INTRODUCTION

Kotak Mahindra Bank (BSE: 500247, NSE: KOTAKBANK) is an Indian financial service firm established in 1985. It was previously known as Kotak Mahindra Finance Limited, a nonbanking financial company. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship company was given the license to carry on banking business by the Reserve Bank of India (RBI). Kotak Mahindra Finance Ltd. is the first company in the Indian banking history to convert to a bank. Today it has more than 20,000 employees and Rs. 10,000 crore in revenue.[2] Mr. Uday Kotak is Executive Vice Chairman & Managing Director of Kotak Mahindra Bank Ltd. In July 2011 Mr. C. Jayaram and Mr. Dipak Gupta, whole time directors of the Bank, were appointed the Joint Managing Directors of Kotak Mahindra Bank. Dr. Shankar Acharya is the chairman of board of Directors in the company. The Bank has its registered office at Nariman Bhavan, Nariman Point, Mumbai Established in 1985, the Kotak Mahindra group has been one of India's most reputed financial conglomerates. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship company was given the license to carry on banking business by the Reserve Bank of India (RBI). This approval created banking history since Kotak Mahindra Finance Ltd. is the first non-banking finance company in India to convert itself in to a bank as Kotak Mahindra Bank Ltd. Today, we are one of the fastest growing bank and among the most admired financial institutions in India.

COMPANY PROFILE
Kotak Mahindra Bank works with a vision to provide customer a helpful hand, in particular with Kotak Mahindra Bank Ltd is one of the fastest growing bank and among the most admired financial institutions in India. The Bank offers transaction banking, operates lending verticals, manages IPOs and provides working capital loans. They have one of the largest and most respected Wealth Management teams in India, providing the widest range of solutions to high net worth individuals, entrepreneurs, business families and employed professionals. The Bank has over 245 branches, a customer base of over 8 lakh and has spread all over India. The Bank offers complete financial solutions for infinite needs of all individual & non-individual customers depending on the customer's need - delivered through a state of the art technology platform. They also offer investment products like Mutual Funds, Life Insurance, retailing of gold coins and bars etc. Apart from Phone banking and Internet banking, they offer convenient banking facility through Mobile banking, SMS services, Netc@rd, Home banking and BillPay facility among others. The Depository services offered by the Bank allows the customers to hold equity shares, government securities, bonds and other securities in electronic or Demat forms. Their Salary 2 Wealth offering provides comprehensive administrative solutions for Corporates with features such as easy and automated web based salary upload process thereby eliminating the paper work involved in the process, a dedicated relationship manager to service the corporate account, customized promotions and tie - ups and many such unique features. The Bank offers comprehensive business solutions for the business community that includes the Current Account, Trade Services, Cash Management Service and Credit Facilities. Their Wholesale banking products offer business banking solutions for long-term investments and working capital needs, advice on mergers and acquisitions and equipment financing. The Bank addresses the entire spectrum of financial needs of Non-Resident Indians. Their tie-up with the Overseas Indian Facilitation Centre (OIFC) as a strategic partner gives them a platform to share their comprehensive range of banking & investment products and services for Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs). The bank has overseas subsidiaries with offices in Mauritius, London, Dubai, Singapore, New York & San Francisco. The overseas subsidiaries are mainly engaged in investment advisory and investment management of funds, Equity & Debt Trading, management of GDR/ FCCB issuances, broker & broker dealer activities and
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investments. Kotak Mahindra Bank Ltd was incorporated in the year 1985 with the name Kotak Capital Management Finance Ltd. In April 8, 1986, the company's name was changed Kotak Mahindra Finance Ltd. They started bill discounting activity. In the year 1987, they entered into lease and hire purchase market. In the year 1990, they started car finance division and during next year, they started investment banking division. Alsom they took over FICOM, one of India's largest financial retail marketing networks. In the year 1994, the company formed Kotak Mahindra International in Mauritius and opened an office in Dubai. They formed Kotak Mahindra (UK) formed with office in London. In the year 1996, the car finance business was hived off into a separate company, namely Kotak Mahindra Primus Ltd and Ford Credit took a 40% stake in Kotak Mahindra Primus. In the year1998, they formed Kotak Mahindra Inc with office in New York. In the year 2001, Kotak Securities Ltd became a subsidiary company. In February 2003, the company was given the license to carry on banking business by the Reserve Bank of India (RBI). This approval created banking history since Kotak Mahindra Finance Ltd is the first non-banking finance company in India to convert themselves into a bank as Kotak Mahindra Bank Ltd. In March 2003, they commenced banking operations. The Bank started their operations in New Delhi by inaugurating a branch. FEATURE Investing your money in a Term Deposit at Kotak Mahindra is a safe, stress-free way to make it grow. A host of features make Kotak Mahindra Term Deposits an excellent investment opportunity.

