1. GENERAL
 
 The accompanying financial statements have been prepared under the
 historical cost convention as modified for foreign currency
 transactions and they conform to Generally Accepted Accounting
 Principles (GAAP) in India, which comprise the statutory provisions,
 guidelines of regulatory authorities and Reserve Bank of India (RBI),
 Accounting Standards and guidance notes issued by the Institute of
 Chartered Accountants of India (ICAI) and the practices prevalent in
 the banking industry in India.
 
 2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE
 
 2.1 Monetary assets and liabilities denominated in Foreign Currencies
 are translated at the Foreign Exchange Dealers Association of India
 (FEDAI) rates prevailing on the Balance Sheet date.
 
 2.2 Guarantees / Standby Letters of Credit, Letters of Credit, Forward
 Rate Agreements, Foreign Currency Options and Forward Exchange
 Contracts are translated at FEDAI rates as on the Balance Sheet date.
 
 2.2 Income and Expenses are translated at the market exchange rates
 prevailing on the date of the respective transactions. Interest earned
 but not due on foreign currency funds deployed abroad, are translated
 at the FEDAI rates as on the balance sheet date.
 
 2.4 In accordance with the guidelines of FEDAI all outstanding forward
 exchange contracts in each currency are revalued on the Balance Sheet
 date at the corresponding forward rates for the respective maturity of
 the contract. The difference between revalued amount and the contracted
 amount is recognized as profit or loss, as the case may be.
 
 2.5 Premium received / paid on outstanding currency options has been
 accounted for as per FEDAI guidelines.
 
 3. INVESTMENTS - Domestic
 
 Investments are accounted for in accordance with the extant regulatory
 guidelines. The Bank has changed (w.e.f.) 01.01.2011 the method of
 accounting of investments from Trade Date to Settlement Date
 method.
 
 3.1 Classification
 
 Investments are classified into three categories namely: Held to
 Maturity, Available for Sale and Held for Trading.  Investments are
 further classified into the following six
 
 groups in the balance sheet:
 
 (i) Government Securities, (ii) Other Approved Securities, (iii)
 Shares, (iv) Debentures and Bonds, (v) Subsidiaries / Joint Ventures
 and (vi) Others (CPs, Mutual Funds, Units, etc.)
 
 3.2 Basis of Classification
 
 Investments that the Bank intends to hold till maturity are classified
 as Held to Maturity.
 
 Investments that are held principally for resale within 90 days from
 the date of purchase are classified as Held for Trading.
 
 Investments that are not classified in the above two categories are
 classified as Available for Sale.
 
 An investment is classified as Held to Maturity, Available for Sale
 or Held for Trading at the time of its purchase and subsequent shift
 amongst categories is done in conformity with Regulatory Guidelines.
 
 3.3 Valuations and Accounting
 
 (i) In determining the cost of an investment:
 
 (a) Brokerage / commission received on subscription is reduced from the
 cost.
 
 (b) Brokerage / commission etc., paid in connection with the
 acquisition of investments is charged to revenue and not included in
 cost.
 
 (c) Broken period interest paid / received on debt instruments is
 treated as interest expended / income and is not included in cost /
 sale consideration.
 
 (d) Cost is determined on the weighted average cost method.
 
 (e) The transfer of a security amongst the above three categories is
 accounted for at the least of the acquisition cost / book value /
 market value on the date of transfer and the depreciation, if any, on
 such transfer is fully provided for.
 
 (ii) Held to Maturity categories:
 
 Each security is carried at acquisition cost or at amortized cost, if
 acquired at a premium over the face value. Any premium on acquisition
 is amortized over the remaining maturity period of the security on
 constant yield basis. Such amortization of premium is adjusted against
 income under the head Interest on investments.
 
 Profit on sale / redemption of securities is recognized as income and
 appropriated to Capital Reserve net of taxes and mandatory transfer to
 statutory reserves.
 
 (iii) Available for Sale and Held for Trading categories:
 
 (a) The value of investments held under the Available For Sale category
 is determined as per Reserve bank of India guidelines as under:
 
 - Central Government Securities: Marked to market on the basis of
 prices declared for the purpose of valuation jointly by Fixed Income
 Money Market and Derivatives Association of India (FIMMDA) and Primary
 Dealers Association of India (PDAI).
 
