
 3.2 The entire investment portfolio is classified into three
 categories, viz, Held to Maturity, Available for Sale and Held for
 Trading in line with the guidelines / directions of Reserve Bank of
 India. Disclosure of the investments under the three categories
 mentioned above is made under six classifications viz.,
 
 i.  Government Securities
 
 ii.  Other approved securities
 
 iii. Shares
 
 iv.  Debentures
 
 v.  Subsidiaries / Joint Ventures and
 
 vi.  Others
 
 3.3 Basis Of Classification:
 
 i.  Investments that the Bank intends to hold till maturity are
 classified as Held to Maturity.
 
 ii.  Investments that are held principally for resale within 90 Days
 from the date of purchase are classified as Held for Trading.
 
 iii. Investments which are not classified in the above two categories,
 are classified as Available for Sale.
 
 iv.  An investment is classified under the above three categories at
 the time of its purchase. Shifting of securities from one category to
 another is done with the approval of the Board normally once in a year.
 Shifting is effected at the lower of acquisition cost / book value /
 market value on the date of transfer and the depreciation, if any, on
 such shifting is fully provided for and the book value of securities is
 changed accordingly.
 
 3.4 Securities under ''Held to Maturity'' are stated at acquisition costs
 unless such costs are higher than the face value, in which case the
 premium is amortized over the remaining period of maturity. Such
 amortization is shown under Income on Investments- Schedule 13 item
 II. In case, the cost is less than the redemption value, the difference
 being the unrealized gain, is ignored. Any diminution in value of
 investments in subsidiaries and joint venture, other than temporary
 in nature, is provided for each investment individually
 
 3.5 Securities under ''Available for sale'' are valued scrip wise and
 depreciation/ appreciation is segregated category wise. While net
 appreciation is ignored, net depreciation under each category is
 provided for.
 
 3.6 Securities under ''Held for Trading'' are valued at market price and
 the net depreciation under each category is provided for and the net
 appreciation, if any, is ignored.
 
 3.7 Cost of investment is based on the weighted average cost method
 category wise.
 
 3.8 The ''market value'' for the purpose of valuation of investments
 included in the ''Available for Sale'' and ''Held for Trading'' categories
 is the market price of the scrip as available from the trades/quotes on
 the stock exchanges, price list of RBI, prices declared by Primary
 Dealers Association of India (PDAI) jointly with the Fixed Income Money
 Market and Derivatives Association of India (FIMMDA).
 
 3.9 In determining acquisition cost of investments:
 
 a.  Incentive received on subscription is deducted from the cost of
 securities;
 
 b.  Brokerage / commission/ stamp duty paid in connection with
 acquisition of securities are treated as revenue expenditure;
 
 c.  Broken period interest, if any, paid on acquisition of investment
 is debited to profit & loss account.  Broken period interest received
 on sale of securities is recognized as Interest Income.
 
 3.10 Profit/ Loss on sale of investments is taken to profit and loss
 account. However, in case of profit on sale of investments in ''Held to
 Maturity'' category, an equivalent amount of profit is appropriated to
 Capital Reserve.
 
 3.11 Non Performing Investments
 
 In respect of Non-Performing Securities, income is not recognized and
 appropriate provision is made for depreciation in the value of such
 securities as per Reserve Bank of India guidelines.
 
 4.  Advances
 
 4.1 Advances are classified into Performing and Non-Performing
 assets and provisions are made as per the prudential norms prescribed
 by the Reserve Bank of India. However, the Bank has made higher
 provisions for sub-standard and doubtful category as follows:
 
 Revised Rates of Provisioning for Non-Performing Assets w.e.f
 18.05.2011 are as under:
 
 */ Unsecured exposure is defined as an exposure where the realizable
 value of the security, as assessed by the bank/ approved valuers/
 Reserve Bank''s Inspecting Officers, is not more than 10 per cent,
 ab-initio, of the outstanding exposure.
 
 The revised provisioning norms will have prospective effect on the
 fresh slippage (i.e. accounts which slip into NPA category on or after
 01.01.2011) and further deterioration in the existing NPAs. However,
 the provisions already made in any existing NPA account as on
 31.12.2010 will not be reduced/reversed.
 
 4.2 Advances are stated net of de-recognized interest and provisions/
 Technical write off made in respect of non- performing advances. Claims
 received from DICGC/ CGTMSE/ ECGC are not reduced from such advances
 till adjusted/ technically written-off whereas part recovery in all NPA
 accounts is reduced from advances.
 
 4.3 Provisions on standard advances are made and are included under
 Other Liabilities and Provisions as per RBI''s guidelines.
 
