Notes to Accounts of Dena Bank

Mar 31, 2018

1.1 Reconciliation of entries under Inter Branch/ Inter Bank transactions, Nominal Account and old entries is an ongoing process. Balances with Reserve Bank/ Other Banks have been reconciled except certain entries which are under process of reconciliation. Consequential impact of pending reconciling items as stated above is not ascertainable. However provision there against has been made as per RBI guidelines.

1.2 Provision on standard assets has been given effect in the accounts according to revised RBI guidelines as under:

i. 0.25% of the outstanding in Farm Credit to Agriculture activities and small and Micro Enterprises (SME) Sectors.

ii. 1.00% of the outstanding in Commercial Real Estate [CRE] sector and also in cases where commencement date of operations is extended.

iii. 0.75% on advances to Commercial Real Estate-Residential Housing (CRE-RH) Sector.

iv. 2.00% of the outstanding in Housing Loans @ teaser rates.

v. 0.40% of the outstanding in all other advances [i.e. except

vi. 5% for the period covering the period of moratorium allowed as per the restructuring package and 2 years thereafter, in restructured standard accounts.

vii. Higher provision has been made @ 10% and 15% on certain Standard Assets in compliance with the RBI directive.

viii. 5% for MSME borrowers availing benefit of GST

ix. Additional Provision against FCI exposure on Govt. of Punjab and Telangana as per RBI Directives

1.3 Classification of advances and provisioning there-against in case of 1022 unaudited branches have been incorporated as certified by the Branch Managers.

1.4 During the year, Bank has incurred loss ofRs.1923.15 cr (Previous yearRs.863.62 cr) which has been carried forward to Profit & Loss Account under Schedule-2 “Reserve & Surplus”. In view of this, Bank has not appropriated any amount to any of the Reserves including Capital Reserves.

1.5 Disclosures in terms of RBI guidelines are as under:

a. Capital:

During the financial year 2017-18,

1) Bank has issued 112,81,95,628 equity shares having face value ofRs.10/- each to Government of India (GOI) at a price ofRs.26.99 per share (including premium ofRs.16.99 per share), on preferential basis in accordance with Chapter VII of SEBI (ICDR) Regulations, 2009 aggregating toRs.3,045 cr.

2) Bank has issued 13,74,18,819 equity shares having face value ofRs.10 each at a price ofRs.29.20 per share (including premium ofRs.19.20 per share), under Qualified Institutions Placement (QIP) in accordance with the provisions of SEBI (ICDR) Regulations, 2009 aggregating toRs.401.26 cr.

3) Bank had received Share Application Money pending allotment of equity shares, aggregating toRs.792.33 cr. in financial year 2016-17 against which the Bank has allotted 15,62,09,320 equity shares to Govt. of India, 4,48,65,702 equity shares to LIC of India and 52,06,977 equity shares to GIC of India, having face value ofRs.10/- each at a price ofRs.38.41 per share (including premium ofRs.28.41 per share), on preferential basis in accordance with Chapter VII of SEBI (ICDR) Regulations, 2009, during the financial year 2017-18 after receipt of approval from GOI, vide their letter F.No.7/38/2014-BOA dated 4^th August 2017.

4) Bank has repaid borrowings towards Unsecured, Subordinated, Non-convertible Basel III compliant Additional Tier I bonds, aggregating toRs.1,400 cr. after exercising Regulatory Call Option.

Sale and Transfers to/ from HTM Category

i. The value of sales and transfer of securities to/from HTM category did exceed 5% of the Book Value of investments held in HTM category at the beginning of the year. Bank had sold securities having book value ofRs.2,118.74 cr (8.19%) from HTM. Bank’s HTM portfolio as of 1^st April 2017 wasRs.25,872.85 cr. Book value & Market value of HTM portfolio as on 31-03-2018 isRs.25,459.05 cr &Rs.25,233.66 cr respectively. Book value is in excess byRs.225.39 cr from market value for which provision is not made, being the HTM portfolio.

ii. The Bank has amortized premium ofRs.73.13 cr during the year (Previous yearRs.62.15 cr) for securities classified under “Held to Maturity” category in terms of Accounting Policy as stated at para 17.3, and the said amount has been charged to Profit and Loss Account by reducing value of the respective securities to that extent.

iii. In accordance with the guidelines issued by RBI, the Bank has shifted securities from one category to another during the year. The consequential depreciation on account of shifting securities from “Available for Sale” and “Held for Trading” category to “Held to Maturity” category has been charged to Profit & Loss Account by reducing book value of these securities, amounted toRs.376.87 cr (previous yearRs.10.21cr) out of the total sum ofRs.376.87 cr an amount ofRs.226.32 cr which was already provided as depreciation as on March 2017 has been adjusted from the account of provision and the balance ofRs.150.55 cr has been adjusted as loss from profit and loss account.

iv The Bank has an investment of ''19.33 cr (Previous yearRs.19.33 cr) in one Regional Rural Bank (RRB) sponsored by the Bank. This includes Investment ofRs.18.28 cr (Previous YearRs.18.28 cr) by way of Share Capital deposits, towards recapitalization of the RRBs. Investment has been valued at cost in accordance with the RBI guidelines.

v. In terms of RBI circular DBR.No.BP.BC.102/21.04.048/2017-18 dated 2nd April, 2018, Out of the Total Net Mark to Market Losses ofRs.110.36 cr on AFS and HFT Investments, Bank has recognizedRs.38.49 cr depreciation in the FY 2017-18 and Balance amount ofRs.71.87 cr has been deferred to be recognized equally in subsequent three quarters

1.6 Derivatives:

a. Forward Rate Agreement/ Interest Rate Swap

b. Exchange Traded Interest Rate Derivatives:

c. Disclosures on risk exposure in derivatives:

i. Qualitative Disclosure

The Treasury Policy & Derivative Policy of the Bank lays down the type of financial derivates instruments, scope of usages, approval process as also the limits like the open position limits, deal size limits and counter party exposure limits besides delegated power for trading in the approved instruments.

Bank is exposed to credit risk, market risk, country risk and operational risk. Bank has risk management policies approved by the Board of Directors which is designed to measure the financial risks for transactions in the trading book on a regular basis. The Risk Management Department measures the financial risk for transactions through measurement tools such as MTM, VaR, Convexity and Modified Durations, and Sensitivity Analysis on a daily basis and Stress Testing, VaR Back Testing on a monthly basis. The reports are submitted to the Top Management which appraises the risk profile to the ALCO. The guidelines issued by RBI, FEDAI & FIMMDA from time to time are followed.

1. Bank does not have the derivative transaction except Forward Contracts like Merchant Forward Contracts and Inter Bank Contracts done for Arbitrage, Funding and Merchant Transactions covering and Proprietary Trading activities.

2. Bank is calculating PV01 of outstanding Forward Exchange Contract on quarterly basis collectively on hedging and trading positions.