 - State Government Securities and Other Trustee Securities: Marked to
 market on the basis of prices derived out of the yield for respective
 maturities declared for the purpose of valuation jointly by FIMMDA and
 PDAI.
 
 - Shares: Wherever Stock Exchange quotations are available valuation is
 done as per lower of the quotations in Bombay Stock Exchange or
 National Stock Exchange. Wherever current quotations are not available
 and in respect of unquoted shares (i) Valuation is as per Book Value
 (without considering Revaluation Reserves, if any) ascertained from the
 latest Balance Sheet of the Company (which is not more than one year
 prior to the date of valuation) (ii) In case the latest Balance Sheet
 is not available, the shares are valued at Re. 1.00 per Company.
 
 - Bonds & Debentures: Valued on the YTM method for the respective
 maturity and rating put out by FIMMDA and PDAI.
 
 - Mutual Fund Units: Quoted Mutual Fund Units are valued as per Net
 Asset Value as declared by the Mutual Fund.
 
 - Treasury Bills, Certificates of Deposits and Commercial Papers are
 valued at carrying cost.
 
 - Preference Shares are valued at lower of market value determined on
 YTM basis and its redemption value.
 
 (b) Each security in the above two categories is revalued at the market
 price or fair value determined as per Regulatory Guidelines and only
 the net depreciation of each group for each category is provided for
 and net appreciation is ignored. On provision for depreciation, the
 book value of the individual securities remains unchanged after marking
 to market.
 
 (iv) Security receipts issued by an Asset Reconstruction Company (ARC)
 are valued in accordance with the guidelines applicable for Non-SLR
 investments.
 
 (v) Investments are classified as performing and non- performing based
 on the following guidelines issued by the RBI.
 
 (a) Interest / Instalment (including maturity proceeds) is due and
 remains unpaid for more than 90 days.
 
 (b) In the case of equity shares, in the event of the nvestment in the
 share of any company is valued at Re. 1.00 per company on account of
 the non-availability of the latest balance sheet, those equity shares
 would be reckoned as NPI.
 
 (c) If any credit facility availed by the issuer is NPA in the books of
 the Bank, investment in any of the securities issued by the same issuer
 would also be treated as NPI and vice versa.
 
 (d) The above would apply mutatis mutandis to preference shares where
 the fixed dividend is not paid.
 
 (e) The investments in debentures / bonds, which are deemed to be in
 the nature of advance, are also subjected to NPI norms as applicable to
 investments.
 
 (vi) The Bank has adopted the Uniform Accounting Procedure prescribed
 by the RBI for accounting of Repo and Reverse Repo transactions.
 
 3.4 Interest Rate Swaps and Forward Rate Agreements
 
 (a) Interest Rate Swaps and Forward Rate Agreements have been
 undertaken for hedging purposes only and hence the cash flows are
 accounted on accrual basis and the balances are carried at Notional
 Principal Value.
 
 (b) When a hedge becomes naked in part or full owing to shrinking
 portfolio, and if allowed to continue till maturity, it is marked to
 market at regular intervals.
 
 (c) The periodical net cash flows arising out of Interest Rate Swaps in
 domestic currency are booked as income / expenditure.
 
 (d) The periodical net cash flows arising out of Interest Rate Swaps in
 foreign currency are booked as income / expenditure and form part of
 the exchange position in Forex transactions.
 
 (e) The Forward Rate Agreements in foreign currency are valued at FEDAI
 rate prevailing on the Balance Sheet date and the outstanding position
 is shown under Contingent liabilities.
 
 (f) Gain / Loss arising out of swap transactions in respect of Tier I /
 II bonds, is computed separately. Losses, if any, are fully provided
 for. Gains on reset or sale is recognized as Income and appropriated to
 Special Reserve net of taxes and mandatory transfer to statutory
 reserve.
 
 3.5 Non-Performing Investments
 
 All such securities where repayment of principal or interest not
 serviced within 90 days from the due date are classified as
 Non-performing Investments, except securities guaranteed by the Central
 Government, which is, treated as performing investments notwithstanding
 arrears of principal / interest payments. In respect of investments
 classified as Non-performing, appropriate provisions are made for the
 depreciation in the value. The depreciation requirement in respect of
 these securities is not set off against appreciation in respect of
 other performing securities.
 
