Accounting Policies of United Bank of India [Amalgamated] Company

Mar 31, 2019

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 are in conformity to the Generally Accepted Accounting Principles (GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/ Guidance Notes/ pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

2. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. RECOGNITION OF INCOME AND EXPENDITURE

3.1 The Revenues and Expenses are accounted for on accrual basis unless otherwise stated.

3.2 Income from Performing Assets is recognized on accrual basis and income from Non-Performing Assets (NPAs) is recognized on realisation. The amount realised/recovered during the year is appropriated first to income on Sub-standard Assets. Amounts realized/ recovered in Doubtful and Loss Assets and Suit Filed and Decreed Accounts are first appropriated against outstanding balances.

3.3 Unrealized income on advances, classified as NPA, is reversed.

3.4 Income from Commission (except on Government Transactions and Bancassurance), exchange, brokerage, claims, locker rent and dividend on shares are accounted for on cash basis.

3.5 Performance linked incentive to whole time directors is accounted for on cash basis.

4. transactions involving foreign exchange

4.1. Monetary Assets and Liabilities, excluding outstanding Forward Exchange Contracts in each currency, are revalued at the Balance Sheet date at closing spot rates announced by the Foreign Exchange Dealers Association of India (FEDAI). Outstanding forward exchange contracts are revalued at the forward rates announced by FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

4.2. Income and expenditure items are recorded at the exchange rates prevailing on the date of transaction.

4.3. Acceptances, endorsements and other obligations including guarantees are carried at the closing spot rates announced by FEDAI.

4.4. Representative Office of the Bank has been classified as ‘Integral Foreign Operation’ in accordance with AS-11 on “The Effects of Changes in Foreign Exchange Rates”.

4.5. 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.

4.6. Foreign currency non-monetary items that are carried in terms of historical costs are reported using the exchange rates on the dates of transactions.

5. INVESTMENTS

5.1 For the purpose of disclosure in the Financial Statements, the investments are classified into six categories as stipulated in Form A of the third schedule to the Banking Regulation Act, 1949 as under:

a) Government Securities

b) Other approved securities

c) Shares

d) Debentures and Bonds

e) Subsidiaries/Joint Ventures

f) Others

5.2 The Investment portfolio of the Bank is categorized, in accordance with the RBI guidelines, into:

a) “Held to Maturity” comprising Investments acquired with an intention to hold till maturity;

b) “Held for Trading” comprising Investments acquired with an intention to trade;

c) “Available for Sale” comprising Investments not covered by (a) and (b) above.

Classification of an investment is done at the time of acquisition.

5.3 In determining acquisition cost of an investment:

a) Brokerage, Commission and Incentives received on subscription to securities, are deducted from the cost of securities;

b) Brokerage, Commission etc. paid in connection with acquisition of securities are treated as revenue expenses;

c) Interest accrued upto the date of acquisition/ sale of securities i.e., broken period interest is credited/ charged to Profit and Loss Account.

5.4. The Bank follows “Settlement Date” for accounting of investment transactions. Investments are valued as per RBI/ Fixed Income Money Market & Derivatives Association (FIMMDA) guidelines, on the following basis:

a) “Held to Maturity” (HTM)

i) Investments under “HTM” category are carried at acquisition cost. Wherever the book value is higher than the face value/ redemption value, the premium is amortized over the remaining period to maturity.

ii) Investments in Rural Infrastructure Development Fund, Short Term Co-operative Rural Credit Refinance Fund, Medium Small Micro Enterprise Refinance Fund - Small Industries Development Bank of India Limited, Medium Small Micro Enterprise Risk Capital Fund - Small Industries Development Bank of India Limited, Rural Housing Development Fund-National Housing Bank Limited, Micro Finance Development and Equity Fund - National Agricultural and Rural Development Bank Limited (classified as shares) are valued at carrying cost.

iii) Investments in sponsored Regional Rural Banks are valued at carrying cost.

iv) Investment in venture capital is valued at carrying cost.

b) “Held for Trading” and “Available for Sale”

5.5. Shifting of securities from and to “HFT” category is done in accordance with RBI guidelines with the approval of Board of Directors.

5.6. The individual scrip in the “HFT” and “AFS” category are marked to market at monthly or at more frequent intervals, if required. Under each category, net depreciation, if any, is provided for while net appreciation, if any, is ignored.

5.7. Income from Zero Coupon Bonds, being the difference between cost and face value, is recognized on a time proportion basis.

5.8. Profit or Loss on sale of investments in any category is taken to Profit and Loss Account. In case of profit on sale of Investments in “HTM” category, an equivalent amount is appropriated to “Capital Reserve Account” at the end of the year. For calculating the surplus/ deficit on sale of securities, weighted average method is adopted.

5.9. For the purpose of calculating holding period in case of “HFT” category, First in First out (FIFO) method is applied.

5.10. Investments are subject to appropriate provisioning/ de-recognition of income, in line with the prudential norms of RBI for “Non Performing Investment” (NPI) Classification. The depreciation/ provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities in accordance with RBI guidelines.

5.11. The derivatives transactions are undertaken for trading or hedging purposes and valuation has been done in accordance with RBI guidelines.

5.12. The Bank has adopted the Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions.

6. financial assets sold to assets reconstruction company (arc)/ securitization company (Sc)

6.1 In the case of financial assets sold to ARC/ SC, if the sale is for a value higher than the Net Book Value (NBV), the excess provision is not reversed but utilized for meeting any shortfall on account of sale of other financial assets to ARC/ SC. If the sale is at a price below the NBV the shortfall after adjusting the available surplus if any, is debited to the Profit and Loss Account.

6.2 The sale of financial 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 book value of such financial assets.

6.3 The Security Receipts are classified as Non-SLR Investment in the books of the Bank and accordingly the valuation, classification and other norms prescribed by RBI in respect of Non-SLR Securities are applicable.

6.4 In case of written off Assets sold to ARC/ SC, the cash proceeds are recognized as income.

7. ADVANCES

7.1. Advances are classified as Performing/ Non-Performing Assets and provisions thereon are made in conformity with the prudential norms prescribed by RBI.

7.2. Non-performing assets are stated net of provisions and claims received from credit guarantee institutions.

7.3 Provision held for performing assets is shown under the head “Other Liabilities and Provisions”.

7.4. Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

8. FIXED ASSETS AND DEPRECIATION

8.1. Premises (including leasehold), other fixed assets and Capital work in progress are stated at historical cost or amount substituted for historical cost. In case of revaluation, the same are stated at the revalued amount and the appreciation is credited to “Revaluation Reserve”.

8.2 Leasehold assets are amortized over the period of lease.

8.3. Depreciation on assets other than Computers and Automated Teller Machines (ATMs) is provided for under written down value method, in the manner and as per the rates prescribed under Schedule II to the Companies Act, 2013 after retaining 5% residual value. However for the assets already in use as on 01.04.2014, Bank use straight-line method for charging depreciation after retaining 5% residual value. Equivalent amount of depreciation on the revalued portion of the asset is transferred to General Reserves from Revaluation Reserve each year.

8.4. Depreciation on computers, ATMs and amortization of software are accounted for on straight-line method @33.33% on pro rata basis from the date of acquisition as per RBI guidelines.

8.5. Impairment Losses, if any, on Fixed Assets (including revalued assets) are recognized in accordance with AS-28 on “Impairment of Assets”.

9. ACCOUNTING FOR GOVERNMENT GRANTS

In accordance with AS-12 Government Grants/ subsidies received is presented in the Balance Sheet by showing the Grant/ Subsidy as a deduction from the Gross Value of the assets concerned in arriving at the book value. The grant/ subsidy is recognized in the Profit & Loss Account over the useful life of the depreciable assets by way of reduced depreciation charged.

Government Grant/ subsidies received, of revenue nature, is recognized in the Profit & Loss Account by reducing the related cost if received during the same financial year otherwise, the same is shown under “Other Income” if received after the close of the relevant financial year.

10. EMPLOYEE BENEFITS

10.1 Employee Benefits are recognized in accordance with AS-15 on “Employee Benefits”.

10.2 Short term employee benefits namely Leave Fare Concession and Medical Aid are measured at cost.

10.3 Long term employee benefits and post-retirement benefits 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.

10.4 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.

10.5 Long Term employee benefits 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 Profit and Loss Account.

10.6 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 five years.

10.7 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 five years.

11. TAXATION

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on “Accounting for Taxes on Income”.

12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In accordance with AS-29 on “Provisions, Contingent Liabilities and Contingent Assets,” the Bank recognizes:

a) Provisions only when it has a present obligation as a result of a past event and 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.

b) Contingent Liability is recognized/ disclosed when a possible obligation from a past event, the existence of which is confirmed by the occurrence/ non-occurrence of one or more uncertain future events not wholly within the control of Bank. Contingent Liability is also recognized/ disclosed when there is a present obligation from past events but is not recognized because of a remote possibility of outflow of resources embodying the economic benefits to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

c) Contingent Assets are not recognized in the Financial Statements.

13. NET PROFIT

The Net Profit is arrived at after accounting for the following:

a) Provision for Taxation

b) Provision on Standard Assets

c) Provision for NPAs and Depreciation on investments as per prudential norms of RBI

d) Other usual and necessary provisions.

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Mar 31, 2018

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 are in conformity to the Generally Accepted Accounting Principles!’GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of lndia (RBI), applicable mandatory Accounting Standards {AS)/Guidance Notes/ pronouncements issued by the Institute of Chartered Accountants of lndia (ICAI) and practices prevailing in the banking industry in India.

2. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. RECOGNITIONOFINCOME AND EXPENDITURE

3.1 The Revenues and Expenses are accounted for on accrual basis unless otherwise stated.

3.2 Income from Performing Assets is recognized on accrual basis and income from Non-Performing Assets (NPAs) is recognized on realisation. The amount realised/recovered during the year is appropriated first to income on Sub-standard Assets. Amounts realized /recovered in Doubtful and Loss Assets and Suit Filed and Decreed Accounts are first appropriated against outstanding balances.

3.3 Unrealized income on advances, classified as NPA, is reversed.

3.4 Income from Commission (except on Government Transactions and Banc assurance), exchange, brokerage, claims, locker rent and dividend on shares are accounted for on cash basis.

3.5 Performance linked incentive to whole time directors is accounted for on cash basis.

4. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

4.1. Monetary Assets and Liabilities, excluding outstanding Forward Exchange Contracts in each currency, are revalue at the Balance Sheet date at closing spot rates announced by the Foreign Exchange Dealers Association of lndia (FEDAI). Outstanding forward exchange contracts are revalued at the forward rates announced by FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or Loss, as the case may be.

4.2. income and expenditure items are recorded at the exchange rates prevailing on the date of transaction,

4.3. Acceptances, endorsements and other obligations including guarantees are carried at The closing spot rates announced by FEDAI.

4.4. Representative Office of the Bank has been classified as ‘Integral Foreign Operation¹ in accordance with AS-11 on “The Effects of Changes in Foreign Exchange Rates”.

4.5. 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.

4.6. Foreign currency non-monetary items that are carried in terms of historical costs are reported using the exchange rates on the dales of transactions.