As on Balance Sheet Date Provision Coverage Ratio is 60.20% calculated as per RBI circular no. RBI2009-10/240 DBOD.No.BP. BC.64/21.4.048/2009-10 dated 01.12.2009. In terms of RBI circular no. DBOD.No.BP.BC. 87/21.04.048 /2010-11 April 21, 2011 on PCR, shortfall ofRs.1,930.66 cr in Countercyclical Provisioning Buffer (Previous YearRs.3,041.43 cr), is to be built up by the Bank at the earliest.

e. Additional Disclosure requirements relating to sale of non-performing assets (NPAs) to Securitisation Companies(SCs)/ Reconstruction Companies (RCs)

As per RBI circular no. RBI/2014-15/508 DBR.No.BP.BC.78/21.04.048/2014-15 dated March 20, 2015, the details of sale of NPAs to SCs and RCs are as below:

f. As per RBI circular no. RBI/2014-15/508 DBR.No.BP.BC.78/21.04.048/2014-15 dated March 11,2015, during the FY 2016-17, Bank has reversed an excess provision amounting to '' NIL (PY '' NIL ) on account of sale of NPAs.

h. Food Credit Exposure: Bank’s exposure in food credit to Food Corporation of India (FCI) was aggregating toRs.568.97 Crs (PYRs.917.37 cr). Out of this, exposure to Government of Punjab (GoP) wasRs.327.85 cr (PY ''339.78 cr). There was a gap between outstanding Food Credit to GoP and Value of Stock and receivables for which neither GoP nor FCI was accepting liability. RBI vide their letter dated 12.04.2016 informed the Secretary, Department of Expenditure, Ministry of Finance to make provision @ 15% by March 2017. Thereafter RBI vide their letter No DBR(BP) No 3992/21.04.048/2016-17 dated 03.10.2016 informed the Chairman that account will be eligible for up gradation and write back of provisions post January 2018, subject to satisfactory performance during this specified period. However, upon up gradation, as a matter of prudence, specific provision of 5% should be maintained by banks during the life of this restructured loan. Accordingly, Bank has made provision ofRs.16.39 cr (PYRs.50.97 cr) @ 5% on its share of outstanding balance.

Further, as per Minutes of Consortium Meeting dated 27.03.2018, Lead Bank SBI informed that in case of Food Credit Exposure to Govt. of Telangana, due to absence of adequate value of stocks, GoT Food Credit account was considered as out of order by RBI and as such RBI has advised to maintain a prudential provision of 15% on the outstanding amount. Accordingly, Bank has made provision ofRs.5.65 cr (PY Rs. NIL ) @ 15% on its share of outstanding balance.

i. RBI vide its circular no DBR.NO.BP.BC.101/21.04.048/2017-18 dated 12th February 2018, has issued revised framework on Resolution of Stressed Assets. In pursuance to the revised framework the bank has classified specific 12 accounts forRs.827.77 Crores as non performing and accordingly made provision towards such stressed accounts forRs.286.33 Crores. Impact in RBI Circular dated 12.02.2018 on resolution of Stressed Assets as on 31.03.2018 is as under:

j. As per the RBI directions vide letter No. DBR.No.BP.BC.100/21.04.048/2017-18 dated February 07, 2018 for Relief for MSME borrowers registered under Goods and Services Tax (GST), 50 MSME borrower accounts (Loan outstanding amount ofRs.51.14 Crs as on 31.03.2018) are eligible to be covered under provisions of relief, the Bank was required to make a provision of 5% i.e.Rs.2.55 Crs. Accordingly provision ofRs.2.55 Crs has been made during the quarter ending March 2018.

1.7 Risk Category wise Country Exposure:

a. In respect of Foreign Exchange transactions, where the Bank’s net funded exposure computed as per the guidelines of the RBI with each country exceeded 1% of the total assets of the Bank, the Bank is required to make the provision. Since, Bank’s net funded exposure in any country does not exceed 1% of total assets, no provision (Previous year NIL) is made.

b. Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the Bank

During the year 2017-18, the Bank has not exceeded prudential credit exposure limit in respect of group/single borrower.

1.8 Disclosure of penalties imposed by RBI

During the year RBI has imposed NIL penalty (P.Y. NIL).

1.9 DISCLOSURES AS PER ACCOUNTING STANDARDS (AS):

a. Accounting Standard - 5 - “Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies”

There were no material prior period income/expenditure items requiring disclosure under AS-5

b. Accounting Standard - 9 - “Revenue Recognition”

Certain items of income are recognized on realization basis as per Accounting Policy as stated at point no. 17.9.

c. Accounting Standard - 10 - “Accounting for Fixed Assets”

Premises does not include non-banking Assets acquired in satisfaction of claims ofRs.9.86 cr (Previous YearRs.9.86 cr). Fixed Assets are depreciated under Straight Line Method on the basis of useful life prescribed under schedule-II of the Companies Act 2013 for the respective assets.

d. Accounting Standard - 11 - “The Effects of Changes in Foreign Exchange Rates”

Net income on account of exchange differences credited in the Profit and Loss account for the year 2017-18 isRs.45.43 cr (previous yearRs.33.04 cr)

e. Accounting Standard - 15 - “Employee Benefits”

The following information is disclosed in terms of Accounting Standard issued by the ICAI.

i. Provision has been made for Employees Benefits viz; Pension, Gratuity, Leave Encashment and other Employees benefits in accordance with AS-15 on the basis of actuarial valuation.

ii. In terms of RBI Letter No. DBR.No.BP.9730 21.04.018//2017-18 dated 27th April, 2018, Out of the Total additional liability ofRs.96.80 cr on account of enhancement in the gratuity limit as per the recent amendment in payment of gratuity Act ( As per the Govt. of India notification dated 29.03.2018), Bank has recognizedRs.24.20 cr in the FY 2017-18 and Balance amount ofRs.72.60 cr has been deferred to be recognised equally in subsequent three quarters

f. Accounting Standard - 17 - “Segment Reporting”

As per the Reserve Bank of India revised guidelines on Accounting Standard -17, the Bank’s Operations are classified into Primary Segment, i.e., the business segment comprising of “Treasury”, “Corporate/ Wholesale Banking”, “Retail Banking” and “Other Banking Operations”, as follows:

(Figures in the Bracket are of previous financial year 2016-17)

* Out ofRs.594.35 cr (Previous YearRs.342.72 cr), Dena Bank participation amount in IBPC is '' NIL (Previous YearRs.120.00 cr) issued by DGGB on risk sharing basis representing various loans to Priority Sector.

DGGB has participated in IBPC '' NIL (Previous YearRs.120.00 cr) issued by Dena Bank on risk sharing basis representing various loans to NonPriority Sector.

l. Accounting Standard 21 - “Consolidated Financial Statements (CFS)”

The Bank is not having any subsidiaries, within the meaning of this Standard; therefore, this Accounting Standard does not apply.

j. Accounting Standard 22 - “Accounting for Taxes on Income”

The Bank has complied with requirements of “AS-22 issued by ICAI and accordingly, deferred tax assets and liabilities are recognized.

The net balance of Deferred Tax Asset as on 31st March 2018 amounting toRs.2,975.52 cr (Previous YearRs.1,719.92 cr) consists of the following:

Based on the thorough review and on the expert advice of Bank’s Tax Consultant, the Bank has estimated future taxable income against which timing difference arising on account of provisions for Bad & Doubtful Debts (NPA) can be realized and accordingly during the year 2017-18, the Bank has recognized deferred tax assets ofRs.1,255.60 crores (cumulativelyRs.2,975.52 crores assets as on 31/03/2018) in respect of the above on such timing difference based on reasonable certainty of availability of future taxable income against which such deferred tax assets can be realized.

k. Accounting Standard 23 - “Accounting for Investments in Associates in Consolidated Financial Statements”

Consolidated Financial Statements have not been prepared due the reason stated in Note 18 (j) above. The Bank has made an investment in equity of Dena Gujarat Gramin Rural Bank ofRs.19.33 cr ( Previous yearRs.19.33 cr) as at 31.03.2018. The same has been accounted for at Cost.

l. Accounting Standard - 24 - “Discontinuing Operations”

No operations have been discontinued in the Bank during the year. m. Accounting Standard - 25 - “Interim Financial Reporting”

Bank has complied with this Accounting Standard n. Accounting Standard - 28 - “Impairment of Assets”

In the opinion of the Management, there is no impairment to its assets.

o. Accounting Standard - 29 - “Provisions, Contingent Liabilities and Contingent Assets” i Movement of Provisions for Contingent Liabilities

ii. Item No’s (I) to (V) of the Schedule - 12 of the Balance Sheet on contingent liabilities, reflect the various types of contingent liabilities categorized according to their nature. These amounts are estimated on the basis of documents related to the basic contracts or claims made. Outflow on account of these contingent liabilities would depend upon the outcome of disposal of litigations by the respective judicial authorities, execution of contracts, invocation of guarantees, devolvement of LCs, settlement of claims etc.