 4. ADVANCES
 
 4.1 All advances have been classified under four categories i.e., (i)
 Standard Assets (ii) Sub-Standard Assets (iii) Doubtful Assets and (iv)
 Loss Assets as per RBI directives / guidelines.
 
 4.2 Advances shown in the Balance Sheet are net of:
 
 (a) Provision made on Non-Performing Assets (NPA)
 
 (b) Uncollected Interest Income in respect of NPA
 
 (c) Bills rediscounted with IDBI / SIDBI
 
 (d) Claims received
 
 (e) Diminution in fair value of Restructured Assets
 
 (f) Technical write-off
 
 (g) Inter-Bank Participations with Risk sharing
 
 4.3 Provision on advances have been made in accordance with RBI
 guidelines / directives as under:
 
 (a) For Standard Assets:
 
 (i) 0.25% on direct advance to agriculture and SME sectors
 
 (ii) 1.00% on advances to commercial real estate.
 
 (iii) 2.00% on Teaser Home Loans
 
 (iv) 0.40% on all other advances
 
 (b) For all Non-Performing Assets (NPA): 
 
 (i) Sub-standard Assets:
 
 (a) A general provision of 10%
 
 (b) Additional provision of 10% for exposures, which are unsecured
 ab-initio (where realizable value of security is not more than 10%
 ab-initio)
 
 (ii) Doubtful assets at 20%, 30% or 100% of the secured portion based
 on the number of years the account remained as Doubtful Asset and at
 100% of the unsecured portion of the outstanding after netting
 retainable amount of the guarantee cover under the scheme of Export
 Credit and Guarantee Corporation (ECGC) / Credit Guarantee Fund Trust
 for Micro and Small Enterprises (CGTMSE), wherever applicable and
 
 (iii) Loss Assets at 100%.
 
 4.4 Restructuring of Advances: In respect of restructured accounts,
 where the outstanding is Rs. 1.00 crore and above, the erosion in the
 fair value of the advance is computed as the difference between the
 fair value of the loan before and after restructuring.
 
 Fair value of the loan before restructuring is computed as the present
 value of cash flows representing the interest at the existing rate
 charged on the advance before restructuring and the principal,
 discounted at a rate equal to the Banks BPLR as on the date of
 
 restructuring plus the appropriate term premium and credit risk premium
 for the borrower category on the date of restructuring. Fair value of
 the loan after restructuring is computed as the present value of cash
 flows representing the interest at the rate charged on the advance on
 restructuring and the principal, discounted at a rate equal to the
 Banks BPLR as on the date of restructuring plus the appropriate term
 premium and credit risk premium for the borrower category on the date
 of restructuring.
 
 In respect of restructured accounts, where the outstanding is less than
 Rs.1.00 crore, the amount of diminution in the Fair value has been
 computed at 5% of the outstanding.
 
 4.5 In the case of suit filed accounts, legal expenses are charged to
 Profit & Loss account and credited to revenue expenditure, when
 recovered.
 
 4.6 Financial assets sold to Asset Reconstruction Company (ARC) /
 Securitisation Company (SC) are recognized as under:
 
 (a) In case the sale is at a price lower than the Net Book Value (NBV),
 the difference is charged to the Profit & Loss account.
 
 (b) In the case the sale is at a price higher than the NBV, the surplus
 provision is not reversed but held separately for meeting the loss if
 any on future sale of financial assets.
 
 5.  DEPOSITS
 
 Interest on deposits, with provision for re-investment of interest, is
 capitalized for every completed quarter and shown as principal.
 
 6.  FIXED ASSETS & DEPRECIATION
 
 6.1 Premises and other fixed assets have been accounted for at
 historical cost. Pending registration, the land and buildings acquired
 by the Bank are capitalized, based on letters of allotment / agreement
 and the physical possession.
 
 6.2 (a) Cost of mobile sets / phones up to Rs. 5000,
 
 (b) Cost of furnishing items like curtains (including stitching
 charges) / carpets / mattresses and pillows irrespective of cost and
 
 (c) Other individual items costing Rs.1000 or less are charged to
 profit and loss account in the year of purchase.
 