5. INVESTMENTS

5.1 For the purpose of disclosure in the Financial Statements, the investments are classified into six categories as stipulated in Form A of the third schedule to the Banking Regulation Ac1,1949 as under:

a) Government Securities

b) Other approved securities

c) Shares

d) Debentures and Bonds

e) Subsidiaries/Joint Ventures

f) Others

5.2 The Investment portfolio of the Bank is categorized, in accordance with the RBI guidelines, in to:

a) ”Held to Maturity” comprising Investments acquired with an intention to hold till maturity;

b) ”Held for Trading” comprising Investments acquired with an intention to trade;

c) ”Available for Sale” comprising investments not covered by (a) and (b) above.

Classification of an investment is done at the time of acquisition.

5.3 In determining acquisition cost of an investment:

a) Brokerage, Commission and Incentives received

b) Brokerage, Commission etc. paid in connection with acquisition of securities are treated as revenue expenses:

c) Interest accrued upto the date of acquisition/sale of securities i.e.. broken period interest is credited/charged to Profit and Loss Account.

5.4. The Bank follows “Settlement Dale” for accounting of investment transactions. Investments are valued as per RBI/ Fixed Income Money Market & Derivatives Association (FIM M DA) guidelines, on the following basis:

a) ”Held to Maturity” (HTM)

i) Investments under “HTM’’ category are carried at acquisition cost. Wherever the book value is higher than the face value/redemption value, the premium is amortized oven he remaining period to maturity.

ii) investments in Rural Infrastructure Development Fund, Short Term Co-operative Rural Credit Refinance Fund, Medium Small Micro Enterprise Refinance Fund - Small Industries Development Bank of lndia Limited, Medium Small Micro Enterprise Risk Capital Fund - Small Industries Development Bank of lndia Limited, Rural Housing Development Fund-National Housing Bank Limited. Micro Finance Development and Equity Fund - National Agricultural and Rural Development Bank Limited (classified as shares) are valued at carrying cost.

iii) Investments in sponsored Regional Rural Banks are valued at carrying cost.

iv) Investment in venture capital is valued at carrying cost.

b) ”Held for Trading” and “Available for Sale”

5.5 Shifting of securities from and to ”HFT” category is done in accordance with RBI guidelines with the approval of Board of Directors,

5.6. The individual scrip in the “H FT” and “ A FS” category are marked to market at monthly or at more frequent intervals, if required. Linder each category, net depreciation, if any, is provided for while net appreciation, if any, is ignored.

5.7. Income from Zero Coupon Bonds, being the difference between cost and face value, is recognized on a time proportion basis.

5.8. Profit or Loss on sale of investments in any category is taken to Profit and Loss Account In case of profit on sale of investments in “HTM” category, an equivalent amount is appropriated to “Capital Reserve Account” at the end of the year. For calculating the surplus f deficit on sale of securities, weighted average method is adopted

5.9. For the purpose of calculating holding period in ease of “HFT” category, First in First out (FIFO) method is applied.

5.10. Investments are subject to appropriate provision ing/ de-recognition of income, in line with the prudential norms of RBI for “Non Performing Investment” (NPI) Classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities in accordance with RBI guidelines.

5.11. The derivatives transactions are undertaken for trading or hedging purposes and valuation has been done in accordance with RBI guidelines.

5.12. The Bank has adopted the Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions.

6. FINANCIAL ASSETS SOLD TO ASSETS RECONSTRUCTION COMPANY (ARC)/ SECURITIZATION COMPANY (SC)

6.1 In the case Of financial assets sold to ARE / SC, if the sale is for a value higher than the Net Book Value (NBV). the excess provision is not reversed but utilized for meeting any shortfall on account of sale of other financial assets to ARC/SC. If the sale is at a price below the NBV the shortfall after adjusting the available surplus if any, is debited to the Profit and Loss Account.

6.2 The sale of financial assets to ARE/SC is recognized in the books of the Bank at tower of cither redemption value of the Security Receipts issued by The Trust created by the ARE/SC for such sale or the net value of such financial assets.

6.3 The Security Receipts are classified as Non-SLR Investment in the books of The Bank and accordingly the valuation, classification and other norms prescribed by RBI in respect of Non-SLR Securities are applicable

6.4 In case of writ ten off Assets sold to ARE/ SC, the cash proceeds are recognized as income.

7. ADVANCES

7.1. Advances are classified as Performing / Non-Performing Assets and provisions thereon are made in conformity with the prudential norms prescribed by RBI.

7.2. Non-performing assets are slated net of provisions and claims received from credit guarantee institutions.

7.3 Provision held for performing assets is shown under the head “Other Liabilities and Provisions”.

7.4. Restructuring of Advances and provisioning there of have been made as per RBI guidelines.

8. FIXED ASSETSAND DEPRECIATION

8.1. Premises (including leasehold), other fixed assets and Capital work in progress are stated at historical cost or amount substituted for historical cost In case of revaluation, the same are slated al the revalued amount and the appreciation is credited to “Revaluation Reserve”.

8.2 Leasehold assets are amortized over the period of lease.

8.3. Depreciation on assets other than Computers and Automated Teller Machines (ATMs) is provided for underwritten down value method, in the manner and as per the rates prescribed under Schedule 11 to the Companies Act, 2013 after retaining 5% residual value. However for the assets already in use as on 01.04.2014, Bank use straight-line method for charging depreciation after remaining 5% residual value.

Equivalent amount of depreciation on the revalue portion of the asset is transferred to General Reserves from Revaluation Reserve each year.

8.4. Depreciation on computers, ATMs and amortization of software are accounted for on straight-line method (gj33.33% on pro rata basis from the date of acquisition as per RBI guidelines.

8.5. Impairment Losses, if any, on Fixed Assets (including revalue assets) are recognized in accordance with AS -28 on “ Impairment of Assets”.

9. ACCOUNTING FOR GOVERNMENT GRANTS

In accordance with AS-12 Government Grants/subsidies received is presented in The Balance Sheet by showing the Grant Subsidy as a deduction from the Gross Value of the assets concerned in arriving at the book value. The grant/subsidy is recognized in The Profit & Loss Account over the useful life of the depreciable assets by way of reduced depreciation charged.

Government Grants/subsidies received, of revenue nature, is recognized in the Profit & Loss Account by reducing the related cost if received during the same financial year otherwise, the same is shown under “Other Income” i f received after the close of the relevant financial year.

10. EMPLOYEE BENEFITS

10.1 Employee Benefits are recognized in accordance with AS-15 on “Employee Benefits”.

10.2 Short term Employee benefits namely Leave Fare Concession and Medical Aid are measured al cost.

10.3 Tong term Employee benefits and post-retirement benefits 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.

10.4 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.

10.5 Tong Term Employee benefits 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 Profit and Loss Account.

10.6 The transitional liability in respect of tong term Employee benefits, including pension benefits, is recognized as an expense on straight line basis over a period of five years.

10.7 In terms of RBI circular, expenditure on “Re-opening of Pension option to employees of Public Sector Banks and enhancement of Gradually limits-Prudential Regulatory Treatment” is being amortized over a period of five years.

11. TAXATION

Provision for tax is made for both current and deferred taxes in accordance with A S-22 on “Accounting for Taxes on Income”,

12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In accordance with AS-29 on “Provisions. Contingent Liabilities and Contingent Assets.” the Bank recognizes:

a) Provisions only when it has a present oh ligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will he required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

b) Contingent Liability is recognized-disclosed when a possible obligation from a past event, the existence of which is con finned by the occurrence/non-occurrence of one or more uncertain future events not wholly within the control of bank. Contingent Liability is also recognized/disclosed when there is a present obligation from past events but is not recognized because of a remote possibility of outflow of resources embodying the economic benefits 10 settle the obligation or a reliable estimate of the amount of the obligation cannot be made

c) Contingent Assets are not recognized in The Financial Statements.

13. NETPROFIT

The Net Profit is arrived at after accounting for the following:

a) Provision for Taxation

b) Provision on Standard Assets

c) Provision for NPAs and Depreciation on investments as per prudential norms of RBI

d) Other usual and necessary provisions.

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Mar 31, 2017

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 Principles(GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/ pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

2. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. RECOGNITION OF INCOME AND EXPENDITURE

3.1 The Revenues and Expenses are accounted for on accrual basis unless otherwise stated.

3.2 Income from Performing Assets is recognized on accrual basis and income from Non-Performing Assets (NPAs) is recognized on realization. The amount realized/recovered during the year is appropriated first to income on Substandard Assets. Amounts realized /recovered in Doubtful and Loss Assets and Suit Filed and Decreed Accounts are first appropriated against outstanding balances.

3.3 Unrealized income on advances, classified as NPA, is reversed.

3.4 Income from Commission (except on Government Transactions and Bancassurance), exchange, brokerage, claims, locker rent and dividend on shares are accounted for on cash basis.

3.5 Performance linked incentive to whole time directors is accounted for on cash basis.

4. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

4.1. Monetary Assets and Liabilities, excluding outstanding Forward Exchange Contracts in each currency, are revalued at the Balance Sheet date at closing spot rates announced by the Foreign Exchange Dealers Association of India (FEDAI). Outstanding forward exchange contracts are revalued at the forward rates announced by FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

4.2. Income and expenditure items are recorded at the exchange rates prevailing on the date of transaction.

4.3. Acceptances, endorsements and other obligations including guarantees are carried at the closing spot rates announced by FEDAI.

4.4. Representative Office of the Bank has been classified as ‘Integral Foreign Operation’ in accordance with AS-11 on “The Effects of Changes in Foreign Exchange Rates”.

4.5. 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.

4.6. Foreign currency non-monetary items that are carried in terms of historical costs are reported using the exchange rates on the dates of transactions.

5. INVESTMENTS

5.1 For the purpose of disclosure in the Financial Statements, the investments are classified into six categories as stipulated in Form A of the third schedule to the Banking Regulation Act, 1949 as under:

a) Government Securities

b) Other approved securities

c) Shares

d) Debentures and Bonds

e) Subsidiaries/Joint Ventures

f) Others

5.2 The Investment portfolio of the Bank is categorized, in accordance with the RBI guidelines, into:

a) “Held to Maturity” comprising Investments acquired with an intention to hold till maturity;

b) “Held for Trading” comprising Investments acquired with an intention to trade;

c) “Available for Sale” comprising Investments not covered by (a) and (b) above.

Classification of an investment is done at the time of acquisition.

5.3 In determining acquisition cost of an investment:

a) Brokerage, Commission and Incentives received on subscription to securities, are deducted from the cost of securities;

b) Brokerage, Commission etc. paid in connection with acquisition of securities are treated as revenue expenses;

c) Interest accrued up to the date of acquisition/ sale of securities i.e., broken period interest is credited/ charged to Profit and Loss Account.

