1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS:
 
 The accompanying financial statements are prepared on historical cost
 basis, except as otherwise stated, following the Going Concern
 concept and conform to the generally accepted accounting practices in
 India, applicable statutory provisions, regulatory norms prescribed by
 the Reserve Bank of India (RBI) and applicable mandatory Accounting
 Standards (AS) notif ed under the Companies (Accounting Standards)
 Rules 2006 and Pronouncements issued by the Institute of Chartered
 Accountants of India (ICAI) and prevailing practices in banking
 industry.
 
 2.  RECOGNITION OF INCOME AND EXPENDITURE:
 
 2.1.  The Revenues and Expenses are accounted for on accrual basis
 unless otherwise stated.
 
 2.2.  Income from Performing Assets is recognized on accrual basis and
 income from Non-Performing Assets (NPAs) is accounted for on
 realization. The amount realized during the year is appropriated f rst
 to income on Sub-standard Assets.  Amounts realized /recovered in
 Doubtful and Loss Assets and Suit Filed and Decreed Accounts are f rst
 appropriated against outstanding balances.
 
 2.3.  Unrealized income on advances classif ed as NPA in the current
 year is reversed.
 
 2.4.  Income from Commission (except on Govt. transactions), exchange,
 brokerage, claims, locker rent and dividend on shares are accounted for
 on cash basis.
 
 2.5.  Performance linked incentive to whole time directors is accounted
 on cash basis.
 
 3.  TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
 
 3.1.  Monetary Assets and Liabilities, excluding outstanding Forward
 Exchange Contracts in each currency, are revalued at the Balance Sheet
 date at closing spot rate announced by the Foreign Exchange Dealers
 Association of India (FEDAI).  Outstanding forward exchange contracts
 are revalued at the forward rates announced by FEDAI. The dif erence
 between the revalued amount and the contracted amount is recognized as
 prof t or loss, as the case may be.
 
 3.2.  Income and expenditure items are recorded at the exchange rates
 prevailing on the date of transaction.
 
 3.3.  Acceptances, endorsements and other obligations including
 guarantees are carried at the closing spot rate announced by FEDAI.
 
 3.4.  Representative Of ce of the Bank has been classif ed as Integral
 Foreign Operation, as prescribed by AS-11.
 
 3.5.  Foreign currency transactions relating to Integral Foreign
 Operation 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.
 
 3.6.  Foreign currency non-monetary items which are carried in terms of
 historical cost are reported using the exchange rate at the date of the
 transaction.
 
 4.  INVESTMENTS:
 
 4.1.  The investments are classif ed as (i) Government Securities (ii)
 Other Approved Securities (iii) Shares (iv) Debentures and Bonds (v)
 Subsidiaries and/or Joint Ventures and (vi) Others, as stipulated in
 Form A of the T ird Schedule to the Banking Regulation Act,1949.
 
 4.2.  In accordance with RBI guidelines, investments are categorized
 into (i) Held to Maturity, (ii) Available for Sale and (iii) Held
 for Trading. The securities acquired by the Bank with an intention to
 hold till maturity are classif ed as Held to Maturity”. Held for
 Trading” category comprises securities acquired by the Bank with the
 intention of trading. The securities, which do not fall within the
 above two categories are classif ed under Available for Sale”. The
 above categorization is done by the Bank at the time of acquisition of
 the securities.
 
 4.3.  As per prudential norms, 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.
 
 4.4.  The valuation of Investments is done in accordance with the
 guidelines issued by RBI as under:
 
 4.4.1. Investments under Held to Maturity category are carried at
 acquisition cost and premium is amortised over the remaining period of
 maturity of the security. Investment in sponsored Regional Rural Banks
 (RRBs) classified as shares, RIDF, STCRS(Ref nance Fund),MSME (Ref
 nance)SIDBI,MSME (Risk Capital) SIDBI, Rural Hosing Development
 Fund-NHB, Micro Finance Development and Equity Fund-NABARD classif ed
 as shares are valued at carrying cost.
 
 4.4.2 a) The individual scrips in Available for Sale category are
 marked to market at quarterly or at more frequent intervals. Securities
 under this category are valued scrip- wise & depreciation/appreciation
 is aggregated for each classif cation referred hereunder:
 
 i) Government Securities 
 
 ii) Other Approved Securities 
 
 iii) Shares
 
 iv) Debentures & Bonds
 
 v) Subsidiaries/Joint Ventures
 
 vi) Others (Commercial Papers, Cumulative
 
 Deposits, Mutual Funds etc.)
 