Key Features

Safe and stress-free way to make your money grow Loan facility to the extent of 85% of principal on a deposit term Attractive interest rates You can choose to roll over only the principal amount that you deposit or principal plus interest earned (i.e. re-invest the interest). Automatic rollover will be for the same period, at an interest rate applicable on the maturity date
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When you reinvest the interest, you get compound interest on the total amount, i.e. rollover of principal plus interest, at the end of the period (quarter or half-yearly)

You can specify, on or before the maturity date, changes in deposit tenure, maturity instructions, payment instructions, principal amount and rollover mode (from principal to principal plus interest or vice versa)

Loan facility is available to the extent of 85% of principal on a deposit term, with a period of minimum of 1 year (as per Kotak Mahindra Bank's conditions)

LOANS AND ADVANCES

Loans that help you fulfill all your financial needs Kotak Mahindra Bank presents Personal Finance - the single expert source for all your financial needs. Unexpected expenses, education, wedding in the family, home improvement or that long awaited vacation. Learn more about Loans:

Home Loans Personal Loans Car Loans Loan against property Home Improvement Loans Home Loan Balance Transfer Kotak Stock Ace Gold Loan PERSONAL LOANS No matter what your financial needs are, our personal loans help you fulfill them Our Personal Loans help to make a difference in your life. No matter what your financial needs are - unexpected expenses, school fees, wedding in the family, home improvement or that long awaited vacation. Whatever the occasion, our range of Personal Loans can help. The procedure is simple, documentation is minimal and approval is quick. Key Features

Avail loans from Rs.50,000-50 lakh* Quick Approval & hassle-free processing Minimal paperwork Flexible repayment options Repay with easy EMIs

Convenience of service at your doorstep HOME LOANS Designed to suit your requirements At Kotak Mahindra Bank, we offer highly customized facilities of availing home loans. Importantly, we appoint a dedicated manager who takes customers through the entire process, starting with the filling in of the application forms and culminating in the loan disbursement process. This otherwise seemingly difficult process is made simpler and more convenient for the customer. Sometimes, customers are unable to spare that extra time from their hectic schedules, and the Bank Doorstep Service makes the home buying process seamless and pleasurable. A relationship that is happy from the start is extended through the attention the customer gets through his loan repayment tenure and beyond. Home buying is an emotional decision and one must find the right partner to guide you through the course. Key Features

High Eligibility for Businessmen Doorstep Service Attractive Interest Rates Simplified Documentation Quicker Turnaround time LOAN AGAINST PROPERTY Unlock the potential in your property and - benefit with lower interest rates Unlock the potential in your property by availing a Loan Against Property (LAP). A LAP is a loan given against the security of your existing property. The benefit is that interest rates on LAP are generally lower than rates on other consumer loans Key Features

High loan eligibility for businessmen

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Loans amounts ranging from Rs.10 lakh - Rs.3 crore! Loans against residential as well as commercial properties HOME IMPROVEMENT LOANS Make your home a better place to reside in

With Kotak Home Improvement Loans, you can make your home a better one to reside in. Key Features

Improve your home Build up its equity Attractive interest rates

Home Loan Balance Transfer Transfer your home loan to us and benefit largely

Kotak Home Loan Transfer offers you the same home on better terms to suit your needs. Key Features

Transfer your loan to a lower interest rate Simple documentation and speedy processing Quick check Even a 1.0% reduction in the interest rate can save you more than Rs.1.5 lakh on a loan of 10 lakh over a 20 yr period. The exact figure will depend on the rate on the existing loan, balance tenure etc

Call us now to know your savings under the Kotak Home Loan Transfer and find out how Kotak Home Finance can meet you needs.

GOLD LOAN A simple, easy, reliable way to use your gold for a better tomorrow Kotak Mahindra Bank now presents Kotak Gold Loan that offers quick and easy financing at very attractive interest rates. With this offering, Kotak brings to you a product designed to make your future full of golden opportunities and growth. Key Features

Instant loan Utmost safety of your gold Minimal documentation Higher Loan to Value Easy repayment with multiple modes Overdraft facility Need not be an existing Kotak Bank customer

ACCOUNTS AND DEPOSITS

Savings Accounts Choose the Account best suited to your needs Our Savings Accounts are designed to ensure you receive the benefits of quick & convenient banking transactions along with options for your money to earn high returns. The savings account goes beyond the traditional role of savings, to provide you a range of services from funds transfer options to online payments of bills to attractive returns earned through a comprehensive suite of investment options.

Current Accounts Accounts deigned for small-mid size business or an enterprise Kotak Mahindra Bank offers you unparalleled advantages with its three Current Account offerings. Whether you have a small/ mid size business or you are an enterprise spread across multiple locations in the country, you would find a Current Account that's just designed for you. With features ranging from Free DDs, Free Cheque Collection, Free At -Par Cheque facility to Free Trading Account & free Demat Account, and more!

Term Deposits Term Deposit with highly attractive interest rates Kotak Mahindra Bank brings you Term Deposit at highly attractive interest rates coupled with special facilities like Overdraft and Re-investment option. Safe Deposit Lockers Be at peace when your valuables are in our lockers Kotak Mahindra Bank offers you Safe Deposit Locker facilities which can be utilized to safe keep your important documents, jewellery and other valuables.
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AWARDS AND RECOGNISIONS Our commitment to excellence whether its in banking or insurance or stock broking or fund management has earned us great recognition in India and internationally. Recent awards:

Kotak Bond Regular received the Lipper Fund Award 2010 for Best Fund over 10 years Bond Indian Rupee

Best Investment Bank for 6 years in a row from 2006 to 2011, Finance Asia Best Equity house in India FinanceAsia Country Awards 2011 Best Domestic Equity House for 4 years in a row by Asiamoney in 2011 Best Private Banking Services Overall in India - Euromoney 2011 Best Range of Advisory Services Category - Euromoney 2010 Best Family Office Services Category - Euromoney 2010 Best Private Bank in India 2010 - Finance Asia Country Awards

Kotak Mahindra Mutual Fund

We are sponsored by Kotak Mahindra Bank Limited, one of India's fastest growing banks, with a pedigree of over twenty years in the Indian Financial Markets. Kotak Mahindra Asset Management Co. Ltd., a wholly owned subsidiary of the bank, is our Investment Manager.