5.4. The Bank follows “Settlement Date” for accounting of investment transactions. Investments are valued as per RBI/ Fixed Income Money Market & Derivatives Association (FIMMDA) guidelines, on the following basis:

a) “Held to Maturity” (HTM)

i) Investments under “HTM” category are carried at acquisition cost. Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity.

ii) Investments in Rural Infrastructure Development Fund, Short Term Co-operative Rural Credit Refinance Fund, Medium Small Micro Enterprise Refinance Fund - Small Industries Development Bank of India Limited, Medium Small Micro Enterprise Risk Capital Fund - Small Industries Development Bank of India Limited, Rural Housing Development Fund-National Housing Bank Limited, Micro Finance Development and Equity Fund - National Agricultural and Rural Development Bank Limited (classified as shares) are valued at carrying cost.

iii) Investments in sponsored Regional Rural Banks are valued at carrying cost.

iv) Investment in venture capital is valued at carrying cost.

5.5. Shifting of securities from and to “HFT” category is done in accordance with RBI guidelines with the approval of Board of Directors.

5.6. The individual scrip in the “HFT” and “AFS” category are marked to market at monthly or at more frequent intervals, if required. Under each category, net depreciation, if any, is provided for while net appreciation, if any, is ignored.

5.7. Income from Zero Coupon Bonds, being the difference between cost and face value, is recognized on a time proportion basis.

5.8. Profit or Loss on sale of investments in any category is taken to Profit and Loss Account. In case of profit on sale of Investments in “HTM” category, an equivalent amount is appropriated to “Capital Reserve Account” at the end of the year. For calculating the surplus / deficit on sale of securities, weighted average method is adopted.

5.9. For the purpose of calculating holding period in case of “HFT” category, First in First out (FIFO) method is applied.

5.10.Investments are subject to appropriate provisioning/ de-recognition of income, in line with the prudential norms of RBI for “Non Performing Investment” (NPI) Classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities in accordance with RBI guidelines.

5.11.The derivatives transactions are undertaken for trading or hedging purposes and valuation has been done in accordance with RBI guidelines.

5.12.The Bank has adopted the Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions.

6. FINANCIAL ASSETS SOLD TO ASSETS RECONSTRUCTION COMPANY (ARC)/ SECURITIZATION COMPANY (SC)

6.1 In the case of financial assets sold to ARC / SC, if the sale is for a value higher than the Net Book Value (NBV), the excess provision is not reversed but utilized for meeting any shortfall on account of sale of other financial assets to ARC/SC. If the sale is at a price below the NBV the shortfall after adjusting the available surplus if any, is debited to the Profit and Loss Account.

6.2 The sale of financial 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 financial assets.

6.3 The Security Receipts are classified as Non-SLR Investment in the books of the Bank and accordingly the valuation, classification and other norms prescribed by RBI in respect of Non-SLR Securities are applicable.

6.4 In case of written off Assets sold to ARC/ SC, the cash proceeds are recognized as income.

7. ADVANCES

7.1. Advances are classified as Performing / Non-Performing Assets and provisions thereon are made in conformity with the prudential norms prescribed by RBI.

7.2. Non-performing assets are stated net of provisions and claims received from credit guarantee institutions.

7.3 Provision held for performing assets is shown under the head “Other Liabilities and Provisions”.

7.4. Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

8. FIXED ASSETS AND DEPRECIATION

8.1. Premises (including leasehold), other fixed assets and Capital work in progress are stated at historical cost or amount substituted for historical cost. In case of revaluation, the same are stated at the revalued amount and the appreciation is credited to “Revaluation Reserve”.

8.2 Leasehold assets are amortized over the period of lease.

8.3. Depreciation on assets other than computers and Automated Teller Machines (ATMs) is provided for under written down value method, in the manner and as per the rates prescribed under Schedule II to the Companies Act, 2013 after retaining 5% residual value.

Equivalent amount of depreciation on the revalued portion of the asset is transferred to General Reserves from Revaluation Reserve each year.

8.4. Depreciation on computers, ATMs and amortization of software are accounted for on straight-line method @33.33% on pro rata basis from the date of acquisition as per RBI guidelines.

8.5. Impairment Losses, if any, on Fixed Assets (including revalued assets) are recognized in accordance with AS -28 on “Impairment of Assets”.

9. ACCOUNTING FOR GOVERNMENT GRANTS

In accordance with AS-12 Government Grants/subsidies received is presented in the Balance Sheet by showing the Grant/ Subsidy as a deduction from the Gross Value of the assets concerned in arriving at the book value. The grant/subsidy is recognized in the Profit & Loss Account over the useful life of the depreciable assets by way of reduced depreciation charged.

Government Grant subsidies received, of revenue nature, is recognized in the Profit & Loss Account by reducing the related cost if received during the same financial year otherwise, the same is shown under “Other Income” if received after the close of the relevant financial year.

10. EMPLOYEE BENEFITS

10.1 Employee Benefits are recognized in accordance with AS-15 on “Employee Benefits”.

10.2 Short term employee benefits namely Leave Fare Concession and Medical Aid are measured at cost.

10.3 Long term employee benefits and post-retirement benefits 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.

10.4 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.

10.5 Long Term employee benefits 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 Profit and Loss Account.

10.6 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 five years.

10.7 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 five years.

11. TAXATION

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on “Accounting for Taxes on Income”.

12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In accordance with AS-29 on “Provisions Contingent Liabilities and Contingent Assets,” the Bank recognizes:

a) Provisions only when it has a present obligation as a result of a past event and 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.

b) Contingent Liability is recognized/disclosed when a possible obligation from a past event, the existence of which is confirmed by the occurrence/non-occurrence of one or more uncertain future events not wholly within the control of bank. Contingent Liability is also recognized/disclosed when there is a present obligation from past events but is not recognized because of a remote possibility of outflow of resources embodying the economic benefits to settle the obligation or a reliable estimate of the amount of the obligation cannot be made

c) Contingent Assets are not recognized in the Financial Statements.

13. NET PROFIT

The Net Profit is arrived at after accounting for the following:

a) Provision for Taxation

b) Provision on Standard Assets

c) Provision for NPAs and Depreciation on investments as per prudential norms of RBI

d) Other usual and necessary provisions.

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Mar 31, 2016

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 Principles(GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/ pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

2. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. RECOGNITION OF INCOME AND EXPENDITURE

3.1 The Revenues and Expenses are accounted for on accrual basis unless otherwise stated.

3.2 Income from Performing Assets is recognized on accrual basis and income from Non-Performing Assets (NPAs) is recognized on realisation. The amount realised/recovered during the year is appropriated first to income on Sub-standard Assets. Amounts realized /recovered in Doubtful and Loss Assets and Suit Filed and Decreed Accounts are first appropriated against outstanding balances.

3.3 Unrealized income on advances, classified as NPA, is reversed.

3.4 Income from Commission (except on Government Transactions and Bancassurance), exchange, brokerage, claims, locker rent and dividend on shares are accounted for on cash basis.

3.5 Performance linked incentive to whole time directors is accounted for on cash basis.

4. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

4.1. Monetary Assets and Liabilities, excluding outstanding Forward Exchange Contracts in each currency, are revalued at the Balance Sheet date at closing spot rates announced by the Foreign Exchange Dealers Association of India (FEDAI). Outstanding forward exchange contracts are revalued at the forward rates announced by FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

4.2. Income and expenditure items are recorded at the exchange rates prevailing on the date of transaction.

4.3. Acceptances, endorsements and other obligations including guarantees are carried at the closing spot rates announced by FEDAI.

4.4. Representative Office of the Bank has been classified as ''Integral Foreign Operation'' in accordance with AS-11 on "The Effects of Changes in Foreign Exchange Rates".

4.5. 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.

4.6. Foreign currency non-monetary items that are carried in terms of historical costs are reported using the exchange rates on the dates of transactions.

5. INVESTMENTS

5.1 For the purpose of disclosure in the Financial Statements, the investments are classified into six categories as stipulated in Form A of the third schedule to the Banking Regulation Act, 1949 as under:

a) Government Securities

b) Other approved securities

c) Shares

d) Debentures and Bonds

e) Subsidiaries/Joint Ventures

f) Others

5.2 The Investment portfolio of the Bank is categorized, in accordance with the RBI guidelines, into:

a) "Held to Maturity" comprising Investments acquired with an intention to hold till maturity;

b) "Held for Trading" comprising Investments acquired with an intention to trade;

c) "Available for Sale" comprising Investments not covered by (a) and (b) above.

Classification of an investment is done at the time of acquisition.

5.3 In determining acquisition cost of an investment:

a) Brokerage, Commission and Incentives received on subscription to securities, are deducted from the cost of securities;

b) Brokerage, Commission etc. paid in connection with acquisition of securities are treated as revenue expenses;

c) Interest accrued upto the date of acquisition/ sale of securities i.e., broken period interest is credited/ charged to Profit and Loss Account.

5.4. The Bank follows "Settlement Date" for accounting of investment transactions. Investments are valued as per RBI/ Fixed Income Money Market & Derivatives Association (FIMMDA) guidelines, on the following basis:

a) "Held to Maturity" (HTM)

i) Investments under "HTM" category are carried at acquisition cost. Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity.

ii) Investments in Rural Infrastructure Development Fund, Short Term Co-operative Rural Credit Refinance Fund, Medium Small Micro Enterprise Refinance Fund – Small Industries Development Bank of India Limited, Medium Small Micro Enterprise Risk Capital Fund – Small Industries Development Bank of India Limited, Rural Housing Development Fund-National Housing Bank Limited, Micro Finance Development and Equity Fund - National Agricultural and Rural Development Bank Limited (classified as shares) are valued at carrying cost.

iii) Investments in sponsored Regional Rural Banks are valued at carrying cost.

iv) Investment in venture capital is valued at carrying cost.

b) "Held for Trading" and "Available for Sale"

a) Govt. Securities

1. Central Govt. Securities At prices published by FIMMDA

2. State Govt. Securities On Yield to Maturity (YTM) basis by adding appropriate mark-up on the Base Yield Curve as per FIMMDA/RBI guidelines.

b) Discounted Instruments (Treasury Bills, At carrying cost Commercial Paper and Certificate of Deposits)

c) Bonds and Debentures On (YTM)basis by adding appropriate Credit Spread on the Base Yield curve as per FIMMDA/RBI guidelines.

d) Equity

i) Quoted At market price

ii) Un-quoted At break-up value, as per latest Balance Sheet (not more than one year old), otherwise at Re 1/ per company.

e) Preference Shares At market price, if quoted or YTM basis by adding appropriate mark-up on the base yield curve as per FIMMDA/RBI guidelines.

f) Security Receipt/Venture At Net Asset Value (NAV) as per FIMMDA/RBI guidelines. Capital Fund

g) Mutual Funds At Market Price, if quoted and at re-purchase price/NAV if unquoted.

5.5 Shifting of securities from and to "HFT" category is done in accordance with RBI guidelines with the approval of Board of Directors.

5.6. The individual scrip in the "HFT" and "AFS" category are marked to market at monthly or at more frequent intervals, if required. Under each category, net depreciation, if any, is provided for while net appreciation, if any, is ignored.

5.7. Income from Zero Coupon Bonds, being the difference between cost and face value, is recognized on a time proportion basis.