1.10 Details of Provisions and Contingencies debited to the Profit and Loss Account during the year:

1.11 Amount of Provisions made for Income Tax /MAT during the year:

a. The Bank has recognized Income Tax liability of '' NIL cr [previous yearRs.116.31 cr] on Book Profits in terms with Section 115JB of the Income Tax Act out of which MAT credit of '' NIL cr [ previous yearRs.51.38 cr] as MAT Credit entitlement u/s 115JAA of the Income Tax Act, 1961 has been recognized. The MAT credit entitlement is treated as an asset.

b. Amount of provision made for Income-tax during the year;

1.12 The advances covered by Bank/ Govt. Guarantee amounting toRs.2,119.52 cr [PYRs.1,711.30 cr][shown in Schedule - 9 Para B (ii)] include ''1,23 7.78 cr [PYRs.786.69 cr] guaranteed by various State Governments for FY 2017-18.

1.13 Draw Down from Reserve

There are no draw down of reserves during the year 2017-18.

1.14 Disclosure of Letter of Comforts (LOCs) issued by the Bank

A total of 1,097 Guarantees/ Letter of Undertaking amounting toRs.1,486.43 cr (equivalent to USD 230.63 million) were issued in respect of Buyer’s Credit during the period April 2017 to March 2018 (Previous YearRs.1,990.90 cr).

The outstanding Guarantees/ Letter of Undertakings as of March 31, 2018 stood atRs.391.92 cr equivalent to USD 60.21 million (Previous Year the same wasRs.624.22 cr).

1.15 Bancassurance Business

During the F.Y. 2017-18, the Bank has earned commission income ofRs.11.09 cr (includingRs.1.84 cr income from PMJJBY &Rs.0.29 cr from PMSBY (received as administrative expenses) as compared toRs.7.40 cr (includingRs.1.66 cr PMJJBY income) during corresponding period of F.Y. 2016-17 from Bancassurance Business.

1.16 Credit Default Swaps

The Bank does not have any Credit Default Swap transaction during the period 01.04.2017 to 31.03.2018.

1.17 Intra Group Exposures

The Bank has one group entity i.e Dena Gujarat Gramin Bank which has availed overdraft facility against Fixed Deposit ofRs.594.35 cr. Percentage of Intra Group exposure to total exposure of the Bank on borrowers/customers is 0.80%.

There is no breach of limits of intra-group exposure.

1.18 Transfer to Depositor Education and Awareness Fund (DEAF)

The details of Unclaimed liabilities amount transferred to DEAF during the year FY 2017-18.

1.19 Unhedged Foreign Currency Exposure

Incremental Capital and provision requirements for Exposures are based on Circular No. DBOD.No.BP.BC.85/21.06.200/2013-14 dated 15.01.2014 and DBOD.No.BP.BC.116/21.06.200/2013-14 dated 03.06.2014 issued by Reserve Bank of India are as under: -For the FY 2017-18, Based on available data, financial statements and the certification received from borrowers wherever received, the Bank has estimated and made an incremental provision ofRs.4.37 cr (Previous YearRs.10.33 Cr reversal of provision) and capital requirement of ''5.92 Cr (Previous year decrease in capital requirement ofRs.5.10 Cr) towards Unhedged Foreign Currency Exposure.

1.20 Qualitative Disclosures around LCR

RBI has introduced LCR as per Basel -III guidelines to monitor the short term liquidity of Banks. The aim of LCR standard is to ensure that Bank maintains adequate level of unencumbered High Quality Liquid Assets (HQLA) that can be converted into cash to meet its Liquidity needs for a 30 days time horizon. At a minimum, the stock of liquid assets should enable the Bank to survive until 30 days of the stress scenario by which time it is assumed that appropriate action can be taken.

The LCR is calculated by dividing the High Quality Liquid Assets with the total net cash out flows over the next 30 days calendar period. As per LCR guidelines net cash outflow is total expected cash outflows minus total expected cash inflows for the next 30 days calendar horizon. The HQLA includes, Cash including cash reserves in excess of CRR, government securities in excess of SLR over & above the mandatory SLR requirement, Government securities to the extent allowed by RBI under Marginal Standing Facility and marketable securities issued/ guaranteed by Sovereigns etc. All such assets must be available at all time to be converted into cash and should be unencumbered. Bank’s HQLA consists of assets which are liquid or can be converted to liquid assets within short notice.

Under outflow the items taken in to account for calculation of LCR includes all types of deposits withdrawable within a period of 30 days, unutilized portion of CC/ OD and un disbursed portion of Loans and expected devolvement of LCs and invocation of Guarantees issued by Bank within 30 days period etc, which is calculated on the basis of past historical data.

Under inflow the items to be taken in to account for calculation of LCR includes interest and installments recordable in loans and advances in next 30 days period and lines of credit or any liquidity arrangements with other Banks, from where Bank can get funds to meet the liquidity stress. Banks funding sources are well diversified and concentration of funding sources are avoided.

Bank does not have any subsidiary/joint venture, hence consolidation is not required. As per RBI guidelines Banks are required to maintain minimum 90% LCR as of March 2018 and Banks LCR is 146.85%.

1.21 Financial Inclusion:

Bank has been allotted total 6485 villages covering 2105 Sub Service Area (SSA) under Financial Inclusion for coverage by March 2018. Against target, 746 SSA have been covered through Brick & Mortar Branch and 1359 Sub Service Area (SSA) have been covered through BC model.

1.22 Aadhaar Enrolment under UIDAI:

Bank is a Non State Registrar of Unique Identification Authority of India (UIDAI). In 2nd phase, Bank has selected 79 Enrolment Agencies and has been carrying out Aadhaar Enrolment through various Enrolment Agencies. Bank has enrolled 10.59 cr approximately residents for Aadhaar Number as of March, 2018.

1.23 Priority Sector lending Certificate (PSLC) :

As per RBI circular no. RBI/2015-16/366 FIDD.CO.Plan.BC.23/04.09.01/2015-16 dated April 7, 2016, the details of sale/purchase of amount of PSLCs (category wise) during the year 2017-18 are as under:

1.24 Procurement from Micro, Small & Medium Enterprises

The procurements made by the Bank from various vendors during the financial year 2017-18 amounts toRs.88.71 cr (Previous YearRs.44.25 cr) Out of this procurement made from MSE amounts toRs.7.84 cr and out of which the procurements made from MSE unit owned by SC/STs entrepreneurs amounts toRs.1.48 cr. The details are being published on the website of the Bank for the benefits of MSEs There are no Micro, Small and Medium enterprises to which the Bank owes dues, which are outstanding for more than 45 days as at March 31, 2018. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the bank

1.25 Note on Ind AS Implementation in Dena Bank:

In Pursuance to the roadmap for the implementation of Ind AS (Indian Accounting Standards) converged with IFRS (International Financial Reporting Standards) for scheduled commercial banks drawn up by MCA (Ministry of Corporate Affairs) notified on January 18, 2016, the Reserve Bank of India has issued notification on February 11, 2016 giving detailed instructions for the implementation of Ind AS by the banks.

The Bank has formed a Steering Committee headed by the Executive Director and comprising of four General for implementation of Ind AS. The proforma financials for the half year ended September 30, 2016 and for quarter ended June 2017 have been submitted by the bank to RBI. The officers of the bank have been imparted training on Ind AS from ICAI/NIBM (National Institute of Banking Management) etc.