We made a humble beginning in the Mutual Fund space with the launch of our first scheme in December, 1998. Today we offer a complete bouquet of products and services suiting the diverse and varying needs and risk-return profiles of our investors.

We are committed to offering innovative investment solutions and world-class services and conveniences to facilitate wealth creation for our investors.
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Businesses Multiple businesses. One brand. Kotak Mahindra is one of India's leading banking and financial services groups, offering a wide range of financial services that encompass every sphere of life.

Kotak Mahindra Bank Ltd is a one stop shop for all banking needs. The bank offers personal finance solutions of every kind from savings accounts to credit cards, distribution of mutual funds to life insurance products. Kotak Mahindra Bank offers transaction banking, operates lending verticals, manages IPOs and provides working capital loans. Kotak has one of the largest and most respected Wealth Management teams in India, providing the widest range of solutions to high net worth individuals, entrepreneurs, business families and employed professionals. For more information, please visit the Kotak Mahindra Bank website www.kotak.com/bank/personal-banking/

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PRODUCTS AND SERVICES

Funded Products Short and medium term funding facilities At Kotak Mahindra Bank we understand the challenges and complexities faced by corporations in managing cash flows. Learn more about Funded Products:

Working Capital Structured Products Treasury Products Mitigate Business Risks Risks are a reality of the business world. We provide money market and foregn exchange facilities to help you mitigate them. Learn more about Treasury Products:

Foreign Exchange Money Market Benchmark PLR Investment Products Meet your financial goals At Kotak Mahindra Bank, we recognize that financial needs vary. We have years of experience in helping organisations put together an investment portfolio that works best for them. Learn more about Investment Products:

Term Deposit Mutual Funds Bancassurance

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Fixed Income Products A range of debt and fixed income products Our debt capital markets group comprises a team of experienced and highly qualified professionals who structure products to suit the dynamic and varied needs of customers across segments. This includes corporates, Public Sector Undertakings, state level undertakings, Financial Institutions and banks. Learn more about Fixed Income Products:

Sales and Distribution Case Studies Research ATM NETWORK The ATM service is available to you absolutely FREE Our strategically located and constantly growing ATM network brings the bank within your easy reach. The state of the art touch screen Kotak Mahindra Bank ATMs are part of the Visa/Plus ATM network. That means you can withdraw cash from our ATM Network with International and Domestic Visa/Visa Electron/Plus Credit Cards/Debit Cards. With our special arrangement with HDFC Bank, you can use your Kotak Mahindra Bank Global Debit Card at over 1450 HDFC Bank ATMs absolutely free onstantly growing ATM network brings the bank within your easy reach. The ATM service is available to you absolutely FREE Our strategically located and constantly growing ATM network brings the bank within your easy reach.

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The state of the art touch screen Kotak Mahindra Bank ATMs are part of the Visa/Plus and Cashnet ATM network. That means you can withdraw cash from our ATM Network with any International and Domestic Visa/Visa Electron/Plus Credit Cards/Debit Cards. Key Features

Access your account anytime anywhere State of the art Touch Screen ATMs Affiliated to the VISA network Access any ATM in the country absolutely free. Services available

24-hour access to cash Transfer funds between accounts View Account Balances and Mini Statement Pin Change option Call our 24-hour Customer Contact Center to know more. NETBANKING Kotak Mahindra Bank's Net Banking service brings you the timeless world of instant banking. It is quick and easy, available to you 24X7 and it's absolutely free! Key Features

Bank 24X7 - anywhere, anytime Move Money - Within your own Kotak Accounts, to someone else's Kotak Account, to another bank via NEFT/ RTGS and Demand Draft. You have the option to 'Pay Now', 'Pay at a later date' or 'Schedule Regular Payments'. You even have the option to 'Save' the Transaction and pay when desired. You can even view all your 'Completed Transactions' along with the status.

You can book a Term Deposit and can do a premature withdrawal online.

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You can add a Beneficiary and Multiple accounts can be mapped for a beneficiary for Transfer Type. (E.g. - NEFT / RTGS etc). Beneficiaries added at other channels like branch too, will be available for the customer on Net Banking to make a transfer to.

View details across Accounts, Term Deposits and Demat Accounts Pay your utility bills , VISA Credit Card bills, Recharge Prepaid Mobile phones and DTH accounts and even pay your Direct tax through Kotak BillPay

Safe online shopping with Kotak Netc@rd ASBA-apply for IPO/FPO/Rights Issue without any paper-work and from the convenience of your home / office.

Invest /Redeem in Mutual Funds online and much more Stringent security offers complete peace of mind

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KEY SUCCESS FACTORS

One of the biggest reasons for this success was the teams unrelenting focus on achieving what they had set out to do, which was to eliminate the problems of the existing system and ensure that there was no disruption of business during and after the Finacle go live.