5.8. Profit or Loss on sale of investments in any category is taken to Profit and Loss Account. In case of profit on sale of Investments in "HTM" category, an equivalent amount is appropriated to "Capital Reserve Account" at the end of the year. For calculating the surplus / deficit on sale of securities, weighted average method is adopted.

5.9. For the purpose of calculating holding period in case of "HFT" category, First in First out (FIFO) method is applied.

5.10. Investments are subject to appropriate provisioning/ de-recognition of income, in line with the prudential norms of RBI for "Non Performing Investment" (NPI) Classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities in accordance with RBI guidelines.

5.11. The derivatives transactions are undertaken for trading or hedging purposes and valuation has been done in accordance with RBI guidelines.

5.12. The Bank has adopted the Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions.

6. FINANCIAL ASSETS SOLD TO ASSETS RECONSTRUCTION COMPANY (ARC)/ SECURITIZATION COMPANY (SC)

6.1 In the case of financial assets sold to ARC / SC, if the sale is for a value higher than the Net Book Value (NBV), the excess provision is not reversed but utilized for meeting any shortfall on account of sale of other financial assets to ARC/SC. If the sale is at a price below the NBV the shortfall after adjusting the available surplus if any, is debited to the Profit and Loss Account.

6.2 The sale of financial 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 financial assets.

6.3 The Security Receipts are classified as Non-SLR Investment in the books of the Bank and accordingly the valuation, classification and other norms prescribed by RBI in respect of Non-SLR Securities are applicable.

6.4 In case of written off Assets sold to ARC/ SC, the cash proceeds are recognized as income.

7. ADVANCES

7.1. Advances are classified as Performing / Non-Performing Assets and provisions thereon are made in conformity with the prudential norms prescribed by RBI.

7.2. Non-performing assets are stated net of provisions and claims received from credit guarantee institutions. 7.3 Provision held for performing assets is shown under the head "Other Liabilities and Provisions".

7.4. Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

8. FIXED ASSETS AND DEPRECIATION

8.1. Premises (including leasehold), other fixed assets and Capital work in progress are stated at historical cost or amount substituted for historical cost. In case of revaluation, the same are stated at the revalued amount and the appreciation is credited to "Revaluation Reserve".

8.2 Leasehold assets are amortized over the period of lease.

8.3. Depreciation on assets other than computers and Automated Teller Machines (ATMs) is provided for under written down value method, in the manner and as per the rates prescribed under Schedule II to the Companies Act, 2013 after retaining 5% residual value.

Equivalent amount of depreciation on the revalued portion of the asset is transferred to General Reserves from Revaluation Reserve each year.

8.4. Depreciation on computers, ATMs and amortization of software are accounted for on straight-line method @33.33% on pro rata basis from the date of acquisition as per RBI guidelines.

8.5. Impairment Losses, if any, on Fixed Assets (including revalued assets) are recognized in accordance with AS -28 on "Impairment of Assets".

9. ACCOUNTING FOR GOVERNMENT GRANTS

In accordance with AS-12 Government Grants/subsidies received is presented in the Balance Sheet by showing the Grant/Subsidy as a deduction from the Gross Value of the assets concerned in arriving at the book value. The grant/subsidy is recognized in the Profit & Loss Account over the useful life of the depreciable assets by way of reduced depreciation charged.

Government Grant subsidies received, of revenue nature, is recognized in the Profit & Loss Account by reducing the related cost if received during the same financial year otherwise, the same is shown under "Other Income" if received after the close of the relevant financial year.

10. EMPLOYEE BENEFITS

10.1 Employee Benefits are recognized in accordance with AS-15 on "Employee Benefits".

10.2 Short term employee benefits namely Leave Fare Concession and Medical Aid are measured at cost.

10.3 Long term employee benefits and post-retirement benefits 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.

10.4 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.

10.5 Long Term employee benefits 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 Profit and Loss Account.

10.6 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 five years.

10.7 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 five years.

11. TAXATION

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on "Accounting for Taxes on Income".

12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In accordance with AS-29 on "Provisions Contingent Liabilities and Contingent Assets," the Bank recognizes:

a) Provisions only when it has a present obligation as a result of a past event and 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.

b) Contingent Liability is recognized/disclosed when a possible obligation from a past event, the existence of which is confirmed by the occurrence/non-occurrence of one or more uncertain future events not wholly within the control of bank. Contingent Liability is also recognized/disclosed when there is a present obligation from past events but is not recognized because of a remote possibility of outflow of resources embodying the economic benefits to settle the obligation or a reliable estimate of the amount of the obligation cannot be made

c) Contingent Assets are not recognized in the Financial Statements.

13. NET PROFIT

The Net Profit is arrived at after accounting for the following:

a) Provision for Taxation

b) Provision on Standard Assets

c) Provision for NPAs and Depreciation on investments as per prudential norms of RBI

d) Other usual and necessary provisions.

1. Confirmation/reconciliation of balances with foreign branches, SBI and other Banks, NOSTRO Accounts, Drafts Payable, Clearing Difference, Inter office adjustments, etc. are in progress on an on-going basis. Pending final clearance/adjustment of the above, the overall impact, if any, on the Financial Statements, in the opinion of the management, is not likely to be significant.

b) During the Financial year 2015-16, the Bank received an amount of Rs.480 Crores from Government of India on 30.03.2016 towards capital infusion. The bank is maintaining the same as "Share Application Money pending allotment" as on 31.03.2016. Bank has considered the same amount as part of Common Equity Tier1 (CET-1) capital fund as on 31.03.2016 as per the permission of Reserve Bank of India vide letter no: DBR.No.BP.12716/21.01.002/2015-16, dated 06.04.2016.

c) During the Financial Year 2015-16, Bank raised Additional Tier-1 capital of Rs.150.00 Crores through issuance of Basel-III compliant Non Convertible Perpetual Bonds (1500 nos.) having face value of Rs.10.00 lacs each in September,2015.

a) As per RBI circular no.DBR.BP.BC.No.31/21.04.018/2015-16 dated July 16, 2015, deposits placed with NABARD/SIDBI/NHB for meeting shortfall in priority sector Lending amounting to Rs.3819.02 Cr(P.Y Rs. Rs.3357.62 Cr) has been excluded from investment and included under Schedule 11 – " Other Assets" under the sub head "others" of the Balance Sheet. Hitherto these were included under "Investments". Interest income on these deposits has been included under "Interest Earned-Others". Earlier such interest income was included under "Interest Earned-Income on Investment". The above change in classification has no impact on the profit of the Bank for the quarter and year ended 31st March, 2016 or the previous period presented.

b) In accordance with UDAY(Ujwal Discom Assurance Yojna) scheme of GOI, Ministry of Power for operational and financial turnaround of Power Distribution companies during the year 2015-16, the bank has subscribed to Non SLR SDL bond of Govt of Rajasthan of Rs231.78 Crores and DISCOM Bond of Jaipur and Jodhpur Vidyut Vitran Nigam of Rs.150 Crores. As per RBI circular dated DRB.BP.BC.No.11637/21.04.132/2015-16 dated 17th March 2016 and subsequent clarification by circular No DRB.BP.BC.No.14186/21.04.132/2015-16 dated 11th May 2016, those DISCOM bond will be converted into Non SLR SDL bond by 31st March 2017.In case of non conversion those will be classified as NPA with effect from the date of restructuring and to be provided accordingly.

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Mar 31, 2015

1.BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The accompanying financial statements are prepared on historial cost basis, except as otherwise stated, following the "Going Concern" concept and conform to the Generally Accepted Accounting Principles(GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/ pronouncements issued by the Institute of Chartered Accountants of India(ICAI) and practices prevailing in the banking industry in India.

2.USE of ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities(including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3.RECOGNITION OF INCOME AND EXPENDITURE

3.1 The Revenues and Expenses are accounted for on accrual basis unless otherwise stated.

3.2 Income from Performing Assets is recognized on accrual basis and income from Non-Performing Assets(NPAs) is recognized on realisation. The amount realised/recovered during the year is appropriated first to income on Sub-standard Assets. Amounts realized/recovered in Doubtful and Loss Assets and Suit Filed and Decreed Accounts are first appropriated against outstanding balances.

3.3 Unrealized income on advances, classified as NPA, is reversed.

3.4 Income from Commission(except on Government Transactions and Bancassurance), exchange, brokerage, claims, locker rent and dividend on shares are accounted for on cash basis.

3.5 Performance linked incentive to whole time directors is accounted for on cash basis.

4.TRANSACTIONS INVOLVING FOREIGN EXCHANGE

4.1 Monetary Assets and Liabilities, excluding outstanding Forward Exchange Contracts in each currency, are revalued at the Balance Sheet dateEt closing spot rates announced by the Foreign Exchange Dealers Association of India(FEDAI). Outstanding forward exchange contracts are revalued at the forward rates announced by FEDAI. The defference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

4.2 Income and expenditure items are recorded at the exchange rates prevailing on the date of transaction.

4.3 Acceptances, endorsements and other obligations including guarantees are carried at the closing spot rates announced by FEDAI.

4.4 Representative Office of the Bank has been classified as 'Integral Foreign Operation' in accordance with AS-11 on "The Effects of Changes in Foreign Exchange Rates"

4.5 Foreign currency transactions relating to 'Integral Foreign Operation' are recored 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.

4.6 Foreign currency non-monetary items that are carried in terms of historical costs are reported using the exchange rates on the dates of transactions.

5. INVESTMENTS

5.1 For the purpose of disclosure in the Financial Statements, the investments are classified into six categories as stipulated in FormA of the third schedule to the Banking Regulation Act, 1949 as under: a) Government Securities b) Other approved securities c) Shares d) Debentures and Bonds e) Subsidiaries/Joint Ventures f) Others

5.2 The Investment portfolio of the Bank is categorized, in accordance with the RBI guidelines, into: a) "Held to Maturity" comprising Investments acquired with an intention to hold till maturity; b) "Held for Trading" comprising Investments acquired with an intention to trade; c) "Available for Sale" comprising Investments not covered by (a) and (b) above Classification of an investment is done at the time of acquisition.

5.3 In determining acquisition cost of an investment: a) Brokerage, Commission and Incentives received on subscription to securities, are deducted from the cost of securities; b) Brokerage, Commission etc. paid in connection wi the acquisition of securities are treated as revenue expenses; c) Interest accrued upto the date of acquisition/ sale of securities i.e., broken period interest is credited/ charged to Profit and Loss Account.

5.4 The Bank follows "Settlement Date" for accounting of investment transactions. Investments are valued as per RBI/Fixed Income Money Market & Derivatives Association(FIMMDA) guidelines, on the following basis: a) "Held to Maturity"(HTM) i) Investments under "HTM" category are carried at acquisition cost. Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity. ii) Investments in Rural Infrastructure Refinance Fund, Short Term Co-operative Rural Credit Refinance Fund, Medium Small Micro Enterprise Refinance Fund- Small Industries Development Bank of India Limited, Medium Small Micro Enterprise Risk Capital Fund- Small Industries Development Bank of India Limited, Rural Housing Development Fund-National Housing Bank Limited, Micro Finance Development and Equity Fund- National Agricultural and Rural Development Bank Limited(classified asshures) are valued at carrying cost. iii) Investments in sponsored Regional Rural Banks are valued at carrying cost. iv) Investment in venture capital is valued at carrying cost. b) "Held for Trading" and "Available for Sale"

5.5 Shifting of securities from and to "HFT" category is done in accordance with RBI guidelines with the approval of Board of Directors.