The consultants have been appointed by the bank to guide the bank in implementation of Ind AS as per the prescribed time line.

However implementation of Ind AS has been deferred by RBI for one year as per RBI’s Statement on Developmental regulatory Policies dated 05.04.2018.

1.26 Corporate Social Responsibility (CSR):

Since Bank has incurred losses during FY2015-16 & FY 2016-17, there is no allocation of fund for CSR activities in FY 2016-17 & FY 2017-18.

However, during current year Bank has incurred an amount ofRs.2.55 crores under CSR for following activities;

1.27 Previous year’s figures have been regrouped/reclassified/re-arranged, wherever necessary, to make them comparable with the current year’s figures.

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Mar 31, 2016

1. Notes to accounts and other disclosures are contained in Schedule 18 of the Annual Financial Statements. However, as there are no notes and disclosures where there is change in accounting policy or is inviting qualification or attention in the Auditors'' Report, hence no further note / disclosure is required herein.

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Mar 31, 2015

1. Basis of Preparation

The Abridged Financial Statements have been prepared on the basis of the audited financial statements of the Bank for the year ended 31stMarch, 2015 (herein referred to as ''Annual Financial Statements'') pursuant to Rule 7A of the Companies (Central Government General Rules and Forms, 1956 and as notified by Ministry of Finance, Government of India vide its letter no. F.No. 7/116/2012-BOA dated August 1, 2012.

2. Significant Accounting Policies:

Significant accounting policies of the Bank are contained in Schedule 17 of the ''Annual Financial Statements''.

3. Notes to accounts and other disclosures are contained in Schedule 18 of the Annual Financial Statements. Note 18.16 a of Schedule 18 of Balance Sheet, which relates to change in accounting policy wherein unclaimed credit balances lying in suspense receipt accounts for more than five years are no longer considered as miscellaneous Income pursuant to change in Section 26A of Banking Regulation Act. The impact of this change has resulted into understatement of Income by RS. 2.69 cr and over statement of liabilities by the same amount.

Extracts of Notes to Accounts as referred to in the Auditors'' Report under Para "Emphasis of Matter"

2.1 a. Accounting Standard - 5 - "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies"

There were no material prior period income/expenditure items requiring disclosure under AS - 5 except as under:

In view of amendment in Section 26A of Banking Regulation Amendment Act.2012 No 4 of 2013, Bank has revised its Accounting Policy, wherein unclaimed credit balances lying in suspense receipt accounts for more than five years are no longer considered as miscellaneous Income. The impact of this change has resulted into understatement of Income by RS. 2.69 cr and over statement of liabilities by the same amount.

2.2 e. ii Accounting Standard - 15 - "Employee Benefits"

RBI circular no DBOD.No. BP.BC.80/ 21.04.018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment dated 9th February, 2011 required the Banks to amortize such pension and enhancement in Gratuity over a period of five years ending 31.03.2015. Bank has already charged such pension & gratuity amounting to RS. 347.08 cr (representing four-fifth of RS. 433.88 cr) up to 31.03.2014 and has provided the unamortized balance of RS.86.80cr during the current FY 2014-15.

Important Notice

Shareholders are requested to visit Dena Bank website-www.denabank.com for the full version of Annual Report 2014-15.

Shareholders desirous of having a copy of the Bank''s Full Annual Report may send an email to [email protected] or a letter to

M/s Sharepro Services (India) Private Limited, Unit : Dena Bank, Samhita Complex, Gala No. 52 to 56, Bldg. No. 13 A-B, Near Sakinaka Telephone Exchange, Andheri-Kurla Road, Sakinaka, Mumbai 400 072.

Shareholders holding shares in Demat form are also requested to update their Demat Accounts with their email ids and shareholders holding shares in physical form by letter to us, to receive notices, information etc.qquickly through email.

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Mar 31, 2013

1. Basis of Preparation

The Abridged Financial Statements have been prepared on the basis of the audited financial statements of the Bank for the year ended 31st March, 2013 (herein referred to as "Annual Financial Statements") pursuant to Rule 7A of the Companies (Central Government General Rules and Forms, 1956 and as notified by Ministry of Finance, Government of India vide its letter no. F.No. 7/116/2012-BOA dated August 1, 2012. These are the first abridged financial statements of the Bank and previous year figures have been compiled from the Audited Financial Statements of previous year.

3. Notes to accounts and other disclosures are contained in Schedule 18 of the Annual Financial Statements. However, as there are no notes and disclosures where there is change in accounting policy or is inviting qualification or attention in the Auditors'' Report, hence no further note / disclosure is required herein.

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Mar 31, 2012

1 a. Matching of entries in respect of Inter Branch transactions has been done up to March 2012 for the purpose of reconciliation, which is an ongoing process.

b. Finacle System is self-balancing. However, in some branches 'basic' GL heads viz ARBH, Items-in-transit, Suspense Receipts, BCCD, Pension Paid are unreconciled upto pre-migration period. The reconciliation is in progress. Subsequently, specific pointing [self balancing in nature] GL Heads [Suspense Payment, ARBH, Items-in- transit, Remittances, Dividend Warrants, Pension paid, Refund Orders paid, Cash Remittance, ATM Cash] have been opened from 10th December, 2011. Existing 'basic' accounts are frozen for new debits and only credits are permitted to square-off the outstanding debits.

c. Balances with Reserve Bank of India/ other banks have been reconciled except certain entries under process of reconciliation.

d. The consequential impact on the accounts of all as stated above [in a, b & c] is not material & not ascertainable pending reconciliation / balancing / adjustment.

2 a. Provision on standard assets has been given effect in the accounts according to revised RBI guidelines as under:

i. 0.25% of the outstanding in the direct advances to Agriculture and SME Sector

ii. 1.00% of the outstanding in Commercial Real Estate (CRE) Sector and also in cases where commencement date of operations is extended.

iii. 2.00% of the outstanding in Housing Loans @ teaser rates and Standard Restructured Advances for a period of two years from the date of restructuring.

iv. 0.40% of the outstanding in all other advances [i.e. except a, b & c above.]

b. Based on Reserve Bank of India letter DBOD. BPNo.14898/21.04.048/2011-12 April 2, 2012, the amortization of provision required for diminution in the fair value of advances and the additional provisioning requirement for the restructured standard assets in case of Air India Group ("Air India"), amounting to Rs. 34.22 crore will be provided over 8 quarters starting from the first quarter of FY 2012-13.

3 Classification of advances and provisioning there-against in case of 449 unaudited branches have been incorporated as certified by the Branch Managers.

4 The Bank has transferred Rs. 240.94 crore (Previous year Rs. 183.49 crore) to Statutory Reserve out of profit of Rs. 803.14 crore for the year (Previous year Rs. 611.63 crore) & Rs. 1.59 crore (Previous year Rs. 2.28 crore) to Capital Reserve (Net of taxes and Transfer to Statutory Reserve) from the profit on sale of investments held under HTM Category. The Bank has transferred Rs. 50.00 crore in Special Reserve created u/s 36 (1) (viii) of the Income Tax Act, 1961 (Previous Year Rs. 22.00 crore). The Bank has also transferred Rs. 388.56 crore to Revenue Reserve (Previous Year Rs. 318.33 crore) after proposed dividend (inclusive of dividend tax) of Rs. 122.05 crore (Previous Year Rs. 85.53 crore).

5 Non-banking asset (land) acquired in satisfaction of claim amounting to Rs. 9.86 crore (Previous Year Rs. 9.86 crore) is pending for registration.