 6.3 Depreciation on premises and other fixed assets including system
 software is provided for on written down value method in the manner and
 at rates as per Income Tax Act / Rules except as under:
 
 6.4 In respect of assets acquired during the year, depreciation is
 charged for half year in respect of assets used for 182 days or less
 and for the full year in respect of assets used for more than 182 days,
 except depreciation on computers and software, which is charged for the
 full year irrespective of the period for which the asset was put to
 use. No depreciation is provided in the year of sale / disposal of an
 asset.
 
 6.5 In respect of Leasehold Properties, the lease premium is amortized
 over the period of the lease.
 
 7. EMPLOYEE BENEFITS
 
 7.1 Short Term Employee benefits:
 
 Amount of short-term employee benefits, such as casual leave and
 medical benefits, expected to be paid in exchange for the services
 rendered by employees is recognized during the period when the employee
 renders the service.
 
 7.2 Post Employment benefits:
 
 (i) Defined Contribution Plan
 
 The Bank operates a Provident Fund scheme, which is a defined
 contribution plan. All eligible employees are entitled to receive
 benefits under the Banks Provident Fund scheme. The Bank contributes
 monthly at a determined rate (currently 10% of employees basic pay
 plus eligible allowance). These contributions are made to a fund set up
 by the Bank and administered by a Board of Trustees. The Bank has no
 liability for future provident fund benefits other than its annual
 contribution, and recognizes such contributions as an expense in the
 year to which they relate.
 
 (ii) Defined Benefit Plan
 
 (a) The Bank operates gratuity, pension and resettlement schemes, which
 are defined benefit plans.
 
 (b) The Bank provides for gratuity to all eligible employees.
 
 The benefit is in the form of lump sum payments to vested employees on
 superannuation, on death while in employment or on termination of
 employment. The rate of gratuity payable to an employee is 15 days
 based on the rate of wages / salary last drawn by the employee as per
 the Payment of Gratuity Act, 1972 for every completed year of service.
 Gratuity is payable to an employee on the termination of his employment
 after he has rendered continuous service for a period of not less than
 5 years (on retirement, resignation, except death & disablement). To be
 eligible under SBT (Employees) Gratuity Regulations, 1972 minimum
 service required is 10 years. The Bank makes annual contribution to the
 Fund administered by the Board of Trustees based on independent
 actuarial valuation carried out annually. The maximum amount payable as
 per the Payment of Gratuity Act, 1972 is Rs.10.00 lakhs. The amount
 payable to the employees will be higher of the amount calculated as per
 SBT (Payment of Gratuity to Employees) Regulations and Payment of
 Gratuity Act, 1972, subject to deduction of Income Tax on amount in
 excess of Rs.10.00 lakhs.
 
 (c) The Bank provides for pension to all eligible employees who have
 opted for pension and joined the services of the Bank on or before 31st
 March 2010. The benefit is in the form of monthly payments as per rules
 and regular payments to vested employees on retirement, on death while
 in employment, or on termination of employment.  Vesting occurs at
 different stages as per rules. The Bank makes annual contributions to
 fund administered by Board of Trustees based on an independent external
 actuarial valuation carried out annually.
 
 (d) The cost of providing defined benefits is determined using the
 projected unit credit method with actuarial valuations being carried
 out at each balance sheet date.  Actuarial gains / losses are
 immediately recognized in the statement of profit and loss and are not
 deferred.
 
 (e) The bank has exercised the option of recognizing the transitional
 liability on adoption of Accounting Standard 15 (2005) for its defined
 benefit schemes against revenue and other reserves.
 
 (f) Defined Contributory Pension Scheme: Employees, joining services of
 the Bank on or after 1st April 2010 are eligible for Defined
 Contributory Pension Scheme in line with the New Pension Scheme
 introduced for employees of Central Government.
 
 (g) The additional liability on account of reopening of pension option
 for serving employees who had not opted for pension earlier as well as
 the enhancement in gratuity limits is being amortized over a period of
 five years beginning with the financial year ending March 31, 2011 as
 per the RBI notification.
 