5.6 The Individual scrip in the "HFT" and "AFS" category are marked to market at monthly or at more frequent intervals, if required. Inder each category net depreciation, if any, is provided for while net appreciation, if any, is ignored.

5.7 Income from Zero Coupon Bonds, being the difference between cost and face value, is recognized on a time proportion basis.

5.8 Profit or Loss on sale of investments in any category is taken to Profit and Loss Account. In case of profit on sale of Investments in "HTM" category an equivalent amount is appropriated to "Capital Reserve Account" at the end of the year. For calculating the surplus/deficit on sale of securities, weighted average method is adopted.

5.9 For the purpose of calculating holding period in case of "HFT" category, First in First out(FIFO) method is applied.

5.10 Investments are subject to appropriate provisioning/de-recognition of income in line with the prudential norms of RBI for "Non Performing Investment"(NPI)Classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities in accordance with RBI guidelines.

5.11 The derivatives transactions are undertaken for trading or hedging purposes and valuation has been done in accordance with RBI guidelines.

5.12 The Bank has adopted the Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions.

6. FINANCIAL ASSETS SOLD TO ASSETS RECONSTRUCTION COMPANY (ARC)/ SECURITIZATION COMPANY(SC)

6.1 In the case of financial assets sold to ARC/SC, if the sale is for a value higher than the Net Book Value(NBV), the excess provision is not reversed but utilized for meeting any shortfall on account of sale of other financial assets to ARC/SC. If the sale is at a price below the NBV the shortfall after adjusting the available surplus if any, is debited to the Profit and Loss Account.

6.2 The sale of financial 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 financial assets.

6.3 The Security Receipts are classified as Non-SLR Investment in the books of the Bank and accordingly the valuation. Classification and other norms prescribed by RBI in respect of Non-SLR Securities are applicable.

6.4 In case of written off Assets sold to ARC/SC, the cash proceeds are recognized as income.

7. ADVANCES

7.1 Advances are classified as Performing/ Non-Performing Assets and provisions thereon are made in conformity with the prudential norms prescribed by RBI.

7.2 Non-performing assets are stated net of provisions and claims received from credit guarantee institutions.

7.3 Provision held for performing assets is shown under the head "Other Liabilities and Provisions".

7.4 Restructuring of Advances and provisioning there of have been made as per RBI guidelines.

8. FIXED ASSETS AND DEPRECIATION

8.1 Premises(including leasehold), other fixed assets and Capital work in progress are stated at historical cost or amount substituted for historical cost. In case of revaluation, the same are stated at the revalued amount and the appreciation is credited to "Revaluation Reserve".

8.2 Leasehold assets are amortized over the preiod of lease.

8.3 Depreciation on assets other than computers and Automated Teller Machines(ATMs) is provided for under written down value method, in the manner and as per the rates prescribed under Schedule II to the Companies Act, 2013 after retaining 5% residual value.

Equivalent amount of depreciation on the revalued portion of the asset is transferred to General Reserves from Revaluation Reserve each year.

8.4 Depreciation on computers, ATMs and amortization of software are accounted for on straight-line [email protected]% on pro rate basis from the date of acquistion as per RBI guidelines.

8.5 Impairment Losses, if any, on Fixed Assets (including revalued assets) are recognized in accordance with AS-28 on "Impairment of Assets".

9. ACCOUNTING FOR GOVERNMENT GRANTS

In accordance with AS-12 Government Grants/ subsidies received is presented in the Balance Sheet by showing the Grant/Subsidy as a deduction from the Gross Value of the assets concerned in arriving at the book value. The grant/subsidy is recognized in the Profit & Loss Account over the useful life of the depreciable assets by way of reduced depreciation charged.

Government Grant Subsidies received, of revenue nature is recognized in the Profit & Loss Account by reducing the related cost if received during the same financial year otherwise, the same is shown under "Other Income" if received after the close of the relevant financial year.

10. EMPLOYEE BENEFITS

10.1 Employee Benefits are recognized in accordance with AS-15 on "Employee Benefits".

10.2 Short term employee benefits namely Leave Fare Concession and Medical Aid are measured at cost.

10.3 Long term employee benefits and post-retirement benefits 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.

10.4 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.

10.5 Long Term employee benefits 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 Profit and Loss Account.

10.6 The transitional hability in respect of long term employee benefits, including pension benefits, is recognized as an expense on straight line basis over a period of five years.

10.7 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 five years.

11. TAXATION

Provision for tax is made for both currentn and deferred taxes in accordance with AS-22 on "Accounting for Taxes on Income"

12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In accordance with AS-29 on "Provisions Contingent Liabilites and Contingent Assets, "the Bank recognizes:

a) Provisions only when it has a present obligation as a result of a past event and 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.

b) Contingent is recognized/disclosed when a possible obligation from a past event, the existence of which is confirmed by the occurrence/non-occurrence of one or more uncertain future events not wholly within the control of bank. Contingent Liability is also recognized/disclosed when there is a present obligation from past events but is not recognized because of a remote possibility of outflow of resources embodying the economic benefits to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

c) Contingent Assets are not recognized in the Financial Statements.

13. NET PROFIT

The Net Profit is arrived at after accounting for the following:

a) Provision for Taxation

b) Provision on Standard Assets

c) Provision for NPAs and Depreciation on investments as per prudential norms of RBI

d) Other usual and necessary provisions.

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Mar 31, 2014

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 Principles(GAAP) in India, applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI), applicable mandatory Accounting Standards (AS)/Guidance Notes/ pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and practices prevailing in the banking industry in India.

2. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions for considering the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. RECOGNITION OF INCOME AND EXPENDITURE

3.1. The Revenues and Expenses are accounted for on accrual basis unless otherwise stated.

3.2. Income from Performing Assets is recognized on accrual basis and income from Non-Performing Assets (NPAs) is recognized on realisation. The amount realised/recovered during the year is appropriated first to income on Sub- standard Assets. Amounts realized /recovered in Doubtful and Loss Assets and Suit Filed and Decreed Accounts are first appropriated against outstanding balances.

3.3. Unrealized income on advances, classified as NPA, is reversed.

3.4. Income from Commission (except on Government Transactions and Bancassurance), exchange, brokerage, claims, locker rent and dividend on shares are accounted for on cash basis.

3.5. Performance linked incentive to whole time directors is accounted for on cash basis.

4. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

4.1. Monetary Assets and Liabilities, excluding outstanding Forward Exchange Contracts in each currency, are revalued at the Balance Sheet date at closing spot rates announced by the Foreign Exchange Dealers Association of India (FEDAI). Outstanding forward exchange contracts are revalued at the forward rates announced by FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

4.2. Income and expenditure items are recorded at the exchange rates prevailing on the date of transaction.

4.3. Acceptances, endorsements and other obligations including guarantees are carried at the closing spot rates announced by FEDAI.

4.4. Representative Office of the Bank has been classified as ''Integral Foreign Operation'' in accordance with AS-11 on "The Effects of Changes in Foreign Exchange Rates".

4.5. 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.

4.6. Foreign currency non-monetary items that are carried in terms of historical costs are reported using the exchange rates on the dates of transactions.

5. INVESTMENTS

5.1 For the purpose of disclosure in the Financial Statements, the investments are classified into six categories as stipulated in Form A of the third schedule to the Banking Regulation Act, 1949 as under:

a) Government Securities

b) Other approved securities

c) Shares

d) Debentures and Bonds

e) Subsidiaries/Joint Ventures

f) Others

5.2 The Investment portfolio of the Bank is categorized, in accordance with the RBI guidelines, into:

a) "Held to Maturity" comprising Investments acquired with an intention to hold till maturity;

b) "Held for Trading" comprising Investments acquired with an intention to trade;

c) "Available for Sale" comprising Investments not covered by (a) and (b) above.

Classification of an investment is done at the time of acquisition.

5.3 In determining acquisition cost of an investment:

a) Brokerage, Commission and Incentives received on subscription to securities, are deducted from the cost of securities;

b) Brokerage, Commission etc. paid in connection with acquisition of securities are treated as revenue expenses;

c) Interest accrued upto the date of acquisition/ sale of securities i.e., broken period interest is credited/ charged to Profit and Loss Account.

5.4. The Bank follows "Settlement Date" for accounting of investment transactions. Investments are valued as per RBI/ Fixed Income Money Market & Derivatives Association (FIMMDA) guidelines, on the following basis:

a) "Held to Maturity" (HTM)

i) Investments under "HTM" category are carried at acquisition cost Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity.

ii) Investments in Rural Infrastructure Development Fund, Short Term Co-operative Rural Credit Refinance Fund Medium Small Micro Enterprise Refinance Fund - Small Industries Development Bank of India Limited, Medium Small Micro Enterprise Risk Capital Fund - Small Industries Development Bank of India Limited, Rural Housing Development Fund-National Housing Bank Limited, Micro Finance Development and Equity Fund - National Agricultural and Rural Development Bank Limited (classified as shares) are valued at carrying cost.

iii)Investments in sponsored Regional Rural Banks are valued at carrying cost.

iv) Investment in venture capital is valued at carrying cost.

5.5. Shifting of securities from and to "HFT" category is done in accordance with RBI guidelines with the approval of Board of Directors.

5.6. The individual scrip in the "HFT" and "AFS" category are marked to market at monthly or at more frequent intervals, if required. Under each category, net depreciation, if any, is provided for while net appreciation, if any, is ignored

5.7. Income from Zero Coupon Bonds, being the difference between cost and face value, is recognized on a time proportion basis.

5.8. Profit or Loss on sale of investments in any category is taken to Profit and Loss Account. In case of profit on sale of Investments in "HTM" category, an equivalent amount is appropriated to "Capital Reserve Account" at the end of the year. For calculating the surplus / deficit on sale of securities, weighted average method is adopted.

5.9. For the purpose of calculating holding period in case of "HFT" category, First in First out (FIFO) method is applied.

5.10. Investments are subject to appropriate provisioning/ de- recognition of income, in line with the prudential norms of RBI for "Non Performing Investment" (NPI) Classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities in accordance with RBI guidelines.

5.11. The derivatives transactions are undertaken for trading or hedging purposes and valuation has been done in accordance with RBI guidelines.

5.12. The Bank has adopted the Accounting Procedure prescribed by the RBI for accounting of Repo and Reverse Repo transactions.

6. FINANCIAL ASSETS SOLD TO ASSETS RECONSTRUCTION COMPANY (ARC)/ SECURITIZATION COMPANY (SC)

6.1. In the case of financial assets sold to ARC / SC, if the sale is for a value higher than the Net Book Value (NBV), the excess provision is not reversed but utilized for meeting any shortfall on account of sale of other financial assets to ARC/SC. If the sale is at a price below the NBV the shortfall after adjusting the available surplus if any, is debited to the Profit and Loss Account.