Accomplished this through an unprecedented amount of testing which saw more than 100 end of days, and simulations of operations right through to April 2012 prior to going live

The banks insistence on testing every offering before giving it the go ahead as well as its vast test case repository was a contributing factor in the smooth execution

The availability of the production environment at the simulation stage itself, which gave the bank and the implementation team a realistic preview of the results that they could expect after going live on the new system. Benefits

Agility and short time to market Scalability to support future growth 44% increase in new accounts added in the quarter succeeding implementation Increase in new sales, cross sales and fee income New offerings, such as RTGS Payments, Sweeps and Standing Instructions 24x7 back office

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AUDIT REPORTS
To The Board Of Directors Of Kotak Mahindra Bank Limited 1. We have audited the attached Consolidated Balance sheet of KOTAK MAHINDRA BANK LIMITED ( the Bank) and its subsidiaries (the Bank and its subsidiaries constitute the Group) as at 31st March, 2012, the Consolidated Profit and Loss account and the Consolidated Cash Flow Statement of the Group for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Banks Management and have been prepared by the Management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We did not audit the financial statements of twelve subsidiaries, whose financial statements reflect total assets of ` 144,197,455 (in thousands) as at 31st March 2012, total revenue of ` 42,468,971 (in thousands) and net cash outflows amounting to ` 31,207 (in thousands) for the year then ended as considered in the Consolidated Financial Statements. The financial statements and other financial information of these subsidiaries have been audited by other auditors whose reports have been furnished to us and our opinion, in so far as it relates to the amounts included in respect of these subsidiaries, is based solely on the report of the other auditors. 4. The financial statements also include ` 9,828 (in thousands) being the Groups proportionate share in the net profit of two associates (carrying value ` 69,943 (in thousands)) which has been recognised on the basis of the unaudited financial information available with the Group. 5. The auditors of a subsidiary company of the Bank, Kotak Mahindra Old Mutual Life Insurance Limited (the Company), have reported in their audit opinion the actuarial valuation of liabilities for life policies in force is the responsibility of the Companys Appointed Actuary (the Appointed Actuary). The actuarial valuation of these liabilities as at 31st March 2012 has
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been duly certified by the Appointed Actuary and in his opinion, the assumptions for such valuation are in accordance with the guidelines and norms issued by the Insurance Regulatory Development Authority (IRDA) (Authority) and the Actuarial society of India in concurrence with the Authority. The auditors of the Company have relied upon the Appointed Actuarys certificate in this regard for forming an opinion on the valuation of liabilities for life policies in force and for policies in respect of which premium has been discontinued but liability exists on financial statements of the Company. 6. We report that the Consolidated Financial Statements have been prepared by the Bank in accordance with the requirements of Accounting Standard 21 (Consolidated Financial Statements) and Accounting Standard 23 (Accounting for Investments in Associates in Consolidated Financial Statements) notified under the Companies (Accounting Standards) Rules, 2006. 7. Based on our audit and on consideration of reports of other auditors on separate financial statements and on the other financial information of the components, and to the best of our information and according to the explanations given to us, we are of the opinion that the attached Consolidated Financial Statements give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at 31st March, 2012; (b) in the case of the Consolidated Statement of Profit and Loss, of the profit of the Group for the year ended on that date and (c) in the case of the Consolidated Cash Flow Statement, of the cash flows of the Group for the year ended on that date.

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To The Members of Kotak Mahindra Bank Limited 1. We have audited the attached Balance Sheet of KOTAK MAHINDRA BANK LIMITED (the Bank) as at 31st March, 2012, the Profit and Loss Account and the Cash Flow Statement of the Bank for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Banks Management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides reasonable basis for our opinion. 3. The Balance Sheet and the Profit and Loss Account are drawn up in conformity with Forms A and B (revised) of the Third Schedule to the Banking Regulation Act, 1949, read with Section 211 of the Companies Act, 1956. 4. We further report as follows : (a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and have found them to be satisfactory; (b) In our opinion, the transactions of the Bank which have come to our notice have been within its powers; (c) In our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from our examination of those books; (d) The financial accounting systems of the Bank are centralised and therefore, accounting returns are not required to be submitted by the Branches; (e) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account; (f) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956, insofar as they apply to banks;

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(g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required for banking companies and the Guidelines issued by the Reserve Bank of India from time to time and give a true and fair view in conformity with the accounting principles generally accepted in India : (i) in the case of the Balance Sheet, of the state of the affairs of the Bank as at 31st March, 2012; (ii) in the case of the Profit and Loss Account, of the profit of the Bank for the year ended on that date and (iii) in the case of Cash Flow Statement, of the cash flows of the Bank for the year ended on that date. 5. On the basis of the written representations received from the Directors as on 31st March, 2012 taken on record by the Board of Directors, we report that none of the Directors is disqualified from being appointed as a director in terms of Section 274(1) (g) of the Companies Act, 1956. 6. We report that during the course of our audit we have visited 13 Branches. Since the key operations of the Bank are completely automated with the key applications integrated to the core banking systems, the audit is carried out centrally at the Head Office as all the necessary records and data required for the purposes of our audit are available therein and the Branches are not required to submit any financial returns.

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SIGNIFICANT ACCOUNTING POLICIES

A. ACCOUNTING METHODOLOGY The Financial Statements have been prepared on historical cost basis of accounting. The Group adopts the accrual method of accounting and historical cost convention. The financial statements conform with the Accounting Standards notified under the Companies (Accounting Standard) Rules, 2006 as amended, guidelines issued by the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority (IRDA) from time to time as applicable to relevant companies and the generally accepted accounting principles prevailing in India. In case the accounting policies followed by consolidating entities are different from those followed by Bank, the same have been disclosed separately. The preparation of financial statements requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as on the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. Any revision in the accounting estimates is recognized prospectively. B. REVENUE RECOGNITION a. Banking/ Investing Activity: i. Interest income is recognised on accrual basis except in case of non-performing assets where it is recognised, upon realisation, as per RBI guidelines. Penal interest is recognised as income on realisation. ii. Interest income in respect of retail advances {except for the subsidiary, Kotak Mahindra Prime Limited (KMPL)} is accounted for by using the internal rate of return method to provide a constant periodic rate of return on the net investment outstanding on the contract. iii. KMPL accrues for auto finance income (including service charges and incentives) by using the internal rate of return method to provide a constant periodic rate of return after adjustment of brokerage expenses on the net investment outstanding on the contract. The volume-based incentives and brokerage are accounted as and when the said volumes are achieved. Income also includes gains made on termination of contracts.