@ Bank has issued 1,66,69,453 equity shares of Rs. 10/- each at a premium of Rs. 80.73 to Life Insurance Corporation of India on preferential basis on 29.03.2012. As a result of this, Government of India shareholding has reduced to 55. 24% as of March 31, 2012.

v. The Bank has amortized premium of Rs. 32.45 crore during the year (Previous year Rs. 28.28 crore) for securities classified under "Held to Maturity" category in terms of Accounting Policy as stated at para 17.3, and the said amount has been charged to Profit and Loss Account by reducing value of the respective securities to that extent.

vi. In accordance with the guidelines issued by RBI, the bank has shifted securities within the categories during the year. The consequential depreciation amounting to Rs. 15.39 crore (previous year Rs. 22.21 crore) on account of shifting securities from "Available for Sale" category to "Held to Maturity" category has been charged to Profit & Loss Account by reducing book value of these securities.

vii. The Bank has investment of Rs. 48.32 crore (Previous year Rs. 21.72 crore) in two Regional Rural Banks (RRBs) sponsored by the Bank. This includes Investment of Rs. 46.92 crore (Previous Year Rs. 20.32 crore) by way of Share Capital deposits, towards recapitalisation of the RRBs. Investment has been valued at cost in accordance with the RBI guidelines.

6 Derivatives:

a. Forward Rate Agreement/ Interest Rate Swap

The Bank has not undertaken Forward Rate Agreement/Interest Rate Swap transaction during the year. Therefore, no separate disclosure is given.

b. Exchange Traded Interest Rate Derivatives:

The Bank has not undertaken Exchange Traded Interest Rate Derivatives transaction during the year. Therefore, no separate disclosure is given.

c. Disclosures on risk exposure in derivatives:

i. Qualitative disclosure

The Treasury Policy & Derivative Policy of the Bank lays down the type of financial derivates instruments, scope of usages, approval process as also the limits like the open position limits, deal size limits, stop loss limits and counter party exposure limits besides delegated power for trading in the approved instruments.

Bank is exposed to credit risk, market risk, country risk and operational risk. Bank has risk management policies approved by the Board of Directors which is designed to measure the financial risks for transactions in the trading book on a regular basis. The Risk Management Department measures the financial risk for transactions on a daily basis through measurement tools such as MTM, VaR, Convexity and Modified Durations. The reports are submitted to the Top Management which appraises the risk profile to the ALCO. The guidelines issued by RBI, FEDAI & FIMMDA from time to time are followed.

At present Bank is undertaking derivate transactions in Currency Futures for proprietary trading.

e. Provision Coverage Ratio (PCR)

As on Balance Sheet Date Provision Coverage Ratio is 75.53% calculated as per RBI circular no. RBI2009-10/240 DBOD.No.BP BC.64/21.4.048/2009-10 dated 01.12.2009. In terms of RBI circular no. DBOD.No.BPBC. 87 /21.04.048 /2010-11 April 21, 2011 on PCR, the Bank is not required to segregate any amount in to "Countercyclical Provisioning Buffer."

7. Risk Category wise Country Exposure:

b. In respect of Foreign Exchange transactions, where the Bank's net funded exposure computed as per the guidelines of the RBI with each country exceeded 1% of the total assets of the Bank, the Bank is required to make the provision. Since, Bank's net funded exposure in any country does not exceed 1% of total assets, no provision (Previous year Nil) is made.

b. Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the Bank During the year 2011-12, the Bank has not exceeded prudential credit exposure limit in respect of Group Borrower Limit / Single Borrower Limit.

8. Amount of Provisions made for Income Tax during the year:

a. The Bank has made provision of Rs. 239.59 crore towards Minimum Alternate Tax [MAT] for the current year u/s 115JB of the Income Tax Act 1961, which is net of Rs. 7.80 crore of MAT credit receivable included in Other Assets.

b. During the year, pursuant to various assessments / appellate / rectification orders, provision for Income Tax pertaining to earlier years has been written-back amounting to Rs. 137.02 crore (previous year Rs. 48.58 crore additional provision made) and credited to the Profit & Loss Account for the year.

9. Premises include 1/ 3rd share in a property [SPBT College Mumbai] jointly owned by the Bank with Central Bank of India, as under:

10. The advances covered by Bank/ Govt. Guarantee [shown in Schedule - 9 Para B (ii)] include Rs. 2186.87 crore [Previous Year Rs. 3696.67 crore] guaranteed by various State Governments.

11. DISCLOSURES AS PER ACCOUNTING STANDARDS (AS):

a. Accounting Standard - 5 - "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies"

There were no material prior period income/expenditure items requiring disclosure under AS - 5.

b. Accounting Standard - 9 - "Revenue Recognition"

Certain items of income are recognised on realization basis as per Accounting Policy as stated at point no. 17.9.

c. Accounting Standard - 10 - "Accounting for Fixed Assets"

The Bank has not revalued any of its fixed assets during the year.

d. Accounting Standard - 11 - "The Effects of Changes in Foreign Exchange Rates"

Net income on account of exchange differences credited in the Profit and Loss account for the year is Rs. 82.21 crore (previous year: Rs. 52.35 crore).

e. Accounting Standard - 15 - "Employee Benefits"

The following information is disclosed in terms of Accounting Standard issued by the ICAI.

i) Provision has been made for Employees Benefits viz; Pension, Gratuity, Leave Encashment and other Employees benefits in accordance with AS-15 on the basis of actuarial valuation. In addition, a sum of Rs. 21.57 crore (Previous year 21.57 crore) has been charged to Profit and Loss account during the year, being 1/5th of transitional Liability as on 31st March 2007, in compliance with AS-15 on Employees Benefits issued by the ICAI. The amount of unrecognized transitional liability is Rs. Nil (Previous year Rs. 21.57 crores).

ii) In terms of the requirements of RBI circular no DBOD.No. BPBC.80/ 21.04.018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment dated 9th February, 2011, the Bank has amortized an amount of Rs. 86.77 crore (representing 1/5th of Rs. 433.88 crore) out of the unrecognized amount of Rs. 347.11 crore as on 31.03.2011. The balance amount carried forward i.e. Rs. 260.34 crore (Pension Rs. 212.36 crore plus Gratuity Rs. 47.98 crore).

f. Accounting Standard - 17 - "Segment Reporting"

As per the Reserve Bank of India revised guidelines on Accounting Standard -17, the Bank's Operations are classified into Primary Segment, i.e., the business segment comprising of "Treasury", "Corporate / Wholesale Banking", "Retail Banking" and "Other Banking Operations", as follows:

Notes:

1) Segment Results are after adjustment on account of Inter Segment Cost, which has been considered on the basis of Transfer Price mechanism decided by the Bank.

2) Assumed Inter Segment Assets, Liabilities and Revenue have been ignored.

3) Treasury Operations consist of entire treasury investment portfolio of the Bank.

4) Unallocated liabilities include Capital and Reserves.

i. Accounting Standard 21 - "Consolidated Financial

Statements(CFS)"

The Bank is not having any subsidiaries, within the meaning of this Standard, therefore, this Accounting Standard does not apply.

j. Accounting Standard 22 - "Accounting for Taxes on Income"

The Bank has complied with requirements of "AS-22 issued by ICAI and accordingly, deferred tax assets and liabilities are recognized.

k. Accounting Standard 23 - "Accounting for Investments in Associates in Consolidated Financial Statements"

As on the Balance Sheet Date there is no such associate of the Bank.

l. Accounting Standard - 24 - "Discontinuing Operations"

No operations have been discontinued in the Bank during the year.

m. Accounting Standard - 28 - "Impairment of Assets"

In the opinion of the Management, there is no impairment to its assets.

n. Accounting Standard - 29 - "Provisions, Contingent Liabilities and Contingent Assets"

ii. Item Nos (I) to (V) of the Schedule - 12 of the balance sheet on contingent liabilities, reflect the various types of contingent liabilities categorized according to their nature. These amounts are estimated on the basis of documents related to the basic contracts or claims made. Outflow on account of these contingent liabilities would depend upon the outcome of disposal of litigations by the respective judicial authorities, execution of contracts, invocation of guarantees, devolvement of LCs, settlement of claims etc.

