1.GENERAL
 
 1.1 The financial statements are prepared under going concern concept
 on historical cost basis, except as otherwise stated, and conform to
 Generally Accepted Accounting Principles (GAAP) in India, the
 prevailing practices and statutory provisions including directives of
 Reserve Bank of India (RBI).
 
 2.EFFECT OF CHANGES IN FOREIGN EXCHANGE RATE
 
 2.1 FOREIGN CURRENCY TRANSACTIONS
 
 i)Foreign currency transactions 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.
 
 ii) Foreign currency monetary items are reported using the Foreign
 Exchange Dealers Association of India (FEDAI) closing spot rate.
 
 iii) Foreign currency non-monetary items, which are carried in terms at
 historical cost, are reported using the exchange rate at the date of
 the transaction.
 
 iv) Contingent Liabilities denominated in foreign currency are reported
 using the FEDAI closing spot rates.
 
 v) Exchange differences arising on settlement of monetary items at
 rates different from those at which they were initially recorded are
 recognised as income or as expense in the period in which they arise.
 
 vi) Outstanding foreign exchange contracts and bills are revalued as
 per FEDAI Rates and the resultant gain/loss is taken to revenue at the
 end of each month.
 
 2.2 FOREIGN OPERATIONS
 
 Foreign Branches and representative offices of the Bank have been
 classified as Non-integral Operations.
 
 Translation
 
 i) Both monetary and non-monetary foreign currency assets and
 liabilities including contingent liabilities of non-integral foreign
 operations are translated at closing exchange rates notified by FEDAI
 at the balance sheet date.
 
 ii) Income and expenditure of non-integral foreign operations are
 translated at quarterly average closing rates.
 
 iii) Exchange differences arising on net investment in non-integral
 foreign operations are accumulated in Foreign Currency Translation
 Reserve until the disposal of the net investment.
 
 3. INVESTMENTS
 
 3.1 Investments are classified into three categories viz. Held to
 Maturity, Available for Sale and Held for Trading and are further
 classified into Investments in Government Securities, Other Approved
 Securities, Shares, Debentures & Bonds, Subsidiaries and Joint Ventures
 and Others.
 
 3.2 (i) Investments classified as Held to Maturity are carried at cost.
 Wherever the cost is higher than the face value, the premium is
 amortised over the remaining period of maturity as per effective
 interest rate method. Profit on sale is initially taken to Profit and
 Loss Account and then appropriated to Capital Reserve Account net of
 taxes. Loss on sale is charged to the Profit and Loss Account.
 
 (ii) Investments classified as Available for Sale, are marked to
 market.  Scrip-wise appreciation/depreciation is aggregated for each
 classification. While net depreciation in respect of each
 classification is charged to Profit & Loss Account, net appreciation in
 respect of any classification is ignored. These investments are shown,
 net of depreciation, in the Balance Sheet.
 
 (iii) Investments classified as Held for Trading are marked to market.
 Scrip-wise appreciation/depreciation is aggregated for each
 classification. While net depreciation in respect of each
 classification is charged to Profit & Loss Account, net appreciation in
 respect of any classification is ignored. These investments are shown,
 net of depreciation, in the Balance Sheet.
 
 3.3 In respect of securities, included in any of the above three
 categories where interest/ principal is in arrears for more than 90
 days, income is not recognized and appropriate provision on the value
 of such Investments is made as per prudential norms.
 
 3.4 Investments in Regional Rural Banks, Commercial Papers and Treasury
 Bills are valued at carrying cost.
 
 3.5 In respect of traded/quoted Investments, Market price is taken from
 the quotes available in the stock exchanges. Government securities are
 valued at Market price or price declared by Primary Dealers Association
 of India (PDAI) jointly with Fixed Income Money Market and Derivatives
 Association of India (FIMMDA).
 
 3.6 Broken period interest paid / received on debt instruments is
 treated as interest expense/income and is excluded from cost/sale
 consideration.
 
 3.7 Security receipts issued by securitisation / reconstruction company
 (SC/RC) in respect of financial assets sold by the Bank to the SC/RC
 are valued at the lower of the redemption value of the security receipt
 and the Net Book Value of the financial assets. The Investment is
 carried in the books at the price determined as above and the sale /
 realization if any, is reduced from Investment and the net book value
 is shown.
 