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iv. Service charges, Fees and Commission income are recognised when due except for guarantee commission and letter of credit commission which is recognised over the period of the guarantee/ letter of credit respectively, except as indicated in para iii above. v. Interest income on discounted instruments is recognised over the tenure of the instruments so as to provide a constant periodic rate of return. vi. Gain on account of securitisation of assets is amortised over the life of the securities issued in accordance with the guidelines issued by the RBI. vii. Gain on account of assignment of assets on bilateral basis is recognised, based on the difference between the book value of the assigned assets and sale consideration received. viii. Dividend income is accounted on an accrual basis when the right to receive the dividend is established. ix. In respect of non-performing assets acquired from other Banks, FIs and NBFCs, collections in excess of the consideration paid at each asset level or portfolio level is treated as income in accordance with RBI guidelines and clarifications. b. Investment Banking Activity: i. Issue management fees, underwriting commission, financial advisory fees and placement fees are accounted on completion of milestones specified in the contract. ii. Brokerage and clearing fees are recognised as on the date of transaction. c. Insurance Activity: i. Premium is recognised as income when it is due from policyholders except on unit linked policies, where the premium is recognised when associated units are created. ii. Uncollected premium on lapsed policies is not recognised as income until revived. iii. Top Up/ Lump sum contributions are accounted as a part of the single premium. iv. Income from linked policies, which include asset management fees and other charges, if any, are recovered from the linked fund in accordance with the terms and conditions of the policies. v. Re-insurance premium ceded is accounted as an expense at the time of recognition of the premium income in accordance with the treaty arrangements with the re-insurers. vi. Commission on re-insurance ceded is accounted as income in the period in which reinsurance is ceded. vii. Re-insurance premium and re-insurance commission are recognised over the period of the risk.
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d. Broking Activity: i. Placement and other fee based income are accounted for on the basis of the progress of the assignment. ii. Brokerage Income (net of service tax): On fixed deposit is accounted on completion of the transaction. On primary market subscription / mobilisation is accounted on receipt of intimation of allotment. On secondary market transaction is recognised on the date of the transaction. iii. Incentive on primary market subscription / mobilisation is accounted on the basis of receipt of intimation of allotment. iv. In respect of depository activity, transaction fees (net of service tax) are recognised on completion of transaction. Account maintenance charges are recognised on time basis over the period of contract. v. Portfolio management fees are accounted on accrual basis as follows: a. In case of fees based on fixed percentage of the corpus / fixed amount, income is accrued over the period of the agreement. b. In case of fees, based on the returns of the portfolio, income is accounted on the termination of the portfolio agreement/ on each anniversary as per the agreement, whichever is earlier. c. In case of upfront non-refundable fee, income is accounted in the year of receipt. e. Asset Management i. Management fee from mutual funds is recognised at specific rates agreed with the relevant schemes, applied on the average daily net assets of each scheme (excluding inter-scheme investments, where applicable, and investments made by the Company in the respective scheme), and are in conformity with the limits specified under SEBI (Mutual Funds) Regulations, 1996. ii. Management fee from venture funds, private equity funds and other similar funds is recognised on accrual basis at the rates specified in the investment management agreement from the date of initial closing of funds under management. iii. Portfolio Advisory Service income is recognised on accrual basis as per the terms of the contract.

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C. FIXED ASSETS AND INTANGIBLE ASSETS Fixed assets / Intangible assets have been stated at cost inclusive of freight, duties and other incidental expenses less accumulated depreciation / amortisation. D. EMPLOYEE BENEFITS i Provident Fund Defined Contribution Plan: Contribution as required by the Statute made to the Government Provident Fund is debited to the Profit and Loss Account when incurred. ii Gratuity Defined Benefit Plan: The Group accounts for the liability for future gratuity benefits based on an actuarial valuation conducted by an independent actuary. The Bank and three of its subsidiaries make contribution to a Gratuity Fund administered by trustees and managed by a life insurance company. In other subsidiaries gratuity obligation is wholly unfunded. The net present value of the Groups obligation towards the same is actuarially determined based on the projected unit credit method as at the Balance Sheet date. iii Actuarial gains/losses are recognised immediately in the Profit and Loss Account and are not deferred. iv Superannuation Fund Defined Contribution Plan: The Group contributes a sum equivalent to 15% of eligible employees salary subject to a maximum of ` 1 lakh per eligible employee per annum, to the Superannuation Funds administered by trustees and managed by a Life Insurance Company. The Group recognises such contributions as an expense in the year they are incurred. v Compensated Absences - Other Long-Term Employee Benefits: The Group accrues the liability for compensated absences based on the actuarial valuation as at the Balance Sheet date conducted by an independent actuary. The net present value of the Groups obligation is determined based on the projected unit credit method as at the Balance Sheet date. vi Other Employee Benefits: The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include performance incentives.