6.2 The sale of financial 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 financial assets.

6.3 The Security Receipts are classified as Non-SLR Investment in the books of the Bank and accordingly the valuation, classification and other norms prescribed by RBI in respect of Non-SLR Securities are applicable.

6.4 In case of written off Assets sold to ARC/ SC, the cash proceeds are recognized as income.

7. ADVANCES

7.1. Advances are classified as Performing / Non-Performing Assets and provisions thereon are made in conformity with the prudential norms prescribed by RBI.

7.2. Non-performing assets are stated net of provisions and claims received from credit guarantee institutions.

7.3 Provision held for performing assets is shown under the head "Other Liabilities and Provisions".

7.4. Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

8. FIXED ASSETS AND DEPRECIATION

8.1. Premises (including leasehold), 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".

8.2 Leasehold assets are amortized over the period of lease.

8.3. Depreciation on assets other than computers and Automated Teller Machines (ATMs) 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 after rounding off to next absolute number. Depreciation on the revalued portion of the assets is adjusted from "Revaluation Reserve".

8.4. Depreciation on computers, ATMs and amortization of software are accounted for on straight-line method @ 33.33% on pro rata basis from the date of acquisition as per RBI guidelines.

8.5. Impairment Losses, if any, on Fixed Assets (including revalued assets) are recognized in accordance with AS -28 on "Impairment of Assets".

9. ACCOUNTING FOR GOVERNMENT GRANTS

In accordance with AS-12 Government Grants/subsidies received is presented in the Balance Sheet by showing the Grant/Subsidy as a deduction from the Gross Value of the assets concerned in arriving at the book value. The grant/subsidy is recognized in the Profit & Loss Account over the useful life of the depreciable assets by way of reduced depreciation charged.

Government Grant subsidies received, of revenue nature, is recognized in the Profit & Loss Account by reducing the related cost if received during the same financial year otherwise, the same is shown under "Other Income" if received after the close of the relevant financial year.

10. EMPLOYEE BENEFITS

10.1 Employee Benefits are recognized in accordance with AS- 15 on "Employee Benefits".

10.2 Short term employee benefits namely Leave Fare Concession and Medical Aid are measured at cost.

10.3 Long term employee benefits and post retirement benefits 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.

10.4 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.

10.5 Long Term employee benefits 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 Profit and Loss Account.

10.6 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 five years.

10.7 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 five years.

11. TAXATION

Provision for tax is made for both current and deferred taxes in accordance with AS-22 on "Accounting for Taxes on Income".

12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In accordance with AS-29 on "Provisions Contingent Liabilities and Contingent Assets," the Bank recognizes:

a) Provisions only when it has a present obligation as a result of a past event and 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.

b) Contingent Liability is recognized/disclosed when a possible obligation from a past event, the existence of which is confirmed by the occurrence/non occurrence of one or more uncertain future events not wholly within the control of bank. Contingent Liability is also recognized/disclosed when there is a present obligation from past events but is not recognized because of a remote possibility of outflow of resources embodying the economic benefits to settle the obligation or a reliable estimate of the amount of the obligation cannot be made

c) Contingent Assets are not recognized in the Financial Statements.

13. NET PROFIT

The Net Profit is arrived at after accounting for the following:

a) Provision for Taxation

b) Provision on Standard Assets.

c) Provision for NPAs and Depreciation on investments as per prudential norms of RBI.

d) Other usual and necessary provisions.

1. Confirmation/reconciliation of balances with foreign branches, SBI and other Banks, NOSTRO Accounts, Drafts Payable, Clearing Difference, Inter office adjustments, etc. is in progress on an on-going basis. Pending final clearance/adjustment of the above, the overall impact, if any, on the Financial Statements, in the opinion of the management, is not likely to be significant.

b) During the year, Government of India has subscribed to 1800,41,152 Equity Shares of Rs.10/- each of the Bank at a price of Rs.38.88 (including a premium of Rs.28.88) per share aggregating to Rs.700.00 crore through preferential allotment in accordance with regulation 76(1) of SEBI (ICDR) Regulations, 2009. The shareholders approved the issue by a special resolution at the Extraordinary General Meeting of the Bank convened for the purpose on 23rd December, 2013. The Bank completed the allotment on 24th December 2013.

c) During the year, the Bank has raised Rs.500.00 Crores through Basel III compliant Tier-2 bonds.

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Mar 31, 2013

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), applicable mandatory Accounting Standards (AS) / Guidance Notes / pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and prevailing practices in the banking industry.

2. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions for considering in the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. RECOGNITION OF INCOME AND EXPENDITURE

3.1 The Revenues and Expenses are accounted for on accrual basis unless otherwise stated.

3.2 Income from Performing Assets is recognized on accrual basis and income from Non-Performing Assets (NPAs) is accounted for on realization. The amount realized / recovered during the year is appropriated first to income on Sub-standard Assets. Amounts realized /recovered in Doubtful and Loss Assets and Suit Filed and Decreed Accounts are first appropriated against outstanding balances.

3.3 Unrealized income on advances, classified as NPA, is reversed.

3.4 Income from Commission (except on Government Transactions and Bancassurance), exchange, brokerage, claims, locker rent and dividend on shares are accounted for on cash basis.

3.5 Performance linked incentive to whole time directors is accounted for on cash basis.

4. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

4.1. Monetary Assets and Liabilities, excluding outstanding Forward Exchange Contracts in each currency, are revalued at the Balance Sheet date at closing spot rates announced by the Foreign Exchange Dealers Association of India (FEDAI). Outstanding forward exchange contracts are revalued at the forward rates announced by FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

4.2. Income and expenditure items are recorded at the exchange rates prevailing on the date of transaction.

4.3. Acceptances, endorsements and other obligations including guarantees are carried at the closing spot rates announced by FEDAI.

4.4. Representative Office of the Bank has been classified as ''Integral Foreign Operation'' in accordance with AS-11 on "The Effects of Changes in Foreign Exchange Rates".

4.5. 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.

4.6. Foreign currency non-monetary items that are carried in terms of historical costs are reported using the exchange rates on the dates of transactions.

5. INVESTMENTS

5.1 For the purpose of disclosure in the Financial Statements, the investments are classified into six categories as stipulated in Form A of the third schedule to the Banking Regulation Act, 1949 as under:

a) Government Securities

b) Other approved securities

c) Shares

d) Debentures and Bonds

e) Subsidiaries/Joint Ventures

f) Others

5.2 The Investment portfolio of the Bank is categorized, in accordance with the RBI guidelines, into:

a) "Held to Maturity" comprising Investments acquired with an intention to hold till maturity;

b) "Held for Trading" comprising Investments acquired with an intention to trade;

c) "Available for Sale" comprising Investments not covered by (a) and (b) above.

5.3 In determining acquisition cost of an investment:

(a) Brokerage, Commission and Incentives received on subscription to securities, are deducted from the cost of securities;

(b) Brokerage, Commission etc. paid in connection with acquisition of securities are treated as revenue expenses;

(c) Interest accrued upto the date of acquisition/ sale of securities i.e., broken period interest is credited/ charged to Profit and Loss Account.

5.4. Investments are valued as per RBI/ Fixed Income Money Market & Derivatives Association (FIMMDA) guidelines, on the following basis:

a) "Held to Maturity" (HTM)

I) Investments under "HTM" category are carried at acquisition cost. Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity.

ii) Investments in Rural Infrastructure Development Fund, Short Term Co-operative Rural Credit Refinance Fund, Medium Small Micro Enterprise Refinance Fund - Small Industries Development Bank of India Limited, Medium Small Micro Enterprise Risk Capital Fund - Small Industries Development Bank of India Limited, Rural Housing Development Fund-National Housing Bank Limited, Micro Finance Development and Equity Fund - National Agricultural and Rural Development Bank Limited (classified as shares) are valued at carrying cost.

iii) Investments in sponsored Regional Rural Banks are valued at carrying cost.

iv) Investments in venture capital is valued at carrying cost.

b) "Held for Trading" and "Available for Sale"

5.5. Shifting of securities from and to "HFT" category is done in accordance with RBI guidelines with the approval of Board ofDirectors.

5.6. The individual scrips in the "HFT" and "AFS" category are marked to market at monthly or at more frequent intervals, if required. Under each category net depreciation, if any, is provided for while net appreciation, if any, is ignored.

5.7. Income from Zero Coupon Bonds, being the difference between cost and face value, is recognized on a time proportion basis.

5.8. Profit or Loss on sale of investments in any category is taken to Profit and Loss Account. In case of profit on sale of Investments in "HTM" category, an equivalent amount is appropriated to "Capital Reserve Account" at the end of the year. For calculating the surplus / deficit on sale of securities, weighted average method is adopted.

5.9. For the purpose of calculating holding period in case of "HFT" category, First In First Out (FIFO) method is applied.

5.10. Investments are subject to appropriate provisioning/ de- recognition of income, in line with the prudential norms of RBI for "Non Performing Investment" (NPI) Classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities in accordance with RBI guidelines.

6. FINANCIAL ASSETS SOLD TO ASSETS RECONSTRUCTION COMPANY (ARC)/ SECURITIZATION COMPANY

6.1. In the case offinancial assets sold to ARC / SC, ifthe sale is for a value higher than the Net Book Value (NBV), the excess provision is not reversed but utilized for meeting any shortfall on account of sale of other financial assets to ARC/SC. If the sale is at a price below the NBV the shortfall after adjusting the available surplus if any, is debited to the Profit and Loss Account.

6.2 The sale of financial 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 financial assets.

6.3 The Security Receipts are classified as Non-SLR Investment in the books of the Bank and accordingly the valuation, classification and other norms prescribed by RBI in respect of Non-SLR Securities are applicable.

6.4 In case of written off Assets sold to ARC/ SC, the cash proceeds are recognized as income.

7. ADVANCES

7.1. Advances are classified as Performing / Non-Performing Assets and provisions thereon are made in conformity with the prudential norms prescribed by RBI.

7.2. Non-performing assets are stated net of provisions! and claims received from credit guarantee institutions.

7.3 Provision held for performing assets is shown under the head [Other Liabilities and Provisions''.

7.4. Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

8. FIXED ASSETS AND DEPRECIATION

8.1. Premises (including leasehold), 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".

8.2 Leasehold assets are amortized over the period of lease.

8.3. Depreciation on assets other than computers and Automated Teller Machines (ATMs) 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 after rounding off to next absolute number. Depreciation on the revalued portion of the assets is adjusted from "Revaluation Reserve".

8.4. Depreciation on computers, ATMs and amortization of software are accounted for on straight-line method @ 33.33% on pro rata basis from the date of acquisition as per RBI guidelines.

8.5. Impairment Losses, if any, on Fixed Assets (including revalued assets) are recognized in accordance with AS -28 on "Impairment of Assets".

9. ACCOUNTING FOR GOVERNMENT GRANTS

In accordance with AS - 12 Government Grants/subsidies received is presented in the Balance Sheet by showing the Grant/Subsidy as a deduction from the Gross Value of the assets concerned in arriving at the book value. The grant/subsidy is recognized in the Profit & Loss Account over the useful life of the depreciable assets by way of reduced depreciation charged.