 4. INTEREST RATE SWAPS
 
 4.1 The Interest Rate Swap transactions undertaken for hedging are
 accounted for on accrual basis and transactions for trading are marked
 to market and net depreciation, if any, is provided for, whereas
 appreciation if any is ignored.
 
 4.2 Gain or loss on terminated interest rate swap transactions
 undertaken for hedging is deferred and recognized over the shorter of
 the remaining contractual life of the swap or remaining life of the
 asset or liability.
 
 4.3 Income and expenses relating to the trading swaps are recognized on
 the settlement date.
 
 4.4 Gain or losses on the termination of the trading swaps are recorded
 as income or expense immediately.
 
 5. FOREIGN EXCHANGE CONTRACTS
 
 Outstanding forward exchange contracts are revalued every month as per
 month end FEDAI rates applicable based on maturity date of the forward
 contracts and the resultant gain/loss is taken to profit and loss at
 the end of the each month.
 
 6. ADVANCES
 
 6.1 Loans and advances are classified as performing and non-performing
 based on the guidelines issued by the RBI. Non-Performing advances in
 India are ascertained as per the Prudential Norms and provisions are
 made upon classifying the same into Sub-
 
 Standard, Doubtful and Loss assets after considering the claims
 Received/Receivable from ECGC and advances are stated after netting of
 provisions.
 
 6.2 Provision on Non-performing advances of foreign branches is made on
 the basis of local requirements or RBI guidelines whichever is higher.
 
 6.3 A general provision on Standard Assets is made on global portfolio
 basis.
 
 6.4 In respect of Central Government Guarantees invoked and suit filed
 by the bank, wherever the Government does not repudiate, the dues are
 considered good.
 
 6.5 In respect of Compromise and Settlement Proposals, write-off is
 done on complete realisation.
 
 6.6 Partial prudential write off of accounts is done upto unsecured
 portion level on a case to case basis on approval by the Competent
 Authority.
 
 7. FIXED ASSETS
 
 7.1 Fixed assets are stated at historical cost/revalued amount less
 accumulated depreciation. Surplus arising on revaluation is credited to
 Revaluation Reserve.
 
 7.2 Advance payments/part payments made towards acquisition of fixed
 assets are included under other Assets.
 
 7.3 Depreciation on Premises (including cost of land wherever
 inseparable/not segregated) and other fixed assets (excluding
 computers) in India is provided on written down value method at the
 rates prescribed in Schedule XIV to the Companies Act, 1956.
 Depreciation on computers is provided at the rate of 33.33% on Straight
 Line Method in terms of RBI guidelines. Depreciation is provided at
 full rate on additions made upto 30th September and at half the rate on
 additions made thereafter.
 
 7.4 Depreciation in respect of fixed assets situated outside India is
 provided on straight line/written down value method as per the local
 laws of respective country.
 
 7.5 Additional depreciation arising out of revaluation is set off
 against Revaluation Reserve.
 
 7.6 In respect of leasehold properties, the lease premium is amortized
 over the period of the lease.
 
 8. EMPLOYEE BENEFITS
 
 8.1 Short Term Employee Benefits
 
 The short-term employee benefits, such as medical benefits, casual
 leave etc. which are paid/credited in exchange for the services
 rendered by employees are recognised during the 12 month period when
 the employee renders the service.
 
 8.2 Long Term Employee Benefits
 
 Post Employment Benefits
 
 A) Defined Contribution Plan
 
 Contribution to Defined Contribution Schemes such as Provident Fund
 etc., are charged to the Profit & Loss Account as and when incurred. In
 respect of certain employees who have not opted for Pension Benefits,
 Provident Fund Contributions are made to a Trust administered by the
 Bank.
 
 B) Defined Benefit Plan
 
 a.  The bank operates gratuity and pension 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/one time payment to vested employees
 on retirement, on death while in employment, or on termination of
 employment, for an amount equivalent to i) 15 days salary (Basic+DA)
 payable for each completed year of service, subject to a maximum amount
 of Rs.10,00,000 or ii) 15 days salary (Basic only) for each completed
 year of service ,whichever is higher. Vesting occurs upon completion of
 five years/ ten years (as applicable) of service. The Bank makes annual
 contributions to a fund administered by Trustees based on an
 independent external actuarial valuation carried out at regular
 intervals.
 
 c. The Bank provides for pension to all eligible employees. 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 as provided under regulation. Vesting occurs
 at different stages as per rules. The Bank makes additional annual
 contributions to funds administered by trustees based on an independent
 external actuarial valuation carried out at regular intervals besides
 monthly contribution @ 10% of pay per month.
 
 d. The cost of providing defined benefits is determined by actuarial
 valuation using the projected unit credit method which is normally
 carried out at each balance sheet date. Net liabilities are immediately
 recognised in the statement of profit and loss and are not deferred.
 