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E. INVESTMENTS For The Bank 1. Classification: In accordance with the RBI guidelines, investments are categorised at the date of purchase into Held for Trading, Available for Sale and Held to Maturity and further classified under six groups, namely, Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Associates and Other for the purpose of disclosure in the Balance Sheet. i. Investments that are held for resale within 90 days from the date of purchase are classified as Held for Trading. ii. Investments that the Bank intends to hold to maturity are classified as Held to Maturity. iii. Investments which are not classified in the above categories are classified as Available for Sale. 2. Valuation: The cost of investments is determined on weighted average basis. Broken period interest on debt instruments is treated as revenue item. The transaction costs including brokerage, commission etc. paid at the time of acquisition of investments is charged to Profit and Loss Account. The valuation of investments is made in accordance with the RBI guidelines as indicated hereunder: a. Held for Trading / Available for sale Each security except treasury bills in this category is revalued at the market price or fair value on a monthly basis and the net depreciation of each group is recognised in the Profit and Loss Account. Net appreciation, if any, is ignored. Further, provision for diminution other than temporary is made for, at the individual security level. The market / fair value of quoted investments included in the Available for Sale and Held for Trading categories is measured with respect to the market price of the scrip as available from the trades / quotes on the stock exchanges, SGL account transactions, price list of RBI or prices declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association of India (FIMMDA) as at the year end. The market value of investments where market quotations are not available is determined as per
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the norms laid down by the RBI. Treasury bills, commercial bills and certificates of deposits being discounted instruments are valued at carrying cost. b. Held to Maturity These are carried at their acquisition cost. Any premium on acquisition of debt instruments is amortised over the balance maturity of the security on a straight-line basis. Any diminution, other than temporary, in the value of securities, is provided for. The market value of investments where market quotations are not available is determined as per the norms laid down by the RBI. c. Repurchase and reverse repurchase transactions Securities sold under agreements to repurchase (Repos) and securities purchased under agreements to resell (Reverse Repos) are accounted as collateralised borrowing and lending transactions respectively. The difference between the consideration amount of the first leg and the second leg of the repo is recognised as interest income / interest expense over the period of the transaction. 3. Transfer between categories: Transfer between categories is done, in accordance with RBI guidelines, at the lower of acquisition cost/ carrying value / market value on the date of the transfer and depreciation, if any, on such transfer is fully provided for. 4. Profit or loss on sale / redemption of investments: a. Held for Trading and Available for Sale: Profit or loss on sale / redemption is included in the Profit and Loss Account. b. Held to Maturity: Profit on sale / redemption of investments is included in the Profit and Loss Account and is appropriated to Capital Reserve after adjustments for tax and Statutory Reserve transfer. Loss on sale / redemption is charged off to the Profit and Loss Account. For the insurance company: a. Investments are recorded at cost on trade date which includes brokerage, transfer charges, transaction taxes as applicable, etc. but excludes preacquisition interest, if any, and service tax on brokerage where cenvat credit is being claimed. b. Investments maturing within twelve months from the Balance Sheet date and investments made with the specific intention to dispose them off within twelve months from the Balance Sheet date are classified as Short Term Investments. Investments other than Short Term Investments are classified as Long Term Investments.
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F. FOREIGN CURRENCY AND DERIVATIVE TRANSACTIONS For the bank: i. Foreign currency monetary assets and liabilities are translated at the Balance Sheet date at rates notified by the Foreign Exchange Dealers Association of India (FEDAI). ii. Income and Expenditure items are translated at the rates of exchange prevailing on the date of the transaction except for representative office expenses which are translated at the monthly average rate of exchange. iii. Foreign Exchange contracts (other than deposit and placement swaps) outstanding at the Balance Sheet date are revalued at rates notified by FEDAI and resulting profits or losses are included in the Profit and Loss Account. Foreign exchange swaps linked to foreign currency deposits and placements are translated at the prevailing spot rate at the time of swap. The premium / discount on the swap arising out of the difference in the exchange rate of the swap date and the maturity date of the underlying forward contract is amortised over the period of the swap and the same is recognised in the Profit and Loss Account. iv. Notional amounts of derivative transactions comprising of forwards, swaps, futures and options are disclosed as off-balance sheet exposures. The swaps are segregated into trading or hedge transactions. Trading swaps outstanding as at the Balance Sheet dates are marked to market and the resulting profits or losses, are recorded in the Profit and Loss Account. Outstanding derivative transactions designated as Hedges are accounted in accordance with hedging instrument on an accrual basis over the life of the transaction underlying instrument. Option premium paid/ received is accounted for in the Profit and Loss Account on expiry of the option. Option contracts are marked to market on every reporting date. v. Contingent liabilities at the Balance Sheet date on account of outstanding foreign exchange contracts are restated at year end rates notified by FEDAI. For other entities: vi. Transactions in foreign currencies are recorded at the rate of exchange prevailing on the date of the transaction. vii. Monetary assets and liabilities denominated in foreign currencies are restated at the rate of exchange ruling at the Balance Sheet date. viii. Exchange differences arising on settlement of the transaction and on account of restatement of assets and liabilities are dealt with in the Profit and Loss Account. In case of items which are
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covered by forward exchange contracts entered to hedge the foreign currency risk, the difference between the year end rate and the rate on the date of the contract is recognised as exchange difference in Profit and Loss Account and the premium paid on forward contracts is recognised over the life of the contract. ix. The financial statements of all subsidiaries incorporated outside India which are in the nature of non-integral foreign operations are converted on the following basis: (a) Income and expenses are converted at the average rate of exchange applicable for the year and (b) All assets and liabilities are translated at the closing rate as on the Balance Sheet date. The exchange difference arising out of year end translation is debited or credited as Foreign Currency Translation Reserve forming part of Reserves and Surplus. Interest rate/ Currency swaps: x. The outstanding swap trades at the Balance Sheet date are disclosed at the contract amount. The swaps which are in the nature of hedges are accounted on an accrual basis; these contracts are not marked to market. Accrued interest is adjusted against the interest cost / income of the underlying liability / asset. The foreign currency balances on account of principal of currency swaps outstanding as at the Balance Sheet date are revalued using the closing rate. Currency options: xi. The outstanding option trades, in the nature of hedge, at the Balance Sheet date are disclosed at the contract amount. The premium paid is amortised over the life of the contract. Equity index/ equity futures/ equity index/ equity options/embedded derivatives: xii. Outstanding derivative contracts, including embedded derivatives, are measured at fair value as at each Balance Sheet date. Fair value of derivatives is determined using quoted market prices in an actively traded market, for the instrument, wherever available, as the best evidence of fair value. In the absence of quoted market prices in an actively traded market, a valuation technique is used to determine the fair value. In most cases the valuation techniques use as input parameters observable market data in order to ensure reliability of the fair value measure. G. ADVANCES i. Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the RBI guidelines and are stated net of provisions made towards non-performing assets.