Government Grant subsidies received, of revenue nature, is recognized in the Profit & Loss Account by reducing the related cost if received during the same financial year otherwise, the same is shown under "Other Income" if received after the close ofthe relevant financial year.

10. EMPLOYEE BENEFITS

10.1 Employee Benefits are recognized in accordance with AS - 15 on "Employee Benefits".

10.2 Short term employee benefits namely Leave Fare Concession and Medical Aid are measured at cost.

10.3 Long term employee benefits and post retirement benefits 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.

10.4 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.

10.5 Long Term employee benefits 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 Profit and Loss Account.

10.6 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 five years.

10.7 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 five years.

11. TAXATION

Provision for tax is made for both current and deferred taxes in accordance with AS - 22 on "Accounting for Taxes on Income".

12. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In accordance with AS-29 on "Provisions Contingent Liabilities and Contingent Assets," the Bank recognizes:

a) Provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate ofthe amount ofthe obligation can be made.

b) Contingent Liability is recognized/disclosed when a possible obligation from a past event, the existence of which is confirmed by the occurrence/non occurrence of one or more uncertain future events not wholly within the control of bank. Contingent Liability is also recognized/disclosed when there is a present obligation from past events but is not recognized because of a remote possibility of outflow of resources embodying the economic benefits to settle the obligation or a reliable estimate of the amount of the obligation cannot be made

c) Contingent Assets are not recognized in the Financial Statements

13. NET PROFIT

The Net Profit is arrived at after accounting for the following:

a) Provision for Taxation.

b) Provision on Standard Assets.

c) Provision for NPAs and Depreciation on investments as per prudential norms of RBI.

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Mar 31, 2012

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), applicable mandatory Accounting Standards (AS) / Guidance Notes / pronouncements issued by the Institute of Chartered Accountants of India (ICAI) and prevailing practices in the banking industry.

2. USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions for considering in the reported assets and liabilities (including contingent liabilities) as on the date of financial statements and the income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable.

3. RECOGNITION OF INCOMEAND EXPENDITURE

3.1 The Revenues and Expenses are accounted for on accrual basis unless otherwise stated.

3.2 Income from Performing Assets is recognized on accrual basis and income from Non-Performing Assets (NPAs) is accounted for on realization. The amount realized/ recovered during the year is appropriated first to income on Sub-standard Assets. Amounts realized/recovered in Doubtful and Loss Assets and Suit Filed and Decreed Accounts are first appropriated against outstanding balances.

3.3 Unrealized income on advances classified as NPA is reversed.

3.4 Income from Commission (except on Government Transactions and Banc assurance), exchange, brokerage, claims, locker rent and dividend on shares are accounted for on cash basis.

3.5 Performance linked incentive to whole time directors is accounted for on cash basis.

4. TRANSACTIONS INVOLVING FOREIGN EXCHANGE

4.1. Monetary Assets and Liabilities, excluding outstanding Forward Exchange Contracts in each currency, are revalued at the Balance Sheet date at closing spot rates announced by the Foreign Exchange Dealers Association of India (FEDAI). Outstanding forward exchange contracts are revalued at the forward rates announced by FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

4.2. Income and expenditure items are recorded at the exchange rates prevailing on the date of transaction.

4.3. Acceptances, endorsements and other obligations including guarantees are carried at the closing spot rates announced by FEDAI.

4.4. Representative Office of the Bank has been classified as 'Integral Foreign Operation', in accordance with AS-11 on "The Effects of Changes in Foreign Exchange Rates".

4.5. 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.

4.6. Foreign currency non-monetary items that are carried in terms of historical costs are reported using the exchange rates on the dates of transactions.

5. INVESTMENTS

5.1 For the purpose of disclosure in the Financial Statements, the investments are classified into six categories as stipulated in Form A of the third schedule to the Banking Regulation Act, 1949 asunder:

a) Government Securities

b) Other approved securities

c) Shares

d) Debentures and Bonds

e) Subsidiaries/Joint Ventures

f) Others

5.2 The Investment portfolio of the Bank is categorized, in accordance with the RBI guidelines, into:

a) "Held to Maturity" comprising Investments acquired with an intention to hold till maturity.

b) "Held for Trading" comprising Investments acquired with an intention to trade.

c) "Available for Sale" comprising Investments not covered by (a) and (b) above.

5.3 In determining acquisition cost of an investment:

(a) Brokerage, Commission and Incentives received on subscription to securities, are deducted from the cost of securities,

(b) Brokerage, Commission etc. paid in connection with acquisition of securities are treated as revenue expenses and

(c) Interest accrued upto the date of acquisition/ sale of securities i.e., broken period interest is credited/ charged to Profit and Loss Account.

5.4. Investments are valued as per RBI/ Fixed Income Money Market & Derivatives Association (FIMMDA) guidelines, on the following basis:

a) "Held to Maturity"

i) Investments under "Held to Maturity" category are carried at acquisition cost. Wherever the book value is higher than the face value/redemption value, the premium is amortized over the remaining period to maturity.

ii) Investments in RIDF, STC (Refinance Fund), MSME (Refinance) SIDBI, MSME (Risk Capital) SIDBI, Rural Housing Development Fund-NHB, Micro Finance Development and Equity Fund-NABARD (classified as shares) are valued at carrying cost.

iii) Investments in sponsored regional rural banks are valued at carrying cost.

iv) Investments in venture capital is valued at carrying cost.

b) "Held for Trading" and "Available for Sale"

5.5. 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.

5.6. Shifting of securities from and to "Held for Trading" category is done in accordance with RBI guidelines with the approval of Board of Directors.

5.7. The individual scripts in the "Held for Trading" and "Available for Sale" category are marked to market at the monthly or at more frequent intervals as provided for.

5.8. Income from Zero Coupon Bonds, being the difference between cost and face value, is recognized on a time proportion basis.

5.9. Profit or Loss on sale of investments in any category is taken to Profit and Loss Account. In case of profit 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 / deficit on sale of securities, weighted average method is adopted.

5.10. For the purpose of calculating holding period in case of "Held for Trading" category, FIFO method is applied.

5.11. Investments are subject to appropriate provisioning/ de- recognition of income, in line with the prudential norms of RBI for NPI Classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities.

6. FINANCIAL ASSETS SOLD TO ASSETS RECONSTRUCTION COMPANY (ARC)/ SECURITIZATION COMPANY (SC)

In the case of financial assets sold to ARC / SC, if the sale is for a value higher than the Net Book Value (NBV), the excess provision is not reversed but utilized for meeting any shortfall on account of sale of other financial assets to ARC/ SC. If the sale is at a price below the NBV, the shortfall after adjusting the available surplus if any, is debited to the Profit and Loss Account. The sale of financial 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 financial assets. The Security Receipts are classified as Non-SLR Investment in the books of the Bank and accordingly the valuation, classification and other norms prescribed by RBI in respect of Non-SLR Securities are applicable. In case of written off Assets sold to ARC/ SC, the cash proceeds are recognized as income.

7. ADVANCES

7.1. Advances are classified as Performing / Non-Performing Assets and provisions thereon are made in conformity with the prudential norms prescribed by RBI.

7.2. Non-performing assets are stated net of provisions and claims received from credit guarantee institutions.

7.3 Provision held for performing assets is shown under the head 'Other Liabilities and Provisions'.

7.4. Restructuring of Advances and provisioning thereof have been made as per RBI guidelines.

8. FIXEDASSETSAND DEPRECIATION

8.1. Premises (including leasehold), 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.

8.2 Leasehold assets are amortized over the period of lease.

8.3. Depreciation on assets other than computers and Automated Teller Machines (ATMs) 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 after rounding off to next absolute number. Depreciation on the revalued portion of the assets is adjusted from Revaluation Reserve.

8.4. Depreciation on computers, ATMs and amortization of software are accounted for on straight-line method @ 33.33% on pro rata basis from the date of acquisition as per RBI guidelines.

8.5. Impairment Losses, if any, on Fixed Assets (including revalued assets) are recognized in accordance with AS -28 on "Impairment of Assets"

9. EMPLOYEE BENEFITS

9.1 Employee Benefits are recognized in accordance with AS - 15 on "Employee Benefits".

9.2 Short term employee benefits are measured at cost.

9.3 Long term employee benefits and post retirement benefits 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.

9.4 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.

9.5 Long Term employee benefits 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 Profit and Loss Account.

9.6 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 five years.

9.7 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 five years.

10. TAXATION

Provision for tax is made for both current and deferred taxes in accordance with AS - 22 on "Accounting for Taxes on Income".

11. PROVISIONS. CONTINGENT LIABILITIES AND CONTINGENTASSETS

In accordance with AS-29 on the above, the Bank recognizes provisions only when it has a present obligation as a result of a past event and 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 recognized in the Financial Statements.

12. NETPROFIT

The Net Profit is arrived at after accounting for the following:

a) Provision for Taxation.

b) Provision on Standard Assets.

c) Provision for NPAs and Depreciation on investments as per prudential norms of RBI.

d) Other usual and necessary provisions.

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Mar 31, 2011

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.

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Mar 31, 2010

1. BASIS OF PREPARATION OF CONSOLIDATED FI- NANCIAL 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 prescnbed by the Reserve Bank of India (RBI) and applicable mandatory Accounting Standards (AS) notified 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 recognised on accrual basis and income from Non-Performing Assets (NPAs) is accounted for on realisation. The amount realised during die Year is appropriated first to income on Sub-standard Assets and those Doubtful Assets which are under specific reconstruction or rehabilitation or nursing programme. Amounts realized /recovered in other Doubtful & Loss Assets and Suit Filed and Decreed Accounts are first appropriated against outstanding balances.

2.3. Income on advances classified as NPA in the current year and remaining unrealised is reversed.

2.4 Income :

Commission (except on Govt, transactions), exchange, brokerage, insurance claim, locker rent and dividend on shares are accounted for on cash basis.

2.5 Expenses :

Performance linked incentive to whole time directors is also accounted on cash basis.

2.6 Expenses relating to Public Issue of Shares are adjusted against Share Premium Account.

3. TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

3.1 Transactions involving Foreign Exchange are accounted for in terms of the AS-11.

3.1.1 Monetary Assets and Liabilities excluding outstanding Forward Exchange Contracts in each currency are revalued at die Balance Sheet date at closing spot rate announced by die Foreign Exchange Dealers Association of India (FEDAI).

Outstanding forward exchange contracts are revalued at the appropriate forward rates announced by FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be.

3.1.2 Income and expenditure items are recorded at the exchange rates prevailing on the date of transaction.

3.1.3 Acceptances, endorsements and other obligations including guarantees are earned at the closing spot rate announced by FEDAI.

3.2 Representative Office of the Bank has been classified as Integral Operation.

3.2.1 Foreign currency transactions relating to Integral 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.

3.2.2 Monetary foreign currency assets and liabilities of integral foreign operations are translated at closing exchange rate notified by FEDAI at the balance sheet date and the resulting profit/loss is included in the profit and loss account.

3.2.3 Foreign currency non-monetary items which are earned in terms of historical cost are reported using the exchange rate at the date of the transaction.