 Net Depreciation under each cate gor y is provided for and
 appreciation, if any, is ignored.
 
 b) Method of Valuation:
 
 i) Central Govt. Securities:
 
 a) Which qualify for SLR -
 
 At Market Prices/Yield to Maturity (YTM) as declared by FIMMDA in
 respect of all Central Government Securities
 
 b) Which do not qualify for SLR -
 
 Are valued after adding 25 basis points (bps) to Base Yield Curve of
 the Central Government Securities of equivalent maturity.
 
 ii) State Govt. Securities & Other Approved Securities: Are valued by
 applying the YTM method by marking it up by 25 basis points above the
 yields of the Central Government Securities of equivalent maturity put
 out by FIMMDA.
 
 iii) Treasury Bills, Commercial Paper & Certificate of Deposits At
 carrying cost
 
 iv) Bonds & Debentures (not in the nature of advance) – Unquoted
 
 i) Based on FIMMDA annualized/semi annualized, Base Yield Curve and a
 matrix of credit spread across maturities & credit ratings.
 
 ii) Yield & Credit Spreads for intermediate tenors for each curve
 arrived by linear interpolation.
 
 iii) The spreads added to the base yield corresponding to residual
 maturity.
 
 iv) Bonds with remaining maturity of :
 
 a) Less than six months : On six months base yield curve plus relative
 credit spread.
 
 b) More than 15 Years : Spread of 15 Years is to be added to the yield
 of applicable maturity.
 
 c) Perpetual Bonds : At yield to worst basis where the f nal maturity
 of the bonds will be taken to be the longest point on the base yield
 curve& the applicable spread would be that which is applicable for the
 longest tenor of corresponding rating.
 
 A.  Rated Bonds & Debentures
 
 The rated bonds are valued by adding the credit spread to the
 
 Base Yield Curve (corresponding to the coupon frequency).  Where rating
 from two or more rating Agencies (not more than 12 months old) are
 available then the lowest rating is applied for.
 
 B.  Unrated Bonds/Bonds Migrated to unrated category during its tenor
 
 Unrated Bonds are valued by taking the highest among the following
 three spreads:
 
 a) Spread over the sovereign yield curve, at the time of issue, marked
 up by 25%.
 
 b) Spread for the last known rating of the bond from the current spread
 matrix.
 
 c) The current spread for AAA bond of similar tenor.
 
 C.  Zero Coupon Bonds
 
 Zero Coupon Bonds are valued at acquisition cost plus discount accrued
 at the rate prevailing at the time of acquisition which is marked to
 market with reference to the present value of the bond which is
 calculated by discounting the face value using the Zero Coupon Yield
 Curve” with appropriate mark up as per the zero coupon spreads put out
 by FIMMDA.
 
 D.  Quoted Bonds & Debentures
 
 If such Bonds/Debentures are transacted within 15 days prior to
 valuation date, then the value adopted is not higher than the rate at
 which the transaction is recorded in stock exchange.
 
 v) Shares
 
 i) Equity Shares:
 
 Quoted : At market price as per last traded quotation (not older than
 15 days) & in the absence of quotation, on book value as per Balance
 Sheet (not older than 1 year) Unquoted : At break up value based on
 Companys latest Balance Sheet (not older than 1 year). In the absence
 of market quotation/ Balance Sheet, both at Re.1/- per company.
 
 ii) Preference Shares:
 
 Quoted : At market price, if traded on Stock Exchange within 15 days
 prior to valuation date, the value is not higher than the price at
 which traded.
 
 Unquoted :By appropriate markup over YTM rates for Central Government
 Securities put out by FIMMDA periodically. The markup is graded
 according to the ratings assigned to the preference shares by rating
 agencies subject to –
 
 a) The YTM rate should not be lower than the corporate rate/ YTM for a
 GOI loan of equivalent maturity.
 
 b) The rate used for the YTM for unrated preference shares should not
 be less than the rate applicable to rated preference share of
 equivalent maturity.
 
 c) Where preference dividend is in arrears, no credit should be taken
 of accrued dividends and the value determined on YTM should be
 discounted by 15% if arrears are for one year & more if it is for more
 than one year.
 
 d) The preference share should not be valued above its redemption
 value.
 
 4.4.3. Investments held under HFT
 
 The individual scrips in the Held for Trading category were marked to
 market at the monthly or at more frequent intervals as provided for, as
 in the case of Available for Sale category.
 
 4.5 Income from Zero Coupon Bonds being the dif erence between cost and
 face value is recognized on a time proportion basis.
 
 4.6 Transfer of scrip from one category to another, under all
 circumstances is done at acquisition cost /book value / market value on
 the date of transfer, whichever is the least.
 
 4.7 Prof t or loss on sale of investments in any category is taken to
 Prof t and Loss account but, in case of prof t on sale of Investments
 in Held to Maturity” category, an equivalent amount is appropriated to
 Capital Reserve Account” at the end of the year. For calculating the
 surplus / def cit on sale of securities, weighted average method is
 adopted.
 
 4.8 For the purpose officalculating holding period in case of Held for
 Trading category, FIFO method is applied.
 
 4.9 Brokerage, Commission & Incentives received on subscription to
 securities, are deducted from the cost of securities. Interest received
 for broken period is credited to Profit & Loss Account.
 