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ii. Provision for non-performing assets comprising sub-standard, doubtful and loss assets is made in accordance with the RBI guidelines. In addition, the Group considers accelerated provisioning that is based on past experience, evaluation of security and other related factors. iii. In accordance with RBI Guidelines the bank has provided general provision on standard advances at uniform rate of 0.40% except in case of direct advances to sectors agricultural and SME at 0.25%, Commercial Real Estate sector at 1.00% and restructured standard advances, teaser rate housing loans at 2.00%. Excess standard asset provision resulting from revision in provisioning rates is not written back in Profit and Loss Account in accordance with the RBI guidelines and clarifications. The Non-Banking Finance Company (NBFC) subsidiaries provide general provision on standard assets at 0.25% in accordance with RBI guidelines. iv. Amounts paid for acquiring non-performing assets from other banks and NBFCs are considered as advances. Actual collections received on such non-performing assets are compared with the cash flows estimated while purchasing the asset to ascertain overdue. If the overdue is in excess of 90 days, the Bank classifies such assets into sub-standard, doubtful or loss as required by the RBI guidelines on purchase of non-performing assets. In respect of NBFCs, if the overdue is in excess of 180 days, then the assets are classified into sub-standard, doubtful and loss as required by the RBI guidelines on purchase of non-performing assets. H. STRUCTURED LIABILITIES The Group has issued structured liabilities wherein the return on these liabilities is linked to noninterest benchmarks. Such structured liabilities have an embedded derivative which is the noninterest related return component. The embedded derivative is separated and accounted separately {Refer Note 2 (F)(xii)}. The resultant debt component of such structured liabilities is recognised in the Balance Sheet under Secured loans and is measured at amortised cost using yield to maturity basis. I. LIABILITY FOR POLICIES i Provision is made for policy liabilities in respect of all in force policies and lapsed policies that are likely to be revived in future based on actuarial valuation done by the Appointed Actuary in accordance with accepted actuarial practices, requirements of IRDA and the Institute of Actuaries of India.

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ii Liabilities in respect of unit-linked policies which have lapsed and are not likely to be revived, are shown as Policyholdersliabilities until expiry of the revival period. iii Linked liabilities comprise of unit liability representing the fund value of policies. J. ACTUARIAL METHOD LIFE INSURANCE i Actuarial method and assumptions: The actuarial liabilities have been calculated in accordance with generally accepted actuarial principles, the requirements of the Insurance Act 1938, IRDA regulations and the prescribed guidance notes of the institute of Actuaries of India. In respect of unit linked policies, a unit reserve equal to the value of units as on the Balance Sheet date and an additional non-unit reserve calculated on gross premium prospective valuation method is created. The method adopted for par policies (accumulation contracts) is the value of the accumulated fund and an additional non-unit reserve calculated on gross premium prospective valuation method. For non-par conventional business the gross premium prospective method is used. Additional reserve on lapsed unit-linked policies is created and shown as Policyholders Funds. ii The assumptions used in the Gross Premium valuation are based on conservative best estimates together with appropriate margins for adverse deviations from experience. The principal assumptions are interest, inflation, return to policyholders accounts, lapses, expenses, mortality and morbidity. iii Reserves for group life business are calculated as the risk premium for the unexpired term with an allowance for expenses and a margin for adverse deviations. K. DISCOUNTED INSTRUMENTS The liability is recognised at face value at the time of issuance of discounted instruments. The discount on the issue is amortised over the tenure of the instrument. L. ACQUISITION COSTS Acquisition costs such as commission and medical fees are costs that vary with and are primarily related to the acquisition of new and renewal insurance contracts. Such costs are recognised in the year in which they are incurred. M. BULLION The Bank imports bullion including precious metal bars on a consignment basis for selling to its wholesale and retail customers. The difference between the sale price to customers and actual price quoted by supplier is reflected under other income.