 C) Other Long Term Employee benefits
 
 a.  All eligible employees of the bank are entitled to compensated
 absences; leave travel concession. The costs of such long term employee
 benefits are internally funded by the Bank.
 
 b. The cost of providing these other long term benefits is determined
 by actuarial valuation using the projected unit credit method which is
 normally carried out at each balance sheet date. Past service cost is
 immediately recognised in the statement of profit and loss and is not
 deferred.
 
 c.  Medical benefits are extended to full time Directors, after their
 retirement as post retirement medical benefits. The cost is ascertained
 and determined by actuarial valuation using the projected unit credit
 method and such valuation is carried out at balance sheet date for
 retired as well as in service full time Directors. The liability is
 immediately recognized in the statement of profit & loss and not
 deferred.
 
 In terms of Limited Revision to AS-15 Employee Benefits (Revised 2005)
 and guidance note thereon, the Bank has decided to amortise the
 increase in transitional liability over the liability that could have
 been recognised as per the pre revised AS-15 as on 31.03.2007 in
 respect of long term employee benefits like Pension, Gratuity, Leave
 Encashment, Sick Leave, LFC/LTC, etc., as an expense on a straight-line
 basis over 5 years from financial year 2007-08.
 
 In accordance with the guidelines given by Reserve Bank of India vide
 its Circular No. DBOD.BP.BC.80/21.04.018/2010- 11 dated 09.02.2011 on
 Re-opening of Pension Option to Employees of Public Sector Banks and
 Enhancement in Gratuity Limits – Prudential Regulatory Treatment, Bank
 has decided to amortize the additional liability on account of –
 
 a) Re-opening of pension option for existing employees who did not opt
 for pension earlier; and
 
 b) Payment of gratuity to existing employees as per the enhanced limit
 of Rs. 10.00 lakhs (increased from Rs. 3.50 lakhs)
 
 pursuant to the amendment of the Payment of Gratuity Act, 1972, as an
 expense on a straight line basis over a period of five years from the
 financial year 2010 -11.
 
 9. REVENUE RECOGNITION
 
 9.1 Items of Income and Expenditure are accounted for on accrual basis,
 except as otherwise stated.
 
 9.2 Income for the following items are recognised on realization basis:
 
 a) Income from non-performing assets in terms of RBI guidelines.
 
 b) Commission earned on Letter of Credit and Guarantees issued.
 
 10. TAXES ON INCOME
 
 Current tax is determined on the amount of tax payable in respect of
 taxable income for the year and accordingly provision for tax is made
 including Minimum Alternate Tax (MAT).
 
 The deferred tax asset or liability is recognised using the tax rates
 that have been enacted or substantially enacted by the Balance Sheet
 date, in terms of notified Accounting Standard 22. Deferred Tax
 Assets/Liabilities are reviewed at each Balance Sheet date based on
 developments during the year.
 
 11. IMPAIRMENT OF ASSETS
 
 Fixed Assets are reviewed for impairment whenever events or changes in
 circumstances warrant that the carrying amount of an asset may not be
 recoverable. Recoverability of assets to be held and used is measured
 by a comparison of the carrying amount of an asset to future net
 discounted cash flows expected to be generated by the asset. If such
 assets are considered to be impaired, the impairment to be recognised
 is measured by the amount by which the carrying amount of the asset
 exceeds the fair value of the asset.
 
 12. EARNINGS PER SHARE
 
 The Bank reports basic and diluted earnings per share in accordance
 with AS 20 – Earnings per Share. Basic earnings per share computed by
 dividing the net profit after tax and dividend on preferential shares
 by weighted average number of equity shares outstanding for the year.
 
 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 share are
 computed using the weighted average number of equity shares and
 dilutive potential equity shares outstanding at year end.
 
 13. ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT
 ASSETS
 
 In conformity with AS 29, Provisions, Contingent Liabilities and
 Contingent Assets issued in this regard by the ICAI, the Bank
 recognises provisions only 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.
 
 Contingent Assets are not recognised in the financial statements as
 this may result in the recognition of income that may never be
 realized.