 4.10 Brokerage, Commission and Stamp Duty paid in connection with
 acquisition of securities are treated as revenue expenses.
 
 4.11 Broken-period interest paid is charged to Profit & Loss Account.
 
 4.12 Investments are subject to appropriate provisioning/ derecognition
 of income, in line with the prudential norms of RBI for NPI Classif
 cation. The depreciation/provision in respect of non-performing
 securities is not set of against the appreciation in respect of the
 other performing securities.
 
 5. ASSETS SOLD TO ASSETS RECONSTRUCTION COMPANY (ARC)/ SECURITIZATION
 COMPANY (SC):
 
 In case of f nancial assets sold to ARC / SC, if the sale is at a price
 below the Net Book Value (NBV), the shortfall is debited to the Prof t
 & Loss Account. If the sale is for a value higher than the NBV, the
 excess provision is not reversed but utilized for meeting any shortfall
 on account of sale of other f nancial assets to ARC/ SC. The sale of f
 nancial assets to ARC/ SC is recognized in the books of the Bank at
 lower of either redemption value of the Security Receipts issued by the
 Trust created by the ARC/SC for such sale or the net value of such f
 nancial assets. The Security Receipts are classif ed as Non- SLR
 Investment in the books of the Bank and accordingly the
 
 valuation, classif cation and other norms prescribed by RBI in respect
 of Non-SLR Securities are applicable. In case of written of Assets sold
 to ARC/ SC the cash proceeds are recognized as income.
 
 6.  ADVANCES:
 
 6.1.  Advances are classif ed as Performing and Non-Performing Assets
 and provisions thereon are made in conformity with the prudential norms
 prescribed by RBI.
 
 6.2.  Non-performing assets are stated net of provisions and ECGC
 claims received. Provisions held for performing assets are shown under
 the head Other Liabilities & Provisions.
 
 6.3.  Restructuring of Advances and provisioning thereof have been made
 as per RBI guidelines.
 
 7.  FIXED ASSETS AND DEPRECIATION:
 
 7.1.  Premises, including leasehold and other fixed assets and Capital
 work in progress, are stated at historical cost. In case of
 revaluation, the same are stated at the revalued amount and the
 appreciation is credited to Revaluation Reserve.
 
 7.2.  Softwares are capitalized with computers.
 
 7.3.  Depreciation on assets other than computers, Automated Teller
 Machines (ATMs) and software is provided for under written down value
 method, in the manner and as per the rates prescribed under Schedule
 XIV to the Companies Act, 1956. The rate is rounded off to next
 absolute number.  Depreciation on the revalued portion of the assets is
 adjusted from Revaluation Reserve.
 
 7.4.  Leasehold assets are amortised over the period of lease.
 
 7.5.  Depreciation on computers, ATM and software are provided on
 straight-line method @ 33.33% on pro rata basis from the date of
 acquisition as per RBI guidelines.
 
 7.6.  Impairment Losses, if any, on Fixed Assets (including revalued
 assets) are recognized in accordance with AS -28.
 
 8.  EMPLOYEE BENEFITS:
 
 8.1 Short term employee benef ts (benef ts which are payable within
 twelve months after the end of the period in which the employees render
 service) are measured at cost.
 
 8.2 Long term employee benef ts (benef ts which are payable after the
 end of twelve months from the end of the period in which the employees
 render service namely sick leave, casual leave, medical benef t and
 leave fare concession) and post retirement benef ts namely gratuity,
 pension and leave encashment are measured on a discounted basis under
 the Projected Unit Credit Method on the basis of annual third party
 actuarial valuations.
 
 8.3 In respect of employees who have opted for Provident Fund Scheme,
 matching contribution is made to a recognized Trust.  For others who
 have opted for Pension Scheme, contribution to Pension Fund is based on
 actuarial valuation.
 
 8.4 Long Term employee benef ts recognized in the balance sheet
 represent the present value of the obligation as adjusted for
 unrecognized past service cost, if any, and as reduced by the fair
 value of plan assets, wherever applicable and actuarial gain / loss to
 the extent recognized in Prof t & Loss Account.
 
 8.5 The transitional liability in respect of long term employee
 benefits, including pension benefits, is recognized as an expense on
 straight line basis over a period of f ve years.
 
 8.6 In terms of RBI circular, expenditure on Re-opening of Pension
 option to employees of Public Sector Banks and enhancement of Gratuity
 limits – Prudential Regulatory Treatment” is being amortized over a
 period of f ve years.
 
 9.  TAXATION:
 
 9.1.  Provision for taxation is made on the basis of estimated tax
 liability.
 
 9.2.  Deferred Tax Liability/ Asset is recognized in terms of AS- 22.
 
 10.  PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:
 
 As per AS-29, the Bank recognizes provisions only when it has a present
 obligation as a result of a pasThevent and it is probable that an outf
 ow of resources embodying economic benef ts 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 recognized in the
 Financial Statements.