12. Floating Provisions

Bank does not have any floating provisions.

13. Draw Down from Reserves

Bank has not drawn any amount from the Reserves during the year.

14. Disclosure of Letter of Comforts (LOCs) issued by the Bank

Since the Bank does not have any subsidiary/branch in overseas, Bank has not issued any Letter of Comforts [LOC] to meet the requirement of foreign regulator.

15. Bancassurance Business

Bank has received Rs. 3.45 crore (Previous year Rs. 9.21 crore) as fees/ commission from bancassurance business.

16. Bank has set a target to cover 728 villages with population above 2000 during 2011-12 under Financial Inclusion Plan (FIP). All 728 villages have been covered by the Bank by 31.03.2012, out of which, 687 villages have been covered through Business Correspondent (BC) model and 41 villages through Brick & Mortar Branch Mode.

17. Bank has not sponsored any SPVs.

18. The Bank has engaged M/s Tata Consultancy Services (TCS) as the Application Service Provider for implementation of Financial Inclusion Plan for a period of 3 years. Bank has engaged individual Business Correspondents (BCs) in the FI villages in all over India except Union Territory of Dadra & Nagar Haveli (UT of DNH). Bank has engaged M/s A Little World (ALW) as Technology Service Provider and M/s Zero Microfinance & Savings Support Foundation (ZMF) as Business Correspondent for the implementation of Financial Inclusion plan in the UT of DNH.

19. Previous year's figures have been regrouped/reclassified/re- arranged, wherever necessary, to make them comparable with the current year's figures.

---

Mar 31, 2011

1.1 a) Initial matching of entries in respect of Inter Branch transactions has been done up to March 2011 for the purpose of reconciliation, which is an ongoing process.

b) Balancing of subsidiary ledgers/registers and reconciliation with general ledgers are in progress at some branches. Outstanding entries in some heads of account including demand drafts payable, drafts paid ex-advice, suspense accounts, dividend/ interest warrants, refund orders paid and clearing adjustments between service branches and participating branches in clearing are in the process of reconciliation/ adjustments.

c) Balances with Reserve Bank of India/ other banks have been reconciled except certain entries under process of reconciliation.

d) The consequential impact on the accounts of all as stated above [in a, b & c] is not ascertainable pending reconciliation / balancing / adjustment.

1.2 Provision on standard assets has been given effect in the accounts according to revised RBI guidelines as under:

a) 0.25% of the outstanding in the direct advances to Agriculture and SME Sector

b) 1.00% of the outstanding in Commercial Real Estate (CRE) Sector

c) 2.00% of the outstanding in Housing Loans @ teaser rates.

d) 0.40% of the outstanding in all other advances [i.e. except a, b & c above.]

1.3 Provision on all assets other than standard assets has also been given effect in the accounts in accordance with the IRAC norms issued by RBI.

1.4 The classification of advances and provisioning there-against in case of 289 Un-audited branches have been incorporated as certified by the branch mangers.

1.5 The Bank has transferred Rs. 183.49 crore (Previous year Rs. 153.38 crore) to Statutory Reserve out of profit of. 611.63 crore for the year (Previous year Rs. 511.25 crore) & Rs. 2.28 crore (Previous year Rs. 16.40 crore) to Capital Reserve (Net of taxes and Transfer to Statutory Reserve) from the profit on sale of investments held under HTM Category. The Bank has transferred. 22.00 crore in Special Reserve created u/s 36 (1) (viii) of the Income Tax Act, 1961 (Previous Year Rs. 15 crore). The Bank has also transferred Rs. 318.33 crore to Revenue Reserve (Previous Year Rs. 259.36 crore) after proposed dividend (inclusive of dividend tax) of. Rs. 85.53 crore (Previous Year Rs. 67.11 crore).

18.6 Non-banking asset (land) acquired in satisfaction of claim amounting to Rs. 9.86 crore (Previous Year Rs. 9.86 crore) is pending for registration.

@Bank has issued 4,65,65,874 equaity shares of Rs. 10/- each at a premium of Rs. 105.75 to GOI on preferential basis on 25.03.2011

v. The Bank has amortized Rs. 28.28 crore during the year (Previous year Rs. 33.35 crore) for securities classified under "Held to Maturity" category, in terms of accounting policy 17.2 and the amount has been charged to Profit and Loss Account by reducing value of the respective securities to that extent.

vi Bank has not charged depreciation amounting to Rs. 6.97 crore due to shifting of investment from AFS category to HTM category.

vii In accordance with the guidelines issued by RBI, the bank has shifted securities within the categories during the year. The consequential depreciation amounting to Rs. 22.21 crore (previous year Rs. 25.45 crore) on account of shifting securities from "Available for Sale" category to "Held to Maturity" category has been charged to Profit & Loss Account by reducing book value of these securities.

During the year, Bank has changed method of amortisation of premium on securities from Constant Yield Method to Straight Line Method. Due to this change, the amount of amortisation for the financial year 2010-11 has reduced from Rs. 32.64 cr. to Rs. 28.28 cr. This has resulted in increase in the profit for the financial year 2010- 11 by Rs. 4.36 cr.

viii The Bank has investment of Rs. 21.72 crore (Previous year Rs. 21.72 crore) in two Regional Rural Banks (RRBs) sponsored by the Bank. This includes Investment of Rs. 20.32 crore (Previous Year Rs. 20.32 crore) by way of Share Capital deposits, towards recapitalisation of the RRBs. Diminution in value of Investment in one of the RRB has not been recognized as the said investment has been valued at cost in accordance with the RBI guidelines.

1.6 Derivatives:

a) Forward Rate Agreement/ Interest Rate Swap

The Bank has not undertaken Forward Rate Agreement/Interest Rate Swap transanction during the year. Therefore no separate disclosure is given.

b. Exchange Traded Interest Rate Derivatives:

The Bank has not undertaken Exchange Traded Interest Rate Derivatives transanction during the year. Therefore no separate disclosure is given.

c. Disclosures on risk exposure in derivatives:

i. Qualitative disclosure

Bank has not undertaken any overnight interest rate swap (OIS) transaction during the year.

# Includes Rs. 5.65 Cr (Previous Year Rs. 4.12 Cr.) towards provision of FITL (NPA).

e. Provision Coverage Ratio (PCR)

As on Balance Sheet Provision Coverage Ratio is 74.62 calculated as per RBI circular no. RBI2009-10/240 DBOD.NO.BP.BC.64/21.4.2009- 10 dated o1.12.2009. In terms of RBI circular no. DBOD.NO.BP.BC. 87/21.04 /2010-11 April 21, 2011 on PCR the Bank is not required to segregate any amount in to "counter cyclical provisioning buffer".

1.7 Risk Category wise country exposure:

In respect of Foreign Exchange transactions, where the Banks net funded exposure computed as per the guidelines of the RBI with each country exceeded 1% of the total assets of the Bank, the Bank is required to make the provision. Since, Banks net funded exposure in any country does not exceed 1% of total assets, no provision (Previous year Nil) is made.

Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the Bank

During the year 2010-11, the Bank has sanctioned limit of Rs. 575 crores to one of the borrower (M/s Chhatisgarh Co operative Marketing Federation) where outstanding as on 31.03.2011 was Rs. 578.65 crores; due to interest application for March 2011. Interest has been subsequently paid on 06.04.2011 & account was within the prudential credit exposure limit in respect of single borrower.