4. INVESTMENTS:

4.1 The investments in Balance Sheet for disclosure are classified as (i) Government Securities (u) Other Approved Secunties (in) Shares (iv) Debentures and Bonds (v) Subsidiaries and/ or Joint Ventures and (vi) Odiers as stipulated in Form A of the Third Schedule to the Banking Regulation Act,1949.

4.2 In accordance with the Reserve Bank of India (RBI) guidelines, investments are categorised into (i) Held to Matunty, (ii) Available for Sale and (iii) Held for Trading. The secunties acquired by the Bank with an intention to hold till maturity are classified as "Held to Matunty". "Held for Trading" category compnses securities acquired by the Bank widi the intention of trading. The securities, which do not fall within the above two categones are classified under "Available for Sale". The above categonzation is done by the Bank at the time of acquisition of the secunties.

4.3 In respect of securities included in any of the above three categories where interest/pnncipal is in arrears for more than 90 days, income is not recognised as per prudential norms.

4.4 The valuation of Investments is done in accordance with the guidelines issued by the RBI as under:

4.4.1 Investments under Held to Matunty 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(Refinance Fund),MSME (Refinance)SIDBI,MSME (Risk Capital) SIDBI, Rural Hosing Development Fund- NHB, Micro Finance Development and Equity Fund- NABARD classified as Shares are valued at carrying cost.

4.4.2 a) The individual scnps 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 classification referred hereunder:

i) Government Securities

ii) Other Approved Securities

111) Shares

iv) Debentures & Bonds

v) Subsidiaries/joint Ventures

vi) Other (Commercial Papers, Cumulative Deposits, Mutual Funds etc.)

Net Depreciation is provided for and appreciation, if any, 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

1) Based on FIMMDA annualized/semi annualized, Base Yield Curve and a matnx 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 : On six months base months yield curve plus relative

credit spread.

b) More than : Spread of 15 Years is to 15 Years be added to the yield of

applicable maturity,

c) Perpetual : At yield to worst basis Bonds where the final 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 tune 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.

Quoted Bonds & Debentures

If such Bonds /Debentures transacted within 15 days prior to valuation date, then the value adopted is not higher than the rate at which the transaction 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.l/- per company

ii) Preference Share

Quoted : At market price, if traded on Stock Exchange widiin 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 script 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 difference between cost and face value is recognised 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 Profit or loss on sale of investments in any category is taken to Profit and Loss account but, in case of profit 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 / deficit on sale of securities, weighted average method is adopted.

4.8 For the purpose of calculating 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 Reserve Ba*ik of India for NPI Classification. The depreciation/provision in respect of non-performing securities is not set off against the appreciation in respect of the other performing securities.

5. ADVANCES:

5.1. Advances are classified as Performing and Non-Performing Assets, account wise and provisions thereon are made in conformity with the prudential norms prescribed by RBI.

5.2. Non-performing assets are stated net of provisions and ECGCclaims received. Provisions held for performing assets is shown under the head Other Liabilities & Provisions.

5.3 (i) In case of financial assets sold to the Assets Reconstruction Company (ARC") / Securitisation Company (SC), if the sale is at a price below the Net Book Value (NBV), the shortfall is debited to the profit and 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 financial assets to ARC. The sale of financial assets to ARC 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 for such sale or the net value of such financial assets. The Security Receipts are classified as Non-SLR Investment in the books of the Bank and accordingly the valuation, classification and other norms prescribed by RBI in respect of Non-SLR Securities are applicable.

5.3 (ii) In the case of written off Assets sold to ARC/SC, the

sale proceeds is recognized as income.

5.4 Restructuring of Advances have been made as per RBI guidelines.

6. FIXED ASSETS AND DEPRECIATION:

6.1. 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.

6.2 Softwares are capitalized with computers.

6.3 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.

6.4 Leasehold assets are amortised over the period of lease.

6.5 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. EMPLOYEE BENEFITS :

7.1 Short term employee benefits (benefits which are payable within twelve months after the end of the period in which the employees render service) are measured at cost.

7.2 Long term employee benefits (benefits 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 benefit and leave fare concession and post retirement benefits 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.

7.3 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.

7.4 Long Term employee benefits 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 gam / loss to the extent recognized in Profit & Loss Account.

7.5 The transitional liability in respect of long term employee benefits is recognized as an expense on straight line basis over a period of five Years.

8. STATIONERY

The stock of stationery in hand as on the closing date is accounted for at cost.

9. TAXATION:

a. Provision for taxation is made on the basis of estimated tax liability.

b. Deferred tax liability/asset is recognized in terms of Accounting Standard 22.

10 IMPAIRMENT OF ASSETS:

Impairment Losses (if any) on Fixed Assets (including revalued assets) are recognized in accordance with die Accounting Standard 28 ("Impairment of Assets").

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Mar 31, 2009

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) notified 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 on performing assets is recognised on ! accrual basis and income from Non-Performing i Assets (NPAs) is accounted for on realization and the amount realised during the year is appropriated first to income on Sub-standard Assets and those Doubtful Assets which are under specific reconstruction or rehabilitation or nursing programme. Amounts realized /recovered in other Doubtful & Loss Assets and Suit Filed and Decreed Accounts are first appropriated against outstanding balances.

2.3. Income accounted for in the previous year in respect of advances classified as NPA in the current year and remaining unrealised is reversed.

2.4 Income :

Commission (except on Govt, transactions), exchange, brokerage, insurance claim, locker rent and dividend on shares are accounted for on cash basis.

2.5 Expenses :

Performance linked incentive to whole time directors are also accounted on cash basis.

3. TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

Transactions involving Foreign Exchange are accounted in terms of the AS-11. 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 appropriate forward rates announced by FEDAI. The difference between the revalued amount and the contracted amount is recognized as profit or loss, as the case may be

3.2. Income and expenditure stems 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.

4. INVESTMENTS:

4.1. The investments in Balance Sheet for disclosure are classified 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 Third Schedule to the Banking Regulation Act,1949.

4.2. In accordance with the Reserve Bank of India (RBI) guidelines, investments are categorised into (i) Held to Maturity, (ii) Available for Sale and (iii) Held for Trading1. The securities acquired by the Bank with an intention to hold till maturity are classified 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 classified under "Available for Sale".

The above categorization is done by the Bank at the time of acquisition of the securities.

4.3. 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 recognised as per prudential norms.

4.4. The valuation of Investments is done in accordance with the guidelines issued by the 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 are valued at carrying cost.

4.4.2. The individual scrip in Available for Sale category are marked to market at quarterly or at more frequent intervals. Securities under this category are valued scrip-wise & depredation/appreciation is aggregated for each classification referred hereunder. Net Depreciation is provided for and appreciation, if any ignored.

a) Government Securities

b) Other approved securities

c) Shares

d) Debentures & Bonds

e) Subsidiaries/Joint Ventures

f) Other (CP, Mutual Products) 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 after adding 25 basis points (bps) to Base Yield Curve of the Central Government Securities of equivalent maturity as per FIMMDA & in case of Other Approved Securities by applying YTM and mark, up the FIMMDA for Central Govt. Securities of equivalent maturity. iii) Treasury Bills, Commercial Paper & Certificate of Deposits (of tenor less than 1 year) & Zero Coupon Bonds 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 10 years : Spread of 10 years is to be added to the yield of applicable maturity,

c) Perpetual Bonds : 15 years spread for corresponding maturity added for the 30 years point on Base Yield Curve.

A. Rated Bonds & Debentures

The rated bond is valued by adding the credit spread to the Base Yield Curve (corresponding to the coupon frequency). Where raring 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 If a corresponding rated bond of the issuer exists, then the unrated bond is valued by marking up the credit spread by a minimum 20% over the equivalent rated bond of similar tenure.

Quoted Bonds & Debentures If such Bonds/Debentures transacted within 15 days prior to valuation date, then the value adopted is not higher than the rate at which the transaction 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 is per Balance Sheet (not older than 1 year Unquoted :At break up value based on Companies latest Balance Sheet (not older than 1 year). In the absence of market quotation/ Balance Sheet, both at Re. 1 per company

ii) Preference Share

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/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 are 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 should not be valued above its redemption value.

4.5 Income from Zero Coupon Bonds being the difference between cost and face value is recognised 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 and the depreciation, if any, on such transfer is fully provided for, without changing book value of scrip.

4.7 Profit or loss on sale of investments in any category is taken to Profit and Loss account but, in case of profit 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 / deficit on sale of securities, weighted average method is adopted.

4.8 For the purpose of calculating 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/derecogxiition of income, in line with the prudential norms of Reserve Bank of India for NPI Classification. The depreciation /provision in respect ornon-performing securities is not set off against rhe appreciation in respect of the other performing securities.

5. ADVANCES:

5.1. Advances ar classified as Performing and Non- Performing Assets, account wise and provisions thereon are made in conformity with the prudential norms prescribed by RBI.

5.2. Advances other than those classified as performing assets are stated net of provisions and ECGC claims received. Provisions held for performing assets is shown under the head Other Liabilities & Provisions.

5.3(i) In case of financial assets sold to the Assets Reconstruction Company (ARC) / Securitisation Company (SC), if the sale is at a price below the Net Book Value(NBV), the shortfall is debited to the profit and 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 financial assets to ARC. The sale of financial assets to ARC 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 for such sale or the net value of such financial assets. The Security Receipts are classified as Non-SLR Investment in the books of the Bank and accordingly the valuation, classification and other norms prescribed by RBI in respect of Non-SLR Securities are applicable.

5.3(ii) In the case of written off Assets sold to ARC/SC, the sale proceeds is recognized as income.

5.4 Restructuring of Advances have been made as per RBI guidelines.

6. FIXED ASSETS AND DEPRECIATION:

6.1. 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.

6.2. Softwares are capitalized with computers.

6.3. 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.

6.4. Leasehold assets are amortised over the period of lease.

6.5. 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. EMPLOYEE BENEFITS :

7.1 Short term employee benefits (benefits which are payable within twelve months after the end of the period in which the employees render service) are measured at cost.

7.2 Long term employee benefits (benefits 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 benefit and leave fare concession and post retirement benefits 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.

7.3 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 at the year-end.

7.4 Long Term employee benefits 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 Profit & Loss Account.

7.5 The transitional liability in respect of long term employee benefits is recognized as an expense on a straight line basis over a period of five years.

8. STATIONERY

The stock of stationery in hand as on the closing date is accounted for at cost.

9. TAXATION:

a. Provision for taxation is made on the basis of estimated tax liability. ___

b. Deferred tax liability/asset is recognized in terms of Accounting Standard 22.

10. IMPAIRMENT OF ASSETS: Impairment Losses (if any) on Fixed Assets (including revalued assets) are recognized in accordance with the Accounting Standard 28 ("Impairment of Assets") .

11. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

As per the Accounting Standard 29 ("Provisions, Contingent Liabilities and Contingent Assets"), the Bank recognizes provisions only when it has a present obligation as a result of a past event & it is probable that an 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 recognized in the Financial Statements since this may result in the recognition of income that may never be realized.