 4.4 For restructured/ rescheduled advances, provisions are made in
 accordance with the guidelines issued by RBI
 
 5.  Floating Provisions
 
 In accordance with the RBI guidelines, the bank has an approved policy
 for creation and utilization of floating provisions separately for
 advances and investments. The quantum of floating provisions to be
 created would be assessed, at, the end of each financial year. The
 floating provisions would be utilized only for contingencies under
 extra ordinary circumstances specified in the policy with prior
 permission of Reserve Bank of India.
 
 6 Fixed Assets
 
 6.1 Premises and other Fixed Assets are stated at historical
 cost/revalued amount. In respect of premises, where segregation is not
 possible between land and superstructure, are considered in the value
 of super- structure.
 
 6.2 Premises taken on perpetual lease are considered as freehold
 premises and are not amortized.
 
 7 Depreciation on Fixed Assets
 
 7.1 Depreciation is provided for on -
 
 7.1.1 Computers at 33.33%, on straight-line method; additions are
 depreciated for the full year irrespective of the date of addition as
 per RBI guidelines.
 
 7.1.2 Other Fixed assets on written down value method at the rates
 prescribed by the Income Tax Act 1961; additions effected before 30th
 September are depreciated for full year and additions effected
 thereafter are depreciated for half year.
 
 7.1.3 Cost of premises is taken composite, wherever it is not possible
 to segregate the cost of land from the cost of the superstructure.
 
 7.2 No depreciation is provided on assets sold/disposed of during the
 year.
 
 7.3 Amount equivalent to depreciation attributable to revalued portion
 of the assets is transferred from Revaluation Reserve Account to the
 Profit & Loss Account.
 
 8 Revenue Recognition
 
 8.1 Income and expenditure are accounted for on accrual basis unless
 otherwise stated.
 
 8.2 Income on non-performing assets is recognized on realization basis
 in accordance with the prudential norms prescribed by Reserve Bank of
 India.
 
 8.3 Partial recovery in non-performing assets is appropriated first
 towards principal and thereafter towards interest.
 
 8.4 Income on guarantees and letters of credit issued, locker rent,
 income from merchant banking transactions, money transfer services,
 dividend on shares, Interest on refund of income tax, commission on
 credit card, interest on overdue bills, processing fee, Government
 business including distribution of pension and income from units of
 mutual fund products and income from ATM operations are accounted for
 on receipt basis.
 
 8.5 Rebate on compromised accounts is accounted for at the time of full
 and final adjustment of the account.
 
 8.6 Interest on overdue Term Deposits is provided at the rate of
 interest applicable to Savings Bank Deposits.
 
 8.7 Liability in respect of incremental lease rent on renewal of lease
 agreement is accounted for at the time of renewal of the lease.
 
 8.8 Bond Issue Expenses incurred in connection with raising Tier-II
 Capital are treated as Deferred Revenue Expenditure to be written off
 over a period of five years.
 
 8.9 Share Issue Expenses are adjusted against the Share Premium Account
 
 9 Staff Retirement Benefits
 
 9.1 Annual contribution to Gratuity Fund, Pension Fund and Leave
 Encashment Fund are provided for on the basis of an actuarial
 valuation.
 
 9.2 Transitional liability relating to Pension Fund and Sick Leave
 determined as per actuarial valuation is writ- ten off over a period of
 five years commencing from 2007-08 in terms of Revised Accounting
 Standard 15 (AS-15) as against remaining seven years out of ten years
 as approved by Reserve Bank of India vide its letter no. DBOD.BP.No.
 271/21.01.002/2005-06 dated 23.08.2005.
 
 9.3 The additional liability on account of re-opening of pension option
 for existing employees who had not opted for pension earlier as well as
 amendment in the ''Payment of Gratuity Act, 1972'' enhancing the gratuity
 limit to Rs.10 lacs as per Actuarial Valuation is amortized over a
 period of five years commencing from the FY 2010-11 in terms of RBI
 Circular DBOD No.BP.BC.80/ 21.04.018/2010-11 dated February 9, 2011.
 The unamortized expenditure carried forward does not include any amount
 relating to separated/ retired employees.
 
 9.4 The Employees joining on or after 01.04.2010 are being covered
 under the New Pension Scheme.
 
 10 Taxes on Income
 
 10.1 Current Income Tax is measured at the amount expected to be paid
 considering the applicable tax rates and favorable judicial
 pronouncement/ legal opinions.
 
 10.2 In accordance with AS-22 Deferred Tax comprising of tax effect of
 timing differences between taxable and accounting income for the
 period, is recognized keeping in view the consideration of prudence in
 respect of Deferred Tax Assets/Liabilities.