1.8 Reserve Bank of India did not subject the Bank to any penalty during the year.

1.9 Provision for Income Tax:

During the year, pursuant to various assessments / appellate / rectification orders, additional provision for Income Tax pertaining to earlier years has been made amounting to Rs. 48.58 crore (previous year Rs. 10.75 crore written back) and charged to the Profit & Loss Account for the year.

The property belonging to the Bank was revalued during the year 2005-06 and written down value of the revalued property as on 31.03.2011 is Rs.14.38 crore. (Previous Year Rs. 14.63 crore).

1.10 The advances covered by Bank/ Govt. Guarantee [shown in Schedule - 9 Para B (ii)] include Rs. 3696.67 crore [Previous Year Rs. 2686.16 crore] guaranteed by various State Governments.

1.11 Two plots of land at Gandhidham, which are in the possession of the bank since long, have been included in the value of premises at their present market value (based on valuation reports obtained). The net amount added to the premises Rs. 1.57 crore has been credited to Capital Reserves (Revaluation Reserve). The same was done prior to April 1st, 2009. No assets in this block have been revalued during the current year 2010-11.

1.13 DISCLOSURE AS PER ACCOUNTING STANDARDS (AS):

a) Disclosure as per AS 5:

There were no material prior period income/expenditure items requiring disclosure under AS - 5.

b) Disclosure as per AS 9:

Certain items of income are recognised on realization basis as per Accounting Policy as stated at point no. 17.6.b.

c) Disclosure as per AS 10:

The Bank has not revalued any of its fixed assets during the year.

d) Disclosure as per AS 11:

Net income on account of exchange differences credited in the Profit and Loss account for the year is Rs. 52.35 crore (previous year: Rs. 33.26 crore).

i) Provision has been made for Employees Benefits viz; Pension, Gratuity, Leave Encashment and other Employees benefits in accordance with AS-15 (revised) on the basis of actuarial valuation. In addition, a sum of Rs. 21.57 crore (Previous year 21.58 crore) has been charged to Profit and Loss account during the year, being 1/5th of transitional Liability as on 31st March 2007, in compliance with AS-15 (revised) on Employees Benefits notified by the ICAI. The amount of unrecognized transitional liability is Rs. 21.58 crore (Previous year Rs. 43.15 crores).

ii) "During the year, the Bank reopened the pension option for such of its employees who had not opted for the pension scheme earlier. As a result of exercise of which by (5448 employees), the bank has incurred a net liability of Rs. 471.56 crore. Further, during the year, the limit of gratuity payable to the employees of the banks was also enhanced pursuant to the amendment to the Payment of Gratuity Act, 1972. As a result the gratuity liability of the Bank has increased by Rs. 79.96 crore.

In terms of the requirements of the Accounting Standard (AS 15), employee benefits, the entire amount of Rs. 551.52 cr (i.e. Pension Rs. 471.56 cr + Gratuity Rs. 79.96 cr) is required to be charged to Profit & Loss Account. However RBI has issued a circular no DBOD.No. BP.BC.80/ 21.04.018/2010-11 on Re-opening of Pension Option to Employees of Public Sector Banks and Enhancement in Gratuity Limits - Prudential Regulatory Treatment dated 9th February, 2011. In accordance with this provision of said Circular, the Bank would amortize the amount of Rs. 433.88 cr over a period of 5 years.

Accordingly, Rs. 86.77 cr (representing 1/5th of Rs. 433.88 cr ) has been charged to P & L Account. In terms of the requirements of the aforesaid RBI circular, the balance amount carried forward i.e. Rs. 347.11 cr (Pension Rs. 283.14 cr plus Gratuity Rs. 63.97 cr) does not include any employee relating to separated/ retired employees.

Had such a circular not been issued by the RBI, the profit of the Bank would have been lower by Rs. 347.11 cr pursuant to application of the requirements of the AS 15."

Notes:

1. Segment Results are after adjustment on account of Inter Segment Cost, which has been considered on the basis of Transfer Price mechanism decided by the Bank.

2. Assumed Inter Segment Assets, Liabilities and Revenue have been ignored.

3. Treasury Operations consist of entire treasury investment portfolio of the Bank.

4. Unallocated liabilities include Capital and Reserves.

In compliance with Accounting Standard 18 issued by ICAI and RBI guidelines, details pertaining to Related Party Transactions are as under:

*There were no diluted potential equity shares

Consolidated Financial Statements - Accounting Standard 21:

The Bank is not having any subsidiaries, therefore, this accounting Standard does not apply.

Taxes on Income : Accounting Standard 22:

The Bank has complied with requirements of "AS 22 on Accounting for Taxes on Income" issued by ICAI and accordingly, deferred tax assets and liabilities are recognized.

Accounting for Investments in Associates in Consolidated Financial Statements : Accounting Standard : 23

As on the Balance Sheet Date there is no such associate of the Bank.

Discontinuing Activities - Accounting Standard 24: No activity has been discontinued in the Bank during the year.

Accounting Standard 28: In the opinion of the Management, there is no impairment to its assets, to which Accounting Standard- 28 is applicable.

Disclosure in terms of Accounting Standard 29 on provisions, contingent liabilities and contingent assets.

Item Nos (I) to (V) of the Schedule 12 of the balance sheet on contingent liabilities, reflect the various types of contingent liabilities categorized according to their nature. These amounts are estimated on the basis of documents related to the basic contracts or claims made. Outflow on account of these contingent liabilities would depend upon the outcome of disposal of litigations by the respective judicial authorities, execution of contracts, invocation of guarantees, devolvement of LCs, settlement of claims etc.

Floating Provisions

Bank does not have any floating provisions.

18.24 Draw Down from Reserves

Bank has not drawn any amount from the Reserves during the year.

Disclosure of Letter of Comforts (LOCs) issued by bank to a foreign regulator

Since the Bank does not have any subsidiary/branch in overseas, Bank has not issued any Letter of Comfort [LOC] to meet the requirement of foreign regulator.

Bank has received Rs. 9.21 crore (Previous year Rs. 8.33 crores) as fees/commission from bancassurance business.

Bank has set a target to cover 299 villages with population above 2000 during 2010-11 under Financial Inclusion Plan (FIP). Against the FIP projection of 299 villages, Bank has covered 310 villages during 2010-11, out of which 303 villages have been covered through the Business Correspondents (BCs) model and 7 villages have been covered by opening of Branch / Satellite Offices.

18.35 Bank has not sponsored any SPVs.

18.36 The Bank has engaged M/s Tata Consultancy Services (M/s TCS) as the Application Service Provider (ASP) for implementation of Fl Plan for a period of 3 years. M/s Society for Educational Welfare & Economic Development (SEED) has been engaged by M/s Tata Consultancy Services (TCS), as Business Correspondents (BC) for Banks Financial Inclusion Project, in consultation with the Bank for covering the Fl villages all over India. The Bank has engaged M/s A Little World (M/s ALW) as Technology Service Provider and M/s Zero Microfinance & Savings Support Foundation (M/s ZMF) for the implementation of the Pilot Project in the UT of Dadra & Nagar Haveli.

18.37 Previous years figures have been regrouped/reclassified/re- arranged, wherever necessary, to make them comparable with the current years figures.

---

Mar 31, 2010

1.1 a) Initial matching of entries in respect of Inter Branch transactions has been done up to March 2010 for the purpose of reconciliation, which is an ongoing process.

b. Balancing of subsidiary ledgers/registers and reconciliation with general ledgers are in progress at some branches. Outstanding entries in some heads of account including demand drafts payable, drafts paid ex-advice, suspense accounts, dividend/ interest warrants, refund orders paid and clearing adjustments between service branches and participating branches in clearing are in the process of reconciliation/ adjustments.

c) Balances with Reserve Bank of India/ other banks have been reconciled except certain entries under process of reconciliation.

d) The consequential impact on the accounts of all as stated above [in a, b & c] is not ascertainable pending reconciliation / balancing / adjustment.