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The Bank also borrows and lends gold, which is treated as borrowings / lending as the case may be with the interest paid / received classified as interest expense / income and is accounted on an accrual basis. N. TAXES ON INCOME The Income Tax expense comprises Current tax and Deferred tax. Current tax is measured at the amount expected to be paid in respect of taxable income for the year in accordance with the Income tax Act, 1961. Deferred tax adjustments comprise of changes in the deferred tax assets and liabilities. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences being the difference between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets arising mainly on account of carry forward losses and unabsorbed depreciation under tax laws are recognized only if there is virtual certainty of its realisation, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted at the Balance Sheet date. Changes in deferred tax assets / liabilities on account of changes in enacted tax rates are given effect to in the Profit and Loss Account in the period of the change. The carrying amount of deferred tax assets are reviewed at each Balance Sheet date. The Group writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Deferred tax assets and deferred tax liabilities across various entities are not set off against each other as the Group does not have a legal right to do so. O. SEGMENT REPORTING A transfer pricing mechanism between segments has been established to arrive at interest cost on the borrowings of the segments based on borrowing costs, maturity profile of assets / liabilities etc. and which is disclosed as part of Segment Revenue.

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Segment revenues consists of earnings from external customers and inter-segment revenue as stated above. Segment expenses consist of interest expenses including those allocated, operating expenses and provisions. Segment results are net of segment revenue and segment expenses. Segment assets include assets related to segments and exclude tax related assets. Segment liabilities include liabilities related to the segment excluding net worth, minority interest and employees stock option (grants outstanding), proposed dividend and dividend tax thereon. Since the business operations of the Group are primarily concentrated in India, the Group is considered to operate only in the domestic segment. P. EMPLOYEE SHARE BASED PAYMENTS Equity-settled: The Bank has formulated Employee Stock Option Schemes (ESOSs) in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme) Guidelines, 1999. The Schemes provide for grant of options to employees of the Group to acquire the equity shares of the Bank that vest in cliff vesting or in a graded manner and that are to be exercised within a specified period. In accordance with the SEBI Guidelines and the guidance note on Accounting for Employee Share-based payments issued by TheInstitute of Chartered Accountants of India, the excess, if any, of the market price of the share preceding the date of grant of the option under ESOSs over the exercise price of the option is amortised on a straight-line basis over the vesting period. Where the terms of an equitysettled award are modified, the minimum expense recognised in Payments to and provision for employees is the expense as if the terms had not been modified. An additional expense is recognised for any modification which increases the total intrinsic value of the sharebased payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification. Cash-settled: The cost of cash-settled transactions (stock appreciation rights) is measured initially using intrinsic value method at the grant date taking into account the terms and conditions upon which the instruments were granted. This intrinsic value is amortised on a straight-line basis over the vesting period with a recognition of corresponding liability. This liability is remeasured at each

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Balance Sheet date up to and including the settlement date with changes in intrinsic value recognised in Profit and Loss Account in Payments to and provision for employees. Q. CLAIMS/ BENEFITS Benefits paid comprise of policy benefit amount, surrenders, claim investigation fees and specific claims settlement costs where applicable and change in the outstanding provision for claims at the year end. Surrender and claims by death are accounted when intimated. Survival benefits are accounted when due. Maturity claims are accounted on the date of maturity. Amounts recoverable from reinsurers are accounted for in the same period as the related claim. Repudiated claims disputed before judicial authorities are provided for based on the best judgment of the management considering the facts and evidence in respect of each such claim. Withdrawals under unit-linked policies are accounted in respective schemes when the associated units are cancelled. R. SECURITISATION The Group enters into arrangements for sale of loans through Special Purpose Vehicles (SPVs). In most cases, post securitisation, the Group continues to service the loans transferred to the SPV. The Group also provides credit enhancement in the form of cash collaterals and / or by subordination of cash flows to Senior Pass Through Certificate (PTC) holders. In respect of credit enhancements provided or recourse obligations (projected delinquencies, future servicing etc.) accepted by the Group, appropriate provision / disclosure is made at the time of sale in accordance with Accounting Standard 29, (AS-29) Provisions, Contingent Liabilities and Contingent Assets notified under the Companies (Accounting Standard) Rules, 2006 as amended. The gain/ premium on account of securitisation of assets at the time of sale is computed as the difference between the sale onsideration and the book value of the securitised asset and is amortised over the tenure of the securities issued. The loss on account of securitisation is recognised immediately in Profit and Loss Account. S. LEASES Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss Account on a straight-line basis over the lease term.

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Assets subject to operating leases are included in fixed assets. Lease income is recognised in the Profit and Loss Account on a straight-line basis over the lease term. Initial direct costs in respect of operating leases such as legal costs, brokerage costs, etc. are recognised immediately in the Profit and Loss Account. Assets given under a finance lease are recognised as a receivable at an amount equal to the net investment in the lease. T. PROVISIONS AND CONTINGENCIES Provision is recognised when there is a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Provision is made for Credit card reward points based on reward points accrued to the customer at Balance Sheet date. Contingent Liabilities are not recognised but are disclosed in the notes unless the outflow of resources is remote. Contingent assets are neither recognised nor disclosed in the financial statements. U. EARNINGS PER SHARE Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue and stock split. For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares. V. IMPAIRMENT The carrying amount of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/ external factors. Impairment loss, if any, is provided in Profit and Loss Account to the extent of carrying amount of assets exceeds their estimated recoverable amount.

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W. CASH AND CASH EQUIVALENTS Cash and cash equivalents in the Balance Sheet comprise Cash in hand, Balances with Reserve Bank of India and Balances with Banks and Money at Call and Short Notice (including the effect of changes in exchange rates on cash and cash equivalents in foreign currency).

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BIBLIOGRAPHY
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