 (h) The additional liability on account of reopening of pension option
 for retired employees who had not opted for pension earlier as well as
 the enhancement in gratuity limit is being charged to the profit and
 loss account.
 
 (iii) Other Long Term Employee benefits:
 
 (a) All eligible employees of the bank are eligible to encash certain
 portion of their earned leave while in employment or on retirement, on
 death or on termination of employment, subject to a maximum amount.
 This is paid by the Bank as and when the liability arises.
 
 (b) The cost of providing other long-term benefits is determined using
 the projected unit credit method with actuarial valuations being
 carried out at each balance sheet date. Past service cost is
 immediately recognized in the statement of profit and loss and is not
 deferred.
 
 8.  PROVISION FOR TAXATION
 
 (a) Income tax expense is the aggregate amount of current tax, deferred
 tax and wealth tax. Current year taxes are determined in accordance
 with the prevailing tax rates and tax laws. Deferred tax adjustments
 comprise of changes in the deferred tax assets or liabilities during
 the year.
 
 (b) Deferred tax assets and liabilities are recognized on a prudent
 basis for the future tax consequences of timing differences arising
 between the carrying values of assets and liabilities and their
 respective tax basis and carry forward losses. Deferred tax assets and
 liabilities are measured using tax rates and tax laws that have been
 enacted or subsequently enacted prior to the balance sheet date. The
 impact of changes in the deferred tax assets and liabilities is
 recognized in the profit and loss account.
 
 (c) Deferred tax assets are recognized and reassessed at each reporting
 date, in accordance with Accounting Standard 22 and based upon
 Managements judgment as to whether realization is considered certain.
 Deferred tax assets are recognized only if there is virtual certainty
 that such deferred tax assets can be realized against future taxable
 income.
 
 9.  REVENUE RECOGNITION
 
 9.1 Income: Interest and other income are recognized on accrual basis
 except for the following, which are recognized on cash basis:
 
 (a) Interest and other income on NPA, projects under implementation
 with time over run and government guaranteed accounts where interest is
 not received regularly, as per Reserve Bank of India guidelines;
 
 (b) Dividend on investment in shares and income distributed on units of
 Mutual Funds;
 
 (c) Locker Rent;
 
 (d) Exchange on demand bills purchased / commission on bills sent for
 collection;
 
 (e) Interest on Overdue bills on realization basis;
 
 (f) Income on cross selling products;
 
 (g) Interest on Non Performing Investments and (h) Insurance claims
 
 9.2 Adjustment in respect of recoveries made in NPA accounts - the
 recoveries made are appropriated in the order of Charges, Interest and
 then to Principal in live NPA and in respect of protested bills
 accounts, the recoveries made are appropriated in the order of
 Principal, Charges and then to unrealized Interest.
 
 9.3 Income from interest on refund of income tax is accounted for in
 the year the assessment order is passed by the concerned authority.
 
 9.4 Expenditure: Revenue expenditure is accounted for on accrual basis
 except Property Taxes and Banks liabilities in respect of disputes
 pertaining to additional rent / lease rent, which are accounted for on
 cash basis.
 
 10.  NET PROFIT
 
 The net profit disclosed in the Profit and Loss account is arrived at,
 after making provisions for the following:
 
 (a) Provision for taxes on Income including Deferred Tax and Wealth
 Tax,
 
 (b) Provision for Non-performing Advances and / or Investments,
 
 (c) Provision on Standard Assets,
 
 (d) Interest sacrifice on restructured accounts,
 
 (e) Depreciation on Investments,
 
 (f) Transfers to contingencies and
 
 (g) Other usual and necessary provisions.
 
 11.  IMPAIRMENT OF ASSETS
 
 Impairment loss, if any, on Fixed Assets is recognized in accordance
 with the Accounting Standard 28 issued in this regard by the Institute
 of Chartered Accountants of India.
 
 12.  ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT
 ASSETS
 
 In conformity with Accounting Standard 29, Provisions, Contingent
 Liabilities and Contingent Assets, the Bank recognizes provisions only
 when it has a present obligation as a result of a past event, it is
 probable that an out flow of resources embodying economic benefits will
 be required to settle the obligations, and when a reliable estimate of
 the amount of the obligation can be made.