1.2 Provision on standard assets has been given effect in the accounts according to revised RBI guidelines as under:

a) 0.25% of the outstanding in the direct advances to Agriculture and SME Sector

b) 1.00% of the outstanding in Commercial Real Estate (CRE) Sector

c) 0.40% of the outstanding in all other advances [i.e. except a. and b. above.]

1.3 Provision on all assets other than standard assets has also been given effect in the accounts in accordance with the IRAC norms issued by RBI.

1.4 The classifi cation of advances and provisioning there- against in case of 261 Un-audited branches have been incorporated as certifi ed by the branch mangers.

1.5 The Bank has transferred Rs. 153.38 crores (Previous year Rs. 126.80 crores) to Statutory Reserve out of profi t of Rs. 511.25 crores for the year (Previous year Rs. 422.66 crores) & Rs. 16.40 crores (Previous year Rs. 26.13 crores) to Capital Reserve (Net of taxes and Transfer to Statutory Reserve) from the profi t on sale of investments held under HTM Category. The Bank has transferred Rs. 15 crores in Special Reserve created u/s 36 (1) (viii) of the Income Tax Act, 1961 (Previous Year Rs. 20.00 crores). The Bank has also transferred Rs. 259.36 Crores to Revenue Reserve (Previous Year Rs. 209.47 crores) after proposed dividend (inclusive of dividend tax) of Rs. 67.11 crores (Previous Year Rs. 40.27 crores).

1.6 Non-banking asset (land) acquired in satisfaction of claim amounting to Rs. 9.86 crores (Previous Year. Rs. 9.86 crores) is pending for registration.

v. The Bank has amortized Rs. 33.35 crores during the year (Previous Year Rs. 30.26 crores) for securities classifi ed under “Held to Maturity” category, in terms of accounting policy 17.2 and the amount has been charged to Profi t and Loss Account by reducing value of the respective securities to that extent.

vi. In accordance with the guidelines issued by RBI, the bank has shifted securities within the categories during the year. The consequential depreciation amounting to Rs. 25.44 crores (previous Year Rs. 7.81 crores) on account of shifting securities from “Available for Sale” category to “Held to Maturity” category has been charged to Profi t and Loss Account by reducing book value of these securities.

vii. The Bank has investment of Rs 21.72 crores (Previous year Rs 21.72 crores) in two Regional Rural Banks (RRBs) sponsored by the Bank. This includes Investment of Rs. 20.32 crores (Previous Year Rs 20.32 crores) by way of Share Capital deposits, towards recapitalisation of the RRBs. Diminution in value of Investment in one of the RRB has not been recognized as the said investment has been valued at cost in accordance with the RBI guidelines.

Risk Category wise country exposure:

a) In respect of Foreign Exchange transactions, where the Banks net funded exposure computed as per the guidelines of the RBI with each country exceeded 1% of the total assets of the Bank, the Bank is required to make the provision. Since, Banks net funded exposure in any country does not exceed 1% of total assets, no provision (Previous year Nil) is made.

b) Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the Bank.

During the year the Bank has not exceeded the prudential credit exposure limit in respect of any Group account / single borrower.

Provision for Income Tax:

a) During the year, pursuant to various assessments/ appellate/ rectification orders, excess provision for Income Tax pertaining to earlier years, no longer required, has been written back to the tune of Rs. 10.75 crores (Previous Year Rs. 38.53 crores) and included in the net profit for the year.

1.7 The advances covered by Bank/ Govt. Guarantee [shown in Schedule - 9 Para B (ii)] include Rs. 2686.16 crores [Previous Year Rs. 2362.56 crores] guaranteed by various State Governments.

1.8 Two plots of land at Gandhidham, which were in the possession of the bank since long but in regard to which legal formalities for registration were not complete, have been included in the value of premises at their present market value (based on valuation reports obtained). The net amount added to the premises Rs. 1.57 crores has been credited to Capital Reserves (Revaluation Reserve). The same was done prior to 1st April, 2009. No assets in this block have been revalued during the current year 2009-10.

1.9 DISCLOSURE AS PER ACCOUNTING STANDARDS (AS):

a) Disclosure as per AS 5:

There is no change in any accounting policy during the year.

b) Disclosure as per AS 10:

The Bank has not revalued any of its fi xed assets during the year.

c) Disclosure as per AS 11:

Net income on account of exchange differences credited in the Profi t and Loss account for the year is Rs. 33.26 crores (Previous Year: Rs. 43.86 crores).

h) Consolidated Financial Statements-Accounting Standard 1:

The Bank is not having any subsidiaries, therefore, this accounting Standard does not apply.

i) Taxes on Income - Accounting Standard 22:

The Bank has complied with requirements of “AS 22 on Accounting for Taxes on Income” issued by ICAI and accordingly, deferred tax assets and liabilities are recognized.

The net balance of Deferred Tax Asset as on 31st March, 2010 amounting to Rs. 176.61 crores (Previous Year Rs 277.64 crores) consists of the following:

j. Accounting for Investments in Associates in Consolidated Financial Statements - Accounting Standard - 23

As on the Balance Sheet Date there is no such associate of the Bank.

k. Discontinuing Activities - Accounting Standard - 24:

No activity has been discontinued in the Bank during the year.

l. Accounting Standard - 28: In the opinion of the Management, there is no impairment to its assets, to which Accounting Standard - 28 is applicable.

m. Disclosure in terms of Accounting Standard - 29: on

provisions, contingent liabilities and contingent assets.

During the year, Bank has made adhoc provision of Rs. 70 crores for proposed wage revision on estimated basis, which will be crystallized on signing the agreement between IBA and employee unions.

ii) Item Nos. (I) to (V) of the Schedule 12 of the balance sheet on contingent liabilities, refl ect the various types of contingent liabilities categorized according to their nature. These amounts are estimated on the basis of documents related to the basic contracts or claims made. Outfl ow on account of these contingent liabilities would depend upon the outcome of disposal of litigations by the respective judicial authorities, execution of contracts, invocation of guarantees, devolvement of LCs, settlement of claims etc. The possibility of any reimbursement in such cases is not ascertainable at this stage.

1.10 Floating Provisions

Bank does not have any floating provisions.

1.11 Draw Down from Reserves

Bank has not drawn any amount from the Reserves (except effect on Revaluation Reserve due to sale of premises earlier revalued) during the year.

1.12 Disclosure of Letter of Comforts (LOCs) issued by banks Since the Bank does not have any subsidiary/branch in overseas, Bank has not issued any Letter of Comfort [LOC] to meet the requirement of foreign regulator.

1.13 Bank has received Rs.8.33 crores as fees/commission from bancassurance business.

1.14 Disclosure regarding progress in respect of extending banking services through the Business Correspondents (BC) model and the initiatives taken by banks in this regard. As per circular no DBOD.No.BL.BC.63/22.01.009/2009-10

1.15 Concentration of Deposits.

1.16 Bank has not sponsored any SPVs.

1.17 Bank has engaged M/s Zero Micro Finance Savings Support Foundation as Business Correspondent with M/s A Little World as technology provider for extending Banking Services in Bhuj and Banaskantha districts of Gujarat State and Union Territory of Dadra and Nagar Haveli. Bank has also entered into MOU with M/s FINO Fintech Foundation as Business Correspondent and with M/s Financial Information Network & Operations Ltd. as technology provider for Financial Inclusion Pilot Project in Durg District of Chattisgarh State.

1.18 Previous years figures have been regrouped / reclassified/ re-arranged, wherever necessary, to make them comparable with the current years figures.